<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1997
REGISTRATION STATEMENT NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
JLM INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 5169 06-1163710
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
---------------------
8675 HIDDEN RIVER PARKWAY
TAMPA, FLORIDA 33637
(813) 632-3300
(Address, including zip code, and telephone number including area code, of
Registrant's principal executive offices)
---------------------
JOHN L. MACDONALD, PRESIDENT
JLM INDUSTRIES, INC.
8675 HIDDEN RIVER PARKWAY
TAMPA, FLORIDA 33637
(813) 632-3300
(Name, address, including zip code, and telephone number including area code, of
agent for service)
COPIES OF COMMUNICATIONS TO:
<TABLE>
<C> <C>
RICHARD M. LEISNER, ESQUIRE G. DAVID BRINTON, ESQUIRE
TRENAM, KEMKER, SCHARF, BARKIN ROGERS & WELLS
FRYE, O'NEILL & MULLIS 200 PARK AVENUE
2700 BARNETT PLAZA NEW YORK, NEW YORK 10166-0153
TAMPA, FLORIDA 33601-1102 (212) 878-8000
(813) 223-7474
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
---------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE
SECURITIES TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock.................................... $37,030,000 $11,222
================================================================================================================
</TABLE>
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 27, 1997
SHARES
JLM INDUSTRIES, INC.
JLM LOGO COMMON STOCK
---------------------
Of the shares of common stock (the "Common Stock") offered
hereby, shares are being sold by JLM Industries, Inc. ("JLM" or the
"Company"), and shares are being sold by the Selling Stockholder (the
"Offering"). The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholder. See "Principal and Selling Stockholders."
Prior to the Offering, there has been no public market for the Common Stock
of the Company. It is currently anticipated that the initial public offering
price of the Common Stock will be between $ and $ per share.
See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. The Company intends to make an
application for quotation of the Company's Common Stock on the Nasdaq National
Market.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=========================================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC(1) DISCOUNT(1) COMPANY(2) STOCKHOLDER
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
Total(3)..................... $ $ $ $
========================================================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and for other information.
(2) Before deducting expenses of the Offering payable by the Company estimated
at $ .
(3) The Company has granted an option to the Underwriters exercisable within
45-days of the date hereof, to purchase up to additional shares of
Common Stock for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholder will be $ , $ , $ and $ ,
respectively. See "Underwriting."
---------------------
The shares of Common Stock offered hereby are offered severally by the
Underwriters when, as and if delivered to and accepted by them, subject to their
right to withdraw, cancel or reject orders in whole or in part and subject to
certain other conditions. It is expected that delivery of the certificates
representing the shares of Common Stock will be made against payment on or about
, 1997, at the office of Oppenheimer & Co., Inc., Oppenheimer Tower,
World Financial Center, New York, NY 10281.
---------------------
OPPENHEIMER & CO., INC. A.G. EDWARDS & SONS, INC.
The date of this Prospectus is , 1997.
<PAGE> 3
[PICTURES TO BE PROVIDED]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE
PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK,
OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and related notes appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information
presented in this Prospectus (i) reflects a -for-1 stock split of the
Company's Common Stock to be effected before the completion of the Offering by
means of a stock dividend, (ii) assumes an offering price of $ , (iii)
assumes that the Underwriters' over-allotment option will not be exercised and
(iv) assumes the Company will consummate the purchase of Aurora Chemical, Inc.
("Aurora"), and Phoenix Tank Car Corporation ("Phoenix") (see Note 19 to Notes
to Consolidated Financial Statements). Unless the context indicates otherwise,
all references in this Prospectus to "JLM" or the "Company" include JLM
Industries, Inc. and its consolidated subsidiaries and references to the
"Selling Stockholder" shall mean John L. Macdonald. All references in this
Prospectus to fiscal years are to the Company's fiscal years ended on December
31.
THE COMPANY
JLM is a leading marketer and distributor of certain commodity chemicals,
principally acetone and phenol. The Company believes it is the second largest
marketer of acetone and the fourth largest marketer of phenol in North America.
JLM is also a global distributor of olefins, principally propylene, as well as a
variety of other commodity and specialty chemicals. In order to provide stable
and reliable sources of supply for its products, the Company (i) maintains
long-established supplier relationships with several major chemical companies,
(ii) manufactures phenol and acetone at its Blue Island Plant and (iii) sources
acetone from its joint venture manufacturing operation. The Company's principal
products are used in the production of adhesives, coatings, forest product
resins, paints, pharmaceuticals, plastics, solvents and synthetic rubbers. The
Company sells its products worldwide to over 600 customers including Ashland
Chemical, Inc., B.F. Goodrich Co., Borden, Inc., Hoechst Celanese Corporation,
E.I. DuPont de Nemours and Company, Eli Lilly & Co., Georgia Pacific
Corporation, ICI Acrylics Inc., Minnesota Mining and Manufacturing Company,
Neste Resins Corporation, Rohm & Haas Company and Shell Chemicals Canada, Inc.
Since its founding in 1986 as a distributor of excess co-product acetone,
JLM has grown rapidly by expanding its product sourcing arrangements and product
offerings, adding manufacturing capacity and providing superior customer service
and consistent product quality and availability. From 1992 to 1996, JLM's EBITDA
increased from $2.1 million to $13.5 million, a compound annual growth rate of
approximately 59.6%.
In order to support its worldwide marketing and distribution capabilities,
the Company continually seeks to acquire assets and establish relationships to
provide a consistent and reliable source of products. The Company acquired a
manufacturing facility in 1995 in Blue Island, Illinois (the "Blue Island
Plant") that produces phenol and acetone. In addition, in 1987, JLM entered into
a joint venture with General Electric Company and an affiliate of CITGO that
manufactures phenol and acetone in Mt. Vernon, Indiana (the "Mt. Vernon Plant").
In connection with the joint venture, the Company entered into a long-term
agreement to purchase all acetone produced at the Mt. Vernon Plant not used by
GE Plastics. In 1996, the Blue Island Plant and the Mt. Vernon Plant
collectively supplied approximately 74.0% of the total acetone sold by JLM, and
the Blue Island Plant supplied approximately 78.0% of the total phenol sold by
JLM.
In addition to its manufacturing facility and joint venture, JLM sources
products through long-established supplier relationships with many of the
industry leaders in the worldwide chemical industry including ARCO Chemical
Company, Goodyear Tire & Rubber Co., Monsanto Company and Repsol, S.A. (Spain),
one of the largest chemical companies in Spain. The Company also has an
exclusive arrangement to distribute solvents in North America for Sasol Chemical
Industries (PTY) Ltd., one of the largest chemical companies in South Africa,
and recently entered into an agreement to become a U.S. distributor of styrene
for GE Plastics.
To further enhance its product sourcing, marketing and distribution
capabilities, the Company has acquired terminaling and storage facilities in
Wilmington, North Carolina (the "JLM Terminal") and Bayport, Texas (the "OTC
Terminal"). The JLM Terminal consists of 10 storage tanks with a total capacity
of 15 million gallons and is capable of handling a broad range of products
including acetone, methanol, ethanol and propanol. The OTC Terminal is a joint
venture with an affiliate of Ultramar Diamond Shamrock that operates primarily
as an export facility for propylene manufactured in the U.S. The OTC Terminal
has an annual throughput capacity of
3
<PAGE> 5
approximately 900 million pounds and a total storage capacity of approximately
22 million pounds. These terminaling and storage facilities give the Company the
ability to take immediate physical delivery of a substantial volume of product
which is of value to the Company's suppliers and ensures that the Company will
have product available for its customers. These facilities also give the Company
the ability to offer chemical storage terminaling and logistics services, and
have allowed the Company to capitalize on a trend by many large chemical
producers to outsource these operations. The Company believes its ability to
multi-source products through its manufacturing facility, joint venture and
supplier relationships, as well as its ownership of terminaling and storage
facilities distinguish it from its competitors and enhance its ability to market
significant volumes of products.
Product sourcing and marketing efforts are handled principally by the
Company's sales team of 33 full time employees. JLM maintains offices in the
U.S., Canada, the Netherlands and Venezuela, and recently opened two affiliate
offices in India and an office in Colombia. JLM has also established sales
arrangements with companies in Spain, Mexico, Brazil, Korea and Taiwan. In
addition, the Company recently purchased a 25.0% interest in SK Chemicals Asia
Pte. Ltd., a Singapore-based Company, and has agreed to purchase a 12.7%
interest in SK Chemical Trading Pte. Ltd., another Singapore-based Company, both
of which are participating in a Vietnamese joint venture that intends to
construct a chemical plant in Vietnam that will produce dioctyl phthalate, a
chemical used in the production of plastics such as poly vinyl chloride ("PVC").
The Vietnamese joint venture also intends to construct terminaling and storage
facilities in Vietnam and Malaysia. See "Business Strategy."
BUSINESS STRATEGY
The Company's principal objective is to continue to expand the number of
sources and breadth of its chemical products and the markets in which it
distributes these products to enhance its position as a leading supplier in the
worldwide chemical industry. Key elements of the Company's business strategy
include:
- Expand Sources of Supply through Joint Ventures, Acquisitions and
Strategic Relationships. The Company will continue to seek to identify
and pursue domestic and international opportunities to expand its sources
of supply for products in or consistent with its core business. These
opportunities may include additional joint ventures, acquisitions and
strategic relationships. Consistent with this strategy, the Company formed
the Mt. Vernon joint venture with General Electric Company and an
affiliate of CITGO in 1987, acquired the Blue Island Plant in 1995 and
established a long-term supplier relationship with Sasol Chemical
Industries (PTY), Ltd., a South African Company, in 1988. Certain phenol
producers have recently announced their intentions to add approximately 3
billion pounds of annual production capacity starting in the year 2000.
JLM currently is exploring opportunities to participate in certain of
these expansions in order to secure additional sources of phenol and
acetone.
- Increase Sales of Existing Products; Add New Products. The Company will
continue to develop its existing relationships and establish new
relationships to increase the overall volume and types of products it
distributes by (i) increasing the amount distributed by the Company of an
existing supplier's output of a given chemical, (ii) distributing
additional products for existing suppliers and (iii) adding new chemical
producers to its supplier base. During 1996, the Company entered into new
agreements to distribute approximately 70 million additional pounds of
chemicals for both existing and new suppliers in 1997, including ARCO
Chemical Company, Goodyear Tire & Rubber Co. and Monsanto Company. In
addition, the Company recently expanded the product line it distributes
for Sasol Chemical Industries (PTY) Ltd. In 1997, the Company has entered
into new agreements with CONDEA Vista Company to distribute butanol and
with GE Petrochemicals, Inc. to become a distributor of styrene in the
U.S.
- Continue International Expansion. The Company currently has
international operations in South America, Europe and Asia. JLM intends to
continue to utilize its chemical market experience, distribution and
logistics capabilities and industry relationships to increase its
international presence, particularly in the growing chemical markets of
Asia and South America. The Company recently opened two affiliate offices
in India and one in Colombia. In addition, JLM recently purchased a
minority interest in one Singapore-based company and has agreed to
purchase a minority interest in another Singapore-based company, both of
which are participating in a Vietnamese joint venture that intends to
construct a
4
<PAGE> 6
dioctyl phthalate chemical plant in Vietnam and terminaling and storage
facilities in Vietnam and Malaysia. The Company believes its indirect
participation in the Vietnamese joint venture will provide it with
increased access to the Asian market.
- Continue to Provide Superior Customer Service. JLM believes that its
continued success will be in large part due to its emphasis on providing
superior customer service. The Company believes it is well positioned to
take advantage of current trends within the chemical industry as chemical
producers continue to outsource their terminaling and logistics operations
and reduce the number of outside distributors used. The Company focuses on
providing sourcing, inventory and logistics solutions for its customers
and endeavors to provide both its customers and suppliers with a level of
service that is unmatched in the industry.
The Company was incorporated in 1986 as a Delaware corporation. Its
principal executive offices are located at 8675 Hidden River Parkway, Tampa,
Florida 33637, and its telephone number is (813) 632-3300.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................. shares
Common Stock offered by the Selling Stockholder..... shares
Common Stock to be outstanding after the Offering... shares(1)
Use of proceeds..................................... To repay approximately $17.1 million in
long-term debt, to fund working capital
and for general corporate purposes. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.............. " "
</TABLE>
- ---------------
(1) Excludes shares of Common Stock to be reserved for issuance under
the Company's equity based compensation plans. See "Management -- Equity
Based Compensation Plans."
5
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues................ $199,751 $174,322 $218,570 $289,371 $236,521 $ 57,861 $ 80,518
Gross profit.......... 9,092 9,132 11,663 23,910 28,239 6,690 6,847
Operating income........ 1,764 1,956 2,383 8,734 11,001 2,675 2,929
Income from continuing
operations before
discontinued
operations and
extraordinary item.... $ 1,397 $ 1,157 $ 1,109 $ 3,629 $ 4,357 $ 322 $ 1,560
Pro forma income per
share from continuing
operations before
discontinued
operations and
extraordinary
item(1)............... $ $
Pro forma shares
outstanding(1)........
OTHER FINANCIAL DATA:
Depreciation and
amortization
expense............... $ 322 $ 352 $ 572 $ 1,522 $ 2,524 $ 532 $ 678
EBITDA(2)............... 2,086 2,308 2,955 10,256 13,525 3,207 3,607
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................... $ (825) $
Total assets................................................ 108,745
Total debt.................................................. 38,602
Total stockholders' equity.................................. 14,736
</TABLE>
- ---------------
(1) Adjusted to give effect to the issuance of shares of Common Stock by
the Company at an assumed initial public offering price of $ per
share and the application of the estimated net proceeds as of the beginning
of the period to repay certain indebtedness as described under "Use of
Proceeds."
(2) EBITDA represents the operating income of the Company plus depreciation and
amortization. EBITDA is not a measure of financial performance under
generally accepted accounting principles ("GAAP") and may not be comparable
to other similarly titled measures by other companies. EBITDA does not
represent net income or cash flows from operations as defined by GAAP and
does not necessarily indicate that cash flows will be sufficient to fund
cash needs. As a result, EBITDA should not be considered an alternative to
net income as an indicator of operating performance or to cash flows as a
measure of liquidity. EBITDA is included in this Prospectus because it is a
basis upon which the Company assesses its financial performance, and certain
covenants in the Company's borrowing arrangements are tied to similar
measures. Supplemental selected consolidated cash flow information is
included below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- --------------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities........... $ (1,244) $ 3,487 $ 6,064 $ 2,746 $ 26 $ (3,565) $ (5,894)
Investing activities........... (2,687) (3,229) (1,218) (4,661) (6,631) (1,480) (443)
Financing activities........... 4,900 (2,086) 85 (469) 6,705 4,411 7,485
Capital expenditures............. 2,513 3,161 1,221 2,320 7,347 1,445 371
</TABLE>
6
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered by this Prospectus. The
following is not intended as, and should not be considered, an exhaustive list
of relevant factors. This Prospectus contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All forward-looking statements included in this
Prospectus are based on current expectations and information available to the
Company on the date hereof, and the Company assumes no obligation to update any
such forward-looking statements. These forward-looking statements involve risks
and uncertainties, including, among others, those set forth below. The Company's
actual results could differ materially from those anticipated in such
forward-looking statements.
CYCLICALITY OF THE WORLDWIDE CHEMICAL MARKETS; POSSIBLE EXCESS PRODUCTION
CAPACITY
The Company's activities include the manufacture and sale of phenol and
acetone and the marketing of propylene. In 1996, sales of acetone, phenol and
propylene accounted for approximately 33.0%, 15.0% and 8.0%, respectively, of
the Company's total revenues. The markets for acetone, phenol and propylene are
cyclical. This cyclicality primarily results from changes in the balance between
supply and demand, the price of feedstocks and the level of general economic
activity. Historically, these markets have experienced alternating periods of
tight supply resulting in generally rising prices and profit margins, followed
by periods of large capacity additions resulting in oversupply and generally
declining prices and profit margins. Although the markets for acetone, phenol
and propylene were favorable to the Company in 1996, there can be no assurance
that this will continue to be the case or that the Company would remain
profitable if a shift in the market was to cause prices to decline and profit
margins to shrink for these products.
According to industry sources, current world phenol and acetone capacity is
approximately 12.4 billion pounds and 8.5 billion pounds, respectively.
Approximately 80.0% of global acetone production is as a co-product in the
manufacture of phenol, and, as a result, phenol demand largely determines
acetone production levels. Certain phenol producers have announced their
intentions to add approximately 3 billion pounds of annual production capacity
starting in the year 2000. In the event that each of the announced capacity
additions is completed, the resulting increase in levels of phenol and acetone
production could exceed anticipated demand for such chemicals, resulting in
declining prices which could have a material adverse effect on the Company's
results of operations and financial condition. However, the Company believes
that some of the announced capacity additions may not be completed as scheduled
because estimated world demand would not justify such an increase in the level
of phenol and acetone production.
FLUCTUATIONS IN THE COST AND AVAILABILITY OF RAW MATERIALS
In 1996, approximately 12.5% of the Company's revenues and 57.3% of the
Company's operating income were derived from the sale of products manufactured
at the Blue Island Plant. An adequate supply of raw materials at competitive
prices is critical to the economic success of the Company's manufacturing
operations. JLM does not produce propylene and benzene, the key raw materials
used for the production of cumene, the primary feedstock for the production of
acetone and phenol. The Company generally obtains propylene via direct pipeline
from a single supplier under a long-term contract. The Company currently obtains
benzene from three suppliers under supply contracts at market rates. The Company
believes that there are a number of alternative sources of supply for propylene
and benzene. However, if the Company's current propylene supplier was unable to
meet its obligations or if the Company's propylene supply agreement could not be
renewed on terms substantially similar to those under the current agreement, the
Company would be required to incur increased costs for propylene which would
have a material adverse effect on the Company's results of operations and
financial condition.
The ability to pass on increases in raw material prices to the Company's
customers is, to a large extent, dependent on market conditions. There may be
periods of time in which increases in raw material prices are not recovered by
the Company due to an inability to increase the selling prices of its products
because of weakness in
7
<PAGE> 9
demand for, or oversupply of, such products. Therefore, increases in raw
material prices could have a material adverse effect on the Company's results of
operations and financial condition. See "Business -- Manufacturing and Product
Sourcing."
RISKS ASSOCIATED WITH DISTRIBUTION SUPPLY CONTRACTS
Certain products distributed by the Company are obtained through supply
relationships with other chemical producers. Typically, the Company's supply
contracts have one-year terms with evergreen provisions that automatically renew
the contracts for additional one year terms unless notice of termination is
provided (which notice may be, under certain agreements, as short as 30 days).
The Company has long-established relationships with many of its suppliers. There
can be no assurance, however, that the Company's relationships or agreements
with such suppliers will not be terminated and, if terminated, can be replaced.
Since 1994, the Company has sourced on average approximately 250 million
pounds of acetone annually from the Mt. Vernon Plant. In 1996, the amount of
acetone made available to JLM was reduced by approximately 15 million pounds and
it is anticipated that over the next four years the amount of acetone made
available to JLM will be further reduced by approximately 35 to 40 million
pounds. This reduction is the result of increased consumption of acetone by GE
Petrochemicals, Inc. ("GE Plastics"). See "Business -- Manufacturing and
Sourcing."
Due to the cyclical nature of the prices of many of the commodity chemical
products the Company distributes, the Company endeavors to enter into
distribution agreements with its external suppliers that provide the Company a
fixed percentage profit per unit volume of product or otherwise reduce the
Company's exposure to fluctuations in the selling price of the products it
distributes for other manufacturers. There can be no assurance that in the
future the Company will be able to enter into contracts that provide it with
similar protection against price volatility. The inability to do so could have a
material adverse effect on the Company's results of operations and financial
condition. See "Business -- Sales and Marketing."
In addition, certain of the Company's agreements with its suppliers require
the Company to purchase a minimum amount of chemical product or to pay certain
agreed upon amounts for such minimum quantities if not taken by the Company.
These agreements involve financial risk to the Company and could require the
Company to expend significant amounts of capital without receiving corresponding
revenues which could have a material adverse effect on the Company's results of
operations and financial condition.
RISKS OF INTERNATIONAL SALES
In 1996, approximately 33.0% of the Company's revenues were attributable to
operations conducted abroad and to export sales. As part of its business
strategy, JLM intends to selectively pursue international expansion. In certain
countries where JLM currently operates or intends to expand its operations, the
Company could be subject to certain political and economic uncertainties,
including labor unrest, political instability, restrictions on transfers of
funds, high export duties and quotas, domestic and international customs and
tariffs, unexpected changes in regulatory environments and potentially adverse
tax consequences. There can be no assurance that these factors will not have a
material adverse effect on the Company's ability to increase or maintain its
international sales or on its results of operations and financial condition.
FOREIGN EXCHANGE FLUCTUATIONS
A portion of the Company's revenues is denominated in currencies other than
the U.S. dollar. Accordingly, the Company's results of operations and financial
condition may be effected by fluctuations in the rate of exchange between such
currencies and the U.S. dollar. Moreover, the Company may incur costs in
connection with conversions between currencies. Although the Company monitors
its exposure to currency fluctuations, there can be no assurance that exchange
rate fluctuations will not have a material adverse effect on the Company's
results of operations and financial condition. For a further discussion of the
effect of foreign currency exchange fluctuations on the Company's operations,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Effects of Inflation; Foreign Currency Exchange Rates."
8
<PAGE> 10
DEPENDENCE ON KEY CUSTOMERS
A small number of the Company's customers historically have accounted for a
significant percentage of the Company's sales of acetone and phenol. Loss of one
or more of these significant customers could have a material adverse effect on
the Company's results of operations and financial condition. In the past, the
Company has not experienced significant difficulties in replacing the sales
volumes accounted for by the periodic loss of significant customers. However,
there can be no assurance that the historic levels of business from current
customers will be maintained in the future or that such customers could be
replaced quickly enough to avoid adversely impacting revenues and profitability.
IMPLEMENTATION OF BUSINESS STRATEGY
The Company has experienced rapid growth since its inception. JLM's
continued growth is largely dependent on the successful implementation of its
business strategy. There can be no assurance that the Company will be able to
successfully implement its business strategy or that if implemented, such
strategy will be successful. If the Company is unable to implement its business
strategy, the Company's results of operations and financial condition could be
adversely affected. See "Business -- Business Strategy."
POTENTIAL COSTS OF ENVIRONMENTAL COMPLIANCE
The Company is subject to federal, state, local and foreign environmental
laws, rules, regulations, and ordinances concerning emissions and discharges,
and the generation, handling, storage, transportation, treatment, disposal and
import and export of hazardous materials ("Environmental Laws"). The operation
of chemical manufacturing and storage facilities and the distribution of
chemical products entail risks under Environmental Laws, many of which provide
for substantial remediation costs in the event of discharges of contaminants and
fines and criminal sanctions for violations. In addition, compliance with
existing and future Environmental Laws may require significant capital
expenditures by the Company. Although it is the Company's policy to comply with
all Environmental Laws and the Company believes that it is currently in material
compliance with all Environmental Laws, there can be no assurance that material
environmental liabilities will not be incurred by the Company or that compliance
with Environmental Laws will not require material capital expenditures by the
Company, each of which could have a material adverse effect on the Company's
results of operations and financial condition.
Elevated levels of contaminants, which may be the result of historical use
and/or migration from neighboring properties, have been detected at the JLM
Terminal and at the Blue Island Plant. Under the terms of the purchase of the
JLM Terminal, the Company is indemnified by Unocal, the prior owner of the
property, for up to $7.5 million in environmental liabilities which it will seek
to enforce if any liabilities for violating Environmental Laws arise at the JLM
Terminal. There can be no assurance, however, that a claim for indemnification
will be successful. The Company has no right to indemnification from the prior
owner of the Blue Island Plant. If the Company is required to conduct a
remediation of the Blue Island Plant or remediation for which it is not
indemnified at the JLM Terminal, the level of expenditure that may be required
to satisfy the Company's environmental liabilities could have a material adverse
effect on its financial condition or results of operations.
Levels of organic compounds slightly in excess of regulatory reporting
thresholds were detected in the ground water at the Company's Polychem facility.
The Company has been addressing the issues and the analytical data most recently
collected indicate very low levels of target contaminants. Accordingly, the
Company is presently investigating whether the site was initially properly
listed on the Hazardous Sites Inventory or whether the site can be removed from
the list. Costs for completion of any required remediation have not been
determined and there can be no assurance that if the Company is required to
complete further remediation at the Polychem facility that the costs would not
have a material adverse effect on the Company's financial condition or results
of operations. See "Business -- Environmental Regulation."
COMPETITION
The worldwide chemical market is intensely competitive. The Company faces
competition from a substantial number of global and regional competitors, many
of which have greater financial, production and other resources
9
<PAGE> 11
than the Company. Among the Company's competitors are some of the world's
largest chemical companies and major integrated petroleum companies that have
their own raw material resources. Barriers to entry in the industry, apart from
capital availability, may be low, particularly with respect to commodity
products. The entrance of new competitors in the industry, including companies
who currently serve as suppliers to the Company, may reduce the Company's
ability to maintain current sales or price levels. The Company's competitive
position is based principally on customer service and support, breadth of
product line, product quality, facility location and the selling prices of its
products. There can be no assurance that the Company will have sufficient
resources to maintain its current competitive position or market share. See
"Business -- Competition."
DEPENDENCE ON KEY PERSONNEL; ABILITY TO RECRUIT PERSONNEL
The future success of the Company is largely dependent on the efforts and
abilities of its senior management and certain other key personnel, particularly
John L. Macdonald, the Company's founder, President and Chief Executive Officer.
The Company's success will depend in large part on its ability to retain these
individuals and other current members of its senior management team and to
attract and retain qualified personnel in the future. The loss of members of
senior management or of certain other key employees or the Company's inability
to retain other qualified employees could have an adverse impact on the
Company's results of operations and financial condition. See "Management."
VOTING CONTROL BY PRINCIPAL STOCKHOLDER
Immediately following completion of the Offering, John L. Macdonald,
President and Chief Executive Officer of the Company, will be the beneficial
owner of shares of Common Stock, which represents approximately % of
the issued and outstanding shares of Common Stock ( % of the issued and
outstanding shares of Common Stock if the Underwriters' over-allotment option is
exercised in full). Mr. Macdonald has, and will continue to have, sufficient
voting power to elect the entire Board of Directors of the Company and, in
general, to determine (without the consent of the Company's other stockholders)
the outcome of any corporate transaction or other matters submitted to the
stockholders for approval. See "Management" and "Principal and Selling
Stockholders."
BROAD MANAGEMENT DISCRETION IN USE OF PROCEEDS; RISKS ASSOCIATED WITH POTENTIAL
ACQUISITIONS
The Company currently has no specific plans for use of a substantial
portion of the net proceeds of the Offering. Accordingly, management of the
Company will have broad discretion with respect to the use of these funds. In
particular, the Company could use a portion of these funds to acquire or invest
in complementary businesses, products and assets. Future acquisitions or joint
venture investments by the Company may result in potentially dilutive issuances
of equity securities, the incurrence of additional debt and amortization
expenses related to goodwill and other intangible assets, which could materially
adversely affect the Company's business and results of operations. In addition,
acquisitions and joint ventures involve numerous risks, including difficulties
in the assimilation of the operations, products and personnel of the acquired
company, the diversion of management's attention from other business concerns,
risks of entering markets in which the Company has no direct prior experience
and the potential loss of key employees. There can be no assurance that the
Company will be able to identify attractive or willing acquisition or joint
venture candidates, or that the Company will be able to complete an acquisition
or joint venture investment if such candidates are identified. The Company has
no present agreements or commitments with respect to any material acquisitions
of other businesses, products or assets, except for its commitment to acquire a
12.7% interest in SK Chemical Trading Pte. Ltd. The Company is also
investigating opportunities to participate in certain recently announced phenol
capacity expansions, although, it has not reached any agreement or understanding
with respect to any such participation. See "Use of Proceeds."
ABSENCE OF DIVIDENDS; RESTRICTIONS ON DIVIDENDS
The Company has never paid any cash dividends on the Common Stock and does
not anticipate cash dividends on the Common Stock at any time in the foreseeable
future. See "Dividend Policy." In addition, pursuant to certain of the Company's
credit agreements, the Company and its subsidiaries are restricted from
10
<PAGE> 12
paying dividends. The Company has pledged its interests in certain of its
subsidiaries as security for certain of the Company's obligations.
NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering there has been no public market for the Common Stock
and there can be no assurance that an active market will develop or be sustained
after the consummation of the Offering. Consequently, the initial public
offering price of the Common Stock offered hereby was determined by negotiations
among the Company, the Selling Stockholder and the Underwriters and may not be
indicative of future prices. See "Underwriting" for information relating to the
method of determining the initial public offering price.
The market price for the Common Stock may be significantly affected by such
factors as the Company's operating results, changes in any earnings estimates
publicly announced by the Company or by analysts, announcements of significant
business developments by the Company or its competitors and various factors
affecting the overall economic environment. In addition, the stock market has
experienced a high level of price and volume volatility, and market prices for
the stock of many companies, especially newly public companies, have experienced
wide price fluctuations not necessarily related to the fundamentals or operating
performance of such companies. These broad market fluctuations may adversely
affect the market price of the Company's Common Stock. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of a substantial number of shares of the Company's Common
Stock in the public market could adversely affect the market price of the Common
Stock and could impair the Company's ability to raise capital through the sale
of equity or equity-related securities. Upon completion of the Offering, the
Company will have shares of Common Stock outstanding. Of such shares,
shares of Common Stock, representing approximately % of the issued and
outstanding shares of Common Stock ( shares of Common Stock representing
% of the issued and outstanding shares of Common Stock if the Underwriters'
over-allotment option is exercised in full) will be freely tradeable without
restriction or further registration under the Securities Act, unless purchased
by "affiliates" of the Company as that term is defined in Rule 144 under the
Securities Act ("Rule 144"). The remaining shares of Common Stock
representing approximately % of the issued and outstanding shares of Common
Stock (approximately % of the issued and outstanding shares of Common Stock
if the Underwriters' over-allotment option is exercised in full) are
beneficially owned by affiliates of the Company and are therefore "restricted
securities" as that term is defined in Rule 144 and as such are subject to
certain holding period, volume limitations and other restrictions prescribed by
Rule 144. The Company, its officers, directors and certain stockholders, who
collectively hold all of such "restricted securities," have agreed that they
will not dispose of any shares of Common Stock for a period of 180 days after
the date of the Underwriting Agreement relating to the Offering without the
written consent of the representatives of the Underwriters. Upon expiration of
such 180 day period, an aggregate of shares will become eligible for sale
without restriction pursuant to Rule 144(k) or Rule 701 under the Securities Act
and approximately
additional shares will be eligible for sale subject to the timing, volume and
manner of sale restrictions of Rule 144. See "Shares Eligible for Future Sale"
and "Underwriting."
ANTI-TAKEOVER MEASURES
Certain provisions of the Company's Certificate of Incorporation and Bylaws
may be deemed to have anti-takeover effects and may delay, deter or prevent a
change in control of the Company that stockholders might otherwise consider in
their best interests. These provisions (i) allow only the Board of Directors,
the Chairman of the Board of Directors or the Chief Executive Officer of the
Company to call special meetings of the stockholders, (ii) establish certain
advance notice procedures for nomination of candidates for election as directors
and for stockholder proposals to be considered at stockholders' meetings, (iii)
generally authorize the issuance of one or more classes of "blank check"
preferred stock, with such designations, rights and preferences as may be
determined from time to time by the Board of Directors, (iv) require approval of
holders of 75.0% of the outstanding Common Stock for the Board of Directors to
create a series of Preferred Stock with general voting rights or with the right
to elect a majority of directors under any circumstances and (v) require
approval of
11
<PAGE> 13
holders of 75.0% of the outstanding voting power to amend or repeal items (i),
(ii), (iv) and (v) above. See "Description of Capital Stock."
IMMEDIATE AND SUBSTANTIAL DILUTION
The amount by which the initial public offering price per share of Common
Stock exceeds the pro forma net tangible book value per share of Common Stock
after the Offering constitutes dilution to investors in the Offering. Persons
purchasing in the Offering will experience an immediate dilution of net tangible
book value of $ per share. See "Dilution."
USE OF PROCEEDS
The net proceeds to the Company from its sale of shares of Common
Stock offered hereby, based on an assumed initial public offering price of
$ per share (the midpoint of the range of prices set forth on the cover of
this Prospectus), after deducting estimated offering expenses and underwriting
discounts, are estimated to be approximately $ million ($ million if the
Underwriters' over-allotment option is exercised in full). The Company will use
approximately $17.1 million of the net proceeds to repay certain long-term debt
and will have the remaining $ available to use for working capital and
general corporate purposes. A portion of the net proceeds may also be used to
acquire or invest in complementary businesses or products. Except for its
commitment of $500,000 to acquire a 12.7% interest in SK Chemical Trading Pte.
Ltd. the Company has no present agreements or commitments and is not currently
engaged in any definitive negotiations with respect to any such transactions. In
addition, while JLM is investigating opportunities to participate in certain
recently announced phenol capacity expansions, it has not reached any agreement
or understanding with respect to any such participation and any discussions, to
date, have been merely exploratory in nature.
The indebtedness expected to be repaid as of March 31, 1997, consists of
(i) approximately $14.4 million incurred to finance the acquisition of the Blue
Island Plant and related capital expenditures, which accrues interest on the
unpaid principal balance at LIBOR plus 3.5% (9.2% per annum as of March 31,
1997) and matures in June 2002, (ii) approximately $1.8 million used to finance
the construction of the Company's headquarters in Tampa, which accrues interest
on the unpaid principal balance at 9.59% per annum and matures in June 2004 and
(iii) approximately $0.9 million incurred to finance the acquisition of the JLM
Terminal which accrues interest on the unpaid principal balance at 10.9% per
annum and matures in June 2000. The above amounts include prepayment penalties
and accrued interest totaling $1.1 million as of March 31, 1997.
Pending use of the net proceeds for the above purposes, the Company intends
to invest such funds in short-term, interest-bearing, investment grade
obligations.
The Company will not receive any proceeds from the sale of shares by the
Selling Stockholder.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock
and does not anticipate that it will pay dividends in the foreseeable future.
The Company currently intends to retain future earnings, if any, for the future
operation and expansion of the Company's business. Any determination to pay
dividends in the future will be at the discretion of the Company's Board of
Directors and will be dependent upon the Company's results of operations,
financial restrictions, restrictions imposed by applicable law and other factors
deemed relevant by the Board of Directors. Furthermore, the Company and its
subsidiaries are restricted from paying dividends under certain credit
agreements to which they are a party. See "Risk Factors -- Absence of Dividends;
Restrictions on Dividends."
12
<PAGE> 14
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
as of March 31, 1997 and (ii) the capitalization of the Company as adjusted to
give effect to the Offering after deducting the estimated underwriting discount
and estimated offering expenses payable by the Company and the anticipated
application by the Company of the estimated net proceeds therefrom. See "Use of
Proceeds." The table should be read in conjunction with the Selected
Consolidated Financial Data and Consolidated Financial Statements of the Company
and Notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------
AS
ACTUAL ADJUSTED(2)
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total short-term debt(1).................................... $22,276 $
======= =======
Long-term debt, excluding current maturities:
Bank debt................................................. $15,421
Loan payable to stockholder............................... 905
------- -------
Total long-term debt.............................. 16,326
Stockholders' equity:
Common stock.............................................. --
Additional paid-in capital................................ 540
Retained earnings......................................... 14,870
Foreign currency translation adjustment................... (152)
Treasury stock............................................ (522)
------- -------
Total stockholders' equity........................ 14,736
------- -------
Total capitalization........................................ $31,062 $
======= =======
</TABLE>
- ---------------
(1) Consists of the current portion of long-term debt and loans payable.
(2) Adjusted to give effect to the issuance of shares of Common Stock by
the Company at an assumed initial public offering price of $ per
share and the application of the estimated net proceeds as of the beginning
of the period to repay certain indebtedness as described under "Use of
Proceeds."
13
<PAGE> 15
DILUTION
As of March 31, 1997, the net tangible book value of the Company was
approximately $13.2 million, or $ per share of outstanding Common
Stock. "Net tangible book value per share" represents the total amount of
tangible assets of the Company reduced by the amount of total liabilities and
divided by the number of shares of Common Stock outstanding after giving effect
to the stock split described in Note 19 of Notes to Consolidated Financial
Statements. After giving effect to the sale by the Company of the shares
of Common Stock in the Offering at an assumed initial public offering price of
$ per share and after deducting estimated underwriting discounts and
offering expenses, the net tangible book value of the Company at March 31, 1997
would have been approximately $ million or $ per share of Common
Stock, representing an immediate increase in net tangible book value of
approximately $ per share of Common Stock to existing stockholders and
an immediate dilution of approximately $ per share of Common Stock to
new investors in the Offering. Dilution per share represents the difference
between the price per share paid by new investors and the net tangible book
value per share immediately after the Offering. The following table illustrates
the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
Net tangible book value per share at March 31, 1997....... $
Increase in net tangible book value per share attributable
to new investors in the Offering.......................
-------
Net tangible book value per share after the Offering.................
-------
Net tangible book value per share dilution to new investors in the
Offering........................................................... $
=======
</TABLE>
The following table sets forth the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company and the
average price per share of Common Stock paid by existing stockholders and by new
investors purchasing shares of Common Stock in the Offering:
<TABLE>
<CAPTION>
CONSIDERATION PAID
SHARES PURCHASED TO THE COMPANY AVERAGE
------------------- ------------------- PRICE PER
NUMBER(1) PERCENT AMOUNT PERCENT SHARE
--------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................... % $ % $
New investors............................
------- ----- ------- -----
Total.......................... 100.0% $ 100.0%
======= ===== ======= =====
</TABLE>
- ---------------
(1) Based on shares of Common Stock outstanding as of March 31, 1997,
after giving effect to the Offering. Excludes shares of Common Stock
issuable upon the exercise of outstanding stock options or upon the vesting
of shares of restricted stock which are to be granted effective upon
completion of the Offering.
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below is certain selected consolidated historical financial
information of the Company and its subsidiaries as of December 31, 1992, 1993,
1994, 1995 and 1996 and for the years then ended and for the three months ended
March 31, 1996 and 1997. Such information has been derived from the Company's
Consolidated Financial Statements and related Notes thereto as of such dates and
with respect to such periods, which Consolidated Financial Statements have been
audited by Deloitte & Touche LLP, independent auditors. Such firm's report on
the Company's Consolidated Financial Statements as of December 31, 1995 and 1996
and for each of the three years ended December 31, 1994, 1995 and 1996, is
included elsewhere in this Prospectus. See the Consolidated Financial Statements
and related Notes included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
selected consolidated financial data presented below as of and for the three
months ended March 31, 1996 and 1997 is unaudited and was prepared by management
of the Company on the same basis as the audited Consolidated Financial
Statements included elsewhere in this Prospectus and, in the opinion of
management of the Company, includes all adjustments necessary to present fairly
the information set forth therein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues............................ $199,751 $174,322 $218,570 $289,371 $236,521 $57,861 $ 80,518
Cost of sales....................... 190,659 165,190 206,907 265,461 208,282 51,171 73,671
-------- -------- -------- -------- -------- ------- --------
Gross profit...................... 9,092 9,132 11,663 23,910 28,239 6,690 6,847
Selling, general and administrative
expenses.......................... 7,328 7,176 9,280 15,176 17,238 4,015 3,918
-------- -------- -------- -------- -------- ------- --------
Operating income.................. 1,764 1,956 2,383 8,734 11,001 2,675 2,929
Interest income (expense) -- net.... 246 (128) (371) (1,757) (2,815) (641) (628)
Other income -- net................. 126 318 453 152 197 64 41
Foreign currency exchange (loss)
gain -- net....................... -- -- (319) (1,075) (527) (799) 63
-------- -------- -------- -------- -------- ------- --------
Income before minority interest
and income taxes................ 2,136 2,146 2,146 6,054 7,856 1,299 2,405
Minority interest in (loss) income
of subsidiaries................... (3) (20) (64) 5 (82) (7) (9)
-------- -------- -------- -------- -------- ------- --------
Income from continuing operations
before income taxes,
discontinued operations and
extraordinary item.............. 2,133 2,126 2,082 6,059 7,774 1,292 2,396
Income tax provision................ 736 969 973 2,430 3,417 970 836
-------- -------- -------- -------- -------- ------- --------
Income from continuing operations
before discontinued operations
and extraordinary item.......... $ 1,397 $ 1,157 $ 1,109 $ 3,629 $ 4,357 $ 322 $ 1,560
======== ======== ======== ======== ======== ======= ========
Net income........................ $ 1,134 $ 858 $ 1,049 $ 3,182 $ 3,929 $ 239 $ 1,476
======== ======== ======== ======== ======== ======= ========
Pro forma income per share from
continuing operations before
discontinued operations and
extraordinary item(1)............. $ $
Pro forma shares outstanding(1).....
OTHER FINANCIAL DATA:
Depreciation and amortization
expense........................... $ 322 $ 352 $ 572 $ 1,522 $ 2,524 $ 532 $ 678
EBITDA(2)........................... 2,086 2,308 2,955 10,256 13,525 3,207 3,607
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)........... $ 1,843 $ 1,047 $ 1,498 $ (274) $ (61) $ 5,119 $ (825)
Total assets........................ 37,642 35,945 55,031 86,498 87,292 81,455 108,745
Total debt.......................... 6,353 5,182 6,561 23,204 31,043 27,756 38,602
Total stockholders' equity.......... 6,295 6,462 7,411 10,519 13,444 10,618 14,736
</TABLE>
- ---------------
(1) Adjusted to give effect to the issuance of shares of common stock by
the Company at an assumed initial public offering price of $ per share
and the application of the estimated net proceeds as of the beginning of the
period to repay certain indebtedness as described under "Use of Proceeds."
(2) EBITDA represents the operating income of the Company plus depreciation and
amortization. EBITDA is not a measure of financial performance under
generally accepted accounting principles ("GAAP") and may not be comparable
to other similarly titled measures by other companies. EBITDA does not
represent net income or cash flows from operations as defined by GAAP and
does not necessarily indicate that cash flows will be sufficient to fund
cash needs. As a result, EBITDA should not be considered an alternative to
net income as an indicator of operating performance or to cash flows as a
measure of liquidity. EBITDA is included in this Prospectus because it is a
basis upon which the Company assesses its financial performance, and certain
covenants of the Company's borrowing agreements are tied to similar
measures. Supplemental selected consolidated cash flow information is
included below:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities................... $ (1,244) $ 3,487 $ 6,064 $ 2,746 $ 26 $(3,565) $ (5,894)
Investing activities................... (2,687) (3,229) (1,218) (4,661) (6,631) (1,480) (443)
Financing activities................... 4,900 (2,086) 85 (469) 6,705 4,411 7,485
Capital expenditures..................... 2,513 3,161 1,221 2,320 7,347 1,445 371
</TABLE>
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Consolidated Financial Data" and the Consolidated Financial Statements of the
Company and the Notes thereto included in this Prospectus. In particular, for
information regarding the Company's operations in different industry segments
and geographic locations see Note 17 of Notes to Consolidated Financial
Statements.
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
forward-looking statements included in this Prospectus are based on current
expectations and information available to the Company on the date hereof, and
the Company assumes no obligation to update any such forward-looking statements.
These forward-looking statements involve risks and uncertainties including,
among others: (i) the cyclical nature of the worldwide chemical market, (ii) the
possibility of excess production capacity, (iii) fluctuations in the cost and
availability of raw material prices, (iv) the political and economic
uncertainties associated with international operations, (v) fluctuations in
foreign exchange, (vi) the risks associated with potential acquisitions and
(vii) the ability to successfully implement other features of the Company's
business strategy. See "Risk Factors." The Company's actual results could differ
materially from those anticipated in such forward-looking statements.
GENERAL
JLM is a leading marketer and distributor of certain commodity chemicals,
principally acetone and phenol. The Company believes it is the second largest
marketer of acetone and the fourth largest marketer of phenol in North America.
JLM is also a global distributor of olefins, principally propylene, as well as a
variety of other commodity and specialty chemicals. In order to provide stable
and reliable sources of supply for its products, the Company (i) maintains
long-established supplier relationships with several major chemical companies,
(ii) manufactures phenol and acetone and (iii) sources acetone from its joint
venture manufacturing operation. JLM's operating income has grown from $2.4
million in 1994 to $11.0 million in 1996, a compound annual growth rate of
114.9%. This growth was achieved primarily as a result of the acquisition and
successful integration of the Blue Island Plant, increased sales of existing
products and the addition of new products.
A majority of the Company's revenues are derived from the sale of commodity
chemicals, prices for which are subject to cyclical fluctuations. The Company
endeavors to enter into supply contracts that provide a fixed percentage profit
per unit of product sold. As a result, the Company believes that revenues may
not be an accurate indicator of the Company's overall financial performance.
Rather, revenues should be considered along with operating income and net income
to accurately measure the Company's financial performance. For example as
average acetone, phenol and propylene selling prices declined from 1995 to 1996,
the Company's revenues declined by approximately 18.3% over the same period.
However, in 1996 operating income and net income increased 26.0% and 23.5%,
respectively, in comparison to the prior year's results.
The Company's business consists of a manufacturing and a marketing segment.
The Company's manufacturing segment includes the operations of the Blue Island
Plant and the sale of acetone manufactured at the Mt. Vernon Plant. The
Company's marketing segment includes its distribution, storage and terminaling
operations and all other sourcing operations.
17
<PAGE> 19
Set forth below, for the periods indicated, is certain information
regarding the contributions by the manufacturing and marketing segments to the
Company's revenues, gross profit, operating income, gross margin and operating
margin. The marketing segment revenues include an assumed selling commission
determined in accordance with industry standards for the sale of products that
are manufactured at the Blue Island Plant. In addition, the marketing segment
operating income reflects the expenses associated with the sale of such
products. The marketing segment also includes an assumed allocation of revenues,
costs of goods sold and expenses associated with the sale of products sourced
from the Mt. Vernon Plant, which allocation has been determined on a basis
consistent with the assumed commission for sale of products manufactured at the
Blue Island Plant. Results for any one or more periods are not necessarily
indicative of annual results or continuing trends.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ ---------------------------------
1994 1995 1996 1996 1997
---------------- ---------------- ---------------- --------------- ---------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Marketing............. $193,836 88.7% $229,505 79.3% $176,274 74.5% $39,983 69.1% $64,186 79.7%
Manufacturing......... 24,734 11.3 59,866 20.7 60,247 25.5 17,878 30.9 16,332 20.3
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Total revenues.......... $218,570 100.0% $289,371 100.0% $236,521 100.0% $57,861 100.0% $80,518 100.0%
Gross profit:
Marketing............. $ 8,919 76.5% $ 14,154 59.2% $ 15,241 54.0% $ 3,053 45.6% $ 3,265 47.7%
Manufacturing......... 2,744 23.5 9,756 40.8 12,998 46.0 3,637 54.4 3,582 52.3
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Total gross profit...... $ 11,663 100.0% $ 23,910 100.0% $ 28,239 100.0% $ 6,690 100.0% $ 6,847 100.0%
Segment operating
income:
Marketing............. $ 4,045 86.7% $ 5,186 45.7% $ 5,011 39.8% $ 959 30.5% $ 1,367 39.0%
Manufacturing......... 621 13.3 6,164 54.3 7,586 60.2 2,186 69.5 2,137 61.0
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Total segment operating
income................ $ 4,666 100.0% $ 11,350 100.0% $ 12,597 100.0% $ 3,145 100.0% $ 3,504 100.0%
Corporate expense....... (2,283) -- (2,616) -- (1,596) -- (470) -- (575) --
-------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Total operating
income................ $ 2,383 100.0% $ 8,734 100.0% $ 11,001 100.0% $ 2,675 100.0% $ 2,929 100.0%
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF SEGMENT REVENUES
--------------------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ -----------------------------
1994 1995 1996 1996 1997
-------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross margin:
Marketing.................... 4.6% 6.2% 8.6% 7.6% 5.1%
Manufacturing................ 11.1 16.3 21.6 20.3 21.9
----- ----- ----- ----- -----
Total gross margin........... 5.3% 8.3% 11.9% 11.6% 8.5%
Segment operating margin:
Marketing.................... 2.1% 2.3% 2.8% 2.4% 2.1%
Manufacturing................ 2.5 10.3 12.6 12.2 13.1
----- ----- ----- ----- -----
Total segment operating
margin....................... 2.1% 3.9% 5.3% 5.4% 4.4%
</TABLE>
Marketing Segment
The marketing segment revenues are influenced largely by the volume of new
and existing products sold by the Company. The volume of products sold depends
on a number of factors, including growth in the homebuilding and automobile
sectors and the overall economic environment. The Company's supply agreements,
primarily relating to acetone, frequently contain a term providing for a fixed
percentage profit per unit of product sold. In addition, the Company's supplier
and customer contracts have a provision permitting the Company to purchase or
sell additional product at the Company's option, typically plus or minus 5.0% of
the contractual volume amount. As a result, during a period of pricing
volatility, the Company has the opportunity to improve its profitability by
exercising the appropriate option to either build inventory in a rising price
environment or to sell product for future delivery in a declining price
environment.
18
<PAGE> 20
In 1995, the Company instituted changes in its shipping and handling of
olefins in order to increase its olefins marketing gross profit margins.
Specifically, the Company now attempts to secure free on board ("FOB") shipping
terms for its bulk commodity sales and, when unable to do so, attempts to
negotiate extended free time for unloading vessels at the port of destination.
By doing so, the Company has reduced the risks of incurring charges for delays
in unloading vessels at the port of destination. In 1995, as a result of the
implementation of these changes, the Company experienced lower revenues, but
improved gross margins, from its olefins marketing activities.
In May 1997, the Company and its joint venture partners agreed to
restructure their investments in Olefins Terminal Corporation ("OTC"). As a
result, the Company and Ultramar Diamond Shamrock ("UDS") bought out the
interest of a third joint venture partner and each became a 50% owner of OTC.
The Company accounts for its investment in OTC through the equity method of
accounting. (See Note 5 of Notes to Consolidated Financial Statements). As part
of the restructuring, OTC's $3.6 million of existing indebtedness was refinanced
and the take-or-pay terminaling agreement between OTC and the Company's olefins
marketing operations was cancelled and a new terminaling arrangement
implemented. The original take-or-pay terminaling agreement resulted in charges
to JLM's pre-tax income of $1.3 million in 1994, $1.3 million in 1995, and $1.4
million in 1996, and the Company did not generate significant revenues at the
terminaling facility to offset these charges. Under the new arrangement,
effective as of January 1, 1997, the Company will pay terminal throughput fees
only when it utilizes the terminaling facility thus generating offsetting
revenues. The Company expects that this arrangement should improve the Company's
gross profit potential (as compared to historical results) since the Company
will no longer incur terminal fees without accompanying revenues.
The Company's Venezuelan operations, which accounted for 4.3% of 1996 total
revenues, expose it to the risk of hyperinflation and currency devaluation. In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52,
Foreign Currency Translation, the effects of fluctuations in exchange rates in
translating the net assets of the financial statements in a hyperinflationary
economy require any gains or losses to be included in current net income. During
the period 1994 through April 1996, exchange controls, followed by rapid
devaluation, created translation losses which were charged against earnings in
each of the respective accounting periods. In April 1996, exchange controls were
lifted and have contributed to stabilizing the currency. See "Effect of
Inflation; Foreign Currency Exchange Rates" below for a further discussion of
the impact of exchange rates on the Company's results of operations.
Manufacturing Segment
The results of operations of the Company's manufacturing segment are
influenced by a number of factors, including economic conditions, competition
and the cost of raw materials, principally propylene and benzene. The Company's
ability to pass along raw material price increases to its customers is limited
because the commodity nature of the chemicals manufactured at the Blue Island
Plant restricts the Company's ability to increase prices.
As a result of an anticipated propylene price increase, in 1996 the Company
entered into a financial hedging contract in order to minimize its exposure in
the first quarter of 1997 to fluctuations in the price of propylene. Gains and
losses for such contracts are recognized as an adjustment of cost of sales at
the time the finished products are sold. As a result, in the first quarter of
1997 the Company had a gain on the hedging contract of approximately $0.5
million, which reduced cost of sales for this period by a corresponding amount.
The development of financial instruments to hedge against changes in the
prices of propylene and benzene has only recently occurred and the Company has
just begun using such instruments. The Company may seek periodically in the
future, to the extent available, to enter into financial hedging contracts for
the purchase of propylene and benzene in an effort to manage its raw material
purchase costs (see Note 2 of Notes to Consolidated Financial Statements). There
can be no assurance that the use of such instruments by the Company will be
successful. The Company can be exposed to losses in connection with such
contracts equal to the amount by which the fixed hedge price on the contract is
above the market price for such chemicals at the time of purchase.
19
<PAGE> 21
Since its acquisition in 1995, the Blue Island Plant has operated at or
near full capacity and, in order to economically expand its production capacity,
it would be necessary to increase its capacity to that of a worldscale facility.
However, physical limitations at the Blue Island Plant prohibit such an increase
and, as a result, the Company has no plans to expand the Blue Island Plant. In
1996, the first full year of ownership of the Blue Island Plant, approximately
60.2% of the Company's total segment operating income was derived from the
manufacturing segment.
Since 1994, the Company has sourced, on average, approximately 250 million
pounds annually of acetone from the Mt. Vernon Plant. The Company is required to
purchase all of the acetone produced at the Mt. Vernon Plant and not consumed by
GE Plastics. In 1996, the amount of acetone available to JLM was reduced by
approximately 15 million pounds and it is anticipated that over the next four
years the amount of acetone available to JLM will be further reduced by
approximately 35 to 40 million pounds. The reduction in the amount of acetone
sourced from the Mt. Vernon Plant is the result of increased consumption by GE
Plastics. In view of capacity limitations affecting the Blue Island Plant and
the anticipated reduction in product sourced from the Mt. Vernon Plant, the
Company anticipates any growth in the manufacturing segment will come as a
result of additional acquisitions or joint ventures.
Tax Matters
JLM accounts for income taxes on a consolidated basis and accrues for tax
liabilities based on its U.S. earnings. The Company's foreign subsidiaries file
tax returns in the country where incorporated. To the extent these subsidiaries
are profitable, taxes are payable based on that country's prevailing tax rate.
Upon repatriation of non-U.S. earnings, the U.S. allows a foreign tax credit to
be applied against the Company's U.S. consolidated return for the foreign taxes
paid by the Company's foreign subsidiaries. If losses are incurred, countries in
which the Company's foreign subsidiaries are incorporated generally allow the
losses to be carried forward and applied against income earned in subsequent
years. The Company's Venezuelan operation has incurred losses which have
generated net operating loss carryforwards ("NOL's") and, based on Venezuelan
tax guidelines, these NOL's may be carried forward for three years. However,
these losses are not deductible for U.S. federal income tax purposes and as a
result cannot be offset against U.S. pre-tax profits.
In an effort to reduce its U.S. federal and state income tax liability, in
1994 the Company established a foreign sales corporation ("FSC"). Under the
Internal Revenue Code, FSCs are granted tax incentives for exporting U.S.
produced goods overseas, and as such, there are specific tax benefits to the
Company for the products it exports. If specific conditions are met under the
Internal Revenue Code, up to 65.0% of the commission income earned by the FSC
from these export transactions may be exempted from U.S. taxation. Since the
formation of the FSC, the Company has met these requirements, thereby reducing
its taxable income.
20
<PAGE> 22
Phenol, Acetone and Propylene Pricing and Volumes
Phenol, acetone and propylene are the principal commodity chemicals sold by
JLM and together accounted for approximately 56.0% of revenues in 1996. Set
forth below, for the periods indicated, is certain information regarding the
Company's quarterly average selling prices and volumes for acetone, phenol and
propylene. The Company believes that, for the periods indicated, its average
selling prices have generally followed market prices, which are driven by
changes in the balance between supply and demand, the price of feedstocks and
the level of general economic activity. Results for any one or more periods are
not necessarily indicative of annual results or continuing trends.
QUARTERLY SALES PRICE PER POUND AND VOLUME OF PRODUCT SOLD
<TABLE>
<CAPTION>
ACETONE PHENOL PROPYLENE
--------------- -------------- --------------
$ LBS $ LBS $ LBS
---- ----- ---- ---- ---- ----
(POUNDS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
1994
First quarter................................... 0.12 97.8 0.21 26.3 0.14 71.2
Second quarter.................................. 0.14 97.9 0.28 5.9 0.16 85.4
Third quarter................................... 0.16 97.6 0.27 2.9 0.24 38.9
Fourth quarter.................................. 0.24 77.6 0.31 2.5 0.30 56.6
1995
First quarter................................... 0.25 92.1 0.42 2.3 0.29 13.9
Second quarter.................................. 0.27 100.8 0.36 9.2 -- --
Third quarter................................... 0.30 93.6 0.33 22.9 0.20 5.5
Fourth quarter.................................. 0.30 101.7 0.30 25.9 0.13 9.2
1996
First quarter................................... 0.25 115.6 0.30 25.5 0.12 9.0
Second quarter.................................. 0.23 106.3 0.28 31.1 0.23 34.2
Third quarter................................... 0.20 110.0 0.34 23.7 0.22 12.4
Fourth quarter.................................. 0.19 92.1 0.36 23.9 0.20 42.1
1997
First quarter................................... 0.18 114.2 0.35 23.9 0.25 90.4
</TABLE>
Based upon information currently available to the Company, it is believed
that prices for acetone and phenol will strengthen during the remainder of 1997
and that propylene prices will show continued volatility. See
"Business -- Industry Overview."
RESULTS OF OPERATION
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996
Revenues. Revenues increased $22.6 million to $80.5 million for the three
months ended March 31, 1997 from $57.9 million for the comparable period in
1996, an increase of 39.2%. Revenues for the marketing segment increased $24.2
million to $64.2 million for the three months ended March 31, 1997 from $40.0
million for the comparable period in 1996, an increase of 60.5%. The increase in
marketing segment revenues was principally the result of increased sales of
propylene, principally in Asia. Revenues for the manufacturing segment decreased
by $1.6 million to $16.3 million for the three months ended March 31, 1997 from
$17.9 million for the comparable period in 1996, a decrease of 8.6%. The
decrease in manufacturing segment revenues was principally the result of a
decline in selling prices for acetone, which was only partially offset by an
increase in selling prices for phenol. Sales volumes of acetone from the Mt.
Vernon Plant and acetone and phenol from the Blue Island Plant were
substantially the same for the three months ended March 31, 1997 and 1996.
Gross Profit. Gross profit increased $0.1 million to $6.8 million for the
three months ended March 31, 1997 from $6.7 million for the comparable period in
1996, an increase of 2.3%. As a percentage of revenues, gross profit decreased
to 8.5% for the three months ended March 31, 1997 from 11.6% for the comparable
period in 1996. Gross profit for the marketing segment increased $0.2 million to
$3.2 million for the three months ended March 31, 1997 from $3.0 million for the
comparable period in 1996, an increase of 6.5%, principally as a result of the
new terminaling arrangement with OTC (See Note 18 of Notes to Consolidated
Financial Statements). Gross profit for the manufacturing segment decreased by
$0.1 million to $3.6 million for the three months ended March 31, 1997 from $3.7
million for the comparable period in 1996, a decrease of 2.7%. The increase in
total
21
<PAGE> 23
gross profit was principally the result of increases in the selling prices for
phenol in the first quarter of 1997, reductions in manufacturing costs
associated with the successful implementation of a new manufacturing technique
in the production of cumene at the Blue Island Plant and a reduction in raw
material costs resulting from a successful hedge of its propylene purchases.
During the three months ended March 31, 1997, approximately 13 million pounds of
propylene purchases were covered by a fixed financial hedge for which the
Company had a gain of $492,970, which reduced its cost of sales for this period
by a corresponding amount. The reduction in cost of sales resulting from the
propylene hedge was partially offset by an increase in the cost of benzene,
which the Company elected not to hedge. Gross profit in both the manufacturing
and marketing segments was also adversely impacted by decreases in acetone
selling prices.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $0.1 million to $3.9 million for the three
months ended March 31, 1997 from $4.0 million for the comparable period in 1996,
a decrease of 2.4%. This decrease was principally as a result of reduced
compensation cost associated with a reduction in sales personnel.
Operating Income. Operating income increased $0.2 million to $2.9 million
for the three months ended March 31, 1997 from $2.7 million for the comparable
period in 1996, an increase of 9.5%. This increase was principally the result of
the factors that increased gross profit discussed above together with the
reduction in selling, general and administrative expenses achieved in the first
three months of 1997.
Interest Expense -- Net. Interest expense decreased slightly by $13,000 to
$628,000 for the three months ended March 31, 1997 from $641,000 for the
comparable period in 1996, a decrease of 2.0%.
Foreign Currency Exchange (Loss) Gain. Foreign currency exchange increased
$862,000 to a gain of $63,000 for the three months ended March 31, 1997 from a
loss of $799,000 for the comparable period in 1996. This gain was principally
the result of the Company's activities in Venezuela.
Income Tax Provision. The Company's provision for income taxes decreased
$0.2 million to $0.8 million for the three months ended March 31, 1997 from $1.0
million for the comparable period in 1996, a decrease of 13.8%. The Company's
effective tax rate for the three months ended March 31, 1997 was 36.0% as
compared to 99.5% for the comparable period of 1996. The rate for 1997 was
significantly lower than that of prior periods due to the increased proportion
of international sales associated with the Company's foreign sales corporation.
Excluding Venezuelan operations, the effective tax rate for the three months
ended March 31, 1997 would have been approximately 35.3% compared to the
effective tax rate for the three months ended March 31, 1996 of 46.9%.
Net Income. Net income increased $1.3 million to $1.5 million for the
three months ended March 31, 1997 from $0.2 million for the comparable period in
1996. The increase in net income was due to the factors stated above.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. Revenues decreased $52.9 million to $236.5 million for the year
ended December 31, 1996 from $289.4 million for the prior year, a decrease of
18.3%. Revenues for the marketing segment decreased $53.2 million to $176.3
million for the year ended December 31, 1996 from $229.5 million for the prior
year, a decrease of 23.2%. Substantially all of the decrease was a result of
changes made by the Company in its olefins marketing strategy to reduce its
exposure to shipping and handling charges. To a lesser extent, the decrease was
also attributable to a decrease of $12.1 million in opportunistic sales of
certain products in 1995 that did not recur in 1996 and a decrease in revenues
of $6.8 million from Venezuelan operations primarily as a result of the
devaluation of the local currency. These decreases more than offset the increase
in revenues of $9.0 million from a full year of the Company's European
operations in 1996 as compared to nine months in 1995. Revenues for the
manufacturing segment increased $0.3 million to $60.2 million for the year ended
December 31, 1996, from $59.9 million for the prior year, an increase of 0.6%.
This increase was principally the result of a decline in sale of acetone from
the Mt. Vernon Plant which was offset by the $17.9 million increase in sales
resulting from a full year of the Blue Island Plant's operations in 1996
compared to seven months in 1995.
22
<PAGE> 24
Gross Profit. Gross profit increased $4.3 million to $28.2 million for the
year ended December 31, 1996 from $23.9 million for the prior year, an increase
of 18.1%. As a percentage of revenues, total gross profit increased to 11.9% in
1996 compared to 8.3% for the prior year, primarily due to the full-year
contribution of higher gross margin products from the Blue Island Plant and
higher distribution margins. Gross profit for the marketing segment increased
$1.1 million to $15.2 million for the year ended December 31, 1996, from $14.1
million for the prior year, an increase of 7.8%. Despite generally lower selling
prices on many products, margins were significantly higher in 1996 as compared
to the prior year principally as a result of the exercise by the Company of its
options on certain acetone sales contracts. Gross profit for the manufacturing
segment increased $3.2 million to $13.0 million for the year ended December 31,
1996 from $9.8 million for the prior year, an increase of 33.2%, primarily as a
result of including a full year of operations of the Blue Island Plant which
generally carry higher gross margins.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.1 million to $17.3 million for the year
ended December 31, 1996 from $15.2 million for the prior year, an increase of
13.6%. The increase was primarily the result of including a full year of
operations of the Blue Island Plant. To a lesser extent, the marketing segment
experienced increased distribution costs in 1996 as compared to 1995, which more
than offset reduced compensation costs for this period.
Operating Income. Operating income increased $2.3 million to $11.0 million
for the year ended December 31, 1996 from $8.7 million for the prior year an
increase of 26.0%. The increase was principally the result of the increase in
gross profit, which was partially offset by the increase in selling, general and
administrative expenses.
Interest Expense -- Net. Interest expense increased $1.0 million to $2.8
million for the year ended December 31, 1996 from $1.8 million for the prior
year principally due to the additional interest expense associated with the
inclusion of the Blue Island Plant for the full year and to a lesser extent to
increased borrowings used to fund working capital requirements associated with
the Company's marketing segment.
Foreign Currency Exchange (Loss) Gain. Foreign currency exchange decreased
$0.6 million to a loss of $0.5 million for the year ended December 31, 1996 from
a loss of $1.1 million for the prior year. Substantially all of these losses
were the result of the Company's activities in Venezuela. In December 1995, the
Company began using the free market rate, in accordance with SFAS No. 52, to
recognize foreign currency exchange gains and losses for its Venezuelan
subsidiary rather than using the official Venezuelan rate. The effect of using
the free market rate resulted in an additional $0.4 million foreign exchange
loss during 1995. During the first quarter of 1996, the free market exchange
rate for U.S. dollars rose from 350 to 470 bolivars per dollar, at which time it
stabilized for the remainder of 1996. See "Effect of Inflation; Foreign Currency
Exchange Rates" discussed below.
Income Tax Provision. The Company's provision for income taxes increased
$1.0 million to $3.4 million for the year ended December 31, 1996 from $2.4
million for the prior year, an increase of 40.6%, principally as a result of the
Company's inability to apply $1.3 million of pre-tax losses from its Venezuelan
operations to reduce its U.S. taxable income. The Company's effective income tax
rate increased to 44.4% for 1996 as compared to 40.1% for 1995.
Net Income. Net income increased $0.7 million to $3.9 million for the year
ended December 31, 1996 from $3.2 million for the prior year, an increase of
23.5%, principally as a result of the factors discussed above.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues. Revenues increased $70.8 million to $289.4 million for the year
ended December 31, 1995 from $218.6 million for the prior year, an increase of
32.4%. Revenues for the marketing segment increased $35.7 million to $229.5
million for the year ended December 31, 1995 from $193.8 million for the prior
year, an increase of 18.4%. The increase in the marketing segment's revenues
resulted primarily from the start-up of the Company's European subsidiary in
April 1995, and from the expansion of the Company's Venezuelan operations. In
addition, the marketing segment benefitted from higher sales volumes and selling
prices of its two largest products, acetone and phenol. Revenues for the
manufacturing segment increased $35.2 million to $59.9 million
23
<PAGE> 25
for the year ended December 31, 1995 from $24.7 million for the prior year, an
increase of 142.0%. The increase in manufacturing segment revenues was
principally the result of increased selling prices for acetone from the Mt.
Vernon Plant and the inclusion of seven months of operations of the Blue Island
Plant after its acquisition in June 1995.
Gross Profit. Gross profit increased $12.2 million to $23.9 million for
the year ended December 31, 1995 from $11.7 million for the prior year, an
increase of 105.0%. The marketing segment's gross profit increased $5.2 million
to $14.2 million for the year ended December 31, 1995 from $8.9 million for the
prior year, an increase of 58.7% as a result of increased revenues as explained
above and higher margins. As a percentage of revenues, total gross profit
increased to 8.3% in 1995 as compared to 5.3% for 1994 primarily as a result of
the higher gross margins of the Company's manufacturing segment and Venezuelan
operations. The manufacturing segment's gross profit increased $7.1 million to
$9.8 million for the year ended December 31, 1995 from $2.7 million for the
prior year, an increase of 255.5%, primarily resulting from including operations
of the Blue Island Plant for a portion of the year.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $5.9 million to $15.2 million for the year
ended December 31, 1995 from $9.3 million for the prior year, an increase of
63.5%, primarily as a result of including the expenses associated with the Blue
Island Plant and the expansion of JLM's international operations, principally in
Venezuela as described above.
Operating Income. Operating income increased $6.3 million to $8.7 million
for the year ended December 31, 1995 from $2.4 million for the prior year, an
increase of 266.5%. The increase was primarily due to including the operations
of the Blue Island Plant which more than offset the increase in selling, general
and administrative expenses.
Interest Expense -- Net. Interest expense increased $1.4 million to $1.8
million for the year ended December 31, 1995 from $0.4 million for the prior
year. The increase was principally the result of the borrowings made to effect
the acquisition of the Blue Island Plant and to a lesser extent the result of
increased borrowings used to fund working capital requirements associated with
the expanded marketing segment.
Foreign Currency Exchange (Loss) Gain. Foreign currency exchange increased
$0.8 million to a loss of $1.1 million for the year ended December 31, 1995 from
a loss of $0.3 million for the prior year. The loss was primarily due to
Venezuelan operations.
Income Taxes. The Company's provision for income taxes increased $1.4
million to $2.4 million for the year ended December 31, 1995 from $1.0 million
for the prior year, an increase of 149.7%, principally due to the increase in
income. The Company's effective income tax rate decreased to 40.1% in 1995 as
compared to 45.1% in 1994, as a result of the increase in foreign currency loss
which is not deductible for tax purposes.
Net Income. Net income increased $2.1 million to $3.2 million for the year
ended December 31, 1995 from $1.1 million for the prior year, an increase of
203.3%. The increase in net income was due to the factors stated above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities increased $2.3 million to $5.9
million for the period ended March 31, 1997 from $3.6 million for the prior
period in 1996. This increase was primarily the result of increases in the
Company's working capital accounts which more than offset an increase in net
income of $1.2 million. Net cash used in investing activities decreased $1.0
million to $0.4 million for the period ended March 31, 1997 from $1.4 million
for the prior period in 1996.
Net cash provided by financing activities increased $3.1 million to $7.5
million for the period ended March 31, 1997 as compared to $4.4 million provided
in the prior period of 1996. As of March 31, 1997, the Company had net
borrowings on its loans payable and long-term debt of $7.6 million. For the
period ended March 31, 1997, Aurora and Phoenix made distributions to their
stockholders of $73,698. As of March 31, 1997, the Company had a borrowing
capacity of $30.5 million under various credit agreements as described in Note 7
of Notes to the Consolidated Financial Statements.
24
<PAGE> 26
Net cash provided by operating activities decreased $2.7 million to $26,402
for the year ended December 31, 1996 as compared to $2.7 million in the prior
year. This decrease was primarily the result of changes in the Company's working
capital accounts which more than offset an increase in net income of $0.7
million. Net cash used in investing activities increased $2.0 million to $6.7
million for the year ended December 31, 1996 as compared to $4.7 million the
prior year. In 1996, $7.3 million of cash was used for capital expenditures as
compared to $2.3 million in the prior year. In 1996, $4.2 million of the capital
expenditures related to the zeolite efficiency upgrades at the Blue Island
Plant. The Company also received proceeds of $0.8 million in 1996 in connection
with the sale of certain assets held for sale.
Net cash provided by financing activities increased $7.2 million to $6.7
million for the year ended December 31, 1996 compared to $0.5 million used in
the prior year. In 1996, the Company had net borrowings on its loans payable,
long-term debt and stockholder loans of $7.2 million. In addition, Aurora and
Phoenix made distributions to their stockholders of $0.5 million. As of December
31, 1996, the Company had a borrowing capacity of $39.7 million under various
credit agreements as described in Note 7 of Notes to the Consolidated Financial
Statements.
Concurrent with the Offering, the Company will repay $17.1 million of
outstanding indebtedness and expects to have available borrowing capacity of
$52.8 million under its credit agreements. The Company will also have $
million of available cash on hand.
The Company is currently constructing an additional storage tank at the JLM
Terminal. The proposed storage tank will increase JLM's current storage capacity
at the JLM Terminal by 3 million pounds. The Company expects construction on the
storage tank to be completed in July 1997 with a total anticipated construction
cost of $0.6 million. Costs associated with evaluation, planning, design and
construction are ongoing and have been funded through the Company's current
credit facilities.
In April 1997, the Company entered into an agreement to purchase a 12.7%
interest in SK Chemical Trading Pte. Ltd. The agreement provides that upon
commencing construction of a chemical plant in Vietnam, the Company is required
to pay an additional $0.5 million as additional consideration for its ownership
interest in SK Chemical Trading Pte. Ltd. The Company expects to fund this
payment through the Company's current credit facilities. See
"Business -- Business Strategy."
JLM believes its liquidity and capital resources including its ability to
effect increased borrowings upon the completion of the Offering, will be
sufficient to enable JLM to continue to implement its business strategy.
ENVIRONMENTAL
It is the Company's policy to comply with all Environmental Laws and the
Company believes that it is currently in substantial compliance with all
applicable Environmental Laws pertaining to the operations of its facilities and
treatment of wastes that are generated by operations at those facilities. In
1996, the Company's expenditures relating to maintaining compliance with
Environmental Laws were approximately $0.7 million. In 1997, the Company has
budgeted approximately $1.2 million for environmental compliance costs
consisting of approximately $0.5 million for a one-time capital expenditure
relating to the installation of a thermal oxidizer at the Blue Island Plant in
response to new regulatory requirements and approximately $0.7 million of
expenditures relating to ongoing compliance with Environmental Laws. These
expenditures will be funded primarily from cash flow from operations. There can
be no assurance, however, that the actual levels of expenditures relating to
environmental compliance will not exceed the budgeted amounts either as a result
of changes in Environmental Laws to make them more stringent or the discovery of
any additional or unknown environmental confirmations relating to the Company's
operations. Any requirement compelling the Company to spend significant amounts
in excess of those budgeted for environmental compliance matters could have a
material adverse effect on the Company's financial condition or results of
operations.
Elevated levels of certain petroleum-related substances, organic chemicals
and metals, which the Company believes are a result of either use by the prior
owner of the site and/or migration from neighboring facilities, have been
detected in groundwater and/or soils at the JLM Terminal. The prior owner of the
site is currently implementing remedial work to address onsite petroleum
contamination and has agreed to indemnify the
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Company for up to $7.5 million for environmental liabilities at the JLM
Terminal. Low levels of various organic compounds, which are the result of
either historical use of the site prior to the Company's acquisition thereof
and/or migration from neighboring facilities have also been detected in the
soils and groundwater at the Blue Island Plant. However the Company has not been
required, and it does not believe that it will be required, to plan, undertake,
or fund any remedial activities at the Blue Island Plant. Low levels of organic
compounds slightly in excess of regulatory reporting thresholds were detected in
the ground water at the Company's Polychem facility. The Company has been
addressing the environmental issues that exist at that facility and analytical
data most recently collected indicate very low levels of target contaminants.
The Company is presently investigating whether the site should remain on the
list of Hazardous Sites Inventory.
The Company does not currently believe that a material amount of funds will
be required to complete remediation at any site. If the Company is required to
conduct remediation at the Blue Island Plant or remediation for which it is not
indemnified at the JLM Terminal or to complete remediation at the Polychem
facility, however, the level of expenditure that may be required to satisfy the
Company's environmental liabilities could have a material adverse effect on its
financial condition or results of operations. See "Business -- Environmental
Regulation."
EFFECT OF INFLATION; FOREIGN CURRENCY EXCHANGE RATES
Inflation generally affects the Company by increasing the cost of labor,
equipment and raw materials. The Company does not believe that inflation has had
any material effect on the Company's business over the last three years.
The Company's foreign operations expose it to the risk of exchange rate
fluctuations. If foreign currency denominated revenues are greater than costs,
the translation of foreign currency denominated costs and revenues into U.S.
dollars will improve profitability when the foreign currency strengthens against
the U.S. dollar and will reduce profitability when the foreign currency weakens.
In addition, the remeasurement of foreign currency denominated assets and
liabilities into U.S. dollars gives rise to foreign exchange gains or losses
which are included in the determination of net income. In certain instances, the
Company enters into forward currency contracts to hedge against the effect of
foreign currency fluctuations on receivables or payables denominated in other
currencies.
In May 1994, the Venezuelan government, following a period of rapid
devaluation in their currency, the bolivar, implemented certain exchange
controls including a frozen exchange rate for converting the bolivar into other
currencies. This "official" rate was initially established at 170 bolivars per
U.S. dollar. In December 1995, the Venezuelan government changed the official
exchange rate to 290. In April 1996, the exchange controls were lifted, and the
free market rate immediately rose to 470 bolivars per U.S. dollar, remaining in
a range of 470 to 480 through December 1996. These periods of devaluation in the
bolivar adversely impacted JLM's Venezuelan operating results by lowering profit
margins and generating foreign currency losses which are reported in the
Consolidated Financial Statements. As of the date hereof, the bolivar has
remained relatively stable during the last 12 months.
EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued SFAS No. 128,
Earnings Per Share. The objective of SFAS No. 128 is to simplify the computation
of earnings per share and to make the U.S. standard for computing earnings per
share more compatible with the earnings per share standards of other countries.
JLM does not anticipate that SFAS No. 128 will have a significant impact on pro
forma earnings per share.
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BUSINESS
OVERVIEW
JLM is a leading marketer and distributor of certain commodity chemicals,
principally acetone and phenol. The Company believes that it is the second
largest marketer of acetone and the fourth largest supplier of phenol in North
America. JLM is also a global distributor of olefins, principally propylene, as
well as a variety of other commodity and specialty chemicals. In order to
provide stable and reliable sources of supply for its products, the Company (i)
maintains long-established supplier relationships with several major chemical
companies (ii) manufactures phenol and acetone at its Blue Island Plant and
(iii) sources acetone from its joint venture manufacturing operation. The
Company's principal products, acetone, phenol and propylene are used in the
production of adhesives, coatings, forest product resins, paints,
pharmaceuticals, plastics, solvents and synthetic rubbers. The Company sells its
products worldwide to over 600 customers including Ashland Chemical, Inc.
("Ashland"), B.F. Goodrich Co. ("B.F. Goodrich"), Borden, Inc. ("Borden"),
Hoechst Celanese Corporation, E.I. DuPont de Nemours and Company ("DuPont"),
Dutch State Mines ("DSM"), Eli Lilly & Co., Georgia Pacific Corporation
("Georgia Pacific"), ICI Acrylics Inc. ("ICI Acrylics"), Minnesota, Mining and
Manufacturing Company, Neste Resins Corporation ("Neste"), Rohm & Haas Company
("Rohm & Haas") and Shell Chemicals Canada, Inc. ("Shell Chemicals Canada").
In 1977, John L. Macdonald, the Chief Executive Officer and President of
the Company, co-founded Gill and Duffus Chemicals, Inc., the domestic chemical
trading operation of the London-based Gill and Duffus Holding PLC. As part of a
management buy-out in 1982, Mr. Macdonald purchased Gill and Duffus Chemicals,
Inc., and subsequently merged into Steuber Company, Inc., the domestic
operations of the Steuber Group, a worldwide chemical distribution company. In
1986, Mr. Macdonald purchased the U.S. assets of the Steuber Group and formed
JLM as the successor.
Since 1986, the Company has grown rapidly by expanding its product sourcing
arrangements and product offerings, acquiring manufacturing and terminaling
facilities and providing superior customer service and product quality and
availability. Among the Company's most significant corporate milestones are (i)
its investment in 1987 in the Mt. Vernon Partnership, (ii) the formation in 1992
of OTC, (iii) the acquisition of the JLM Terminal in 1992 and (iv) the
acquisition of Blue Island Plant in 1995. In addition, the Company entered into
its first exclusive marketing agreement with Sasol Chemical Industries (PTY)
Ltd. (South Africa) ("SasolChem") in 1987 and began its expansion into the
international markets with the opening of offices in Canada in 1987, Venezuela
in 1992 and Europe in 1995.
INDUSTRY OVERVIEW
Phenol
Phenol is produced through the oxidation of cumene, which is produced from
propylene and benzene. Acetone is produced as a co-product during this
manufacturing process in the approximate ratio of 0.6 pounds of acetone for
every 1.0 pound of phenol. Approximately 80.0% of global acetone production is
produced as a co-product in the manufacture of phenol, and, as a result, phenol
demand largely determines acetone production levels. The markets for phenol and
acetone are cyclical and sensitive to changes in the balance between supply and
demand, the price of feedstocks and the level of general economic activity.
According to industry sources, current world phenol capacity is
approximately 12.4 billion pounds (4.5 billion pounds in North America). The two
largest end markets for phenol are phenolic resins, which is the Company's only
market for phenol, and bisphenol A ("BPA"). Phenolic resins are used extensively
as bonding agents and adhesives for wood products such as plywood and granulated
wood panels, and account for approximately 37.0% of total phenol demand. BPA is
used as a raw material in the manufacture of high performance plastics such as
those used in automobiles, household appliances, electronics and protective
coatings applications. BPA, the fastest growing application for phenol,
currently accounts for approximately 28.0% of phenol demand and is expected to
grow to approximately 33.0% by the year 2000. Phenol for the production of BPA
requires a greater degree of purification and is produced almost exclusively by
manufacturers of BPA for their internal consumption. Any phenol not consumed
internally by such manufacturers generally is sold to other
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end users. The Company believes sales of excess phenol by BPA producers will be
relatively limited as the demand for BPA continues to increase, which should
have a positive effect on phenol prices generally.
Phenol selling prices and margins were at cyclical highs during 1995 and
1996. The Company expects worldwide and North American phenol demand to grow by
approximately 3.5% and 2.5% per year, respectively, through 1999. The growth in
demand is anticipated to be highest in Southeast Asia and, to a lesser extent,
the United States. The Company also expects there to be little change in the
levels of phenol production through 1998. As a result, production utilization
rates should remain relatively high. Capacity expansions by several major phenol
producers of approximately 3 billion pounds worldwide (1.2 billion pounds in the
U.S.) starting in the year 2000 have recently been announced. It is unclear how
many of these projects will ultimately be completed and the Company believes
that it is possible that some of these announced capacity additions will not be
built as scheduled.
Acetone
The largest end market for acetone is as a raw material in the production
of methyl methacrylate ("MMA"), which is used as a chemical intermediate to
produce acrylic sheeting and other chemical products, and as an ingredient for
surface coating resins for the automotive and construction markets. Acetone is
also used as a raw material in the production of BPA and as an industrial
solvent.
The U.S. Federal government has recently exempted acetone from all
regulations as a volatile organic compound ("VOC"). To date, 32 states have
followed the Federal government's ruling and the Company expects acetone to be
exempted from VOC regulation by all 50 states in the near future. The Company
believes that the exemption of acetone from VOC regulation will lead to
increased demand for acetone based coatings and solvents.
According to industry sources, current world acetone production capacity is
approximately 8.5 billion pounds (2.9 billion pounds in North America). Selling
prices and margins for acetone were at cyclical highs in 1995 and early 1996,
similar to those for phenol, driven by growth in the use of acetone for the
production of MMA, BPA (for engineering plastics), and a rejuvenated market for
acetone based solvents. World demand is expected to grow approximately 2.5%
annually through 1999. Recently announced capacity additions in Europe and the
U.S. for phenol, if completed, would increase the capability for acetone
production, which could be partially offset by closure of on-purpose production
over the next few years. The Company expects acetone demand in North America to
grow approximately 2.8% annually through 1999, driven primarily by growth in the
BPA market of approximately 4.9% annually, renewed growth in acetone-based
solvents of 3.0% annually, and a continued recovery in the MMA market.
Propylene
According to industry sources, current world propylene capacity is
approximately 100 billion pounds with global demand for propylene expected to
grow approximately 5.0% per year through 1999. North American capacity is
currently approximately 30 billion pounds with North American demand expected to
grow approximately 2.5% per year through 1999. The U.S. is expected to take a
significant role in producing and sourcing propylene to international consumers.
Over 50.0% of globally produced propylene is used in the manufacture of
polypropylene which, in turn, is used primarily in plastic film and molded parts
in consumer items, including automobile components, brushes, carpeting, rope and
tape.
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BUSINESS STRATEGY
The Company's principal objective is to continue to expand the number of
sources and breadth of its chemical products and the markets in which it
distributes these products to enhance its position as a leading supplier to the
worldwide chemical industry. Key elements of the Company's business strategy
include:
- Expand Sources of Supply through Joint Ventures, Acquisitions and
Strategic Relationships. The Company will continue to seek to identify
and pursue domestic and international opportunities to expand its sources
of supply for products in or consistent with its core business. These
opportunities may include additional joint ventures, acquisitions and
strategic relationships. Consistent with this strategy, the Company formed
the Mt. Vernon joint venture with GE and an affiliate of CITGO in 1987,
acquired the Blue Island Plant in 1995 and established a long term
supplier relationship with SasolChem in 1988. Certain phenol producers
have recently announced their intentions to add approximately 3 billion
pounds of annual production capacity starting in the year 2000. JLM is
currently exploring opportunities to participate in certain of these
expansions in order to secure additional sources of phenol and acetone.
- Increase Sales of Existing Products; Add New Products. The Company will
continue to develop its existing relationships and establish new
relationships to increase the overall volume and types of products it
distributes by (i) increasing the amount distributed by the Company of an
existing supplier's output of a given chemical, (ii) distributing
additional products for existing suppliers and (iii) adding new chemical
producers to its supplier base. During 1996, the Company entered into new
agreements to distribute approximately 70 million additional pounds of
chemicals for both existing and new suppliers in 1997, including ARCO
Chemical Company ("ARCO Chemical"), Goodyear Tire & Rubber Co.
("Goodyear") and Monsanto Company ("Monsanto"). In addition, the Company
recently expanded the product line it distributes for SasolChem. To date
in 1997, the Company has entered into new agreements with CONDEA Vista
Company ("CONDEA Vista") to distribute butanol and with GE Plastics to
become a U.S. distributor of styrene.
- Continue International Expansion. The Company currently has
international operations in South America, Europe and Asia. JLM intends to
continue to utilize its chemical market experience, distribution and
logistics capabilities and industry relationships to increase its
international presence, particularly in the growing chemical markets of
Asia and South America. JLM recently purchased a minority interest in one
Singapore-based company and has agreed to purchase a minority interest in
another Singapore-based company, both of which are participating in a
Vietnamese joint venture that intends to construct a chemical plant in
Vietnam that will produce dioctyl phthlate, a chemical used in the
manufacture of plastics such as PVC. The Vietnamese joint venture also
intends to construct terminaling and storage facilities in Vietnam and
Malaysia. The Company believes that its indirect participation in the
Vietnamese joint venture also will provide it with increased access to the
Asian market.
- Continue to Provide Superior Customer Service. JLM believes that its
continued success will be in large part due to its emphasis on providing
superior customer service. The Company believes it is well positioned to
take advantage of current trends within the chemical industry as chemical
producers continue to outsource their terminaling and logistics operations
and reduce the number of outside distributors used. The Company focuses on
providing sourcing, inventory and logistics solutions for its customers
and endeavors to provide both its customers and suppliers with a level of
service that is unmatched in the industry.
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PRODUCTS AND CUSTOMERS
JLM markets more than 50 chemical products to over 600 customers worldwide.
In 1996, sales of acetone, phenol and propylene accounted for approximately
56.0% of the Company's total revenues. Set forth below is certain information
about the Company's sales of acetone, phenol, propylene and certain other
products, including representative customers for such products.
Acetone
In 1996, JLM distributed approximately 350 million pounds of acetone, of
which approximately 74.0% was sourced from the Blue Island Plant and the Mt.
Vernon Plant. The largest end market application of acetone is as a raw material
in the production of MMA, an important chemical intermediate used to make
aircraft windows, lighting fixtures, medical/dental parts, storm doors and
taillight lenses. Additional end market applications for acetone include
adhesives, pharmaceuticals, solvents, paints and plastics. JLM's acetone
customers include Ashland, B.F. Goodrich, DuPont, ICI Acrylics and Rohm & Haas.
Phenol
In 1996, the Company distributed approximately 120 million pounds of
phenol, of which approximately 78.0% was sourced from the Blue Island Plant. The
two largest end market applications for phenol are phenolic resins, which are
used in adhesives and bonding agents in plywood and other forest products, and
BPA. JLM's phenol customers include Borden, Georgia Pacific and Neste.
Propylene
In 1996, the Company distributed approximately 100 million pounds of
propylene. The largest end market application for propylene is as a raw material
in the production of polypropylene which is used in the manufacture of appliance
parts, automobile components, brushes, carpeting, rope and tape. Propylene is
also used in the production of foams for furniture, insulation, elastomers,
molded goods and pharmaceuticals. The Company also markets other olefins,
including butadiene and ethylene. The Company's significant olefins customers
include Dupont, Exxon Corporation ("Exxon"), GE and Goodyear. JLM's propylene
customers include Borealis Exploration Limited, DSM and The Dow Chemical
Corporation ("Dow Chemical").
Other Products
In addition to acetone, phenol and propylene, the Company markets and
distributes other commodity and specialty chemicals including acetophenone,
benzoic acid, butadiene, cumene, DDVP, esters, ethylene, fumaric acid, ketones,
lindane and methanol. Certain of JLM's customers for such products include BASF
Corp., Dow Chemical, DSM, Goodyear, Lilly Industries Inc., PPG Industries Inc.,
Repsol, S.A. (Spain) ("Repsol") and Shell Chemicals Canada.
During each of the past three years, no single distribution relationship,
customer or group of affiliated customers has accounted for more than 10.0% of
the Company's revenues.
MANUFACTURING AND PRODUCT SOURCING
In order to support its worldwide marketing and distribution capabilities,
the Company continually seeks to acquire assets and establish relationships to
provide consistent and reliable sources of products. JLM sources a majority of
its products from its Blue Island Plant and the Mt. Vernon Plant. In 1996, the
Blue Island Plant and Mt. Vernon Plant collectively supplied approximately 74.0%
of the total acetone sold by JLM and the Blue Island Plant supplied
approximately total 78.0% of the phenol sold by JLM.
Blue Island
The Company manufactures cumene, phenol, acetone and certain co-products
including alpha methyl styrene ("AMS") and acetophenone at the Blue Island
Plant. The Blue Island Plant has an annual manufacturing capacity of
approximately 145 million pounds of cumene, 95 million pounds of phenol, 58
million pounds of
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acetone, 5 million pounds of AMS and 1 million pounds of acetophenone. The
phenol produced at the Blue Island Plant can only be used in the production of
phenolic resins and not in the production of BPA.
The Blue Island Plant is strategically located south of Chicago, Illinois,
near primary barge and rail transportation terminals that facilitate economic
and efficient delivery of raw materials and shipment of finished products. In
addition, this location affords the Company significant freight cost advantages
in servicing its customer base (which is primarily located in the Midwest) in
comparison to competitors located on the U.S. Gulf Coast.
The Blue Island Plant utilizes a newly installed state-of-the-art UOP
zeolite catalyst to produce cumene, the key raw material used to manufacture
phenol and acetone. This process has improved the efficiency, profitability and
quality of the cumene production and has eliminated the need to purchase
supplemental cumene from outside sources. Additionally, the new technology has
improved the purity of the Company's AMS and, as a result, the Company's average
margin for AMS has increased significantly.
The raw materials required for the production of cumene are propylene and
benzene. The Company, under a long-term supply agreement which expires in 2005,
obtains propylene via direct pipeline from the Clark Oil refinery located
adjacent to the Blue Island Plant. The Company believes that the terms of its
propylene supply contract provide it with a significant raw material cost
advantage over many of its competitors, in part because the Company does not
have to pay for any transportation costs for the propylene purchased under the
supply agreement. The Company purchases benzene from three major petrochemical
producers, generally under supply contracts at market rates.
Currently, the Blue Island Plant is operating at full capacity and in order
to economically expand production capacity, it would be necessary to increase
its capacity to that of a worldscale facility. However, physical limitations at
the Blue Island Plant prohibit such an increase and as a result the Company has
no plans to expand the Blue Island Plant. The Company is continually exploring
opportunities to expand its manufacturing capabilities through acquisitions or
joint ventures. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity."
Mt. Vernon Partnership
In addition to its ownership of the Blue Island Plant, JLM participates in
a manufacturing joint venture with General Electric Company ("GE") and an
affiliate of CITGO (the "Mt. Vernon Partnership") which owns and operates the
Mt. Vernon Plant. The Company owns a 2.0% partnership interest in the Mt. Vernon
Partnership, an Indiana limited partnership, that was formed to purchase the Mt.
Vernon Plant from GE in November 1987. The Company's principal purpose for
entering into the partnership was to secure a long-term source of supply for
acetone. In 1988, the Company entered into a long-term acetone sales agreement
with the Mt. Vernon Partnership. Under the terms of the acetone agreement, the
Company is obligated through the year 2002, and thereafter unless the agreement
is terminated upon prior notice, to purchase all of the acetone produced at the
Mt. Vernon Plant and not consumed by GE Plastics. The agreement further provides
that the Mt. Vernon Partnership cannot terminate the agreement as long as JLM is
a partner in the Mt. Vernon Partnership. The initial term of this agreement
expires in 2002 and continues thereafter for successive one-year terms unless
one year's notice is otherwise provided by either party.
The Company has been since 1988 and believes that it will in the future be
able to continue to profitably market all the acetone offered to it under this
agreement. Since 1994, the Company has sourced on average approximately 250
million pounds of acetone annually from the Mt. Vernon Plant. In 1996, the
amount of acetone available to JLM from the Mt. Vernon Plant was reduced by
approximately 15 million pounds and it is anticipated over the next four years
that the amount of acetone available to JLM will be further reduced by
approximately 35 to 40 million pounds as a result of increased consumption by GE
Plastics.
Under the terms of the partnership agreement for the Mt. Vernon
Partnership, the management of the business and affairs of the partnership is
controlled by the partners owning at least 66.0% of the partnership interests.
The Mt. Vernon Partnership has entered into an operation and maintenance
agreement with GE pursuant to which GE manages, operates and maintains the Mt.
Vernon Plant. The partnership agreement generally
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provides GE with the right at any time to require the sale of JLM's interest in
the Mt. Vernon Partnership to a third party selected by GE and the right after
December 31, 2008 to directly purchase JLM's interest in the partnership.
Supplier Relationships
In addition to its manufacturing facility and joint venture, JLM sources
its products through long-established supplier relationships with many of the
largest and most well-known chemical companies worldwide. Suppliers to JLM
include ARCO Chemicals, Goodyear, Monsanto, Repsol and SasolChem. The structure
of the Company's long-term relationships with its outside suppliers helps the
Company mitigate the impact of cyclical market fluctuations in product supply
and price to which typical spot traders or distributors are exposed. In a
majority of JLM's supply contracts, the purchase price paid by JLM is not
determined until after JLM sells the product, and is generally based on a fixed
percentage profit per unit of product sold. In contrast, the typical spot trader
or distributor may agree to a fixed purchase price prior to the sale, taking the
market risk of effecting a successful resale of the product. In addition, spot
traders do not typically enter into long-term supply contracts or relationships,
thereby reducing their ability to service the needs of both customers and
suppliers.
In 1988, the Company entered into an agreement to purchase acetone from
SasolChem, which was to remain in effect until either party gave six months
notice of termination. In 1992, the Company entered into new agreements with
SasolChem to purchase additional quantities of acetone, methyl-ethyl ketone and
n-propanol. These new agreements are on terms substantially similar to its
existing acetone agreement with SasolChem. The Company has since expanded its
relationship with SasolChem to include the purchase and distribution of methyl-
isobutyl ketone and ethanol in North America.
The Company has recently entered into an agreement to distribute styrene
monomer for GE Plastics. Styrene is the primary component used in the production
of synthetic rubbers and plastics. Additionally, the Company has entered into
agreements with ARCO Chemical Company, CONDEA Vista and Monsanto to distribute
n-propanol, butanol and ethyl acetate, respectively.
TERMINALING AND STORAGE
The Company, with an affiliate of UDS, participates in a joint venture
which owns and operates the OTC Terminal at the mouth of the Houston, Texas ship
channel in Bayport, Texas. The facility is located on 2.4 acres of land and has
throughput capacity of approximately 900 million pounds. The facility includes
twin storage spheres with a total capacity of approximately 22 million pounds of
propylene and is capable of handling and storing gaseous products at a full
range of temperature and pressure conditions. The OTC Terminal is believed to be
the only independent propylene export terminal in the U.S. and its Gulf Coast
location is well suited to enable U.S. producers to place their products into
the global market. See "Properties."
The OTC Terminal is operated by Baytank (Houston) Inc. ("Baytank"), a major
terminal owner and operator, under a long-term contract. OTC also leases from
Baytank the land upon which the OTC Terminal is located. The Company has been
engaged by OTC to provide certain administrative and managerial services to OTC,
including on-site supervision of terminal operations and certain bookkeeping and
administrative matters.
The Company has additional terminal and storage facilities located at the
JLM Terminal on the Cape Fear River in Wilmington, North Carolina. The JLM
Terminal is located on 14 acres of land, is accessible to ship, barge, rail and
truck, is capable of handling a broad range of products including methanol,
oxygenated solvents and inorganic chemicals, and has a total capacity of 15
million gallons. The facility includes three tank truck loading bays, six
loading bays for jumbo rail cars, laboratory services and a computerized weigh
scale. Of the total storage capacity at the JLM Terminal, approximately 2.5
million gallons of capacity are used by the Company and the remainder are
subject to long-term leases to third parties expiring from 1998 to 2002. See
"Properties."
The Company maintains inventory at approximately 15 locations across North
America and in a number of locations in Europe and South America. In addition to
the Company's owned terminal and storage facilities located at the JLM Terminal
and OTC Terminal, the Company has approximately 3.5 million gallons of liquid
storage capacity and approximately 500,000 pounds of palletized storage capacity
pursuant to short-term leases at
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various locations in the U.S. The Company believes its storage facilities are
adequate for the Company's current and anticipated near-term needs. Should the
need arise for substantial amounts of additional storage facilities in the
future, the Company does not currently anticipate any material difficulties in
obtaining sufficient new storage facilities through purchase or lease at
prevailing commercially reasonable rates. The Company operates a fleet of more
than 100 rail cars and has long-term working relationships with a number of
national barge lines and tank truck carriers. See "Properties."
SALES AND MARKETING
The Company focuses on bulk quantity sales (generally not smaller than
truck load lots) of commodity chemicals to over 600 customers worldwide in a
broad range of industries. Product sourcing and marketing efforts are handled
principally by the Company's sales team of 33 full time employees. Individual
salespersons are assigned principal responsibility for specific supplier or
customer relationships and for specific products. In addition, each salesperson
is required to be familiar with all of the Company's products, suppliers and
customers. As a result, the Company believes it is able to respond to customer
and supplier needs as well as to take advantage of changing market conditions
more effectively than its competitors.
JLM maintains offices in the U.S., Canada, the Netherlands and Venezuela,
and recently opened two affiliate offices in India and one in Columbia. JLM also
has an alliance with a distributor in Spain and operates through agency
relationships in Mexico, Brazil, Korea and Taiwan. In addition, the Company
recently purchased a 25.0% interest in SK Chemicals Asia Pte. Ltd., and has
agreed to purchase a 12.7% interest in SK Chemical Trading Pte. Ltd. two
Singapore-based companies participating in a Vietnamese joint venture which
intends to construct a chemical plant in Vietnam that will produce dioctyl
phthlate, a chemical used in the production of plastics such as PVC. The
Vietnamese joint venture also intends to construct terminaling and storage
facilities in Vietnam and Malaysia.
Approximately 2.6% of the Company's revenues in 1996 are from sales of
specialty chemicals. Prices for specialty chemicals are generally subject to
smaller fluctuations than are those for commodity chemicals and specialty
chemical sales generally carry higher gross margins. In establishing supply and
distribution relationships in specialty chemicals, the Company attempts to
leverage existing relationships and knowledge of the needs and objectives of
both suppliers and customers.
The Company's position as a large volume marketer, combined with JLM's
knowledge of customer and supplier needs and objectives, affords it
opportunities to effect product exchanges. Engaging in product exchange
transactions allows the Company to solve customer or supplier problems and take
profitable advantage of identified market trends. The Company's ability to
engage in swap transactions is enhanced by its terminal and storage capabilities
which also enable the Company to accumulate inventory to take advantage of
market trends.
In its olefins marketing activities, JLM focuses on the international
marketing of olefin petrochemical gases which require specialized shipping,
handling and storage. The Company's olefins marketing activities to date have
been largely trading oriented. However, the Company believes that its long-term
relationships with key industry participants and its access to terminal and
storage facilities will enable the Company to become a large volume marketer of
olefins. The Company has long-term supply and sales contracts with a number of
major olefins producers and consumers in North America, South America, Europe
and Asia. For example, the Company has supply relationships with Repsol and
Copene-Petroquimica do Nordeste S.A. to source butadiene for the U.S. and with
UDS, Exxon and Lyondell Petrochemical Company to export propylene from the U.S.
Some of the Company's significant olefin customers include DuPont, Exxon, GE and
Goodyear.
COMPETITION
The Company operates in a highly competitive industry. Many of the
Company's competitors have significantly greater financial, production and other
resources than the Company. Many of the Company's competitors are large,
integrated chemical manufacturers, some of whom have their own basic raw
material resources. The Company competes to a lesser extent with certain
chemical distribution companies and chemical traders.
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The Company competes in its marketing and distribution activities by
providing superior customer service. In the opinion of the Company, the key
elements of effective customer service include reliable and timely delivery of
products, satisfying customer needs for quality and quantity and competitive
pricing. The Company's long-term supplier relationships, terminal and storage
facilities, transportation capabilities and industry and product knowledge
support the Company's efforts to provide superior customer service. In addition,
the Blue Island Plant's Midwest location gives it significant freight cost
advantages in selling to its customers in the Midwest over its competitors'
production facilities located in the Southeast.
EMPLOYEES
As of March 31, 1997, the Company and its consolidated subsidiaries had
approximately 161 full-time employees. Of these, 82 employees were in management
and administration, 33 in sales and marketing and 46 were in production and
distribution. Approximately 27 of the Company's domestic employees at the Blue
Island Plant are covered by a collective bargaining agreement with the Oil,
Chemical and Atomic Workers Union. This agreement expires on October 31, 1998.
The Company considers its relations with both its union and non-union employees
to be satisfactory.
PROPERTIES
The following table sets forth certain information as of March 31, 1997,
relating to the Company's principal facilities:
<TABLE>
<CAPTION>
APPROXIMATE
FACILITY PRINCIPAL ACTIVITIES; LOCATION SQUARE FEET OWNED/LEASED
- -------- ------------------------------ ----------- ------------
<S> <C> <C> <C>
Corporate Headquarters Administration Headquarters; 25,000 Owned
Tampa, Florida
Blue Island Plant Manufacturing; 958,000 Owned
Blue Island, Illinois
OTC Terminal Terminaling and Storage; 104,000 Co-owned
Houston, Texas
JLM Terminal Terminaling and Storage; 609,000 Owned
Wilmington, North Carolina
North America Sales Offices Blue Island, Illinois * Owned
Houston, Texas * Owned
Wilmington, North Carolina * Owned
Toronto, Canada * Leased
International Sales Offices Rotterdam, Netherlands * Leased
Caracas, Venezuela * Leased
Maracaibo, Venezuela * Leased
Valencia, Venezuela * Leased
</TABLE>
- ---------------
* Less than 25,000 square feet
ENVIRONMENTAL REGULATION
The Company and its operations are subject to federal, state, local and
foreign environmental laws, rules, regulations, and ordinances concerning
emissions to the air, discharges to surface and subsurface waters, and the
generation, handling, storage, transportation, treatment, disposal and import
and export of hazardous materials ("Environmental Laws"). Compliance with such
Environmental Laws may result in significant capital expenditures by the
Company. Moreover, under certain Environmental Laws, the Company may be liable
for remediation of contamination at certain of its current and former
properties. For example, under the Comprehensive Environmental Response,
Compensation and Liability Act of 1990, as amended ("CERCLA") and similar state
laws, the Company and prior owners and operators of the Company's properties may
be liable for the costs of removal or remediation of certain hazardous or toxic
materials on, under or emanating from the properties,
34
<PAGE> 36
regardless of their knowledge of, or responsibility for, the presence of such
materials. CERCLA and similar state laws also impose liability for
investigation, cleanup costs and damage to natural resources on persons who
dispose of or arrange for the disposal of hazardous substances at third-party
sites. In addition, under the Resource Conservation and Recovery Act of 1976
("RCRA"), the holder of a permit to treat or store hazardous waste can be
required to remediate environmental pollution from solid waste management areas
at the permitted facility regardless of when the contamination occurred.
Although it is impossible to predict precisely what effect Environmental
Laws will have on the Company in the future, the Company believes, based on past
experience and Management's best assessment of future events, that any
environmental liabilities will be determined and incurred over an extended
period of time, allowing the Company to fund them through its operating cash
flow and mitigating their impact on the Company's results of operations.
Accordingly, the Company further believes that the effect of any such
environmental liabilities would not be material in relation to the Company's
consolidated financial position at December 31, 1995 and 1996 and March 31,
1997. Depending on future operating results, however, the environmental
liabilities to be recorded in a given annual or quarterly period may result in
charges that materially affect the Company's results of operations for that
period.
Although elevated levels of certain petroleum-related substances, organic
chemicals and metals have been detected in groundwater and/or soils at the
Company's Wilmington, North Carolina terminal facilities, the Company believes
that the presence of such substances is the result of either historical use
prior to the Company's acquisition of the site from Union Oil Company of
California ("Unocal") in 1992 and/or migration from neighboring facilities
(including an adjacent Superfund site that is currently being remediated).
Unocal, the prior owner of the site, is currently implementing a state approved
Remedial Action Plan ("RAP") to address onsite petroleum contamination. The
Company is not subject to any requirements under the RAP and believes that the
prior owner bears responsibility for any additional remediation of
petroleum-related contaminants. Except for the ongoing remediation, no
significant cleanup activities have been conducted at the JLM Terminal since it
was acquired by the Company in 1992. Should remedial activities be conducted to
address contaminants that are not petroleum-related, the Company has
insufficient information regarding the types, concentrations, and possible
cleanup levels of onsite contaminants to reasonably estimate costs that may be
associated with such remediation, but believes that any such costs would be
covered by the indemnity provided for in the 1992 Asset Purchase Agreement
between the Company and Unocal. Pursuant to indemnification provisions set forth
in the agreement, Unocal agreed to indemnify the Company up to $7.5 million for
environmental liabilities at the JLM Terminal.
The Company believes that the low levels of various organic compounds
detected in soils and groundwater at the Blue Island plant are the result of
historical use of the site prior to its acquisition by the Company in 1995
and/or migration from neighboring facilities. The concentrations of some of
these compounds exceed established state groundwater standards and/or cleanup
objectives. However, the Company also believes that the likelihood of either
state or federal environmental regulatory agencies seeking remediation in the
near term is low, based on the location of the facility, the character of the
area (each of which are factors in assessing risk), and the fact that the site
is pending removal from the federal list of contaminated sites. To date, the
Company has not been required to plan, undertake, or fund any remedial
activities.
Levels of organic compounds slightly in excess of regulatory reporting
thresholds were detected in groundwater at the Polychem plant owned by the
Company. The Company has been addressing the problem, and recent analytical
results show that the levels of contaminants have decreased to acceptable
levels. Accordingly, the Company has requested that state authorities permit
closure of the remediation at the site.
The Company does not believe that a material amount of funds will be
required to complete remediation at any site.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings, other than claims and
lawsuits arising in the normal course of the Company's business. The Company
does not believe that such claims and lawsuits, individually or in the
aggregate, will have a material adverse effect on its business.
35
<PAGE> 37
The Internal Revenue Service (the "IRS") has concluded a federal income tax
examination of the Company's 1988, 1989 and 1990 tax years and has proposed
adjustments for such years. The Company has filed a protest of the proposed
adjustments and is awaiting a determination by the Service with respect to the
Company's protest. The Company believes that the outcome of the examination will
not have a material adverse effect on the financial condition of the Company.
The IRS has also commenced a federal income tax examination for the
Company's 1992, 1993 and 1994 tax years. The examination is in its final stages,
and the Service has not asserted any income tax deficiencies or definitively
indicated all the issues that will be involved in the examination. The issues
that have been raised by the Service thus far do not indicate that any impact on
the taxable years at issue would be material. However, there can be no assurance
that additional issues impacting future taxable years will not be raised and
resolved adversely to the Company during the course of the examination or
subsequent proceedings.
36
<PAGE> 38
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors is composed of four members. Upon the
completion of the Offering, the size of the Board of Directors will be increased
to seven members and three additional directors will be named to fill the
additional positions. Directors generally serve for one-year terms and until
their successors are duly elected and qualified. Upon consummation of the
Offering, the Certificate of Incorporation and Bylaws of the Company will
provide that the size of the Board of Directors may be changed (but not to fewer
than three or more than nine members) by resolution adopted by the Board of
Directors of the Company.
The following table sets forth certain information regarding the Company's
existing directors, executive officers, two of the three nominees who will be
elected as additional directors effective upon the consummation of the Offering
and a key employee of the Company. Each of the nominees for director named below
has agreed to serve as a director of the Company upon their election to the
Board. The Company anticipates naming a third nominee on or prior to
consummation of the Offering.
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS AGE POSITIONS
- -------------------------------- --- ---------
<S> <C> <C>
John L. Macdonald............................ 53 President, Chief Executive Officer and Director
Thaddeus J. Lelek............................ 48 Vice President and Director
Wilfred J. Kimball........................... 58 Vice President and Director
Frank A. Musto............................... 40 Vice President, Chief Financial Officer and
Director
John T. White................................ 66 Vice President and General Counsel
Michael J. Molina............................ 44 Vice President -- Tax and Audit and Secretary
Linda L. Sato................................ 36 Vice President and Treasurer
NOMINEES FOR DIRECTORS
- ----------------------
J. Robert Mehall............................. 55 Director
Jerry L. Weinstein........................... 61 Director
KEY EMPLOYEE
- ------------
Thomas Johannes van der Weijde............... 46 Vice President, JLM International, Inc.
</TABLE>
John L. Macdonald founded the Company in April 1986 and has served as the
President, Chief Executive Officer and a director of the Company throughout its
history. Mr. Macdonald also co-founded Gill and Duffus Chemical, Inc., in 1978
and served as its President and Chief Executive Officer until the conclusion of
a leveraged buyout in 1983 in which Gill and Duffus Chemical, Inc., merged with
the Steuber Company, Inc. Mr. Macdonald received a B.A. from Colorado College
and has more than 28 years experience in the chemical industry.
Thaddeus J. Lelek has been with the Company since its formation in 1986,
serving in a variety of senior marketing positions. In 1986 he was elected as
Vice President of JLM Marketing. Mr. Lelek has more than 27 years of experience
in the chemical industry. Mr. Lelek is principally responsible for formulating
and implementing the Company's marketing strategies and programs for North
American sales. From 1983 to 1986, Mr. Lelek was also responsible for marketing
in North America for Steuber Company, Inc. and from 1980 to 1983, Mr. Lelek
headed up the national sales effort for distribution for Gill and Duffus
Chemicals, Inc. Mr. Lelek was also employed in various capacities, including
National Sales Manager for certain products, for Gulf Oil Chemicals, Inc., from
1970 to 1979. Mr. Lelek graduated with a B.S. in Chemical Engineering from
Worchester Polytechnic Institute.
Wilfred J. Kimball was hired as Vice President of JLM Chemicals and Vice
President of the Company following the acquisition by the Company in 1995 of the
Blue Island Plant from BTL Specialty Resins Corp. ("BTL Corporation"). Mr.
Kimball is primarily responsible for the operation of the Company's Blue Island
Plant. In addition, he is responsible for the operations of JLM Terminal and the
day to day direction of certain of the Company's sales force and support staff.
From 1990 to 1995 Mr. Kimball was President of BTL Corporation and in this
capacity was primarily responsible for the Blue Island Plant. From 1985 to 1990,
Mr. Kimball served in various executive capacities with BTL Corporation,
including Vice President of Manufacturing and Engineer-
37
<PAGE> 39
ing and President of Plyophen Chemicals, a division of BTL Corporation. Prior to
1985, Mr. Kimball served for 22 years in various capacities with Union Carbide
Canada LTD. Mr. Kimball received a B.S. in Chemical Engineering from the
University of Brunswick.
Frank A. Musto has been with the Company since its formation in 1986. Mr.
Musto was elected as Vice President and Chief Financial Officer in 1994. Mr.
Musto is principally responsible for the Company's banking relationships,
current cash management systems and investment of excess funds. Prior to joining
the Company, from 1979 to 1981, and from 1983 to 1985, Mr. Musto was the Marine
Accountant, Controller and Treasurer for the Steuber Company, Inc. From 1981 to
1982, Mr. Musto was the controller for Amerpol International, New York City, a
custom house broker, freight forwarder and agent for the government controlled
fishing fleet in Poland. Mr. Musto graduated from Bernard M. Barauch College
with a B.B.A. in Accounting.
John T. White has served as Vice President and General Counsel of the
Company since 1990. Mr. White is the Company's chief legal officer and is
principally responsible for the legal affairs of the Company and its
consolidated subsidiaries. From 1987 to 1989, Mr. White was Senior Vice
President for Paribas Corporation, a North American investment banking firm.
From 1970 to 1987, Mr. White was a partner with the New York City law firm of
Wender, Murase & White, and from 1962 to 1970 Mr. White was a partner in the
international law firm of Baker & McKenzie, resident in the firm's New York City
office. Mr. White received a bachelor's degree from Harvard College, a Juris
Doctorate from Columbia and a L.L.M. from New York University.
Michael J. Molina joined the Company in 1986 as controller. In 1995, he was
promoted to his current position as Vice President -- Tax and Audit. Mr. Molina
is primarily responsible for taxes, audits and management information systems.
From 1992 to 1995, Mr. Molina served as Vice President of Administration. Mr.
Molina received a B.A. from Johns Hopkins University and a M.B.A. from Pace
University.
Linda L. Sato has been employed by the Company since 1986 when she was
hired as the Company's Assistant Controller. In 1994 she was designated as Vice
President and Controller. In 1996, Ms. Sato was promoted to Vice President and
Treasurer. Ms. Sato graduated from the University of Connecticut with a B.A. in
Accounting.
J. Robert Mehall has been Executive Vice President -- Corporate
Development, Petrochemicals/NGLs and Crude Oil Supply for Ultramar Diamond
Shamrock since 1996. From 1982 to 1996 Mr. Mehall was Executive Vice President
and Senior Vice President of Diamond Shamrock, Inc.
Jerry L. Weinstein has been Vice President of Owens Corning -- Specialty &
Foam Products Division since 1994. From 1980 until 1994, Mr. Weinstein was
President and Chief Executive Officer of UC Industries, Inc., an independent
manufacturer of plastic products for the building materials industry.
Thomas Johannes van der Weijde has been employed by the Company since
January 1995 when he was hired as Vice President of JLM International. Mr. van
der Weijde is principally responsible for directing the Company's international
sales operations (other than for olefins). From 1988 to 1995, Mr. van der Weijde
was employed by Repsol, the Spanish state oil company, as Managing
Director -- Europe. From 1979 to 1988, Mr. van der Weijde was employed by
Carless Refining and Marketing B.V. Rotterdam, initially as the European Sales
Manager and later as Managing Director. Mr. van der Weijde received a Bachelors
degree in Physics from the University of Amsterdam.
None of the executive officers or directors are related to one another.
Executive officers are elected by and serve at the discretion of the Board of
Directors.
DIRECTORS COMPENSATION
Directors who are not employees of the Company ("Non-Employee Directors")
will receive an annual retainer fee of $10,000 and an automatic grant of options
to purchase 1,000 shares of Common Stock each year in accordance with the
Company's Non-Employee Directors' Stock Plan (the "Directors' Plan").
38
<PAGE> 40
COMMITTEES OF THE BOARD OF DIRECTORS
Upon the consummation of the Offering, the Board of Directors will create
an Audit Committee and Compensation Committee.
The Audit Committee's principal responsibilities will be to recommend
annually a firm of independent auditors to the Board of Directors, to review the
annual audit of the Company's Consolidated Financial Statements and to meet with
the independent auditors of the Company from time to time in order to review the
Company's general policies and procedures with respect to audits and accounting
and financial controls.
The principal responsibilities of the Compensation Committee will include
the establishment of compensation policies for the executive officers of the
Company and administration of any stock-based compensation plans.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation awarded to, earned by, or
paid for services rendered to the Company in all capacities during the year
ended December 31, 1996 for each of the named executive officers (as defined
under applicable Securities and Exchange Commission Rules) of the Company (the
"Named Executive Officers"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2)
- --------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
John L. Macdonald 1996 $170,000 $250,000 $9,486
President and CEO
Thaddeus J. Lelek 1996 109,167 10,000 --
Vice President
Wilfred J. Kimball 1996 135,483 15,000 9,105
Vice President
Frank A. Musto 1996 93,158 26,000 7,711
Vice President and
Chief Financial Officer
John T. White 1996 110,000 27,500 --
Vice President and
General Counsel
</TABLE>
- ---------------
(1) The Company was not subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, in 1995 or 1994. Accordingly, information
with respect to 1995 or 1994 is not required to be disclosed. Other Annual
Compensation consisting of perquisites does not exceed the minimum amounts
required to be reported pursuant to Securities and Exchange Commission Rules
and the column has therefore been deleted. No options, SARs or other
long-term compensation awards were granted in 1996.
(2) Consists of the amounts contributed by the Company to the Company's Defined
Contribution Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has not previously had a compensation committee and
the functions of the compensation committee historically have been performed by
the Board of Directors the sole member of which was John L. Macdonald, the
Company's Chief Executive Officer and President. The Board of Directors will
establish a compensation committee effective upon completion of the Offering.
See "Committees of the Board of Directors."
EQUITY BASED COMPENSATION PLANS
JLM will adopt the 1997 Employee Stock Purchase Plan (the "Stock Purchase
Plan"), the Long-Term Incentive Plan (the "JLM LTIP") and the Directors' Plan.
The Compensation Committee will administer the Stock Purchase Plan and the JLM
LTIP and make the determination as to the grant of awards, options and/or
39
<PAGE> 41
rights under the respective plans. No member of the Compensation Committee may
receive grants or awards under the plans. The Board of Directors of JLM will
administer the Directors' Plan.
Stock Purchase Plan. An aggregate of shares of Common Stock are
reserved for issuance under the plan. Under the Stock Purchase Plan, all
employees will be given the opportunity to purchase shares of JLM Common Stock
two times a year at a price equal to 85.0% of the market price of the stock
immediately prior to the beginning of each offering period. The Stock Purchase
Plan provides for two offering periods, the months of March and September, in
each of the years 1997-2006.
JLM LTIP. An aggregate of shares of Common Stock are reserved
for issuance under the plan. Under the JLM LTIP, restricted stock, incentive
stock options, nonqualified stock options and stock appreciation rights or any
combination thereof may be granted to JLM employees. In general, the exercise
price of the options granted under the plan will be determined at the discretion
of the committee administering the plan, which price may not be less than the
market price of JLM Common Stock on the date the option is granted. Options will
normally vest 33 1/3% each year after issuance over a period of three years and
will expire after 10 years. The committee may condition awards of restricted
stock and stock appreciation rights upon satisfaction of performance criteria or
other conditions.
Director's Plan. An aggregate of shares of Common Stock are
reserved for issuance under the plan. Each year Non-Employee Directors who are
elected or continuing as Non-Employee Directors as of the conclusion of the
Company's annual meeting of stockholders will receive options to purchase 1,000
shares of Common Stock. The exercise price of the Options will vest fully at the
end of one year and will expire after five years.
CERTAIN TRANSACTIONS
JLM Stables, Inc., a subsidiary of the Company, operated a horse farm in
Ocala, Florida and in connection therewith, leased from John L. Macdonald, 100
acres of land consisting of riding areas and grazing pasture, a stable building
and farm manager's house. Pursuant to the lease, JLM Stables, Inc. paid certain
costs associated with owning and operating the leased property including
utilities, maintenance and insurance. In 1994, 1995 and 1996, the Company's
total rental payments to Mr. Macdonald were $48,000 per year. Effective November
1, 1996, the Company entered into a new three-year lease with Mr. Macdonald,
providing for rental payments of $4,000 per month. During the three month period
ended March 31, 1997, the Company paid to Mr. Macdonald $12,000 in connection
with this lease. In December 1996, the Company made a decision to terminate its
involvement with the horse farm business, and is taking steps to sell all assets
used in those activities. In connection with the termination of the horse farm
operations, Mr. Macdonald purchased certain horses from the Company for an
aggregate purchase price of approximately $324,000 and agreed to terminate the
lease effective upon the entering into of an Underwriting Agreement between the
Company and the Underwriters.
On November 19, 1996, Mr. Macdonald loaned the Company approximately
$941,000. The loan is unsecured, bears interest at the prime rate, currently
8.5%, compounded annually and matures on January 1, 1998. As March 31, 1997, the
unpaid principal balance of the loan was approximately $905,000. During 1994,
1995 and 1996, the Company was indebted to Mr. Macdonald on an open account
basis for approximately $605,000, $886,000 and $905,000, respectively. All such
indebtedness was repaid prior to entering into the November loan transaction.
In 1995 and 1996, the Company purchased approximately $268,000 and
$406,000, respectively, of chemical products from Kemlink JV, a New York joint
venture partnership owned 50.0% by Kemlink, L.L.C., a Delaware limited liability
company of which Mr. Macdonald is a 97.0% owner. All purchases in 1995 and 1996
were at prices comparable to those paid to unrelated parties. In addition,
during these years, the Company sold approximately $1.6 million and $1.3
million, respectively, of chemical products to Kemlink. The Company did not
purchase from or sell any chemicals to Kemlink in 1994. Effective December 31,
1996, the Kemlink joint venture partnership was terminated.
The Company's Spanish distributor is Chemical Trading, S.L. ("CTSL"), which
is owned 100.0% by Eduardo Delgadillo, a stockholder of the Company. The Company
and CTSL have an arrangement pursuant to
40
<PAGE> 42
which the Company pays CTSL's operating expenses. The Company treats the
difference between such payments and the amount of commissions and other amounts
due to CTSL as a loan. Under such arrangement CTSL was indebted to the Company
for approximately $140,000, $569,000 and $322,000, as of December 31, 1994, 1995
and 1996, respectively, and approximately $421,000 as of March 31, 1997. Such
indebtedness is carried on an open account basis and during 1996, approximately
$522,000 was repaid without interest through the sale to the Company by Mr.
Delgadillo of 48 shares of the Company's Common Stock (representing
approximately 5.1% of the issued and outstanding shares of Common Stock at such
date) owned by him. For purposes of these debt repayment transactions, these
shares were valued at book value. During the period from 1994 to 1996, Mr.
Delgadillo was the beneficial owner of between 9.9% and 4.8% of the Company's
outstanding Common Stock.
In 1994, 1995, 1996 and 1997, the Company leased certain office space from
Aurora, a Texas corporation of which John L. Macdonald is an 80% stockholder.
Aurora markets certain solvent chemicals, primarily phenol, benzene, and
acetone. The lease is on a month to month basis with a rental of $2,100 per
month. In 1994, 1995, 1996 and for the period ending March 31, 1997, lease
payments were approximately $18,000, $25,000, $25,000 and $11,000, respectively.
The lease with Aurora will be terminated upon the consummation of the purchase
by the Company of all of the common stock of Aurora as described below. In 1994,
1995, 1996 and for the period ending March 31, 1997, the Company sold
approximately $1.4 million, $5.6 million, $3.0 million and $0.2 million,
respectively, of chemical products to Aurora.
The Company has entered into an Agreement for Sale and Purchase of Common
Stock held by Mr. Macdonald and an unrelated third party to purchase for a total
purchase price of approximately $1.3 million all of the issued and outstanding
shares of Aurora. Under the terms of the agreement, the Company will purchase
Mr. Macdonald's ownership interest in Aurora for $1.0 million to be paid by a
three year promissory note which will bear interest at a rate of 10.0% per annum
and will require equal monthly payments. The other shareholder is receiving
consideration of approximately $0.3 million for the purchase of his ownership
interest. The closing of the transaction is contingent upon the entering into of
an Underwriting Agreement between the Company and the Underwriters.
In 1994, 1995, 1996 and 1997, the Company leased chemical tank railcars
from Phoenix, a Connecticut corporation of which the sole stockholder is John L.
Macdonald. The Company made payments in 1994, 1995, 1996 and for the period
ending March 31, 1997 to Phoenix in respect of such leases of approximately
$203,000, $161,000, $160,000 and $6,000, respectively. The Company has entered
into an Agreement for Sale and Purchase of Common Stock with Mr. Macdonald to
purchase for a total purchase price of $500,000 all of the issued and
outstanding shares of Phoenix. Under the terms of the agreement, the Company
will purchase Mr. Macdonald's ownership interest in Phoenix for $500,000 to be
paid by a three year promissory note which will bear interest at a rate of 10.0%
per annum and will require equal monthly payments. The closing of the
transaction is contingent upon the entering into of an Underwriting Agreement
between the Company and the Underwriters.
The Company believes that each of the certain transactions described above
were on terms no less favorable to the Company than those which could have been
obtained in arm's length transactions with unaffiliated third parties. However,
except as indicated above, the Company did not obtain independent objective
information to support its belief in this respect. After the consummation of the
Offering, the Company will not enter into any transaction with any officer,
director or stockholder except on terms that are no less favorable to the
Company than those which could be obtained in an arm-length transaction with an
unaffiliated party unless the approval of a majority of disinterested directors
is obtained.
41
<PAGE> 43
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of the date of the
Prospectus and as adjusted to reflect the sale of shares offered hereby,
assuming no exercise of the Underwriters' over-allotment option, by (i) each
person known by the Company to own beneficially more than 5.0% of the
outstanding Common Stock, (ii) each director of the Company who owns shares of
Common Stock, (iii) each of the Named Executive Officers, (iv) all officers and
directors as a group, and (v) the Selling Stockholder. The persons named in the
table have sole voting and investment powers with respect to all shares of
Common Stock shown as beneficially owned by them. For purposes of the table, a
person or group of persons is deemed to have "beneficial ownership" of any
shares as of a given date which such person has the right to acquire within 60
days after such date.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING(1)(2) AFTER THE OFFERING(1)
--------------------------- SHARES OFFERED ----------------------
NUMBER PERCENTAGE FOR SALE NUMBER PERCENTAGE
----------- ------------ -------------- ------- -----------
<S> <C> <C> <C> <C> <C>
John L. Macdonald(3)............. 95.2%
8675 Hidden River Parkway
Tampa, Florida 33627
Thaddeus J. Lelek................ -- -- -- -- --
Wilfred J. Kimball............... -- -- -- -- --
Frank A. Musto................... -- -- -- -- --
John T. White.................... -- -- -- -- --
J. Robert Mehall................. -- -- -- -- --
Jerry L. Weinstein............... -- -- -- -- --
All Directors and Executive
Officers As a Group (9
persons)....................... 95.2% --
</TABLE>
- ---------------
(1) Does not include an aggregate of shares of Common Stock issuable to the
Company's directors and executive officers (nine persons) upon the exercise
of stock options to be granted to such persons effective upon the completion
of the Offering. Such options will have an exercise price equal to the
initial public offering price and will vest in equal one-third increments in
arrears over three years from the date of grant. Also does not include an
aggregate of shares of restricted Common Stock to be awarded to four
executive officers, effective upon the completion of the Offering. Such
shares of restricted Common Stock will be subject to a substantial risk of
forfeiture that will lapse in equal one-fourth increments in arrears over
four years from the date of award.
(2) Does not include shares (4.8%) of Common Stock owned by the Company's
minority stockholder.
(3) The Selling Stockholder, John L. Macdonald, serves as the Company's
President and Chief Executive Officer. Mr. Macdonald also serves as a
director of the Company. Includes shares of Common Stock held by two
irrevocable trusts created for the benefit of Mr. Macdonald's children for
which Mr. Macdonald disclaims beneficial ownership.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description of the Company's capital stock is qualified in
its entirety by reference to the Certificate of Incorporation and By-Laws of the
Company, which are included as exhibits to the Registration Statement of which
this Prospectus forms a part.
AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of stock that the Company has
authority to issue under its Certificate of Incorporation is 35,000,000 shares,
of which 30,000,000 shares represent shares of Common Stock and 5,000,000 shares
represent shares of Preferred Stock (the "Preferred Stock").
42
<PAGE> 44
COMMON STOCK
As of May , 1997, there were shares of Common Stock outstanding.
Subject to any preferential rights of any Preferred Stock created by the Board
of Directors, each outstanding share of Common Stock will be entitled to such
dividends, if any, as may be declared from time to time by the Board out of
funds legally available therefor. See "Dividend Policy." Each outstanding share
is entitled to one vote on all matters submitted to a vote of stockholders
except on matters which are required to be voted exclusively by holders of
Preferred Stock or any class of shares of Preferred Stock. In the event of
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to receive on a pro rata basis any assets remaining after provision
for payment of creditors and after payment of any liquidation preferences to
holders of Preferred Stock. There are no redemption provisions applicable to the
Common Stock. All outstanding shares of Common Stock are fully paid and
non-assessable and the shares of Common Stock to be issued upon completion of
the Offering will be fully paid and non-assessable.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes 5,000,000 shares of
Preferred Stock. The Board has the authority to prescribe for each series of
Preferred Stock it establishes the number of shares in that series, the voting
rights (if any) to which such shares in that series are entitled, the
consideration for such shares in that series and the designations, powers,
preferences and relative, participating, optional or other special rights, and
such qualifications, limitations or restrictions of the shares in that series,
without further action or vote by the Stockholders. Depending upon the rights of
such Preferred Stock, the issuance of Preferred Stock could have an adverse
effect on holders of Common Stock by delaying or preventing a change in control
of the Company, making removal of the present management of the Company more
difficult or resulting in restrictions upon the payment of dividends and other
distributions to the holders of Common Stock. The issuance of Preferred Stock
with voting and conversion rights may adversely affect the voting power of the
holders of Common Stock, including the loss of voting control to others. At
present, the Company has no plans to issue any of the Preferred Stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED CAPITAL STOCK
Under the Company's Certificate of Incorporation, upon consummation of this
offering, assuming no exercise of the Underwriters' over-allotment option, there
will be shares of Common Stock available for future issuance without
stockholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital or to facilitate corporate acquisitions. In addition, the Board has the
authority to issue shares of Preferred Stock.
One of the effects of the existence of unissued and unreserved Common Stock
or Preferred Stock may be to enable the Board to issue shares to persons
friendly to current management, which issuance could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
the Company's management and possibly deprive the stockholders of opportunities
to sell their shares of Common Stock at prices higher than prevailing market
prices. Such additional shares also could be used to dilute the stock ownership
of persons seeking to obtain control of the Company. The Company currently does
not have any plans to issue additional shares of Common Stock or Preferred Stock
other than in connection with employee compensation plans.
NO PREEMPTIVE RIGHTS
No holder of any class of stock of the Company authorized at the time of
the Offering will have any preemptive or conversion rights of any other right to
subscribe to any securities of the Company of any kind or class.
CERTAIN PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to Section 203 of the Delaware General Corporation
Law ("DGCL"). Pursuant to Section 203, with certain exceptions, a Delaware
corporation may not engage in any of a broad range of business
43
<PAGE> 45
combinations, such as mergers, consolidations and sales of assets, with an
"interested stockholder" for a period of three years from the date that such
person became an interested stockholder unless (a) the transaction that results
in the person's becoming an interested stockholder or the business combination
is approved by the board of directors of the corporation before the person
becomes an interested stockholder, (b) upon consummation of the transaction
which results in the stockholder becoming an interested stockholder, the
interested stockholder owns 85.0% or more of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding shares owned by
persons who are directors and also officers and shares owned by certain employee
stock plans or (c) on or after the date the person becomes an interested
stockholder, the business combination is approved by the corporation's board of
directors and by holders of at least two-thirds of the corporation's outstanding
voting stock, excluding shares owned by the interested stockholder, at a meeting
of stockholders. Under Section 203, an "interested stockholder" is defined as
any person, other than the corporation and any direct or indirect majority-owned
subsidiary, that is (a) the owner of 15.0% or more of the outstanding voting
stock of the corporation or (b) an affiliate or associate of the corporation and
was the owner of 15.0% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately prior to the
date on which it is sought to be determined whether such person is an interested
stockholder. Section 203 does not apply to a corporation that so provides in an
amendment to its certificate of incorporation or Bylaws passed by a majority of
its outstanding shares, but such stockholder action does not become effective
for 12 months following its adoption and would not apply to persons who were
already interested stockholders at the time of the amendment. The Company's
Certificate of Incorporation does not exclude the Company from the restrictions
imposed under Section 203.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. The provisions of
Section 203 may encourage companies interested in acquiring the Company to
negotiate in advance with the Company's Board of Directors, because the
stockholder approval requirement would be avoided if the Board of Directors
approves either the business combination or the transaction which results in the
stockholder becoming an interested stockholder. Such provisions also may have
the effect of preventing changes in the Board. It is further possible that such
provisions could make it more difficult to accomplish transactions which
stockholders may otherwise deem to be in their best interests.
CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION AND BYLAWS AFFECTING CHANGE
IN CONTROL
Certain provisions of the Certificate of Incorporation and Bylaws may delay
or make more difficult unsolicited acquisitions or changes of control of the
Company. It is believed that such provisions will enable the Company to develop
its business in a manner that will foster its long-term growth without
disruption caused by the threat of a takeover not deemed by its Board of
Directors to be in the best interests of the Company and its stockholders. Such
provisions could have the effect of discouraging third parties from making
proposals involving an unsolicited acquisition or change of control of the
Company, although such proposals, if made, might be considered desirable by a
majority of the Company's stockholders. Such provisions may also have the effect
of making it more difficult for third parties to cause the replacement of the
current Board. These provisions include (i) the availability of capital stock
for issuance from time to time at the discretion of the Board of Directors (see
"Authorized but Unissued Capital Stock"), (ii) prohibitions against stockholders
calling a special meeting of stockholders, (iii) requirements for advance notice
for raising business or making nominations at stockholders' meetings, (iv) the
ability of the Board of Directors to increase the size of the board and to
appoint directors to newly created directorships and (v) higher than majority
requirements to make certain amendments to the Bylaws and Certificate of
Incorporation.
Special Meetings
The Certificate of Incorporation and Bylaws also provide that special
meetings of the stockholders can be called only by the Chief Executive Officer
of the Company or by a vote of the majority of the Board of Directors.
Furthermore, the Bylaws of the Company provide that only such business as is
specified in the notice of any such special meeting of stockholders may come
before such meeting.
44
<PAGE> 46
Advance Notice for Raising Business or Making Nominations at Meetings
The Bylaws of the Company establish an advance notice procedure for
stockholder proposals to be brought before an annual meeting of stockholders and
for nominations by stockholders of candidates for election as directors at an
annual or special meeting at which directors are to be elected. Only such
business may be conducted at an annual meeting of stockholders as has been
brought before the meeting by, or at the direction of, the Chairman of the Board
of Directors, or by a stockholder of the Company who is entitled to vote at the
meeting who has given to the Secretary of the Company timely written notice, in
proper form, of the stockholder's intention to bring that business before the
meeting. The chairman of such meeting has the authority to make such
determinations. Only persons who are nominated by, or at the direction of, the
Chairman of the Board of Directors, or who are nominated by a stockholder who
has given timely written notice, in proper form, to the Secretary prior to a
meeting at which directors are to be elected will be eligible for election as
directors of the Company.
To be timely, a stockholder's notice of business to be brought before an
annual meeting and nominations of candidates for election as directors at any
annual meeting shall be delivered to the Secretary of the Company at the
principal executive offices of the Company not less than 70 days nor more than
90 days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 20 days, or delayed by more than 70 days, from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the ninetieth day prior to such annual meeting and not later
than the close of business on the later of the seventieth day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made.
To be timely, a stockholder's notice of nominations of persons for election
to the Board of Directors may be made at such a special meeting of stockholders
if the stockholder's notice shall be delivered to the Secretary of the Company
at the principal executive offices of the Company not earlier than the ninetieth
day prior to such special meeting and not later than the close of business on
the later of the seventieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
The notice of any nomination for election as a director must set forth the
name and address of, and the class and number of shares of the Company held by,
the stockholder who intends to make the nomination and the beneficial owner, if
any, on whose behalf the nomination is being made; the name and address of the
person or persons to be nominated; a representation that the stockholder is a
holder of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; such other information regarding
each nominee proposed by such stockholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the SEC had
each nominee been nominated, or intended to be nominated, by the Board of
Directors; and the consent of each nominee to serve as a director if so elected.
Number of Directors; Filling of Vacancies
The Certificate of Incorporation and Bylaws provide that newly created
directorships resulting from any increase in the authorized number of directors
(or any vacancy) may be filled by a vote of a majority of directors then in
office. Accordingly, the Board may be able to prevent any stockholder from
obtaining majority representation on the Board of Directors by increasing the
size of the board and filling the newly created directorships with its own
nominees. If any applicable provision of the DGCL expressly confers power on
stockholders to fill such a directorship at a special meeting of stockholders,
such a directorship may be filled at such meeting only by the affirmative vote
of at least 80.0% in voting power of all shares of the Company entitled to vote
generally in the election of directors, voting as a single class.
45
<PAGE> 47
Amendments to the Bylaws
The Certificate of Incorporation provides that the affirmative vote of the
holders of at least 80.0% in voting power of all the shares of the Company
entitled to vote generally in the election of directors, voting together as a
single class, shall be required in order for the stockholders to alter, amend or
repeal any provision of the Bylaws which is to the same effect as provisions
contained in the Certificate of Incorporation relating to (i) the amendment of
the Bylaws, (ii) the filling of director vacancies and (iii) calling and taking
actions at meetings of stockholders.
Amendments to the Certificate of Incorporation
Certificate of Incorporation requires the affirmative vote of the holders
of at least 80.0% in voting power of all the shares of the Company entitled to
vote generally in the election of directors, voting together as a single class,
to alter, amend or repeal provisions of the Certificate of Incorporation
relating to (i) the amendment of the Certificate of Incorporation and/or the
Bylaws, (ii) the filling of director vacancies and (iii) calling and taking
actions at meetings of stockholders.
INDEMNIFICATION AND LIMITATION OF LIABILITY FOR DIRECTORS AND OFFICERS
The Certificate of Incorporation provides that the Company may indemnify
directors and officers to the fullest extent permitted by the laws of the State
of Delaware. The Company has entered into indemnification agreements with its
directors creating certain indemnification obligations on the Company's part in
favor of the directors and, as permitted by applicable law, these
indemnification agreements clarify and expand the circumstances under which a
director will be indemnified. The Certificate of Incorporation also provides
that a director of the Company shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation thereof is not
permitted under the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended.
The indemnification rights conferred by the Certificate of Incorporation of
the Company are not exclusive of any other right to which a person seeking
indemnification may otherwise be entitled. The Company will also provide
liability insurance for the directors and officers for certain losses arising
from claims or charges made against them while acting in their capacities as
directors or officers.
The effect of such indemnification arrangements may be to exempt or limit
the liability of such directors to the Company or its stockholders for monetary
damages for breach of fiduciary duty to the Company, except to the extent such
exemption or limitation is not permitted under applicable law.
TRANSFER AGENT
The transfer agent and registrar of the Company's Common Stock is
.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Offering, the Company will have
shares of Common Stock outstanding. Of such shares, shares, including
all shares offered hereby and an additional shares issued
and outstanding prior to the Offering and held by an individual not affiliated
with the Company will be freely tradeable by persons other than affiliates of
the Company, without restriction under the Securities Act of 1933, as amended
(the "Securities Act") (subject to certain volume limitations and other
restrictions prescribed by Rule 144 promulgated under the Securities Act). As
defined in Rule 144, an "affiliate" of an issuer is a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such issuer.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an "affiliate" as that term is defined
above, who has paid for shares is entitled, beginning one year from the later of
the date of acquisition of the shares from the Company or from an affiliate of
the Company, to sell
46
<PAGE> 48
within any three-month period up to that number of shares that does not exceed
the greater of 1.0% of the then outstanding shares or the average weekly trading
volume of the then outstanding shares during the four calendar weeks preceding
each such sale. A person (or persons whose shares are aggregated) who is not
deemed an affiliate of the Company and who has paid for his shares is entitled,
beginning two years from the later of the date of the acquisition from the
Company or from an affiliate of the Company, to sell such shares under Rule
144(k) without regard to the volume limitations described above. Affiliates
continue to be subject to such volume limitations after the two year holding
period.
The Company, its officers and directors and certain of its other current
stockholders, who collectively hold shares of Common Stock, have
agreed that they will not dispose of any shares of Common Stock, or any
securities convertible or exchangeable for shares of Common Stock, for a period
of 180 days after the date of the Underwriting Agreement without the written
consent of Oppenheimer & Co., Inc., on behalf of the Representatives. See
"Underwriting."
Following the Offering, the Company intends to file a registration
statement on Form S-8 under the Securities Act to register shares of
Common Stock issuable upon the exercise of stock options granted under the
Option Plans. Shares of Common Stock issued upon the exercise of stock options
after the effective date of such registration statement generally will be
available for sale in the open market. Immediately following the Offering,
however, no options to purchase Common Stock will be exercisable under the
Option Plans.
47
<PAGE> 49
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company, the Selling Stockholder and
Oppenheimer & Co., Inc., and A.G. Edwards & Sons, Inc., as representatives (the
"Representatives") of the underwriters of the Offering (the "Underwriters"), the
Company and the Selling Stockholder have agreed to sell to the Underwriters, and
the Underwriters have severally agreed to purchase from the Company and the
Selling Stockholder, the number of shares of Common Stock set forth opposite
their names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Oppenheimer & Co., Inc......................................
A.G. Edwards & Sons, Inc....................................
---------
Total.............................................
=========
</TABLE>
The Underwriters propose to offer the Common Stock directly to the public
at the public offering price set forth on the cover page of this Prospectus, and
at such price less a concession not in excess of $ per share of Common
Stock to certain securities dealers, of which a concession not in excess of
$ per share of Common Stock may be reallowed to certain other
securities dealers. After the Offering, the offering price and other selling
terms may be changed by the Underwriters.
In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot in connection with
the Offering, creating a short position in the Common Stock for their own
account. In addition, to cover over-allotments or to stabilize the price of the
Common Stock, the Underwriters may bid for and purchase, shares of Common Stock
in the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Common
Stock in the Offering, if the syndicate repurchases previously distributed
Common Stock in transactions to cover syndicate short provisions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all of the
above shares of Common Stock if any are purchased.
The Company has granted an option to the Underwriters execercisable within
45 days after the date of this Prospectus, to purchase from the Company up to an
aggregate of additional shares of Common Stock, to cover
over-allotments, if any, at the initial public offering price less the
underwriting discount set forth on the cover pages of this Prospectus. If the
Underwriters exercise their over-allotment option to purchase any of the
additional shares of Common Stock, each of the Underwriters has
severally agreed, subject to certain conditions, to purchase approximately the
same percentage as the number of shares of Common Stock to be purchased by each
of them bears to the shares of Common Stock offered hereby. The
Company will be
48
<PAGE> 50
obligated, pursuant to the over-allotment option, to sell Common Stock to the
Underwriters to the extent such over-allotment option is exercised.
The Company and each of its officers and directors and certain stockholders
have agreed that without the consent of Oppenheimer & Co., Inc., on behalf of
the Representatives, they will not, for a period of 180 days after the date of
the Underwriting Agreement (i) offer, pledge, sell, distribute, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or similar agreement that transfers, in whole or in
part, the economic risk of ownership of the Common Stock, subject to certain
limited exceptions, including the sale by the Company and the Selling
Stockholder of shares of Common Stock in the Offering. The Company also may
grant options, restricted stock, stock appreciation rights or other units of
stock-based incentive compensation under the JLM LTIP.
The Company, the Selling Stockholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
The Representatives do not intend to confirm sales of the Common Stock to
accounts over which they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common
Stock. There can be no assurance that any active trading market will develop for
the Common Stock or as to the price at which the Common Stock may trade in the
public market from time to time subsequent to the offering made hereby. The
initial price to the public for shares of Common Stock offered hereby will be
negotiated between the Company and the Representatives. Among the factors to be
considered in determining the initial price to the public are (i) the history of
and prospects for the industry in which the Company competes, (ii) the ability
of the Company's management, (iii) the past and present operations of the
Company, (iv) the historical results of operations of the Company, (v) the
prospects for future earnings and business potential of the Company, (vi) the
general condition of the securities markets at the time of the Offering, (vii)
the recent market prices of securities of generally comparable companies, (viii)
the market capitalizations and stages of development of other companies which
the Company and Representatives believe to be comparable to the Company and (ix)
other factors deemed relevant.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis,
Professional Association, Tampa, Florida, and for the Underwriters by Rogers &
Wells, New York, New York.
EXPERTS
The Consolidated Financial Statements of JLM and the Statement of Revenues
and Direct Costs of the Blue Island, Illinois, location of BTL Specialty Resins
Corp. included in this Prospectus and the Registration Statement have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (together with all
amendments, exhibits and schedules, the "Registration Statement") under the
Securities Act with respect to the shares of Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company, reference is hereby made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each such instance reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. As a result of the Offering, the Company will become
49
<PAGE> 51
subject to the informational requirements of the Exchange Act, and in accordance
therewith will file reports, proxy statements and other information with the
Commission. The Registration Statement, as well as all periodic reports and
other information to be filed by the Company pursuant to the Exchange Act, may
be inspected without charge and copied upon payment of fees prescribed by the
Commission at the public reference facilities maintained by the Commission in
Room 1024, 450 Fifth Street NW, Washington, D.C. 20549, and at the Commission's
regional offices located at Seven World Trade Center, 7th Floor, New York, New
York 10048 and Citicorp Center, 500 Madison Street, Suite 1400, Chicago,
Illinois 60661. The Commission maintains a worldwide web site at
(http:/www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements which have been certified by its
independent public accountant, and quarterly reports containing unaudited
summary financial information for each of the first three quarters of each
fiscal year.
50
<PAGE> 52
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS OF JLM INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets -- December 31, 1995 and 1996
and (Unaudited) March 31, 1997............................ F-3
Consolidated Statements of Income -- Years Ended December
31, 1994, 1995 and 1996 and (Unaudited) Three Months Ended
March 31, 1996 and 1997................................... F-4
Consolidated Statements of Changes in Stockholders'
Equity -- Years Ended December 31, 1994, 1995 and 1996 and
(Unaudited) Three Months Ended March 31, 1997............. F-5
Consolidated Statements of Cash Flows -- Years Ended
December 31, 1994, 1995 and 1996 and (Unaudited) Three
Months Ended March 31, 1996 and 1997...................... F-6
Notes to Consolidated Financial Statements.................. F-7
CONSOLIDATED SUPPLEMENTAL SCHEDULE
Independent Auditors' Report................................ F-22
Supplemental Schedule....................................... F-23
</TABLE>
STATEMENT OF REVENUES AND DIRECT COSTS OF THE BLUE ISLAND, ILLINOIS LOCATION OF
BTL SPECIALTY RESINS CORP.
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-24
Statement of Revenues and Direct Costs for the Period From
April 1, 1995 through June 7, 1995........................ F-25
Notes to Statement of Revenues and Direct Costs............. F-26
</TABLE>
F-1
<PAGE> 53
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
JLM Industries, Inc. and Subsidiaries
Tampa, Florida
We have audited the accompanying consolidated balance sheets of JLM
Industries, Inc. and subsidiaries (the "Company") as of December 31, 1995 and
1996, and the related consolidated statements of income, changes in
stockholders' equity and of cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of JLM Industries,
Inc. and subsidiaries as of December 31, 1995 and 1996 and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Tampa, Florida
February 19, 1997
(May 22, 1997 as to Note 18 and
July , 1997 as to Note 19)
The accompanying consolidated financial statements retroactively reflect
the combination of JLM Industries, Inc. and subsidiaries with two interrelated
predecessor businesses previously under common control and management, which is
to be effected prior to the effective date of this Registration Statement.
However, the consolidated financial statements do not reflect the contemplated
common stock split. The above opinion is in the form which will be signed by
Deloitte & Touche LLP upon consummation of such combination and stock split,
which are described in Note 19 of notes to consolidated financial statements,
and assuming that from February 19, 1997 to the date of the combination and
stock split, no other events shall have occurred that would effect the
accompanying consolidated financial statements and notes thereto, except for
events described in Note 18 of notes to the consolidated financial statements as
to which the date is May 22, 1997.
DELOITTE & TOUCHE LLP
Tampa, Florida
February 19, 1997
F-2
<PAGE> 54
JLM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996 AND (UNAUDITED) MARCH 31, 1997
<TABLE>
<CAPTION>
MARCH 31,
1995 1996 1997
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 4,710,483 $ 4,792,473 $ 5,829,482
Accounts receivable:
Trade............................................. 29,514,825 25,721,911 44,078,475
Other............................................. 3,234,256 2,769,232 3,533,148
Inventories.......................................... 14,193,219 13,283,576 14,615,456
Prepaid expenses and other current assets............ 1,925,022 3,699,913 3,754,210
Assets held for sale................................. 2,626,594 1,924,394 1,866,746
----------- ----------- ------------
Total current assets......................... 56,204,399 52,191,499 73,677,517
Other investments...................................... 1,876,118 1,881,066 1,935,535
Note receivable from Olefins Terminal Corporation...... 2,752,356 2,320,313 2,406,797
Property and equipment -- net.......................... 24,711,397 29,368,360 29,206,372
Other assets -- net.................................... 953,681 1,530,565 1,519,139
----------- ----------- ------------
Total assets................................. $86,497,951 $87,291,803 $108,745,360
=========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses................ $50,929,882 $39,590,106 $ 51,692,849
Current portion of long-term debt.................... 3,044,064 3,962,385 4,696,652
Loans payable........................................ 2,132,079 8,366,520 17,578,930
Income taxes payable................................. 352,461 33,322 513,605
Deferred revenue..................................... 20,400 300,475 20,000
----------- ----------- ------------
Total current liabilities.................... 56,478,886 52,252,808 74,502,036
Long-term debt, less current portion................... 17,018,214 17,808,872 15,420,991
Deferred income taxes.................................. 1,195,131 2,538,980 2,826,487
Loan payable to stockholder............................ 1,009,960 905,148 905,148
Minority interest...................................... 55,699 137,802 146,470
Other liabilities...................................... 220,688 203,761 208,901
----------- ----------- ------------
Total liabilities............................ 75,978,578 73,847,371 94,010,033
----------- ----------- ------------
Commitments and Contingencies (Note 12)
Stockholders' Equity:
Preferred stock -- authorized 5,000,000 shares,
issued and outstanding 0 shares................... -- -- --
Common stock -- $.01 par value, authorized 30,000,000
shares, issued and outstanding 900 shares......... 9 9 9
Additional paid-in capital........................... 539,991 539,991 539,991
Retained earnings.................................... 10,002,182 13,467,898 14,869,776
Foreign currency translation adjustment.............. (22,809) (41,266) (152,249)
----------- ----------- ------------
10,519,373 13,966,632 15,257,527
Less treasury stock at cost -- 48 shares............. -- (522,200) (522,200)
----------- ----------- ------------
Total stockholders' equity................... 10,519,373 13,444,432 14,735,327
----------- ----------- ------------
Total liabilities and stockholders' equity... $86,497,951 $87,291,803 $108,745,360
=========== =========== ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 55
JLM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.................... $218,569,604 $289,370,945 $236,521,183 $57,861,298 $80,517,783
Cost of sales............... 206,906,758 265,460,931 208,281,667 51,171,163 73,671,162
------------ ------------ ------------ ----------- -----------
Gross profit.............. 11,662,846 23,910,014 28,239,516 6,690,135 6,846,621
Selling, general and
administrative expenses... 9,280,280 15,175,815 17,237,736 4,015,203 3,917,669
------------ ------------ ------------ ----------- -----------
Operating income.......... 2,382,566 8,734,199 11,001,780 2,674,932 2,928,952
Interest expense -- net..... (369,899) (1,757,326) (2,814,667) (641,486) (627,910)
Other income -- net......... 453,025 152,320 196,896 64,082 40,769
Foreign currency exchange
(loss) gain -- net........ (319,303) (1,074,974) (527,652) (799,015) 62,908
------------ ------------ ------------ ----------- -----------
Income before minority
interest and income
taxes.................. 2,146,389 6,054,219 7,856,357 1,298,513 2,404,719
Minority interest in
(income) loss of
subsidiaries.............. (63,821) 4,670 (82,103) (7,362) (8,668)
------------ ------------ ------------ ----------- -----------
Income from continuing
operations before
income taxes,
discontinued operations
and extraordinary
item................... 2,082,568 6,058,889 7,774,254 1,291,151 2,396,051
------------ ------------ ------------ ----------- -----------
Income tax provision:
Current................... 924,218 2,093,004 2,073,586 598,745 548,289
Deferred.................. 48,982 336,793 1,343,849 370,705 287,507
------------ ------------ ------------ ----------- -----------
Total income tax
provision.............. 973,200 2,429,797 3,417,435 969,450 835,796
------------ ------------ ------------ ----------- -----------
Income from continuing
operations before
discontinued operations
and extraordinary
item................... 1,109,368 3,629,092 4,356,819 321,701 1,560,255
Discontinued operations:
Loss from operations of
discontinued operations
(net of income tax
benefit of $214,115,
$217,155, $279,312,
$54,847 and $56,452,
respectively).......... (229,060) (325,728) (419,215) (82,270) (84,679)
Loss on disposal of
discontinued operations
(net of income tax
benefit of $81,049 and
$3,620,
respectively).......... -- (121,574) (9,050) -- --
------------ ------------ ------------ ----------- -----------
Income before
extraordinary item..... 880,308 3,181,790 3,928,554 239,431 1,475,576
Extraordinary gain on share
of partnership forgiveness
of debt (net of income tax
expense of $103,620)...... 169,064 -- -- -- --
------------ ------------ ------------ ----------- -----------
Net income................ $ 1,049,372 $ 3,181,790 $ 3,928,554 $ 239,431 $ 1,475,576
============ ============ ============ =========== ===========
Pro forma income per share
from continuing operations
before discontinued
operations and
extraordinary item........ $ $
============ ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 56
JLM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
PREFERRED COMMON PAID-IN RETAINED TRANSLATION TREASURY STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS ADJUSTMENT STOCK EQUITY
--------- ------ ---------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1994............... $ -- $ 9 $539,991 $ 5,971,664 $ (49,320) $ -- $ 6,462,344
Stockholder
distributions...... -- -- -- (53,564) -- -- (53,564)
Net income........... -- -- -- 1,049,372 -- -- 1,049,372
Currency translation
adjustment......... -- -- -- -- (47,166) -- (47,166)
----- ----- -------- ----------- --------- --------- -----------
Balance at December
31, 1994........... -- 9 539,991 6,967,472 (96,486) -- 7,410,986
Stockholder
distributions...... -- -- -- (147,080) -- -- (147,080)
Net income........... -- -- -- 3,181,790 -- -- 3,181,790
Currency translation
adjustment......... -- -- -- -- 73,677 -- 73,677
----- ----- -------- ----------- --------- --------- -----------
Balance at December
31, 1995........... -- 9 539,991 10,002,182 (22,809) -- 10,519,373
Stockholder
distributions...... -- -- -- (462,838) -- -- (462,838)
Net income........... -- -- -- 3,928,554 -- -- 3,928,554
Purchase of treasury
stock.............. -- -- -- -- -- (522,200) (522,200)
Currency translation
adjustment......... -- -- -- -- (18,457) -- (18,457)
----- ----- -------- ----------- --------- --------- -----------
Balance at December
31, 1996........... -- 9 539,991 13,467,898 (41,266) (522,200) 13,444,432
Stockholder
distributions
(unaudited)........ -- -- -- (73,698) -- -- (73,698)
Net income
(unaudited)........ -- -- -- 1,475,576 -- -- 1,475,576
Currency translation
adjustment
(unaudited)........ -- -- -- -- (110,983) -- (110,983)
----- ----- -------- ----------- --------- --------- -----------
Balance at March 31,
1997 (unaudited)... $ -- $ 9 $539,991 $14,869,776 $(152,249) $(522,200) $14,735,327
===== ===== ======== =========== ========= ========= ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 57
JLM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1994 1995 1996 1996 1997
----------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 1,049,372 $ 3,181,790 $ 3,928,554 $ 239,430 $ 1,475,576
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Deferred income taxes................................. 48,982 336,793 1,343,849 370,705 287,507
Minority interest in income (loss) of subsidiaries.... 63,821 (172,950) 82,103 7,362 8,668
Loss on disposal of assets............................ 155,625 177,942 379,067 --
Loss on disposal of discontinued operations -- net.... -- 121,574 9,050 -- --
Extraordinary gain on share of partnership forgiveness
of debt -- net...................................... (169,064) -- -- -- --
Depreciation and amortization......................... 572,226 1,522,282 2,524,187 531,993 678,042
Loss from partnerships................................ 48,000 41,697 48,000 12,000 12,000
(Income) loss from investment in Olefins Terminal
Corporation -- net.................................. (205,155) (82,500) 55,169 47,941 6,924
Noncash management fee and interest income from
Olefins Terminal Corporation........................ (338,768) (297,706) (334,578) (67,324) (86,484)
Allowance for doubtful accounts....................... -- 44,537 383,662 -- --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable.......... (9,649,574) (3,720,019) 4,081,252 414,325 (19,120,480)
(Increase) decrease in inventories.................. (15,267) (6,703,960) 510,593 6,290,069 (1,331,880)
Decrease (increase) in prepaid expenses and other
current assets.................................... 2,138 (397,739) (1,774,891) (979,902) (54,297)
(Increase) decrease in income tax receivable........ (499,954) 396,334 -- -- --
(Increase) decrease in assets held for sale......... -- (2,476,594) 1,101,250 (360,973) --
Increase in other assets............................ (275,686) (33,351) (906,048) -- (77,443)
Increase (decrease) in accounts payable and accrued
expenses.......................................... 15,374,780 10,642,880 (11,345,206) (11,001,784) 12,102,743
Increase (decrease) in income taxes payable......... 52,738 78,740 (322,759) 162,855 480,283
Increase (decrease) in deferred revenue............. -- 20,400 280,075 786,600 (280,475)
(Decrease) increase in other liabilities............ (150,000) 65,627 (16,927) (18,121) 5,148
----------- ----------- ------------ ------------ ------------
Net cash provided by (used in) operating
activities....................................... 6,064,214 2,745,777 26,402 (3,564,824) (5,894,168)
----------- ----------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets held for sale.............. 1,034,000 -- 786,535 -- 1,090
Proceeds from sale of Polychem Ltd., Inc................ -- 882,337 -- -- --
Capital expenditures.................................... (1,220,974) (2,319,890) (7,346,658) (1,444,976) (370,633)
Capitalized acquisition costs........................... (127,700) -- -- -- --
Purchase of net assets, net of cash acquired............ (900,000) (3,223,084) -- -- --
Other investments....................................... (3,481) -- (70,672) (35,310) (73,393)
----------- ----------- ------------ ------------ ------------
Net cash used in investing activities............. (1,218,155) (4,660,637) (6,630,795) (1,480,286) (442,936)
----------- ----------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) proceeds of loans payable.............. (1,952,917) 797,140 6,234,441 4,854,812 9,212,410
Proceeds from long-term debt............................ 3,188,962 7,699,613 4,279,312 2,616,308 50,333
Repayments of long-term debt............................ (1,640,676) (9,223,825) (3,241,263) (2,813,836) (1,703,949)
Proceeds from shareholder loan.......................... 605,000 402,380 -- -- --
Distributions to shareholders........................... (53,564) (147,080) (462,838) (140,337) (73,698)
(Repayments) borrowings of shareholder loan............. (61,769) 2,580 (104,812) (105,945) --
----------- ----------- ------------ ------------ ------------
Net cash provided by (used in) financing activities... 85,036 (469,192) 6,704,840 4,411,002 7,485,096
----------- ----------- ------------ ------------ ------------
Effect of foreign exchange rates on cash................. (47,166) 73,677 (18,457) (826) (110,983)
----------- ----------- ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents......................................... 4,883,929 (2,310,375) 81,990 (634,934) 1,037,009
Cash and cash equivalents, beginning of period........... 2,136,929 7,020,858 4,710,483 4,710,483 4,792,473
----------- ----------- ------------ ------------ ------------
Cash and cash equivalents, end of period................. $ 7,020,858 $ 4,710,483 $ 4,792,473 $ 4,075,549 $ 5,829,482
=========== =========== ============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.............................................. $ 592,987 $ 2,000,005 $ 2,928,671 $ 554,035 $ 698,251
=========== =========== ============ ============ ============
Income taxes.......................................... $ 1,129,356 $ 1,131,857 $ 2,113,975 $ 252,217 $ 65,826
=========== =========== ============ ============ ============
Noncash investing activities:
Capital lease obligations............................. $ 149,331 $ 121,135 $ 106,391 $ -- $ 50,335
=========== =========== ============ ============ ============
Noncash financing activities:
Treasury stock purchased by satisfaction of accounts
receivable.......................................... $ -- $ -- $ 522,200 $ -- $ --
=========== =========== ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 58
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND THE
(UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997
1. DESCRIPTION OF BUSINESS
JLM Industries, Inc. and subsidiaries ("JLM" or the "Company") is a leading
marketer and distributor of certain commodity chemicals, principally acetone and
phenol. JLM is headquartered in Tampa, Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of JLM and its wholly-owned subsidiaries, as if the
reorganization referred to in Note 19 has occurred. JLM's principal operating
subsidiaries are JLM Marketing, Inc., JLM Chemicals, Inc., JLM Terminals, Inc.,
JLM International, Inc., Olefins Marketing, Inc., JLM Industries (Europe) B.V.,
JLM Chemicals Canada, Inc. and JLM Industries de Venezuela, C.A. All material
intercompany balances and transactions have been eliminated in consolidation.
Included in the 1994 consolidation is the 80% owned subsidiary, Olefins
Marketing Inc. and the 95% owned subsidiary, Polychem Ltd., Inc. ("Polychem").
In 1995, the 20% minority interest in Olefins Marketing Inc. was assigned to JLM
and the resulting decrease in minority interest of $177,620 was included in
other income. Also, in 1995 Polychem was sold (see Note 16). Included in the
1995, 1996 and 1997 consolidation is the 55% owned subsidiary, JLM Europe
(B.V.).
Unaudited Interim Information -- In the opinion of management, all
adjustments necessary for a fair presentation of the unaudited interim
consolidated financial statements as of March 31, 1997 and for the three months
ended March 31, 1996 and 1997 have been included. Such adjustments consist only
of normal recurring items. Interim results are not necessarily indicative of
results for a full year.
Consolidated Statements of Cash Flows -- Cash equivalents consist of highly
liquid investments with original maturities from purchase date of three months
or less.
Inventories -- Inventories are valued at the lower of cost or market. The
costs of JLM Marketing, Inc.'s inventories are determined on the last-in,
first-out (LIFO) method. As of December 31, 1996 and March 31, 1997, JLM
Marketing Inc.'s inventory was approximately 22% and 33%, respectively, of total
inventory. The costs of remaining inventories are determined on the first-in,
first out (FIFO) method. In the year ended December 31, 1996, there was a
decrease of LIFO inventory quantities and an increase in the price index,
resulting in a decrease in the LIFO reserve. In the three months ended March 31,
1997, there was an increase of LIFO inventory quantities with no change in the
price index, resulting in no change in the LIFO reserve. If LIFO inventories
were valued at current costs, operating income would have been $1,006,000,
$623,000, $(13,000), $0 and $0 higher (lower) than those reported for the years
ended December 31, 1994, 1995 and 1996, and the three months ended March 31,
1996 and 1997, respectively. The excess of replacement cost over the value of
inventories based upon the LIFO method was $1,629,000, and $1,616,000 as of
December 31, 1995 and 1996. There was no change in the excess of replacement
cost over the value of inventories based upon the LIFO method from December 31,
1996 to March 31, 1997.
JLM enters into contracts whereby parties to the contracts agree to
exchange various quantities of inventory over a specified period of time. JLM
records these exchanges of inventory at the lower of cost or market. As of
December 31, 1995 and 1996 and March 31, 1997, JLM owed approximately
$1,360,000, $1,378,000 and $755,700, respectively, under these contracts which
are included in inventory.
In 1996, JLM entered into a financial hedging contract in order to minimize
its exposure in the three months ended March 31, 1997 to the fluctuations in the
price of propylene, one of the two key raw materials used by JLM. The purpose of
the financial hedging contract was to secure an acceptable purchase price for
JLM's propylene requirements in the three months ended March 31, 1997. In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 80,
Accounting for Futures Contracts, gains and losses for such contracts are
recognized as an adjustment to cost of sales at the time the finished goods are
sold by JLM. As a result, in the
F-7
<PAGE> 59
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
three months ended March 31, 1997, JLM recognized a gain of $492,970, which
reduced cost of sales for this period. JLM can be exposed to losses in
connection with such contracts, generally the amount by which the fixed hedged
price on the contract is above the market price for such chemicals at the time
of purchase.
Prepaid Expenses and Other Current Assets -- Prepaid expenses and other
current assets include marketable securities and stock issuance costs.
Marketable securities are stated at cost, adjusted for unrealized gains or
losses, in accordance with SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Stock issuance costs relate to JLM's proposed
initial public offering. Upon successful completion of the offering, such costs
will be netted against the proceeds. In the event that the offering is not
successful, JLM will expense these costs.
Assets Held for Sale -- Assets held for sale are stated at cost which
approximates market value.
Other Investments -- Other investments include JLM's investments in
partnerships and the investment in Olefins Terminal Corporation ("OTC"). JLM
accounts for certain of its investments in partnerships on an equity basis, and
accordingly, records its respective share of profits and losses which are
allocated in accordance with the partnership agreements. Except for OTC, JLM has
no obligation to make any contributions beyond its initial investments. See
further discussion of OTC in Note 5.
Property and Equipment -- Property and equipment are stated at cost.
Depreciation and amortization are computed using the straight-line method over
the shorter of the lease term or the estimated useful lives.
A summary of the lives used for computing depreciation is as follows:
<TABLE>
<S> <C>
Building.................................................... 31.5 years
Vehicles and airplanes...................................... 2 to 10 years
Equipment................................................... 5 to 10 years
Furniture and fixtures...................................... 3 to 5 years
Leasehold improvements...................................... Life of lease
</TABLE>
Other Assets -- As of December 31, 1995 and 1996 and March 31, 1997, other
assets consist primarily of the cash surrender values of life insurance policies
held on key employees and deferred acquisition costs. In addition to the above,
as of December 31, 1996 and March 31, 1997 other assets included license fees,
certain development costs and advances on consulting and non-competition
agreements (see Note 12). These costs are amortized on a straight-line basis
from 2 to 10 years. Accumulated amortization on other assets as of December 31,
1995 and 1996 and March 31, 1997 was $208,434, $578,029 and $666,898,
respectively.
Deferred Revenue -- JLM accounts for amounts received from customers in
advance of shipments of inventory as deferred revenue.
Income Taxes -- JLM accounts for income taxes under the asset and liability
method as required by SFAS No. 109, Accounting for Income Taxes. Under this
method, deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax basis of existing assets and liabilities. The effect on deferred taxes
of a tax rate change is recognized in income in the period that the rate change
is enacted.
Aurora Chemical Inc. ("Aurora") and Phoenix Tank Car Corporation
("Phoenix") have elected to be treated as S corporations for federal income tax
purposes, with profits and losses generally reportable by the stockholders in
their individual income tax returns. Any tax liability related to either Aurora
or Phoenix prior to their acquisition by JLM will be the responsibility of their
shareholders. Accordingly, JLM has recorded no tax liability for such periods.
On a pro forma basis the tax liability for Aurora and Phoenix would be
immaterial.
Translation of Foreign Currency Financial Statements -- Assets and
liabilities of foreign subsidiaries are translated at period-end exchange rates.
Results of operations are translated at weighted average rates for the
F-8
<PAGE> 60
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
period. The effects of exchange rate changes in translating foreign financial
statements are presented as a separate component of stockholders' equity, except
for the Venezuelan subsidiary which operates in a hyperinflationary economy for
which the translation gains and losses are included in net income currently.
Foreign Exchange Contracts -- JLM enters into foreign exchange contracts as
a hedge against foreign accounts payable and receivable. Market value gains and
losses are recognized, and the resulting credit or debit offsets foreign
exchange gains or losses on these payables and receivables. At December 31, 1996
and March 31, 1997, JLM had no open foreign exchange contracts
Stock-Based Compensation -- In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123, Accounting for Stock-Based Compensation
("SFAS No. 123"), which is effective for fiscal years beginning after December
15, 1995. Under SFAS No. 123, JLM may elect to recognize stock-based
compensation expense based on the fair value of the awards or continue to
account for stock-based compensation under Accounting Principles Board Opinion
No. 25 Accounting for Stock Issued to Employees and disclose in the financial
statements the effects of SFAS No. 123 as if the recognition provisions were
adopted. JLM does not currently have a stock-based compensation plan.
Stockholders' Equity -- Effective May 22, 1997, the Company amended its
Certificate of Incorporation and increased the number of shares of common stock
authorized to 30,000,000 and changed the par value from no par to $.01 per
share. Additionally, this amendment provided for 5,000,000 authorized shares of
a new class of preferred stock. All share and per share amounts in the
accompanying consolidated financial statements have been retroactively adjusted
for the amendment.
Pro forma Earnings per Share -- The pro forma earnings per common share is
based on the weighted average number of common shares outstanding during each
period adjusted for actual shares issued during the period.
The Financial Accounting Standards Board recently issued SFAS No. 128,
Earnings Per Share. The objective of SFAS No. 128 is to simplify the computation
of earnings per share and to make the U.S. standard for computing earnings per
share more compatible with the earnings per share standards of other countries.
JLM does not anticipate that SFAS No. 128 will have a significant impact on pro
forma earnings per share.
Use of Estimates -- The preparation of the consolidated financial
statements, in conformity with generally accepted accounting principles,
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimated.
Fair Value of Financial Instruments -- The estimated fair value of amounts
reported in the consolidated financial statements have been determined by using
available market information and appropriate valuation methodologies. The
carrying value of all current assets and current liabilities approximates the
fair value because of their short-term nature. The fair value of long-term debt
approximates its carrying value.
Concentration of Credit Risk -- Financial instruments which potentially
subject JLM to a concentration of credit risk principally consist of trade
accounts receivable. Credit risk with respect to trade accounts receivable is
generally diversified due to the large number of entities comprising JLM's
customer base and their dispersion across many different geographies. JLM
performs ongoing credit evaluations of its customers' financial condition and
requires collateral, such as letters of credit, or business insurance in certain
circumstances.
F-9
<PAGE> 61
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Land and building............................... $ 6,090,504 $ 6,168,690 $ 6,168,690
Vehicles........................................ 1,040,360 378,894 361,893
Airplane........................................ -- 2,090,071 2,090,071
Equipment....................................... 17,896,185 22,493,073 22,781,904
Leased equipment -- capital lease............... 1,121,135 1,188,122 1,188,122
Furniture and fixtures.......................... 849,545 850,708 859,492
Leasehold improvements.......................... 172,701 318,066 450,186
----------- ----------- -----------
27,170,430 33,487,624 33,900,358
Less accumulated depreciation and
amortization.................................. (2,459,033) (4,119,264) (4,693,986)
----------- ----------- -----------
$24,711,397 $29,368,360 $29,206,372
=========== =========== ===========
</TABLE>
Depreciation and amortization expense for property and equipment was
$452,075, $1,335,500, $2,241,584, $499,741 and $574,722 for the years ended
December 31, 1994, 1995 and 1996 and the three months ended March 31, 1996 and
1997, respectively. The leased equipment consists of several capital leases,
which expire through June 1999, with a $189,318 option to purchase at the end of
the lease period. Future minimum capital lease payments for the years 1997
through 2001 are $266,563, $281,534, $331,767, $3,448, and $1,253, respectively.
Interest payments on such capital leases for the years 1997 through 2000 are
$72,232, $47,020, $13,670 and $440, respectively.
4. INVESTMENTS IN JOINT VENTURES AND PARTNERSHIPS
Investments in partnerships at December 31, 1995 and 1996 and March 31,
1997 consist principally of the following:
Phenol Plant Partnership -- JLM holds a 2% interest in the Mt. Vernon
Phenol Plant Partnership via its wholly owned subsidiary JLM (Ind), Inc., an
Indiana Corporation. The plant converts cumene into phenol which is marketed
under contractual agreements to GE Plastics. JLM has a long-term exclusive
agreement through 2002, and thereafter unless the agreement is terminated upon
prior notice, to purchase all acetone not used internally by GE Plastics
produced at the Mt. Vernon Phenol Plant. Based on its percentage of ownership,
JLM accounts for this investment using the cost method. As of December 31, 1995
and 1996 and March 31, 1997, the amount of this investment was approximately
$492,000. No contributions or distributions were made in 1995, 1996 or 1997.
Real Estate Partnerships -- JLM holds a 99% interest in Len-Kel Realty
Limited Partnership ("Len-Kel"). During 1987 and 1988, Len-Kel acquired 28 units
in a development project converting historical buildings into residential use.
The units are currently operated as rental property. JLM is a limited partner in
Len-Kel and cannot exert control over the partnership. Accordingly, the
investment is carried on the equity method. As of December 31, 1995 and 1996 and
March 31, 1997, the amount of this investment was approximately $957,000,
$909,000 and $897,000, respectively.
JLM holds other investments through limited partnerships. The amount of
these partnerships totaled approximately $133,000, $47,000 and $47,000 at
December 31, 1995 and 1996 and March 31, 1997, respectively.
During the years ended December 31, 1994, 1995 and 1996 and the three
months ended March 31, 1996 and 1997, JLM recorded income (losses) from
partnership investments of $224,684, ($41,697), $(48,000), $(12,000) and
$(12,000), respectively. The 1994 recorded income of $224,684 is comprised of a
loss of $48,000 from
F-10
<PAGE> 62
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
partnership operating activities and an extraordinary gain of $272,684 from
partnership forgiveness of debt. Income tax expense of $103,620 has been
allocated to the extraordinary gain, for an extraordinary gain net of applicable
taxes of $169,064. Losses do not require cash contributions by JLM. As a limited
partner, JLM has no obligation to make any contributions beyond its initial
investment.
5. OLEFINS TERMINAL CORPORATION
During 1991, JLM formed a 100% owned subsidiary, OTC, to design and
construct a polymer grade propylene export facility in Bayport, Texas. On August
15, 1991, OTC issued common stock and common stock warrants to other investors
which reduced JLM's ownership to 49% (32% on a fully diluted basis).
Construction was completed in July 1992. JLM accounts for its investment in OTC
on the equity basis. During the years ended December 31, 1994, 1995 and 1996 and
the three months ended March 31, 1996 and 1997, income (loss) from the
investment in OTC of $205,155, $82,500, $(55,169), $(47,941) and $(15,641),
respectively, was recorded. As of December 31, 1995 and 1996 and March 31, 1997,
the amount of this investment was approximately $295,000, $280,000 and $295,000,
respectively.
JLM provides OTC with financial and management services for a fee of 2.5%
on certain sales, as defined. JLM recorded management fees of $188,768,
$147,706, $139,321, $29,824 and $0 for the years ended December 31, 1994, 1995
and 1996 and the three months ended March 31, 1996 and 1997, respectively, under
this agreement. No payment of management fees had been made to JLM as of March
31, 1997 as these amounts were subordinated to OTC's senior indebtedness. As of
December 31, 1996 and March 31, 1997, JLM has recorded approximately $729,000 in
management fees due from OTC in accounts receivable-other.
As of December 31, 1995 and 1996 and March 31, 1997, JLM has a non-current
note receivable, including accrued interest, from OTC in the amount of
$2,752,356, $2,320,313 and $2,406,797, respectively. The note bears interest at
the rate of 10% per annum.
JLM is under contract through August 1997 to ship 5,000 metric tons per
month through OTC's terminal. JLM pays $113,200 each month for these terminaling
privileges. If JLM ships less than 5,000 metric tons in a month, the difference
can be carried over to subsequent months. These carryover rights, however,
expire at the end of each subsequent contract year. JLM recorded no prepaid
terminaling fees as of December 31, 1996 as there was no guarantee that such
amounts could be utilized by JLM in 1997.
See Note 18 regarding the OTC refinancing of their long-term debt.
The following summarizes the assets, liabilities and stockholders' equity
of OTC:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS:
Current....................................... $ 2,204,142 $ 2,154,737 $ 3,131,227
Noncurrent.................................... 14,697,600 12,095,787 11,355,334
----------- ----------- -----------
$16,901,742 $14,250,524 $14,486,561
=========== =========== ===========
LIABILITIES:
Current liabilities........................... $ 5,397,487 $ 4,292,927 $ 4,184,299
Noncurrent liabilities........................ 10,611,211 9,230,060 9,553,953
Stockholders' equity.......................... 893,044 727,537 748,309
----------- ----------- -----------
$16,901,742 $14,250,524 $14,486,561
=========== =========== ===========
</TABLE>
OTC had net income (loss) of $621,682, $250,035, $(165,507), $(145,276) and
$20,772 for the years ended December 31, 1994, 1995 and 1996 and the three
months ended March 31, 1996 and 1997, respectively.
F-11
<PAGE> 63
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Accounts payable................................ $48,116,089 $35,886,152 $45,843,678
Accrued expenses................................ 2,813,793 3,703,954 5,849,171
----------- ----------- -----------
$50,929,882 $39,590,106 $51,692,849
=========== =========== ===========
</TABLE>
7. LOANS PAYABLE
Loans payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Secured revolving loan agreements expiring in June 1997
and April 2000. Interest is payable monthly at prime
and prime plus 1.75% (prime was 8.25% and 8.5% as of
December 31, 1996 and March 31, 1997, respectively).... $ -- $5,915,336 $ 8,410,854
Secured loans payable associated with Venezuelan
operations due on demand. Interest is payable monthly
at 37.2% and between 21% -- 23% as of December 31, 1996
and March 31, 1997, respectively....................... 29,354 1,013,655 1,087,507
Secured loans payable due on demand. Interest is payable
monthly at rates between 8.3% -- 10.0% as of December
31, 1996 and March 31, 1997............................ 2,102,725 1,437,529 8,080,569
---------- ---------- -----------
Total loans payable............................ $2,132,079 $8,366,520 $17,578,930
========== ========== ===========
</TABLE>
The loans payable are collateralized by virtually all of JLM's inventory
and accounts receivable. As of December 31, 1996 and March 31, 1997, JLM had a
total of approximately $52,800,000 of credit facilities available with various
financial institutions of which approximately $30,929,255 and $14,025,706,
respectively, was unused. Additionally, as of December 31, 1996 and March 31,
1997, JLM had guaranteed vendor letters of credit in the amount of $12,250,000
and $16,910,645, respectively.
JLM's loans payable also contain certain financial covenants which must be
met with respect to, among other things, tangible net worth, cash flow coverage,
earnings and capital expenditures. JLM was not in compliance the tangible net
worth and the cash flow coverage covenants as of December 31, 1996, and
accordingly, received waivers with respect to such covenants from its financial
institutions. There can be no assurance that JLM will not require additional
waivers in the future or, if required, that the financial institutions will
grant them. Additionally, certain provisions of the loans payable to which JLM
is subject restrict JLM's ability to pay dividends.
F-12
<PAGE> 64
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Secured term loan payable due in equal quarterly
installments through June 2002. Interest is
payable quarterly at LIBOR plus 3.5% (LIBOR
was 5.375% and 5.688% as of December 31, 1996
and March 31, 1997, respectively)............. $14,864,177 $12,507,619 $11,293,334
Secured term loan payable due in June 2002.
Interest is payable monthly at 8.875% and
9.063% as of December 31, 1996 and March 31,
1997, respectively............................ -- 2,300,000 2,200,000
Mortgage payable due in equal monthly
installments through June 2004. Interest is
payable monthly at 9.59% as of December 31,
1996 and March 31, 1997....................... 1,800,587 1,703,694 1,679,471
Secured loans payable due in 2006. Interest is
payable at rates between 8%-9.68% as of
December 31, 1996 and March 31, 1997.......... 113,108 1,838,215 1,808,929
Secured loan payable due in variable monthly
installments through June 2000. Interest is
payable monthly at 10.9% as of December 31,
1996 and March 31, 1997....................... 1,129,167 929,167 866,667
Secured loan payable due in 1998, payable in a
$74,000 installment in 1997 and the balance
due in 1998. Interest is payable monthly at
the prime rate plus 1% (prime was 8.25% and
8.50% as of December 31, 1996 and March 31,
1997, respectively)........................... 1,052,400 978,400 904,400
Secured installment loan payable due in
September 1999, payable in quarterly
installments of $50,000. Interest is payable
quarterly at the prime rate plus 2% (prime was
8.25% and 8.50% as of December 31, 1996 and
March 31, 1997, respectively)................. -- 564,339 464,339
Secured loans payable due in equal monthly
installments through 1999. Interest is payable
monthly at rates between 10.13%-13.47% as of
December 31, 1996 and March 31, 1997.......... 93,821 65,258 99,894
Capital lease obligations due in equal monthly
installments through April 2001. Interest is
payable monthly at rates between 9.93%-16.99%
as of December 31, 1996 and March 31, 1997.... $ 1,009,018 $ 884,565 $ 800,610
----------- ----------- -----------
Total................................. 20,062,278 21,771,257 20,117,643
Less current portion.................. (3,044,064) (3,962,385) (4,696,652)
----------- ----------- -----------
Long-term portion..................... $17,018,214 $17,808,872 $15,420,991
=========== =========== ===========
</TABLE>
F-13
<PAGE> 65
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term debt becoming due during subsequent fiscal years ending on
December 31 are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 3,962,385
1998........................................................ 4,724,810
1999........................................................ 3,802,765
2000........................................................ 3,147,303
2001........................................................ 3,320,577
Thereafter.................................................. 2,813,417
-----------
Total............................................. 21,771,257
Less current portion.............................. (3,962,385)
-----------
Long-term portion................................. $17,808,872
===========
</TABLE>
The long-term debt is secured by substantially all of JLM's property and
equipment.
9. LOAN PAYABLE TO STOCKHOLDER AND RELATED PARTY TRANSACTIONS
JLM has loans payable to its majority stockholder in the amount of
$1,009,960, $905,148 and $905,148 at December 31, 1995 and 1996 and March 31,
1997, respectively. The loan payable as of December 31, 1996 and March 31, 1997
bears interest at the prime rate, which was 8.25%, and matures on April 1, 1998.
In 1995 and 1996, JLM purchased $479,400 and $318,600 of chemical products from
a joint venture partnership owned 50.0% by Kemlink, L.L.C., a Delaware limited
Liability company of which the majority stockholder is a 97.0% owner. All
purchases in 1995 and 1996 were at prices comparable to those paid to unrelated
parties. In addition, during 1995 and 1996, JLM sold $1,588,900 and $1,260,000,
respectively, of chemical products to Kemlink J.V. JLM did not purchase from or
sell any chemicals to Kemlink J.V. in 1994. Effective December 31, 1996 Kemlink
J.V. was terminated.
10. INCOME TAXES
JLM's current and deferred income tax provision consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- -------------------
1994 1995 1996 1996 1997
-------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Current:
Federal........................ $366,645 $1,333,030 $1,350,848 $330,438 $336,630
State and local................ 48,826 212,427 182,528 45,215 59,305
Foreign........................ 398,252 249,343 257,278 168,245 95,902
Deferred......................... 48,982 336,793 1,343,849 370,705 287,507
-------- ---------- ---------- -------- --------
$862,705 $2,131,593 $3,134,503 $914,603 $779,344
======== ========== ========== ======== ========
</TABLE>
The income tax provision reflected above includes the income tax
expense/benefit associated with discontinued operations and extraordinary gain.
F-14
<PAGE> 66
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of the deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Foreign net operating loss................. $ 77,000 $ 415,000 $ 430,000
Minimum tax credit carryforward............ -- 283,400 283,400
----------- ----------- -----------
77,000 698,400 713,400
Valuation allowance........................ (77,000) (415,000) (430,000)
----------- ----------- -----------
Total deferred tax assets.......... -- 283,400 283,400
----------- ----------- -----------
Deferred tax liabilities:
Property................................... (289,451) (1,953,133) (2,252,040)
Investment in partnership.................. (866,571) (817,974) (806,574)
Other...................................... (39,109) (51,273) (51,273)
----------- ----------- -----------
Total deferred tax liabilities..... (1,195,131) (2,822,380) (3,109,887)
----------- ----------- -----------
Net deferred tax liability......... $(1,195,131) $(2,538,980) $(2,826,487)
=========== =========== ===========
</TABLE>
The net change in the total valuation allowance for the year ended December
31, 1996 and the three months ended March 31, 1997 was an increase of $338,000
and $15,000, respectively. The valuation allowance represents the deferred tax
assets booked for foreign net operating losses generated from Venezuelan
operations.
At December 31, 1996 and March 31, 1997, there are foreign net operating
losses of approximately $1,220,000 and $1,270,000, respectively, available to
offset future foreign taxable income. These net operating losses expire in
various years ending in 2000.
JLM's effective income tax rate differs from the statutory federal income
tax rate of 34% as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
----------------------- --------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Statutory federal income tax rate.......... 34.00% 34.00% 34.00% 34.00% 34.00%
State and local income taxes............... 2.55 4.00 2.58 4.92 2.74
Foreign income taxes, net of federal income
tax benefit.............................. 6.55 2.12 3.80 17.53 2.42
Valuation allowance -- foreign net
operating loss........................... -- -- 4.79 38.10 .67
Foreign Sales Corporation benefit.......... -- -- (2.05) (1.69) (4.45)
Other...................................... 2.02 0.00 1.25 6.61 .62
----- ----- ----- ----- -----
Effective income tax rate.................. 45.12% 40.12% 44.37% 99.47% 36.00%
===== ===== ===== ===== =====
</TABLE>
Undistributed earnings (accumulated deficit) of non-U.S. subsidiaries
included in consolidated retained earnings amounted to $542,794, $(284,069) and
$(256,467) as of December 31, 1995 and 1996 and March 31, 1997, respectively.
JLM intends to continue to indefinitely reinvest these earnings, which reflect
full provision for non-U.S. income taxes, to expand its international
operations. Accordingly, no provision has been made for U.S. income taxes that
might be payable upon repatriation of such earnings. In the event any earnings
of non-U.S. subsidiaries are repatriated, JLM will provide for U.S. income taxes
upon repatriation of such earnings which will be offset by applicable foreign
tax credits, subject to certain limitations.
F-15
<PAGE> 67
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. TREASURY STOCK
Chemical Trading, S.L. ("Trading"), JLM's Spanish distributor, was indebted
to JLM pursuant to an arrangement in which JLM pays the distributor's operating
expenses. JLM treats the difference between such payments made by JLM and the
amount of commissions and other amounts due to the distributor in respect of his
activities on behalf of JLM as a loan by JLM to the distributor. Such
indebtedness was carried on an open account basis and in July 1996, $522,200 was
repaid without interest through the sale to JLM of 48 shares of common stock
owned by Trading's owner. For purposes of this repayment transaction, shares of
JLM's stock were valued at book value. Included in accounts receivable-other as
of December 31, 1995 and 1996 and March 31, 1997 are amounts owed to JLM by
Trading in the amount of $568,633, $322,350 and $420,944, respectively.
12. COMMITMENTS AND CONTINGENCIES
JLM is obligated under operating leases with remaining noncancelable terms
of a year or more for office equipment and automobiles. The approximate minimum
annual rentals under these leases at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 829,306
1998........................................................ 592,128
1999........................................................ 371,174
2000........................................................ 186,583
2001........................................................ 33,370
----------
Total minimum lease payments...................... $2,012,561
==========
</TABLE>
Total rental expenses for all operating leases approximated $1,533,000,
$1,605,300, $1,875,000, $469,000 and $286,000 for the years ended December 31,
1994, 1995 and 1996 and the three months ended March 31, 1996 and 1997,
respectively.
JLM is also obligated under a license agreement at December 31, 1996 to
make future minimum payments as follows:
<TABLE>
<S> <C>
1997........................................................ $115,750
1998........................................................ 115,750
1999........................................................ 115,650
--------
Total............................................. $347,150
========
</TABLE>
The Internal Revenue Service (the "IRS") has concluded a federal income tax
examination of JLM's 1988, 1989 and 1990 tax years and has proposed adjustments
for such years. JLM has filed a protest of the proposed adjustments and is
awaiting a determination by the IRS with respect to the JLM protest. JLM
believes that the outcome of the examination will not have a material adverse
effect on the financial condition of JLM.
The IRS has also commenced a federal income tax examination for JLM's 1992,
1993 an 1994 tax years. The examination is in its final stages, and the IRS has
not asserted any income tax deficiencies or definitively indicated all the
issues that will be involved in the examination. The issues that have been
raised by the IRS thus far do not indicate that any impact on the taxable years
at issue would be material. However, there can be no assurance that additional
issues impacting future taxable years will not be raised and resolved adversely
to JLM during the course of the examination or subsequent proceedings.
JLM is subject to federal, state, local and foreign environmental laws,
rules, regulations and ordinances concerning emissions to the air, discharges to
surface and subsurface waters, and the generation, handling, storage,
transportation, treatment, disposal and import and export of hazardous
materials. JLM has engaged environmental counsel for three of their facilities:
the JLM Chemicals, Inc. Blue Island, Illinois facility, the JLM Terminals, Inc.
facility and the Polychem facility. Regarding the JLM Chemicals, Inc. facility,
JLM believes that
F-16
<PAGE> 68
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the low levels of various organic compounds detected in soil and groundwater at
the facility are the result of historical use of the facility prior to its
acquisition by JLM (see Note 15) and/or migration from neighboring facilities.
JLM also believes that the likelihood of either state or federal environmental
regulatory agencies seeking remediation in the near term is low, based on the
location of the facility, the character of the area (each of which are factors
in assessing risk) and the fact that the site is pending removal from the
federal list of contaminated sites. Regarding the JLM Terminals, Inc. facility,
JLM believes that ultimate liability for remediation of soil and groundwater
contamination rests with the previous owner of the facility and/or a neighboring
facility. Regarding the Polychem facility, levels of organic compounds slightly
in excess of regulatory thresholds were detected in the ground water. JLM has
been addressing the problem and recent analytical results show that the levels
of contaminants have decreased to acceptable levels. Accordingly, JLM has
requested that state authorities permit closure of the remediation of the
Polychem facility. JLM does not believe that a material amount of funds will be
required to complete remediation at any site.
On December 12, 1996, JLM entered into consulting and non-competition
agreements with two independent third parties. The terms of the consulting
agreements are from January 3, 1997 through December 31, 2003 and JLM is
committed to pay $130,000 per year, payable semi-annually beginning January 1,
1997 through December 31, 2002 and $200,000 on January 1, 2003. The terms of the
non-competition agreements will be from January 1, 1997 through December 31,
2006 and JLM is committed to pay $100,000 per year, payable semi-annually from
July 1, 1997 through December 31, 2002 and $270,000 on January 1, 2003. As of
December 31, 1996 and March 31, 1997, JLM has advanced $470,000 to the third
parties and, in conjunction with entering into the consulting and
non-competition agreements, these amounts shall be satisfied by setting them off
against the amounts owed by the third parties to JLM. As of December 31, 1996
and March 31, 1997, the $240,000 advance has been recorded in other assets-net
and the remaining $230,000 advance is recorded in prepaid expenses and other
current assets in the accompanying consolidated balance sheet. On October 24,
1996, the third parties signed promissory notes aggregating $470,000 and bearing
no interest for the monies that had been advanced.
13. PROFIT-SHARING PLAN
JLM has a defined contribution profit-sharing plan covering substantially
all of its employees. Prior to July 1995, JLM was contributing an amount equal
to 50% of the contribution of eligible employees, limited to the lesser of 3% of
the employees' compensation or $1,000. Effective July 1995, JLM changed its
contribution amount from the above to 100% of the contribution of eligible
employees, limited to a maximum amount of 6% of the employees' compensation.
JLM's contribution rate is determined annually at the beginning of each plan
year. The costs for this plan were approximately $15,000, $130,000, $278,000,
$64,000 and $65,000 for the years ended December 31, 1994, 1995 and 1996 and the
three months ended March 31, 1996 and 1997, respectively.
Included in selling, general and administrative expenses are discretionary
profit-sharing bonuses paid to employees based on performance or formulas. The
bonuses of JLM were approximately $447,000, $326,000, $581,000, $150,000 and
$100,000 for the years ended December 31, 1994, 1995 and 1996, and the three
months ended March 31, 1996 and 1997, respectively.
14. POLYCHEM LTD., INC.
During 1994, JLM formed and held 95% ownership of a new subsidiary, JLM
Acquisition, Inc. On August 8, 1994, JLM Acquisition, Inc. purchased
substantially all the business assets of Polychem, a chemical dyes distributor
in Dalton, Georgia, for $900,000 in cash and a promissory note for $1,240,000
payable in semi-annual installments over five years. The acquisition was
accounted for as a purchase transaction and, accordingly, the purchase price was
allocated to the assets on the basis of estimated fair market value on the date
of purchase.
F-17
<PAGE> 69
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The excess of purchase price over the fair value of the tangible assets acquired
was $1,515,000. See Note 16 for discussions of the discontinued operations of
Polychem.
15. JLM CHEMICALS, INC.
During 1995, JLM formed a new wholly-owned subsidiary, JLM Chemicals, Inc.
On June 8, 1995, JLM Chemicals, Inc. purchased certain of the business assets
and assumed certain liabilities of BTL Specialty Resins, Corp., a phenol and
acetone producer located in Blue Island, Illinois. The acquisition has been
accounted for as a purchase transaction and, accordingly, the purchase price was
allocated to the assets and liabilities on the basis of estimated fair market
value on the date of purchase. The fair value of the assets and liabilities, at
the date of acquisition, recorded in conjunction with the transaction are
presented below:
<TABLE>
<S> <C>
Inventories................................................. $ 2,983,555
Prepaid expenses and other current assets................... 598,505
Property and equipment...................................... 18,583,845
Other assets................................................ 325,000
Accounts payable and accrued expenses....................... (1,146,686)
Debt........................................................ (18,121,135)
------------
Net assets acquired, excluding cash............... 3,223,084
Cash........................................................ 1,776,916
------------
Net assets acquired............................... $ 5,000,000
============
</TABLE>
16. DISCONTINUED OPERATIONS
During 1995 and 1996, JLM's Board of Directors adopted formal plans to sell
the non-core business segments, consisting of Polychem, MAC Enterprises, Inc.
("Enterprises") and JLM Stables, Inc. ("Stables") (collectively the "Segments"),
as part of JLM's strategic focus on marketing and manufacturing of commodity and
specialty chemicals. The Segments have been accounted for as discontinued
operations in the accompanying consolidated financial statements, which requires
the plan of disposal to be carried out within one year.
On October 26, 1995, JLM completed the sale of substantially all the
operating assets of Polychem for cash of $882,237 and the assumption of related
liabilities. The purchaser has an irrevocable option for a period of three years
to buy the Polychem real property for $1; however, Polychem has retained title
to this real property. In conjunction with the sale of Polychem, JLM guaranteed
the payment of the note payable that was assumed by the purchaser of Polychem.
In December 1996, JLM entered into a plan to sell the assets of both
Enterprises and Stables. Based on management's review of the assumptions used in
determining the estimated gain or loss from the disposals of Enterprises and
Stables, JLM recorded a provision of $9,050, net of income taxes, for the loss
on disposal during 1996.
The operating results of the discontinued operations are summarized as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------- ---------------------
1994 1995 1996 1996 1997
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales.......................... $1,927,003 $4,004,431 $ 244,909 $ 81,773 $ 65,853
Loss from discontinued
operations before income
taxes........................ (443,175) (745,506) (711,197) (137,117) (141,131)
Income tax benefit............. 214,115 298,204 282,932 54,847 56,452
Net loss....................... (229,060) (447,302) (428,265) (82,270) (84,679)
</TABLE>
F-18
<PAGE> 70
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net liabilities of discontinued operations are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------ ----------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current assets................................. $3,542,884 $2,227,636 $2,257,197
Property and equipment, net.................... 330,062 4,735 2,706
Current liabilities............................ 3,705,882 2,712,711 3,733,189
Net liabilities of discontinued operations..... 936,333 1,384,741 1,473,286
</TABLE>
17. SEGMENT REPORTING
JLM's business consists of a marketing and a manufacturing segment. JLM's
manufacturing segment includes the operations of JLM Chemicals, Inc. and the
sale of acetone manufactured at the Mount Vernon Phenol Plant. JLM's marketing
segment includes its distribution, storage and terminaling operations and all
other sourcing operations. Marketing segment revenues include an assumed selling
commission determined in accordance with industry standards for the sale of
products manufactured at JLM Chemicals, Inc. The marketing segment also includes
an assumed allocation of revenues, costs of goods sold and expenses associated
with the sale of products sourced from the Mt. Vernon Phenol Plant, which
allocation is determined on a basis consistent with the commission for sale of
products manufactured at JLM Chemicals, Inc.
The following schedule presents information about JLM's continuing
operations in these segments and geographic locations for:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------ -----------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
INDUSTRY SEGMENT
Revenues:
Marketing.......... $193,835,542 $229,504,506 $176,274,489 $ 39,983,334 $ 64,186,446
Manufacturing...... 24,734,062 59,866,439 60,246,694 17,877,964 16,331,337
------------ ------------ ------------ ------------ ------------
$218,569,604 $289,370,945 $236,521,183 $ 57,861,298 $ 80,517,783
============ ============ ============ ============ ============
Operating Income:
Marketing.......... $ 4,045,205 $ 5,186,059 $ 5,011,196 $ 958,652 $ 1,367,147
Manufacturing...... 620,667 6,164,010 7,586,128 2,185,771 2,137,056
Corporate.......... (2,283,306) (2,615,870) (1,595,544) (469,491) (575,251)
------------ ------------ ------------ ------------ ------------
$ 2,382,566 $ 8,734,199 $ 11,001,780 $ 2,674,932 $ 2,928,952
============ ============ ============ ============ ============
Capital Expenditures:
Marketing.......... $ 1,220,974 $ 1,390,899 $ 2,592,422 $ 369,906 $ 211,986
Manufacturing...... -- 928,991 4,398,480 1,075,070 197,306
Corporate.......... -- -- 2,355,756 -- --
------------ ------------ ------------ ------------ ------------
$ 1,220,974 $ 2,319,890 $ 7,346,658 $ 1,444,976 $ 409,292
============ ============ ============ ============ ============
Depreciation and
Amortization:
Marketing.......... $ 518,244 $ 839,890 $ 794,031 $ 177,625 $ 183,062
Manufacturing...... -- 667,745 1,652,809 352,294 421,933
Corporate.......... 53,982 14,647 77,347 2,074 73,047
------------ ------------ ------------ ------------ ------------
$ 572,226 $ 1,522,282 $ 2,524,187 $ 531,993 $ 678,042
============ ============ ============ ============ ============
Identifiable Assets:
Marketing.......... $ 46,233,226 $ 49,865,521 $ 43,303,972 $ 64,752,440
Manufacturing...... 2,773,350 28,092,298 31,871,092 30,982,300
Corporate.......... 6,024,597 8,540,132 12,116,739 13,010,620
------------ ------------ ------------ ------------
$ 55,031,173 $ 86,497,951 $ 87,291,803 $108,745,360
============ ============ ============ ============
</TABLE>
F-19
<PAGE> 71
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------ -----------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
GEOGRAPHIC
LOCATION
Revenues:
United States...... $206,962,650 $244,864,754 $191,382,570 $ 44,403,519 $ 66,296,031
Venezuela.......... 4,440,499 14,491,443 10,068,395 2,499,996 1,917,923
Holland............ -- 21,248,933 29,201,763 9,163,401 11,219,960
Other nations...... 7,166,455 8,765,815 5,868,455 1,794,382 1,083,869
------------ ------------ ------------ ------------ ------------
$218,569,604 $289,370,945 $236,521,183 $ 57,861,298 $ 80,517,783
============ ============ ============ ============ ============
Operating Income
(Loss):
United States...... $ 3,452,127 $ 9,324,264 $ 12,204,002 $ 3,114,977 $ 3,390,214
Venezuela.......... 922,201 1,290,877 (414,554) (189,797) (69,001)
Holland............ -- 117,666 571,046 70,378 83,682
Other nations...... 291,544 617,261 236,830 148,865 99,308
Corporate.......... (2,283,306) (2,615,869) (1,595,544) (469,491) (575,251)
------------ ------------ ------------ ------------ ------------
$ 2,382,566 $ 8,734,199 $ 11,001,780 $ 2,674,932 $ 2,928,952
============ ============ ============ ============ ============
Identifiable Assets:
United States...... $ 52,758,912 $ 74,896,376 $ 73,683,268 $ 68,792,586 $ 89,391,327
Venezuela.......... 1,069,341 4,233,208 6,112,667 6,176,157 5,570,842
Holland............ -- 5,374,039 6,169,386 4,905,991 12,582,697
Other nations...... 1,202,920 1,994,328 1,326,482 1,580,439 1,200,494
------------ ------------ ------------ ------------
$ 55,031,173 $ 86,497,951 $ 87,291,803 $ 81,455,173 $108,745,360
============ ============ ============ ============ ============
</TABLE>
18. SUBSEQUENT EVENTS
In April 1997, JLM entered into an agreement to purchase 25% of the common
stock of S. K. Chemicals Asia Pte. Ltd. ("S.K. Chemicals"), an international
petrochemical distributor, for $500,000 cash. As of December 31, 1996 and March
31, 1997, JLM has made a refundable deposit of $50,000 to S. K. Chemicals and
has recorded this deposit in other investments in the accompanying consolidated
balance sheet. In addition, in April 1997, JLM entered into an agreement to
purchase for $500,000 a 12.7% interest in S.K. Chemical Trading Pte ("S.K.
Trading"), a joint venture that intends to construct a petrochemical plant in
Vietnam. The agreements for S.K. Chemicals and S.K. Trading, collectively,
require up to an additional $500,000 over the following four years given certain
earnings, as defined.
On May 1, 1997, JLM entered into a three-year cancelable exclusive
marketing agreement with one of its suppliers. JLM has agreed to purchase 100%
of the supplier's excess styrene after the supplier has serviced its internal
needs, the needs of its affiliate businesses and those of its existing customer
base. If JLM purchases less than the agreed upon amounts, JLM shall pay a
percentage of the difference between the price contracted for and any lesser
price at which the supplier sells the unpurchased product.
On May 7, 1997, OTC refinanced their existing long-term debt and replaced
it with an unsecured term loan (the "Term Loan"). The proceeds from the Term
Loan will, among other items, be used to repay all of OTC's existing long-term
debt, to purchase all outstanding stock warrants, and to pay for management fees
outstanding to JLM. After the purchase of the stock warrants is complete, OTC
will be owned 50% by JLM and will continue to be accounted for on the equity
basis. In conjunction with the refinancing, JLM's terminaling contract was
canceled and a new, one year terminaling arrangement, which is effective January
1, 1997, was entered into. The
F-20
<PAGE> 72
JLM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
new terminaling contract, which has no minimum throughput requirements, requires
JLM to pay for throughput at $16 per metric ton during the one year term and it
cancels the carryover rights from the old terminaling contract. Also in
conjunction with the refinancing, JLM's non-current note receivable, including
accrued interest, was converted to an investment in OTC and JLM's account
payable to OTC was forgiven and accounted for as a reduction in JLM's investment
in OTC. The amount of the account payable to OTC as of December 31, 1996 and
March 31, 1997 was approximately $2,000,000 and $2,500,000, respectively. In
addition, JLM has pledged its ownership interest in OTC to the other 50% owner
as security for certain contingent payment obligations required to be made
equally by JLM and the other 50% owner of OTC, if OTC has inadequate operating
funds.
On May 9, 1997, the Company completed the sale of the majority of the
assets of Enterprises for $1,075,000 cash. The sale resulted in an immaterial
loss and the proceeds of the sale were used to repay the entire outstanding loan
balance of Enterprises of approximately $905,000.
On May 22, 1997, the Company entered into agreements to purchase the 45%
minority interest of its European subsidiary, JLM (Europe) B.V. The Company will
purchase such minority interest based upon the net book value of the subsidiary
as of April 30, 1997. The purchase price of the minority interest is $98,000
cash.
19. COMBINATION OF ENTITIES UNDER COMMON CONTROL AND STOCK SPLIT
Prior to the closing of the proposed initial public offering, JLM will
purchase the stock of Aurora and Phoenix for $1,750,000 from the stockholders of
these two companies. Aurora markets certain solvent chemicals, primarily phenol,
benzene and acetone and is owned 80% by the majority stockholder of JLM and 20%
by an unrelated third party. Phoenix leases railcars for use in the
transportation of bulk liquid chemicals and is owned 100% by the majority
stockholder of JLM. The transaction will be accounted for similar to a pooling
of interests. During the years ended 1994, 1995 and 1996, and the three months
ended March 31, 1996 and 1997, Aurora and Phoenix distributed $53,564, $147,080,
$462,838, $140,337 and $73,698 respectively, of its retained earnings to its
stockholders.
On , 1997, JLM approved stock splits resulting in an exchange
of 1 share for approximately shares of common stock issued and outstanding.
All share and per share amounts have been retroactively adjusted for this split.
F-21
<PAGE> 73
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
JLM Industries, Inc. and Subsidiaries
Tampa, Florida
We have audited the consolidated balance sheets of JLM Industries, Inc. and
subsidiaries (the "Company") as of December 31, 1995 and 1996 and the related
consolidated statements of income, changes in stockholders' equity and of cash
flows for each of the three years in the period ended December 31, 1996 and have
issued our report thereon dated February 19, 1997 (May 22, 1997 as to Note 18
and July , 1997 as to Note 19) (included in this Form S-1). Our audits also
included the accompanying consolidated financial statement schedule. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects the information set forth herein.
DELOITTE & TOUCHE LLP
Tampa, Florida
February 19, 1997
(May 22, 1997 as to Note 18 and
July , 1997 as to Note 19)
F-22
<PAGE> 74
JLM INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 AND 1997
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGED TO BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS END OF YEAR
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994:
Accumulated amortization(2)................. $ 65,452 $ 82,245 $ -- $147,697
Allowance for doubtful accounts............. 25,661 -- -- --
Year Ended December 31, 1995:
Accumulated amortization(2)................. 147,697 104,925 (44,188)(1) 208,434
Allowance for doubtful accounts............. 25,661 44,637 -- 70,198
Year Ended December 31, 1996:
Accumulated amortization(2)................. 208,434 389,595 -- 578,029
Allowance for doubtful accounts............. 70,198 383,662 -- 453,660
(Unaudited) Three Months Ended March 31, 1996:
Accumulated amortization(2)................. 208,434 32,252 -- 240,686
Allowance for doubtful accounts............. 70,198 -- -- 70,198
(Unaudited) Three Months Ended March 31, 1997:
Accumulated amortization(2)................. 578,029 86,869 -- 566,898
Allowance for doubtful accounts............. 453,860 -- -- 453,860
</TABLE>
- ---------------
(1) Represents the disposal of the goodwill for Polychem Ltd., Inc. in October
1995.
(2) Represents accumulated amortization of goodwill, deferred acquisition costs,
license fees, certain development costs and advances on non-competition
agreements.
F-23
<PAGE> 75
INDEPENDENT AUDITORS' REPORT
The Stockholders and
Board of Directors
JLM Industries, Inc. and Subsidiaries
Tampa, FL
We have audited the accompanying statement of revenues and direct costs of
the Blue Island, Illinois, location of BTL Specialty Resins Corp. ("Blue
Island"), for the period from April 1, 1995 through June 7, 1995. The statement
of revenues and direct costs is the responsibility of Blue Island's management.
Our responsibility is to express an opinion on the statement of revenues and
direct costs based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenues and direct costs is
free of material misstatement. An audit includes examining, on a test basis.
evidence supporting the amounts and disclosures in the statement of revenues and
direct costs. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement of revenues and direct costs presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of revenues and direct costs presents fairly,
in all material respects, the results of revenues and direct costs of Blue
Island for the period from April 1, 1995 through June 7, 1995 in conformity with
generally accepted accounting principles.
As more fully described in Note 2 to the statement of revenues and direct
costs, Blue Island has been operated as a location of BTL Specialty Resins Corp.
As a result, certain expense allocations have not been made in the accompanying
statement of revenues and direct costs.
DELOITTE & TOUCHE LLP
January 29, 1997
F-24
<PAGE> 76
BLUE ISLAND, ILLINOIS
LOCATION OF BTL SPECIALTY RESINS CORP.
STATEMENT OF REVENUES AND DIRECT COSTS
FOR THE PERIOD FROM APRIL 1, 1995 THROUGH JUNE 7, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
Net sales................................................... $8,522
Cost of goods sold.......................................... 6,227
------
Gross profit.............................................. 2,295
Direct selling, general and administrative expenses......... 208
------
Excess of revenues over direct costs...................... $2,087
======
</TABLE>
See notes to statement of revenues and direct costs.
F-25
<PAGE> 77
BLUE ISLAND, ILLINOIS
LOCATION OF BTL SPECIALTY RESINS CORP.
NOTES TO STATEMENT OF REVENUES AND DIRECT COSTS
FOR THE PERIOD FROM APRIL 1, 1995 THROUGH JUNE 7, 1995
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
On June 8, 1995, JLM Chemicals, Inc., a wholly-owned subsidiary of JLM
Industries, Inc., acquired substantially all of the business assets of the Blue
Island, Illinois location of BTL Specialty Resins Corp. ("Blue Island") for
$19,175. Blue Island is a manufacturer of phenol and acetone.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The accompanying statement of revenues and direct
costs reflects the operations of Blue Island, operating as a location of BTL
Specialty Resins, Corp., and may not necessarily be indicative of the financial
results had Blue Island been operating as a separate entity. Allocations for
certain expenses such as interest, corporate overhead and income taxes have not
been made as Blue Island could not determine a reasonable methodology for
allocation and Blue Island believes that any allocation may not be indicative of
the actual costs incurred by Blue Island.
Plant and Equipment -- Provision is made for depreciation primarily on the
straight-line method based on estimates of useful lives ranging form 12 to 20
years. Leasehold improvements and capital leases are amortized over the life of
the respective lease. Depreciation and amortization expense was approximately
$386 for the period from April 1, 1995 through June 7, 1995.
Inventories -- Inventories are valued at the lower of cost (first-in,
first-out) or market.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenues and
direct costs during the reporting period. Actual operating results could differ
from those estimated.
Revenue Recognition -- Blue Island recognizes revenue when products are
shipped.
3. COMMITMENTS AND CONTINGENCIES
Blue Island leases certain machinery, equipment and facilities under
non-cancelable lease agreements which expire at various dates through 2000.
These leases generally contain renewal options and require Blue Island to pay
taxes, insurance, maintenance and other expenses in addition to the minimum base
rentals.
The following is a schedule by year of future minimum lease payments
required under operating leases that have non-cancelable terms in excess of one
year as of June 7, 1995:
<TABLE>
<S> <C>
1996........................................................ $ 639
1997........................................................ 511
1998........................................................ 477
1999........................................................ 486
2000........................................................ 31
------
$2,144
======
</TABLE>
Rental expense under operating leases was approximately $45 for the period
from April 1, 1995 through June 7, 1995.
F-26
<PAGE> 78
======================================================
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 12
Dividend Policy....................... 12
Capitalization........................ 13
Dilution.............................. 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 27
Management............................ 37
Certain Transactions.................. 40
Principal and Selling Stockholders.... 42
Description of Capital Stock.......... 42
Shares Eligible for Future Sale....... 46
Underwriting.......................... 48
Legal Matters......................... 49
Experts............................... 49
Additional Information................ 49
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
SHARES
[LOGO]
JLM INDUSTRIES, INC.
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
OPPENHEIMER & CO., INC.
A.G. EDWARDS & SONS, INC.
, 1997
======================================================
<PAGE> 79
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate (except for the registration and NASD filing
fees) of the fees and expenses payable by the registrant in connection with the
issuance and distribution of the common stock.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 11,222
NASD filing fee............................................. 4,203
Nasdaq listing fees......................................... *
Printing and engraving expenses............................. *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Blue Sky fees and expenses.................................. *
Transfer Agent's fees and expenses.......................... *
Miscellaneous............................................... *
--------
Total............................................. $ *
========
</TABLE>
- ---------------
* To be provided by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no cause to believe his conduct was unlawful.
DGCL Section 145(b) provides that a Delaware corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine that despite the adjudication of liability, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
DGCL Section 145 further provides that to the extent a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him or
incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under such Section 145.
DGCL Section 102(b)(7) provides that a corporation in its original
certificate of incorporation or an amendment thereto validly approved by
stockholders may eliminate or limit personal liability of members of its
II-1
<PAGE> 80
board of directors or governing body for breach of a director's fiduciary duty.
However, no such provision may eliminate or limit the liability of a director
for breaching his duty of loyalty, failing to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which was illegal, or obtaining an improper
personal benefit. A provision of this type has no effect on the availability of
equitable remedies, such as injunction or rescission, for breach of fiduciary
duty. The Company's Certificate of Incorporation (as to be in effect after
completion of the Offering to which this Registration Statement relates)
contains such a provision.
The Company's Certificate of Incorporation (as to be in effect after
completion of the Offering to which this Registration Statement relates) further
provides that the Company may indemnify its officers and directors and, to the
extent authorized by the Board of Directors, employees and agents of the
Company, to the fullest extent permitted by and in the manner permissible under
the laws of the State of Delaware.
In addition, prior to the completion of the Offering, the Company intends
to enter into agreements (the "Indemnification Agreements") with each of the
directors and certain officers of the Company pursuant to which the Company will
agree to indemnify each such person against claims, liabilities, damages,
expenses, losses, costs, penalties or amounts paid in settlement (collectively,
"Losses") incurred by such person and arising out of his capacity or service as
a director, officer, employee and/or agent of the Company to the maximum extent
permitted by applicable law. In addition, each such person shall be entitled to
an advance of expenses to the maximum extent authorized or permitted by law to
meet the obligations indemnified against. The Indemnification Agreements also
obligate the Company to purchase and maintain insurance for the benefit and on
behalf of each of its directors insuring such director in or arising out of his
capacity as a director, officer, employee and/or agent of the Company. The
Company has purchased such insurance, which provides coverage with respect to
liabilities that may arise under the statutory provisions referred to above and
other liabilities as well, including certain liabilities that could arise under
the Securities Act of 1933 and against which such persons might not be
indemnified by the Company.
The underwriters also will agree to indemnify the directors and officers of
the Company against certain liabilities as set forth in Section 7(c) of the
Underwriting Agreement (see Exhibit 1).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
1 -- Form of Underwriting Agreement
3.1 -- Articles of Incorporation, as amended
3.2* -- Form of Amended and Restated Articles of Incorporation
3.3 -- Bylaws
3.4* -- Form of Amended and Restated Bylaws
4* -- Form of Common Stock Certificate
5* -- Opinion of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill &
Mullis, as to the legality of the Common Stock Being
Registered
10.1 -- Authorized Distributor Agreement between GE Petrochemicals,
Inc. and JLM Marketing, Inc. for Styrene
10.2+ -- Memorandum of Agreement between Sasol Chemical Industries
(PTY) Ltd. and JLM Marketing, Inc. for N-Propanol
10.3+ -- Memorandum of Agreement between Sasol Chemical Industries
(PTY) Ltd. and JLM Marketing, Inc. for Acetone
10.4+ -- Memorandum of Agreement between Sasol Chemical Industries
(PTY) Ltd. and JLM Marketing, Inc. for Methyl Ethyl Ketone
</TABLE>
II-2
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
10.5+ -- Acetone Sales Agreement between Mt. Vernon Phenol Plant
Partnership, JLM Marketing, Inc. and JLM Industries, Inc.
10.6 -- Asset Purchase Agreement by and among BTL Specialty Resins
Corp. and JLM Chemicals, Inc. providing for the acquisition
of the Blue Island (Illinois) Phenol Plant, as amended
10.7 -- Propane/Propylene Agreement between Clark Oil & Refining
Corporation and BTL Specialty Resins Corp.
10.8 -- Q-Max Process License Agreement between BTL Specialty Resins
Corp. and UOP
10.9 -- Credit Agreement among JLM Chemicals, Inc., The CIT
Group/Equipment Financing, Inc. and The CIT Group/Business
Credit, Inc., as amended
10.10 -- Security Agreement by JLM Chemicals, Inc. in favor of the
Lenders and The CIT Group/Equipment Financing, Inc.
10.11 -- Pledge Agreement by JLM Industries, Inc. in favor of the
Lenders and The CIT Group/Equipment Financing, Inc.
10.12 -- Mortgage, Assignment of Leases and Rents and Security
Agreement from JLM Chemicals, Inc. to The CIT
Group/Equipment Financing, Inc., as corrected and modified
10.13 -- Partnership Agreement of Mt. Vernon Phenol Plant Partnership
10.14 -- Intercreditor Agreement between JLM Marketing, Inc., JLM
Industries, Inc., JLM Terminals, Inc., JLM International,
Olefins Marketing, Inc., State Street Bank and Trust
Company, Caisse Nationale De Credit Agricole and Standard
Chartered Bank New York Branch
10.15 -- Master Promissory Note by JLM International, Inc. and
Olefins Marketing, Inc. in favor of Caisse Nationale De
Credit Agricole
10.16 -- Guaranty Agreement by JLM Industries, Inc. to Caisse
Nationale De Credit Agricole, New York Branch
10.17 -- Security Agreement between Olefins Marketing, Inc. and
Caisse Nationale De Credit Agricole, New York Branch
10.18 -- Security Agreement between JLM International, Inc. and
Caisse Nationale De Credit Agricole, New York Branch
10.19* -- Amended and Restated Credit Agreement among JLM Industries,
Inc., JLM Marketing, Inc., JLM Terminals, Inc., JLM
International Inc., Olefins Marketing, Inc., John L.
MacDonald and State Street Bank and Trust Company, as
amended
10.20 -- Facility Letter between Standard Chartered Bank and Olefins
Marketing
10.21 -- Security Agreement by Olefins Marketing to Standard
Chartered Bank
10.22* -- Security Agreement by JLM International, Inc. to Standard
Chartered Bank
10.23 -- Continuing Guaranty by JLM International, Inc. and Olefins
Marketing Corp. in favor of Standard Chartered Bank
10.24 -- Facility letter between Generale Bank and JLM Industries
10.25 -- Corporate Guarantee by JLM Industries, Inc. to Generale Bank
10.26* -- Agreement by and among Union Carbide Corporation, D-S
Splitter, Inc., JLM Industries, Inc. and Olefins Terminal
Corporation
10.27* -- Pledge and Security Agreement by JLM Industries, Inc. to
Ultramar Diamond Shamrock Corporation
10.28* -- Management, Operating and Stockholders Agreement of Olefins
Terminal Corporation between D-S Splitter, Inc., Ultramar
Diamond Shamrock Corporation, JLM Industries, Inc., Olefins
Marketing, Inc. and Olefins Terminal Corporation
10.29* -- Investment Agreement by and between JLM Industries, Inc. and
Tan Siew Kiat
</TABLE>
II-3
<PAGE> 82
<TABLE>
<C> <S> <C>
10.30* -- Agreement for Sale and Purchase of Common Stock between John L. Macdonald and Gene Harmeyer, as owners
of the capital stock of Aurora Chemical, Inc., and JLM Marketing, Inc.
10.31* -- Agreement for Sale and Purchase of Common Stock between John L. Macdonald, owner of the capital stock of
Phoenix Tank Car Corp., and JLM Marketing, Inc.
10.32* -- Form of Indemnification Agreement for Officers and Directors
10.33* -- Form of 1997 Employee Stock Purchase Plan
10.34* -- Form of Long Term Incentive Plan
10.35* -- Form of Nonemployee Directors' Plan
10.36* -- Assignment and Assumption Agreement between Ashland Chemical, Inc. and JLM Terminals, Inc.
10.37* -- Asset Purchase Agreement between Union Oil Company of California and Ashland Chemical, Inc.
24.1* -- Consent of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill, & Mullis (contained in Exhibit 5)
24.2* -- Consent of Deloitte & Touche LLP to the consolidated financial statements of JLM Industries, Inc. and
subsidiaries
24.3 -- Consent of Deloitte & Touche LLP to the Statement of Revenues and Direct Costs of the Blue Island,
Illinois, location of BTL Specialty Resins Corp.
24.4 -- Consent of J. Robert Mehall
24.5 -- Consent of Jerry L. Weinstein
27.1 -- Financial Data Schedule for the year ended December 31, 1996
27.2 -- Financial Data Schedule for the three months ended March 31, 1997
</TABLE>
- ---------------
* To be filed by amendment
+ Confidential treatment has been requested with respect to portions of this
Exhibit.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14), or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt deliver to each purchaser.
II-4
<PAGE> 83
The undersigned registrant hereby undertakes that:
i. For purposes of determining any liability under the Securities act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
ii. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 1
EXHIBIT 1
__________ Shares
JLM INDUSTRIES, INC.
Common Stock
UNDERWRITING AGREEMENT
____________, 1997
Oppenheimer & Co., Inc.
A.G. Edwards & Sons, Inc.
c/o Oppenheimer & Co., Inc
Oppenheimer Tower
200 Liberty Street
World Financial Center
New York, New York 10281
On behalf of the Several
Underwriters named on
Schedule I attached hereto.
Ladies and Gentlemen:
JLM Industries, Inc., a Delaware corporation (the "Company"),
and John L. Macdonald (the "Selling Stockholder") propose, subject to the terms
and conditions contained herein, to sell to you and the other underwriters
named on Schedule I to this Agreement (the "Underwriters"), for whom you are
acting as Representatives (the "Representatives"), an aggregate of __________
shares (the "Firm Shares") of the Company's Common Stock, $0.01 par value (the
"Common Stock"). Of the _____ Firm Shares, _______ are to be issued and sold
by the Company and ________ are to be sold by the Selling Stockholder. The
respective amounts of the Firm Shares to be purchased by each of the several
Underwriters are set forth opposite their names on Schedule I hereto. In
addition, the Company also proposes to grant to the Underwriters an option to
purchase up to an additional __________ shares (the "Option Shares") of Common
Stock from it for the purpose of covering over-allotments in connection with
the sale of the Firm Shares. The Firm Shares and the Option Shares are
together called the "Shares."
<PAGE> 2
1. Sale and Purchase of the Shares. On the basis of the
representations, warranties and covenants contained in, and subject to the
terms and conditions of, this Agreement:
(a) The Company agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at a price of $ _____ per share
(the "Initial Price"), the number of Firm Shares set forth opposite
the name of such Underwriter under the column "Number of Firm Shares
to be Purchased from the Company" on Schedule I to this Agreement,
subject to adjustment in accordance with Section 11 hereof. The
Selling Stockholder agrees to sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to
purchase from the Selling Stockholder, at the Initial Price, the
number of Firm Shares set forth opposite the name of such Underwriter
under the column "Number of Firm Shares to be Purchased from the
Selling Stockholder" on Schedule I to this Agreement, subject to
adjustment in accordance with Section 11 hereof.
(b) The Company grants to the several
Underwriters an option to purchase, severally and not jointly, all or
any part of the Option Shares at the Initial Price. The number of
Option Shares to be purchased by each Underwriter shall be the same
percentage (adjusted by the Representatives to eliminate fractions) of
the total number of Option Shares to be purchased by the Underwriters
as such Underwriter is purchasing of the Firm Shares. Such option may
be exercised only to cover overallotments in the sales of the Firm
Shares by the Underwriters and may be exercised in whole or in part at
any time on or before 12:00 noon, New York City time, on the business
day before the Firm Shares Closing Date (as defined below), and from
time to time thereafter within 45 days after the date of this
Agreement, in each case upon written or telegraphic notice, or verbal
or telephonic notice confirmed by written or telegraphic notice, by
the Representatives to the Company no later than 12:00 noon, New York
City time, on the business day before the Firm Shares Closing Date or
at least two business days before the Option Shares Closing Date (as
defined below), as the case may be, setting forth the number of Option
Shares to be purchased and the time and date (if other than the Firm
Shares Closing Date) of such purchase.
2. Delivery and Payment. Delivery by the Company and
the Selling Stockholder of the Firm Shares to the Representatives for the
respective accounts of the Underwriters, and payment of the purchase price by
certified or official bank check or checks payable in New York Clearing House
(next day) funds drawn to the order of the Company for the shares purchased
from the Company and to the Selling Stockholder for the shares purchased from
the Selling Stockholder, against delivery of the respective certificates
therefor to the Representatives, shall take place at the offices of Rogers &
Wells, 200 Park Avenue, New York, New York 10166, at 10:00 a.m., New York City
time, (a) on the third full business day following the first day that the
shares are traded, (b) if this Agreement is executed and delivered after 4:30
p.m., New York City time, on the fourth business day following the date of this
Agreement, or (c) at such time on such other date, not later than the fourth
full business day following the Effective Date (as hereinafter defined), as
shall be agreed upon by the Company,
2
<PAGE> 3
the Selling Stockholder and the Representatives (such time and date of delivery
and payment are called the "Firm Shares Closing Date").
In the event the option with respect to the Option Shares is
exercised, delivery by the Company of the Option Shares to the Representatives
for the respective accounts of the Underwriters and payment of the purchase
price by certified or official bank check or checks payable in New York
Clearing House (next day) funds to the Company shall take place at the offices
of Rogers & Wells specified above at the time and on the date (which may be the
same date as, but in no event shall be earlier than, the Firm Shares Closing
Date) specified in the notice referred to in Section 1(b) (such time and date
of delivery and payment are called the "Option Shares Closing Date"). The Firm
Shares Closing Date and the Option Shares Closing Date are called,
individually, a "Closing Date" and, together, the "Closing Dates."
Certificates evidencing the Shares shall be registered in such
names and shall be in such denominations as the Representatives shall request
at least two business days before the Firm Shares Closing Date or, in the case
of Option Shares, on the day of notice of exercise of the option as described
in Section 1(b) and shall be made available to the Representatives for checking
and packaging, at such place as is designated by the Representatives, one full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
3. Registration Statement and Prospectus; Public
Offering. The Company has prepared in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the published
rules and regulations thereunder (the "Rules") adopted by the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1
(No. 333-_______), including a preliminary prospectus relating to the Shares,
and has filed with the Commission such registration statement and such
amendments thereto as may have been required to the date of this Agreement.
Copies of such registration statement (including all amendments thereof) and of
the related preliminary prospectus have heretofore been delivered by the
Company to you. The term "preliminary prospectus" means any preliminary
prospectus (as described in Rule 430 of the Rules) included at any time as part
of the registration statement or filed with the Commission by the Company with
the consent of the Representatives pursuant to Rule 424(a) of the Rules. The
registration statement, as amended at the time and on the date it became
effective (the "Effective Date"), including all exhibits and information, if
any, deemed to be part of the registration statement pursuant to Rule 424(b),
Rule 430A and Rule 434 of the Rules, is called the "Registration Statement."
The term "Prospectus" as used in this Agreement means the prospectus in the
form included in the Registration Statement or (A) if Rule 430(A) of the Rules
is relied on, the term "Prospectus" means the final prospectus filed with the
Commission pursuant to Rule 424(b) of the Rules and (B) if Rule 434 of the
Rules is relied on, then (i) the term "Prospectus" means the "prospectus
subject to completion" (as such term is defined in Rule 434(g) of the Rules)
together with the term sheet (the "Term Sheet") required under Rule 434(b) of
the Rules and (ii) the date of such Prospectus shall be deemed to be the date
of the Term Sheet. If the Company files a registration statement to register a
portion of the Shares and relies on Rule 462(b) of the Rules for such
registration statement to become effective upon filing with the Commission (the
"Rule 462(b) Registration Statement"), then any reference to the "Registration
3
<PAGE> 4
Statement" herein shall be deemed to include both the registration statement
referred to above (No. 333-______) and the Rule 462(b) Registration Statement,
as each such registration statement may be amended pursuant to the Securities
Act.
The Company and the Selling Stockholder understand that the
Underwriters propose to make a public offering of the Shares, as set forth in
and pursuant to the Prospectus, as soon after the Effective Date and the date
of this Agreement as the Representatives deem advisable. The Company and the
Selling Stockholder hereby confirm that the Underwriters and dealers have been
authorized to distribute or cause to be distributed each preliminary prospectus
and are authorized to distribute the Prospectus (as from time to time amended
or supplemented if the Company furnishes amendments or supplements thereto to
the Underwriters).
4. Representations and Warranties of the Company. The
Company hereby represents and warrants to each Underwriter as follows:
(a) On the Effective Date, the Registration
Statement complied, and on the date of the Prospectus, the date any
post-effective amendment to the Registration Statement becomes
effective, the date any supplement or amendment to the Prospectus is
filed with the Commission and each Closing Date, the Registration
Statement and the Prospectus (and any amendment thereof or supplement
thereto) will comply, in all material respects, with the applicable
provisions of the Securities Act and the Rules; the Registration
Statement did not, as of the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; and on the other dates referred to
above neither the Registration Statement nor the Prospectus, nor any
amendment thereof or supplement thereto, will contain any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading. When any related preliminary
prospectus was first filed with the Commission (whether filed as part
of the Registration Statement or any amendment thereto or pursuant to
Rule 424(a) of the Rules) and when any amendment thereof or supplement
thereto was first filed with the Commission, such preliminary
prospectus as amended or supplemented complied in all material
respects with the applicable provisions of the Securities Act and the
Rules and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading;
provided, however, that none of the representations and warranties in
this paragraph 4(a) shall apply to statements in, or omissions from,
the Registration Statement or the Prospectus made in reliance upon,
and in conformity with, information herein or otherwise furnished in
writing to the Company by the Representatives on behalf of the several
Underwriters for use in the Registration Statement or the Prospectus.
With respect to the preceding sentence, the Company acknowledges that
the only information furnished in writing by the Representatives on
behalf of the several Underwriters for use in the Registration
Statement or the Prospectus is the paragraph with respect to
stabilization on the inside front cover page of the Prospectus and the
statements contained under the caption "Underwriting" in the
Prospectus.
4
<PAGE> 5
(b) The Registration Statement is effective under
the Securities Act, and no stop order suspending the effectiveness of
the Registration Statement or suspending or preventing the use of the
Prospectus has been issued and no proceedings for that purpose have
been instituted or are threatened under the Securities Act; any
required filing of the Prospectus and any supplement thereto pursuant
to Rule 424(b) of the Rules has been or will be made in the manner and
within the time period required by such Rule 424(b).
(c) The financial statements of the Company
(including all notes and schedules thereto) included in the
Registration Statement and Prospectus present fairly the financial
position, the results of operations, the statements of cash flows and
the statements of stockholders' equity and the other information
purported to be shown therein of the Company and its consolidated
subsidiaries at the respective dates and for the respective periods to
which they apply; and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently
applied throughout the periods involved, are correct and complete and
are in accordance with the books and records of the Company and its
consolidated subsidiaries. The summary and selected financial data
included in the Prospectus present fairly the information shown
therein as at the respective dates and for the respective periods
specified, and the summary and selected financial data have been
presented on a basis consistent with the financial statements so set
forth in the Prospectus and other financial information. The pro
forma balance sheet and income statement information in the Prospectus
has been prepared in accordance with the applicable Rules and includes
all adjustments necessary for a fair presentation of the pro forma
financial position and results of operations of the Company and its
consolidated subsidiaries as of the dates and for the periods to which
they apply.
(d) Deloitte & Touche, whose report is filed with
the Commission as a part of the Registration Statement, are and,
during the periods covered by their reports, were independent public
accountants as required by the Securities Act and the Rules.
(e) The Company and each of its Subsidiaries (as
hereinafter defined) is a corporation duly organized, validly existing
and in good standing under their respective jurisdictions of
organization. The Company has no subsidiary or subsidiaries and does
not control, directly or indirectly, any corporation, partnership,
joint venture, association or other business organization, except for
those set forth on Schedule 4(e) hereto. The Company and each such
subsidiary or other entity (collectively, "Subsidiaries") is duly
qualified to do business and in good standing as a foreign corporation
in each jurisdiction in which the character or location of its assets
or properties (owned, leased or licensed) or the nature of its business
makes such qualification necessary except for such jurisdictions where
the failure to so qualify would not have a material adverse effect on
the assets or properties, business, results of operations prospects or
condition (financial or otherwise) of the Company and its Subsidiaries
considered as a whole (a "Material Adverse Effect"). Except as
disclosed in the Prospectus, the Company does not own, lease or license
any asset or property or conduct any, business outside the United
States of America. The Company and each of its Subsidiaries has all
requisite corporate power and authority, and all necessary
authorizations, approvals, consents,
5
<PAGE> 6
orders, licenses, certificates and permits of and from all
governmental or regulatory bodies or any other person or entity, to
own, lease and license its assets and properties and conduct its
businesses as now being conducted and as described in the Prospectus
except for such authorizations, approvals, consents, orders, material
licenses, certificates and permits the failure to so obtain would not
have a Material Adverse Effect; no such authorization, approval,
consent, order, license, certificate or permit contains a materially
burdensome restriction other than as disclosed in the Prospectus; and
the Company has all such corporate power and authority and such
authorizations, approvals, consents, orders, licenses, certificates
and permits to enter into, deliver and perform this Agreement and to
issue and sell the Shares.
(f) Each of the Company and its Subsidiaries
owns, or possesses adequate and enforceable rights, either as owner or
licensee, to use, all trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how
and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as described
in the Prospectus. Neither the Company nor any of its Subsidiaries
has received any notice of, or is aware of, any infringement of or
conflict with asserted rights of others with respect to any
Intangibles.
(g) The Company and each of its Subsidiaries has
good and marketable title in fee simple to each of the items of real
property and good and marketable title to each of the items of
personal property which are reflected in the financial statements
referred to in Section 4(b) or are referred to in the Registration
Statement or the Prospectus as being owned by it and valid and
enforceable leasehold interests in each of the items of real and
personal property which are referred to in the Registration Statement
or the Prospectus as being leased by it in each case free and clear of
all liens, encumbrances, claims, security interests and defects, other
than those described in the Prospectus.
(h) There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign,
pending or, to the Company's knowledge, threatened (and the Company
does not know of any basis therefor) against or involving the assets,
properties or business of, the Company or its Subsidiaries or their
respective directors or officers which is required to be disclosed in
the Prospectus that is not so disclosed.
(i) Subsequent to the respective dates as of
which information is given in the Registration Statement and the
Prospectus, except as described therein, (i) there has not been any
material adverse change in the assets or properties, business, results
of operations, prospects or condition (financial or otherwise), of the
Company or its Subsidiaries, whether or not arising from transactions
in the ordinary course of business; (ii) none of the Company or its
Subsidiaries has sustained any loss or interference with its assets,
businesses or properties (whether owned or leased) from fire,
explosion, earthquake, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree
6
<PAGE> 7
which would have a Material Adverse Effect; and (iii) and since the
date of the latest balance sheet included in the Prospectus, except as
reflected therein, the Company has not (1) issued any securities,
other than those issuances set forth on Schedule 4(i) hereto. [i.e.
the issuance of securities pursuant to the exercise of options
granted under stock option plans or agreements existing prior to the
date of the latest balance sheet included in the Registration
Statement and Prospectus], or incurred any liability or obligation,
direct or contingent, for borrowed money, except for borrowings under
its existing credit facilities in the ordinary course of business, (2)
entered into any transaction not in the ordinary course of business or
(3) declared or paid any dividend or made any distribution on any
shares of its capital stock or redeemed, purchased or otherwise
acquired or agreed to redeem, purchase or otherwise acquire any shares
of its stock.
(j) There is no document, contract or other
agreement of a character required to be described in the Registration
Statement or Prospectus or to be filed as an exhibit to the
Registration Statement which is not described or filed as required by
the Securities Act or the Rules. Each agreement described in the
Registration Statement and the Prospectus or listed in the Exhibits to
the Registration Statement is in full force and effect and is valid
and enforceable by and against the Company in accordance with its
terms. Neither the Company, nor to the Company's knowledge, any other
party is in default in the observance or performance of any term or
obligation to be performed by it under any such agreement, and no
event has occurred which with notice or lapse of time or both would
constitute such a default, in any such case which default or event
would have a Material Adverse Effect. No default exists, and no event
has occurred which with notice or lapse of time or both would
constitute a default, in the due performance and observance of any
term, covenant or condition, by the Company or any of its Subsidiaries
of any other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of them or their
respective properties or businesses may be bound or affected which
default or event would have a Material Adverse Effect.
(k) None of the Company or its Subsidiaries is in
violation of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation or any term or provision of its
Certificate of Incorporation or by-laws.
(l) Neither the execution, delivery and
performance of this Agreement by the Company nor the consummation of
any of the transactions contemplated hereby (including, without
limitation, the issuance and sale by the Company of the Shares) will
(i) give rise to a right to terminate or accelerate the due date of
any payment due under, or conflict with or result in the breach of any
term or provision of, or constitute a default (or an event which with
notice or lapse of time or both would constitute a default) under, or
require any consent or waiver under, or result in the execution or
imposition of any lien, charge or encumbrance upon any properties or
assets of the Company or any of its Subsidiaries pursuant to the terms
of, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or its Subsidiaries is a party or by
which it or its Subsidiaries or any of their properties or businesses
is bound, or any franchise, license, permit, judgment, decree, order,
statute, rule or regulation applicable to the
7
<PAGE> 8
Company or its Subsidiaries or (ii) violate any provision of
the Certificate of Incorporation, by-laws or other organizational
documents of the Company or any of its Subsidiaries.
(m) The Company's authorized and outstanding
capital stock is on the date hereof, and will be on the Closing Date,
as set forth under the caption "Capitalization" in the Prospectus.
The certificates evidencing the Shares are in due and proper legal
form and have been duly authorized for issuance by the Company. All
of the issued and outstanding shares of Common Stock have been duly
and validly issued and are fully paid and nonassessable and none of
them was issued in violation of any preemptive or other similar right.
The Shares have been duly authorized and the Shares to be sold by the
Company, when issued and sold pursuant to this Agreement, will be duly
and validly issued, fully paid and nonassessable and the Underwriters
will receive good title to such Shares, free and clear of all liens,
security interests, pledges, changes, claims and encumbrances. There
are no statutory preemptive or other similar rights to subscribe for
or to purchase or acquire any shares of Common Stock of the Company or
its Subsidiaries or any such rights pursuant to its Certificate of
Incorporation or by-laws or any agreement or instrument to or by which
the Company or any of its Subsidiaries is party or bound. Except as
disclosed in the Prospectus, there is no outstanding option, warrant
or other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any share of stock of the
Company or its Subsidiaries or any security convertible into, or
exercisable or exchangeable for, such stock. The Common Stock, and
the Shares conform in all material respects to all statements in
relation thereto contained in the Registration Statement and the
Prospectus. All outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, and are fully
paid and nonassessable and are owned directly by the Company or by
another wholly-owned subsidiary of the Company free and clear of any
security interests, liens, encumbrances, equities or claims, other
than those described in the Prospectus.
(n) No holder of securities of the Company has
rights, which have not been waived, to the registration of shares of
Common Stock or other securities, as a result of the filing of the
Registration Statement by the Company or the offering contemplated
thereby. Each stockholder, director and executive officer of the
Company has delivered to the Representatives its, his or her
enforceable written agreement (each, a "Lock-up Agreement") in the
form attached to this Agreement. To the knowledge of the Company,
from _________, 1997 through the date hereof, no such stockholder,
director or executive officer has sold any of its Common Stock or
reduced its, his or her risk through the use of any option, put, call
or other derivative security relative to its Common Stock.
(o) All necessary corporate action has been duly
and validly taken by the Company to authorize the execution, delivery
and performance of this Agreement and the issuance and sale of the
Shares by the Company. This Agreement has been duly and validly
executed and delivered by the Company and constitutes and will
constitute a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
except (i) as the enforceability thereof may be limited by
8
<PAGE> 9
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and
by general equitable principles and (ii) to the extent that rights to
indemnity or contribution under this Agreement may be limited by
Federal and state securities laws or the public policy underlying such
laws.
(p) No labor dispute with the employees of the
Company or its Subsidiaries exists or, to the knowledge of the
Company, is threatened; and the Company is not aware of any existing
or imminent labor disturbance by the employees of any of its principal
suppliers or contractors which would have a Material Adverse Effect.
The Company is not aware of any threatened or pending litigation
between the Company or its Subsidiaries and any of its executive
officers which, if adversely determined, could have a Material Adverse
Effect and has no reason to believe that such officers will not remain
in the employment of the Company.
(q) No transaction has occurred between or among
the Company and any of its officers or directors or any affiliate or
affiliates of any such officer or director that is required to be
described in and is not described in the Prospectus.
(r) The Company has not taken, nor will it take,
directly or indirectly, any action designed to or which might
reasonably be expected to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization
or manipulation of the price of the Common Stock.
(s) Each of the Company and its Subsidiaries has
filed all Federal, state, local and foreign tax returns which are
required to be filed through the date hereof, or has received
extensions thereof and such returns are each true, correct and
complete in all material respects, and has paid all taxes shown on
such returns and all assessments received by it to the extent that the
same are material and have become due and there are no tax audits or
investigations pending which if adversely determined would have a
Material Adverse Effect.
(t) The books, records and accounts of the
Company accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the results
of operations of, the Company. The Company maintains a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization
and (iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(u) The Company and its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are
9
<PAGE> 10
customary in the businesses in which they are engaged or propose
to engage after giving effect to the transactions described in the
Prospectus; and neither the Company nor any Subsidiary of the Company
has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue their business at a cost that would not have a Material
Adverse Effect.
(v) Each approval, consent, order, authorization,
designation, declaration or filing of, by or with any regulatory,
administrative or other governmental body necessary in connection with
the execution and delivery by the Company of this Agreement and the
consummation of the transactions herein contemplated required to be
obtained or performed by the Company (except such additional steps as
may be required by the National Association of Securities Dealers,
Inc. (the "NASD") or may be necessary to qualify the Shares for public
offering by the Underwriters under the state securities or Blue Sky
laws) has been obtained or made and is in full force and effect.
(w) The Shares have been duly authorized for
quotation on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") National Market System, subject to official
Notice of Issuance, and a registration statement has been filed on
Form 8-A pursuant to Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which registration statement
complies in all material respects with the Exchange Act.
(x) The Company has complied with all of the
requirements and filed the required forms as specified in Florida
Statutes Section 517.075.
(y) There are no affiliations with the NASD among
the Company's officers, directors or, to the best of the knowledge of
the Company, any five percent or greater stockholder of the Company,
except as set forth in the Registration Statement or otherwise
disclosed in writing to the Representatives of the Underwriters.
(z) (i) Each of the Company and its Subsidiaries
is in compliance in all material respects with all rules, laws and
regulation relating to the use, treatment, storage and disposal of
toxic substances and protection of health or the environment
("Environmental Law") which are applicable to its business; (ii) none
of the Company or its Subsidiaries has received any notice from any
governmental authority or third party of an asserted claim under
Environmental Laws; (iii) each of the Company and its Subsidiaries has
received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and is in
compliance with all terms and conditions of any such permit, license
or approval; (iv) to the Company's knowledge, no facts currently exist
that will require the Company or its Subsidiaries to make future
material capital expenditures to comply with Environmental Laws; and
(v) no property which is or has been owned, leased or occupied by the
Company or its Subsidiaries has been designated as a Superfund site
pursuant to the Comprehensive Environmental
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<PAGE> 11
Response, Compensation of Liability Act of 1980, as amended (42 U.S.C.
Section 9601, et seq.), or otherwise designated as a contaminated site
under applicable state or local law.
(aa) The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended
(the "Investment Company Act").
(bb) None of the Company, its Subsidiaries or any
other person associated with or acting on behalf of the Company or its
Subsidiaries including, without limitation, any director, officer,
agent or employee of the Company or its Subsidiaries has, directly or
indirectly, while acting on behalf of the Company or its Subsidiaries
(A) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political
activity; (B) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds; (C) violated any provision
of the Foreign Corrupt Practices Act of 1977, as amended; or (D) made
any other unlawful payment.
5. Representations and Warranties of the Selling
Stockholder. The Selling Stockholder hereby represents and warrants to each
Underwriter as follows:
(a) The Selling Stockholder has caused
certificates for the number of Shares to be sold by such Selling
Stockholder hereunder to be delivered to ____________ (the
"Custodian"), endorsed in blank or with blank stock powers duly
executed, with a signature appropriately guaranteed, such certificates
to be held in custody by the Custodian for delivery, pursuant to the
provisions of this Agreement and an agreement dated
__________________, 1997 among the Custodian and the Selling
Stockholder (the "Custody Agreement").
(b) The Selling Stockholder has granted an
irrevocable power of attorney (the "Power of Attorney") to the person
named therein, on behalf of the Selling Stockholder, to execute and
deliver this Agreement and any other document necessary or desirable
in connection with the transactions contemplated hereby and to deliver
the shares to be sold by the Selling Stockholder pursuant hereto.
(c) This Agreement, the Custody Agreement, the
Power of Attorney and the Lock-Up Agreement have each been duly
authorized, executed and delivered by or on behalf of the Selling
Stockholder. Each of the Custody Agreement, the Power of Attorney and
the Lock-Up Agreement constitutes a legal, valid and binding agreement
of the Selling Stockholder, enforceable in accordance with its terms.
(d) The execution and delivery by the Selling
Stockholder of, and the performance by the Selling Stockholder of its
obligations under, this Agreement will not contravene any provision of
applicable law, or any agreement or other instrument binding upon the
Selling Stockholder or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the
Selling Stockholder, and no consent, approval, authorization or order
of or qualification with any governmental body or agency is
11
<PAGE> 12
required for the performance by the Selling Stockholder of its
obligations under this Agreement, except such as may be required
by the securities or Blue Sky laws of the various states in connection
with the offer and sale of the Shares.
(e) The Selling Stockholder has, and on the Firm
Shares Closing Date will have, valid marketable title to the Shares to
be sold by the Selling Stockholder and the legal right and power, and
all authorization and approval required by law, to enter into this
Agreement and to sell, transfer and deliver the Shares to be sold by
the Selling Stockholder.
(f) Upon delivery of and payment for the Shares
to be sold by the Selling Stockholder pursuant to this Agreement, the
several Underwriters will receive valid marketable title to such
Shares free and clear of any security interests, liens, encumbrances,
equities or claims.
(g) All information relating to the Selling
Stockholder furnished in writing by the Selling Stockholder expressly
for use in the Registration Statement and Prospectus is, and on each
Closing Date will be, true, correct, and complete, and does not, and
on each Closing Date will not, contain any untrue statement of a
material fact or omit to state any material fact necessary to make
such information not misleading.
(h) The Selling Stockholder has reviewed the
Registration Statement and Prospectus and, although the Selling
Stockholder has not independently verified the accuracy or
completeness of all the information contained therein, nothing has
come to the attention of the Selling Stockholder that would lead the
Selling Stockholder to believe that (i) on the Effective Date, the
Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein in order to make the statements made therein not misleading
and (ii) on the Effective Date the Prospectus contained and, on each
Closing Date contains, no untrue statement of a material fact or
omitted or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, misleading.
(i) The sale of Shares by the Selling Stockholder
pursuant to this Agreement is not prompted by the Selling
Stockholder's knowledge of any material information concerning the
Company or its Subsidiaries which is not set forth in the Prospectus.
(j) The Selling Stockholder has not taken and
will not take, directly or indirectly, any action designed to or that
might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares.
(k) The Selling Stockholder has no actual
knowledge that any representation or warranty of the Company set forth
in Section 4 above is untrue or inaccurate in any material respect.
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<PAGE> 13
6. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters under this Agreement are several and not joint.
The respective obligations of the Underwriters to purchase the Shares are
subject to each of the following terms and conditions:
(a) Notification that the Registration Statement
has become effective shall have been received by the Representatives
and the Prospectus shall have been timely filed with the Commission in
accordance with Section 7(a) of this Agreement.
(b) No order preventing or suspending the use of
any preliminary prospectus or the Prospectus shall have been or shall
be in effect and no order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose shall be pending before or threatened by the Commission, and
any requests for additional information on the part of the Commission
(to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of the
Representatives.
(c) The representations and warranties of the
Company and the Selling Stockholder contained in this Agreement and in
the certificates delivered pursuant to Section 6(d) shall be true and
correct when made and on and as of each Closing Date as if made on
such date and the Company and the Selling Stockholder shall have
performed all covenants and agreements and satisfied all the
conditions contained in this Agreement required to be performed or
satisfied by them at or before such Closing Date.
(d) The Representatives shall have received on
each Closing Date a certificate, addressed to the Representatives and
dated such Closing Date, of the president and chief executive officer
and the chief financial officer or chief accounting officer of the
Company to the effect that (i) the signers of such certificate have
carefully examined the Registration Statement, the Prospectus and this
Agreement and that the representations and warranties of the Company
in this Agreement are true and correct on and as of such Closing Date
with the same effect as if made on such Closing Date and the Company
has performed all covenants and agreements and satisfied all
conditions contained this Agreement required to be performed or
satisfied by it at or prior to such Closing Date, and (ii) no stop
order suspending the effectiveness of the Registration Statement has
been issued and to the best of their knowledge, no proceedings for
that purpose have been instituted or are pending under the Securities
Act.
(e) The Representatives shall have received on
the Firm Shares Closing Date a certificate, addressed to the
Representatives and dated such Closing Date, of the Selling
Stockholder, to the effect that the Selling Stockholder has carefully
examined the Registration Statement, the Prospectus and this Agreement
and that the representations and warranties of the Selling Stockholder
contained in this Agreement are true and correct on and as of such
Closing Date with the same effect as if made on such Closing Date and
the Selling Stockholder has performed all covenants and agreements and
satisfied all conditions contained this Agreement required to be
performed or satisfied by him at or prior to such Closing Date.
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<PAGE> 14
(f) The Representatives shall have received on
the Effective Date, at the time this Agreement is executed and on each
Closing Date, a signed letter from Deloitte & Touche addressed to the
Representatives and dated, respectively, the Effective Date, the date
of this Agreement and each such Closing Date, in form and substance
reasonably satisfactory to the Representatives, confirming that they
are independent accountants to the Company within the meaning of the
Securities Act and the Rules, that the response to Item 10 of the
Registration Statement is correct insofar as it relates to them and
stating that:
(i) in their opinion the audited
financial statements and financial statement schedules
included in the Registration Statement and the Prospectus and
reported on by them comply as to form in all material respects
with the applicable accounting requirements of the Securities
Act and the Rules;
(ii) on the basis of a reading of the
amounts included in the Registration Statement and the
Prospectus under the headings "Summary Financial and Other
Data" and "Selected Financial Data," carrying out certain
procedures (but not an examination in accordance with
generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter, a reading of the minutes of
the meetings of the stockholders and directors of the Company,
and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the
Company as to transactions and events subsequent to the date
of the latest audited financial statements, except as
disclosed in the Registration Statement and the Prospectus,
nothing came to their attention which caused them to believe
that:
(A) the amounts in "Summary
Financial and Other Data," and "Selected Financial
Data" included in the Registration Statement and the
Prospectus do not agree with the corresponding
amounts in the audited or unaudited financial
statements from which such amounts were derived; or
(B) with respect to the Company,
there were, at a specified date not more than five
business days prior to the date of the letter, any
change in the capital stock of the Company, increase
in the long-term debt of the Company or any decreases
in net income or in stockholders' equity in the
Company, as compared with the amounts shown on the
Company's audited balance sheet for the fiscal year
ended December 31, 1996 included in the Registration
Statement; and
(iii) they have performed certain other
procedures as may be permitted under generally acceptable
auditing standards as a result of which they determined that
certain information of an accounting, financial or statistical
nature (which is limited to accounting, financial or
statistical information derived from the general accounting
records of the Company) set forth in the Registration
Statement
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<PAGE> 15
and the Prospectus and reasonably specified by the
Representatives agrees with the accounting records of the
Company; and
(iv) based upon the procedures set forth in
clauses (ii) and (iii) above and a reading of the amounts
included in the Registration Statement under the headings
"Summary Financial and Other Data" and "Selected Financial
Data" included in the Registration Statement and Prospectus
and a reading of the financial statements, from which certain
of such data were derived, nothing has come to their attention
that gives them reason to believe that the "Summary Financial
and Other Data" and "Selected Financial Data" included in the
Registration Statement and Prospectus do not comply as to the
form in all material respects with the applicable accounting
requirements of the Securities Act and the Rules or that the
information set forth therein is not fairly stated in relation
to the financial statements included in the Registration
Statement or Prospectus from which certain of such data were
derived are not in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the audited financial statements
included in the Registration Statement and Prospectus.
References to the Registration Statement and the
Prospectus in this paragraph (e) are to such documents as
amended and supplemented at the date of the letter.
(g) The Representatives shall have received on
each Closing Date from Trenam, Kemker, Scharf, Barkin, Frye, O'Neill &
Mullis, counsel for the Company, an opinion, addressed to the
Representatives and dated such Closing Date, and stating in effect
that:
(i) Each of the Company and its
Subsidiaries has been duly organized and is validly existing
as a corporation in good standing under the laws of their
respective jurisdictions of organization. Each of the Company
and its Subsidiaries is duly qualified and in good standing as
a foreign corporation in each jurisdiction in which the
character or location of its assets or properties (owned,
leased or licensed) or the nature of its businesses makes such
qualification necessary, except for such jurisdictions where
the failure to so qualify would not have a Material Adverse
Effect.
(ii) Each of the Company and its
Subsidiaries has the corporate power and authority to own,
lease and license its assets and properties and conduct its
business as now being conducted and as described in the
Registration Statement and the Prospectus and with respect to
the Company, to enter into, deliver and perform this Agreement
and to issue and sell the Shares.
(iii) The Company has authorized, issued
and outstanding capital stock as set forth in the Registration
Statement and the Prospectus under the caption
"Capitalization"; the certificates evidencing the Shares are
in due and proper legal
15
<PAGE> 16
form and issuance by the Company; all of the issued and
outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and
nonassessable. There are no statutory preemptive or other
similar rights to subscribe for or to purchase or acquire any
shares of Common Stock of the Company or its Subsidiaries or
any such rights pursuant to the Company's Certificate of
Incorporation or by-laws or any agreement filed or required to
be filed as an exhibit to the Registration Statement. The
Shares when issued and sold pursuant to this Agreement will be
duly and validly authorized and issued, fully paid and
nonassessable and free and clear of all security interests,
liens, encumbrances, equities or claims. To the best of such
counsel's knowledge, except as disclosed in the Registration
Statement and the Prospectus, there is no outstanding option,
warrant or other right calling for the issuance of, and no
commitment, plan or arrangement to issue, any share of stock
of the Company or any of its Subsidiaries, or any security
convertible into, exercisable for, or exchangeable for stock
of the Company or any of its Subsidiaries. The issued and
outstanding shares of capital stock of each of the Company's
Subsidiaries have been duly authorized and validly authorized
and issued, are fully paid and nonassessable and are owned by
the Company or by another wholly owned subsidiary of the
Company, free and clear of any perfected security interest or,
to the knowledge of such counsel, any other security
interests, liens, encumbrances, equities or claims, other than
those described in the Registration Statement and the
Prospectus.
(iv) Each of the Lock-Up Agreements
executed by the Company's stockholders, directors and
executive officers has been duly and validly delivered by such
persons and constitutes the legal, valid and binding
obligation of each such person enforceable against each such
person in accordance with its terms, except as the
enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
(v) To such counsel's knowledge, no
holder of securities of the Company has rights, which have not
been waived, to the registration of shares of Common Stock or
other securities, as a result of the filing of the
Registration Statement by the Company or the offering
contemplated thereby.
(vi) All necessary corporate action has
been duly and validly taken by the Company to authorize the
execution, delivery and performance of this Agreement and the
issuance and sale of the Shares. This Agreement has been duly
and validly executed and delivered by the Company and this
Agreement constitutes the legal, valid and binding obligation
of the Company enforceable against the Company in accordance
with its terms except (A) as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles and (B)
to the extent that rights to indemnity or contribution
16
<PAGE> 17
under this Agreement may be limit Federal or state securities
laws or the public policy underlying such laws.
(vii) Neither the execution, delivery and
performance of this Agreement by the Company nor the
consummation of any of the transactions contemplated hereby
(including, without limitation, the issuance and sale by the
Company of the Shares) will (A) give rise to a right to
terminate or accelerate the due date of any payment due under,
or conflict with or result in the breach of any term or
provision of, or constitute a default (or any event which with
notice or lapse of time, or both, would constitute a default)
under, or require consent or waiver under (except those which
have been obtained), or result in the execution or imposition
of any lien, charge or encumbrance upon any properties or
assets of the Company or any of its Subsidiaries pursuant to
(1) the terms of any indenture, mortgagee, deed trust, note or
other agreement or instrument of which such counsel is aware
and to which the Company or any of its Subsidiaries is a party
by which it or any of its properties or businesses is bound or
(2) any franchise, license, permit, judgment, decree, order,
statute, rule or regulation of which such counsel is aware or
(B) violate any provision of the Certificate of Incorporation,
by-laws or other organizational document of the Company or any
of its Subsidiaries.
(viii) To the best of such counsel's
knowledge, no default exists, and no event has occurred which
with notice or lapse of time, or both, would constitute a
default, in the due performance and observance of any term,
covenant or condition by the Company of any indenture,
mortgage, deed of trust, note or any other agreement or
instrument to which the Company is a party or by which it or
any of its assets or properties or businesses may be bound or
affected.
(ix) None of the Company or its
Subsidiaries is in violation of (A) to such counsel's
knowledge, any franchise, license, permit, judgment, decree,
order, statute, rule or regulation or (B) any term or
provision of its Certificate of Incorporation or by-laws.
(x) No consent, approval, authorization
or order of any court or governmental or regulatory body is
required for the execution, delivery or performance of this
Agreement by the Company or the consummation of the
transactions contemplated hereby or thereby, except such as
have been obtained under the Securities Act and such as may be
required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the
several Underwriters.
(xi) To such counsel's knowledge, there
is no action, suit or proceeding before any court or
governmental agency or body, domestic or foreign, pending or
threatened against, or involving the assets, properties or
businesses of,
17
<PAGE> 18
the Company or its Subsidiaries or their respective directors
or officers which is required to be described in the
Registration Statement which is not so described.
(xii) The statements in the Prospectus
under the captions "Description of Capital Stock,"
"____________" and "____________" insofar as such statements
constitute a summary of documents referred to therein or
matters of law, are fair summaries in all material respects
and accurately present the information called for with respect
to such documents and matters. All documents, contracts and
other agreements required to be filed as exhibits to or,
described in, the Registration Statement have been so filed
with the Commission or are fairly described in the
Registration Statement, as the case may be.
(xiii) The Registration Statement, all
preliminary prospectuses and the Prospectus and each amendment
or supplement thereto (except for the financial statements and
schedules and other financial and statistical data derived
therefrom included therein or omitted therefrom, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act
and the Rules.
(xiv) The Registration Statement is
effective under the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement or
suspending or preventing the use of the Prospectus has been
issued and to such counsel's knowledge no proceedings for that
purpose have been instituted or are threatened under the
Securities Act; any required filing of the Prospectus and any
supplement thereto pursuant to Rule 424(b) of the Rules has
been made in the manner and within the time period required by
such Rule 424(b).
(xv) The Shares have been authorized for
listing on Nasdaq.
(xvi) The capital stock of the Company
conforms in all material respects to the description thereof
contained in the Prospectus under the caption "Description of
Capital Stock."
(xvii) The Company is not an "investment
company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of
1940, as amended.
To the extent deemed advisable by such counsel, they may rely
as to matters of fact on certificates of responsible officers of the Company
and public officials and on the opinions of other counsel satisfactory to the
Representatives as to matters which are governed by laws other than the laws of
the States of Florida and Delaware or the Federal laws of the United States;
provided that such counsel shall state that in their opinion the Underwriters
and they are justified in relying on such other opinions. Copies of such
certificates and other opinions shall be furnished to the Representatives and
counsel for the Underwriters
18
<PAGE> 19
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the Representatives and representatives of the
independent public accountants of the Company, at which conferences the
contents of the Registration Statement and the Prospectus and related matters
were discussed. While such counsel has not undertaken to independently verify
and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus (except as specified in the foregoing opinion), on the basis of the
foregoing, no facts have come to the attention of such counsel which lead such
counsel to believe that the Registration Statement at the time it became
effective (except with respect to the financial statements and notes and
schedules thereto and other financial data, as to which such counsel need
express no belief) contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus as amended or
supplemented (except with respect to the financial statements and notes
schedules thereto and other financial data, as to which such counsel need make
no statement) on the date thereof and the date of such opinion contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(h) The Representatives shall have received on
each Closing Date from Hunton & Williams, special counsel for the
Company, an opinion, addressed to the Representatives and dated such
Closing Date, and stating in effect that:
(i) (A) Each of the Company and its
Subsidiaries is in compliance in all material respects with
any and all applicable Environmental Laws; (B) none of the
Company or its Subsidiaries has received any notice from any
governmental authority or third party of an asserted claim
under any Environmental Law; (C) each of the Company and its
Subsidiaries has received all permits, licenses or other
approvals required of it under applicable Environmental Laws
to conduct its business and is in compliance with all terms
and conditions of any such permit, license or approval, except
where such failure to receive required permits, licenses or
other approvals or failure to comply with the terms and
conditions of such permits, licenses or other approvals would
not, singly or in the aggregate, have a Material Adverse
Effect; and (D) no property which is or has been owned, leased
or occupied by the Company or its Subsidiaries has been
designated as a Superfund site pursuant to the Comprehensive
Environmental Response, Compensation of Liability Act of 1980,
as amended (42 U.S.C. Section 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or
local law.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the Representatives and representatives of the
independent public accountants of the Company, at which conferences the
contents of the Registration Statement and the Prospectus as they related to
the matters set forth in the foregoing opinion were discussed. While such
counsel has not
19
<PAGE> 20
undertaken to independently verify and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus (except as specified in the foregoing
opinion), on the basis of the foregoing, no facts have come to the attention of
such counsel with respect to the matters set forth in the foregoing opinion
which lead such counsel to believe that the Registration Statement at the time
it became effective (except with respect to the financial statements and notes
and schedules thereto and other financial data, as to which such counsel need
express no belief) contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus as amended or
supplemented (except with respect to the financial statements and notes
schedules thereto and other financial data, as to which such counsel need make
no statement) on the date thereof and the date of such opinion contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(i) The Representatives shall have received on
the Firm Shares Closing Date from ___________________, counsel for the
Selling Stockholder, an opinion, addressed to the Representatives and
dated such Closing Date, and stating in effect that:
(i) This Agreement has been duly and
validly executed and delivered by or on behalf of the Selling
Stockholder.
(ii) This Agreement, the Custody
Agreement, the Power of Attorney and the Lock-Up Agreement
each constitute the legal, valid and binding obligation of the
Selling Stockholder enforceable against the Selling
Stockholder in accordance with their respective terms except
(A) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles and (B) to the
extent that rights to indemnity or contribution under this
Agreement may be limited by Federal or state securities laws
or the public policy underlying such laws; and the Selling
Stockholder has full legal right and authority to enter into
this Agreement and to sell, transfer and deliver in the manner
provided in this Agreement, the Shares to be sold by the
Selling Stockholder hereunder.
(iii) The transfer and sale by the Selling
Stockholder of the Shares to be sold by the Selling
Stockholder as contemplated by this Agreement will not
conflict with, result in a breach of, or constitute a default
under any agreement or instrument known to such counsel to
which the Selling Stockholder is a party or by which the
Selling Stockholder or any of its properties may be bound, or
any franchise, license, permit, judgment, decree, order,
statute, rule or regulation.
(iv) All of the Selling Stockholder's
rights in the Shares to be sold by the Selling Stockholder
pursuant to this Agreement, have been transferred to the
Underwriters who have severally purchased such Shares pursuant
to this
20
<PAGE> 21
Agreement, free and clear of adverse claims, assuming
for purposes of this opinion that the Underwriters purchased
the same in good faith without notice of any adverse claims.
(v) No consent, approval, authorization,
license, certificate, permit or order of any court,
governmental or regulatory agency, authority or body or
financial institution is required in connection with the
performance of this Agreement by the Selling Stockholder or
the consummation of the transactions contemplated hereby,
including the delivery and sale of the Shares to be delivered
and sold by the Selling Stockholder, except such as may be
required under state securities or blue sky laws in connection
with the purchase and distribution of the Shares by the
several Underwriters.
To the extent deemed advisable by such counsel, they may rely
as to matters of fact on certificates of the Selling Stockholder and on the
opinions of other counsel satisfactory to the Representatives as to matters
which are governed by laws other than the laws of the States of Florida and
Delaware or the Federal laws of the United States; provided that such counsel
shall state that in their opinion the Underwriters and they are justified in
relying on such other opinions. Copies of such certificates and other opinions
shall be furnished to the Representatives and counsel for the Underwriters
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the Representatives and representatives of the
independent public accountants of the Company, at which conferences the
contents of the Registration Statement and the Prospectus and related matters
were discussed. While such counsel has not undertaken to independently verify
and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus (except as specified in the foregoing opinion), on the basis of the
foregoing, no facts have come to the attention of such counsel which lead such
counsel to believe that the Registration Statement at the time it became
effective (except with respect to the financial statements and notes and
schedules thereto and other financial data, as to which such counsel need
express no belief) contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus as amended or
supplemented (except with respect to the financial statements and notes
schedules thereto and other financial data, as to which such counsel need make
no statement) on the date thereof and the date of such opinion contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(j) All proceedings taken in connection with the
sale of the Firm Shares and the Option Shares as herein contemplated
shall be reasonably satisfactory in form and substance to the
Representatives and their counsel and the Underwriters shall have
received from Rogers & Wells, counsel for the Underwriters, an
opinion, addressed to the Representatives and dated such Closing Date,
with respect to the Shares, the Registration
21
<PAGE> 22
Statement and the Prospectus, and such other related matters, as
the Representatives may reasonably request, and the Company shall have
furnished to Rogers & Wells such documents is they may reasonably
request for the purpose of enabling them to pass upon such matters.
(k) The Representatives shall have received
copies of the Lock-up Agreements executed by each entity or person
described in Section 4(m).
(l) If the Shares have been qualified for sale in
Florida, the Representatives shall have received on each Closing Date
certificates, addressed to the Representatives, and dated such Closing
Date, of an executive officer of the Company, acting solely in his
capacity as an executive officer of the Company, to the effect that
the signer of such certificate has reviewed and understands the
provisions of Section 517.075 of the Florida Statutes, and represents
that, to his knowledge after due inquiry, the Company has complied,
and at all times will comply, with all provisions of Section 517.075
and further, that as of such Closing Date, neither the Company nor any
of its affiliates does business with the government of Cuba or with
any person or affiliate located in Cuba.
(m) The Company and the Selling Stockholder shall
have furnished or caused to be furnished to the Representatives such
further certificates and documents as the Representatives shall have
reasonably requested.
7. Covenants of the Company. (a) The Company covenants
and agrees with the several Underwriters as follows:
(i) The Company shall prepare the Prospectus in a
form approved by the Representatives and file such Prospectus
pursuant to Rule 424(b) under the Securities Act not later than the
Commission's close of business on the second business day following
the execution and delivery of this Agreement, or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) or Rule 434 under
the Securities Act.
(ii) The Company shall promptly advise the
Representatives (i) when any amendment to the Registration Statement
shall have become effective, (ii) of any request by the Commission for
any amendment of the Registration Statement or the Prospectus or for
any additional information, (iii) of the prevention or suspension of
the use of any preliminary prospectus or the Prospectus or of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (iv) of the receipt
by the Company of any notification with respect to the suspension the
qualification of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The
Company shall not file any amendment of the Registration Statement or
supplement to the Prospectus unless the Company has furnished the
Representatives a copy for its review prior to filing and shall not
file any such proposed amendment or supplement to which the
Representatives reasonably object. The Company shall use its best
efforts to prevent the
22
<PAGE> 23
issuance of any such stop order and, if issued, to obtain as
soon as possible the withdrawal thereof.
(iii) If, at any time when a prospectus relating to
the Shares is required to be delivered under the Securities Act and
the Rules, any event occurs as a result of which the Prospectus as
then amended or supplemented would include any untrue statement of
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they
were made not misleading, or if it shall be necessary to amend or
supplement the Prospectus to comply with the Securities Act or the
Rules, the Company promptly shall prepare and file with the
Commission, subject to the second sentence of paragraph (ii) of this
Section 6(a) an amendment or supplements which shall correct such
statement or omission or in amendment which shall effect such
compliance.
(iv) The Company shall make generally available to
its security holders and to the Representatives as soon as
practicable, but not later than 45 days after the end of the 12-month
period beginning at the end of the fiscal quarter of the Company
during which the Effective Date occurs (or 90 days if such 12-month
period coincides with the Company's fiscal year), an earning statement
(which need not be audited) of the Company, covering such 12-month
period, which shall satisfy the provisions of Section 11(a) of the
Securities Act or Rule 158 of the Rules.
(v) The Company shall furnish to the
Representatives and counsel for the Underwriters, without charge,
signed copies of the Registration Statement (including all exhibits
thereto and amendments thereof) and to each other Underwriter a copy
of the Registration Statement (without exhibits thereto) and all
amendments thereof and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Securities Act or the
Rules, as many copies of any preliminary prospectus and the Prospectus
and amendments thereof and supplements thereto as the Representatives
may reasonably request.
(vi) In the event it becomes necessary to qualify
the Shares for sale in various states, the Company shall cooperate
with the Representatives and their counsel in endeavoring to qualify
the Shares for offer and sale in connection with this offering under
the state Blue Sky laws of such jurisdictions as the Representatives
may designate and shall maintain such qualifications in effect so long
as required for the distribution of the Shares; provided, however,
that the Company shall not be required in connection therewith, as a
condition thereof, to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction or subject
itself to taxation as doing business in any jurisdiction.
(vii) For a period of five years after the date of
this Agreement, the Company shall supply to the Representatives, and
to each other Underwriter who may so request in writing, copies of
such financial statements and other periodic and special reports as
the Company may from time to time distribute generally to the holders
of any
23
<PAGE> 24
class of its capital stock and to furnish to the Representatives a
copy of each annual or other report it shall be required to
file with the Commission (including the Report on Form SR required by
Rule 463 of the Rules).
(viii) Without the prior written consent of
Oppenheimer & Co., Inc., for a period of 180 days after the date of
this Agreement, the Company and each of its individual directors and
executive officers shall not offer for sale, sell, contract to sell,
distribute, transfer, grant any option for the sale of, or otherwise
dispose of, directly or indirectly (other than on Form S-8 or on the
successor form), or exercise any registration rights with respect to,
any equity securities of the Company (or any securities convertible
into, exercisable for or exchangeable for equity securities of the
Company), except for the issuance of the Shares pursuant to the
Registration Statement and the issuance of options pursuant to the
Company's [Stock Option Plan] as described in the Registration
Statement and the Prospectus. In the event that during this period,
(i) any options are issued pursuant to the Company's [Stock Option
Plan] that are exercisable during such 180-day period or (ii) any
registration is effected on Form S-8 or on any successor form relating
to options that are exercisable during such 180-day period, the
Company shall obtain the written agreement of such grantee or holder
of such registered securities that, for a period of 180 days after the
date of this Agreement, such person will not, without the prior
written consent of Oppenheimer & Co., Inc., offer for sale, sell,
distribute, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, or exercise any registration rights with
respect to, any shares of Common Stock (or any securities convertible
into, exercisable for, or exchangeable for any shares of Common Stock)
owned by such person.
(ix) On or before completion of this offering, the
Company shall make all filings required under applicable securities
laws and by the NASDAQ National Market (including any required
registration under the Exchange Act.
(x) The Company shall file timely and accurate
reports in accordance with the provisions of Florida Statutes Section
517.05, or any successor provision, and any regulation promulgated
thereunder, if at any time after the Effective Date, the Company or
any of its affiliates commences engaging in business with the
government of Cuba or any person or affiliate located in Cuba.
(xi) The Company will apply the net proceeds from
the offering of the Shares in the manner set forth under "Use of
Proceeds" in the Prospectus.
(b) The Company agrees to pay, or reimburse if paid by
the Representatives, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses incident to
the public offering of the Shares and the performance of the obligations of the
Company under this Agreement including those relating to: (i) the preparation,
printing, filing and distribution of the Registration Statement including all
exhibits thereto, each preliminary prospectus, the Prospectus, all amendments
and supplements to the Registration Statement and the Prospectus, and the
printing, filing and distribution of this Agreement; (ii) the preparation and
delivery of certificates for the Shares to the Representatives
24
<PAGE> 25
and the Underwriters; (iii) the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the various
jurisdictions referred to in Section 6(a)(v), including the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
registration and qualification and the preparation, printing, distribution
and shipment of preliminary and supplementary Blue Sky memoranda; (iv) the
furnishing (including costs of shipping and mailing) to the Representatives and
to the Underwriters of copies of each preliminary prospectus, the Prospectus
and all amendments or supplements to the Prospectus, and of the several
documents required by this Section to be so furnished, as may be reasonable
requested for use in connection with the offering and sale of the Shares by the
Underwriters or by dealers to whom Shares may be sold; (v) the filing fees of
the NASD in connection with its review of the terms of the public offering and
reasonable fees and disbursements of counsel for the Underwriters in connection
with such review; (vi) the furnishing (including costs of shipping and mailing)
to the Representatives and to the Underwriters of copies of all reports and
information required by Section 6(a)(vi); (vii) the inclusion of the Shares for
quotation on the NASDAQ National Market System; and (viii) all transfer taxes,
if any, with respect to the sale and delivery of the Shares by the Company to
the Underwriters. Subject to the provisions of Section 9, the Underwriters
agree to pay, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses incident to
the performance of the obligations of the Underwriters under this Agreement not
payable by the Company pursuant to the preceding sentence, including, without
limitation, the fees and disbursements of counsel for the Underwriters.
8. Indemnification.
(a) The Company and the Selling Stockholder
agree, jointly and severally, to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation,
legal and other expenses incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other Federal or state law or
regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, the Registration Statement or
the Prospectus or any amendment thereof or supplement thereto, or
arise out of or are based upon any omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading; or (ii) any breach of the representations
and warranties set forth in Section 4 hereof, provided, however, that
such indemnity shall not inure to the benefit of any Underwriter (or
any person controlling such Underwriter) on account of any losses,
claims, damages or liabilities arising from the sale of the Shares to
any person by such Underwriter if such untrue statement or omission or
alleged untrue statement or omission was made in such preliminary
prospectus, the Registration Statement or the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with
information
25
<PAGE> 26
furnished in writing to the Company by the Representatives on behalf
of any Underwriter specifically for use therein. Notwithstanding the
foregoing, the liability of the Selling Stockholder pursuant to the
provisions of this Section 8(a) shall be limited to an amount equal to
the aggregate net proceeds received by such Selling Stockholder from
the sale of the Shares sold by the Selling Stockholder hereunder.
This indemnity agreement will be in addition to any liability which
the Company and the Selling Stockholder may otherwise have.
(b) Each Underwriter agrees, severally and not
jointly, to indemnify and hold harmless the Company, the Selling
Stockholder, each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, each director of the Company, and each officer of the
Company who signs the Registration Statement, to the same extent as
the foregoing indemnity from the Company or the Selling Stockholder to
each Underwriter, but only insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which was made in any
preliminary prospectus, the Registration Statement or the Prospectus,
or any amendment thereof or supplement thereto, contained in the last
paragraph of the cover page, in the paragraph relating to
stabilization on the inside front cover page of the Prospectus and the
statements contained under the caption "Underwriting" in the
Prospectus; provided, however, that the obligation of each Underwriter
to indemnify the Company or the Selling Stockholder (including any
controlling person, director or officer thereof), as the case may be,
shall be limited to the net proceeds received by the Company from such
Underwriter.
(c) Any party that proposes to assert the right
to be indemnified under this Section will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such
party in respect of which a claim is to be made against an
indemnifying party or parties under this Section, notify each such
indemnifying party of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served. No indemnification
provided for in Section 8(a) or 8(b) shall be available to any party
who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was prejudiced by the failure
to give such notice but the omission so to notify such indemnifying
party of any such action, suit or proceeding shall not relieve it from
any liability that it may have to any indemnified party for
contribution or otherwise than under this Section. In case any such
action, suit or proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in,
and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party, to such indemnified party of
its election so to assume the defense thereof and the approval by the
indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses,
except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party, in
connection with the defense thereof.
26
<PAGE> 27
The indemnified party shall have the right to employ its counsel in
any such action, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the employment of
counsel by such indemnified party has been authorized in writing
by the indemnifying, parties, (ii) the indemnified party shall have
reasonably concluded that there may be a conflict of interest between
the indemnifying parties and the indemnified party in the conduct of
the defense of such action (in which case the indemnifying parties
shall not have the right to direct the defense of such action on
behalf of the indemnified party) or (iii) the indemnifying parties
shall not have employed counsel to assume the defense of such action
within a reasonable time after notice of the commencement thereof, in
each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying parties. An indemnifying party shall not
be liable for any settlement of any action, suit, proceeding or claim
effected without its written consent which consent shall not be
unreasonably withheld.
9. Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnification provided
for in Section 8(a) or 8(b) is due in accordance with its terms but for any
reason is held to be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b), then each indemnifying party
shall contribute to the aggregate losses, claims, damages and liabilities
(including any investigation, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of any action, suit or
proceeding or any claims asserted, but after deducting any contribution
received by any person entitled hereunder to contribution from any persons who
may be liable for contribution) to which the indemnified party may be subject
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholder on the one hand and the Underwriters
on the other from the offering of the Shares or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 8
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and the
Selling Stockholder on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
Selling Stockholder and the Underwriters shall be deemed to be in the same
proportion as (x) the total proceeds from the offering (net of underwriting
discounts but before deducting expenses) received by the Company or the Selling
Stockholder, as set forth in the table on the cover page of the Prospectus,
bear to (y) the underwriting discounts received by the Underwriters, as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company, the Selling Stockholder or the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact related to information supplied by the Company,
the Selling Stockholder or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Selling Stockholder and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
Section 9, (i) in no case shall any Underwriter
27
<PAGE> 28
(except as may be provided in the Agreement Among Underwriters) be liable or
responsible for any amount in excess of the underwriting discount applicable to
the Shares purchased by such Underwriter hereunder; (ii) the Company shall be
liable and responsible for any amount in excess of such underwriting discount;
and (iii) in no case shall the Selling Stockholder be liable and responsible
for any amount in excess of the aggregate net proceeds of the sale of Shares
received by the Selling Stockholder hereunder; provided, however, that no
person guilty of fraudulent misrepresentation (within the meaning of Section
II(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 9, each person, if any, who controls an Underwriter within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange Act shall
have the same rights to contribution as such Underwriter, and each person, if
any, who controls the Company within the meaning of the Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, each officer of the
Company who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company, subject
in each case to clauses (i) and (ii) in the immediately preceding sentences of
this Section 9. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such party in respect of which a claim for contribution may be made against
another party or parties under this Section, notify such party or parties from
whom contribution may be sought, but the omission so to notify such party or
parties from whom contribution may be sought shall not relieve the party or
parties from whom contribution may be sought from any other obligation it or
they may have hereunder or otherwise than under this Section. No party shall
be liable for contribution with respect to any action, suit, proceeding or
claim settled without its written consent. The Underwriter's obligations to
contribute pursuant to this Section 9 are several in proportion to their
respective underwriting commitments and not joint.
10. Termination. This Agreement may be terminated with
respect to the Shares to be purchased on a Closing Date by the Representatives
by notifying the Company and the Selling Stockholder at any time:
(a) in the absolute discretion of the
Representatives at or before any Closing Date: (i) if on or prior to
such date, any domestic or international event or act or occurrence
has materially disrupted, or in the opinion of the Representatives
will in the future materially disrupt, the securities markets; (ii) if
there has occurred any new outbreak or material escalation of
hostilities or other calamity or crisis the effect of which on the
financial markets of than United States is such as to make it, in the
judgment of the Representatives, inadvisable to proceed with the
offering; (iii) if there shall be such a material adverse change in
general financial, political or economic conditions or the effect of
international conditions on the financial markets in the United States
is such as to make it, in the judgment of the Representatives,
inadvisable or impracticable to market the Shares; (iv) if trading in
the Shares has been suspended by the Commission or trading generally
on the New York Stock Exchange, Inc. or Nasdaq has been suspended or
limited, or minimum or maximum ranges for prices for securities shall
have been fixed, or maximum ranges for prices for securities have been
required, by said exchanges or by order of the Commission, the NASD or
any other governmental or regulatory authority; or (v) if a banking
moratorium has been declared by any state or Federal authority, or
28
<PAGE> 29
(b) at or before any Closing Date, that any of
the conditions specified in Section 6 shall not have been fulfilled
when and as required by this Agreement.
If this Agreement is terminated pursuant to any of its
provisions, neither the Company nor the Selling Stockholder shall be under any
liability to any Underwriter, and no Underwriter shall be under any liability
to the Company, except that (y) if this Agreement is terminated by the
Representatives or the Underwriters because of any failure, refusal or
inability on the part of the Company or the Selling Stockholder to comply with
the terms or to fulfill any of the conditions of this Agreement, the Company
will reimburse the Underwriters for all out-of-pocket expenses (including the
reasonable fees and disbursements of their counsel) incurred by them in
connection with the proposed purchase and sale of the Shares or in
contemplation of performing their obligations hereunder and (z) no Underwriter
who shall have failed or refused to purchase the Shares agreed to be purchased
by it under this Agreement, without some reason sufficient hereunder to justify
cancellation or termination of its obligations under this Agreement, shall be
relieved of liability to the Company, the Selling Stockholder or to the other
Underwriters for damages occasioned by its failure or refusal.
11. Substitution of Underwriters. If one or more of the
Underwriters shall fail (other than for a reason sufficient to justify the
cancellation or termination of this Agreement under Section 10) to purchase on
any Closing Date the Shares agreed to be purchased on such Closing Date by such
Underwriter or Underwriters, the Representatives may find one or more
substitute underwriters to purchase such Shares or make such other arrangements
as the Representatives may deem advisable or one or more of the remaining
Underwriters may agree to purchase such Shares in such proportions as may be
approved by the Representatives, in each case upon the terms set forth in this
Agreement. If no such arrangements have been made by the close of business on
the business day following such Closing Date,
(a) if the number of Shares to be purchased by
the defaulting Underwriters on such Closing Date shall not exceed 10%
of the Shares that all the Underwriters are obligated to purchase on
such Closing Date, then each of the nondefaulting Underwriters shall
be obligated to purchase such Shares on the terms herein set forth in
proportion to their respective obligations hereunder; provided, that
in no event shall the maximum number of Shares that any Underwriter
has agreed to purchase pursuant to Section 1 be increased pursuant to
this Section 10 by more than one-ninth of such number of Shares
without the written consent of such Underwriter, or
(b) if the number of Shares to be purchased by
the defaulting Underwriters on such Closing Date shall exceed 10% of
the Shares that all the Underwriters are obligated to purchase on such
Closing Date, then the Company shall be entitled to an additional
business day within which it may, but is not obligated to, find one or
more substitute underwriters reasonably satisfactory to the
Representatives to purchase such Shares upon the terms set forth in
this Agreement.
In any such case, either the Representatives or the Company
shall have the right to postpone the applicable Closing Date for a period of
not more than five business days in order
29
<PAGE> 30
that necessary changes and arrangements (including any necessary amendments or
supplements to the Registration Statement or Prospectus) may be effected by the
Representatives and the Company. If the number of Shares to be purchased on
such Closing Date by such defaulting Underwriter or Underwriters shall exceed
10% of the Shares that all the Underwriters are obligated to purchase on such
Closing Date, and none of the nondefaulting Underwriters or the Company shall
make arrangements pursuant to this Section within the period stated for the
purchase of the Shares that the defaulting Underwriters agreed to purchase,
this Agreement shall terminate with respect to the Shares to be purchased on
such Closing Date without liability on the part of any nondefaulting
Underwriter to the Company or the Selling Stockholder, and without liability on
the part of the Company or the Selling Stockholder, except in both cases as
provided in Sections 7(b), 8, 9 and 10. The provisions of this Section shall
not in any way affect the liability of any defaulting Underwriter to the
Company or the nondefaulting Underwriters arising out of such default. A
substitute underwriter hereunder shall become an Underwriter for all purposes
of this Agreement.
12. Miscellaneous. The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers, of the Selling Stockholder and of the Underwriters set forth in
or made pursuant to this Agreement shall remain in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or the
Company or the Selling Stockholder or any of the officers, directors or
controlling persons referred to in Sections 8 and 9 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 7(b), 8, 9
and 10 shall survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the
Underwriters, the Company and the Selling Stockholder and their respective
successors and assigns, and, to the extent expressed herein, for the benefit of
persons controlling any of the Underwriters, or the Company, and directors and
officers of the Company, and their respective successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser
of Shares from any Underwriter merely because of such purchase.
All notices and communications hereunder shall be in writing
and mailed or delivered or by telephone or telegraph if subsequently confirmed
in writing, (a) if to the Representatives, c/o Oppenheimer & Co., Inc.,
Oppenheimer Tower, World Financial Center, New York, New York 10281 Attention:
____________________, with a copy to G. David Brinton, Rogers & Wells, 200 Park
Avenue, New York, NY 10166, facsimile (212) 878-8375; (b) if to the Company, to
its agent for service as such agent's address appears on the cover page of the
Registration Statement, with a copy to ______________________________________;
and (c) if to the Selling Stockholder to:____________________________________,
with a copy to:_________________________________________.
30
<PAGE> 31
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflict of laws.
This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
JLM INDUSTRIES, INC.
By
--------------------------------------
Name: John L. Macdonald
Title: President
--------------------------------------
John L. Macdonald
Confirmed:
OPPENHEIMER & CO., INC.
A.G. EDWARDS & SONS, INC.
Acting severally on behalf of themselves
and as representatives of the several
Underwriters named in Schedule I annexed
hereto.
By OPPENHEIMER & CO., INC.
By
--------------------------------------
Name:
Title:
31
<PAGE> 32
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm Shares Number of Firm Shares Total Number of
to be Purchased from to be Purchased from Firm Shares to be
Name the Company the Selling Stockholder Purchased
---- ----------- ----------------------- ----------
<S> <C> <C> <C>
Oppenheimer & Co., Inc.
A.G. Edwards & Sons, Inc.
--------------
Total
==============
</TABLE>
32
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
JLM INDUSTRIES, INC.
-------
I, THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, do hereby certify as follows:
FIRST: The name of the corporation is
JLM INDUSTRIES, INC.
SECOND: Its registered office is to be located at 229 South State
Street, in the City of Dover, in the County of Kent, in the State of Delaware.
The name of its registered agent at that address is the United States
Corporation Company.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the corporation is
authorized to issue is three thousand (3,000) shares, all of which are without
par value.
FIFTH: The name and address of the single incorporator are
Maureen Hennelly 70 Pine Street, New York, NY 10270
<PAGE> 2
SIXTH: The By-Laws of the corporation may be made, altered, amended,
changed, added to or repealed by the Board of Directors without the assent or
vote of the stockholders. Elections of directors need not be by ballot unless
the By-Laws so provided.
SEVENTH: The corporation shall, to the full extent permitted by Section
145 of the Delaware General Corporation Law, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provisions contained in this certificate in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, I have hereunto set my hand and seal, the 18th day
of March, 1986.
/s/ Maureen Hennelly (L.S.)
----------------------------
Maureen Hennelly
<PAGE> 3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
JLM INDUSTRIES, INC.
IT IS HEREBY CERTIFIED THAT:
1. The name of the corporation (hereinafter called "Corporation")
is JLM INDUSTRIES, INC.
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article 1. thereof and by substituting in lieu of said
Article the following new Article.
"1. The name of the Corporation is J L M Holdings, Inc."
3. The amendment of the Certificate of Incorporation of the
Corporation herein certified has been duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
Signed and attested to on December 18, 1991.
/s/ John L. Macdonald
--------------------------------
John L. Macdonald, President
Attest:
/s/ Michael Molina
- --------------------------------
Michael Molina, Secretary
<PAGE> 4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATION OF INCORPORATION
OF
J L M HOLDINGS, INC.
IT IS HEREBY CERTIFIED THAT:
1. The name of the corporation (formerly, JLM Industries, Inc.)
(hereinafter called the "Corporation")) is J L M Holdings, Inc.
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article 1. thereof and by substituting in lieu of said
Article the following new Article.
"1. The name of the Corporation is JLM Industries, Inc."
3. The amendment of the Certificate of Incorporation of the
Corporation herein certified has been duly adopted in accordance with the
provision of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
Signed and attested to on April 9, 1992.
/s/ John L. Macdonald
--------------------------------
John L. Macdonald, President
Attest:
/s/ Michael Mollna
- -------------------------
Michael Mollna, Secretary
<PAGE> 5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
JLM INDUSTRIES, INC.
JLM Industries, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of JLM Industries, Inc. has duly
adopted resolutions setting forth a proposed amendment of the Certificate of
Incorporation of said Corporation, declaring said amendment to be advisable and
calling for a vote of the stockholders of said Corporation for consideration
thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation, as amended,
of this Corporation be amended by changing the Article thereof
numbered "Fourth" so that, as amended said Article shall be read as
follows:
Capital Stock
(A) Authorized Capitalization. The total number of
shares of capital stock authorized to be issued by this corporation
shall be:
30,000,000 shares of common stock, par value $.01 per
share (the "Common Stock"); and
5,000,000 shares of preferred stock, par value $.01
per share (the "Preferred Stock").
(B) The designation, relative rights, preferences and
liabilities of each class of stock, itemized by class, shall be as
follows:
1. Preferred. Shares of the Preferred Stock may be
issued from time to time in one or more series. The
board of directors of this Corporation (hereafter the
"Board of Directors" or "Board") by resolution shall
establish each series of Preferred Stock and fix and
determine the number of shares and the designations,
preferences, limitations and relative rights of each
such series, provided that all shares of the
Preferred Stock shall be identical except as to the
following relative rights and preferences, as to
which there may be variations
<PAGE> 6
fixed and determined by the Board of Directors
between different series:
(a) The rate or manner of payment of dividends.
(b) Whether shares may be redeemed and, if so,
the redemption price and the terms and
conditions of redemption.
(c) The amount payable upon shares in the event
of voluntary and involuntary liquidation.
(d) Sinking fund provisions, if any, for the
redemption or purchase of shares.
(e) The terms and conditions, if any, on which
the shares may be converted.
(f) Voting rights, if any.
(g) Any other rights or preferences now or
hereafter permitted by the laws of the State
of Delaware as variations between different
series of preferred stock.
2. Common. Each share of Common Stock shall be entitled
to one vote on all matters submitted to a vote of
stockholders, except matters required to be voted on
exclusively by holders of Preferred Stock or of any
series of Preferred Stock. The holders of Common
Stock shall be entitled to such dividends as may be
declared by the Board of Directors from time to time,
provided that required dividends, if any, on the
Preferred Stock have been paid or provided for. In
the event of the liquidation, dissolution, or winding
up, whether voluntary or involuntary, of this
Corporation, the assets and funds of this Corporation
available for distribution to stockholders, and
remaining after the payment to holders of Preferred
Stock of the amounts to which they are entitled,
shall be divided and paid to the holders of the
Common Stock according to their respective shares.
2
<PAGE> 7
(C) No Preemptive Rights.
1. Preferred Stock. Unless otherwise specifically
provided in the terms of the Preferred Stock, the
holders of any class of Preferred Stock of this
Corporation shall have no preemptive right to
subscribe for and purchase their proportionate share
of any additional Preferred Stock (of the same class
or otherwise) or Common Stock issued by this
Corporation, from and after the issuance of the
shares originally subscribed for by the stockholders
of this Corporation, whether such additional shares
be issued for cash, property, services or any other
consideration and whether or not such shares be
presently authorized or be authorized by subsequent
amendment to the Certificate of Incorporation of this
corporation.
2. Common Stock. The holders of Common Stock of this
Corporation shall have no preemptive right to
subscribe for and purchase their proportionate share
of any additional Preferred Stock or Common Stock
issued by this Corporation, from and after the
issuance of the shares originally subscribed for by
the stockholders of this Corporation, whether such
additional shares be issued for cash, property,
services or any other consideration and whether or
not such shares be presently authorized or be
authorized by subsequent amendment to these Articles
of Incorporation.
(D) Payment for Stock. The consideration for the issuance of
shares of capital stock may be paid, in whole or in part, in cash, in
promissory notes, in other property (tangible or intangible), in labor
or services actually performed for this Corporation, or in other
benefits to this Corporation at a fair valuation to be fixed by the
Board of Directors. When issued, all shares of stock shall be fully
paid and non-assessable.
(E) Treasury Stock. The Board of Directors of this Corporation
shall have the authority to acquire by purchase and hold from time to
time any shares of its issued and outstanding capital stock for such
consideration and upon such terms and conditions as the Board of
Directors in its discretion shall deem proper and reasonable in the
interest of this Corporation.
* * *
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the amendment was submitted to the stockholders for approval and the
stockholders unanimously approved the
3
<PAGE> 8
amendment to the Certificate of Incorporation by written consent in accordance
with Section 228 of the General Corporation Law of the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: Immediately prior to the effectiveness of the amendment
effected by this Certificate of Amendment to the Certificate of Incorporation
(the "Amendment"), this Corporation was authorized to issue up to 3,000 shares
of no par value per share common stock ("Old Common Stock"), of which there are
852 shares issued and outstanding and 48 shares outstanding but held as
treasury stock by this Corporation as of immediately prior to the effectiveness
of the Amendment, but no other class of capital stock. Upon effectiveness of
the Amendment, this Corporation shall be authorized to issue up to 30,000,000
shares of $.01 par value per share common stock ("New Common Stock") and up to
5,000,000 shares of $.01 par value per share preferred stock created by the
Amendment ("New Preferred Stock"), but no other class of capital stock.
Pursuant to, in connection with and simultaneously with the effectiveness of
the Amendment, there shall be a reclassification and conversion of all shares
of Old Common Stock, such that each share of Old Common Stock that is issued
and outstanding as of immediately prior to the effectiveness of the Amendment
shall be automatically reclassified and converted into the same number of
shares of New Common Stock (meaning that all 852 shares of Old Common Stock
issued and outstanding and 48 shares outstanding but held as treasury stock by
this corporation as of immediately prior to the effectiveness of the Amendment
shall be automatically reclassified and converted into 900 shares of New Common
Stock with $.01 par value per share), such reclassification and conversion to
be effective simultaneously with the effectiveness of the Amendment and without
any further act by any person. Upon effectiveness of the Amendment, there
shall not be outstanding any shares of New Preferred Stock.
IN WITNESS WHEREOF, said JLM Industries, Inc. has caused this
certificate to be signed by Frank A. Musto, its authorized officer, this 22nd
day of May, 1997.
JLM INDUSTRIES, INC.
BY: /s/ Frank A. Musto
-----------------------------
Frank A. Musto, Vice
President and Chief Financial
Officer
4
<PAGE> 1
EXHIBIT 3.3
BY-LAWS
OF
JLM INDUSTRIES, INC.
ARTICLE I - OFFICES
The office of the Corporation shall be located in the City and State designated
in the Articles of Incorporation. The Corporation may also maintain offices at
such other places within or without the United States as the Board of Directors
may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1 - Annual Meetings:
The annual meeting of the shareholders of the Corporation shall be held within
five months after the close of the fiscal year of the Corporation, for the
purpose of electing directors, and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
Special meetings of the shareholders may be called at any time by the Board of
Directors or by the President, and shall be called by the President or the
Secretary at the written request of the holders of ten per cent (10%) of the
shares then outstanding and entitled to vote thereat, or as otherwise required
under the provisions of the Business Corporation Act.
Section 3 - Place of Meetings:
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices of
waivers of notice of such meetings.
By-Laws - 1
<PAGE> 2
Section 4 - Notice of Meetings:
(a) Except as otherwise provided by Statute, written notice of such meeting of
shareholders, whether annual or special, stating the time when and place where
it is to be held, shall be served either personally or by mail, not less than
ten or more than fifty days before the meeting, upon each shareholder of record
entitled to vote at such meeting, and to any other shareholder to whom the
giving of notice may be required by law. Notice of a special meeting shall
also state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be
taken that would, if taken, entitle shareholders to receive payment for their
shares pursuant to Statute, the notice of such meeting shall include a
statement of that purpose and to that effect. If mailed, such notice shall be
directed to each such shareholder at his address, as it appears on the records
of the shareholders of the Corporation, unless he shall have previously filed
with the Secretary of Corporation a written request that notices intended for
him be mailed to some other address, in which case, it shall be mailed to the
address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the
meeting, or to any shareholder who attends such meeting, in person or by proxy,
or to any shareholder who, in person or by proxy, submits a signed waiver of
notice either before or after such meeting. Notice of any adjourned meeting of
shareholders need not be given, unless otherwise required by statute.
Section 5 - Quorum:
(a) Except as otherwise provided herein, or by statute, or in the Certificate
of Incorporation (such Certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at all
meetings of shareholders of the Corporation, the presence at the commencement
of such meetings in person or by proxy of shareholders holding of record a
majority of the total number of shares of the Corporation then issued and
outstanding and entitled to vote,
By-Laws - 2
<PAGE> 3
shall be necessary and sufficient to constitute a quorum for the transaction of
any business. The withdrawal of any shareholder after the commencement of a
meeting shall have no effect on the existence of a quorum, after a quorum has
been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
at the meeting as originally called if a quorum had been present.
Section 6 - Voting:
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors, to
be taken by vote of the shareholders, shall be authorized by a majority of
votes cast at a meeting of shareholders by the holders of shares entitled to
vote thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the Corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without
a meeting, may do so by proxy; provided, however, that the instrument
authorizing such proxy to act shall have been executed in writing by the
shareholder himself, or by his attorney-in-fact thereunto duly authorized in
writing. No proxy shall be valid after the expiration of eleven months from
the date of its execution, unless the person executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall
be exhibited to the Secretary at the meeting and shall be filed with the
records of the Corporation.
By-Laws - 3
<PAGE> 4
(d) Any resolution in writing, signed by all of the shareholders entitled to
vote thereon, shall be and constitute action by such shareholders to the effect
therein expressed, with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of shareholders and such
resolution so signed shall be inserted in the Minute Book of the Corporation
under its proper date.
ARTICLE III - BOARD OF DIRECTORS
Section 1 - Number, Election and Term of Office:
(a) The number of the directors of the Corporation shall be one (1), unless and
until otherwise determined by vote of a majority of the entire Board of
Directors.
(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares, present in person or by
proxy, entitled to vote in the election.
(c) Each director shall hold office until the annual meeting of the
shareholders next succeeding his election, and until his successor is elected
and qualified, or until his prior death, resignation or removal.
Section 2 - Duties and Powers:
The Board of Directors shall be responsible for the control and management of
the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the shareholders.
Section 3 - Annual and Regular meetings; Notice:
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders, at the place of
such annual meeting of shareholders.
By-Laws - 4
<PAGE> 5
(b) The Board of Directors, from time to time, may provide by resolution for
the holding of other regular meetings of the Board of Directors, and may fix the
time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) Section 4 of this Article III, with respect to special meetings,
unless such notice shall be waived in the manner set forth in paragraph (c) of
such Section 4.
Section 4 - Special Meetings; Notice:
(a) Special meetings of the Board of Directors shall be held whenever called
by the President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of special meetings shall
be mailed directly to each director, addressed to him at his residence or usual
place of business, at least two (2) days before the day on which the meeting is
to be held, or shall be sent to him at such place by telegram, radio or cable,
or shall be delivered to him personally or given to him orally, not later than
the day before the day on which the meeting is to be held. A notice, or waiver
of notice, except as required by Section 8 of this Article III, need not
specify the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairman:
At all meetings of the Board of Directors, the Chairman of the Board, if any and
if present, shall preside. If there shall be no Chairman, or he shall be
absent, then the President shall preside, and in his absence, a Chairman chosen
by the directors shall preside.
By-Laws - 5
<PAGE> 6
Section 6 - Quroum and Adjournments:
(a) At all meetings of the Board of Directors, the presence of a majority of
the entire Board shall be necessary and sufficient to constitute a quorum for
the transaction of business, except as otherwise provided by law, by the
Certificate of Incorporation, or by these By-laws.
(b) A majority of the directors present at the time and place of any regular
or special meeting, although less than a quorum, may adjourn the same from time
to time without notice, until a quorum shall be present.
Section 7 - Manner of Acting:
(a) At all meetings of the Board of Directors, each director present shall
have one vote, irrespective of the number of shares of stock, if any, which he
may hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
Section B - Vacancies:
Any vacancy in the Board of Directors occurring by reason of an increase in the
number of directors, or by reason of the death, resignation, disqualification,
removal (unless a vacancy created by the removal of a director by the
shareholders shall be filled by the shareholders at the meeting at which the
removal was effected) or inability to act of any director, or otherwise, shall
be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
Section 9 - Resignation:
Any director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.
By-Laws - 6
<PAGE> 7
Section 10 - Removal:
Any director may be removed with or without cause at any time by the affirmative
vote of shareholders holding of record in the aggregate at least a majority of
the outstanding shares of the Corporation at a special meeting of the
shareholders called for that purpose, and may be removed for cause by action of
the Board.
Section 11 - Salary:
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 12 - Contracts:
(a) No contract or other transaction between this Corporation and any other
Corporation shall be impaired, affected or invalidated, nor shall any director
be liable in any way by reason of the fact that any one or more of the directors
of this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other Corporation, provided that such facts are
disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be
counted in determining the presence of a quorum at such meeting. This Section
shall
By-Laws - 7
<PAGE> 8
not be construed to impair or invalidate or in any way affect any contract or
other transaction which would otherwise be valid under the law (common,
statutory or otherwise) applicable thereto.
Section 13 - Committees:
The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an executive committee
and such other committees, and alternate members thereof, as they may deem
desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board.
ARTICLE IV - OFFICERS
Section 1 - Number, Qualifications, Election
and Term of Office:
(a) The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer, and such other officers, including a Chairman of the
Board of Directors, and one or more Vice Presidents, as the Board of Directors
may from time to time deem advisable. Any other officer other than the Chairman
of the Board of Directors may be, but is not required to be, a director of the
Corporation. Any two or more offices may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of
Directors at the regular annual meeting of the Board following the annual
meeting of shareholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
elected and qualified, or until his death, resignation or removal.
Section 2 - Resignation:
Any officer may resign at any time by giving written notice of such resignation
to the Board of Directors, or to the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
by such officer, and the acceptance of such resignation shall not be necessary
to make it effective.
By-Laws - 8
<PAGE> 9
Section 3 - Removal:
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by a majority vote of the Board of Directors.
Section 5 - Duties of Officers:
Officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these by-laws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
Section 6 - Sureties and Bonds:
In case the Board of Directors shall so require, any officer, employee or agent
of the Corporation shall execute to the Corporation a bond in such sum, and with
such surety or sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all property, funds or
securities of the Corporation which may come into his hands.
Section 7 - Shares of Other Corporations:
Whenever the Corporation is the holder of shares of any other Corporation, any
right or power of the Corporation as such shareholder (including the attendance,
acting and voting at shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the Corporation by
the President, and Vice President, or such other person as the Board of
Directors may authorize.
ARTICLE V - SHARES OF STOCK
Section 1 - Certificate of Stock
(a) The certificates representing shares of the Corporation shall
By-Laws - 9
<PAGE> 10
be in such form as shall be adopted by the Board of Directors, and shall be
numbered and registered in the order issued. They shall bear the holder's name
and the number of shares, and shall be signed by (i) the Chairman of the Board
or the President or a Vice President, and (ii) the Secretary or Treasurer, or
any Assistant Secretary or Assistant Treasurer, and shall bear the corporate
seal.
(b) No certificate representing shares shall be issued until the full amount of
consideration therefor has been paid, except as otherwise permitted by law.
(c) To the extent permitted by law, the Board of Directors may authorize the
issuance of certificates for fractions of a share which shall entitle the
holder to exercise voting rights, receive dividends and participate in
liquidating distributions, in proportion to the fractional holdings; or it may
authorize the payment in cash of the fair value of fractions of a share as of
the time when those entitled to receive such fractions are determined; or it
may authorize the issuance, subject to such conditions as may be permitted by
law, of scrip in registered or bearer form over the signature of an officer or
agent of the Corporation, exchangeable as therein provided for full shares, but
such scrip shall not entitle the holder to any rights of a shareholder, except
as therein provided.
Section 2 - Lost or Destroyed Certificates:
- ------------------------------------------
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the
certificate representing the same. The Corporation may issue a new certificate
in the place of any certificate theretofore issued by it, alleged to have been
lost or destroyed. On production of such evidence of loss or destruction as
the Board of Directors in its discretion may require, the Board of Directors
may, in its discretion, require the owner of the lost or destroyed certificate,
or his legal representatives, to give the Corporation a bond in such sum as the
Board may direct, and with such surety or sureties as may be satisfactory to
the Board, to indemnify the Corporation against any claims, loss, liability or
damage it may suffer on account of the issuance of the new certificate. A new
certificate may be issued without requiring any such evidence or bond when, in
the judgment of the Board of Directors, it is proper so to do.
By-Laws - 10
<PAGE> 11
Section 3 - Transfers of Shares:
(a) Transfers of shares of the Corporation shall be made on the share
records of the Corporation only by the holder of record thereof, in person or
by his duly authorized attorney, upon surrender for cancellation of the
certificate or certificates representing such shares, with an assignment or
power of transfer endorsed thereon or delivered therewith, duly executed, with
such proof of the authenticity of the signature and of authority to transfer
and of payment of transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other
claim to, or interest in, such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
Section 4 - Record Date:
In lieu of closing the share records of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding fifty days, nor less than ten days,
as the record date for the determination of shareholders entitled to receive
notice of, or to vote at, any meeting of shareholders, or to consent to any
proposal without a meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividends, or allotment of any rights, or
for the purpose of any other action. If no record date is fixed, the record
date for the determination of shareholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if no notice is
given, the day on which the meeting is held; the record date for determining
shareholders for any other purpose shall be at the close of business on the day
on which the resolution of the directors relating thereto is adopted. When a
determination of shareholders of record entitled to notice of or to vote at any
meeting of shareholders has been made as provided for herein, such
determination shall apply to any adjournment thereof, unless the directors fix
a new record date for the adjourned meeting.
By-Laws - 11
<PAGE> 12
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amounts, and at such time or times as
the Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of Directors
from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from
time to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
Section 1 - By Shareholders:
All by-laws of the Corporation shall be subject to alteration or repeal, and
new by-laws may be made, by the affirmative vote of shareholders holding of
record in the aggregate at least a majority of the outstanding shares entitled
to vote in the election of directors at any annual or special meeting of
shareholders, provided that the notice or waiver of notice of such meeting
shall have summarized or set forth in full therein, the proposed amendment.
section 2 - By Directors:
The Board of Directors shall have power to make, adopt, alter, amend and
repeal, from time to time, by-laws of the Corporation; provided, however, that
the shareholders entitled to vote with respect thereto as in this Article IX
above-provided may alter, amend or repeal by-laws made by the Board of
Directors, except that the Board of Directors shall have no power to change the
quorum for meetings of shareholders or of the Board of Directors, or to change
any provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
shareholders. If any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set
forth in the notice of the next meeting of shareholders for the election of
directors, the by-law so adopted, amended or repealed, together with a concise
statement of the changes made.
By-Laws - 12
<PAGE> 13
(a) Any person made a party to any action, suit or proceeding, by reason of
the fact that he, his testator or intestate representative is or was a
director, officer or employee of the Corporation, or of any Corporation in
which he served as such at the request of the Corporation, shall be indemnified
by the Corporation against the reasonable expenses, including attorney's fees,
actually and necessarily incurred by him in connection with the defense of such
action, suit or proceedings, or in connection with any appeal therein, except
in relation to matters as to which it shall be adjudged in such action, suit or
proceeding, or in connection with any appeal therein that such officer,
director or employee is liable for negligence or misconduct in the performance
of his duties.
(b) The foregoing right of indemnification shall not be deemed exclusive of
any other rights to which any officer or director or employee may be entitled
apart from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be
entitled shall be fixed by the Board of Directors, except that in any case
where there is no disinterested majority of the Board available, the amount
shall be fixed by arbitration pursuant to the then existing rules of the
American Arbitration Association.
The undersigned secretary certifies that he has adopted the
foregoing by-laws as the first by-laws of the Corporation.
Dated: April 1, 1986
-----------------
/s/ Michael Molina
---------------------------
Secretary
By-Laws - 13
<PAGE> 1
EXHIBIT 10.1
AUTHORIZED DISTRIBUTOR AGREEMENT
THIS AGREEMENT is made as of May 1,1997 between GE Petrochemicals, Inc., a
Delaware corporation, with a place of business at 501 Avery St., Parkersburg,
West Virginia (the "Company"), a wholly owned subsidiary of General Electric
Company and JLM Marketing, Inc., a Delaware corporation, having the following
principal office and place of business at 8675 Hidden River Parkway, Tampa,
Florida 33637 (the "Distributor"):
1. APPOINTMENT, TERRITORY AND TERM
A. APPOINTMENT OF DISTRIBUTOR
The Company hereby appoints the Distributor and the Distributor hereby accepts
said appointment as an authorized distributor for the Company in the Territory,
and grants to the Distributor the right to purchase so much of the Product as
the Company shall make available for resale in the Territory pursuant to and
subject to the terms and conditions of this Agreement. This Agreement does not
contemplate or require the payment by the Distributor of a fee of any kind
whatsoever for its appointment as an authorized distributor.
B. PRODUCT
The term "Product" shall mean Styrene. The parties agree that the Company shall
sell to Distributor such quantities of Product as Company may make available
after servicing its internal needs, the needs of its affiliate businesses, and
those of its then existing customer base. It is estimated that Company shall
sell to Distributor up to 40 Million pounds of Product during the initial term
of this Agreement. Distributor agrees to purchase on the terms set forth herein
100% of the Product made available by the Company for sale to Distributor.
Following the first six months of the initial term hereof, Distributor shall
provide a four month rolling forecast of its Product orders. In the event that
the Distributor purchases less than 100% of Purchaser's forecasted amount,
Distributor shall pay to Company one-half of the difference between the price
set forth hereunder and any lesser price at which Company sells the unpurchased
Product.
<PAGE> 2
C. TERRITORY
The geographic area (the "Territory") in which the Distributor shall undertake
the responsibilities specified in this Agreement is the United States. Upon
ninety (90) days' prior written notice, the Company in its sole and absolute
discretion reserves the right to restrict the Territory.
D. RETAINED ACCOUNTS
In order to maintain an efficient distribution of the Product, the Company
desires to retain certain accounts that require its direct sales participation.
The Distributor agrees not to sell the Product to any of the retained direct
accounts or other accounts set forth on Exhibit A to this Agreement (the
"Retained Accounts"). Aside from the Retained Accounts, either party may sell to
any other prospective customer, however each party recognizes that the goal of
this distribution arrangement is to promote a broader and more efficient
distribution of the Product.
E. TERM
The term of the distributorship hereby created shall be for a period of three
(3) years from May 1,1997 to April 31,1998, and shall continue on an annual
basis thereafter, subject to termination by either party upon sixty (60) days
prior written notice to the other party.
2. COMPANY RESPONSIBILITIES
The Company shall:
- -- Sell the Product to the Distributor at such prices as shall be established by
the Company from time to time in its sole discretion for resale by the
Distributor in the Territory.
- -- Use reasonable efforts to supply such Product ordered by the Distributor in
the quantities and at the times specified by the Distributor, provided that
the Company reserves the right at any time prior to shipment to allocate its
available Product as it may determine in the exercise of its business
judgment.
- -- Provide to the Distributor information and advice relating to marketing,
advertising and packaging to the extent the Company shall determine in its
sole discretion.
- -- Extend such credit to the Distributor as the Company may, in its sole
discretion, deem appropriate, subject to change or withdrawal at any time.
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<PAGE> 3
3. DISTRIBUTOR RESPONSIBILITIES
The Distributor shall:
- -- Use its best efforts to sell, advertise and promote the sale and use of the
Product throughout the Territory and to fulfill the sales targets agreed to
by the parties or established by the Company.
- -- Order and maintain adequate stocks of the Product to meet the needs of its
customers in the Territory.
- -- Furnish to the Company, in such manner and at such times as the Company may
from time to time request, financial statements and information relating to
sales and service, inventory levels, the Distributor's promotional efforts,
publicly or lawfully available information relating to competitive
activities, legal developments in the Territory (including product liability,
intellectual property, import and custom, and taxation rules to which the
Distributor becomes aware), and the Distributor's sales plans and forecasts.
- -- Pay when due all amounts owed to the Company by the Distributor as reflected
on the Company's invoices to the Distributor. The Distributor shall not pay
less than any invoiced amount unless otherwise authorized by the Company in
writing.
- -- Meet with the Company on a regular basis to review and make adjustments, as
necessary, to Distributor's sales objectives and performance.
4. STANDARD SALES TERMS AND CONDITIONS
- -- Unless otherwise agreed in writing by the Company for a given transaction or
type of transaction, the purchase and sale of all Product to the Distributor
shall be subject to the terms and conditions and the provisions of this
Agreement and to the Company's standard form of Conditions of Sale attached
hereto and made a part hereof, including any subsequent modifications of said
Conditions of Sale made in the sole discretion of the Company. Any additional
or different terms proposed by the Distributor, whether in its purchase
order, order acknowledgment, acceptance or any other manner in the purchase
and sale of the Product shall be deemed null and void and shall not be
binding upon the parties, unless specifically and expressly agreed to by the
Company in writing. In the event of any inconsistency between the provisions
of this Agreement and the Conditions of Sale, the terms of this Agreement
shall govern.
- -- All sales contracts entered into by the Distributor with its customers shall
contain terms and conditions which provide the Company with the protections
of the Warranties and Limitations of Liability contained in the Conditions of
Sale.
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- -- The price of the Product shall be determined by Company on a quarterly basis
by written notice to Distributor. The Company reserves the right to change
its prices for the Product at any time and from time to time with fifteen
(15) days prior written notice to the Distributor.
5. COMPANY TRADE NAME AND TRADEMARKS; PATENTS
- -- The Distributor acknowledges that the marks "GE PETROCHEMICALS", "GENERAL
ELECTRIC" and "GE" are the dominant features of the legal and communicative
trade names of the Company, and that the marks "GE" "GE PETROCHEMICALS" and
GENERAL ELECTRIC are the principal trademarks for the Product manufactured or
sold by the Company.
- -- The Distributor shall not in any manner use the words "General Electric" or
"GE or any imitation or variant thereof, as a part of the Distributor's trade
name, company or firm name, nor will it grant such use by any subsidiary or
affiliate to dealers, if any, appointed by the Distributor. The Distributor
shall comply at all times with the rules and regulations furnished to the
Distributor by the Company with respect to the use of such trademarks and
trade names and to express and identify properly the "Authorized Distributor"
relationship with the Company for the Product, and shall not publish, or
cause to be published, any statement or encourage or approve any advertising
or practice which might mislead or deceive the public or might be detrimental
to the good name, trademarks, goodwill or reputation of the Company or its
Product. The Distributor shall, upon request, withdraw any statement and
discontinue any advertising or practice deemed by the Company to have such
effect.
- -- The Distributor shall hold the Company harmless against any expense or loss
resulting from infringement of patents or trademarks arising from compliance
with the Distributor's designs or specifications or instructions. Except as
otherwise provided in the preceding sentence, the Company shall defend any
suit or proceeding brought against the Distributor so far as based on a claim
that any Product, or any part thereof, supplied under this contract
constitutes an infringement of any patent of the United States, if notified
promptly in writing and given authority, information and assistance (at the
Company's expense) for the defense of same, and the Company shall pay all
damages and costs awarded therein against the Distributor. In case the
Product, or any part thereof, is in such suit held to constitute infringement
and the use of the Product or part is enjoined, the Company shall at its own
expense and its option either procure for the Distributor the right to
continue using the Product, or part, or replace the same with noninfringing
Product, or modify it so it becomes noninfringing, or remove the Product and
refund the purchase price and the transportation cost thereof. The Company
shall, however, in no event be liable for any use made by the Distributor of
the Product supplied hereunder which is covered by any adversely held
patents. The foregoing states the entire liability of the Company for patent
infringement by the Product or any part thereof.
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<PAGE> 5
6. PRODUCT CHANGES AND DELETIONS
Irrespective of any general contractual commitment by the Distributor to any
of its customers to furnish Product on a continuing basis, or any purchase
order placed with the Company by the Distributor, the Company reserves the
right from time to time in its absolute discretion, without thereby incurring
any liability to the Distributor with respect to any purchase order placed by
the Distributor, or otherwise, to discontinue or limit its production of any
Product, to terminate, allocate, or limit deliveries of any such Product to
Distributor, to alter the composition of any Product, or to add new and
additional Product, to substitute such altered Product for the prior Product
in filling orders, change its sales and distribution policies, and withdraw,
reissue, or amend the Product warranty or label.
7. PRIVATE INFORMATION
- -- The Distributor shall maintain in confidence and safeguard all business and
technical information which becomes available to the Distributor in
connection with this Agreement and which is either of a Company proprietary
nature or is not intended to be disclosed to others. This obligation of the
Distributor shall continue for five (5) years after expiration or termination
of this Agreement. In addition, the Distributor shall restrict access to such
information to those Distributor employees with a need to know such
information in order to perform under this Agreement. Such employees shall,
by written agreement with the Distributor, acknowledge their obligation to
protect such Company information and, upon request, the Distributor will
furnish such employee agreements to the Company.
- -- Knowledge or information of any kind disclosed by the Distributor to the
Company shall be deemed to have been disclosed without obligation on the part
of the Company to hold the same in confidence, and the Company shall have
full right to use and disclose such information without any compensation to
the Distributor beyond that specifically provided by this Agreement;
provided, however, that the Company shall maintain the confidentiality of the
Distributor's financial statements furnished to it.
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<PAGE> 6
8. DELIVERY
- -- Shipment of the Product shall be made only to the Distributor's principle
office and place of business identified herein, unless otherwise agreed in
writing by the Company. Title to the Product shall pass to the Distributor
upon delivery to the carrier F.O.B. point of shipment. Upon delivery to the
carrier, all risk of loss or damage and responsibility to file claims shall
be the Distributor's.
- -- Shipping dates are approximate. In no event shall the Company be liable for
failure or delay in delivery, or failure or delay in manufacture, due to acts
of God, acts of the Distributor, acts of civil or military authority,
priorities, fires, strikes, floods, epidemics, quarantine restrictions, war,
riot, delays in transportation, car shortages, or inability due to causes
beyond the Company's reasonable control, failure to obtain necessary labor,
materials or manufacturing facilities or any other cause, whether of a
similar or dissimilar nature. In the event of any such failure or delay, the
date of delivery shall be extended for a period equal to the time lost by
reason of the failure or delay.
- -- The Company may allocate limited supplies of the Product among its
distributors and other customers at its sole discretion.
9. RELATIONSHIP OF PARTIES AND CONTROLLING LAWS
- -- This Agreement and any rights thereunder are non-exclusive and are not
assignable by the Distributor. The Distributor is an independent contractor
to the Company. The Distributor, its agents, subsidiaries, affiliates and
employees are in no way the legal representative, agent or employee of the
Company for any purpose whatsoever and they have no right or authority to
assume or create, in writing or otherwise, any obligation of any kind,
express or implied, in the name of or on behalf of the Company. The Company
reserves the right to determine in its sole and absolute discretion the
acceptability of any order or contract provision proposed by the Distributor.
- -- All costs and expenses incurred by the Distributor shall be the sole
responsibility of the Distributor and no claim for reimbursement or other
payment shall be made against the Company.
- -- The Distributor shall indemnify the Company and hold it harmless from any
claims, demands, liabilities, suits, or expenses of any kind arising out of
the Distributor's business activities or its performance under this
Agreement. This provision shall survive the expiration or termination of this
Agreement for any reason.
- -- This Agreement and the rights and obligations thereunder and the relations
of the parties and all matters arising under or in connection with this
Agreement, including
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<PAGE> 7
the construction, validity, performance or termination thereunder, shall be
governed by and construed in accordance with the laws of the State of New
York.
10.BUSINESS PRACTICES
- -- The Distributor hereby represents and warrants that in carrying out its
responsibilities under this Agreement, the Distributor and its owners,
directors, officers, employees or agents thereof have not and shall not pay,
offer or promise to pay, or authorize the payment directly or indirectly of
any moneys or anything of value to any government official or employee, or
any political party or candidate for political office for the purpose of
influencing any act or decision of such official or of the government to
obtain or retain business or direct business to any person.
- -- The Distributor acknowledges that in the event that the Distributor resells,
directly or indirectly, any Product to any agency of the United States
Government, the Company is under no obligation to agree to any Federal
Acquisition Regulations (FAR) clauses or similar requirements which the
Distributor may be obliged to pass down to the Company. Notwithstanding any
other provision of this Agreement, provisions of any such FAR clauses or
similar requirements shall not be included in any transaction between the
Distributor and the Company unless the Company expressly agrees to such
provisions in a writing expressly referring to such clause and executed prior
to the shipment by the Company of such Product to the Distributor.
- -- In the event the Company has reason to believe that a breach of any of the
representations and warranties in this Section 10 has occurred or may occur,
the Company may withhold further delivery of the Product until such time as
it has received confirmation to its satisfaction that no breach has or will
occur. The Company shall not be liable to the Distributor for any claim, loss
or damage whatsoever related to its decision to withhold delivery under this
provision.
- -- In the event the Company has reason to believe that a breach of any of the
representations and warranties in this Section 10 has occurred or may occur,
the Company shall have the right to audit the Distributor in order to satisfy
itself that no breach has occurred. Upon request by the Distributor, the
Company shall select an independent third party to conduct an audit of the
Distributor in order to certify to the Company that no breach has or will
occur. The Distributor shall fully cooperate in any audit conducted by or on
behalf of the Company.
- -- In the event the Company concludes in its sole and absolute discretion that
the Distributor has failed to meet its obligations hereunder, this Agreement
may be immediately terminated by the Company upon the effective service of
written notice to the Distributor. The Distributor shall indemnify and hold
the Company harmless against any and all claims, losses or damages arising
from or related to such breach or the termination of this Agreement, or both.
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<PAGE> 8
- -- In no event shall the Company be obligated under this Agreement to take any
action or omit to take any action which the Company believes in good faith
would cause it to be in violation of the laws of the United States of America
or any state or locality thereof.
11. WARRANTY AND LIMITATION OF LIABILITY
- -- The Company warrants that it has title to the Product sold hereunder and
warrants that the Product meet the Company's internal specifications, unless
alternative specifications have been agreed to in writing by the Company. The
conditions of any tests designed to resolve any alleged breach of warranty
shall be mutually agreed upon and the Company shall be notified and may be
represented at all such tests. If any Product delivered hereunder fails to
meet the above stated warranties within sixty (60) days of delivery to the
Distributor or resale, whichever is first to occur, and the Company is
immediately notified, then the Company shall replace the items of Product
which fail to meet the warranty, F.O.B. the Company's plant or, in the
Company's discretion, refund the purchase price for such items of Product
which fail to meet the warranty.
- -- THE WARRANTIES STATED IN THIS SECTION 11 ARE IN LIEU OF ALL OTHER WARRANTIES,
WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, CONDITION, QUALITY, DURABILITY, DESIGN, OPERATION, OR
FITNESS FOR USE, OR SUITABILITY OF THE PRODUCT IN ANY RESPECT WHATSOEVER OR
IN CONNECTION WITH OR FOR THE PURPOSE AND USES OF THE DISTRIBUTOR (OR ANY
PARTY CLAIMING BY OR THROUGH THE DISTRIBUTOR).
- -- THE TOTAL LIABILITY OF THE COMPANY ON ANY AND ALL CLAIMS, WHETHER IN
CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE OR PATENT INFRINGEMENT),
DELICT, QUASI-DELICT, STRICT LIABILITY OR OTHERWISE, ARISING OUT OF,
CONNECTED WITH OR RESULTING FROM THE PERFORMANCE OR NON-PERFORMANCE OF THIS
AGREEMENT OR FROM THE MANUFACTURE, SALE, DELIVERY, RESALE, REPAIR,
REPLACEMENT OR USE OF ANY PRODUCT OR THE FURNISHING OF ANY SERVICE, SHALL NOT
EXCEED THE PRICE ALLOCABLE TO THE PRODUCT OR SERVICE WHICH GIVES RISE TO THE
CLAIM. Except as to title, any such liability shall terminate upon the
expiration of the warranty period specified above.
- -- IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, INDEMNITY, WARRANTY,
TORT (INCLUDING NEGLIGENCE), DELICT, QUASI-DELICT, STRICT LIABILITY OR
OTHERWISE, SHALL THE COMPANY BE LIABLE FOR LOSS OF PROFIT OR REVENUES, LOSS
OF USE OF THE PRODUCT OR ANY ASSOCIATED EQUIPMENT, COST OF CAPITAL, LOSS OF
PURCHASE POWER, COST OF SUBSTITUTE EQUIPMENT, FACILITIES OR SERVICES,
DOWNTIME
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<PAGE> 9
COSTS, ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR EXEMPLARY DAMAGES, OR CLAIMS
OF CUSTOMERS OF THE DISTRIBUTOR FOR ANY OF THE FOREGOING ITEMS. The
Distributor shall indemnify the Company against any such claims from its
customers.
- -- If the Company furnishes the Distributor with advice or other assistance
concerning any Product, systems or work which is not required pursuant to
this Agreement, the furnishing of such advice or assistance will not subject
the Company to any liability, whether in contract, indemnity, warranty, tort
(including negligence), delict, quasi-delict, strict liability or otherwise.
- -- In no event, whether as a result of breach of contract, indemnity, warranty,
tort (including negligence), strict liability or otherwise shall the Company
be liable for any loss or damage to the property of the Distributor which is
recoverable from insurance maintained by the Distributor, and the Distributor
waives rights of recovery against the Company for such loss or damage to the
extent covered by such insurance.
- -- As used in this Section 11, the term "Company" shall include GE
Petrochemicals, Inc., General Electric Company, its affiliated companies (as
presently or hereafter constituted) and directors, officers, employees,
agents, vendors, subcontractors, or suppliers of General Electric Company and
its affiliated companies.
- -- The provisions of this Section 11 shall not relieve the Company of any
obligations under the "Warranties" and "Patents" Articles included in the
Conditions of Sale.
- -- THE DISTRIBUTOR HAS NO AUTHORIZATION TO MAKE ANY REPRESENTATION, STATEMENT
OR WARRANTY ON BEHALF OF THE COMPANY RELATING TO ANY PRODUCT SOLD HEREUNDER
OTHER THAN EXPRESSLY PROVIDED BY THE TERMS OF THE WARRANTY AND LIMIT OF
LIABILITY IN THIS SECTION 11. IF THE DISTRIBUTOR, NEVERTHELESS DOES MAKE ANY
SUCH REPRESENTATION, STATEMENT OR WARRANTY, THE SOLE RESPONSIBILITY THEREFOR
SHALL BE THAT OF THE DISTRIBUTOR.
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<PAGE> 10
12. TERMINATION
- -- This Agreement may be terminated:
-- By an agreement in writing between the Company and the Distributor.
-- By either party at will, with or without cause, upon not less than
sixty (60) days' notice in writing.
-- In addition, by the Company immediately upon notice to the Distributor
in the event:
- The Distributor attempts to assign this Agreement or any rights
hereunder without the Company's prior written consent;
- There is a change in the control or management of the Distributor
unacceptable to the Company;
- The Distributor ceases to function as a going concern or
substantially ceases to conduct its operations in the normal course
of business as a distributor;
- A receiver for the Distributor is appointed, or applied for, or the
Distributor otherwise takes advantage of any insolvency laws;
- The Distributor materially breaches this Agreement or acts in any
manner deemed by the Company in its sole and absolute opinion to be
detrimental to the best interests of the Company;
- The Distributor, without the prior written consent of the Company,
sells or attempts to sell Product to customers located outside of
the territory;
- The Distributor, without the prior written consent of the Company,
sells or attempts to sell Product to Retained Accounts;
- The Distributor's activities (under this Agreement) in the Territory
require it to qualify to do business under the laws of the
jurisdiction(s) where such activities are conducted, or to fulfill
any registration requirements in the Territory, and the Distributor
either fails to so qualify or register or, having qualified,
subsequently ceases to qualify or register; or
- The Company concludes in its sole and absolute opinion that the
Distributor has failed to meet its obligations under Section 10
herein.
Without limitation, the foregoing events shall be deemed to be just
cause for termination by the Company.
- -- The Distributor shall in no event be deemed a dealer or franchisee for
purposes of any law protecting the same. The Distributor hereby waives the
protections afforded by any such laws and waives any right to any claim
arising with respect to any termination under this Agreement, whether under
tort or other theory, except under a theory of breach of the express terms of
this Agreement.
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<PAGE> 11
13. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION
- --Within thirty (30) clays after the expiration or termination of this
Agreement, The Company may, at its option, repurchase from the Distributor, at
the net price paid by the Distributor plus actual transportation costs paid
thereon, less a fair adjustment for obsolescence and physical condition, any or
all of said Product and any usable advertising and promotional materials.
- -- Upon expiration or termination of this Agreement, the Distributor shall cease
to use the name and trademarks of General Electric Company and GE
Petrochemicals, Inc., including removal of the words GE or General Electric
or GE Petrochemicals from all buildings under the control of the Distributor.
The Distributor shall ensure such cessation of use and removal by all persons
claiming to have received the right to such use from the Distributor.
- -- The acceptance of any order from, or the sale of any Product to the
Distributor, after the expiration or termination of this Agreement shall not
be construed as a renewal or extension thereof nor as a waiver of
termination. In the absence of a written agreement to the contrary signed by
the Company, all such transactions shall be governed by the Conditions of
Sale.
- -- After the date for termination of the distributorship is established by
notice or agreement, or within thirty (30) days prior to its expiration
(unless a new written distributorship agreement relating to said Product
shall then be in effect), the Company shall be obligated to deliver, and the
Distributor shall be obligated to accept, only such Product, in the quantity
ordered on a monthly basis during the preceding 12 months, as the Distributor
shall have ordered from the Company prior to thirty (30) days before the
effective date of expiration; provided, however, that in no event shall the
Company be obligated to deliver, or the Distributor obligated to accept, any
said Product after the date of such termination or expiration.
- -- Neither the Company nor the Distributor shall be liable to the other by
reason of termination, expiration, or non-renewal of this Agreement, for
compensation, reimbursement or damages on account of the loss of prospective
profits on anticipated sales or on account of expenditures, investments,
leases or commitments in connection with the business or goodwill of the
Company or the Distributor or otherwise.
14. RELEASE OF CLAIMS
IN CONSIDERATION OF THE EXECUTION OF THIS AGREEMENT BY THE COMPANY, THE
DISTRIBUTOR HEREBY RELEASES THE COMPANY FROM ALL CLAIMS, DEMANDS, CONTRACTS
AND LIABILITIES, IF ANY THERE BE, RELATING TO THE DISTRIBUTION OF THE PRODUCT
AS OF THE DATE OF EXECUTION OF THIS AGREEMENT BY THE DISTRIBUTOR, EXCEPT
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INDEBTEDNESS WHICH MAY BE OWING AND CLAIMS FOUNDED UPON A WRITTEN CONTRACT
SIGNED ON BEHALF OF THE COMPANY. IN ANY EVENT, CLAIMS BY EITHER PARTY OF ANY
NATURE UNDER OR ARISING OUT OF THIS AGREEMENT NOT SPECIFICALLY MADE IN
WRITING TO THE OTHER PARTY WITHIN ONE YEAR FROM THE EXPIRATION OF THIS
AGREEMENT SHALL BE DEEMED WAIVED, EXCEPTING CLAIMS MADE DEFENSIVELY BY THE
COMPANY OR THE DISTRIBUTOR IN CONNECTION WITH LITIGATION COMMENCED AGAINST
IT.
15. FAILURE TO ENFORCE CLAIMS
The failure of either party to enforce at any time or for any period of time
the provisions hereof in accordance with its terms shall not be construed to
be a waiver of such provisions or of the rights of such party thereafter to
enforce each and every such provision.
16. ARBITRATION
- -- All disputes arising in connection with this Agreement that cannot be
settled by friendly negotiation shall be finally settled by arbitration under
the American Arbitration Association Commercial Arbitration Rules ("AAA
Rules"). In the event of any, conflict between the AAA Rules and this
Agreement, the provisions of this Agreement shall govern. The arbitral
tribunal shall consist of three arbitrators, one appointed by the Claimant in
the Request for Arbitration and one appointed by the Respondent in the
Answer.
- -- The arbitrators so selected shall, within sixty (60) days of the date of
appointment of the second arbitrator, agree on a third arbitrator. If any of
the arbitrators shall not be appointed within the time limits specified
above, such arbitrator shall be appointed by the American Arbitration
Association at the written request of any party.
- -- The arbitration proceedings shall take place in New York, New York.
- -- The award of the arbitrators shall be by majority vote and shall be in
writing, shall set forth the facts found by the arbitrators to exist, and
shall state their determination. The arbitrators are authorized to grant
pre-award and post-award interest at commercial rates. NOTWITHSTANDING OTHER
PROVISIONS OF THIS AGREEMENT WHICH MAY BE INTERPRETED TO THE CONTRARY, THE
ARBITRATORS APPOINTED HEREIN SHALL NOT HAVE THE AUTHORITY TO GRANT PUNITIVE
DAMAGES TO EITHER PARTY. The costs of arbitration, including reasonable legal
fees, shall be borne by either or both of the parties in whatever proportion
as the arbitral tribunal may award.
- -- The award of any such arbitral tribunal shall be final and judgment upon the
award may be entered in any competent court or application may be made to any
12
<PAGE> 13
competent court for judicial acceptance or confirmation of the award. Neither
party shall seek recourse to a court of law to appeal for the revision of
the award.
17. NOTICES
- -- Any notice, approval, consent or other communication required or permitted
under this Agreement shall be in writing, in the English language, and shall
be deemed to be validly given and effectively served upon when (1) delivered
personally, (2) mailed by registered or certified mail, or (3) transmitted by
facsimile with a confirming copy sent by overnight mail or courier service to
the parties at the addresses indicated in this Agreement (in the case of the
Company, to the attention of the General Manager, GE Petrochemicals, Inc. Fax
No.: 413-448-5260). Either party may change its address by giving written
notice thereof to the other party. Notice given by a party's counsel shall be
considered notice given by that party.
- -- The Distributor agrees to provide immediate written notice to the Company
upon the occurrence of any of the following:
-- Any employee or official of any government entity, or any member of the
immediate family of any employee or official of any government entity
becomes an employee, consultant, or owner (directly or indirectly) of the
Distributor's organization;
-- The Distributor, its parent, its subsidiaries, its officers, managers, or
Company account employees become defendants in any criminal proceedings,
or the subject of any criminal investigation by any law enforcement
agency, commission, task force or grand jury; or
-- The Distributor, its parent, its subsidiaries, its officers, managers or
Company account employees become parties to any litigation (civil law
suits and arbitrations) which involve allegations of any of the following:
- Breach of dealer, distributor, or sales representative agreement;
- Failure to pay commissions, finder's fees or similar compensation;
- Fraud;
- False statements;
- False advertising or labeling;
- Failure to pay for goods delivered;
- Bribery, improper influence, or conflict of interest; or
- Monopoly, restraint of trade, or antitrust conspiracy.
The foregoing notice requirements are in addition to any other notices
required herein, imposed or implied by law or appropriate under the
circumstances.
13
<PAGE> 14
18. PERFORMANCE REVIEW
The Distributor shall cooperate with the Company in establishing annual sales
goals and plans for the distribution of Product. On a semi-annual basis, the
Company and Distributor shall review the Distributor's performance and any
change in its sales, inventory, or customer accounts that is likely to affect
the Distributor's performance under this Agreement. Deficient performance may
subject the Distributor to termination pursuant to the provisions of Section
12 hereof.
19. EXECUTION AND MODIFICATION
- -- This Agreement contains the entire and only agreement between the parties
with respect to the sale to and purchase of the Product. Any representations
or terms and conditions relating to transactions within the scope of this
Agreement which are not incorporated or referenced herein shall not be
binding upon either party.
- -- As of its effective date, this Agreement wholly cancels, terminates and
supersedes any agreement heretofore entered into between the parties with
respect to the Product. This Agreement shall not become effective or binding
upon the Company until signed by an authorized executive of GE
Petrochemicals, Inc.
- -- No change, modification, extension, renewal, ratification, rescission,
termination, notice of termination, discharge, abandonment or waiver of this
Agreement or any of the provisions hereof nor any representation, promise or
condition relating to this Agreement shall be binding upon the Company unless
made in writing and signed by an authorized executive of GE Petrochemicals,
Inc.
IN WITNESS WHEREOF, this Agreement has been executed by both parties.
GE PETROCHEMICALS, INC. JLM MARKETING, INC.
By /s/ By /s/ John Macdonald
--------------------------------- --------------------------------
(Print or Type Name) (Print or Type Name)
GM, Global Sourcing & Petrochemicals John Macdonald, Pres.
- ------------------------------------ --------------------------------
(Title) (Title)
4/11/97 0407.97
- ------------------------------------ --------------------------------
(Date) (Date)
14
<PAGE> 1
EXHIBIT 10.2
MEMORANDUM OF AGREEMENT
made and entered into by and between
SASOL CHEMICAL INDUSTRIES (PTY) LTD
a company incorporated under the laws of the
Republic of South Africa, having its registered office at
2 Sturdee Avenue, Rosebank, 2196 Republic of South Africa
(hereinafter referred to as SASOLCHEM)
and
JLM MARKETING INCORPORATED
a company incorporated under the laws of the
State of Delaware, United States of America,
having its registered office at
8675 Hidden River Parkway, TAMPA, FL 33637
United States of America
(hereinafter referred to as JLM)
<PAGE> 2
-2-
WHEREAS SASOLCHEM is a producer of N-PROPANOL, hereinafter referred to as the
PRODUCT;
WHEREAS SASOLCHEM desires to export the PRODUCT to JLM for the marketing of the
PRODUCT in the USA and Canada; and
WHEREAS JLM is willing to purchase the PRODUCT from SASOLCHEM for the marketing
of the PRODUCT in the USA and Canada.
NOW, therefore, the parties have agreed as follows:
1 SALE AND PURCHASE
SASOLCHEM hereby agrees to sell the PRODUCT to JLM and JLM agrees to
purchase the PRODUCT from SASOLCHEM. Product supplied to JLM in terms of
this Agreement shall only be marketed by JLM in the USA and Canada. In
particular, JLM agrees not to sell the product to manufacturers of
xanthates.
2 DURATION
This Agreement shall become effective on 1 July 1992 and shall continue on
an evergreen basis until terminated by either party by giving 6 (six)
months written notice of termination to the other party. No such notice of
termination shall, however, be given so as to take effect before 31
December 1992.
<PAGE> 3
-3-
3 QUALITY
SASOLCHEM shall supply the PRODUCT, at the point of sale as defined in
Clause 4(a), in conformity with the specification of the PRODUCT as set
out in Annexu e "A" hereto.
4 TERMS OF SALE AND PRICE
(a) SASOLCHEM shall supply the PRODUCT to JLM on a CIF USA port basis, unless
the parties mutually agree otherwise. Ownership and risk in the PRODUCT
shall pass to JLM at the inlet flange (the point of sale) of the vessel
where the PRODUCT is loaded in Durban. (Incoterms latest edition to
apply).
(b) JLM shall purchase the PRODUCT from SASOLCHEM and sell it in its own name
and for its own account.
(c) Sales are to be made and invoiced by SASOLCHEM to JLM at the provisional
price for the PRODUCT as agreed between the parties for each calendar
quarter before the middle of each preceding quarter. In case the parties
do not agree on the provisional price, the final price of the preceding
calendar quarter shall be the provisional price for the new calendar
quarter.
(d) Payment for the PRODUCT shall be made by JLM to SASOLCHEM within 45 days
after the Bill of Lading date.
<PAGE> 4
-4-
Payment of all amounts owing in terms of this Agreement shall be made in
US Dollars at such Bank in the Republic of South Africa, or elsewhere, as
SASOLCHEM may from time to time nominate, free of any bank commission
outside the Republic of South Africa, or any other deduction whatsoever.
(e) The provisional price agreed for each calendar quarter in accordance
with Clause 4(c) shall be subject to review and adjustment by the end of
the month immediately following each calendar quarter. In order to
determine the final price for each quarter, JLM shall advise SASOLCHEM, by
means of an audited certificate if so requested by SASOLCHEM, of JLM's
selling price of the PRODUCT in the USA and Canada for each quarter, and
to such other purchasers as are approved by SASOLCHEM pursuant to
paragraph 1 hereof.
The final CIF, USA port, duty unpaid price for each quarter shall be
calculated as follows:
JLM's average delivered selling price of the PRODUCT for each quarter,
minus actual pipeline, barge, storage and surveying costs
minus duty paid by JLM
minus finance charges for 30 days calculated at the price bank rate in the
USA
= CIF USA port duty unpaid price.
<PAGE> 5
-5-
A commission of **** of the CIF, duty unpaid price, shall be paid to JLM,
which will be subject to review from time to time as market conditions
dictate.
Any difference between the final price as calculated above and the
provisional price as determined in accordance with Clause 4(c), shall be
adjusted, ie in case the final price is higher than the provisional price
fixed for each quarter, JLM shall pay the additional amount to SASOLCHEM
and in case the final price is lower than the provisional price for each
quarter, SASOLCHEM shall pay the amount owing to JLM. All settlements
shall be effected within 15 days after the final figures have been
submitted.
5 QUANTITIES
SASOLCHEM shall advise JLM during October of each year of the quantity of
the PRODUCT SASOLCHEM estimates to be available for export to JLM during
the following calendar year. JLM shall in turn advise SASOLCHEM whether or
not it expects to be able to sell the estimated volume.
By not later than the middle of each quarter the parties shall negotiate
the actual quantities of the PRODUCT to be shipped during the following
quarter.
The quantities of the PRODUCT to be shipped each calendar year shall be
spread as evenly as possible between the four quarters.
<PAGE> 6
-6-
SASOLCHEM advises JLM that the estimated quantity available for calendar
year 1993 is 2 500 (TWO THOUSAND FIVE HUNDRED) metric tons.
6 SECRECY
JLM shall not reveal during the currency of this Agreement or after its
expiry or termination, the trade secrets of SASOLCHEM nor use such secrets
otherwise than for purposes of the implementation of this Agreement.
7 ALTERNATIVE EXPORT CHANNELS
JLM or SASOLCHEM may engage other exporters and/or distributors for the
PRODUCT with the prior consent of the other party in order to overcome any
trade difficulties which might arise. Such consent will not be
unreasonably withheld.
8 APPLICABLE LAW/ARBITRATION CLAUSE
The Agreement shall be governed by English (UK) law. Any dispute hereunder
that cannot be settled amicably shall be submitted to arbitration of the
International Chamber of Commerce. The place of arbitration shall be
London.
9 LIABILITY
SASOLCHEM shall not be liable for any damage suffered by anyone as a
result of the use of the PRODUCT sold under this Agreement either in its
form as sold or in a processed form or otherwise and in particular
<PAGE> 7
-7-
SASOLCHEM shall not be liable for consequential damage of any kind
including, but not limited to, product liability or loss of profit.
Against claims in respect of all the foregoing JLM undertakes to fully
indemnify and hold SASOLCHEM harmless, which indemnity and holding
harmless shall also encompass legal costs of any nature, including costs
as between attorney and client. Unless JLM notifies SASOLCHEM of any claim
for damages within 60 (SIXTY) days after JLM's receipt in the USA of the
PRODUCT, provided that for any cause of damage not reasonably discoverable
within such 60 day period, any claim of damages must be made within
180(ONE HUNDRED AND EIGHTY) days after JLM's receipt in the USA of the
PRODUCT JLM has notified SASOLCHEM that JLM has insurance coverage against
liability.
10 FORCE MAJEURE
Neither of the parties shall be held liable in respect of failure to
fulfil its obligations in terms of this Agreement, when, but only for as
long as, such failure is caused by or arises from force majeure such as,
but not limited to, the lawful order of a state, war, civil commotion,
riots, insurrection, strikes, lock-outs, fires, explosions, floods, or
other like circumstances, in so far as any of the aforementioned events is
beyond its control, arises after conclusion of this Agreement and has not
been wholly or partially caused by its negligence or that of its
contractors, agents, employees or functionaries.
<PAGE> 8
-8-
In such cases the affected party shall immediately notify the other party
of such failure and shall use its best endeavours to remove the said
circumstances with the least delay possible, so that the contractual
obligations can, as soon as possible, be fulfilled in the manner provided
for.
11 INCORRECT OR DEFECTIVE PRODUCT
Should SASOLCHEM deliver PRODUCT which does not comply with the
specification contained in this Agreement, SASOLCHEM shall replace at
SASOLCHEM'S cost, the delivered PRODUCT by the correct one or one
complying with the said specification.
The parties shall jointly decide how best to sell or dispose of PRODUCT
delivered that does not comply with the specification. The incurred
selling or disposal costs shall be for SASOLCHEM's account.
12 NOTICES AND DOMICILIUM
For all purposes arising out of this Agreement, the parties hereby choose
domicilium citandi en executandi respectively as follows:
SASOL CHEMICAL INDUSTRIES (PTY) LTD
2 STURDEE AVENUE
ROSEBANK
JOHANNESBURG 2001
REPUBLIC OF SOUTH AFRICA
<PAGE> 9
-9-
JLM MARKETING INC.
8675 HIDDEN RIVER PARKWAY
TAMPA, FL 33637
UNITED STATES OF AMERICA
Either party may from time to time change domicilium by notice in writing
to the other party.
SIGNED AT Johannesburg on this the 11th day of January 1994
WITNESSES:
1 /s/ /s/
--------------------------- ----------------------------
For and on behalf of
SASOL CHEMICAL INDUSTRIES
(PTY) LTD
2 /s/
---------------------------
SIGNED AT Tampa, Florida on this the 2nd day of March 1994
WITNESSES:
1 /s/ /s/
--------------------------- ----------------------------
for and on behalf of
JLM MARKETING INC.
2 /s/
---------------------------
<PAGE> 10
[SASOL CHEM LOGO]
N-PROPANOL
EXPORT SALES SPECIFICATION
(CODE NO 20/44)
<TABLE>
<CAPTION>
DESCRIPTION:
Normal propyl alcohol of 99,8% mass purity.
SPECIFICATION
PROPERTIES UNITS LIMITS TEST METHODS
COMPOSITION
<S> <C> <C> <C>
Colour (Pt Co) Hazen 5 max ASTM D1209
Appearance - Clear and free of sediment
Density at 20'C kg/l 0,803 - 0,805 ASTM D1298
Water Content mass % 0,1 max ASTM D1364
n-Propanol mass % 99,8 min
sec-Butanol mass % 0,1 max
Distillation at 101,3 kPa ASTM D86
Recovery up to 95(degree)C vol % 0 max
Recover up to 99(degree)C vol % 99 min
Acidity as CH3COOH mass % 0,003 max ASTM D1613
Residue on Evaporation mass % 0,002 max ASTM D1353
Flash Point (closed cup)
at 101,3 kPa (degree)C 20 - 30 ASTM D56
</TABLE>
USES:
As a high purity propyl alcohol it can be used in antiseptics, other
pharmaceutical preparations, drug synthesis, cosmetic preparation, as an
intermediate for the production of normal propyl amines and normal propyl
acetate and as a solvent for flexographic inks for food packaging.
SASOLCHEM
ISSUE NO: DVDW 7/92
<PAGE> 1
EXHIBIT 10.3
MEMORANDUM OF AGREEMENT
made and entered into by and between
SASOL CHEMICAL INDUSTRIES (PTY) LTD
a company incorporated under the laws of
the Republic of South Africa, having its
registered office at 2 Sturdee Avenue, Rosebank,
2196 Republic of South Africa
(hereinafter referred to as SASOLCHEM)
and
JLM MARKETING INCORPORATED
a company incorporated under the laws of the
State of Delaware, United States of America,
having its registered office at
8675 Hidden River Parkway, TAMPA, FL 33637
United States of America
(hereinafter referred to as JLM)
<PAGE> 2
-2-
WHEREAS SASOLCHEM is a producer of ACETONE, hereinafter referred to as the
PRODUCT;
WHEREAS SASOLCHEM desires to export the PRODUCT to JLM for the marketing
of the PRODUCT in the USA and Canada; and
WHEREAS JLM is willing to purchase the PRODUCT from SASOLCHEM for the
marketing of the PRODUCT in the USA and Canada.
NOW, therefore, the parties have agreed as follows:
1 SALE AND PURCHASE
SASOLCHEM hereby agrees to sell the PRODUCT to JLM and JLM agrees to
purchase the PRODUCT from SASOLCHEM. Product supplied to JLM in
terms of this Agreement shall only be marketed by JLM in the USA and
Canada. JLM agrees not to sell the PRODUCT into any other market
unless prior approval is obtained from SASOLCHEM.
2 DURATION
This Agreement shall become effective on 1 July 1992 and shall
continue on an evergreen basis until terminated by either party by
giving 6 (six) months' written notice of termination to the other
party. No such notice of termination shall, however, be given so as
to take effect before 31 December 1993.
<PAGE> 3
-3-
3 QUALITY
SASOLCHEM shall supply the PRODUCT, at the point of sale as defined
in Clause 4(a), in conformity with the specification of the PRODUCT
as set out in Annexure "A" hereto.
4 TERMS OF SALE AND PRICE
(a) SASOLCHEM shall supply the PRODUCT to JLM on a CIF USA port basis,
unless the parties mutually agree otherwise. Ownership and risk in
the PRODUCT shall pass to JLM at the inlet flange (the point of
sale) of the vessel where the PRODUCT is loaded in Durban (Incoterms
latest edition to apply).
(b) JLM shall purchase the PRODUCT from SASOLCHEM and sell it in its own
name and for its own account.
(c) Sales are to be made and invoiced by SASOLCHEM to JLM at the
provisional price for the PRODUCT as agreed between the parties for
each calendar quarter before the middle of each preceding quarter.
In case the parties do not agree on the provisional price, the final
price of the preceding calendar quarter shall be the provisional
price for the new calendar quarter.
(d) Payment for the PRODUCT shall be made by JLM to SASOLCHEM within 45
days after the Bill of Lading date.
<PAGE> 4
-4-
Payment of all amounts owing in terms of this Agreement shall be
made in US Dollars at such Bank in the Republic of South Africa, or
elsewhere, as SASOLCHEM may from time to time nominate, free of any
bank commission outside the Republic of South Africa, or any other
deduction whatsoever.
(e) The provisional price agreed for each calendar quarter in accordance
with Clause 4(c) shall be subject to review and adjustment by the
end of the month immediately following each calendar quarter. The
provisional price shall be weighted in accordance with the agreed
volume split between the different end-users and the different
geographic areas supplied to. In order to determine the final price
for each quarter, JLM shall advise SASOLCHEM, by means of an audited
certificate if so requested by SASOLCHEM, of JLM's selling prices of
the PRODUCT to the methyl methacrylate and solvent industries in the
USA and Canada for each quarter.
The final CIF, USA port, duty unpaid price for each quarter shall be
calculated as follows:
JLM's average delivered selling price of the PRODUCT for each
quarter,
minus actual pipeline, barge, storage and surveying costs
minus duty paid by JLM
minus finance charges for 30 days calculated at the prime bank rate
in the USA
= CIF USA port duty unpaid price.
<PAGE> 5
-5-
A commission of *** of the CIF, duty unpaid price, shall be paid to
JLM.
Any difference between the final price as calculated above and the
provisional price as determined in accordance with Clause 4(c),
shall be adjusted, ie in case the final price is higher than the
provisional price fixed for each quarter, JLM shall pay the
additional amount to SASOLCHEM and in case the final price is lower
than the provisional price for each quarter, SASOLCHEM shall pay the
amount owing to JLM. All settlements shall be effected within 15
days after the final figures have been submitted.
5 QUANTITIES
SASOLCHEM shall advise JLM during October of each year of the
quantity of the PRODUCT SASOLCHEM estimates to be available for
export to JLM during the following calendar year. JLM shall in turn
advise SASOLCHEM whether or not it expects to be able to sell the
estimated volume to the methyl methacrylate industry.
By not later than the middle of each quarter the parties shall
negotiate the actual quantities of the PRODUCT to be shipped during
the following quarter.
The quantities of the PRODUCT to be shipped each calendar year shall
be spread as evenly as possible between the four quarters.
<PAGE> 6
-6-
SASOLCHEM advises JLM that the estimated quantity available for
calendar year 1993 is 25 000 (TWENTY-FIVE THOUSAND) metric tons. The
MMA : Solvents ratio will be 30:70 for 1993. No Sasol acetone will
be supplied into the solvents distribution market in the US Gulf
during 1993. New Jersey and Wilmington will only be supplied with
acetone into the solvents distribution market.
6 SECRECY
JLM shall not reveal during the currency of this Agreement or after
its expiry or termination, the trade secrets of SASOLCHEM nor use
such secrets otherwise than for purposes of the implementation of
this Agreement.
7 APPLICABLE LAW/ARBITRATION CLAUSE
The Agreement shall be governed by English (UK) law. Any dispute
hereunder that cannot be settled amicably shall be submitted to
arbitration of the International Chamber of Commerce. The place of
arbitration shall be London.
8 LIABILITY
SASOLCHEM shall not be liable for any damage suffered by anyone as a
result of the use of the PRODUCT sold under this Agreement either in
its form as sold or in a processed form or otherwise and in
particular
<PAGE> 7
-7-
SASOLCHEM shall not be liable for consequential damage of any kind
including, but not limited to, product liability or loss of profit.
Against claims in respect of all the foregoing JLM undertakes to
fully indemnify and hold SASOLCHEM harmless, which indemnity and
holding harmless shall also encompass legal costs of any nature,
including costs as between attorney and client. Unless JLM notifies
SASOLCHEM of any claim for damages within 60 (SIXTY) days after
JLM's receipt in the USA of the PRODUCT, provided that for any cause
of damage not reasonably discoverable within such 60 day period, any
claim of damages must be made within 180(ONE HUNDRED AND EIGHTY)
days after JLM's receipt in the USA of the PRODUCT JLM has notified
SASOLCHEM that JLM has insurance coverage against liability.
9 FORCE MAJEURE
Neither of the parties shall be held liable in respect of failure to
fulfil its obligations in terms of this Agreement, when, but only
for as long as, such failure is caused by or arises from force
majeure such as, but not limited to, the lawful order of a state,
war, civil commotion, riots, insurrection, strikes, lock-outs,
fires, explosions, floods, or other like circumstances, in so far as
any of the aforementioned events is beyond its control, arises after
conclusion of this Agreement and has not been wholly or partially
caused by its negligence or that of its contractors, agents,
employees or functionaries.
<PAGE> 8
-8-
In such cases the affected party shall immediately notify the other
party of such failure and shall use its best endeavours to remove
the said circumstances with the least delay possible, so that the
contractual obligations can, as soon as possible, be fulfilled in
the manner provided for.
10 INCORRECT OR DEFECTIVE PRODUCT
Should SASOLCHEM deliver PRODUCT which does not comply with the
specification contained in this Agreement, SASOLCHEM shall replace
at SASOLCHEM'S cost, the delivered PRODUCT by the correct one or one
complying with the said specification. The parties shall jointly
decide how best to sell or dispose of PRODUCT delivered that does
not comply with the specification.
The parties shall jointly decide how best to sell or dispose of
PRODUCT by the correct one or one complying with the said
specification. The incurred selling or disposal costs shall be for
SASOLCHEM's account.
11 NOTICES AND DOMICILIUM
For all purposes arising out of this Agreement, the parties hereby
choose domicilium citandi en executandi respectively as follows:
SASOL CHEMICAL INDUSTRIES (PTY) LTD
2 STURDEE AVENUE
ROSEBANK
JOHANNESBURG 2001
REPUBLIC OF SOUTH AFRICA
<PAGE> 9
-9-
JLM MARKETING INC.
8675 HIDDEN RIVER PARKWAY
TAMPA, FL 33637
UNITED STATES OF AMERICA
Either party may from time to time change its domicilium by notice
in writing to the other party.
SIGNED AT JOHANNESBURG on this the 11th day of January 1994
WITNESSES:
1 /s/ /s/
----------------------- -----------------------
for and on behalf of
SASOL CHEMICAL INDUSTRIES
(PTY) LTD
2 /s/
-----------------------
SIGNED AT Tampa, Florida on this the 2nd day of March 1994
WITNESSES:
1 /s/ /s/
----------------------- -----------------------
for and on behalf of
JLM MARKETING INC.
2 /s/
-----------------------
<PAGE> 10
[SASOLCHEM LOGO]
ACETONE
EXPORT SALES SPECIFICATION
(CODE NO 221/10)
<TABLE>
<CAPTION>
SPECIFICATION
PROPERTIES UNITS LIMITS TEST METHODS
COMPOSITION
<S> <C> <C> <C>
Colour (Pt Co) Hazen + 5 max ASTM D1209
Appearance - Clear and free of sediment
Density at 20'C kg/l 0,789 - 0,792 ASTM D1298
Water Content mass % 0,3 max ASTM D1364
Acetone mass % 99,5 min
Ethanol mass % 0,005 max
Distillation at 101,3 kPa ASTM D86
Initial Boiling Point (degree C) 55,8 min
Dry Point (degree C) 56,6 max
Acidity as CH3COOH mass % 0,002 max ASTM D1613
Residue on Evaporation mass % 0,001 max ASTM D1353
Permanganate Test
at 25(degree)C minute 90 min ASTM D1363
</TABLE>
USES:
As a solvent in the following applications:
lacquers, lacquer thinners, liquid printing inks, nail polish removers, in
the filling of acetylene cylinders, polyester resins, bituminous paints,
PVC cloth manufacture, adhesives and explosives.
A raw material for the manufacture of:
methyl iso-butyl ketone, di-acetone alcohol, hexylene glycol and fine
chemicals
Refining of petroleum products and manufacture of grease.
SASOLCHEM
ISSUE NO: DVDW 7/92
<PAGE> 1
EXHIBIT 10.4
MEMORANDUM OF AGREEMENT
made and entered into by and between
SASOL CHEMICAL INDUSTRIES (PTY) LTD
a company incorporated under the laws of
the Republic of South Africa, having its registered office
at 2 Sturdee Avenue, Rosebank, 2196 Republic of South Africa
(hereinafter referred to as SASOLCHEM)
and
JLM MARKETING INCORPORATED
a company incorporated under the laws of the
State of Delaware, United States of America,
having its registered office at
8675 Hidden River Parkway, TAMPA, FL 33637
United States of America
(hereinafter referred to as JLM)
<PAGE> 2
-2-
WHEREAS SASOLCHEM is a producer of MEK (methyl-ethyl ketone), hereinafter
referred to as the PRODUCT;
WHEREAS SASOLCHEM desires to export the PRODUCT to JLM for the marketing of the
PRODUCT in the USA and Canada; and
WHEREAS JLM is willing to purchase the PRODUCT from SASOLCHEM for the marketing
of the PRODUCT in the USA and Canada.
NOW, therefore, the parties have agreed as follows:
1 SALE AND PURCHASE
SASOLCHEM hereby agrees to sell the PRODUCT to JLM and JLM agrees to
purchase the PRODUCT from SASOLCHEM. The volume of product supplied to JLM
under this Agreement shall only be resold in the USA. JLM agrees not to
sell the PRODUCT into any other market unless prior approval is obtained
from SASOLCHEM.
2 DURATION
This Agreement shall become effective on 1 July 1992 and shall continue on
an evergreen basis until terminated by either party by giving 6 (six)
months written notice of termination to the other party. No such notice of
termination shall, however, be given so as to take effect before 31
December 1993.
<PAGE> 3
-3-
3 QUALITY
SASOLCHEM shall supply the PRODUCT, at the point of sale as defined in
Clause 4(a), in conformity with the specification of the PRODUCT as set
out in Annexure "A" hereto.
4 TERMS OF SALE AND PRICE
(a) SASOLCHEM shall supply the PRODUCT to JLM on a CIF USA port basis, unless
the parties mutually agree otherwise. Ownership and risk in the PRODUCT
shall pass to JLM at the inlet flange (the point of sale) of the vessel
where the PRODUCT is loaded in Durban. (Incoterms latest edition to
apply).
(b) JLM shall purchase the PRODUCT from SASOLCHEM and sell it in its own name
and for its own account.
(c) Sales are to be made and invoiced by SASOLCHEM to JLM at the provisional
price for the PRODUCT as agreed between the parties for each calendar
quarter before the middle of each preceding quarter.
In case the parties do not agree on the provisional price, the final price
of the preceding calendar quarter shall be the provisional price for the
new calendar quarter.
(d) Payment for the PRODUCT shall be made by JLM to SASOLCHEM within 45 days
after the Bill of Lading date.
<PAGE> 4
-4-
Payment of all amounts owing in terms of this Agreement shall be made in
US Dollars at such Bank in the Republic of South Africa, or elsewhere, as
SASOLCHEM may from time to time nominate, free of any bank commission
outside the Republic of South Africa, or any other deduction whatsoever.
(e) The provisional price agreed for each calendar quarter in accordance
with Clause 4(c) shall be subject to review and adjustment by the end of
the month immediately following each calendar quarter. In order to
determine the final price for each quarter, JLM shall advise SASOLCHEM, by
means of an audited certificate if so requested by SASOLCHEM, of JLM's
selling price of the PRODUCT in the USA and Canada for each quarter, and
to such other purchasers as are approved by SASOLCHEM pursuant to
paragraph 1 hereof.
The final CIF, USA port, duty unpaid price for each quarter shall be
calculated as follows:
JLM's average delivered selling price of the PRODUCT for each quarter,
minus actual pipeline, barge, storage and surveying costs
minus duty paid by JLM
minus finance charges for 30 days calculated at the prime bank rate in the
USA
= CIF USA port duty unpaid price.
<PAGE> 5
-5-
A commission of *** of the CIF, duty unpaid price, shall be paid to JLM.
Any difference between the final price as calculated above and the
provisional price as determined in accordance with Clause 4(c), shall be
adjusted, ie in case the final price is higher than the provisional price
fixed for each quarter, JLM shall pay the additional amount to SASOLCHEM
and in case the final price is lower than the provisional price for each
quarter, SASOLCHEM shall pay the amount owing to JLM. All settlements
shall be effected within 15 days after the final figures have been
submitted.
5 QUANTITIES
SASOLCHEM shall advise JLM during October of each year of the quantity of
the PRODUCT SASOLCHEM estimates to be available for export to JLM during
the following calendar year. JLM shall in turn advise SASOLCHEM whether or
not it expects to be able to sell the estimated volume.
By not later than the middle of each quarter the parties shall negotiate
the actual quantities of the PRODUCT to be shipped during the following
quarter.
The quantities of the PRODUCT to be shipped each calendar year shall be
spread as evenly as possible between the four quarters.
<PAGE> 6
-6-
SASOLCHEM advises JLM that the estimated quantity available for calendar
year 1993 is 6 0OO (SIX THOUSAND) metric tons.
6 SECRECY
JLM shall not reveal during the currency of this Agreement or after its
expiry or termination, the trade secrets of SASOLCHEM nor use such secrets
otherwise than for purposes of the implementation of this Agreement.
7 ALTERNATIVE EXPORT CHANNELS
JLM or SASOLCHEM may engage other exporters and/or distributors for the
PRODUCT with the prior consent of the other party in order to overcome any
trade difficulties which might arise. Such consent will not be
unreasonably withheld.
8 APPLICABLE LAW/ARBITRATION CLAUSE
The Agreement shall be governed by English (UK) law. Any dispute hereunder
that cannot be settled amicably shall be submitted to arbitration of the
International Chamber of Commerce. The place of arbitration shall be
London.
9 LIABILITY
SASOLCHEM shall not be liable for any damage suffered by anyone as a
result of the use of the PRODUCT sold under this Agreement either in its
form as sold or in a processed form or otherwise and in particular
<PAGE> 7
-7-
SASOLCHEM shall not be liable for consequential damage of any kind
including, but not limited to, product liability or loss of profit.
Against claims in respect of all the foregoing JLM undertakes to fully
indemnify and hold SASOLCHEM harmless, which indemnity and holding
harmless shall also encompass legal costs of any nature, including costs
as between attorney and client. Unless JLM notifies SASOLCHEM of any claim
for damages within 60 (SIXTY) days after JLM's receipt in the USA of the
PRODUCT, provided that for any cause of damage not reasonably discoverable
within such 60 day period, any claim of damages must be made within
180(ONE HUNDRED AND EIGHTY) days after JLM's receipt in the USA of the
PRODUCT JLM has notified SASOLCHEM that JLM has insurance coverage against
liability.
10 FORCE MAJEURE
Neither of the parties shall be held liable in respect of failure to
fulfil its obligations in terms of this Agreement, when, but only for as
long as such failure is caused by or arises from force majeure such as,
but not limited to, the lawful order of a state, war, civil commotion,
riots, insurrection, strikes, lock-outs, fires, explosions, floods, or
other like circumstances, in so far as any of the aforementioned events
is beyond its control, arises after conclusion of this Agreement and has
not been wholly or partially caused by its negligence or that of its
contractors, agents, employees or functionaries.
<PAGE> 8
-8-
In such cases the affected party shall immediately notify the other party
of such failure and shall use its best endeavours to remove the said
circumstances with the least delay possible, so that the contractual
obligations can, as soon as possible, be fulfilled in the manner provided
for.
11 INCORRECT OR DEFECTIVE PRODUCT
Should SASOLCHEM deliver PRODUCT which does not comply with the
specification contained in this Agreement, SASOLCHEM shall replace at
SASOLCHEM'S cost, the delivered PRODUCT by the correct one or one
complying with the said specification.
The parties shall jointly decide how best to sell or dispose of PRODUCT
delivered that does not comply with the specification. The incurred
selling or disposal costs shall be for SASOLCHEM's account.
12 NOTICES AND DOMICILIUM
For all purposes arising out of this Agreement, the parties hereby choose
domicilium citandi en executandi respectively as follows:
SASOL CHEMICAL INDUSTRIES (PTY) LTD
2 STURDEE AVENUE
ROSEBANK
JOHANNESBURG 20O1
REPUBLIC OF SOUTH AFRICA
<PAGE> 9
-9-
JLM MARKETING INC.
8675 HIDDEN RIVER PARKWAY
TAMPA, FL 33637
UNITED STATES OF AMERICA
Either party may from time to time change its domicilium by notice in
writing to the other party.
SIGNED AT Johannesburg on this the 11th day of January 1994
WITNESSES:
1 /s/ /s/
--------------------------- ----------------------------
for and on behalf of
SASOL CHEMICAL INDUSTRIES
(PTY) LTD
2 /s/
---------------------------
SIGNED AT Tampa, Florida on this the 2nd day of March 1994
WITNESSES:
1 /s/ /s/
--------------------------- ----------------------------
for and on behalf of
JLM MARKETING INC.
2 /s/
---------------------------
<PAGE> 10
[SASOL CHEM LOGO]
METHYL ETHYL KETONE
EXPORT SALES SPECIFICATION
(CODE NO 221/20)
<TABLE>
<CAPTION>
SPECIFICATION
PROPERTIES UNITS LIMITS TEST METHODS
COMPOSITION
<S> <C> <C> <C>
Colour (Pt Co) Hazen + 10 max ASTM D1209
Appearance - Clear and free of sediment
Density at 20'C kg/l 0,804 - 0,806 ASTM D1298
Water Content mass % 0,05 max ASTM D1364
MEK mass % 99,5 min
Distillation at 101,3 kPa ASTM D86
Initial Boiling Point (degree C) 79,0 min
Dry Point (degree C) 80,5 max
Acidity as CH3COOH mass % 0,003 max ASTM D1613
Residue on Evaporation mass % 0,002 MAX ASTM D1353
Permanganate Test
at 25(degree)C minute 120 min ASTM D1363
</TABLE>
USES:
As a solvent in the following applications:
lacquers, lacquer thinners, epoxy thinners, natural and synthetic resins,
polyurethane adhesives, gums and rubbers, liquid printing inks, PVC cloth
manufacture and as a cleaning agent for metal surfaces. Refining and
dewaxing of mineral and lubricating oils. Production of MEK peroxide and
pharmaceuticals.
SASOLCHEM
ISSUE NO: DVDW 7/92
<PAGE> 1
EXHIBIT 10.5
ACETONE SALES AGREEMENT
THIS AGREEMENT, is made effective the first day of January, 1994, by
and between Mt. Vernon Phenol Plant Partnership, a Partnership organized
under the Uniform Partnership Act of the State of Indiana with offices on
Highway 69, Lexan Lane, Mt. Vernon, Indiana 47620 (hereinafter referred to
as "MTV PHENOL"), JLM Marketing, Inc., a Delaware corporation with offices
at 8675 Hidden River Parkway, Tampa, FL 33637 (hereinafter referred to as
JLM") and JLM Industries, Inc., a Delaware corporation with offices at 8675
Hidden River Parkway, Tampa, FL 33637.
WHEREAS, MTV PHENOL has previously sold acetone to JLM Industries,
Inc. under a contract dated January 1,1988, (herein after called the "Prior
Agreement") which Prior Agreement was assigned effective September 1, 1994,
by JLM Industries, Inc. to JLM; and
WHEREAS, MTV PHENOL and JLM desire to revise the Prior Agreement; and
WHEREAS, MTV PHENOL has requested JLM Industries, Inc., as guarantor
of JLM's performance under the Prior Agreement to guarantee JLM's
performance under this Acetone Sales Agreement (herein called the
"Agreement").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained, MTV PHENOL agrees to sell and deliver acetone to JLM and
JLM agrees to buy and take acetone from MTV PHENOL and JLM Industries
unconditionally guarantees the performance of JLM hereunder upon the
following terms and conditions hereinafter set forth:
ARTICLE I
DEFINITIONS
1. "Phenol Plant" as used herein means the phenol and acetone
manufacturing facility and related facilities, which have been purchased
from GE by MTV PHENOL and which are more particularly identified in the
Phenol Plant Purchase and Sale Agreement between MTV PHENOL and GE dated
November 1,1987. The Phenol Plant also includes all additions,
modifications, changes, deletions and accessions thereto.
2. "Acetone" shall mean acetone produced in the Phenol Plant.
3. "GE" means General Electric Company, a New York corporation
having an office and mailing address at One Plastics Avenue, Pittsfield, MA
01201, including all its subsidiaries and affiliates.
<PAGE> 2
4. "Fiscal Quarter" means a quarter on the annual fiscal calendar
used by MTV PHENOL.
5. "Fiscal Month" means a month on the annual fiscal calendar used
by MTV PHENOL
6. "Primary Term" means the period starting January 1, 1994 and
ending December 31, 2002.
ARTICLE II
TERM OF CONTRACT
This Agreement shall remain in force and effect for the Primary Term.
Thereafter, this Agreement shall remain in force and effect from calendar
year to calendar year thereafter unless and until this Agreement is
terminated by either party hereto by giving the other party written notice
of termination at least one (1) year in advance of either the end of the
Primary Term or any succeeding calendar year, provided, however, that MTV
PHENOL cannot give any notice of termination as long as JLM (IND.) INC. OR
any other subsidiary or affiliate then controlled by JLM Industries, Inc.
is a partner in MTV PHENOL.
ARTICLE III
QUANTITIES
1. MTV PHENOL will sell and JLM will purchase all of MTV PHENOL's
output of Acetone from the Phenol Plant, including output from future
expansions of said plant, which is in excess of the sale of Acetone from
the Phenol Plant to GE. GE shall have first priority to purchase any
Acetone produced by the Phenol Plant which is: (a) used by GE to
manufacture its own products, (b) swapped by GE to third parties in
exchange for Acetone deliveries by said third parties or their assigns to
GE's Acetone consuming locations, or (c) shipped to or swapped with third
parties by GE for the conversion into products made from Acetone by said
third parties for delivery to and consumption by GE. If Acetone is shipped
as specified in this Article III. (c), above, MTV PHENOL shall notify JLM
of such actions as soon as commercially practical.
ARTICLE IV
DELIVERIES
1. MTV PHENOL will notify JLM at least ten days prior to the
beginning of each Fiscal Month during the term hereof of the quantity
expected to be available for delivery during that Fiscal Month. MTV Phenol
agrees that it will base the quantity to be made available for delivery to
JLM on MTV PHENOL's production, normal inventory levels and GE's offtake
and will not artificially adjust quantities to be taken by JLM based on
prices of Acetone in the market. During the Fiscal Month, JLM must take the
full quantity actually made available by MTV PHENOL. JLM must take delivery
only in barges, rail tank cars or tank trucks arranged for and provided by
JLM. JLM will
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<PAGE> 3
schedule arrival of transportation equipment so that deliveries can be made
into such equipment in an orderly fashion. JLM shall notify MTV PHENOL at
least five (5) days in advance of the estimated arrival date and provide
identification to MTV PHENOL of each piece of barge equipment. JLM shall
notify MTV PHENOL as soon as commercially practical of the estimated
arrival date and provide identification to MTV PHENOL of each other piece
of transportation equipment. MTV PHENOL shall be obligated to deliver
Acetone only at the rate that its Acetone loading system can reasonably
operate and only during those daylight hours that MTV PHENOL shall notify
JLM from time to time that it plans to operate its Acetone loading
equipment.
2. The loading of Acetone into barges shall be carried out in
accordance with Exhibit B.
3. Title to and risks of loss of the Acetone shall pass to JLM at
the flange connection between MTV PHENOL's loading line and JLM's barge or
rail tank cars or tank trucks as the case may be.
4. Quality shall be based on Exhibit A and determined in accordance
with Exhibit B for barge shipments and from MTV PHENOL's tank samples for
rail tank car or tank truck shipment. Quantities shall be based on MTV
PHENOL's tank measurements for barge shipments and MTV PHENOL's weight for
rail tank car or tank truck shipments. Such measurements for quantity shall
be deemed correct unless proven to be in error by more than one-half
percent (0.5%). If in error, parties shall determine quantity by mutual
agreement.
ARTICLE V
PRICE
1. The "Contract Price" for Acetone sold hereunder shall be the
"Prevailing Market Price" less an allowance equal to *********************
*****************(herein called "Allowance"). The Prevailing Market Price
shall be the price in cents per pound, delivered to domestic customers, at
the time the Contract Price is determined, for domestically produced
acetone sold and purchased in barges between unrelated parties in
quantities of not less than 50 million pounds per year under contracts or
similar arrangements for terms of one year or longer but excluding any
rebates or discounts based on cumulative volume given to those unrelated
purchasers.
2. The Prevailing Market Price for acetone during each calendar
quarter shall be determined by JLM and presented to MTV PHENOL for approval
and determination of the Contract Price within five working days after the
commencement of each such calendar quarter, provided, however, that if the
price for acetone has not been settled in the market within such time, MTV
PHENOL shall not unreasonably withhold its consent to an extension of time
for fixing the Contract Price for such calendar quarter. If the parties
cannot reach agreement on the Prevailing Market Price after negotiation in
good faith, either may request that the Prevailing Market Price be
determined by Chemical Data, Inc. of Houston, Texas, or other nationally
recognized firm of consultants satisfactory to the parties and such firm
shall have five (5) days allowing submission to them of the question for
making a determination of the Prevailing Market Price of
- 3 -
<PAGE> 4
acetone and furnishing each party with written notification thereof. If
either party believe such a determination of the market price by such
consultants is inaccurate, it may elect, within twenty (20) days after
receipt of consultants notice of such determination but not afterward, to
refer the matter to arbitration in the manner provided for in Article V.4.
3. Contract Price determined for any calendar quarter within the
term of this Agreement shall be effective as of the beginning of such
calendar quarter. Each such determination shall be made, if possible, prior
to the beginning of the calendar quarter concerned and shall be made in
accordance with Article V.2. Deliveries, in any event shall not be
interrupted because of delayed determination and, pending such
determination, deliveries shall be conditionally billed and paid for on the
basis of the Contract Price last agreed upon or determined, as the case may
be.
4. (a) If a party wishes to submit to arbitration a controversy
under Article V.1. or V.2. of this Agreement, it shall be submitted in
accordance with the provisions of this Article V.4. and pursuant to the
rules of the American Arbitration Association. Such arbitration shall take
place in Connecticut or such other place as the parties may agree. Such
party shall serve its demand for arbitration in writing upon the other
party within the time prescribed for submission. Such demand shall contain
a brief statement of the matter in controversy, the party's position with
respect thereto and the name of one arbitrator. Within then (10) days of
receipt of such demand, the party upon whom it is served shall designate a
second arbitrator in a writing served upon the other party. The arbitrators
so designated, shall select a third arbitrator and the three arbitrators so
selected, all of whom shall be knowledgeable concerning Acetone and its
marketing, shall promptly proceed to hear the matter and, by majority vote,
make a determination and award. Such award shall be final and judgment may
be entered thereon.
(b) The cost of arbitration, including the fees of arbitrators,
shall be borne equally by the parties, except that each party shall pay the
fees and costs of its own counsel and witnesses.
ARTICLE VI
REPORTS AND REOPENER
1. On or before the 25th day of the month following each calendar
quarter during the term of this Agreement, JLM shall furnish MTV PHENOL a
statement in the format specified in Exhibit C, certified by an officer of
JLM, which shall report for the calendar quarter preceding the date of the
statement the data specified in Exhibit C.
2. For the purpose of this statement only the following definitions
shall apply:
(a) "Acetone" shall mean Acetone received by JLM from MTV PHENOL and
Acetone received by JLM from third parties as the result of a swap by JLM
of Acetone received from MTV PHENOL.
(b) "Category I" is the number of pounds of Acetone sold at arms
length by JLM or an Affiliate of JLM to any non-affiliated customer.
- 4 -
<PAGE> 5
(c) "Category II" is the number of pounds of Acetone disposed of by
means other than arms length sales, such as, but not limited to, swaps for
material other than Acetone and tolling arrangements.
(d) "Affiliate" shall mean any business entity controlled by JLM, the
parent of JLM, a subsidiary of JLM or a subsidiary of the parent of JLM.
(e) "Sales Type" shall mean each of the three sales type categories
shown on Exhibit C, specifically (1) Exports from USA, (2) Barges, and (3)
Rail and Truck. "Sales Types" shall mean the sum of the three Sales Type.
(f) "Pounds Sold This Quarter (PSTQ)" shall mean the pounds of
Acetone sold to each Sales Type and the total sold to all Sales Types
during the period being reported.
(g) "Average Sales Price Per Pound" (ASP) for each Sales Type and the
total of all Sales Types shall be the amount received by JLM or, if the
sale is by an Affiliate, then the amount received by the Affiliate, during
the period being reported divided by PSTQ.
(h) "Distribution Costs Per Pound" for the total of all Sales Types
shall be the freight charges, surveyor and tankerman fees, track leasing
fees, storage charges at outside terminals, and the lease costs, net of any
mileage or other allowances, of any transportation equipments used in
transporting Acetone all divided by PSTQ. All of the above costs shall only
include those costs that were actually incurred by JLM and that can
reasonably be allocated to the transport of Acetone, all for the period
being reported.
(i) "Net Selling Price Per Pound (NSP)" shall be (g) less (h).
(j) "Net Margin Per Pound (NM)" shall be NSP less the Contract Price.
3. Additional Payments shall be calculated as follows:
(a) The NM for Category I sales and Category II sales shall be the
same and shall be equal to the NM determined for Category I Sales.
(b) If the NM for the combined Category I and II sales is more than
**** cents per pound, JLM shall rebate to MTV PHENOL, ***** percent (**%)
of the amount determined by multiplying total PSTQ by NM less **** cents
per pound.
4. When delivered to MTV PHENOL by JLM, Exhibit C shall be
accompanied by a check for the Additional Payment amount if Additional
Payments as described in VI.3 above apply for that quarter.
5. In the event that NM for Category I sales is less than **** cents
per pound for each of four consecutive quarters or less than a loss of ***
cents per pound for each of two consecutive quarters, JLM may request a
renegotiation of the amount
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<PAGE> 6
of the Allowance specified in Article VI. The parties will conduct good
faith negotiations to reach agreement on a fair and equitable Allowance
amount. In the event the parties cannot mutually agree on a new Allowance
within 30 days of the initial request, JLM may either terminate this
Agreement upon 60 days written notice or withdraw their request. Withdrawal
of a request to renegotiate shall not prevent JLM from making the request
again in the future.
ARTICLE VII
PAYMENT
1. MTV PHENOL shall invoice JLM once a month for Acetone. The
invoice shall be prepared and dated as of the penultimate Thursday of the
Fiscal Month and be for all shipments made but not yet billed as of the
invoice date.
2. Payment Terms shall be net 50 days. In the event that JLM elects
in writing at least two (2) days prior to the invoice preparation date, JLM
may request that the terms of payment be extended by up to an extra thirty
(30) days beyond the original due date. The payment when made shall include
an interest payment equal to the Prime Interest Rate plus one half of one
percent (.5%) for the extra days requested times the amount of the invoice.
The Prime Interest Rate shall be the rate published in The Wall Street
Journal on the date the invoice was prepared which is The Wall Street
Journal's determination of the base rate on corporate loans posted by at
least 75% of the nation's 30 largest banks. If The Wall Street Journal
publication of the Prime Interest Rate is discontinued the Parties will
mutually agree on a new source for the Prime Interest Rate.
ARTICLE VIII
AUDIT RIGHTS
1. MTV PHENOL shall be entitled from time to time to an audit of the
relevant records relating to Net Margin Per Pound of Acetone sold by JLM by
an independent auditor reasonably agreeable to both parties. The cost of
the audit shall be borne by MTV PHENOL unless the audit determines that the
challenged statement is incorrect, in which case the cost of the audit
shall be borne by JLM. The results of the audit shall be communicated to
both parties. The auditor shall not disclose to MTV PHENOL the names or
prices of JLM's customers. Both parties shall accept the results of the
audit as final.
ARTICLE IX
TAXES
Any services, occupation, sales, or other tax, inspection fee, or the
equivalent of any of same, which are now or hereafter imposed by any
governmental authority, and any increase in the rate of same, upon the
storage, sale, transportation or delivery activities, or other taxable
incident occurring with respect to the Acetone processed and delivered
hereunder, which MTV PHENOL is required to pay or collect, shall be
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<PAGE> 7
reimbursed by JLM to MTV PHENOL in addition to the price established
herein. This provision does not apply to income or franchise taxes, excess
profit taxes, or taxes measured by net worth.
ARTICLE X
LIMITED WARRANTY
Subject to Article XII, MTV PHENOL warrants title and that the Acetone
supplied under this contract shall conform to the specifications in the
attached Exhibit A. Subject to the preceding sentence, MTV PHENOL MAKES NO
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AS TO
MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE, OR ANY OTHER MATTER WITH
RESPECT TO ANY ACETONE SUPPLIED UNDER THIS CONTRACT, whether used alone or
in combination with any other material.
ARTICLE XI
LIMITATIONS OF LIABILITY
1. All claims by JLM for any cause whatsoever (whether such cause be
based in contract, negligence, strict liability, other tort or otherwise)
shall be deemed waived unless made in writing and received by MTV PHENOL
within sixty (60) days after JLM'S receipt of the Acetone in respect to
which such claim is made, or if such claim is for non-delivery of Acetone,
within sixty (60) days after the date upon which such Acetone was to be
delivered, provided that as to any such cause not reasonably discoverable
within such sixty (60) day period (including that discoverable only in
processing, further manufacture, other use or resale) any claim shall be
made in writing and received by MTV PHENOL within one hundred eighty (180)
days after JLM's receipt of the Acetone in respect to which such claim is
made, or within thirty (30) days after JLM learns of the facts giving rise
to such claim, whichever shall first occur. Failure of MTV PHENOL to
receive written notice of any such claim within the applicable applicable
time period shall be deemed an absolute and unconditional waiver by JLM of
such claim irrespective of whether the facts giving rise to such claim
shall have then been discovered or of whether processing, further
manufacture, other use or resale of such Acetone shall have then taken
place.
2. JLM'S EXCLUSIVE REMEDY SHALL BE FOR DAMAGES, AND MTV PHENOL's
TOTAL LIABILITY FOR ANY AND ALL LOSSES AND DAMAGES ARISING OUT OF ANY CAUSE
WHATSOEVER (WHETHER SUCH CAUSE BE BASED IN CONTRACT, NEGLIGENCE, STRICT
LIABILITY, OTHER TORT OR OTHERWISE) SHALL IN NO EVENT EXCEED THE PURCHASE
PRICE OF THE ACETONE IN RESPECT TO WHICH SUCH CAUSE ARISES, OR, AT MTV
PHENOL'S OPTION, THE REPAIR OR REPLACEMENT OF SUCH ACETONE, AND IN NO EVENT
SHALL MTV PHENOL BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES RESULTING FROM ANY SUCH CAUSE. After delivery of Acetone, MTV
PHENOL shall not be liable for, and JLM assumes liability for, all personal
injury and property damage connected with the handling, transportation,
possession, processing, further manufacture, other use or resale of the
Acetone supplied under this contract, whether such acetone is used above or
in combination with other material.
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<PAGE> 8
Transportation charges for the return of any Acetone shall not be paid
unless authorized in advance by MTV PHENOL.
3. If MTV PHENOL furnished technical or other advice to JLM whether
or not JLM's request, with respect to processing, manufacture, other use or
resale of any Acetone, MTV PHENOL shall not be liable for, and JLM assumes
all risk of, such advice and the results thereof.
ARTICLE XII
FORCE MAJEURE
1. Deliveries may be suspended by MTV PHENOL in the event of: (a)
Acts of God, war, riot, fire, explosion, accident, flood or sabotage; (b)
lack of adequate fuel, power, raw materials, labor, containers or
transportation facilities; (c) compliance with governmental requests, laws,
regulations, orders or actions; (d) breakage or failure of machinery or
apparatus; (e) national defense requirements; (f) labor trouble, strike,
lockout or injunction which event makes impractical the manufacture or
delivery of the Acetone or of a material upon which the manufacture of
Acetone is dependent; or (g) any other event, whether or not of the class
or kind enumerated herein, beyond the reasonable control of MTV PHENOL.
Deliveries suspended or not made by reason of this article shall be
cancelled without penalty but this Agreement shall otherwise remain
unaffected.
2. Acceptance of deliveries may be suspended by JLM in the event of:
(a) Acts of God, war, riot, fire, explosion, accident, flood or sabotage;
(b) compliance with governmental requests, laws, regulations, orders or
actions; (c) labor trouble, strike, lockout or injunction; or (d) any other
event beyond the reasonable control of JLM, all as such events may impact
the rail, truck or barge delivery of Acetone to or by JLM. If a Force
Majeure event affects one or more of the possible modes of delivery of
Acetone to or by JLM, JLM shall be obligated to take every commercially
practical action which would result in delivery of the Acetone by the
available mode or modes of delivery. A Force Majeure event at a customer of
JLM is not a Force Majeure event in the context of this Agreement.
ARTICLE XIII
PATENTS
Subject to Article XII, MTV PHENOL warrants that the Acetone sold
pursuant to this contract does not infringe any valid U.S. patent. This
warranty is given upon condition that JLM promptly notify MTV PHENOL of any
claim or suit involving JLM in which such infringement is alleged and that,
if MTV PHENOL is affected, JLM permit MTV PHENOL to control completely the
defense or compromise of any such allegation of infringement. MTV PHENOL
does not warrant that the use of the Acetone or any material made
therefrom, whether the Acetone is used alone or in combination with any
other material, will not infringe a patent. MTV PHENOL reserves the right
to terminate MTV PHENOL's warranty under this Article XIV at any time with
respect to any undelivered Acetone, it being agreed that in the event of
such termination JLM may, without penalty, thereafter refuse acceptance of
such undelivered Acetone. MTV
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<PAGE> 9
PHENOL shall reimburse JLM for any damages and expense incurred as a result
of JLM's defense of a patent infringement suit relating to Acetone.
ARTICLE XIV
USE OF MTV PHENOL'S NAME
JLM, if it in its absolute discretion elects to do so, may state to
its customers or potential customers that it has a supply agreement for
Acetone with MTV PHENOL but JLM shall not represent that it is an agent for
MTV PHENOL or that MTV PHENOL has any responsibility whatsoever to JLM's
customers. Any advertising using MTV PHENOL's name shall be subject to
prior written approval by MTV PHENOL. JLM shall have no right to use GE's
name in any representation regarding Acetone.
ARTICLE XV
ASSIGNMENT
Neither party may (by operation of law or otherwise) assign its rights
or delegate its performance hereunder without the prior written consent of
the other and any attempted assignment or delegation without such consent
shall be void.
ARTICLE XVI
PERFORMANCE
1. JLM undertakes to utilize its best efforts to market Acetone.
Notwithstanding the provisions of Article II, MTV PHENOL may cancel this
contract on 30 days notice if, in MTV PHENOL's sole judgement, any of the
following events occur and MTV PHENOL determines that the event or events
could detrimentally impact the economic benefits that MTV PHENOL receives
from this Agreement:
(a) JLM declares bankruptcy.
(b) JLM is more than three months in arrears in payments due on
invoiced shipments made under this Agreement, unless the due payment is in
dispute relative to a Contract Price determination in accordance with
Articles V or VIII.
(c) John L. Macdonald enters into competition with JLM in the
marketing or sale of Acetone.
(d) JLM commits any material breach of this Agreement and does not
commence to correct the breach within 20 days of being notified of such
breach and have it fully corrected within a reasonable amount of time.
2. JLM shall maintain normal and adequate customer and commercial
records relating to the Acetone business. If this Agreement is cancelled in
accordance with this Article XVI, JLM shall immediately and for a
subsequent period of three months make all records associated with the
Acetone business available for MTV PHENOL
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review and audit. MTV PHENOL may make notes of such records during any
review but may not make copies.
ARTICLE XVII
MISCELLANEOUS
1. The validity, interpretation and performance of this Agreement
and any dispute connected herewith shall be governed and construed in
accordance with the laws of the State of New York.
2. This Agreement supersedes any and all prior agreements whether
written or oral, that may exist between the parties with respect to.. This
Agreement constitutes the full understanding of the parties, a complete
allocation of risks between them and a complete and exclusive statement of
the terms and conditions of their agreement.
3. No conditions, usage of trade, course of dealing or performance,
understanding or agreement purporting to modify, vary, explain or
supplement the terms or conditions of this contract shall be binding unless
hereafter made in writing and signed by the party to be bound, and no
modification shall be effected by the acknowledgment or acceptance of
purchase order or shipping instruction forms containing terms or conditions
at variance with or in addition to those set forth herein.
4. No waiver by either party with respect to any breach or default
or of any right or remedy and no course of dealing, shall be deemed to
constitute a continuing waiver of any other breach or default or of any
other right or remedy, unless such waiver be expressed in writing signed by
the party to be bound.
ARTICLE XVIII
NOTICES
Notices required or permitted to be given the parties under this
Agreement shall be in writing and shall be sufficiently given when
delivered in person to the recipient described below or when mailed by
registered mail, return receipt requested, postage prepaid, addressed to
the party as follows:
TO MTV PHENOL: Mt. Vernon Phenol Plant Partnership
c/o GE Plastics
1 Plastics Avenue
Pittsfield, MA 01201
Attention: General Manager-Sourcing
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<PAGE> 11
TO JLM: JLM Marketing, Inc.
8675 Hidden River Parkway
Tampa, FL 33637
Attention: President
TO JLM INDUSTRIES, INC: JLM Industries, Inc.
8675 Hidden River Parkway
Tampa, FL 33637
Attention: President
or to such address as may be specified from time to time in a written
notice by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective representatives thereunto duly authorized
as of the day and year first written above.
MT. VERNON PHENOL PLANT
JLM MARKETING, INC. PARTNERSHIP
By: /s/ John L. Macdonald By: /s/ Robert H. Brust
------------------------------ ------------------------------
John L. Macdonald Robert H. Brust
President Vice President
General Electric Company
JLM INDUSTRIES, INC. By: /s/
------------------------------
By: /s/ John L. Macdonald V.P.
------------------------------ Texas Phenol Plant Partnership
John L. Macdonald
President By: /s/ John L. Macdonald
------------------------------
John L. Macdonald
President
JLM (Ind.) Inc.
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EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
BY AND AMONG
BTL SPECIALTY RESINS CORP.
A DELAWARE CORPORATION
AS SELLER
AND
JLM CHEMICALS, INC.
A DELAWARE CORPORATION
AS BUYER
PROVIDING FOR THE ACQUISITION OF
THE
BTL BLUE ISLAND (ILLINOIS) PHENOL PLANT
DATED JUNE 8, 1995
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TABLE OF CONTENTS
<TABLE>
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RECITALS.................................................................. 1
PROVISIONS................................................................ 1
1. DEFINITIONS......................................................... 1
1.1 "Accounts Receivable"....................................... 1
1.2 "Additional Assets"......................................... 1
1.3 "Assumed Liabilities"....................................... 2
1.4 "Boiler Lease".............................................. 2
1.5 "Business".................................................. 2
1.6 "Business Records".......................................... 2
1.8 "Closing Date".............................................. 2
1.9 "Contracts"................................................. 3
1.10 "Disposed Assets"........................................... 3
1.11 "Easements"................................................. 3
1.12 "Effective Date"............................................ 3
1.13 "Effective Date Assets"..................................... 3
1.14 "Equipment"................................................. 4
1.15 "ERISA"..................................................... 4
1.17 "Final Inventory"........................................... 4
1.18 "Furnishings and Fixtures".................................. 4
1.19 "Improvements".............................................. 4
1.20 "Intangible Property"....................................... 4
1.21 "Interim Period"............................................ 4
1.22 "Inventory"................................................. 5
1.23 "Leases".................................................... 5
1.24 "Lien"...................................................... 5
1.25 "Net Interim Operating Income".............................. 5
1.26 "PBGC"...................................................... 5
1.27 "Permits"................................................... 5
1.28 "Plan"...................................................... 5
1.29 "Plant Employees"........................................... 5
1.30 "Plant Supplies"............................................ 5
1.31 "Premises".................................................. 5
1.32 "Prepayments"............................................... 5
1.33 "Pro Forma Financial Statements"............................ 6
1.34 "Purchased Assets".......................................... 6
1.35 "Rolling Stock"............................................. 6
1.36 "Safety Laws"............................................... 6
1.37 "Survey".................................................... 6
1.38 "Union"..................................................... 6
1.39 "Union Contract"............................................ 6
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1.40 "Vehicles".................................................. 6
2. PURCHASE AND SALE OF ASSETS......................................... 6
2.1 Assets and Business to be Transferred....................... 6
2.2 Purchase Price.............................................. 7
2.3 Buyer's Cash Payment........................................ 7
2.4 Determination of Cash Due at Closing........................ 9
2.5 Unaudited Closing Date Financial Statements................. 10
2.6 Conduct of Review........................................... 10
2.7 Basis for Preparation....................................... 11
2.8 Review Dispute.............................................. 11
2.9 Final Payment............................................... 11
2.10 Allocation of Purchase Price................................ 11
2.11 Sales and Other Taxes....................................... 12
2.12 Assumption of Obligations................................... 12
2.13 Liabilities Not Assumed..................................... 13
3. GENERAL REPRESENTATIONS AND WARRANTIES OF THE SELLER................ 14
3.1 Organization, Authority and Standing........................ 14
3.2 Authorization............................................... 14
3.3 Subsidiaries................................................ 15
3.4 Operations and Assets....................................... 15
3.5 Permits..................................................... 15
3.6 Sole Owner.................................................. 15
3.7 Books and Records........................................... 15
3.8 Financial Condition......................................... 15
3.9 Absence of Undisclosed Liabilities.......................... 15
3.10 Taxes....................................................... 16
3.11 Required Governmental Consents.............................. 16
3.12 Required Contract Consents.................................. 16
3.13 Underlying Documents........................................ 17
3.14 [Intentionally Omitted]..................................... 17
3.15 Compliance with Laws and Regulations........................ 17
3.16 Litigation and Claims....................................... 17
3.17 Plant Production............................................ 17
3.18 Insurance................................................... 17
3.19 Officer, Director, Shareholder Interests.................... 17
3.20 Title to Real Property...................................... 18
3.21 Condition of Premises....................................... 18
3.22 List of Equipment, Vehicles, and other Tangible Assets...... 18
3.23 Condition of Equipment, Etc................................. 18
3.24 List of Leases and Easements................................ 19
3.25 Status of Contracts, Easements and Leases................... 19
3.26 Intangible Property......................................... 20
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3.27 Accounts Receivable......................................... 20
3.28 Title to Personal Property.................................. 20
3.29 Employees................................................... 20
3.30 Employee Remuneration....................................... 20
3.31 Employee Contracts.......................................... 20
3.32 Employment Practices........................................ 21
3.33 Employee Benefit Plans...................................... 21
3.34 Ability to Continue Business................................ 23
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER......................... 23
4.1 Organization, Authority and Standing........................ 23
4.2 Authorization............................................... 23
4.3 Required Governmental Consents.............................. 24
4.4 Required Contract Consents.................................. 24
4.5 Effect of Agreement......................................... 24
4.6 Litigation.................................................. 24
4.7 WARN Act.................................................... 24
5. ACCESS TO INFORMATION; CONFIDENTIALITY.............................. 25
5.1 Access...................................................... 25
5.2 Confidentiality Obligation of Buyer......................... 25
5.3 Confidentiality Obligation of Seller Following Closing...... 25
5.4 Permitted Disclosures....................................... 26
5.5 Scope of Confidential Information........................... 26
6. PRECLOSING COVENANTS OF THE SELLER.................................. 27
6.1 Conduct of Business Pending the Closing..................... 27
6.2 Preparation of Exhibits and Schedules....................... 29
6.3 Notice of Certain Adverse Changes, Defaults or Claims....... 29
6.4 Implementation of Representations and Warranties............ 29
6.5 Third Party Consents........................................ 29
6.6 Assistance in Transferring Assets and Business.............. 29
6.7 Survey and Title Commitment................................. 29
6.8 Certain Tax Notices......................................... 29
7. PRECLOSING COVENANTS OF THE BUYER................................... 29
7.1 Implementation of Representations and Warranties............ 29
7.2 Third Party Consents........................................ 30
8. AGREEMENTS REGARDING PLANT EMPLOYEES................................ 30
8.1 Employment Offers........................................... 30
8.2 Redundancy.................................................. 30
8.3 Special Arrangement......................................... 31
8.4 Assumption of Hourly Plan................................... 31
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8.5 Buyer's Employee Benefit Plans.............................. 31
8.6 HMO Contract................................................ 32
8.7 Transfer of Salaried Plan Account Balances.................. 32
8.8 Welfare Benefit Continuation................................ 32
9. CONDITIONS TO SELLER'S OBLIGATIONS.................................. 33
9.1 Representations and Warranties; Performance................. 33
9.2 Litigation.................................................. 33
9.3 Consents.................................................... 34
9.4 Hart-Scott-Rodino........................................... 34
9.5 Opinion of the Buyer's Counsel.............................. 34
10. CONDITIONS TO BUYER'S OBLIGATIONS................................... 34
10.1 Representations and Warranties; Performance................. 34
10.2 Investigations.............................................. 34
10.3 Consents; Permits........................................... 34
10.4 Litigation.................................................. 35
10.5 No Material Adverse Change; Risk of Loss.................... 35
10.6 Opinion of Seller's Counsel................................. 35
10.7 Employment of Mr. Kimball................................... 35
10.8 Consents, Estoppels, Lien Releases.......................... 35
10.9 Survey...................................................... 35
10.10 Title Commitment............................................ 36
10.11 Financing Condition......................................... 36
10.12 Hart-Scott-Rodino........................................... 36
11. CLOSING............................................................. 36
11.1 Closing Date................................................ 36
11.2 Actions at Closing.......................................... 37
11.3 Exhibit Amendments.......................................... 37
11.4 Instruments of Conveyance and Transfer...................... 37
11.5 Payment and Assumption...................................... 38
11.6 Books and Records........................................... 38
11.7 Other Documents............................................. 39
11.8 Further Assurances of the Seller............................ 39
11.9 Further Assurances of the Buyer............................. 39
11.10 State Filings............................................... 39
12. ENVIRONMENTAL MATTERS............................................... 39
12.1 Definitions................................................. 39
12.2 Buyer's Agreement Regarding Accepted Environmental
Conditions.................................................. 42
12.3 Additional Seller Representations........................... 43
12.4 Environmental Indemnifications.............................. 43
12.5 Resin-related Materials..................................... 44
12.6 AMS Tower................................................... 44
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13. AGREEMENT NOT TO COMPETE; POST-CLOSING INSURANCE.................... 45
13.1 Agreement Not to Compete.................................... 45
13.2 Post-Closing Liability Insurance............................ 45
14. REMOVAL OF PHENOL FORMALDEHYDE REACTOR.............................. 45
14.1 Removal of Phenol Formaldehyde Reactor...................... 45
15. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; GENERAL
INDEMNIFICATION..................................................... 45
15.1 Survival.................................................... 45
15.2 General Indemnification by Seller........................... 46
15.3 General Indemnification by Buyer............................ 46
15.4 Notice of Claim............................................. 47
15.5 Defense..................................................... 47
15.7 Remedies.................................................... 48
16. TERMINATION AND ABANDONMENT......................................... 48
16.1 Termination by the Seller................................... 48
16.2 Termination by the Buyer.................................... 48
16.3 Mutual Consent.............................................. 48
16.4 Effect of Termination....................................... 48
17. MISCELLANEOUS PROVISIONS............................................ 48
17.1 Expenses.................................................... 48
17.2 Brokers..................................................... 48
17.3 Agency...................................................... 49
17.4 Notices..................................................... 49
17.5 Headings.................................................... 49
17.6 Counterparts................................................ 50
17.7 Binding Nature.............................................. 50
17.8 Waiver...................................................... 50
17.9 Entire Agreement............................................ 50
17.10 Good Faith.................................................. 50
17.11 Applicable Law.............................................. 50
17.12 Severability................................................ 50
17.13 Rules of Construction....................................... 50
</TABLE>
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<PAGE> 7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into on
the 8th day of June, 1995, by and between BTL Specialty Resins Corp., a Delaware
corporation (the "Seller"), and JLM Chemicals, Inc., a Delaware corporation (the
"Buyer").
RECITALS
The Seller is engaged in the business of the production and sale of phenol,
acetone and certain byproduct chemicals, operating a plant located at Blue
Island, Illinois, and is the owner of the assets used in such business or
arising from the operation of the business as provided herein. The Buyer wishes
to purchase such assets, and the Seller wishes to sell such assets, and transfer
certain liabilities, to the Buyer. Accordingly, the parties, intending to be
legally bound, agree as follows.
PROVISIONS
1. DEFINITIONS
When used in this Agreement, the following capitalized terms are used with
the meanings set forth in this Section 1.
1.1 "Accounts Receivable" means all amounts owed to the Seller arising
from the sale of Inventory, the performance of any obligations by the Seller
under any Contracts, Easements or Leases, or otherwise arising from the
operation of the Business during the Interim Period, and the full benefit of all
security therefor.
1.2 "Additional Assets" means the following arising from the operation of
the Business during the Interim Period:
(a) all of the additional Contracts;
(b) all of the additional Easements;
(c) all of the additional Equipment;
(d) all of the additional Furnishings and Fixtures;
(e) all of the additional Intangible Property;
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<PAGE> 8
(f) all of the additional Plant Supplies;
(g) all of the additional Inventory;
(h) all of the additional Prepayments;
(i) all of the additional Records;
(j) all of the additional Vehicles and Rolling Stock.
1.3 "Assumed Liabilities" is defined in Section 2.12.
1.4 "Boiler Lease" means the lease relating to the leased boiler house and
related equipment located at the Premises between Seller and Indeck Power
Equipment Co., dated January 4, 1993.
1.5 "Business" means the business of producing phenol, acetone and
byproducts of phenol production now carried on by the Seller at the Premises.
The Business does not include the production of resins (a discontinued product
line), except to the extent that the Purchased Assets include certain
Improvements, Equipment and materials formerly used in resin production.
However, the Purchased Assets do not include Resin Materials as defined in
Section 12.
1.6 "Business Records" means all records relating exclusively to the
Purchased Assets and the operation of the Business by the Buyer, including
customer lists, vendor files, personnel records (including all files relating to
employee grievances and actions taken with respect thereto, and files relating
to employment applications, but excluding any records and files the disclosure
of which would violate any applicable law, statute, regulation, rule, order or
decree), all records pertaining to prior Union Contract negotiations and any
disputes with the Union, telephone numbers, credit files, forms, all of the
Seller's records relating exclusively to the Purchased Assets and to purchases
and sales of Inventory made by the Seller from the Effective Date, all records
relating to prior inspections under or compliance with Safety Laws at the
Premises, all assessments of environmental conditions at the Premises or any
Release of Hazardous Materials at the Premises, all records pertaining to the
generation, storage or disposal of Hazardous Materials on or from the Premises,
all records pertaining to compliance with all Environmental Laws at the
Premises, all architectural, engineering and construction drawings and
specifications pertaining to the Premises and Improvements, all records
pertaining to the purchase of (or lease of) any Equipment, Vehicles, Rolling
Stock or Furnishings and Fixtures and records relating to the maintenance and
repair thereof, records pertaining to safety systems at the Premises and all
records relating exclusively to or useful for the performance of any Assumed
Liability.
1.7 "Clark Tanks" means the propylene/propane storage tank and the two
benzene storage tanks, located on property leased from Clark Oil & Refining
Corporation pursuant to a lease dated September 16, 1985, and related pipes and
other property leased to the Seller under such lease.
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<PAGE> 9
1.8 "Closing Date" means the date determined in accordance with Section
11.1.
1.9 "Contracts" means all of the Seller's right to and interest in (i) the
contracts identified on Exhibit 1.9, (ii) the Contracts referred to in Section
3.25 not identified on Exhibit 1.9, and (iii) any of the contracts relating
exclusively to the Business that are not required to be disclosed in Exhibit
3.26 or are entered into by the Seller during the Interim Period in conformance
with Section 6.1, and all rights and powers related thereto.
1.10 "Disposed Assets" means any of the Effective Date Assets or
Additional Assets that have been used, consumed or sold by the Seller during the
Interim Period.
1.11 "Easements" means all of the Seller's right to and interest in all
agreements relating to the Premises, access thereto, use thereof, the provision
of utilities, communications or transportation facilities, and all agreements
relating to the use of properties of others for the benefit of the Premises or
its owner, including shared loading or other facilities, including those
identified on Exhibit 1.11, plus any of the foregoing types of agreements
entered into by the Seller in the conduct of the Business during the Interim
Period.
1.12 "Effective Date" means 5:00 p.m., Illinois time, on March 31, 1995.
1.13 "Effective Date Assets" means all of the following as they existed on
the Effective Date:
(a) the Contracts;
(b) the Easements;
(c) the Equipment;
(d) the Furnishings and Fixtures;
(e) the Intangible Property;
(f) the Inventory;
(g) the Leases;
(h) the Plant Supplies;
(i) the Premises;
(j) the Prepayments;
(k) the Records; and
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<PAGE> 10
(l) the Vehicles and Rolling Stock.
1.14 "Equipment" means the machinery and equipment, tools, spare parts and
accessories owned or leased by the Seller and used exclusively in connection
with the Business, which includes all the property on the Premises owned or
leased by the Seller, except for the Excluded Assets, plus any of the foregoing
types of property acquired by the Seller in the conduct of the Business during
the Interim Period. Excluded from the Equipment and the Purchased Assets is one
3,000 gallon phenol formaldehyde reactor located in the building formerly used
in resin production on the Premises, together with all parts and equipment
required exclusively for the operation of such reactor.
1.15 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all regulations issued pursuant thereto.
1.16 "Excluded Assets" is defined in Section 2.1(b).
1.17 "Final Inventory" means the Inventory existing on the Closing Date.
1.18 "Furnishings and Fixtures" means furniture, office furnishings,
personalty deemed affixed to any Improvements and miscellaneous property owned
by the Seller located at the Premises, plus any such types of property acquired
by the Seller in the conduct of the Business during the Interim Period.
1.19 "Improvements" means all plant, buildings, structures, improvements,
appurtenances and fixtures (including fixed machinery and fixed equipment) owned
or leased by the Seller situate on the Premises or forming part thereof,
including all of the foregoing shown on the Survey.
1.20 "Intangible Property" means all right, title and interest of the
Seller in and to:
(a) the inventions, trade secrets, licenses, processes and technology
of or relating exclusively to the Business described in Exhibit 1.20
hereto, except trademarks or service marks and logos (and the goodwill
related thereto);
(b) all other contract rights, causes in action, inchoate rights and
other intangible property used in or relating exclusively to the Business,
including all rights with respect to, and all proceeds of claims made with
respect to, business interruption insurance covering operations affected by
the explosion and fire at the Clark chemical facility adjacent to the
Premises (such claim being for approximately $139,000.00); and
(c) any of the foregoing types of property acquired or created by the
Seller in the conduct of the Business during the Interim Period.
1.21 "Interim Period" means the period from the Effective Date through the
Closing Date.
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1.22 "Inventory" means the inventories of the Business including all
feedstock and other raw materials, work in progress, finished goods and other
property classified by the Seller as inventory of the Business.
1.23 "Leases" means all of the Seller's right to and interest in the
leases of personal or real property identified on Exhibit 1.23.
1.24 "Lien" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement, or any other
interest in property designed to secure the repayment of Indebtedness, whether
arising by agreement or under any statute or law, or otherwise, or any other
encumbrance or claim.
1.25 "Net Interim Operating Income" means the earnings from operations
based on an accrual basis of accounting and using regular operating and
accounting records and procedures attributable to Business during the Interim
Period, plus (i) extraordinary operating expenses, including the Seller's
expenses under Section 12.5 and 12.6 if otherwise deductible as an expense, (ii)
any payments of the types prohibited by Section 6, (iii) interest, real property
taxes or provisions therefor, depreciation and amortization, and (iv) any
reserves (for doubtful accounts receivable or otherwise).
1.26 "PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.
1.27 "Permits" means all governmental approvals, permits, licenses or
authorizations necessary to own or use the Purchased Assets or to operate the
Business.
1.28 [Intentionally Omitted]
1.29 "Plant Employees" means the people identified on Exhibit 1.29 and
anyone hired as an employee at the Plant during the Interim Period in accordance
with Section 6.
1.30 "Plant Supplies" means all materials, supplies or commodities of any
type used in the Business, not otherwise specified elsewhere in this agreement,
including fuel owned by the Seller and lubricants, office supplies, etc., plus
any of such property acquired by the Seller in the conduct of the Business
during the Interim Period.
1.31 "Premises" means the lands and premises owned by the Seller together
with the easements and rights appurtenant thereto as described in Exhibit 1.31
(subject to modification by the Survey, which shall be the description used in
the deed), and the real property leased by the Seller from Clark Oil & Refining
Corporation, referred to in Section 1.7.
1.32 "Prepayments" means prepaid expenses or deposits under any of the
Contracts, Easements, or Leases, except as expressly stated on Exhibit 2.1(b).
5
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1.33 "Pro Forma Financial Statements" means the financial statements of
the Business prepared by Ernst & Young, for the years 1992, 1993 and 1994, and
the review report of Ernst & Young on such financial statements.
1.34 "Purchased Assets" means the Effective Date Assets and the Additional
Assets, other than the Disposed Assets, but excluding the Resin Materials as
defined in Section 12.
1.35 "Rolling Stock" means railroad equipment leased by the Seller, plus
any other railroad equipment acquired by the Seller in the conduct of the
Business during the interim period.
1.36 "Safety Laws" means the Occupational Safety and Health Act of 1970,
as amended, and regulations promulgated with respect thereto and any applicable
state or local law or ordinance relating to worker or workplace safety.
1.37 "Survey" means the survey identified in Section 10.9.
1.38 "Union" means the Clark Oil Refinery Independent Union.
1.39 "Union Contract" means the agreement between the Seller and the Union
effective from November 1, 1992 through October 31, 1995.
1.40 "Vehicles" means the trucks, cars and other vehicles owned or leased
exclusively by the Seller and identified in Exhibit 1.40, plus any of the
foregoing types of property acquired by the Seller in the course of conduct of
the Business during the Interim Period.
1.41 "Zeolite Catalyst Contract" means the UOP Q-Max Process Catalyst
Engineering Design Agreement dated November 21, 1994, along with the related
Q-Max Process License Agreement and Cumene Specification Guarantee Agreement.
2. PURCHASE AND SALE OF ASSETS
2.1 Assets and Business to be Transferred.
(a) Subject to the terms and conditions of this Agreement, Seller
agrees to sell and transfer, convey, assign and deliver to Buyer and Buyer
agrees to purchase on the Closing Date, all of the Purchased Assets. EXCEPT
AS PROVIDED IN SECTION 12, THE PURCHASED ASSETS OTHER THAN INVENTORY ARE TO
BE SOLD "AS IS". SELLER WILL MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE CONDITION OR QUALITY OF SUCH PURCHASED ASSETS,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
(b) Notwithstanding anything in this Agreement to the contrary,
specifically excluded from the Purchased Assets are the following assets of
the Business (collectively, the "Excluded Assets"):
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(i) all cash, short term investments and cash equivalents (with the
exception of petty cash of the Business);
(ii) all insurance policies and any rights thereunder except for
the business interruption insurance claim referred to in Section 1.20;
(iii) security bonds;
(iv) all prepaid expenses, advances or deposits to the extent
relating to any of the Excluded Assets or any of the Excluded
Liabilities;
(v) all retained Business Records;
(vi) any assets of any Employee Benefit Plan (as defined in Section
3.33), except for the assets under the BTL Specialty Resins Corp.
Retirement Plan (the "Salaried Plan") with respect to Transferred
Employees (as defined in Section 8.1), the contract between Seller and
Blue Cross/Blue Shield of Illinois identified as "HMO Illinois a Blue
Cross HMO" GP-16-1-1 HCSC and the contract between Seller and Blue
Cross/Blue Shield of Illinois identified as "DentaCap" (collectively,
the "HMO Contract") and the assets under the BTL Specialty Resins Corp.
Blue Island Hourly Retirement Plan (the "Hourly Plan");
(vii) all refunds, credits or overpayments with respect to taxes
paid or accrued by the Seller and all other payments or deposits made by
the Seller in respect of taxes in excess of the amount of the Seller's
liability therefor;
(viii) all rights to the "BTL" name;
(ix) all receivables of the Business, including the Accounts
Receivable;
(x) any other assets set forth as "Excluded Assets" in Exhibit
2.1(b).
2.2 Purchase Price. In full consideration for the purchase of the
Purchased Assets, and subject to the terms and conditions of this Agreement, the
Buyer will pay the purchase price, consisting of a cash payment as determined
under this Section 2 and the assumption of the Assumed Liabilities.
2.3 Buyer's Cash Payment.
(a) The cash portion of the Purchase Price will be composed of (i) a
base payment as determined under Section 2.3(b) (the "Base Payment"), plus
(ii) the interest specified in Section 2.3(c). The sum of the Base Payment
plus such interest is the "Cash Payment".
(b) The Base Payment shall be $19,583,000.00 adjusted for allocations
or prorations of taxes and fees required by this Agreement, and further
adjusted as follows:
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(i) the payment will be increased by the value of all Inventory in
the Final Inventory above $1,250,000.00;
(ii) the payment will be increased by all Boiler Lease payments
made by the Seller since the Effective Date;
(iii) the payment will be increased by the amount of salary and
benefits paid or payable by the Seller (or its affiliate) to Wilfred J.
Kimball and John Terry Michie for the Interim Period;
(iv) the payment will be increased by the amount of any capital
expenditures made by Seller after the Effective Date relating to the
fixed assets of the Business other than the expenses referred to in
Section 2.12(b)(4);
(v) the payment will be decreased by an amount equal to the Net
Interim Operating Income;
(vi) the payment will be decreased by the amount of the Boiler
Lease principal obligation in excess of $1,167,000.00 as of the
Effective Date;
(vii) the payment will be decreased by the amount of $26,750.00 to
reflect a retirement benefit payable to one of the Plant Employees under
the Union Contract, for which Buyer requires a purchase price credit.
(c) The Buyer agrees to pay the following additional interest
payments, subject to final determination in accordance with this Section:
(i) interest on the Base Payment at an annual rate equal to 5.76%
calculated for the number of days in the Interim Period; and
(ii) interest on the Average Daily Working Capital at an annual
rate equal to the announced "prime rate" of Midlantic National Bank plus
2%, calculated for the number of days in the Interim Period. For this
Purpose, "Average Daily Working Capital" means an amount equal to (A)
the sum of (1) the daily average of Accounts Receivable outstanding on
each day of the Interim Period and (2) the average value of Inventory
existing on each day of the Interim Period, less (B) the average amount
of accounts payable pertaining to the Business outstanding on each day
of the Interim Period.
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(d) The Seller shall collect all Accounts Receivable included in the
calculation of Net Interim Operating Income and, subject to this
subsection, shall retain all such proceeds. However, the credit risk will
remain with the Buyer and the Buyer will remit to the Seller on request the
amount of such Accounts Receivable not collected by the Seller by the
expiration of 60 days after the Closing Date, at which time the Seller
shall assign to the Buyer all such Accounts Receivable. After the
assignment to the Buyer, all proceeds of Accounts Receivable subsequently
collected by the Seller shall be remitted daily to the Buyer unless the
Buyer agrees to a less frequent remittance. The Seller shall not compromise
any Account Receivable or take any action to collect any Account Receivable
(such as notification to or demand of the account debtor) without the
consent of the Buyer. At the request of the Buyer the Seller will report
from time to time as to the amount of collections. With respect to payments
by parties obligated to both the Seller for pre-Effective Date accounts and
to the Buyer for Interim Period accounts, the Seller will apply payments
received to the invoice or charge specified in connection with the payment
(if none is specified, payments will be applied to invoices or other
amounts owed on the basis of age, with oldest paid first).
2.4 Determination of Cash Due at Closing.
(a) Seller and Buyer shall jointly monitor, record, and compile the
results of operations and the changes in the composition and condition of
the assets and liabilities of the Business arising during the Interim
Period. Prior to Closing, Seller and Buyer shall prepare a statement
showing a preliminary calculation of the Cash Payment, including the Net
Interim Operating Income and the amount of all other adjustments necessary
for a determination of the Cash Payment. For purposes of this Agreement,
the statements so prepared shall be referred to as the "Preliminary Price
Statement." The Preliminary Price Statement shall be prepared using
accounting principles and practices that are consistent with those used in
the preparation of the Pro Forma Financial Statements, except that the
determination of Net Interim Operating Income and the value of the Final
Inventory shall be subject to any specific requirements set forth in this
Agreement.
(b) In the valuation of the Final Inventory, the following principles
and procedures of valuation shall apply:
(i) The physical inventory will be taken jointly by the
representatives of Buyer and Seller and will commence as close to the
Closing Date as possible and continue for such number of business days
as is necessary to conduct the physical inventories to determine the
Final Inventory;
(ii) All inventories of raw materials and finished goods shall be
valued as of the Closing Date on the basis of the lower of the Seller's
costs or the current fair market value. Seller's cost shall be
determined as follows:
(1) the cost of raw material inventory (benzene, propylene and
purchased cumene) shall be calculated at Seller's actual cost on a
first-in, first-out basis; and
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(2) the cost of finished goods shall be Seller's standard cost
associated with the manufacture of such inventories, as adjusted for
actual raw material prices as determined under Section 2.4(b)(ii)(1),
above.
(iii) Fair market value shall be determined for the purposes of
this subsection by good faith negotiation between the parties at the
time of the physical inventory. If the parties fail to agree upon a fair
market value for any item by such negotiation, the fair market value
shall be the purchase or sales price received for such category of
Inventory in the last significant bona fide arm's length purchase or
sale of such type of Inventory, subject to an appropriate deduction for
(i) any raw materials that do not meet the Seller's usual requirements
and (ii) any finished goods that do not meet the Seller's standard
quality specifications, including the disposal cost of nonusable
Inventory and the cost of reprocessing below-standard finished goods in
order to make them marketable in the ordinary course.
(c) A dispute regarding the Preliminary Price Statement may not serve
as a basis for delaying or avoiding Closing. If the parties cannot agree,
the Seller shall prepare the statement for the purpose of determining the
preliminary Cash Payment to be made at the Closing.
(d) The amount of the preliminary Cash Payment as shown on the
Preliminary Price Statement, and as adjusted for prorations and allocations
required by this Agreement, will be paid by the Buyer to the Seller at
Closing by wire transfer to an account designated by the Seller.
2.5 Unaudited Closing Date Financial Statements. As soon as practicable
following Closing (and, in any event, within 30 days after the Closing Date),
the Buyer and the Seller shall update the Preliminary Price Statement to reflect
amounts not previously reflected therein as of the Closing Date. For purposes of
this Agreement, such statement shall be referred to as the "Unaudited Closing
Date Statement." The Unaudited Closing Date Statement shall be prepared using
accounting principles and practices that are consistent with those used in the
preparation of the Preliminary Price Statement.
2.6 Conduct of Review. If either party has a bona fide dispute regarding
the accuracy of the Unaudited Closing Date Statement and requests an
accountants' review, the Buyer shall cause Deloitte & Touche and the Seller
shall cause Ernst & Young to conduct a joint review of the Unaudited Closing
Date Statement and to make any corrections necessary to reflect the final amount
of the Cash Payment. The Seller and the Buyer shall be responsible for the fees
and expenses of their respective accountants. The accountants shall make such
adjustments to the Unaudited Closing Date Statement as appropriate so that they
can issue a joint report (based on standards consistent with a review of
financial statements) setting forth the Cash Payment and the calculation thereof
determined in conformity with this Agreement. Such report and any notes thereto
are collectively referred to herein as the "Accountants' Closing Date
Statement." If the accountants agree, the Accountants' Closing Date Statement
shall be final and binding. If the accountants cannot agree on such financial
statements, each shall advise the Buyer and the Seller and shall prepare its own
statements and explanation thereof and each shall specifically enumerate
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points of disagreement between the accounting firms and the factual or
accounting grounds for the position adopted by such firm.
2.7 Basis for Preparation. In the preparation of the Preliminary Price
Statement, the Unaudited Closing Date Statement and the Accountants' Closing
Date Statement, no item shall be excluded for lack of materiality.
2.8 Review Dispute.
(a) Parties' Attempt to Resolve. If the Cash Payment is not
determined finally under Section 2.6, the Buyer and Seller shall seek in
good faith, for a period of 10 business days following delivery of the
separate statements of the accountants pursuant to Section 2.6, to resolve
the disagreement. If the parties are unable to resolve the differences
during the 10-day period, the parties shall submit the unresolved matters
for the review of another independent accounting firm of recognized
national standing (the "Accounting Referee").
(b) Resolution by Accounting Referee. The review by the Accounting
Referee shall be limited to such items as were addressed in the
accountants' statements under Section 2.6 that have not been resolved by
the parties. Subject to that limitation, the parties shall cause the
Accounting Referee to review as promptly as practicable the Closing Date
Statement submitted by each accounting firm, and such other information as
the Accounting Referee shall require and to make such corrections thereto
as it deems appropriate consistent with the terms of this Agreement. The
Closing Date Statement as approved by the Accounting Referee shall be the
statements upon which the final calculation of the Cash Payment shall be
made. The expenses of the Accounting Referee shall be evenly divided
between Buyer and Seller. The determination of the Accounting Referee shall
be final and binding on the parties. The agreement of the parties with
respect to referral to the Accounting Referee constitutes an agreement for
binding arbitration under the Illinois Uniform Arbitration Act, 710
I.L.C.S. sec. 5/1 et seq., and the duty to refer to the Accounting Referee,
as well as to comply with the decision of the Accounting Referee, shall be
enforceable as a binding arbitration agreement and finding of an arbitrator
under the rules applicable to arbitrations governed by that statute. All
procedures for such referral and the scope of the issues to be arbitrated,
however, are as provided in this Agreement.
2.9 Final Payment. Once the final amount of the Cash Payment has been
determined, the Buyer or the Seller, as applicable, will pay the amount of any
adjustment owed within five business days of such final determination. Any
additional amount owed to the Seller, or to be refunded by the Seller to the
Buyer, shall include interest on such amount for the period from the Closing
Date to the date of payment at an annual rate of 5.76%. Such payment may be made
by wire transfer or by check in immediately available funds.
2.10 Allocation of Purchase Price. The purchase price for the Purchased
Assets shall be allocated for all federal and state tax purposes (including, but
not limited to, income, excise, sales, use, personal property, real property and
transfer taxes) among the Purchased Assets as set forth in Exhibit 2.10 (with a
final adjustment to be made in connection with, and included in, the final
purchase price statement). This allocation is intended to comply with the
allocation method
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required by Section 1060 of the Internal Revenue Code of 1986, as amended.
The parties shall cooperate to comply with all substantive and procedural
requirements of Section 1060 and the regulations thereunder. The allocation
shall be adjusted to reflect the final Cash Payment and subsequently shall be
adjusted only if and to the extent necessary to comply with such requirements.
The Buyer and the Seller agree that they will not take, or permit any affiliated
person to take, for income tax purposes, any position that is inconsistent with
such allocation.
2.11 Sales and Other Taxes. All transfer, sales, excise, use and other
taxes, imposed on or collectible by taxing or other authorities of the State of
Illinois or its political subdivision by reason of the transfer of the Purchased
Assets or arising out of the consummation of the Closing shall be paid by the
Seller except for the transfer tax payable in connection with recordation of the
deed to the owned Premises. All recording or registration fees are the
responsibility of the Buyer except for fees for recording Lien releases
delivered by Seller, which Seller shall pay.
2.12 Assumption of Obligations. At and after the Closing, Buyer shall
assume and agree to pay or perform only the liabilities and obligations of
Seller that arise out of the Business or the Purchased Assets and are expressly
identified in this Section 2.12 or are represented by any other express
covenant, agreement, or indemnity of Buyer in this Agreement or the other
agreements and instruments to be executed and delivered by Buyer in connection
with this Agreement (the "Assumed Liabilities"). Subject to the express
exclusions set forth in Section 2.13, the Assumed Liabilities shall consist of
the following liabilities of the Business whether known or unknown, contingent
or otherwise:
(a) (Property Taxes). The purchase price assumes that Seller's
remaining unpaid liability for 1994 state or local property taxes on the
Purchased Assets is approximately $353,000.00 (which the Seller represents
to be the fact), and that the liability for property taxes on the Purchased
Assets for 1995, based on the 1994 tax bill, will be approximately
$705,608.00. Liability for 1995 property taxes shall be apportioned as of
the Effective Date, and Buyer shall assume the obligation to pay the
remaining balance of 1994 taxes owed. If, when the actual 1995 tax bill is
issued, the Seller's portion of 1995 taxes for the period prior to the
Effective Date exceeds $177,000.00, such excess shall be paid to Buyer by
Seller. If the tax bill for 1995 is less, the Buyer will pay the difference
to the Seller.
(b) (Contracts). All payment and performance obligations under the
Contracts (including the Union Contract), the Easements, the Permits and
the Leases, to the extent they arise from the conduct of the Business
during the Interim Period or thereafter will be assumed by the Buyer,
except (as to any of the foregoing types of liabilities) (i) liability for
the payment of obligations included in the calculation of Net Interim
Operating Income, (ii) an obligation the existence or amount of which also
constitutes a breach of representation by the Seller in this Agreement, and
(iii) an obligation attributable to (1) any breach or default by Seller
under any of the Contracts, Easements or Leases on or before the Closing
Date, (2) any liability or obligation incurred during the Interim Period in
violation of Section 6 to the extent that the Buyer does not receive
property or services of substantially equivalent value in respect of such
liability or obligation, (3) any Buyer Indemnified Environmental Liability
(defined in Section 12), or (4) the
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obligations to make the payments of $108,000.00 and $213,000.00 under Sections
1.1a and 1.1b of the Zeolite Catalyst Contract.
(c) (Environmental). The Buyer will assume the Accepted Remediation
Obligations pursuant and subject to Section 12.
(d) (Employee Benefits). The obligations described in Section 8 with
respect to each Employee Benefit Plan (as defined in Section 3.33),
including the Hourly Plan, the accounts of Transferred Employees under the
Salaried Plan, and the HMO Contract, each as identified on Exhibit 3.33,
for periods after the Closing Date, will be assumed by the Buyer.
Notwithstanding anything in Section 8, Buyer will, as of the closing date,
cover under Buyer's long-term disability insurance plan all of Seller's
salaried Plant Employees who accept employment by Buyer pursuant to Section
8.
2.13 Liabilities Not Assumed. For illustration, and without expanding the
limitation of Section 2.12, the Buyer shall not assume or be responsible for any
of the following liabilities or obligations expressly identified in this Section
2.13 (the "Excluded Liabilities"):
(a) (Nonenumerated Liabilities). Any liability or obligation of
Seller of any kind, known or unknown, contingent or otherwise, not either
enumerated as an Assumed Liability in Section 2.12 or resulting from any
other express covenant, agreement, or indemnity of the Buyer in this
Agreement or the other agreements and instruments to be executed and
delivered by the Buyer in connection with Agreement.
(b) (Taxes). Any liability or obligation of Seller for federal,
state, or local income, franchise, excise, sales or use (to the extent
arising from the transfer of the Purchased Assets or from transactions
before the Closing Date), or recapture taxes, assessments, and penalties,
whether arising out of the transactions contemplated by this Agreement or
otherwise, and any obligations for unemployment insurance contributions
pertaining to the period before the Effective Date.
(c) (Violations of Law). Except for the Accepted Remediation
Obligations under Section 12 any liability or obligation resulting from
violations of any applicable laws or regulations by Seller prior to the
Closing Date or infringement of third-party rights or interests.
(d) (Employee Liabilities). Any employee liabilities relating to
present and past employees of the Business with respect to Seller's
Employee Benefit Plans established or existing on or prior to Closing Date
(regardless of whether such liabilities are accrued or payable at Closing,
and whether such liabilities are actual or contingent), including (i)
through (vi) below, but excluding employee benefit plan liabilities
expressly assumed by Buyer pursuant to Section 8:
(i) any liability or obligation for workers' compensation with
respect to injuries occurring (or exposure to hazardous substances
occurring) prior to the Closing Date;
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(ii) except for the retirement benefit referred to in Section
2.3(b)(vii), any current or future liabilities to employees of Seller
retiring on or before Closing, and to their dependents;
(iii) except as provided by Section 8 or Section 2.12(d), any
current or future liabilities for benefits that have been accrued or
earned by any employees associated with the Business on or before the
Closing Date under any Seller pension plans attributable to service on
or prior to the Closing Date;
(iv) any current or future liabilities for claims incurred prior to
the Closing Date with respect to any employees associated with the
Business under any welfare or disability plans of Seller established or
existing at or prior to the Closing Date, regardless of when filed with
Buyer, Seller, or the claims administrator for any such plan, except
with respect to claims relating to the HMO Contract;
(v) any retrospective premium or pension, savings, thrift, or
profit-sharing plan contribution relating to any employees associated
with the Business incurred or accrued on or prior to the Closing Date,
regardless of when invoiced or recorded;
(vi) provided the Buyer has complied with its obligations under
Section 8 regarding employees of the Seller, any monetary liability for
severance payments that arise at any time in favor of any of Seller's
employees under any Seller Employee Benefit Plan, with respect to
service with Seller prior to the Closing Date.
(e) (Product Liability). Any liability or obligation for product
liability or warranty claims or damage claims arising out of defects in or
failures of any product or material of Seller or the Business provided,
distributed, licensed, or delivered prior to the Effective Date.
(f) (Litigation). Any liability or obligation (other than the
Accepted Remediation Obligations under Section 12) associated with any of
the assets of the Seller and any litigation pending or threatened against
Seller or the Purchased Assets.
(g) (Zeolite Catalyst Contract). Any liability for amounts due under
Sections 1.1a or 1.1b of the Zeolite Catalyst Contract.
3. GENERAL REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrant to the Buyer as set forth below.
3.1 Organization, Authority and Standing. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Seller has full power and authority to own and maintain
its properties and to carry on the Business now conducted. The Seller is duly
qualified to do business and in good standing in Illinois and each state or
jurisdiction in which the operation of the Business or the location of the
Purchased Assets
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makes such qualifications necessary except where the failure to be so qualified
or in good standing would not have a material adverse effect on the Business.
3.2 Authorization. The Seller has full corporate power and authority to
enter into this Agreement, and the execution, delivery and performance of this
Agreement and all documents or transactions contemplated hereby have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by and on behalf of the Seller and constitutes the valid
and binding obligation of the Seller, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy laws and
similar laws affecting creditors' rights generally or by general principles of
equity.
3.3 Subsidiaries. The Seller does not own any equity interest, directly
or indirectly, in any corporation, partnership, joint venture, firm or other
entity other than BTLSR Toledo, Inc. No stock or other equity interest in BTLSR
Toledo, Inc. is included in the Purchased Assets.
3.4 Operations and Assets. The material operations of the Business are
carried on at and the location of the tangible Purchased Assets is, Blue Island,
Illinois.
3.5 Permits. The Seller holds all material Permits requisite for the
conduct of the Business and the ownership and use of the Purchased Assets. All
material Permits held by Seller are set forth in Exhibit 3.5. Except as set
forth in Exhibit 3.5 the Seller has not received from any governmental authority
any notice of noncompliance with, breach of or violation of any Permit. The
Seller, to the best of its knowledge, after reasonable inquiry, has complied in
all material respects with conditions or requirements of each Permit.
3.6 Sole Owner. The current owners of all equity securities of the
Seller, beneficially and of record are Resin Holdings, Inc., and The Prudential
Insurance Company of America.
3.7 Books and Records. All material financial transactions of the
Business have been, and during the Interim Period will be, duly recorded in the
Seller's books and records, which have been maintained in accordance with good
business practice. The Business Records contain all material records used by the
Seller in the conduct of the Business.
3.8 Financial Condition. The Pro Forma Financial Statements were prepared
in accordance with generally accepted accounting principles consistently applied
and fairly present the financial position of the Business (as a separate going
concern) as at the dates, and for each period, reported on. There have been no
material adverse changes affecting the Business since December 31, 1994.
3.9 Absence of Undisclosed Liabilities. Except as disclosed in Exhibit
3.9, the Seller has incurred no material liability or obligation, either
accrued, absolute, contingent or otherwise to be included in the Assumed
Liabilities arising from operation of the Business other than (i) those arising
in the ordinary course of business in usual amounts, both individually and in
the aggregate, for the Business; or (ii) obligations (of kinds not reflected on
balance sheets or the notes thereto prepared in accordance with generally
accepted accounting principles) under the
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Contracts, Leases or Easements. The Seller represents that to its knowledge
after due inquiry there are no material modifications to any material written
Contract, Lease or Easement that would be implied or arise from course of
performance, conduct or otherwise that have not been disclosed to the Buyer.
3.10 Taxes.
(a) The Seller has duly filed with the appropriate United States,
state, local and foreign governmental agencies, all tax returns and
reports, and unemployment insurance contributions and reports, required to
be filed and has paid all taxes, interest, penalties, assessments or
deficiencies, if any, or amounts required to be withheld from any employee,
due to, or claimed to be due by, any taxing authority that could result in
a Lien on any Purchased Asset or cause the Buyer to be liable for such
payments, other than (i) transfer or excise taxes due by reason of the
transactions contemplated hereunder (to be paid in accordance with Section
2.11) or, (ii) property taxes on the Purchased Assets which are not
delinquent.
(b) The Seller has not executed or filed with any taxing authority any
agreement extending the period for assessment or collection of any taxes
applicable to the Business or the Purchased Assets that could impose any
Lien on any Purchased Asset or other such taxes.
(c) The Seller is not a party to any pending action or proceeding,
nor, to the best of its knowledge, is any such action or proceeding
threatened by any governmental authority for the assessment or collection
of taxes, interest, penalties, assessments or deficiencies, and no material
claim for assessment or collection of taxes, interest, penalties,
assessments or deficiencies has been asserted against the Seller. No
material issue has been raised by any federal, state, local or foreign
taxing authority in connection with an audit or examination of the Seller's
tax returns, business or properties which has not been settled or resolved.
3.11 Required Governmental Consents. Except for (i) the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, to be
complied with prior to Closing; (ii) the filing and/or recording of deeds and
other instruments of conveyance, transfer, or assignment required by federal
copyright, patent, or trademark laws or the laws of the states in which the
Purchased Assets are located, to occur upon Closing; and (iii) the further
exceptions set forth in Exhibit 3.11 (the foregoing items being referred to
herein as the "Seller's Required Government Consents"), no approval,
authorization, certification, consent, variance, permission, license, or permit
to or from, or notice, filing, or recording to or with, federal, state, or local
governmental authorities is necessary for the execution and delivery of this
Agreement and the other agreements and instruments to be executed and delivered
in connection with the transactions contemplated hereby or thereby by Seller, or
the consummation by Seller of the transactions contemplated hereby or thereby.
3.12 Required Contract Consents. Except for the Seller's required
Governmental Consents or as set forth in Exhibit 3.12 (such scheduled items
being referred to herein as the "Seller's Required Contract Consents"), no
approval, authorization, consent, permission, or waiver to or from, or notice,
filing, or recording to or with, any person is necessary for (i) the
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execution and delivery of this Agreement and the other agreements and
instruments to be executed and delivered in connection with the transactions
contemplated hereby or thereby by Seller or the consummation by Seller of the
transactions contemplated hereby; (ii) the transfer and assignment to Buyer at
Closing of the Purchased Assets or the assumption by the Buyer of the Assumed
Liabilities, or (iii) the ownership and use of the Purchased Assets and the
conduct of the Business (including by Buyer).
3.13 Underlying Documents. All underlying documents listed or described
in any Exhibit have been made available to the Buyer. All such documents
constitute true and complete copies and there are no material written amendments
or modifications thereto that have not been disclosed to the Buyer. All
documents referred to in the amended Exhibits delivered to the Seller pursuant
to Section 6.2 will constitute true and complete copies, and there will be no
amendments or modifications thereto, whether written, oral or to be implied by
course of conduct.
3.14 [Intentionally Omitted.]
3.15 Compliance with Laws and Regulations. The Seller has not received
any notice of violation, and to its knowledge after due inquiry is not in
violation of any applicable federal, state or local statute, law, rule or
regulation with respect to or affecting the conduct of the Business or the
ownership or operation of the Purchased Assets, except to the extent that
non-compliance would not have a material adverse effect on the operations or
properties of the Business (as a separate going concern) or the ownership or
operation of the Purchased Assets by the Buyer after the Closing Date and except
for communications relating to the designation as Hazardous Waste of the
distillation bottom tars from the production of phenol and acetone from cumene
at the premises. The Seller is not presently subject to any order, injunction or
decree issued by any governmental body, agency, authority or court relating to
the Business other than matters of general application to persons conducting
businesses similar to the Business.
3.16 Litigation and Claims. There are no claims, actions, suits,
investigations or proceedings pending or threatened against or affecting the
Business, at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
if determined adversely would have a material adverse effect on the Business (as
a separate going concern) following the Closing Date.
3.17 Plant Production. Exhibit 3.17 states the production of the Business
in pounds since December 31, 1994.
3.18 Insurance. Exhibit 3.18 identifies all material policies of
insurance applicable to the Purchased Assets or the business, and any material
bond, letter of credit or other financial assurance agreement relating to any
Contract, Lease or Easement, whether issued on behalf of or for the benefit of
the Seller. To the Seller's knowledge there has been no material default in the
payment of premiums on any such policy, and there is no reasonably foreseeable
ground for cancellation or avoidance of any such policy or for reduction of the
coverage provided thereby. Such insurance policies adequately insure the Seller
against all risks customarily insured against
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by persons or corporations engaged in businesses similar to those of the Seller,
except for deductibles or self-insured limits reflected on Exhibit 3.18.
3.19 Officer, Director, Shareholder Interests. Except as otherwise
disclosed in Exhibit 3.19, no officer or director of the Seller or any affiliate
of the Seller has any substantial financial interest, direct or indirect, in any
supplier, customer, lessor or lessee of the Seller, or in any other party to a
Lease, Easement or a material Contract, or has in his possession any material
property or asset belonging to the Seller, to the extent that the foregoing
apply to the Business or the Purchased Assets.
3.20 Title to Real Property. The Premises, parcels under the Lease
identified in Section 1.7, and the Easements constitute all the real property
and interests therein or related thereto, or rights to property of others,
material to the operation of the Business as currently conducted. No additional
real property or interests therein, utility, access, right of way, put-through,
tolling, service or other agreements are necessary for the conduct of the
Business as presently operated. The Seller owns and has good and marketable
title in fee simple to the Premises (including all Improvements) other than
Improvements and realty leased under the Lease referred to in Section 1.7 (Clark
Tanks), as to which Seller has a good and marketable leasehold interest to each
leased parcel and related Improvements, free and clear of all Liens or other
encumbrances or claims except (i) Liens of creditors to be released in
connection with the Closing, and easements, rights-of-way, restrictions, grants
or licenses of record, including those set forth on Exhibit 1.11 or Exhibit
3.20, (ii) other encumbrances appearing in the title insurance policy delivered
pursuant to this Agreement, provided that the foregoing do not individually or
in the aggregate materially impair the use or value of the property subject
thereto or interfere with the operation of the Business and otherwise are
acceptable to Buyer; (iii) imperfections of title, if any, which individually or
in the aggregate do not materially impair the use of the property subject
thereto or interfere with the operation of the Business; and (iv) liens for 1994
or 1995 property taxes (items (i) through (iv), other than creditor Liens to be
released, being the "Permitted Encumbrances"). All Easements are identified on
Exhibit 1.11 and are free of all Liens other than Permitted Encumbrances.
3.21 Condition of Premises. The Improvements and the present use thereof
constitute legal conforming structures and uses under the applicable building,
zoning and land use ordinances, except that the benzene storage tanks referred
to in Section 1.7 constitute a legal nonconforming use that would terminate if
such tanks are destroyed, replaced or removed The Premises and Improvements, and
their use in the Business, are not to Seller's knowledge in material breach of
any statute, zoning or use ordinance, building or fire code regulation,
covenant, restriction or plan. All repairs or additions to the Improvements have
to Seller's knowledge been performed in conformance to all applicable building,
zoning, pollution control, safety and land use regulations, except where
nonconformance would not have a material adverse effect on the operations of the
Business or the condition of the Premises. The Seller has not received any
notice of violation or orders of compliance issued by any authority having
jurisdiction under building, fire, pollution control, safety, health or land use
requiring any repairs, work, changes or additions to be made in or about any
part of Improvements or Clark Tanks that
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would reasonably be expected to have a material adverse effect on the operations
of the Business or the condition of the Premises.
3.22 List of Equipment, Vehicles, and other Tangible Assets. Exhibits
1.37 (Rolling Stock) and 1.42 (Vehicles) set forth, and as amended by the Seller
as of the Closing Date with respect to acquisitions or dispositions of such
assets during the Interim Period will set forth, true and complete lists
describing and specifying the identity of all Rolling Stock and all Vehicles.
3.23 Condition of Equipment, Etc. The tangible Purchased Assets are in
substantially the same condition as they were at December 31, 1994, customary
wear and tear excepted.
3.24 List of Leases and Easements. Except for the Leases listed in
Exhibit 1.23 the Seller is not a party to any lease of material personal
property used in the Business, as lessor or lessee.
3.25 Status of Contracts, Easements and Leases.
(a) As used in this Section, the terms "contract" and "agreement" mean
and include every contract, agreement and commitment, whether written or
oral. Exhibit 1.9 contains to the Seller's knowledge a full and complete
list (except for contracts involving obligations of the Seller under the
dollar amount indicated in clause (i) below) of each material executory
contract or agreement to which the Seller is a party, or by which it is
bound in any respect, relating exclusively to the Business, including:
(i) contracts or agreements for the purchase, sale, lease or other
acquisition or disposition of equipment, goods, materials, research and
development, supplies, studies, site assessments, or capital assets, for
the use of any transportation or dock facilities (or relating to access
to loading and unloading facilities) or for the receipt or performance
of services, involving the Business or the purchase, sale or shipment of
Inventory, in any case involving more than $10,000;
(ii) contracts or agreements for the joint performance of work or
services with other parties, and all other joint venture or teaming
agreements involving more than $5,000 or of more than 1 year in
duration;
(iii) license agreements (as licensor or licensee) of any computer
software or computer products, patents, or other intellectual property
included in the Purchased Assets involving more than $5,000 or of more
than 1 year in duration;
(iv) non-disclosure agreements, proprietary invention agreements or
other contracts or agreements with employees or contractors formerly or
currently involved with the Business relating (1) to the confidentiality
of any intellectual property of the Seller pertaining to the Business,
or (2) the Seller's rights with respect to any such property developed
by any of its employees, contractors, servants or agents involving more
than $5,000 or of more than 1 year in duration;
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(v) contracts or agreements with agents, brokers, consignees, sales
representatives or distributors, involving the Business or the purchase
or sale of Inventory involving more than $5,000 or of more than 1 year
in duration; and
(vi) powers of attorney or similar authorizations granted to third
parties involving the Business or the purchase or sale of Inventory.
(b) Each of the Contracts, Easements and Leases included in the
Purchased Assets or the Assumed Liabilities are in good standing and in
full force and effect. The Seller has not breached and, to the Seller's
knowledge, no other party has breached, any material term thereof. All
material obligations owed by or to Seller for the payment of money under
any Contract, Easement or Lease have been paid and no material prepayments
thereof by any party have been made except as identified in Exhibit 1.9.
Exhibit 1.9 identifies any material security deposit, escrow or similar
fund held by Seller under any Contract, Easement, or Lease that Seller
under any circumstance would have to return to any other party, or would
have to credit against payments due or to be due to Seller by any party.
Any security deposit, escrow, prepayment or similar fund or credit held by
another party that is subject to refund to or credit to the benefit of
Seller relating to the Business is included in the Purchased Assets and is
identified on Exhibit 1.9.
3.26 Intangible Property. Exhibit 1.20 correctly describes all of the
Intangible Property, which constitutes all of the intangible property related to
the Business that is owned, licensed, possessed, used or held by the Seller (or
any affiliate of the Seller) in or for the conduct of the Business. To the
Seller's knowledge: (i) the Seller owns sufficient interest in and to the
Intangible Property to enable it to conduct the Business as presently conducted;
(ii) none of the Seller's rights in, to or with respect to Intangible Property
is being infringed by others in any material respect; and (iii) the conduct of
the Business and the use by Seller of the Intangible Property does not infringe
in any material respect any patent, trademark, or, to the knowledge of the
Seller, any copyright, trade secret, trade name or commercial name or other
intellectual property rights of third parties. No claim of infringement has been
made or threatened against Seller (or any affiliate of Seller) to such effect.
3.27 Accounts Receivable. During the Interim Period, the Seller has not
extended credit other than in accordance with its customary purchase credit
practices. Seller has no reason to believe that Accounts Receivable are not
collectible in full in the ordinary course.
3.28 Title to Personal Property. On the Closing Date, the Seller will own
and have good and marketable title to all of the personal property included in
the Purchased Assets free and clear of all Liens, other encumbrances or claims.
The Seller is not a party to any conditional sale or other title retention
agreement relating to any of the Purchased Assets. None of the personalty
included in the Purchased Assets is subject to any Lien except the liens of
creditors that are to be released in connection with the Closing.
3.29 Employees. Exhibit 1.29 states the name, title or category, date of
hire, and rate of remuneration of each Plant Employee. All accrued vacation
allowance, sick leave or other
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absence allowance credits, vacation pay or sick pay due to the Plant Employees
is listed on Exhibit 1.29.
3.30 Employee Remuneration. Since the Effective Date, no payments have
been made or authorized to employees of the Business except at regular rates of
remuneration, and no bonus or increase in remuneration has been authorized or
put into effect.
3.31 Employee Contracts. Except as disclosed in Exhibit 3.31 the Seller
is not a party, bound by or aware of any written employment contract or
collective agreement relating to any employees of the Business and is not aware
of any current labor relations problems except those referred to in Exhibit
3.31. Except as disclosed in Exhibit 3.33, there is no agreement or practice
with respect to the Business relating to the payment of any management,
consulting, independent contractor or other fee or bonus.
3.32 Employment Practices. The Business has been conducted in all
material respects in accordance with all applicable labor laws and, to the
Seller's knowledge there are no unfair labor practice or discrimination
complaints pending based on or under the laws of the United States of America,
the State of Illinois or the provisions of ERISA.
3.33 Employee Benefit Plans.
(a) Definitions. As used in this Section 3.33:
(i) "Affiliated Entity" means any corporation, trade or business
(whether or not incorporated) that is, along with the Seller, a member
of a controlled group of corporations or a controlled group of trades or
businesses, as described in Section 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code") or Section
4001(a)(14) of ERISA, or which, with the Seller, is treated as a single
employer under the Code or ERISA;
(ii) "Employee Benefit Plan" means any plan, program, policy, or
arrangement, sponsored or maintained by the Seller or an Affiliated
Entity and covering one or more Employees, or one or more former
employees of Seller with respect to the Business, other than regular
salary, wages or commissions paid substantially concurrently with the
performance of the services for which paid. The term "Employee Benefit
Plan" includes any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA and any employee pension benefit plan within the
meaning of Section 3(2) of ERISA, provided, however, that, except as
otherwise specifically provided, such term does not include any plan to
which more than one employer (treating Seller and each Affiliated Entity
as a single employer) is required to contribute and which is maintained
pursuant to one or more collective bargaining agreements; and
(iii) "Employee" means any person employed by Seller at the Closing
Date with respect to the Business. Any person who has ceased employment
with Seller before the Closing Date shall not be an Employee for
purposes of this Section, even if such person has rights under an
Employee Benefit Plan as a result of service with Seller.
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(b) Identification of Plans. Exhibit 3.33 includes a complete list of
all Employee Benefit Plans. Each Employee Benefit Plan providing benefits
funded through a policy of insurance is so indicated by the word "insured".
(c) Claims Against Employee Benefit Plans. No action, suit or claim
(other than routine claims for benefits) has been filed or to the knowledge
of Seller, is threatened against the Hourly Plan, or against the Salaried
Plan with respect to the Employees and, to the knowledge of Seller, there
is no basis for any such action, suit or claim.
(d) Prohibited Transactions. The Seller has not engaged in any
prohibited transaction, as defined in Section 4975 of the Code or Section
406 of ERISA with respect to the Hourly Plan or the Salaried Plan that
could be expected to subject the trustee of such plan to any material tax
or penalty imposed under Section 4975(a) of the Code or Section 502(i) of
ERISA.
(e) Plan Documents. Seller has made available to Buyer a true,
correct and complete copy of each instrument constituting a part of the
Hourly Plan and Salaried Plan and a summary of each other Employee Benefit
Plan. With respect to the Hourly Plan and Salaried Plan, such documents
include, without limitation, plan documents, benefit schedules, insurance
contracts, trusts and other funding vehicles, summary plan descriptions,
summaries of material modifications and similar instruments setting forth
the provisions of such plan. As to the Hourly Plan, Seller has delivered to
Buyer the most recent annual financial report with respect to such plan.
Such financial report is an accurate description of the financial status of
the Hourly Plan as of the date thereof, and to the knowledge of Seller
there have been no material adverse changes in the financial status of such
plan since the date of the most recent report provided for such plan.
(f) Plan Provision Changes. The documents described in the preceding
subsection and made available to Buyer describe all currently effective
benefits and all benefits that Seller or any Affiliated Entity has
undertaken to provide in the future. Neither Seller nor any Affiliate
Entity has made any written or oral, implied or express representations
that are inconsistent with the terms of the documents described in the
preceding subsection.
(g) Qualified Status of Certain Plans. With respect to each of the
Hourly Plan and Salaried Plan, the IRS has issued favorable determination
letters to such plans to the effect that the forms of such plans satisfy
the requirements of Code Section 401(a) and for all years subsequent to the
establishment of such Plans and up to the Closing Date, such plans, in form
and operation, satisfy in all respects the qualification requirements of
Code Section 401(a) (except for any required amendments for which the
remedial amendment period, as defined in Section 401(b) of the Code, has
not expired with respect to such plan and for which there would be no
material increase in cost of administration if adopted), and no action that
has been taken or not taken with respect to such plans subsequent to such
date has had or is reasonably expected to have any adverse impact on the
continued qualification of such plans through the Closing Date. The IRS has
not revoked any letter of determination to which reference is made above,
nor has the IRS threatened any such revocation.
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(h) Liens. Neither Seller nor any Affiliated Entity is subject to a
requirement to provide security under Section 401(a)(29) of the Code, nor
is any Purchased Asset subject to a lien by reason of the provisions of
Section 412(n) of the Code.
(i) Administrative Agency Matters. Except as identified in Exhibit
3.33, there is not, to the knowledge of Seller, any investigation,
proceeding, administrative review or other administrative agency process
pending or threatened that could reasonably be expected to result in the
imposition on Buyer of any penalty or other assessment in connection with
any of the Employee Benefit Plans identified in Exhibit 3.33.
(j) Title IV Contingent Employer Liability. Except as identified in
Exhibit 3.33, with respect to the Business, neither Seller nor any
Affiliated Entity presently maintains one or more defined benefit pension
plans which are not multiemployer plans, as defined in Section 3(37) of
ERISA, but which are subject to the provisions of Title IV of ERISA.
(k) Plan Withdrawal/Termination Liability. Neither Seller nor any
Affiliated Entity is a party to any multiemployer plan, as defined in
Section 3(37) of ERISA or has any liability with respect to a
multi-employer plan that could be expected to become a liability of Buyer.
(l) General Compliance with Applicable Law. The Hourly Plan and
Salaried Plan have been maintained, operated and funded in a manner which
is in compliance with all Laws applicable thereto including but not limited
to any and all requirements with respect to reporting and disclosure,
except to the extent that noncompliance does not result in any liability to
Buyer with respect to periods ending on or prior to the Closing Date.
(m) Retiree Health Benefits. The Seller is not obligated to provide
health insurance or benefits, or otherwise to pay for medical care costs,
of any retired Plant Employee or his or her dependents, other than Seller's
obligations under the federal Consolidated Omnibus Budget Reconciliation
Act or applicable State Law.
3.34 Ability to Continue Business. The Purchased Assets constitute
substantially all of the property used in the Business by the Seller. The
Purchased Assets are adequate for the conduct of the Business as conducted by
the Seller as of and since December 31, 1994. The Purchased Assets include all
proprietary rights (except trademarks, service marks and logos), trade secrets,
and other tangible or intangible properties or assets used exclusively in
connection with the Business.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller, as set forth below.
4.1 Organization, Authority and Standing. The Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all necessary corporate power and authority to own or
acquire the purchased assets and to
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perform its obligations under this Agreement. On or before the Closing, the
Buyer will be duly qualified to transact business in the State of Illinois, and
each state or jurisdiction in which the operation of the Business or the
location of the Purchased Assets make such qualification necessary, except where
the failure to be so qualified or in good standing would not have a material
adverse effect on the Business.
4.2 Authorization. The Buyer has the corporate power and authority
to enter into this Agreement, and the execution, delivery and performance of
this Agreement and all documents or transactions contemplated hereby have been
duly authorized by all requisite corporate action. This Agreement has been duly
executed and delivered and constitutes the valid and binding obligation of the
Buyer, enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy laws and similar laws affecting creditors'
rights generally or by general principles of equity.
4.3 Required Governmental Consents. Except for (i) the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 to be
complied with prior to Closing; (ii) the filing and/or recording of deeds and
other instruments of conveyance, transfer, or assignment required by federal
copyright, patent, or trademark laws or the laws of the states in which the
Purchased Assets are located, to occur upon Closing; (iii) recordations
necessary in connection with security given for acquisition financing to be
obtained by the Buyer; and (iv) the assignment of the Permits or the acquisition
by the Buyer of similar Permits for the operation of the Business after the
Closing (the foregoing items being referred to herein as the "Buyer's Required
Government Consents"), no approval, authorization, certification, consent,
variance, permission, license, or permit to or from, or notice, filing, or
recording to or with, federal, state, or local governmental authorities is
necessary for the execution and delivery of this Agreement and the other
agreements and instruments to be executed and delivered in connection with the
transactions contemplated hereby or thereby by the Buyer, or the consummation by
the Buyer of the transactions contemplated hereby or thereby.
4.4 Required Contract Consents. Except for the Buyer's Required
Government Consents or as set forth in Exhibit 4.4 (such scheduled items being
referred to herein as the "Buyer's Required Contract Consents"), no approval,
authorization, consent, permission, or waiver to or from, or notice, filing, or
recording to or with, any person is necessary for (i) the execution and delivery
of this Agreement and the other agreements and instruments to be executed and
delivered in connection with the transactions contemplated hereby or thereby by
Seller or the consummation by the Buyer of the transactions contemplated hereby,
or (ii) the assumption by the Buyer of the Assumed Liabilities.
4.5 Effect of Agreement. Except as provided in Sections 4.3 or 4.4, the
execution, delivery and performance by the Buyer of this Agreement, and the
consummation of the transactions herein contemplated, will not (i) result in a
breach of the terms of, or constitute a default under or violation of, any law
or regulation of any governmental authority, applicable to the Buyer, (ii)
result in a breach of the terms of, or constitute a default under or violation
of, any provision of the Certificate of Incorporation or Bylaws of the Buyer, or
any agreement or instrument to which the Buyer is a party or by which it is
bound or to which it is subject.
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4.6 Litigation. There are no claims, actions, suits investigations or
proceedings pending or, to the Buyer's knowledge, threatened (i) against the
Buyer or any of its affiliates that is reasonably likely to have a material
adverse effect on the ability of the Buyer to perform its obligations under this
Agreement, or (ii) which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby. Neither the Buyer nor any
of its affiliates is subject to any outstanding order, ruling, judgment or
decree that would have a material adverse effect on the ability of the Buyer to
perform its obligations under this Agreement.
4.7 WARN Act. The Buyer represents that it does not currently contemplate
a termination of operations at the Premises or a mass lay-off of Plant
Employees, or termination of Plant Employees that in the aggregate would
constitute a mass lay-off of Plant Employees under the federal Worker Adjustment
and Retraining Act, within one year following the Closing.
5. ACCESS TO INFORMATION; CONFIDENTIALITY
5.1 Access. Between the date hereof and the Closing Date, the Seller
shall afford representatives of the Buyer (and the Buyer's proposed lender)
reasonable access during regular business hours and upon reasonable notice to
the Premises and offices of the Business, the personnel and representatives
(including independent accountants) of the Business and to the financial,
contractual and other records of the Business, including all contracts, deeds
and other documents in the possession or control of the Seller relating to the
Business or the Purchased Assets, appropriate to enable the Buyer to investigate
the affairs of the Business. The Seller shall to the extent permitted by law
furnish to the Buyer or its authorized representatives such information with
respect to the Business and the Purchased Assets as the Buyer may reasonably
request, but no such investigation shall prejudice the rights of the Buyer under
this Agreement or enlarge or add to the representations and warranties herein of
the Seller. However, the Buyer shall not contact the Seller's accountants,
attorneys (other than McMillan Binch and Kirkland & Ellis), bankers, suppliers
or customers without the consent of the Seller, which consent shall not be
unreasonably withheld.
5.2 Confidentiality Obligation of Buyer.
(a) Until Closing (and, if this Agreement is terminated for any
reason, forever thereafter), Buyer shall hold in strict confidence, not
disclose to any person without the prior written consent of Seller, and not
use in any manner except in connection with the transactions contemplated
hereby, any confidential information obtained from Seller in connection
with the transactions contemplated hereby. Buyer shall use its best efforts
to cause agents, advisors and lenders, to observe the nondisclosure and use
restrictions under this Section. This obligation shall cease to apply to
Buyer upon the occurrence of the Closing.
(b) If this Agreement terminates prior to Closing for any reason, the
Buyer shall return to the Seller all materials in its possession containing
any such confidential information, including all copies, extracts,
adaptations, and transcriptions thereof, or shall certify to the Seller
that all such materials not delivered have been destroyed.
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5.3 Confidentiality Obligation of Seller Following Closing. Following the
Closing, the Seller shall hold in strict confidence, not disclose to any person
without the prior written consent of Buyer, and not use in any manner
whatsoever, any confidential information remaining in its possession concerning
the Business, except as required for the preparation or filing of tax returns,
financial statements or other governmentally mandated filings or disclosures.
The Seller shall use its best efforts to cause its agents to observe the
nondisclosure and use restrictions of this Section. Such confidential
information specifically includes the terms of this Agreement and the
transactions consummated in connection with it, as well as the terms and
conditions for Inventory purchases and sales under the Contracts. In connection
with or promptly following Closing, the Seller shall surrender to Buyer all
materials remaining in its possession containing any such confidential
information, including all copies, extracts, adaptations, and transcriptions
thereof (other than original records or copies of records retained by the Seller
under Section 11.6). The Buyer shall provide to the Seller or make available
(for copying at the Seller's expense) such Business Records as the Seller shall
request for use in preparing any tax return that relates to the Seller in
connection with the Business.
5.4 Permitted Disclosures. Notwithstanding Sections 5.2 and 5.3, either
party may disclose confidential information (i) where necessary to any
regulatory authorities or governmental agencies pursuant to requirements of law
or legal process or (ii) if required by court order or decree. With regard to
such disclosure (and subject to the Seller's obligations under Section 5.6) the
disclosing party agrees to give proper notice of any demand or request for
disclosure, so that the other party will have an opportunity to protect its
interests.
5.5 Scope of Confidential Information. For purposes of this Agreement,
information shall not be deemed confidential (i) if such information is or
becomes available from public sources, is or becomes generally known in the
trade or is determined not to be confidential in a final adjudication not
subject to appeal; (ii) if such information is received from a third party not
under an obligation to keep such information confidential; or (iii) if the
recipient can demonstrate that such information was previously known to it, its
affiliates or advisors free of any obligation to keep it confidential, or was
independently developed by the recipient.
5.6 Records; Personnel. For a period of seven years from the Closing
Date:
(a) The Buyer shall not dispose of or destroy any of the Business
Records delivered by the Seller (the "Transferred Records") without first
offering to turn over possession thereof to the Seller, at the Seller's
cost, by written notice to the Seller at least 30 days prior to the
proposed date of such disposition or destruction.
(b) The Buyer shall allow the Seller and its agents reasonable access
to all Transferred Records in the Buyer's possession and not in the
Seller's possession during normal working hours at the principal place of
business of the Business or at any location where any Transferred Records
are stored, and the Seller shall have the right, at its own expense, to
make copies of any such Transferred Records, to the extent necessary for
use by the Seller in connection with tax returns or other governmentally
mandated filings or disclosures, financial statement preparation, defense
of claims relating to Excluded Liabilities or the determination or
performance
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of the Seller's obligations under this Agreement. Any such access or copying
shall be had or done in such a manner so as not to unduly interfere with the
normal conduct of the Buyer's business. If disclosure of any information
contained in the Transferred Records is compelled by legal process, and such
information is not publicly available and disclosure thereof would adversely
affect the Buyer, the Buyer shall have the right to contest the disclosure of
such information (which it shall do promptly upon notice and with reasonable
diligence or it shall forfeit such right) and shall indemnify the Seller and its
affiliates and hold them harmless against any Losses (as defined in Section
15.3) incurred by any of them by reason of the non-disclosure of such
information. If disclosure of any such information is not compelled by legal
process the Seller may only disclose information to the extent reasonably
necessary and shall use its best efforts to limit any such disclosure (such as
by obtaining a protective order) and the Buyer shall first have the opportunity
to require the Seller not to disclose such information by agreeing in writing,
in form and substance reasonably satisfactory to the Seller, to assume any
liability occasioning the Seller's request or otherwise to indemnify the Seller
and its affiliates and hold them harmless against any Losses incurred by any of
them by reason of such nondisclosure.
(c) The Buyer shall make reasonably available to the Seller upon
written request, and subject to availability (with priority given to the
Buyer's requirements) (i) the Buyer's personnel to assist the Seller in
locating and obtaining any Transferred Records, and (ii) any of the Buyer's
personnel whose assistance or participation is reasonably required by the
Seller or any of its affiliates for the purposes described in Section
5.6(b) for which the Buyer's assistance is reasonably necessary. In
addition, the Buyer shall otherwise cooperate with any reasonable request
of the Seller in connection with the performance, defense or discharge of
the Excluded Liabilities. The Seller shall reimburse the Buyer for the
out-of-pocket expenses incurred by it in performing the covenants contained
in this Section 5.6(c), and the Seller shall reimburse the Buyer for the
value of the time spent by such personnel in compliance with such clause
(ii) of the first sentence of this Section 5.6(c) or the second sentence of
this Section 5.6(c) in the amount of the compensation expenses recorded by
Buyer, calculated fairly for the time spent by such personnel.
6. PRECLOSING COVENANTS OF THE SELLER
6.1 Conduct of Business Pending the Closing.
(a) The parties have agreed that the assets created in the course of
operation of the Business during the Interim Period would be transferred to
the Buyer as part of the Purchase Price, and that liabilities of the Seller
created during the Interim Period in accordance with the provisions of this
Section would be assumed by the Buyer as part of the Assumed Liabilities if
the Buyer purchased the Purchased Assets as of the Effective Date. This
Agreement supersedes any prior understanding of the parties with respect to
Interim Period operation of the Business and the assets and liabilities
created thereby.
(b) During the Interim Period, the Seller:
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(i) shall not engage in any activities or transactions which shall
be outside the ordinary course of its Business operations as conducted
prior to the Effective Date, without the prior written consent of the
Buyer, which consent shall not be unreasonably withheld;
(ii) shall not increase the salaries or wages of any of its
employees, or pay bonuses to any of its employees;
(iii) shall not make any intracompany transfer or payment out of
Business revenue or Business assets for goods purchased or services
rendered except at prices not in excess of arms' length value and
otherwise consistent with past practice;
(iv) will use its reasonable best efforts (which shall not include
the payment of any additional funds outside the normal course) to
preserve the existing licenses, franchises, rights and privileges
pertinent to the Business;
(v) will use its reasonable best efforts (which shall not include
the payment of any additional funds outside the normal course) to
preserve the organization relating to the Business intact and to
preserve the goodwill of employees, contractors, customers, suppliers
and others having business relations relating to Plant products or
operations, including the continuation of the Seller's usual and
customary purchasing, billing and collection procedures;
(vi) will maintain in all material respects the Equipment,
Vehicles, Rolling Stock, Improvements, Clark Tanks, Furnishings and
Fixtures in the same working order and condition as at the Effective
Date (reasonable wear and tear excepted), and will perform in all
material respects all scheduled or regular maintenance or necessary
repair;
(vii) will keep in force all current coverages under existing
insurance policies covering Purchased Assets and Business operations
(including all Workers' Compensation insurance);
(viii) will not take any action or permit any action to be taken
that would adversely affect the Purchased Assets or the Business (as a
separate going concern) or would materially impair the ability of the
Seller to consummate the proposed sale;
(ix) will not transfer any Purchased Asset to any lender of the
Seller;
(x) will apply payments received from customers (or other payments
of receivables) to the invoice or charge specified in connection with
the payment (if none is specified, payments will be applied to invoices
or other amounts owed on the basis of age, with oldest paid first, so
that payments will first satisfy accounts receivable arising before the
Effective Date);
(xi) will not without the Buyer's written consent enter into any
contract, commitment or other transaction to be assumed by the Buyer
that will not be terminable by the Buyer on not more than 30 days'
notice, without a penalty or other compensation payable by the Buyer;
and
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(xii) will not without the prior written consent of the Buyer,
which consent shall not be unreasonably withheld: (1) subject to a Lien
any of the Purchased Assets (other than (A) Liens for current year
property taxes not yet payable and (B) the continuing Liens of secured
creditors referred to in Section 3.20); (2) transfer any of the
Effective Date Assets or Additional Assets except Inventory in the
ordinary course of business; (3) amend or cancel any material Contract,
or any Easement or Lease, (4) amend or fail to comply with any provision
of the Union Contract; (4) move or relocate any of the Purchased Assets
from their present location(s); or (5) agree to do any of the foregoing.
6.2 Preparation of Exhibits and Schedules. No later than 5 days before
the Closing Date, the Seller may prepare, sign and deliver to the Buyer
amendments to the Exhibits specified of this Agreement. On the Closing Date,
prior to the Closing, the Seller may sign and deliver to the Buyer further
amendments to such Exhibits, but such amendments may only contain additional
disclosures that (i) pertain to occurrences since the first amendment date
specified above or (ii) pertain to occurrences or facts existing prior to the
first amendment date but of which the Seller, following reasonable inquiry after
the execution of this Agreement, was not aware on such amendment date.
6.3 Notice of Certain Adverse Changes, Defaults or Claims. The Seller
shall give prompt notice to the Buyer of any material adverse change to the
Business or the Purchased Assets and any Seller's Required Contract Consent
arising after the date hereof, any material notice of default received by the
Seller subsequent to the date of this Agreement and prior to the Closing Date
under any instrument or agreement to which the Seller is a party or by which any
of its properties are bound affecting this Agreement, the Purchased Assets or
Assumed Liabilities, or of the assertion of any material claim which, if upheld,
would render materially inaccurate any representation of the Seller herein.
6.4 Implementation of Representations and Warranties. The Seller shall
use reasonable efforts to render accurate as of the Closing Date its
representations and warranties contained in this Agreement, and shall refrain
from taking any action which would render materially inaccurate as of the
Closing Date any of such representations or warranties (except for Exhibit
amendments contemplated to reflect operations during the Interim Period).
6.5 Third Party Consents. The Seller shall use reasonable efforts to (not
to include the expenditure of money other than the fees of Seller's advisors)
obtain the Seller's Required Government Consents and any Seller's Required
Contract Consents, and to assist the Buyer in obtaining the Buyer's Required
Governmental Consents and to acquire any Permit necessary for the Buyer's
operation of the Business.
6.6 Assistance in Transferring Assets and Business. The Seller shall use
its best efforts to assist the Buyer in planning for and accomplishing the
orderly transition and transfer of the Purchased Assets to the Buyer as provided
herein.
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6.7 Survey and Title Commitment. As soon as reasonably possible after the
execution of this Agreement, Seller will provide the Survey (as defined in
Section 10.9) and the title insurance commitment (referred to in Section 10.10),
at Seller's expense.
6.8 Certain Tax Notices. The Seller will cooperate with Buyer as
reasonably requested in connection with any post-sale notices required to be
filed with governmental authorities.
7. PRECLOSING COVENANTS OF THE BUYER
7.1 Implementation of Representations and Warranties. The Buyer shall use
reasonable efforts to render accurate as of the Closing Date its representations
and warranties contained in this Agreement, and shall refrain from taking any
action which would render materially inaccurate as of the Closing Date any of
such representations or warranties.
7.2 Third Party Consents. The Buyer shall use all reasonable efforts to
obtain the Buyer's Required Government Consents and its Required Contract
Consents, to acquire any Permit necessary for the Buyer's operation of the
Business, and to assist the Seller in obtaining the Seller's Required
Governmental Consents and its Required Contract Consents.
8. AGREEMENTS REGARDING PLANT EMPLOYEES
8.1 Employment Offers. Prior to the Closing Date, the Buyer will make
offers of employment (to be effective as of the Closing) to all Plant Employees
on no less favorable terms and conditions as those provided to the Plant
Employees by the Seller prior to Closing, which terms and conditions have been
disclosed to the Buyer. The Seller will use its best efforts to encourage such
employees to accept the Buyer's offer of employment. This obligation does not
require Buyer to continue such terms and conditions for any specific term after
the Closing (except as provided by the Union Contract). Buyer shall be free to
act with respect to Plant Employees hired by Buyer, but any liability relating
thereto shall be Buyer's. All obligations of the Seller to such employees
accrued through the Closing, including obligations for salary, sales
commissions, payroll taxes, fringe benefits, and severance pay (for Plant
Employees not accepting the Buyer's offer of employment or for any Plant
Employee accepting Buyer's offer of employment but who makes a claim for
severance pay under Seller's plan with respect to service with the Seller on or
prior to the Closing Date), but excluding accrued vacation leave, sick leave or
other leave, are the sole obligations of the Seller, to be finally determined
and settled by the Seller as of the Closing Date. Vacation, sick leave or other
leave accrued for the employment period with Seller prior to the Closing Date,
shall be effectively recognized in the employment terms offered by the Buyer,
and Seller shall not be obligated to reimburse Buyer for the assumption of such
liability and no adjustment to the Purchase Price shall be made in connection
therewith. With the exception of the Union Contract which will be assumed by the
Buyer, all employment arrangements between the Buyer and the Plant Employees
hired by the Buyer will be negotiated directly between such employees and the
Buyer. All obligations to any employees of the Seller not accepting the Buyer's
offer of employment in accordance with this Section 8.1 shall remain the
responsibility of the Seller. The Seller shall be responsible for terminating
the employment of its employees who do not resign in connection with their
acceptance of
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employment by the Buyer (to the extent termination is required in such
circumstance) and for giving any notice of termination. In the case of Union
employees, the Seller and Buyer will issue a joint notice of assignment and
assumption of the Union Contract. The Seller shall be responsible for the
collection of premiums and all related costs of benefits offered by Seller under
the continuation of benefits provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), for all Plant Employees and
their dependents not kept in the continuous employ of the Seller following
Closing. "Transferred Employees" shall mean the Plant Employees who, on or
immediately after the Closing Date, become employees of Buyer.
8.2 Redundancy. Prior to the Closing, the Buyer and Seller will agree
upon a list of the Plant Employees whom the Buyer and Seller, acting reasonably,
determine are potentially redundant, if any. As to any such employee that Buyer
and Seller agree is potentially redundant and whose employment is terminated by
the Buyer within six months of the Closing Date due to actual redundancy, as
asserted by the Buyer in good faith acting reasonably, the Seller will reimburse
the Buyer on request for the severance costs associated with the termination of
employment of all such persons as determined in accordance with Seller's
termination guidelines.
8.3 Special Arrangement. The Buyer is not obligated to assume any
obligation of the Seller under the Seller's employment agreement with Wilfred F.
Kimball, which agreement will be terminated by the Seller in connection with the
Closing.
8.4 Assumption of Hourly Plan. Effective as of the Closing Date, Buyer
and Seller shall execute an Amendment and Continuation Agreement satisfactory to
Buyer and Seller, which provides for the continuation of the Hourly Plan and the
trust established thereunder by Buyer as of the Closing Date, such that, as of
the Closing Date, Buyer shall be substituted for Seller for all purposes
therein. Under the Hourly Plan, Buyer shall give credit to Transferred Employees
who are participants in such plan or who are members of the class of employees
covered by such plan for their period or periods of employment with Seller prior
to the Closing Date for purposes of eligibility to participate and vesting.
Buyer shall be responsible for the preparation and filing of all Forms 5500 (and
applicable attachments) that are due at any time after the Closing Date. Seller
shall promptly after the Closing Date transfer to Buyer all participant records
in Seller's possession with respect to the Hourly Plan and any information
necessary to determine benefits thereunder, or any information needed to
complete the first Forms 5500 due on or after the Closing Date.
8.5 Buyer's Employee Benefit Plans. Except for the period described in
Section 8.8 hereof, Buyer agrees to cover (or cause to be covered) each
Transferred Employee effective as of and from the Closing Date under new or
existing employee benefit plans of Buyer ("Buyer's Plans") that provide benefits
comparable in the aggregate to the benefits provided to the Transferred
Employees under the Employee Benefit Plans of Seller; provided, however, that
Buyer's Plans covering Transferred Employees whose terms and conditions of
employment are governed by the Union Contract shall conform to the requirements
of the Union Contract. Except to the extent of any limitation imposed by any
insurance contract, Buyer's Plans shall provide that each Transferred Employee's
period or periods of employment with Seller prior to the Closing Date under
Seller's Employee Benefit Plans shall be credited under Buyer's Plans for
purposes
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of eligibility to participate, vesting, waiting periods, limitations as to
pre-existing conditions and other exclusions, if any. Except to the extent of
any limitation imposed by any insurance contract, Buyer's Plans which provide
health care or similar benefits to or with respect to Transferred Employees
shall provide credits toward deductibles, co-payments and other similar payments
for amounts paid under the comparable Employee Benefit Plans of Seller by the
Transferred Employees in the calendar year in which the Closing Date occurs.
Except with respect to the HMO Contract as set forth in Section 8.6 below and
for the period described in Section 8.8 below, Seller shall retain liability
under its Employee Benefit Plans that are employee welfare benefit plans for all
eligible expenses that are incurred with respect to each Transferred Employee
(and covered dependents) prior to the Closing Date and Buyer shall be
responsible for eligible welfare benefit expenses under Buyer's Plans that are
incurred with respect to each Transferred Employee (and covered dependents) on
and after the Closing Date. Seller and Seller's Plan shall retain liability for
any Transferred Employee (and covered dependent) who is hospitalized on the
Closing Date and who remains continuously hospitalized until after the Closing
Date.
8.6 HMO Contract. To the extent permitted by the HMO Contract, effective
as of the Closing Date, Buyer and Seller shall execute such documents as are
necessary to transfer the HMO Contract to Buyer, such that, effective as of the
Closing Date, Buyer shall be substituted for Seller for all purposes under the
HMO Contract. Buyer and Seller shall use their best efforts to accomplish the
transfer of such HMO Contract effective as of the Closing Date and Buyer shall
be responsible for payment of all premiums thereunder with respect to periods
commencing on and after the Closing Date.
8.7 Transfer of Salaried Plan Account Balances. Effective as of and from
the Closing Date, Buyer shall cover (or cause to be covered) each Transferred
Employee who, as of the Closing Date, is a participant in the Salaried Plan or
who is a member of the class of employees covered under such plan, under a Buyer
Plan that is intended to meet the requirements of Code Sections 401(a) and
401(k) ("Buyer's 401(k) Plan"). Buyer's 401(k) Plan shall provide that each
Transferred Employee's period or periods of employment with Seller prior to the
Closing Date under the Salaried Plan shall be credited under Buyer's 401(k) Plan
for purposes of eligibility to participate and vesting. As soon as practicable
after the Closing Date (but in no event more than 90 days thereafter), Seller
shall cause to be transferred from the trust established under the Salaried Plan
to the trust established under Buyer's 401(k) Plan assets equal to the value of
the total accounts of Transferred Employees under the Salaried Plan who are
employed by Buyer as of the date of such asset transfer (which assets to be
transferred shall be valued as of the valuation date immediately preceding the
date of asset transfer). Buyer and Seller shall each provide (or cause to be
provided) 30 days' advance notification of the asset transfer to the Internal
Revenue Service, to the extent required by applicable law. The transfer of
assets shall be in cash or securities mutually agreed upon by Buyer and Seller.
Notwithstanding anything in this Section 8.7 to the contrary, Seller shall not
be obligated to transfer any assets from the Salaried Plan to Buyer's 401(k)
Plan until Buyer has furnished evidence satisfactory to Seller that Buyer's
401(k) Plan is qualified under Code Section 401(a), that the trust established
by Buyer thereunder is tax-exempt under Code Section 501(a) and that all
optional forms of benefit under the Salaried Plan required to be preserved
pursuant to Code Section 411(d)(6) with respect to the assets to be transferred
have been so preserved under Buyer's 401(k) Plan. Seller shall promptly after
the
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Closing Date transfer to Buyer all participant records in Seller's possession
with respect to the account balances transferred to Buyer's 401(k) Plan or any
other information necessary to determine the benefits of Transferred Employees.
Effective as of the date of asset transfer, Buyer shall be liable, and Seller
shall have no liability, with respect to the transferred account balances.
8.8 Welfare Benefit Continuation. Seller agrees to continue to cover (or
cause to continue to be covered) each Transferred Employee (and his or her
eligible dependents) under Seller's Employee Benefit Plans that are employee
welfare benefit plans for a period after the Closing Date up to and including
the earlier of July 31, 1995 or the date as of which such coverage would
otherwise end under the terms of such plans (the "Transition Period") as if such
Transferred Employees had continued to be employed actively by Seller throughout
the Transition Period. Buyer shall reimburse Seller monthly in arrears for the
cost for providing such continued coverage with respect to Transferred
Employees, it being understood by Buyer and Seller that such cost shall include,
without limitation, the pro rata portion of each insurance (including stop-loss
insurance) premium, administrative services contract and other actual
administrative expense incurred by Seller that is attributable to the
Transferred Employees, and, in the case of self-insured benefits, such
reimbursement shall include the full amount of claims paid with respect to the
Transferred Employees. Buyer shall reimburse Seller within 30 days of the date
on which Seller delivers a written invoice to Buyer setting forth the
reimbursement due from Buyer for the applicable portion of the Transition
Period. Buyer shall notify Seller in writing of (i) the identity of all
Transferred Employees whose employment with Buyer terminates during the
Transition Period, such notice to include the date and circumstances of such
termination and (ii) the identity of all Transferred Employees and their covered
dependents, as applicable, who, during the Transition Period, otherwise become
"qualified beneficiaries" within the meaning of COBRA, with such notice
including the date as of which such individual became, and the circumstances
causing such individual to become, a "qualified beneficiary." Buyer and Seller
shall reasonably cooperate with each other to provide proper and timely notices
of continuation coverage rights under COBRA and applicable state law with
respect to individuals who become entitled to receive such notices during the
Transition Period. Effective as of and from the Closing Date, except as provided
in this Section 8.8 with respect to the Transition Period, Buyer and Buyer's
Plans shall be liable, and Seller and its employee benefit plans shall have no
liability, with respect to Incidents occurring on and after the Closing Date.
For purposes of this Section 8.8, "Incident" includes, without limitation,
death, accident, disability, injury, and disease.
9. CONDITIONS TO SELLER'S OBLIGATIONS
Each of the obligations of the Seller to be performed hereunder shall be
subject to the satisfaction (or waiver by Seller) at or prior to the Closing of
each of the following conditions. The conditions are for the exclusive benefit
of the Seller, all or any of which may be waived by the Seller. If any condition
is not satisfied on or before the earlier of the Closing Date and the
Termination Date, the Seller may terminate this Agreement by notice to the
Buyer. Seller's decision to close shall evidence conclusively the satisfaction
of all conditions (but shall not be a waiver of any breach of representation,
warranty or covenant committed by the Buyer).
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9.1 Representations and Warranties; Performance. The Buyer's
representations and warranties contained in this Agreement shall be true (except
where failure to be true would not have a material adverse effect on the Buyer's
ability to consummate the transactions contemplated hereby) on and as of the
Closing with the same force and effect as though made on and as of such date.
The Buyer shall have complied in all material respects with the covenants and
agreements set forth herein to be performed by it on or before the Closing. The
Buyer shall have delivered to the Seller a certificate dated the Closing Date
and signed by a duly authorized officer of Buyer confirming the foregoing.
9.2 Litigation. No litigation shall be threatened or pending against the
Buyer or the Seller before any court or governmental agency that, in the
reasonable opinion of counsel for the Seller, could result in the restraint or
prohibition of any such party, or the obtaining of damages or other relief from
such party, in connection with this Agreement or the consummation of the
transactions contemplated hereby, and no statute, rule or regulation or order of
any court or administrative agency shall be in effect which prohibits the Seller
from consummating the transactions contemplated hereby.
9.3 Consents. All required Seller's Government Consents and Seller's
Required Contract Consents shall have been obtained.
9.4 Hart-Scott-Rodino. All waiting periods applicable to this Agreement
and the transactions contemplated hereby under the Hart-Scott-Rodino Antitrust
Improvements Act shall have expired, and neither the Federal Trade Commission
nor the Department of Justice shall have authorized the institution of an
investigation or an enforcement proceeding to delay, prohibit or otherwise
restrain or delay the transactions contemplated by this Agreement.
9.5 Opinion of the Buyer's Counsel. Buyer shall have delivered to Seller
an opinion of Hunton & Williams, counsel to the Buyer, dated as of the Closing
Date, in form and substance acceptable to the Seller (which opinion may rely on
the opinion of Schiff, Hardin & Waite as to matters of Illinois law).
10. CONDITIONS TO BUYER'S OBLIGATIONS
Each of the obligations of Buyer to be performed hereunder shall be subject
to the satisfaction (or the waiver by Buyer) at or prior to the Closing of each
of the following conditions. The foregoing conditions are for the exclusive
benefit of the Buyer, all or any of which may be waived by the Buyer. If any
condition is not satisfied on or before the earlier of the Closing Date and the
Termination Date, the Buyer may terminate this Agreement by notice to the Seller
without prejudice to any other rights or remedies of the Buyer. The Buyer's
decision to close shall evidence conclusively the satisfaction of such
conditions but shall not be a waiver of any claim for breach of representation,
warranty or covenant committed by the Seller).
10.1 Representations and Warranties; Performance. Seller's
representations and warranties contained in this Agreement, as amended on the
Closing Date by the delivery of the amended Exhibits in accordance with Section
6, shall be true on and as of the Closing Date with
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the same force and effect as though made on and as of such date. The Seller
shall have complied in all material respects with the covenants and agreements
set forth herein to be performed by it on or before the Closing Date. The Seller
shall have delivered to Buyer a certificate dated the Closing Date and signed by
a duly authorized officer of Seller to all such effects.
10.2 Investigations. The investigation of the Business or the Purchased
Assets by Buyer, of the information revealed by the Exhibits hereto, or any
other document delivered to Buyer as contemplated by this Agreement, shall not
have revealed any fact or circumstance that is unacceptable to the Buyer.
10.3 Consents; Permits. All Buyer's Required Government Consents shall
have been obtained. The Buyer shall have obtained all Permits necessary for its
ownership of the Purchased Assets and operation of the Business, or shall be
satisfied that any Permit not then obtained will be available to the Buyer
without a delay unacceptable to the Buyer. The Buyer shall have received
satisfactory evidence of Seller's acquisition of Seller's Required Government
Consents.
10.4 Litigation. No litigation shall be threatened or pending against the
Buyer or the Seller before any court or governmental agency that, in the
reasonable opinion of counsel for the Buyer, could result in the restraint or
prohibition of any such party, or the obtaining of damages or other relief from
such party, in connection with this Agreement or the consummation of the
transactions contemplated hereby and no statute, rule or regulation or order of
any court or administrative agency shall be in effect which prohibits the Buyer
from consummating the transactions contemplated hereby.
10.5 No Material Adverse Change; Risk of Loss. From the date of this
Agreement until the Closing, no material adverse change (whether or not such
change is referred to or described in any supplement to the Exhibits), as to the
Purchased Assets, the Assumed Liabilities, or the financial condition,
operations, or prospects of the Business shall have occurred. Risk of loss of or
damage to the Purchased Assets shall remain with the Seller until completion of
the Closing. If any insured loss to the Purchased Assets occurs prior to such
time, the Buyer may elect (i) to take the insurance proceeds payable with
respect thereto and complete the Closing or (ii) if the loss is incurred or the
damage is material, to cancel this Agreement.
10.6 Opinion of Seller's Counsel. Seller shall have delivered to Buyer an
opinion of McMillan Binch, counsel to Seller, dated as of the Closing Date, in
the form and substance acceptable to the Buyer which opinion may rely on the
opinion of Kirkland & Ellis as to matters of Illinois law.
10.7. Employment of Mr. Kimball. The Buyer and Wilfred J. Kimball shall
have entered into an agreement reasonably satisfactory to the Buyer providing
for the employment of Mr. Kimball by the Buyer.
10.8 Consents, Estoppels, Lien Releases. The Seller shall have delivered
to the Buyer, or the Buyer shall have obtained, consents and estoppel letters in
favor of the Buyer and the Buyer's lender satisfactory to the Buyer and the
Buyer's lender, from lessors or lessees under the
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Leases and from parties to material Contracts as the Buyer might require, and
executed releases of all Liens affecting any Purchased Asset other than
Permitted Encumbrances.
10.9 Survey. The Buyer shall have obtained a survey of the Premises and
locatable Easements prepared in accordance with ALTA survey standards (as
required by the Buyer's proposed lender) showing the boundaries of the Premises,
all above ground improvements, locatable Easements and other Permitted
Encumbrances located thereon (the "Survey"). The Survey shall show that the real
property has frontage on Homan Avenue and 131st Street, that the encroachments,
if any, by the Improvements onto adjoining property and the encroachments, if
any, by improvements from adjoining property onto the Premises, do not
materially adversely affect the use of the Premises or Improvements or interfere
with the Business and, in the reasonable opinion of the Buyer, will not prevent
the Buyer from obtaining financing thereon. The Survey shall show the location
of all locatable Easements and other Permitted Encumbrances burdening or
benefiting the Premises and that no such locatable Easements and other Permitted
Encumbrances materially adversely affect the use of the Premises or interfere
with the Business. The Survey shall also show that the Improvements comply with
any applicable setbacks or restrictions of record. The expense of obtaining such
survey shall be borne by the Seller.
10.10 Title Commitment. The Seller shall have delivered to the Buyer, at
the Seller's expense, a commitment for a policy of title insurance (ALTA Owner's
Policy) insuring the Buyer's fee simple title to the Premises in an amount equal
to $21,000,000.00, subject only to Permitted Encumbrances. As of the time of the
recordation of the deed to the Premises, the records shall reflect no additional
encumbrance affecting the Premises other than those reflected in the title
insurance commitment.
10.11 Financing Condition. Buyer shall have obtained financing, on terms
acceptable to Buyer in its discretion, sufficient to allow it to purchase the
Purchased Assets and obtain adequate working capital. The Buyer may terminate
this Agreement without liability if it determines that acceptable financing will
not be obtained or will not be obtained consistent with the need to complete the
proposed closing in a timely manner. The Buyer agrees that it will not enter
into a commitment to acquire the Texaco El Dorado (Kansas) phenol plant if that
would preclude it from obtaining financing for the acquisition of the Purchased
Assets and would otherwise provide the Buyer with the ability to refuse to close
on the basis that the financing condition was not met. The remedy for breach of
this covenant by the Buyer is the termination of the Seller's obligations under
this Agreement and the Buyer's reimbursement of the Seller's third-party
expenses related to this transaction, including the costs of the Survey and for
attorneys' fees and disbursements of outside counsel (Canadian and U.S.)
beginning with services provided in connection with the negotiation of the
letter of intent referred to in Section 17.9.
10.12 Hart-Scott-Rodino. All waiting periods applicable to this Agreement
and the transactions contemplated hereby under the Hart-Scott-Rodino Antitrust
Improvements Act shall have expired, and neither the Federal Trade Commission
nor the Department of Justice shall have authorized the institution of an
investigation or an enforcement proceeding to delay, prohibit or otherwise
restrain or delay the transactions contemplated by this Agreement.
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11. CLOSING
11.1 Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 a.m. on a date mutually
agreed to by the parties or specified by the Buyer on at least five days'
notice, provided such date is not later than June 15, 1995 (the time and date of
Closing as so determined being herein called the "Closing Date"). The Closing
shall be held at the offices of Kirkland & Ellis, 200 East Randolph Drive,
Chicago, Illinois, or at such other place as the parties may agree upon in
writing. For the purpose of the final Cash Payment calculation, the Closing
shall be deemed to have concluded at 5:00 p.m., Chicago time, the day before the
Closing Date.
11.2 Actions at Closing. At Closing, Buyer and Seller shall take the
actions identified in this Section 11, in addition to such other actions as may
otherwise be required under this Agreement.
11.3 Exhibit Amendments. At the Closing, the Seller may deliver
amendments to the Exhibits in accordance with Section 6.
11.4 Instruments of Conveyance and Transfer. Subject to the terms and
conditions of this Agreement, at the Closing Date, the Seller shall duly execute
and deliver to the Buyer:
(a) all appropriate bills of sale, a special warranty deed to the
owned Premises, transfers, assignments, consents and such other
endorsements and instruments of transfer, conveyance and assignment, in
form satisfactory to the Buyer's counsel, as shall be effective to vest in
the Buyer good title to the Purchased Assets to be transferred, conveyed,
assigned and delivered, free and clear of all Liens except the Permitted
Encumbrances, and other documents requisite for the transfer of the
Purchased Assets to the Buyer;
(b) duly endorsed titles to each of the Vehicles, along with all
odometer certifications or other documents necessary for transfer and
re-registration in the name of the Buyer under the laws of the state in
which the Vehicle is licensed at the time of Closing;
(c) an Assignment and Assumption of the Union Contract;
(d) an Assignment and Assumption of Benefit Plans (including plan
asset transfers or sponsorship transfer instructions, where appropriate),
by which Buyer shall assume the obligations referred to in Section 2.12(d);
(e) the certificate of the Chairman of the Board of Seller as to the
accuracy and completeness of the Seller's representations and warranties;
(f) certificates of good standing of Seller as of the most recent
practicable date, from the Secretaries of State of Delaware and Illinois;
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(g) certified copies of resolutions of the Board of Directors of the
Seller, approving the transactions set forth in this Agreement;
(h) certified copies of resolutions of the shareholder of Seller
approving the transactions set forth in this Agreement;
(i) a certificate of incumbency for the officers of Seller;
(j) the opinion of counsel described in Section 10.6;
(k) physical possession of the Purchased Assets where located, and all
keys to the Premises and Vehicles (subject to other arrangements for
custody of them by retained Plant Employees);
(l) evidence that all transfer, excise, sales and use taxes due as of
Closing have been paid or provision therefor has been made, in accordance
with this Agreement; and
(m) such other evidence of the performance of all covenants and
satisfaction of all conditions required of the Seller by this Agreement, at
or prior to the Closing, as the Buyer or its counsel may reasonably
require.
11.5 Payment and Assumption. Subject to the terms and conditions of this
Agreement, at the Closing:
(a) The Buyer shall pay the preliminary Cash Payment to the Seller, in
accordance with Section 2.
(b) The Buyer shall duly execute and deliver to the Seller:
(i) documents evidencing the Buyer's acceptance of the bills of
sale, deeds, transfers, assignments, consents and such other
endorsements and instruments of transfer, conveyance and assignment
delivered by the Seller pursuant to Section 11.4(a);
(ii) agreements of assumption reflecting the assumption of the
Assumed Liabilities by the Buyer;
(iii) an Assignment and Assumption of the Union Contract;
(iv) an the Assignment and Assumption of Benefit Plans;
(v) the certificate of an authorized officer as to the accuracy and
completeness of the Buyer's representations and warranties;
(vi) the opinion of counsel described in Section 9.5;
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(vii) certified copies of resolutions of the Board of Directors of
the Buyer approving the transactions set forth in this Agreement;
(viii) a certificate of incumbency for the officers of the Buyer;
and
(ix) certificates of compliance or certificates of good standing of
Buyer as of the most recent practicable date, from the Secretaries of
State of Delaware and Illinois.
11.6 Books and Records. All Business Records in the possession or under
the control of the Seller, including lists of suppliers and customers of the
Business, shall be delivered to and become the property of the Buyer on Closing
except to the extent required by law to be retained by the Seller or as
otherwise provided in this Agreement, in which case they shall be made available
by the Seller to the Buyer and its authorized representatives for inspection and
copying during the period of five years following the Closing Date.
11.7 Other Documents. Each party shall deliver to the other on the
Closing Date such other documents, certificates, schedules, agreements and
instruments called for by this Agreement at such time.
11.8 Further Assurances of the Seller. The Seller shall from time to time
at the request of the Buyer, and without further consideration, execute and
deliver such instruments of transfer, conveyance and assignment in addition to
those issued pursuant to Section 11.5 hereof, and take such other actions, as
may be reasonably necessary to transfer, convey, assign to and vest in the
Buyer, and to put the Buyer in possession of, the Purchased Assets.
11.9 Further Assurances of the Buyer. The Buyer shall from time to time
at the request of Seller and without further consideration, execute and deliver
such instruments of assumption in addition to those issued pursuant to Section
11.5 hereof, and take such other actions, as may be reasonably necessary to
assume the Assumed Liabilities.
11.10 State Filings:
(a) The Seller and the Buyer will cause the preparation, execution and
filing of such documentation as is required for compliance with the
Illinois Responsible Property Transfer Act, 1988 ("IRPTA") including the
Illinois Environmental Disclosure Document for Transfer of Real Property,
and Buyer shall obtain any necessary acknowledgement by Buyer's lender.
Each of Buyer and Seller warrants that the information it provides for such
certificates will be true. Pursuant to Section 4(b) of the IRPTA, Buyer and
Seller shall waive the time period for delivery and agree to cooperate to
ensure filing as required under this Section 11.10.
(b) The Seller and Buyer will execute and deliver, and the Buyer shall
record:
(i) the Real Estate Transfer Declaration required by the Illinois
Department of Revenue under the Illinois Real Estate Transfer Tax Act;
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(ii) the Real Estate Transfer Declaration required for recordation
of the Deed to real property purchased by Buyer.
12. ENVIRONMENTAL MATTERS
12.1 Definitions.
(a) "Accepted Environmental Conditions" means any and all conditions
on, in, at or under the Premises, including the presence and concentrations
of Hazardous Materials in the soil and groundwater, whether known or
unknown, including but not limited to the conditions disclosed in the
Environmental Reports (as defined herein).
(b) "Accepted Remediation Obligations" means all obligations to
undertake remediation (or to reimburse an Environmental Authority or other
party for the cost of remediation) of the Premises (whether soil, surface
water, groundwater or other components) under any Environmental Law that is
required by any Environmental Authority or remediation of the Premises
required under any final order or judgment in an action by a third party
against the Buyer or the Seller due to the Accepted Environmental
Conditions. Such obligations include all related expenses and the amount of
any civil penalty or fine, court costs and attorney's fees, fees for
witnesses and experts, and costs of investigation and preparation for
defense of any Administrative Notice or of any claim or any Proceeding, or
other charge imposed by any Environmental Authority (i) related to the
foregoing, or (ii) arising out of or related to Buyer's operations after
the Closing Date. Accepted Remediation Obligations will extend to land,
groundwater or surface water adjacent to the Premises only to the extent
encompassed in the remediation required by such Environmental Authority, or
required under a final order or judgment in a third party action, and
resulting from migration of contaminants from the Premises.
(c) "Affiliate" means any Person directly or indirectly controlling,
controlled by or under common control with any other Person, "control"
being determined according to legal principles developed under the
Securities Act of 1933, as amended.
(d) "Buyer Indemnified Environmental Liabilities" means any and all
obligations to pay the amount of any judgment or settlement, the cost of
complying with any settlement, judgment or order for injunctive or other
equitable relief, the cost of compliance, cleanup, remediation, Response or
other corrective action in response to any notice, demand or request from
an Environmental Authority, including without limitation a notice inviting
comment ("Administrative Notice"), the amount of any civil penalty or
criminal fine, and any court costs and reasonable amounts for attorney's
fees, fees for witnesses and experts, and costs of investigation and
preparation for defense of any Administrative Notice or of any claim or any
Proceeding, regardless of whether such Proceeding is threatened, pending or
completed, that have been or may be asserted against or imposed upon Buyer,
any Affiliate of Buyer, or any property used in the Business at any time
before the Closing, that is not within the scope of the Accepted
Remediation Obligations and results from the following:
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(i) failure of Seller to comply at any time before the Closing with
all Environmental Laws;
(ii) a disposal at any time before the Closing of any Hazardous
Waste at, on, in, under or in any way affecting any site or facility
adjacent to the Premises, and the cost of any permitting, financial
assurance, closure and post-closure requirements, fines, penalties or
other assessments imposed by any Environmental Authority with respect to
any cumene catalyst charge disposed of on the Premises by Seller,
including the removal and disposal of such catalyst by Seller but not
including any remediation of the Premises otherwise within the
description of Accepted Remediation Obligations;
(iii) fines or penalties for failure to register or otherwise
report the presence at any time before the Closing of underground
storage tanks, as defined in RCRA or in any applicable Environmental
Law, on, in, at, or under the Premises for which the Buyer is held
liable;
(iv) off-site disposal of Hazardous Materials or Hazardous Waste by
the Seller;
(v) violations of terms and conditions of environmental Permits
issued to Seller that directly result in any claim or proceeding being
brought against Buyer;
(vi) any failure of the Seller to perform its obligations under
Sections 12.5, 12.6 or 14.1; or
(vii) any and all claims for injury or damage to persons or
property (other than the Purchased Assets) arising out of exposure to
Hazardous Materials or Hazardous Waste that (A) occurred on or before
the Closing Date or (B) resulted from operations at the Premises on or
before the Closing Date.
(e) "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
(f) "Environmental Authority" means any department, agency, or other
body or component of any federal, state or local government that exercises
any form of jurisdiction or authority under any Environmental Law.
(g) "Environmental Authorization" means any license, permit, order,
approval, consent, notice, registration, filing or other form of permission
or action required under, any applicable Environmental Law.
(h) "Environmental Laws" means all federal, state and local laws
(including common or decisional law) and regulations relating to pollution
or protection of human health or the environment (including without
limitation ambient air, surface, water, ground water, wetlands, land
surface or subsurface strata), including laws and regulations relating to
emissions,
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discharges, Releases or threatened Releases of Hazardous Materials or Hazardous
Waste, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of, or recordkeeping
regarding, Hazardous Materials or Hazardous Waste.
(i) "Environmental Reports" means the reports of investigations or
audits of environmental conditions on the Premises prepared by ETA, Inc.,
in September, 1985 (entitled "Environmental Audit of the Clark Oil &
Refining Corporation Chemical Plant"), and by Prairie Environmental
Specialists, Inc., in December, 1991 (entitled "Report of Findings -- Phase
I Hydrogeologic Site Assessment -- BTL SPECIALTY RESINS, 131st Street
Plant, Blue Island, Illinois").
(j) "FIFRA" means the Federal Insecticide, Fungicide, and Rodenticide
Act, as amended.
(k) "Hazardous Materials" means chemicals, pollutants, contaminants,
wastes and toxic substances, including:
(i) Hazardous substances, as defined in CERCLA or in any
Environmental Law;
(ii) Chemical substances and mixtures, as defined in TSCA or in any
Environmental Law;
(iii) Pesticides, as defined in FIFRA or in any Environmental Law;
and
(iv) Crude oil or fractions thereof, gasoline or any other
petroleum product or byproduct.
(l) 'Hazardous Waste" means solid or hazardous waste, as defined in
RCRA or in any Environmental Law.
(m) "Person" means any government, natural person, corporation,
partnership or other legal entity.
(n) "Proceeding" means any judicial action, suit or proceeding, civil
or criminal, any administrative proceeding, formal or informal, including
any process following upon an Administrative Notice, any investigation by a
governmental authority or entity, including without limitation a grand
jury, and any arbitration, mediation or other non-judicial process for
dispute resolution.
(o) "RCRA" means the Resource Conservation and Recovery Act, as
amended.
(p) "Release" means "release" as defined in CERCLA or in any
Environmental Law.
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(q) "Response" means "response" as defined in CERCLA or in any
Environmental Law.
(r) "TSCA" means the Toxic Substances Control Act, as amended.
12.2 Buyer's Agreement Regarding Accepted Environmental Conditions.
Buyer acknowledges that Seller has provided Environmental Reports
pertaining to the Accepted Environmental Conditions, but it is understood the
Buyer is purchasing the Premises including Accepted Environmental Conditions
based solely upon its own due diligence investigation and not because of or in
reliance upon any representation made by Seller or any officer, agent or
employee of Seller to Buyer except for the Buyer's reliance on the Seller's
representations in Section 12.3. In the event of any inaccuracy or
incompleteness of any survey, environmental reports, or other report prepared by
a third party, Seller shall not be liable therefor. The Buyer acknowledges that
the Seller makes no indemnification and will assume no liability or obligation
regarding Accepted Remediation Obligations, which the Buyer agrees to assume and
agrees to indemnify Seller with respect to under Section 12.4. The Buyer will
not assert against the Seller any claim for, or seek contribution from the
Seller with respect to (under CERCLA or other law), the costs of remediation of
the Accepted Remediation Obligations or expenses related thereto. Seller
acknowledges that Buyer will assume no liability or obligation in connection
with any Buyer Indemnified Environmental Liability other than the Accepted
Remediation Obligations.
12.3 Additional Seller Representations.
(a) The Seller represents and warrants that since November 30, 1994:
(i) No reportable Release of Hazardous Materials or Hazardous Waste
in, at or under the Premises has occurred;
(ii) The Seller has complied with all applicable Environmental Laws
in the conduct of the Business in all material respects; and
(iii) The Seller has no actual knowledge of any other
non-reportable Release of Hazardous Materials or Hazardous Waste
occurring at the Premises or any property under a Lease since November
30, 1994 that would reasonably be expected to have a material adverse
effect.
(b) To Seller's knowledge, based on information received by Clark Oil
& Refining Corporation, any cumene catalyst previously disposed of by Clark
Oil & Refining Corporation at the Premises was removed and disposed of by
such corporation off-site.
12.4 Environmental Indemnifications.
(a) The Seller shall indemnify and save harmless the Buyer from any
Buyer Indemnified Environmental Liability.
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(b) The Buyer shall indemnify and save harmless the Seller from any
liabilities or obligations of any kind or nature whatsoever, whether
accrued, absolute, contingent or otherwise, known or unknown, arising out
of or in connection with Buyer's failure to perform the Accepted
Remediation Obligations, or from the ownership and operation of the
Business or use of the Purchased Assets and the Premises as to matters
arising from circumstances or events occurring after the Closing Date. Such
indemnification shall extend to the amount of any judgment or settlement,
the cost of complying with any settlement, judgment or order for injunctive
or other equitable relief, the cost of compliance, cleanup, remediation,
Response or other corrective action in response to any notice, demand or
request from an Environmental Authority, including without limitation an
Administrative Notice, the amount of any civil penalty or criminal fine,
and any court costs and reasonable amounts for attorney's fees, fees for
witnesses and experts, and costs of investigation and preparation for
defense of any Administrative Notice or of any claim or any Proceeding,
regardless of whether such Proceeding is threatened, pending or completed,
that have been or may be asserted against or imposed upon the Seller or any
Affiliate of the Seller.
(c) The procedures for indemnification under this Section shall be
those specified under Section 15 of this Agreement, except that the minimum
claims requirement under Section 15.6 will not apply.
12.5 Resin-related Materials.
(a) Seller represents and warrants that no resin products have been
manufactured in the conduct of the Business since approximately 1990.
Seller acknowledges that Buyer does not intend to manufacture resins at the
Premises or to purchase any resin products, stocks, or other chemicals,
substances, or materials maintained on the Premises for the purpose of, or
connected with, manufacturing or testing resin materials. Seller shall
remove, or cause to be removed, from the Premises, at its sole expense, all
materials, reagents, ingredients, stocks, and any other chemicals
maintained on the Premises for, the manufacture or testing of resin
materials (collectively, the "Resin Materials"). Further, Seller shall
dispose of the Resin Materials in a lawful manner in compliance with
Environmental Laws, and shall timely and properly make and maintain all
reports required by Environmental Laws regarding such disposal. The Seller
shall provide copies of all such reports to Buyer at Buyer's request. The
removal of all Resin Materials from the Premises shall be complete prior to
the Closing Date.
(b) In the course of removal of the Resin Materials, the Seller shall
use its best efforts to prevent any Release of such Resin Materials to the
environment, particularly to the air, soil or water within the Premises. If
a Release of Resin Materials occurs, Seller shall timely make any reports
required by Environmental Laws, and shall promptly notify Buyer and provide
to Buyer copies of all such reports. Further, Seller shall, at its sole
expense, promptly undertake the removal from the Premises of all Resin
Materials released within the Premises, that occurs in the course of the
removal.
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(c) Transfer of the Premises shall be deemed to constitute a
representation and warranty by the Seller that all Resin Materials have
been removed and disposed of in accordance with this Agreement.
12.6 AMS Tower.
(a) For the purpose of this section, the "AMS Tower" is that certain
equipment, fixtures, and appurtenances (and any residue chemicals contained
therein) located on the Premises, previously used for the manufacture of
alpha methyl styrene. Seller shall cause the removal and disposal of the
AMS Tower prior to the Closing Date at Seller's expense. Seller shall
dispose of the AMS Tower in a lawful manner in compliance with
Environmental Laws, and shall timely and properly make and maintain all
reports required by Environmental Laws regarding such disposal. The Seller
shall provide copies of all such reports to Buyer at Buyer's request.
(b) In the course of removal of the AMS Tower, the Seller shall use
its best efforts to prevent any Release of any Hazardous Materials or
Hazardous Waste to the environment, particularly to the air, soil or water
within the Premises. If such a Release occurs, Seller shall timely make any
reports required by Environmental Laws, and shall promptly notify Buyer and
provide to Buyer copies of all such reports. Further, Seller shall, at its
sole expense, promptly undertake the removal from the Premises of all such
contaminants Released within the Premises, that occurs in the course of the
removal.
(c) Transfer of the Premises shall be deemed to constitute a
representation and warranty by the Seller that the AMS Tower has been
removed and disposed of in accordance with this Agreement.
13. AGREEMENT NOT TO COMPETE; POST-CLOSING INSURANCE
13.1 Agreement Not to Compete. For a period of five years after the
Closing Date, the Seller shall not carry on, nor maintain an interest, direct or
indirect, in any corporation, firm or other entity which carries on, within the
United States of America, the business of producing or selling phenol, acetone
or byproducts thereof. However, the Seller may hold and purchase less than a
controlling interest in a corporation whose shares are listed for trading on a
stock exchange and whose sales of the above-mentioned products represent less
than 10% of the sales of such corporation, if the Seller provides the Buyer with
a nondisclosure agreement executed by the Seller in which the Seller and its
employees agree not to disclose any confidential information relating to the
Business to such entity.
13.2 Post-Closing Liability Insurance. Seller agrees that if Seller
continues to maintain after the Closing Date liability coverage for some or all
of the risks currently insured against with respect to the Business (so-called
"tail coverage"), Seller will attempt to cause its insurer to add Buyer as an
additional named insured on such policy, provided the same can be accomplished
at no material additional cost to the Seller (or if the Buyer pays the amount of
the cost in excess of non-material charges). If the Buyer is added to such
policy, the Seller agrees to provide (or cause the insurer to provide) Buyer at
least 30 days' prior notice of the cancellation of such policy.
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14. REMOVAL OF PHENOL FORMALDEHYDE REACTOR
14.1 Removal of Phenol Formaldehyde Reactor. Following the Closing and on
or before January 1, 1996, the Seller may remove from the premises the 2,000
gallon phenol formaldehyde reactor and related parts and equipment located in
the former resin operations building on the Premises. In doing so, the Seller
shall coordinate such activities with the Buyer and shall comply with all rules
applicable to Premises invitees and any special requirements reasonably required
by the Buyer, including the maintenance of adequate liability insurance. Seller
shall provide reasonable notice to the Buyer and shall perform the activities
during regular business hours in a manner not to interfere with the Buyer's
operations. The Seller shall comply with all applicable laws in the conduct of
such activities and shall indemnify and hold the Buyer harmless from any loss,
liability or expense arising from such activities. The Seller shall dispose of
all debris generated by the removal and shall put the affected area in a "broom
clean" condition upon completion.
15. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; GENERAL
INDEMNIFICATION
15.1 Survival. The representations and warranties of the parties contained
in this Agreement or in any certificate or instrument delivered pursuant hereto
shall survive for two years following the Closing Date, except that the
representations and warranties of Seller in Section 3.10 shall survive until the
expiration of the applicable statute of limitations for recovery of the taxes
and other payments referred to therein.
15.2 General Indemnification by Seller. Seller shall indemnify, defend,
and hold harmless Buyer and its respective successors and assigns and the
directors, officers, employees, and agents of each (collectively, the "Buyer
Group"), at, and at any time after, the Closing, from and against any and all
demands, claims, actions, or causes of action, assessments, losses, damages,
liabilities, costs, and expenses, including reasonable fees and expenses of
counsel, other expenses of investigation, handling, and litigation, and
settlement amounts, together with interest and penalties (collectively, a "Loss"
or "Losses"), asserted against, resulting to, imposed upon, or incurred by the
Buyer Group, directly or indirectly, by reason of, resulting from, or arising in
connection with a claim by a third party based on any of the following:
(a) Any breach of any representation or warranty of Seller contained
in or made pursuant to this Agreement;
(b) Any failure by Seller to perform any of its covenants or
agreements contained herein;
(c) Excluded Liabilities;
(d) Any failure to comply with any "bulk sales" or similar laws
relating to notices to creditors.
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15.3 General Indemnification by Buyer. Buyer shall indemnify, defend, and
hold harmless Seller and its successors and assigns and the directors, officers,
employees, and agents of each (collectively, the "Seller Group"), at, and at any
time after, the Closing, from and against any and all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities, costs, and
expenses, including reasonable fees and expenses of counsel, other expenses of
investigation, handling, and litigation, and settlement amounts together with
interest and penalties (collectively, a "Loss" or "Losses"), asserted against,
resulting to, imposed upon, or incurred by the Seller Group, directly or
indirectly, by reason of, resulting from, or arising in connection with a claim
by a third party based on any of the following:
(a) Any breach of any representation or warranty of Buyer contained in
or made pursuant to this Agreement;
(b) Any failure by the Buyer to perform any of its covenants or
agreements contained in this Agreement;
(c) Any Loss under the federal Worker Adjustment and Retraining Act
arising our of or relating to actions taken by Buyer after the Closing; and
(d) Any of the Assumed Liabilities.
15.4 Notice of Claim. The party entitled to indemnification hereunder
(the "Claimant") shall promptly deliver to the party liable for such
indemnification hereunder (the "Obligor") notice in writing (the "Required
Notice") of any claim for recovery specifying in reasonable detail the nature of
the Loss, and, if known, the amount, or an estimate of the amount, of the
liability arising therefrom (the "Claim"). The Claimant shall provide to the
Obligor as promptly as practicable thereafter information and documentation
reasonably requested by the Obligor to support and verify the claim asserted,
provided that, in so doing, it may restrict or condition any disclosure in the
interest of preserving privileges of importance in any foreseeable litigation.
15.5 Defense.
(a) If the facts pertaining to the Loss arise out of the claim of any
third party (other than a member of the Buyer Group or Seller Group,
whichever is entitled to indemnification for such matter), the Obligor may
assume the defense or the prosecution thereof, including the employment of
counsel or accountants, at its cost and expense.
(b) The Claimant shall have the right to employ counsel separate from
counsel employed by the Obligor in any such action and to participate
therein, but the fees and expenses of counsel employed by the Claimant
shall be at its expense.
(c) The Claimant shall have the right to determine and adopt (or, in
the case of a proposal by Obligor, to approve) a settlement of such matter
in its reasonable discretion, except that Claimant need not consent to any
settlement that (1) imposes any nonmonetary obligation on the Claimant or
(2) the Obligor does not agree to pay in full. The Obligor shall not
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be liable for any settlement of any such claim effected without its prior
written consent, which shall not be unreasonably withheld.
(d) Regardless of whether the Obligor chooses to so defend or
prosecute such claim, all the parties hereto shall cooperate in the defense
or prosection thereof and shall furnish such records, information, and
testimony, and attend such conferences, discovery proceedings, hearings,
trials, and appeals, as may be reasonably requested in connection
therewith.
15.6 Limitations on Indemnification.
The provisions for indemnity under Sections 15.2(a) and 15.3(a), as the
case may be, shall be effective only when the aggregate amount of all Losses for
which indemnification is sought from the Seller or the Buyer, under Sections
15.2(a) or 15.3(a), respectively, exceeds $75,000.00 in which case the Claimant
shall be entitled to indemnification of the Claimant's Losses in excess thereof.
The indemnification obligations of the Seller or the Buyer pursuant to Sections
12,4, 15.2(a) or 15.3(a), as the case may be, shall be effective only until the
dollar amount paid by the obligor in respect of the Losses indemnified against
under such Sections aggregates to an amount equal to the Cash Payment portion of
the purchase price under this Agreement.
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15.7 Remedies.
(a) With respect to the environmental matters addressed in Section 12,
the remedies of that Section shall be exclusive. In furtherance of the
foregoing, effective as of the Closing each party will be deemed by this
Agreement to waive, to the fullest extent permitted under applicable law,
any and all other rights, claims and causes of action it might have from
and after the Closing, against the other party or its officers, directors,
employees, agents, representatives and affiliates relating to the
environmental matters addressed in Section 12.
(b) As to all matters not within the scope of Section 15.7(a), the
indemnification provisions of this Section 15 shall not be deemed exclusive
and shall not prejudice any other rights or remedies, at law or in equity,
of any party under this Agreement with respect to any matter relating to
the terms, provisions, covenants or conditions of this Agreement or any
transaction contemplated hereby except that each party agrees that any
action for money damages may not be brought unless and until the claims
meet or exceed the claim minimums specified in Section 15.6.
16. TERMINATION AND ABANDONMENT
16.1 Termination by the Seller. Unless extended by mutual written
consent, this Agreement may be terminated by the Seller if (i) the Seller is
then in compliance with its obligations under this Agreement and (ii) the
Closing has not occurred by June 15, 1995.
16.2 Termination by the Buyer. This Agreement may be terminated the Buyer
at any time if it in good faith determines that any condition to Buyer's
obligation to purchase the assets will not or is unlikely to be satisfied by
June 15, 1995, provided that the failure of condition did not result from the
breach by the Buyer of its obligations under Section 10.11.
16.3 Mutual Consent. This Agreement may be terminated, and the purchase
and sale of the Purchased Assets abandoned, at any time before the Closing Date
by mutual consent of the parties.
16.4 Effect of Termination. Upon any permitted termination pursuant to
the provision of this Section, both parties shall be relieved of all further
obligations under this Agreement, except for the Buyer's obligations regarding
the Seller's confidential information as provided in Section 5 hereof.
17. MISCELLANEOUS PROVISIONS
17.1 Expenses. Except as otherwise provided herein, the parties shall
each pay their own legal and accounting fees and other out-of-pocket expenses
incurred incident to the preparation and carrying out of this Agreement and the
transactions herein contemplated.
17.2 Brokers. Each of the Seller and the Buyer represent that it has
dealt with no broker or finder in connection with any of the transactions
contemplated by this Agreement and, insofar
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as it knows, no broker or other person is entitled to any commission or finder's
fee in connection with any such transaction. Each party agrees to indemnify and
hold the other party harmless against any loss, liability, damage, cost or
expense incurred by the other by reason of any brokerage commission or finder's
fee alleged to be payable because of any act, omission or statement of the
indemnifying party.
17.3 Agency. Nothing in this Agreement shall constitute either party as
the agent or representative of the other or authorize either party to bind or
incur any obligation on behalf of the other, except as expressly stated herein
or otherwise authorized in writing.
17.4 Notices. Any notice, request, instruction or other document to be
given hereunder by either party to the other shall be in writing and effective
when delivered personally or sent by first class mail, postage prepaid, as
follows:
<TABLE>
<S> <C>
TO THE SELLER: BTL SPECIALTY RESINS CORP.
2112 Sylvan Avenue
Toledo, Ohio 43606
Attention: Chairman
With a copy to:
McMillan Binch Barristers & Solicitors
South Tower, Suite 3800
Royal Bank Plaza
200 Bay Street
Toronto, Ontario, Canada MSJ 2J7
TO THE BUYER: JLM CHEMICALS, INC.
3350 West 131st Street
Blue Island, Illinois 60406
Attention: President
With a copy to:
JLM INDUSTRIES, INC.
8675 Hidden River Parkway
Tampa, Florida 33637
Attention: General Counsel
</TABLE>
or to such other addresses or other persons as may be designated in writing by
either of the parties, by notice given as aforesaid.
17.5 Headings. The headings of the several sections of this Agreement are
inserted for the convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
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17.6 Counterparts. This Agreement may be executed in one or more
counterparts, and when so executed each counterpart shall be deemed to be an
original, and said counterparts together shall constitute one and the same
instrument.
17.7 Binding Nature. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their successors and assigns.
17.8 Waiver. No action taken pursuant to this Agreement, including any
investigation by or on behalf of either party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, condition or agreement contained herein. Waiver of the breach of any
one or more provisions of this Agreement shall not be deemed or construed to be
a waiver of other breaches or subsequent breaches of the same provisions.
17.9 Entire Agreement. This Agreement and the Exhibits hereto constitute
the entire agreement between the parties pertaining to the subject matter
contained herein and supersede all prior and contemporaneous negotiations,
agreements, representations, and understandings of the parties, including, the
terms of a letter of intent, dated March 15, 1995. No supplement, modification,
or amendment of this Agreement shall be binding unless executed in writing by
the party sought to be bound.
17.10 Good Faith. Each of the parties hereto agrees that it shall act in
good faith in an attempt to cause all the conditions precedent to its respective
obligations to be satisfied and to transfer the Purchased Assets and assume the
Assumed Liabilities.
17.11 Applicable Law. This Agreement shall be governed by the laws of
Illinois, without reference to choice of law principles.
17.12 Severability. Should any provision of this Agreement be determined
to be invalid, it shall be severed from this Agreement and the remaining
provisions of the Agreement shall remain in full force and effect.
17.13 Rules of Construction. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections or
subsections, subsections or clauses are references to articles, sections,
subsections or clauses of this Agreement.
(c) The table of contents and headings contained herein are solely for
convenience of reference and shall not constitute a part of this Agreement
nor shall they affect its meaning, construction or effect.
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(d) Each party hereto and its counsel have reviewed and revised (or
requested revisions of) this Agreement, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a
particular party shall not be applicable in the construction and
interpretation of this Agreement or any exhibits hereto or amendments
hereof.
(e) As used in this Agreement, "including" is illustrative and not
exclusive.
17.14 Disclosure. No disclosure with respect to the provisions of this
Agreement shall be made to suppliers or customers of the Business prior to the
closing without the mutual consent of the parties, except (i) as required by
law, (ii) in connection with a third party consent necessary for the
consummation, (iii) to the Union, or (iv) to each party's agents and advisors
and the Buyer's prospective lender and their representatives and the Seller's
lenders and their representatives. After the Closing, the Seller shall not
disclose the amount of the Cash Payment except as required by law or with the
written consent of the Buyer. The parties will agree on the text of a press
release to be issued upon Closing.
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WITNESS the due execution of this Agreement by the parties as of the date
first set forth above.
BTL SPECIALTY RESINS CORP. JLM CHEMICALS, INC.
By: By:
------------------------------- -----------------------------------
Title: Title:
---------------------------- ------------------------------
53
<PAGE> 60
Amendment No. 1
to Asset Purchase Agreement
This Amendment No. 1 to the Asset Purchase Agreement dated June 8,
1995, between BTL Specialty Resins Corp. ("BTL"), and JLM Chemicals, Inc.
("JLM") (the "Purchase Agreement"), is made as of the date of the Purchase
Agreement. Capitalized terms that are defined in the Purchase Agreement and
not otherwise defined herein are used with the meanings ascribed to them in the
Purchase Agreement.
In the Purchase Agreement, JLM has agreed, subject to the Purchase
Agreement, to assume the obligations of BTL to the extent the obligations arise
from the conduct of the Business during the Interim Period or thereafter.
BTL is party to three contracts assigned to JLM under the Purchase
Agreement that by their terms required the consent of the other party in order
for BTL to assign the contracts to JLM. The contracts are:
(i) The Car Service Agreement dated June 28, 1986,
including all Riders to such Agreement, and as amended to
the date hereof between BTL and Union Tank Car Company
("UTC") (the "UTC Agreements"); and
(ii) (1) The Engineering Agreement dated June 6, 1990,
between BTL and UOP, (2) the Engineering Design Services
Q-Max Process Unit Agreement, dated November 21, 1994,
between BTL and UOP, (3) the Catalytic Condensation Process
License Agreement dated October 1, 1986, between BTL and
UOP, (v) the Q-Max Process License Agreement dated November 21,
1994, between BTL and UOP, and (5) the Service Agreement dated
January 1, 1988 between BTL and UOP, each as modified or amended
prior to the date of this consent (the "UOP Agreements"); and
(iii) (1) The License Agreement dated February 21, 1963, as
amended (including by amendments dated August 22, 1966 and
October 31, 1968) and (2) the Supplemental License Agreement
having an effective date of June 1, 1978 (as it might have
been amended subsequently) between BTL and Allied Signal Inc.
("Allied"), as modified or amended prior to the date hereof,
which agreements relate to the license of Allied's process
technology, and related patent and patent applications, for
the production of phenol and acetone from
<PAGE> 61
cumene, as modified or amended prior to the
date hereof (the Allied Agreements").
As a condition to the granting of their consents, UTC, UOP and
Allied have required JLM to assume all obligations (whether relating to events
prior or subsequent to the Effective Date). JLM has required, as a condition to
assuming the pre-Effective Date obligations, that the Purchase Agreement be
amended to assure that BTL indemnifies JLM against any obligations assumed by
JLM pursuant to the Consents that are not Assumed Liabilities.
In consideration of JLM's assumption of obligations pursuant to
the Consents, the parties agree as set forth herein:
1. Section 15.2 of the Purchase Agreement shall be amended to
delete the period at the end of subsection (d) and replace it with a semicolon,
and by adding a new subsection (e) to provide in full as follows:
"(e) any matters arising under (i) the UTC
Agreement or (ii) the UOP Agreements or (iii)
the Allied Agreements pertaining to periods
prior to the Effective Date."
2. The provisions of Section 15.6 regarding Minimum Loss
requirements for indemnification claims against BTL and a limit on BTL's
obligation to indemnify shall not apply to Losses arising under Section
15.2(e).
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the date of the Purchase Agreement
BTL Specialty Resins Corp.
By /s/
-----------------------------
Its Chairman
--------------------------
JLM Chemicals, Inc.
By /s/
-----------------------------
Its President
<PAGE> 1
EXHIBIT 10.7
PROPANE/PROPYLENE AGREEMENT
This Agreement, dated this 16th day of September, 1985, is made by and
between CLARK OIL & REFINING CORPORATION, a Wisconsin corporation ("Vendor"),
and B.T.L. of Illinois, INC., a corporation formed under the laws of the State
of Illinois ("Purchaser").
In order to induce the parties hereto to enter into the Asset Purchase
Agreement (as herein defined), and as additional consideration therefor, the
parties hereto agree as follows:
1. Definitions
1.1 Propane/Propylene. "Propane/Propylene" shall mean the product used
as a feedstock in Purchaser's cumene unit on Purchaser's property.
1.2 Vendor's Property. "Vendor's Property" shall mean the refinery
located generally in Blue Island, Illinois.
1.3 Purchaser's Property "Purchaser's Property" shall mean the chemical
plant purchased by Purchaser from Vendor, located generally in Blue Island,
Illinois.
1.4 Point of Delivery. "Point of Delivery" shall mean that point at
which Vendor shall deliver Propane/Propylene to Purchaser, which shall be at
the boundary of Purchaser's Property, or at such other point as may be
subsequently agreed upon in writing by the parties.
1.5 Force Majeure. "Force Majeure" shall mean any act of God or the
elements, accident, casualty, labor disturbances, unavailability or delays in
delivery of any product, labor, fuel, service or materials, failure or
breakdown of Vendor's Facilities or Purchaser's Facilities, or any other event
or condition beyond the reasonable control of Vendor or Purchaser.
1.6 Asset Purchase Agreement. "Asset Purchase Agreement" shall mean
the agreement by and among Clark Chemical Corp., Vendor and Purchaser dated
July 3, 1985, as amended.
2. Sale, Delivery and Purchase of Propane/Propylene
2.1 Quantities. For the full term of this Agreement (as defined in
Paragraph 3 hereof), Vendor shall sell and deliver to Purchaser and Purchaser
shall buy from Vendor, Propane/Propylene to be used as a feedstock in
Purchaser's cumene unit on Purchaser's Property.
2.2 Deliveries. Vendor shall offer to sell to Purchaser such
quantities of Propane/Propylene as are needed as a feedstock for Purchaser's
existing cumene unit on Purchaser's Property.
<PAGE> 2
Said Propane/Propylene shall be measured with a positive displacement meter to
be installed on Vendor's Property.
3. Term. The term of this Agreement shall commence on the Closing
Date of the Asset Purchase Agreement and shall continue for a minimum period of
twenty (20) years ("Term"). Notwithstanding anything in the preceding sentence
to the contrary, at any time after the First two years of the Term, (a) Vendor
shall have the right to terminate this Agreement upon thirty (30) days prior
written notice if it sells all, or substantially all, of Vendor's Property or
permanently discontinues the operation thereof, and (b) Purchaser shall have the
right to terminate this Agreement upon thirty (30) days prior written notice if
it sells all or substantially all, of Purchaser's Property or permanently
discontinues the operation thereof.
4. Price and Payment.
4.1 Price. During the Term the price to be charged by Vendor to
Purchaser per gallon of Propane/Propylene delivered shall be equal to the sum
of the values of each of the components, Propane and Propylene, and shall be
calculated according to the concentration of each of the components in the
delivered stream. Each week Vendor shall sample the Propane/Propylene
delivered to Purchaser. Vendor shall analyze each sample with a laboratory
chromatograph to determine the Propane and Propylene content thereof. The
Propane content of each sample shall be multiplied by the metered volume for
the period sampled to determine the price to be charged by Vendor to Purchaser
as hereinabove set forth. The Propylene content and price shall be determined
in a like manner.
The price for both the Propylene and Propane shall be individually
quoted by Vendor no later than the first day of the month preceding the month
of delivery. The price quote by Vendor for Propane shall be equal to the price
Vendor is willing to pay to Purchaser for any Propane repurchased by Vendor
from Purchaser. Purchaser shall have until the fifteenth day of the month
preceding the month of delivery to accept the price and nominate the quantity
of Propane/Propylene that it will purchase at the quoted price. It is the
intent of Vendor that the price quoted to Purchaser for all Propane/Propylene
to be sold and delivered under this Agreement shall be at the alternative
alkylation value thereof to Vendor. Failure on the part of Purchaser to accept
an offer from Vendor during any month shall not terminate this Agreement.
4.2 Payment. Vendor shall invoice Purchaser on or before the 10th day
of each month for all Propane/Propylene sold and delivered to Purchaser during
the preceding calendar month. Purchaser shall pay said invoices on or before
the 15th day of
2
<PAGE> 3
the month in which they are rendered. Invoices that are not paid on or before
the due date shall bear interest at the rate of 1 1/2% per month. With each
invoice, Vendor shall furnish to Purchaser, a written statement showing the
actual volume and content of the Propane/Propylene delivered to Purchaser
during the preceding calendar month.
5. Passage of Title and Measurement.
5.1 Title. Title and risk of loss to Propane/Propylene shall pass to
Purchaser at the time of delivery and at the Point of Delivery.
5.2 Measuring Devices. Vendor shall maintain, repair and replace the
laboratory chromatograph and the positive displacement meters by performing
such routine checks and inspections as are deemed advisable in conformance with
standard industry practices. Vendor shall notify the Purchaser before making
any calibration tests so that the Purchaser may have a representative present.
Purchaser shall have the right at any and all reasonable times to check and
inspect charts and other records or measurements applicable to such
instruments.
5.3 Measurement of Propane/Propylene. The measurement of
Propane/Propylene delivered hereunder shall be performed at the expense of
Vendor and shall be computed in conformance with standard industry practices.
If the Purchaser shall have reason to question the accuracy of any gauge,
device or data used in measuring or computing either the volume or the
composition of the Propane/Propylene delivered hereunder at any time, Purchaser
shall so notify Vendor in writing. Within a reasonable time thereafter, such
gauge, device or data shall be tested in the presence of both parties, and if
such test shall reveal an inaccuracy of two percent (2)% or greater, the
quantity shall be recalculated and corrected for the period beginning fifteen
(15) days immediately prior to the date of said notice (or beginning on the
date such inaccuracy commenced, if ascertainable). If the gauge, device or
data are found to be accurate within manufacturer's meter accuracy, not to
exceed two percent (2%), then Purchaser shall bear the expense of tests made at
its request; otherwise, Vendor shall be responsible for the costs of such
tests.
6. Taxes. All sales, utility, or other tax, excise or assessment upon
or measured by Propane/Propylene sold or delivered to Purchaser hereunder, now
in existence or authorized in the future for collection by any governmental
agency or duly constituted authority, shall be paid entirely by Purchaser.
Should Vendor be required at any time to pay said sales or other tax, excise on
assessment on behalf of the Purchaser, Vendor shall notify Purchaser in
writing, stating the amount thereof, and Purchaser shall reimburse Vendor said
amount within fifteen (15) days from date of invoice. Invoices that are not
paid on or
3
<PAGE> 4
before the due date shall bear interest at the rate of 1 1/2% per month.
7. Permits, Rules and Regulations. The parties shall comply with all
laws, rules and regulations, whether federal, state or local, which are now or
which may in the future become applicable to the processing, sale, delivery and
use of the Propane/Propylene.
8. Laws and Force Majeure.
8.1 Laws and force Majeure. The provision of this Agreement shall be
subject to all valid and applicable federal, state, county, municipal and other
governmental laws, executive order, ordinances, rules, regulations and acts, and
neither party shall be held liable for damages for failure to comply herewith,
if compliance is prevented by, or the failure is the result of, any such law,
order, ordinance, rule, regulation or act, or due to Force Majeure.
8.2 Effect on Operations. If either party's operations are at any time
prevented or affected by any of the causes referred to in Paragraph 8.1, the
performance of its operations to the extent so prevented or affected shall be
excused without liability thereunder, and this Agreement shall continue in full
force and effect until either party is permitted to resume its operations and
thereafter for the balance of the Term hereof.
9. Default.
9.1 Default by Vendor. In the event that Purchaser concludes Vendor at
any time is failing to perform or observe any of the provisions of this
Agreement required to be performed or observed by Vendor, Purchaser shall
notify Vendor in writing of the facts relied upon as constituting a breach
hereof, and Vendor, if in default, shall have ninety (90) days after receipt of
such notice in which to complete or substantially complete compliance with
provisions. Purchaser shall have the right to terminate this Agreement upon
written notice to Vendor if Vendor fails to complete or substantially complete
such compliance efforts within the ninety (90) day period, unless such failure
is excused by the provisions of Section 8 hereof.
9.2 Default by Purchaser. In the event that Vendor concludes Purchaser
at any time is failing to perform or observe any of the provisions of Sections
4.2, 6, 7, 10 and 13.1 of this Agreement required to be performed or observed
by Purchaser, Vendor shall notify Purchaser in writing of the facts relied upon
as constituting a breach hereof, and Purchaser, if in default, shall have
ninety (90) days after receipt of such notice in which to complete or
substantially complete compliance with such provisions. Vendor shall have the
right to terminate this Agreement upon written notice to Purchaser if Purchaser
fails to complete or substantially complete such compliance efforts within
4
<PAGE> 5
the ninety (90) days period, unless such failure is excused by the provisions
of Section 8 hereof.
10. Indemnification. Purchaser shall defend, indemnify and hold
Vendor harmless from and against any and all claims, demands, actions,
proceedings, liability or losses, of whatsoever nature (including reasonable
attorney's fees) for injury or death to person(s) or for damage or loss to
property arising out of or caused by any act or omission by Purchaser or its
agents or representatives unless and to the extent such injury, damage or loss
is caused by the willful misconduct or negligence of Vendor. Vendor shall
defend, indemnify and hold Purchaser harmless from and against any and all
claims, demands, actions, proceedings, liability or losses, of whatsover nature
(including reasonable attorney's fees) for injury or death to person(s) or for
damage or loss to property arising out of or caused by an act or omission by
Vendor or its agents or representatives unless and to the extent that such
injury, damage or loss is caused by the willful misconduct or negligence of
Purchaser.
11. Assignment. Neither party hereto shall assign this Agreement in
whole or in part without first obtaining the consent, in writing, of the other
party, which consent shall not be unreasonably withheld, provided, however,
that Purchaser shall have the right to assign this Agreement without the
consent of Vendor to an affiliated or associated company, which assignment
shall not, however, release Purchaser from its obligations and liabilities
hereunder.
12. Notices. any notice to be given under this Agreement shall be in
writing and shall be deemed to have been properly given and received (i) when
delivered in person to the authorized representative of the party to whom the
notice is addressed, or (ii) on the date received as indicated on the return
receipt when sent by prepaid certified or registered mail, return receipt
requested, to the party to be notified at its address, as follows:
To Vendor: Clark Oil & Refining Corporation
7930 Clayton Road
St. Louis, Missouri 63117
Attention: John W. Samsel
To Purchaser: BTL, Inc.
3385 Harvester road
Burlington, Ontario L7N 3N2
Attention: David J.Greenway
Either party may change such representative or address by giving written notice
of said change to the other party.
5
<PAGE> 6
13. General Provisions.
13.1 Attorney's Fees. In the event either party brings an action to
enforce the terms and conditions of this Agreement or to declare its rights
hereunder, the prevailing party in such action, on trial or appeal, shall be
entitled to its reasonable attorney's fees, to be paid by the other party.
13.2 Successors. subject to Section 11 hereof, the provisions of
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns.
13.3 Express Obligations. All obligations of Vendor and Purchaser
under this Agreement are expressly stated, and no other obligations of
covenants are to be implied hereunder.
13.4 Entire Contract. This Agreement is intended by the parties to
constitute a complete and exclusive expression of their contract with respect
to the subject matter hereof.
13.5 Modifications. This Agreement shall not be changed or modified
except by a subsequent agreement in writing signed by both parties.
13.6 Waiver. The waiver by either party of a failure on the part of
the other party to perform in accordance with any of the terms and conditions
of this Agreement shall not be construed as a waiver of any future or
continuing failure, whether similar or dissimilar thereto.
13.7 Applicable Law. This Agreement shall be construed under and in
accordance with the laws of the State of Illinois.
The parties have executed this Agreement this 16th day of September,
1985.
CLARK OIL & REFINING CORPORATION
/s/
By:-----------------------------
B.T.L. OF ILLINOIS, INC.
/S/
By:-----------------------------
6
<PAGE> 7
[CLARK OIL & REFINING CORPORATION LETTERHEAD]
September 20, 1990
Mr. Wilfred J. Kimball
President
BTL Specialty Resins Corp.
3365 Harvester Road
Burlington, Ontario Canada L7N3N2
Dear Wilf:
Attached is an executed copy of a letter agreement modifying our
Propane/Propylene agreement dated September 16, 1985.
Yours Truly,
/S/ Richard P. Nelson
---------------------
Richard P. Nelson
Enclosure
<PAGE> 8
[BLT SPECIALTY RESINS CORP. LETTERHEAD]
September 14, 1990
Clark Oil & Refining Corporation
8182 Maryland Avenue
St. Louis, Missouri 63105
Attn: Mr. Richard P. Nelson
Vice President, Refining Operations
Dear Sirs:
Re: Propane/Propylene Agreement (the "Agreement") dated
September 16, 1985 between Clark Oil & Refining
Corporation and BTL Specialty Resins Corp.
(successor in interest to BTL of Illinois, Inc.)
We are writing to confirm our agreement that Section 2.1 of the Agreement
shall be deleted and replaced with the following:
2.1 Quantities. For the full term of this Agreement (as
defined in Paragraph 3 hereof), Vendor shall sell and
deliver to Purchaser and Purchaser shall buy from
Vendor, Propane/Propylene to be used as a feedstock
in Purchaser's cumene unit on Purchaser's Property.
Notwithstanding the foregoing, nothing herein shall
prevent Purchaser from purchasing up to 25% of its
annual Propane/Propylene requirements for the cumene
unit on the Purchaser's Property from sources other
than the Vendor.
Please evidence your agreement with the foregoing amendment by signing and
returning the enclosed copy of this letter to us.
Yours truly,
/s/ Wilfred J. Kimball
----------------------
Wilfred J. Kimball
Agreed to this 20 day of Sept., 1990.
Clark Oil & Refining Corporation
/s/ Richard P. Nelson
By: --------------------------
<PAGE> 1
EXHIBIT 10.8
Q-MAX (TM) PROCESS
LICENSE AGREEMENT
BETWEEN
BTL SPECIALTY RESINS CORP.
AND
UOP
FOR
Q-MAX PROCESS UNIT
BLUE ISLAND, ILLINOIS
<PAGE> 2
<TABLE>
<CAPTION>
CONTENTS
Article
<S> <C>
1 Definitions
2 Warranty
3 Grant-Forward of Patent Rights
4 Grant-Back of Patent Rights
5 Technical Information
6 Records of Operation
7 Royalties
8 Patent Infringement
9 Default
10 Termination
11 Assignment or Transfer
12 General Provisions
Schedule
A Definitions
B Royalties
</TABLE>
<PAGE> 3
THIS AGREEMENT, dated November 21, 1994, is made between BTL SPECIALTY
RESINS CORP., a corporation of Ontario, Canada ["LICENSEE"] and UOP, a
company organized and existing under the laws of the State of New York,
United States of America ["UOP"].
ARTICLE 1
DEFINITIONS
1.1 Certain words used in this agreement are defined in Schedule A.
ARTICLE 2
WARRANTY
2.1 UOP warrants that it has the right to grant to LICENSEE a license
under UOP's Patent Rights as set forth in Article 3.
ARTICLE 3
GRANT-FORWARD OF PATENT RIGHTS
3.1 Subject to the provisions of this agreement, UOP grants to LICENSEE a
nonexclusive, nontransferable license under UOP's Patent Rights to use
the Process in the Unit, to use in carrying out the Process in the
Unit any apparatus or catalysts therefor, and to export to, sell or
use in any country the products of the Process produced in the Unit.
ARTICLE 4
GRANT-BACK OF PATENT RIGHTS
4.1 LICENSEE grants to UOP and its Subsidiaries (i) the rights to (a) use
the Process, (b) any apparatus or catalysts for carrying out the
Process, and (c) export to, sell or use in any country the products of
the Process free from suit for any infringement of LICENSEE's Patent
Rights occurring during the life of LICENSEE's Patent Rights, and (ii)
the right to pass on the immunity described in (i) above to other
licensees of UOP.
ARTICLE 5
TECHNICAL INFORMATION
5.1 UOP's Technical Information shall be available to LICENSEE through UOP
or its nominee. LICENSEE shall only use UOP's Technical Information
furnished to
- 1 -
<PAGE> 4
LICENSEE directly or indirectly, in writing or otherwise, in
LICENSEE's operation of the Process in the Unit. LICENSEE shall not
duplicate or disclose to others such Technical Information; however,
LICENSEE may furnish portions of such Technical Information, to the
extent necessary for LICENSEE's operations hereunder, to others who
have entered into an appropriate agreement with UOP for the
protection of such Technical Information. UOP shall not be
unreasonable with respect to the provisions of any such agreement or
with respect to the approval of LICENSEE's selection of any party to
such agreement. LICENSEE shall not analyze any catalysts acquired
directly or indirectly from UOP for use in the Unit and LICENSEE
shall prevent others from acquiring from LICENSEE information
concerning or samples of such catalysts.
5.2 Article 5.1 shall not be construed as requiring UOP to furnish
Technical Information in the form of specific services such as
preparation of engineering design specifications or detailed design or
other services such as construction, computer utilization, operating,
training or software development services unless UOP is appropriately
compensated for such services. UOP is willing to furnish such services
pursuant to an agreement or agreements separate from this agreement
under provisions mutually satisfactory to LICENSEE and UOP. Upon
LICENSEE's request and subject to provisions similar to those then
being offered to others for similar services, UOP shall prepare and
furnish to LICENSEE engineering design specifications for the Unit.
5.3 LICENSEE's Technical Information shall be available to UOP. UOP shall
not duplicate or disclose to others LICENSEE's Technical Information
furnished to UOP directly or indirectly, in writing or otherwise,
except to the extent necessary in the performance of UOP's business.
5.4 The restrictions on use, duplication and disclosure in this Article 5
shall not apply to:
(i) Technical Information which was developed by the recipient and
was in the recipient's possession before its receipt from the
other party;
(ii) Technical Information which at the time of its disclosure to the
recipient is, or thereafter becomes through no act or failure to
act on the part of the recipient, part of the public domain; or
(iii) Technical Information which has been rightfully furnished to the
recipient by a third party without restriction on disclosure or
use.
The occurrence of any of the above exceptions shall not be construed
as an express or implied grant of any rights under any of either
party's patents. An individual feature of Technical Information shall
not be considered within the above exceptions merely because the
feature is embraced by more general information within the exceptions.
A combination of features of Technical
- 2 -
<PAGE> 5
Information shall not be considered within the above exceptions unless
the combination itself and its principle of operation are within the
exceptions.
ARTICLE 6
RECORDS OF OPERATION
6.1 LICENSEE will keep detailed and accurate records of the character and
amount of charge and products and operating conditions and catalysts
used in the Unit, and will keep such records as are necessary to
determine royalties payable hereunder, and will furnish copies thereof
to UOP at UOP's request. The amount of charge and products shall be
determined by accurate tank gauges or other methods of measurement
approved by UOP. UOP may, on reasonable notice and during business
hours, make such examinations as it may deem necessary to verify such
records.
ARTICLE 7
ROYALTIES
7.1 LICENSEE will pay royalties and provide statements to UOP as set forth
in Schedule B.
ARTICLE 8
PATENT INFRINGEMENT
8.1 LICENSEE will promptly advise UOP in writing of any claim of
infringement and of the commencement against it of any suit or action
for infringement of patents made or brought against LICENSEE and based
upon the use hereunder by LICENSEE of the Process in accordance with
designs and specifications furnished by UOP or approved by UOP in
writing.
8.2 UOP (i) will undertake at its own expense the defense of any such suit
or action and (ii) will hold LICENSEE free and harmless from any
damages or other sums that may be assessed in or become payable under
any decree or judgment by any court which results from such suit or
action; provided that the aggregate amounts that may become payable by
UOP under the provisions of (ii) above shall not in any event exceed
one-half (1/2) of the total royalties received by UOP under this
agreement. The provisions of (i) and (ii) above shall be the exclusive
remedy of LICENSEE in connection with patent infringement.
8.3 UOP will be fully responsible for and will have sole charge in the
defense of any such suit or action. LICENSEE will render UOP all
reasonable assistance that may be required by UOP in the defense of
such suit or action and LICENSEE shall have the right to be
represented therein by advisory counsel of its own selection and at
its own expense.
- 3-
<PAGE> 6
8.4 Neither UOP nor LICENSEE shall settle or compromise any such suit or
action without the written consent of the other party if the
settlement or compromise obliges the other to make any payment or part
with any property or assume any obligation or grant any licenses or
other rights by reason of such settlement or compromise.
ARTICLE 9
DEFAULT
9.1 If LICENSEE shall delay in paying royalties or providing statements to
UOP as provided in Article 7 or default on any other obligation under
this agreement, UOP may give written notice to LICENSEE specifying the
claimed particulars of such default. If such default is not remedied
within thirty (30) days after submission of such notice, UOP may (i)
terminate this agreement by giving written notice to LICENSEE, (ii)
assess a finance charge (not to exceed the maximum amount permitted by
law) for the period of any delay in paying royalties, and/or (iii)
enforce the defaulted obligation by any available lawful means. Any
indulgence by UOP shall not be construed as a waiver of UOP's rights
under this paragraph either with respect to such default or to similar
subsequent defaults.
ARTICLE 10
TERMINATION
10.1 LICENSEE may terminate this agreement at any time after ten (10) years
from the Commencement Date, provided LICENSEE has first acquired a
fully paid license for the design capacity or demonstrated capacity of
the Unit, whichever is greater. LICENSEE shall notify UOP, in writing,
of the Commencement Date within thirty (30) days thereafter. UOP may
terminate this agreement at any time after ten (10) years from the
Commencement Date. In each case, termination shall be effected by at
least six (6) months prior written notice. In any event, this
agreement shall terminate ten (10) years after the date of this
agreement should the Commencement Date not have occurred by such date.
10.2 After termination, neither party shall have any further rights or
obligations under this agreement except (i) LICENSEE shall remain
liable under Article 7 for any royalties accrued prior to termination,
(ii) the restrictions on use, duplication and disclosure of Technical
Information under Article 5 shall remain in effect, (iii) UOP's rights
under Article 4 and the right to use LICENSEE's Technical Information
under Article 5.3 shall remain in effect, and (iv) after termination
under this Article 10, LICENSEE's rights under Article 3 and the right
to use UOP's Technical Information under Article 5.1 shall remain in
effect to the extent of any fully paid license(s) acquired by
LICENSEE.
- 4 -
<PAGE> 7
ARTICLE 11
ASSIGNMENT OR TRANSFER
11.1 This agreement shall not be assignable by either party without the
prior written consent of the other party; however, it may be assigned
without such consent by either party to the successor in interest of
all or substantially all of the business and assets of such party or
by UOP to the successor in interest of all or substantially all of
UOP's licensing business. No assignment shall be valid until the
assignee has assumed the rights and obligations of the assignor under
this agreement.
11.2 Prior to any sale, lease or other disposition of the Unit, LICENSEE
shall (i) acquire a fully paid license for the demonstrated capacity
or the design capacity of the Unit, whichever is greater, (ii)
transfer the fully paid licenses acquired hereunder to the purchaser,
lessee or other operator of the Unit, and (iii) require as a condition
of such sale, lease or other disposition that the purchaser, lessee or
other operator of the Unit enter into an appropriate agreement with
UOP restricting the use (to the extent of said transferred fully paid
licenses), duplication and disclosure of UOP's Technical Information.
11.3 Any assignment of this agreement or any sale, lease or other
disposition by LICENSEE of the Unit shall not relieve LICENSEE or UOP
of the restrictions on use, duplication and disclosure of Technical
Information under Article 5.
ARTICLE 12
GENERAL PROVISIONS
12.1 Notices and written statements required under this agreement shall be
deemed to have been given upon mailing, postpaid, to the recipient
party at the following address or at such other address as may from
time to time be designated in writing to the other party:
LICENSEE: BTL Specialty Resins Corp.
3350 W. 131st Street
P.O. Box 598
Blue Island, Illinois 60406-0598
tel: 708-388-9373
fax: 708-388-9379
UOP: UOP
25 East Algonquin Road
P.O. Box 5017
Des Plaines, Illinois 60017-5017
U.S.A.
tel: 708-391-2000
fax: 708-391-2253
- 5 -
<PAGE> 8
12.2 "Q-Max" is proprietary and LICENSEE shall not claim any rights or
interests in the word "Q-Max". LICENSEE shall make no commercial use
of the word "Q-Max" as a trademark, service mark or otherwise unless
such commercial use, including the manner of use, has first been
approved in writing by UOP.
12.3 This agreement embodies the entire agreement between the parties
relating to the subject of this agreement and there are no prior
representations or agreements relating thereto.
12.4 No change in, addition to, or waiver of the provisions of this
agreement shall be binding upon either party unless approved in
writing by its authorized representative and no modifications shall be
effected by the acknowledgment or acceptance of purchase order forms
containing other or different provisions.
12.5 Nothing contained in this agreement shall be construed as granting any
rights to LICENSEE, express or implied, to use the Process other than
in the Unit.
12.6 This agreement shall be construed and the legal relations between the
parties shall be determined according to the laws of the State of
Illinois, U.S.A.
12.7 Upon execution by the parties, this agreement shall be deemed
effective as from the date of this agreement.
ARTICLE 13
SPECIAL PROVISIONS
13.1 Prior to the Commencement Date, all operations of the Unit shall be
exclusively governed by the provisions of the Cat Con License
Agreement.
13.2 On the Commencement Date: (a) the Cat Con License Agreement shall
terminate and all fully paid licenses acquired by LICENSEE under the
Cat Con License Agreement shall cease to exist; (b) any UOP Technical
Information furnished to LICENSEE under the Cat Con License Agreement
shall be deemed to have been furnished under and shall be governed by
the provision of this agreement; and (c) all operations of the Unit
shall be exclusively governed by the provisions of this agreement.
13.3 If LICENSEE decides not to revamp the Unit for operation under this
agreement: (a) this agreement shall terminate, and the payments
specified in paragraph 1 of Schedule B will not come due; and (b)
LICENSEE shall promptly return to UOP all of the UOP Technical
Information furnished by UOP for the revamp of the Unit, and LICENSEE
shall have no further right to use such information for any purpose.
- 6 -
<PAGE> 9
AGREED: AGREED:
BTL SPECIALTY RESINS CORP. UOP
U O P
By /s/ By /s/ /s/
--------------------------- --------------------------- -------
Title President Title President. INITIAL
------------------------ ---------------------------
WITNESSED: WITNESSED:
By /s/ By /s/
--------------------------- ---------------------------
Title Sales & Marketing Mgr. Title Secretary.
------------------------ ---------------------------
- 7 -
<PAGE> 10
SCHEDULE A
DEFINITIONS
1. "Q-Max Process" or "Process" means a process for producing cumene
by reacting benzene with a C3 alkylating agent or a polyisopropylbenzene
transalkylating agent in the presence of a catalyst containing a molecular
sieve.
2. "Patent Rights" shall mean rights with respect to or transferable
interests in patents and patent applications of all countries only to the
extent that they or the claims thereof cover the Process, any apparatus and
catalysts for carrying out the Process, and the products of the Process (i)
acquired by the company in question prior to the Cut-off Date, or (ii)
based on inventions conceived and under the control of the company in
question prior to the Cut-off Date; in each case to the extent that, and
subject to the conditions (including the obligation to account to and/or
make payments to others) under which, the company in question has the right
to grant licenses, immunities or licensing rights.
3. "Technical Information" shall mean (i) improvements and
developments relating to the Process made or acquired by the company in
question prior to the Cut-off Date, and (ii) operating technique necessary
for the operation of the Process made or acquired by the company in
question prior to the termination of this agreement; in each case to the
extent that, and subject to the conditions (including the obligation to
account to and/or make payments to others) under which, the company in
question has the right to disclose such information to others. Technical
Information shall not include any information relating to the composition
of and methods for the manufacture of catalysts for use in the Process.
4. "Unit" shall mean the existing UOP Catalytic Condensation Process
unit which LICENSEE has been operating under the provisions of the Cat Con
License Agreement and which LICENSEE intends to revamp for operations
hereunder at Blue Island, Illinois, whose present contemplated revamp
design capacity is 186.3 metric tons of Cumene Product per operating day
(or 65,883 metric tons of Cumene Product per calendar year, based on 8490
operating hours per calendar year), as such unit may from time to time be
modified or enlarged but not replaced.
5. "Commencement Date" shall mean the date when LICENSEE first
commences operation of the Process in the Unit.
6. " Cut-off Date " shall mean (i) the date four (4) years after the
Commencement Date, (ii) the date seven (7) years after the date of this
agreement, or (iii) the date of termination of this agreement, whichever
occurs first.
7. "Cumene Product" shall mean the total quantity of cumene produced
in and leaving the Unit.
- 8 -
<PAGE> 11
8. "Subsidiary" shall mean any company in which the company in
question, directly or indirectly, shall at the time in question own, or
have the power to exercise control of, a majority of the stock having the
right to vote for the election of directors.
9. "Annual Average BLS Index" as applied to any calendar year shall
mean the average of the monthly indices for the consecutive twelve month
period ending October 31 of the preceding calendar year from the Producer
Price Index of "Industrial Commodities" as published by the Bureau of Labor
Statistics, United States Department of Labor, using the year 1982 as the
base index equal to 100. It is understood that the Annual Average BLS Index
applicable for calculation of royalties due as a result of actual
operations shall be the Annual Average BLS Index applicable to the year of
such operations. If at any time during the term of this agreement the
Producer Price Index of " Industrial Commodities" should cease to be
published, another suitable index published by the Government of the United
States of America or other authoritative organization and generally
recognized by the trade as authoritative with respect to changes in the
United States of America of equivalent commodity costs shall be used.
10. "Cat Con License Agreement" shall mean the UOP Catalytic
Condensation Process License Agreement dated October 1, 1985 between
LICENSEE and UOP.
- 9 -
<PAGE> 1
EXHIBIT 10.9
[EXECUTION COPY]
CREDIT AGREEMENT
among
JLM CHEMICALS, INC.,
as Borrower,
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as a Term Lender and Capital Expenditure Lender
THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Working Capital Lender
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Term Agent
THE CIT GROUP/BUSINESS CREDIT, INC.
as Working Capital Agent
THE CIT GROUP/EQUIPMENT FINANCING, INC.
as Collateral Agent
THE CIT GROUP/EQUIPMENT FINANCING, INC.
as Agent
Dated as of June 14, 1995
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
PAGE
<S> <C> <C> <C>
ARTICLE I. DEFINITIONS, ACCOUNTING TERMS, AND RULES
OF CONSTRUCTION ......................... 1
SECTION 1.01 Defined Terms........................ 1
SECTION 1.02 Computation of Time Periods.......... 22
SECTION 1.03 Accounting Principles and Terms...... 22
SECTION 1.04 Rules of Construction................ 23
ARTICLE II. AMOUNT AND TERMS OF THE LOANS............ 23
SECTION 2.01 Term Loan............................ 23
SECTION 2.02 Capital Expenditure Loans............ 23
SECTION 2.03 Working Capital Loans................ 23
SECTION 2.04 Reduction or Termination of Working
Capital Loan Commitment.............. 23
SECTION 2.05 Notices of Borrowings ............... 24
SECTION 2.06 Method of Electing Interest Rates.... 25
SECTION 2.07 Interest............................. 26
SECTION 2.08 Minimum Amounts...................... 27
SECTION 2.09 Fees................................. 28
SECTION 2.10 Payments and Computations ........... 29
SECTION 2.11 Notes; Amortization ................. 29
SECTION 2.12 Optional Prepayments ................ 31
SECTION 2.13 Mandatory Prepayments ............... 32
SECTION 2.14 Contingent Interest ................. 33
SECTION 2.15 Application of Insurance Proceeds.... 33
SECTION 2.16 Application of Eminent Domain........ 35
SECTION 2.17 Use of Proceeds ..................... 35
SECTION 2.18 Priority of Special Dividends,
Contingent Interest and Excess Cash Flow
Mandatory Prepayments................ 36
SECTION 2.19 Deposit Account...................... 36
ARTICLE III. CONDITIONS PRECEDENT.................... 37
SECTION 3.01 Conditions Precedent to All Loans.... 37
SECTION 3.02 Conditions Precedent to Term Loan.... 42
SECTION 3.03 Conditions Precedent to Making a
Capital Expenditure Loan............. 42
SECTION 3.04 Conditions Precedent to Making a
Working Capital Loan................. 43
SECTION 3.05 Conditions Precedent to All Loans.... 43
SECTION 3.06 Deemed Representation................ 44
ARTICLE IV. REPRESENTATIONS AND WARRANTIES........... 44
SECTION 4.01 Organization and Qualification of
Borrower............................. 44
SECTION 4.02 Authorization and Enforceability..... 45
SECTION 4.03 Compliance with Law.................. 45
</TABLE>
i
<PAGE> 3
<TABLE>
PAGE
<S> <C> <C> <C>
SECTION 4.04 Approvals and Permits................ 45
SECTION 4.05 No Conflicts; No Default............. 46
SECTION 4.06 No Litigation........................ 46
SECTION 4.07 Obligations; No Default; Event of
Loss................................. 46
SECTION 4.08 Taxes................................ 47
SECTION 4.09 ERISA................................ 47
SECTION 4.10 Full Disclosure...................... 48
SECTION 4.11 Broker's or Finder's Commissions..... 48
SECTION 4.12 Budget and Projections............... 48
SECTION 4.13 Environmental Matters................ 49
SECTION 4.14 No Material Adverse Change........... 50
SECTION 4.15 Borrower Financial Statement......... 50
SECTION 4.16 Pro Forma Financial Statement........ 51
SECTION 4.17 Labor Disputes and Acts of God....... 51
SECTION 4.18 Governmental Regulation.............. 51
SECTION 4.19 Partnerships......................... 51
SECTION 4.20 Solvency............................. 51
SECTION 4.21 Asset Purchase Documents............. 51
ARTICLE V. AFFIRMATIVE COVENANTS OF BORROWER........ 52
SECTION 5.01 Reporting Requirements............... 52
SECTION 5.02 Notices.............................. 54
SECTION 5.03 Payment of Taxes and Claims.......... 56
SECTION 5.04 Maintenance of Existence,
Properties, Facility Agreements,
Construction and Maintenance of Property,
Etc.................................. 56
SECTION 5.05 Compliance with Laws................. 57
SECTION 5.06 Insurance............................ 57
SECTION 5.07 Books and Records; Inspection........ 59
SECTION 5.08 Property Rights, Utilities, Etc...... 60
SECTION 5.09 Compliance With Environmental Laws... 60
SECTION 5.10 Event of Eminent Domain.............. 60
SECTION 5.11 ERISA................................ 61
ARTICLE IV. NEGATIVE COVENANTS....................... 61
SECTION 6.01 Debt................................. 61
SECTION 6.02 Liens................................ 62
SECTION 6.03 Guarantees........................... 63
SECTION 6.04 Prohibition of Fundamental Changes... 64
SECTION 6.05 Investments.......................... 64
SECTION 6.06 Transactions with Affiliates......... 64
SECTION 6.07 Operating Leases..................... 64
SECTION 6.08 Abandonment.......................... 64
SECTION 6.09 Prohibition on Disposition of
Assets............................... 64
SECTION 6.10 Capital Program...................... 65
SECTION 6.11 Nature of Business................... 65
SECTION 6.12 Dividends............................ 65
</TABLE>
ii
<PAGE> 4
<TABLE>
Page
<S> <C> <C> <C>
SECTION 6.13 Changes, Amendments and
Modifications........................ 66
ARTICLE VII. FINANCIAL COVENANTS OF BORROWER.......... 66
SECTION 7.01 Minimum Tangible Net Worth........... 66
SECTION 7.02 Debt to Equity Ratio..... ........... 67
SECTION 7.03 Cash Flow Coverage Ratio ............ 67
SECTION 7.04 Maximum Capital Expenditures......... 67
ARTICLE VIII. EVENTS OF DEFAULT........................ 68
SECTION 8.01 Events of Default.................... 68
ARTICLE IX. CHANGE OF CIRCUMSTANCES.................. 74
SECTION 9.01 Taxes................................ 74
SECTION 9.02 Additional Costs..................... 75
SECTION 9.03 Limitation on Types of Loans......... 77
SECTION 9.04 Illegality........................... 77
SECTION 9.05 Treatment of Affected Loans.......... 77
SECTION 9.06 Certain Compensation................. 78
SECTION 9.07 Adequacy............................. 79
ARTICLE X. AGENCY................................... 79
SECTION 10.01 The Working Capital Agent............ 79
SECTION 10.02 The Term Agent....................... 80
SECTION 10.03 The Collateral Agent................. 80
SECTION 10.04 The Agent............................ 80
SECTION 10.05 Delegation of Duties................. 81
SECTION 10.06 Exculpatory Provisions... ........... 81
SECTION 10.07 Reliance by each Applicable Agent.... 81
SECTION 10.08 Notice of Default... ................ 82
SECTION 10.09 Non-Reliance on any Applicable
Agent and other Lenders.............. 82
SECTION 10.10 Indemnification...................... 83
SECTION 10.11 Agent in its Individual Capacity..... 83
SECTION 10.12 Successor Applicable Agent........... 84
SECTION 10.13 Amendments Concerning Agency
Function............................. 84
SECTION 10.14 Liability of each Applicable Agent... 84
SECTION 10.15 Transfer of Applicable Agency
Function............................. 84
SECTION 10.16 Withholding Taxes.................... 84
SECTION 10.17 Shared Liability..................... 85
SECTION 10.18 Non-Receipt of Funds by any
Applicable Agent..................... 85
ARTICLE X. MISCELLANEOUS............................ 86
SECTION 11.01 Participations and Assingments....... 86
</TABLE>
iii
<PAGE> 5
<TABLE>
Page
<S> <C> <C> <C>
SECTION 11.02 Survival............................. 87
SECTION 11.03 Amendments and Waivers............... 87
SECTION 11.04 Notices.............................. 88
SECTION 11.05 Payment of Expenses.................. 88
SECTION 11.06 Indemnification...................... 89
SECTION 11.07 Environmental Matters................ 89
SECTION 11.08 Successors and Assigns............... 90
SECTION 11.09 Lenders Beneficiary.................. 90
SECTION 11.10 Counterparts......................... 91
SECTION 11.11 Descriptive Headings................. 91
SECTION 11.12 Severability......................... 91
SECTION 11.13 Governing Law........................ 91
SECTION 11.14 Consent to Jurisdiction.............. 91
SECTION 11.15 Waiver of Jury Trial................. 91
Schedule 1.01A Projections
Schedule 1.01B Facility Agreements
Schedule 4.04 Approvals and Permits
Schedule 4.15 Borrower Financial Statement
Schedule 5.01 Scope of Audit
Schedule 5.06 Required Insurance
Exhibit A Form of Term Loan Note
Exhibit B Form of Capital Expenditure Loan Note
Exhibit C Form of Working Capital Loan Note
Exhibit D-1 Form of Working Capital Notice of
Borrowing
Exhibit D-2 Form of Capital Expenditure Notice of
Borrowing
Exhibit E Form of Interest Rate Selection
Exhibit F Form of Mortgage
Exhibit G Form of Security Agreement
Exhibit H Form of Pledge Agreement
Exhibit I-1 Form of Clark Consent
Exhibit I-2 Form of Assignment and Assumption
Agreement (Term Agent)
Exhibit J-1 Form of Assignment and Assumption
Agreement (Working Capital Agent)
Exhibit J-2 Form of Assignment and Assumption
Agreement (Working Capital Agent)
Exhibit K Form of Solvency Certificate
Exhibit L Form of Blocked Account Agreement
</TABLE>
iv
<PAGE> 6
CREDIT AGREEMENT, dated as of June 14, 1995 among JLM CHEMICALS,
INC. ("Borrower"), THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT-EF"),
THE CIT GROUP/BUSINESS CREDIT, INC. ("CIT-BC"), each other lender
which may hereafter execute and deliver an Assignment and Assumption
Agreement (as hereinafter defined) with respect to the Loans (as
hereinafter defined) and Commitments (as hereinafter defined) pursuant
to Section 11.01 of this Agreement (CITEF, CIT-BC, each assignee under
an Assignment and Assumption Agreement, each a "Lender" and
collectively, the "Lenders") and THE CIT GROUP/EQUIPMENT FINANCING,
INC. as agent for the Term Lenders and Capital Expenditure Lenders (in
such capacity, together with its successors in such capacity, "Term
Agent") and THE CIT GROUP/BUSINESS CREDIT, INC., as agent for the
Working Capital Lenders (in such capacity, together with its
successors in such capacity, "Working Capital Agent"), THE CIT GROUP
/EQUIPMENT FINANCING, INC., as collateral agent for the Lenders (in
such capacity, together with its successors in such capacity,
"Collateral Agent") and THE CIT GROUP/EQUIPMENT FINANCING, INC., as
agent for the Lenders (in such capacity, together with its successors
in such capacity, "Agent").
PRELIMINARY STATEMENT
Borrower desires that the Lenders extend credit as provided
herein, and the Lenders are prepared to extend such credit.
Accordingly, Borrower, Lenders and Agents agree as follows:
ARTICLE I.
DEFINITIONS, ACCOUNTING TERMS, AND RULES OF CONSTRUCTION
SECTION 1.01 Defined Terms. As used in this Agreement the
following terms have the following meanings (terms defined in the
singular to have the same meanings when used in the plural and vice
versa):
"Account" means (without duplication) (1) an account as defined
in the Uniform Commercial Code as in effect in the State of New York,
and (2) any right to payment for inventory of the Borrower sold in the
ordinary course of the Borrower's business, regardless of how such
right is evidenced, and whether or not it has been earned by
performance, whether secured or unsecured, or now existing or
hereafter arising.
"Account Affiliate" means with respect to any designated Person,
any Person which, directly or indirectly,
<PAGE> 7
controls or is controlled by or is under common control with such
designated Person. For purposes of this definition, "control",
"controlled by" and "under common control with", as used with respect
to any Person shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"Account Debtor" means each Person obligated to pay on an
Account.
"Acquisition" means the acquisition of the Facility by Borrower
on the Closing Date under and pursuant to the terms of the Asset
Purchase Agreement.
"Affected Loans" has the meaning specified in Section 9.05.
"Affiliate" means with respect to any designated Person, any
Person which, directly or indirectly, controls or is controlled by or
is under common control with such designated Person. For the purposes
of this definition, "control", "controlled by" and "under common
control with", as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means The CIT Group/Equipment Financing, Inc., or any
successor thereto, acting as agent for the Lenders pursuant to this
Agreement or any other Loan Document.
"Agents" means the Term Agent, or the Working Capital Agent, or
the Collateral Agent, or the Agent, or any or all of the foregoing,
all as the context may require.
"Agreement" means this Credit Agreement.
"All Loans" means, collectively, the Term Loan, the Capital
Expenditure Loan, and the Working Capital Loans.
"Applicable Agent" means (1) in the case of all matters related
to Non-Working Capital Loans, the Term Agent, (2) in the case of all
matters related to Working Capital Loans, the Working Capital Agent,
(3) in all cases relating to the Collateral, the Collateral Agent and
(4) in the case of the Consents and all other cases not covered by
(1), (2) or (3) of this definition, the Agent.
2
<PAGE> 8
"Applicable Lending Office" means, for each of the Lenders, the
lending office of such Lender (or of an Affiliate of such Lenders)
designated as such for such Type of Loan on the signature page hereto
or in the applicable Assignment and Assumption Agreement or such other
office of such Lender (or of an Affiliate of such Lender) as such
Lender may from time to time specify to the Applicable Agent and
Borrower as the office by which its Loans of such Type are to be made
and maintained.
"Applicable Margin" means: (1) with respect to the Prime Rate,
two percent (2%) for the Term Loan and the Capital Expenditure Loan,
and one and three quarters percent (1.75%) for the Working Capital
Loan, and (2) with respect to the LIBOR Rate, three and one-half
percent (3.50%) for the Term Loan and the Capital Expenditure Loans,
and three and one-quarter percent (3.25%) for the Working Capital
Loans.
"Approvals and Permits" means any permit, variance, permission,
authorization, consent, approval, license, franchise, ruling, permit,
tariff, rate, certification, exemption, or registration issued by any
Governmental Authority which is required to be obtained in accordance
with applicable Law in connection with the Borrower's ownership,
operation, construction, or maintenance of the Facility, or the
implementation of the Capital Program.
"Assets" means all assets purchased by the Borrower from the
Seller pursuant to the Asset Purchase Agreement.
"Asset Purchase Agreement" means the Asset Purchase Agreement
dated as of June 8, 1995, between Borrower and Seller.
"Asset Purchase Documents" means the Asset Purchase Agreement and
any and all documents executed in connection with or delivered
pursuant to the Asset Purchase Agreement.
"Assignee" has the meaning specified in Section 11.01.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement, substantially in the form of Exhibit J-1 or J-2
hereto, as applicable, pursuant to which a Lender assigns rights and
an Assignee assumes obligations in accordance with Section 11.01.
"Board of Governors" means the Board of Governors of the Federal
Reserve Bank.
3
<PAGE> 9
"Boiler Lease" means the Equipment Lease dated January 1,
1993 between Seller and Indeck Power Equipment Co .
"Borrower" means JLM Chemicals, Inc.
"Borrower's Obligations" means (1) Borrower's obligation to
perform each and every obligation, covenant and agreement of
Borrower contained in this Agreement, or any other Loan Document,
whether for principal, interest, fees, expenses, indemnities or
otherwise, including but not limited to all indebtedness,
obligations and liabilities of Borrower to any Agent and/or any
or all of the Lenders now existing or hereafter incurred under or
arising out of or in connection with any and all of the Notes or
this Agreement or any of the other Loan Documents, including but
not limited to Contingent Interest, and any documents or
instruments executed in connection therewith, (2) Borrower's
reimbursement obligations with respect to all sums advanced in
accordance with the Security Documents by or on behalf of any
Agent and/or any or all of the Lenders to protect any of the
Collateral purported to be covered thereby, (3) Borrower's
indemnification obligations under or pursuant to any of the Loan
Documents, and (4) amounts paid by any Agent and/or a Lender in
preservation of any of such Agent's or such Lender's rights or
interest in the Collateral, together with interest on such
amounts from the date such amounts are paid until reimbursement
in full at the rates herein set forth, and if no rate is
specified at a rate equal to the Prime Rate plus the Applicable
Margin on the Working Capital Loans from the time such amount is
due until such amount is paid; in each case whether absolute or
contingent, liquidated or unliquidated, now or hereafter
existing, renewed or restructured, whether or not from time to
time decreased or extinguished and later increased, recreated or
reincurred, and including all indebtedness of Borrower under any
instrument now or hereafter evidencing or securing any of the
foregoing.
"Borrowing Base" means, at any time, based upon the most
recently delivered Borrowing Base Certificate, an amount equal to
the sum of (1) eighty-five percent (85%) of the face amount of
all Accounts which are Eligible Accounts as of the date of such
Borrowing Base Certificate, plus (2) fifty percent (50%) of all
Inventory which is Eligible Inventory as of the date of such
Borrowing Base Certificate, all as computed and set forth in the
applicable Borrowing Base Certificate delivered by Borrower.
"Borrowing Base Certificate" means a Borrowing Base
Certificate in a form acceptable to the Working Capital Agent, as
certified by an officer of Borrower.
4
<PAGE> 10
"Broken Funding Fee" has the meaning specified in Section 9.06.
"Business Day" means any day on which commercial banks located in
New York City are not authorized or required to close and, if such day
relates to a borrowing of, a payment or prepayment of principal of, or
a conversion of or into, or a continuation of, or an Interest Period
for, a LIBOR Rate Loan, a notice by Borrower with respect to any such
borrowing, payment, prepayment, conversion, continuation or Interest
Period, which day is also a day on which dealings in Dollar deposits
are carried out in the London interbank market.
"Cancellation Premium (Non-Workinq Capital Loans)" means a
premium equal to the principal amount of the Non-Working Capital Loan
which is prepaid multiplied by the following applicable percentage (1)
during the period from the Closing Date to the first anniversary of
the Closing Date, three percent (3%), (2) during the period from the
day after the first anniversary of the Closing Date to the second
anniversary of the Closing Date, two percent (2%) and (3) on the day
after the second anniversary of the Closing Date and at all times
thereafter, one percent (1%), provided, however, no such Premium is
required to be paid in connection with Mandatory Prepayments due to
any of the following: (1) Excess Cash Flow Mandatory Prepayments, (2)
prepayments made with Eminent Domain Proceeds, or (3) prepayments made
with Insurance Proceeds.
"Cancellation Premium (Working Capital Loan Dollar Commitment)"
means a premium equal to the principal amount of the reduction in the
Working Capital Loan Dollar Commitment multiplied by the following
applicable percentage (1) during the period from the Closing Date to
the first anniversary of the Closing Date, three percent (3%), (2)
during the period from the day after the first anniversary of the
Closing Date to the second anniversary of the Closing Date, two
percent (2%), and (3) on the day after the second anniversary of the
Closing Date and at all times thereafter, one percent (1%).
"Capital Expenditure" means, for any period, the Dollar amount of
expenditures (including the principal portion of payments under
Capital Leases), actually made by Borrower during such period for
fixed assets, real property, plant and equipment, except for the
regularly scheduled rental payments under or pursuant to the Boiler
Lease.
"Capital Expenditure Lenders" means each Lender that makes or
maintains a Capital Expenditure Loan.
5
<PAGE> 11
"Capital Expenditure Loan" has the meaning specified in Section
2.02.
"Capital Expenditure Loan Commitment" has the meaning specified
in Section 2.02.
"Capital Expenditure Loan Commitment Fee" has the meaning
specified in Section 2.09.
"Capital Expenditure Loan Commitment Termination Date" means the
second anniversary of the Closing Date.
"Capital Expenditure Loan Note" has the meaning specified in
Section 2.11.
"Capital Expenditure Notice of Borrowing" has the meaning
specified in Section 2.05.
"Capital Lease" means any lease of property, real or personal,
which, in accordance with GAAP, would be required to be capitalized on
a balance sheet of the lessee.
"Capital Program" means the improvements or additions to be made
to the Facility by the addition of a new UOP Zeolite catalyst.
"Capital Program Contract" means each contract and agreement
entered into by the Borrower to implement the Capital Program.
"Capital Program Costs" means at any time all costs or expenses
actually incurred by the Borrower in connection with the development,
financing, design, engineering, acquisition, construction, assembly,
inspection, testing, completion and start-up of the Capital Program
including, without limitation, all engineering fees and expenses.
"Cash Tax Payments" means, for any period, the total of (1) Taxes
actually paid during such period which were not paid with reserves
established prior to such period to pay such Taxes, plus (2) the
amount actually deposited into reserves during such period to enable
the Borrower to make annual tax payments when due.
"Cash Flow Coverage Ratio" means, for any period, the ratio of
(1) Earnings Before Interest, Taxes and Depreciation for such period,
to (2) Debt Service for such period.
"CIT-BC" means The CIT Group/Business Credit, Inc.
6
<PAGE> 12
"CIT-EF" means The CIT Group/Equipment Financing, Inc.
"Clark" means Clark Oil & Refining Corporation.
"Closing Date" means June 14, 1995.
"Code" means the Internal Revenue Code of 1986.
"Collateral" means all real and personal property, tangible and
intangible, subject to the Liens created or intended to be created by
any Security Document.
"Collateral Agent" means The CIT Group/Equipment Financing, Inc.,
or any successor thereto, acting as collateral agent for the Lenders
pursuant to this Agreement or any other Loan Document.
"Collateral Evaluation Fee" has the meaning specified in Section
2.09.
"Commitments" means the Capital Expenditure Loan Commitment and
the Working Capital Loan Commitment, or both, all as the context may
require.
"Commitment Fees" means the Capital Expenditure Loan Commitment
Fee and the Working Capital Loan Commitment Fee, or both, all as the
context may require.
"Consent" means (1) in the case of Clark, the consent in the form
of Exhibit I-1, and (2) in the case of any Person (other than Clark),
the consent in the form of Exhibit I-2.
"Consolidated Subsidiaries" means all Subsidiaries of the Pledgor
that should be included in Pledgor's consolidated financial statements
in accordance with generally accepted accounting principles.
"Contingent Interest" has the meaning specified in Section 2.12.
"Debt" of any Person means at any date, without duplication, (1)
indebtedness or liability for borrowed money, or for the deferred
purchase price of property or services (including trade obligations);
(2) obligations as lessee under Capital Leases; (3) current
liabilities in respect of unfunded vested benefits under any Plan, (4)
reimbursement obligations under letters of credit issued for the
account of any Person; (5) all reimbursement obligations arising under
bankers' or trade acceptances; (6) all guarantees, endorsements (other
than for collection or deposit in the ordinary course of business),
and other
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<PAGE> 13
contingent obligations to purchase any of the items included in this
definition, to provide funds for payment, to supply funds to invest in
any Person, or otherwise to assure a creditor against loss, except for
indemnities arising under contracts entered into in the ordinary
course of business, under the Facility Agreements and under the Asset
Purchase Documents; (7) all obligations secured by any Lien on
property owned by such Person, whether or not the obligations have
been assumed; and (8) all obligations under any agreement providing
for a swap, ceiling rates, ceiling and floor rates, contingent
participation or other hedging mechanisms with respect to interest
payable on any of the items described in this definition.
"Debt Service" means, for any period, the total of (1) all
Principal Payments required to be made on NonWorking Capital Loans
during such period, other than any Optional Prepayments or Mandatory
Prepayments, plus (2) all Interest Payments (other than Contingent
Interest) required to be paid on all Loans during such period.
"Debt to Equity Ratio" means as of any date the ratio of (1)
Total Liabilities to (2) Tangible Net Worth.
"Default" means the occurrence of an event that, with the giving
of notice or lapse of time, or both, would become an Event of Default.
"Default Rate" means, with respect to an amount of any Loan not
paid when due, an interest rate per annum equal to: (1) if such Loan
is a Prime Rate Loan, a variable rate two percent (2%) above the rate
of interest then in effect on such Loan (including the Applicable
Margin); and (2) if such Loan is a LIBOR Rate Loan, a fixed rate two
percent (2%) above the rate of interest then in effect on such Loan (
including the Applicable Margin) at the time of default until the end
of the then current Interest Period therefor and, thereafter, a
variable rate two percent (2%) above the rate-of interest for the
applicable Prime Rate Loan (including the Applicable Margin).
"Deposit Account" has the meaning specified in Section 2.19.
"Deposit Account Agreement" means the letter agreement, in
substantially the form of Exhibit L, to be executed and delivered by
the Borrower, the Collateral Agent, the Working Capital Agent, and
LaSalle National Bank.
"Depreciation" means depreciation and amortization of Borrower,
all as determined in accordance with GAAP.
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<PAGE> 14
"Distributable Cash Flow" means for any period total of (1) the
Excess Cash Flow for such period, minus (2) the Excess Cash Flow
Mandatory Prepayments required to be made based upon such period.
"Dollars" and "$" means lawful money of the United States of
America.
"Earnings Before Interest, Taxes, and Depreciation" means, for
any period, Net Income plus Interest Expense plus Taxes plus
Depreciation, all for such period.
"Eligible Account" shall mean the gross amount of the Borrower's
Accounts which are payable in Dollars (calculated on a daily basis as
of the date of such calculation) that at the time of determining
eligibility conforms to the applicable warranties contained in this
Agreement and the Security Agreement, less, without duplication, the
sum of the following items (calculated as of the date of the most
recent Borrowing Base Certificate delivered by the Borrower): (1) any
returns, discounts, claims, credits and allowances of any nature
(whether issued, owing, granted or outstanding); (2) reserves for: (a)
sales, services or leases to the United States of America or to any
agency, department or division thereof (other than sales under
contracts as to which the Borrower and the Working Capital Agent have
complied with the Assignment of Claims Act of 1940 to Working Capital
Agent's reasonable satisfaction), (b) foreign sales, services or
leases other than sales covered by (c) below and sales secured by
commercial letters of credit (in form and substance satisfactory to
the Working Capital Agent) issued or confirmed by, and payable at,
banks having a place of business in the United States of America and
payable in Dollars, or (c) sales to Account debtors in Canada other
than sales which otherwise comply with all of the other criteria for
eligibility hereunder, are payable in Dollars and which when
aggregated with all other Accounts owed by Account debtors in Canada
do not exceed Two Million Dollars ($2,000,000) in the aggregate at any
one time; (3) each Account that remains unpaid more than ninety (90)
days from the invoice date; (4) contras (that is Accounts generated
from the sale of goods to a Person that holds any offsetting claims
against Borrower) but only to the extent of the amount of such
offsetting claims; (5) sales, services or leases to any Account
Affiliate; (6) bill and hold (deferred shipment) or consignment sales;
(7) sales, services or leases to any Account Debtor which is (a)
insolvent, (b) in any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings under any Federal
or state law, (c) negotiating, or has called a meeting of its
creditors for purposes of negotiating, a compromise of its
9
<PAGE> 15
debts or (d) financially unacceptable to Working Capital Agent or any
Working capital Lender or has a credit rating unacceptable to Working
Capital Agent or any Working Capital Lender; (8) all sales, services
or leases to any Account Debtor if fifty percent (50%) or more of
either (a) all outstanding invoices or (b) the aggregate dollar amount
of all outstanding invoices, are unpaid more than sixty (60) days from
the due date; (9) any other reasons deemed necessary by Working
Capital Agent or any Working Capital Lender in its reasonable business
judgment and which are customary either in the commercial finance
industry or in the lending practices of Working Capital Agent or any
Working Capital Lender; (10) all Accounts arising from the sale,
lease, or rental of goods for which the Account Debtor shall have
objected to the quality or quantity of goods or services of Borrower
or where such Account Debtor shall have rejected, returned or refused
to accept such goods or services; (11) all pre-billed Accounts and
Accounts arising from progress billing; and (12) an amount
representing, historically, returns, discounts, claims, credits and
allowances.
"Eligible Inventory" shall mean the gross amount of the Inventory
that at all times conform to the applicable warranties contained in
this Agreement and the Security Agreement and, which at all time
continue to be acceptable to the Working Capital Agent and each
Working Capital Lender in the exercise of its reasonable business
judgment, less (1) any work-in-process, supplies (other than raw
material), (2) goods not present in the United States of America, (3)
goods returned or rejected by the Borrower's customers other than
goods that are undamaged and resalable in the normal course of
business, (4) goods to be returned to the Borrower's suppliers, (5)
goods in transit to third parties (other than the Borrower's agents or
warehouses) and (6) any reserves required by the Working Capital Agent
or any Working Capital Lender in its reasonable discretion for special
order goods, market value declines, and bill and hold (deferred
shipment) or consignment sales.
"Eminent Domain Proceeds" has the meaning specified in Section
5.10.
"Employee Benefit Plan" means any plan, agreement, arrangement or
commitment which is an employee benefit plan, as defined in Section
3(3) of ERISA, maintained by Borrower or any ERISA Affiliate or with
respect to which Borrower or any ERISA Affiliate at any relevant time
has any liability or obligation to contribute.
"Environmental Consultant" means Clayton Environmental
Consultants or such other providers of
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<PAGE> 16
environmental consulting services as Required Lenders may designate.
"Environmental Discharge" means any spill, emission, leaking,
pumping, injection, deposit, dispersal, leaching, migration, disposal,
discharge or release of Hazardous Materials, to the extent the same is
in violation of any Environmental Law, into the indoor or outdoor
environment or into or out of any property, including the movement of
Hazardous Materials through or in the air, soil, surface water or
groundwater.
"Environmental Law" means any applicable Law relating to human
health or safety or pollution including, without limitation, Laws
relating to noise or to Environmental Discharges, or otherwise
relating to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal, transport, handling or remediation
of Hazardous Materials or to the transfer of industrial or
manufacturing facilities or property.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for (1) any liability under Environmental Laws, or (2)
damages arising from, or costs incurred by such Governmental Authority
in response to, an Environmental Discharge.
"Environmental Notice" means any written complaint, order, claim,
citation, letter, inquiry, notice or other written communication from
any Person (1) relating to Borrower's compliance with or liability or
potential liability under any Environmental Law in connection with any
activity or operations at any time conducted by Borrower on the Site,
(2) relating to the occurrence or presence of or exposure to or
possible or threatened or alleged occurrence or presence of or
exposure to Environmental Discharges or Hazardous Materials at, to, or
from any of Borrower's past, present or future locations or facilities
or at, to or from any location or facility (a) to which Borrower,
Seller or any prior owner or operator of the Assets or the Site has
transported or arranged for the transportation of Hazardous Materials
or (b) at which Borrower, Seller or any prior owner or operator of the
Assets or the Site has disposed or arranged for the disposal of
Hazardous Materials, including, without limitation: (i) the existence
of any contamination or possible or threatened contamination at any
such location or facility, including the Site; and (ii) remediation of
any Environmental Discharge or Hazardous Materials at any such
location or facility or any part thereof, including the Site; or (3)
relating to any violation or alleged violation of any relevant
Environmental Law by Borrower, Seller or any prior owner of operator
of the Assets or the Environmental Site.
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<PAGE> 17
"Equity Cash Flow" for any period means the total of (1)
Distributable Cash Flow for such period, minus (2) Contingent Interest
based on such period even though it is paid after the expiration of
such period.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA Affiliate" means any person (as defined in Section 3(9) of
ERISA) that is a member of any group described in Section 414(b) or
(c) of the Code of which Borrower is a member, or Section 414(m) or
(o) of the Code of which Borrower is a member.
"Eurocurrency Liabilities" has the meaning assigned to such term
in Regulation D of the Board of Governors.
"Eurocurrency Liability Reserve Percentage" means for any day the
percentage (expressed as a decimal) which is required on such day, as
prescribed by the Board of Governors for determining the reserve
requirement for a member bank of the Federal Reserve System in New
York City with deposits exceeding Five Billion Dollars
($5,000,000,000) in respect of Eurocurrency Liabilities (or in respect
of any other category of liabilities which includes deposits by
reference to which the interest rate on LIBOR Rate Loans are
determined or any category of extensions of credit or other assets
which includes loans by a non-United States office of any Lender to
United States residents). The LIBOR Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurocurrency Liability Reserve Percentage.
"Event of Default" has the meaning specified in Section 8.01.
"Event of Eminent Domain" means any compulsory transfer or taking
or transfer under threat of compulsory transfer or taking of any
material part of the Collateral or the Facility by any Governmental
Authority.
"Event of Loss" means any of the following events: (1) loss of
all or substantially all of the Facility or the use thereof due to
destruction, damage beyond economical repair, or rendition of the
Facility permanently unfit for normal use for any reason whatsoever
(other than if it is merely not economically feasible to maintain, use
or operate), and (2) anything which results in an insurance settlement
with respect to the Facility on the basis of a total loss or
constructive total loss.
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<PAGE> 18
"Excess Cash Flow" means, for any period, the total of (1) Net
Income After Cash Tax Payments for such period, plus (2) Depreciation
for such period, plus (3) Interest Expense for such period, minus (4)
all Debt Service required to be paid during such period, minus (5) all
Capital Expenditures permitted to be made in accordance with the terms
of this Agreement which are made during such period.
"Excess Cash Flow Mandatory Prepayment" has the meaning specified
in Section 2.13.
"Facility" means the Blue Island phenol/acetone plant, including
but not limited to the land, buildings and related fixtures and
equipment of the Borrower located on the Site, including the Capital
Program as and when implemented.
"Facility Agreement" means each contract and agreement listed on
Schedule 1.01C hereto.
"Facility Fee" has the meaning specified in Section 2.09.
"Federal Funds Rate" means, for any day, the rate per annum
(expressed on a 360-day basis of calculation) equal to the weighted
average of the rates on overnight federal funds transactions as
published by the Federal Reserve Bank of New York for such day,
provided, that (1) if such day is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the
immediately preceding Business Day as so published on the next
succeeding Business Day, and (2) if no such rate is so published on
such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average of the rates quoted by three (3) Federal funds
brokers to the Applicable Agent on such day on such transactions.
"Fees" means the Facility Fee, the Collateral Evaluation Fee, the
Commitment Fees and the Management Fee, or any or all of the
foregoing, all as the context may require.
"Fiscal Year" means each period from January 1 to December 31.
"GAAP" means generally accepted accounting principles in the
United States of America in effect on the Closing Date.
"Good Faith Contest" means the contest of an item if: (1) the
item is diligently contested in good faith by appropriate proceedings
timely instituted; (2) adequate
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<PAGE> 19
reserves are established with respect to the contested item; (3)
during the period of such contest, the enforcement of the contested
item is effectively stayed; and (4) the failure to pay or comply with
the contested item during the period of such contest could not result
in a Material Adverse Change.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
"Hazardous Materials" means any pollutants, contaminants, toxic
or hazardous wastes, chemicals, substances, radioactive material, or
special waste, as any of those terms is defined from time to time in
or for the purposes of any relevant Environmental Law, including,
without limitation, asbestos fibers and friable asbestos,
polychlorinated biphenyls, and petroleum or hydrocarbonbased products,
derivatives wastes, or breakdown, constituent or decomposition
products thereof.
"Indemnity Claim" has the meaning specified in Section 11.06.
"Independent Engineer" means Chem Systems or such other providers
of consulting engineering services as Required Lenders may designate.
"Insolvent" means, at any particular time, a Multiemployer Plan
is insolvent within the meaning of Section 4245 of ERISA.
"Insurance Account" has the meaning specified in Section 2.15.
"Insurance Proceeds" has the meaning specified in Section 2.15.
"Interest Expense" means, for any period, all interest required
to be paid in cash by Borrower on all of its Debt, including all
Interest Payments required to be made during such period.
"Interest Payment" means all payments of interest due on the
Loans pursuant to this Agreement and the Notes.
"Interest Period" means with respect to each LIBOR Rate Loan,
(1) in the case of making a LIBOR Rate Loan, the
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<PAGE> 20
period commencing on the date of making such Loan and ending on the
fourteenth day of the month following the month in which such Loan is
made, and (2) the case of a LIBOR Rate Loan after the period in (1)
above is expired, a period commencing on the fifteenth day of a
calendar month and ending on the fourteenth day of the first, second
or third month, as Borrower may elect in the Notice of Interest Rate
Selection; provided that any Interest Period which would otherwise end
on a day which is not a Business Day shall be extended to the next
succeeding Business Day.
"Inventory" means (without duplication) (1) inventory as defined
in the Uniform Commercial Code in the State of New York, and (2) all
of Borrower's present and hereafter acquired merchandise, inventory
held for sale, and all additions, substitutions and replacements
thereof, wherever located, together with all materials (other than
equipment) used or usable in manufacturing, processing, packaging or
shipping same, in all stages of production from raw materials through
work-in-process to finished goods.
"Kalama License" means the License Agreement dated April, 1994
between Kalama Chemical, Inc. and Seller.
"Law" means any treaty, federal, state or local statute, law,
rule, regulation, ordinance, order, code, policy, Approvals and
Permits or rule of common law, now or hereafter in effect, and any
judicial or administrative interpretation thereof by a Governmental
Authority or otherwise, including any judicial or administrative
order, consent decree or judgment.
"Lenders" means the Term Lenders, the Capital Expenditure
Lenders, and the Working Capital Lender, or any or all of the
foregoing, all as the context may require.
"LIBOR Base Rate" means, with respect to the Interest Period for
any LIBOR Rate Loan, the rate for deposits in Dollars, with maturities
comparable to such Interest Period, that appears on the display
designated as page 3750 on the Telerate Service (or such other page as
may replace the 3750 page on that service or such other service or
services as may be nominated by the British Bankers' Association for
the purpose of displaying London interbank offered rates for Dollar
deposits), determined as of the close of business, two (2) Business
Days prior to the commencement of such Interest Period.
"LIBOR Rate" means, with respect to any Interest Period, a rate
per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher l/100 of 1%) by dividing (1) the
applicable LIBOR Base Rate by (2)
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<PAGE> 21
l.00 minus the Eurocurrency Liability Reserve Percentage, if any,
for the applicable Lender.
"LIBOR Rate Loan" means a Loan which bears interest based upon
the LIBOR Rate.
"Lien" means any mortgage, pledge, hypothecation, security
interest, collateral assignment, lien (statutory or other), or other
security interest or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction (except any such filing that is expired or
that relates to an operating lease)).
"Liquidity" means, at any time, the total of (1) cash held by the
Borrower as of such date, plus (2) the difference as of such date
between (a) the lesser of (i) the Working Capital Loan Dollar
Commitment and (ii) the Borrowing Base as of such date, and (b) the
aggregate principal amount of Working Capital Loans outstanding as of
such date.
"Loan Documents" mean this Agreement, the Notes and the Security
Documents.
"Loans" means the Term Loan, the Capital Expenditure Loan, and
the Working Capital Loans, or any or all of the foregoing, all as the
context may require.
"Management Fee" has the meaning specified in Section 2.09.
"Mandatory Prepayments" means all prepayments required under
Section 2.13.
"Material Adverse Change" means (1) a material adverse change in
the status of the business, results of operations, condition
(financial or otherwise), prospects property of Borrower, or (2) any
event or occurrence of whatever nature which could have a material
adverse effect on Borrower's ability to perform its obligations under
any Loan Document.
"Monthly Date" means the first Business Day of each month.
"Moody's" means Moody's Investors Service and any successor
thereto which provides credit ratings.
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<PAGE> 22
"Mortqaqe" means a Mortgage in substantially the form of Exhibit
F hereto, to be delivered by Borrower under the terms of this
Agreement.
"Motor Vehicles" has the meaning specified in the Security
Agreement.
"Multiemp1oyer Plan" means any Employee Benefit Plan that is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"Net Income After Cash Tax Payments" means for any period the
total of (1) Net Income for such period, plus (2) Taxes for such
period, minus (3) Cash Tax Payments for such period.
"Net Income" means for any period the net income (inclusive of
extraordinary items) for Borrower, all as determined in accordance
with GAAP.
"Net Loss" means for any period the net loss (inclusive of
extraordinary items) for Borrower, all as determined in accordance
with GAAP.
"Non-Excluded Taxes" has the meaning specified in Section 9.01.
"Non-Workinq Capital Loans" means the Term Loan, and the Capital
Expenditure Loan or both, all as the context may require.
"Notes" means the Term Loan Note, the Capital Expenditure Loan
Note, and the Working Capital Loan Note, or any or all of the
foregoing, all as the context may require.
"Notice of Borrowing" means, as applicable, a Capital
Expenditures Notice of Borrowing or a Working Capital Notice of
Borrowing.
"Notice of Interest Rate Selection" has the meaning specified in
Section 2.06.
"Operating Leases" means any lease other than a Capital Lease.
"Optional Prepayment" means any of the optional prepayments made
in accordance with Section 2.12.
"Other Taxes" has the meaning specified in Section 9.01.
"Parent" means the parent corporation of a Lender.
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<PAGE> 23
"PBGC" means Pension Benefit Guaranty Corporation.
"Pension Plan" means any pension plan (other than a Multiemployer
Plan) which is an employee pension benefit plan as defined in Section
3(2) of ERISA and in respect of which Borrower or any ERISA Affiliate
is an "employer" as defined in Section 3(5) of ERISA or has an
obligation to contribute.
"Permitted Investments" means (1) direct obligations of the
United States of America or any agency thereof backed by the full
faith and credit of the United States of America with maturities of
one (l) year or less from the date of acquisition; (2) commercial
paper with maturities of two hundred seventy (270) days or less of (a)
a Lender or any Parent of a Lender, or (b) a domestic issuer rated at
least "P-1" by Moody's or "A-l" by S&P, (3) certificates of deposit
with maturities of one (l) year or less from the date of acquisition
issued by (a) any Lender, or (b) any commercial bank operating within
the United States of America whose outstanding long-term debt is rated
at least "A" by Moody's or "A" by S&P, and (4) any of the capital
stock, assets, obligations or other securities received in connection
with the settlement of any Debt or claim incurred in connection with
or arising out of the ordinary course of business of the Borrower.
"Permitted Liens" has the meaning specified in Section 6.02.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"Pledge Agreement" means the Pledge Agreement, in substantially
the form of Exhibit H. to be delivered by Pledgor pursuant to the term
of this Agreement.
"Pledqor" means JLM Industries, Inc.
"Prime Rate" means the rate of interest publicly announced by
Chemical Bank, N.A. from time to time in New York as its prime rate,
the Prime Rate to change when and as such prime rate changes. The
Prime Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged by Chemical Bank, N.A. to any
customer. Chemical Bank, N.A. may make commercial advances or other
loans at rates of interest at, above or below the Prime Rate.
"Prime Rate Loan" means a Loan which bears interest based upon
the Prime Rate.
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<PAGE> 24
"Principal Office" means the principal office of each Agent, as
applicable, which in all cases is presently located at 1211 Avenue of
the Americas, New York, NY 10036.
"Principal Payments" means all payments of principal due on the
Loans pursuant to this Agreement.
"Projections" means the projections set forth on Schedule 1.01A.
"Ouarterly Date" means the first day of each calendar quarter.
"Quarterly Payment Date" means the last day of each calendar
quarter.
"Ouarterly Period" means each period from and including each
Quarterly Date to and including the day prior to the next Quarterly
Date.
"Regulation D" means Regulation D of the Board of Governors.
"Regulatory Change" means, with respect to any Lender, any change
after the date of this Agreement in United States federal, state,
municipal or foreign Laws (including Regulation D) or the adoption or
making after such date of any interpretations, directives or requests
applying to a class of banks including such Lender of or under any
United States, federal, state, municipal or foreign Laws or
regulations (whether or not having the force of Law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Reorganization" means with respect to any Multiemployer Plan,
the condition that such plan is in reorganization within the meaning
of such term as used in Section 4241 of ERISA.
"Reportable Event" means an event described in Section 4043(c) of
ERISA or in the regulations thereunder (other than those events as to
which the thirty (30) day notice period is waived under PBGC
Regulation Section 2615 or for which the PBGC has announced that it
will waive the penalty for a failure to report).
"Required Lenders" means both the Required Term Lenders and the
Required Working Capital Lenders.
"Required Term Lenders" means the Term Lenders and Capital
Expenditure Lenders having fifty-one percent (51%) of the outstanding
principal amount of all Non-Working Capital Loans.
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<PAGE> 25
"Required Working Capital Lenders" means Working Capital Lenders
having fifty-one percent (51%) of the outstanding principal amount of
all outstanding Working Capital Loans and if no such Loans are
outstanding having fifty-one percent (51%) of the Working Capital Loan
Dollar Commitment.
"S&P" means Standard & Poor's Corporation or any successor
thereto which provides credit ratings.
"Secured Parties" means each of the Agents and each of the
Lenders.
"Security Agreement" means the Security Agreement, in
substantially the form of Exhibit G. to be delivered by the Borrower
pursuant to the terms of this Agreement.
"Security Documents" means the Security Agreement, the Mortgage,
the Consents, the Pledge, the Deposit Account Agreement, and any other
security agreement granting a Lien on any assets of the Borrower or
Pledgor, as the case may be, or any other Person to secure Borrower's
Obligations.
"Seller" means BTL Specialty Resins Corp.
"Site" means the land located at 3350 West 131 Street, Blue
Island, Illinois 60406.
"Solvency Certificate" means a certificate in substantially the
form of Exhibit K, to be delivered by Borrower pursuant to the terms
of this Agreement.
"Solvent" means, when used with respect to any Person, that (1)
the fair value of the property of such Person, on a going concern
basis, is greater than the total amount of liabilities (including,
without limitation, contingent liabilities) of such Person, (2) the
present fair salable value of the assets of such Person, on a going
concern basis, is not less than the amount that will be required to
pay the probable liabilities of such Person on its debts as they
become absolute and matured, (3) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (4)
such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such
Person is engaged. Contingent liabilities will be computed at the
amount that, in light of all the facts and circumstances existing at
such time, represents the amount that can
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<PAGE> 26
reasonably be expected to become an actual or matured liability.
"Special Dividend" means dividends permitted under the exceptions
to Section 6.12 Dividends designated as (2), (3) or (4) exception.
"Tangible Net Worth" means, as of any date, the total of: (1)
Total Tangible Assets, minus (2) Total Liabilities.
"Taxes" mean, for any period, the tax expenses of Borrower, all
as determined in accordance with GAAP.
"Term Agent" means The CIT Group/Equipment Financing, Inc., or
any successor thereof, acting as agent for the Term Lenders and
Capital Expenditure Lenders pursuant to this Agreement.
"Term Lenders" means each Lender that makes or maintains a Term
Loan.
"Term Loan" has the meaning specified in Section 2.01.
"Term Loan Note" has the meaning specified in Section 2.11.
"Title Company" means Lawyers Title Insurance Corporation.
"Title Insurance Policy" has the meaning specified in Section
3.01(22).
"Total Tangible Assets" means, as of any date, the total assets
of the Borrower, other than intangible assets, including but not
limited to goodwill, patents, trademarks, tradenames, copyrights and
franchises, all as determined in accordance with GAAP.
"Total Liabilities" means, as of any date, the total liabilities
of the Borrower, all as determined in accordance with GAAP.
"Type" of any Loan means either a Prime Rate Loan or a LIBOR Rate
Loan, all as the context may require.
"UOP License Agreement" means the UOP Catalytic Condensation
Process License Agreement dated October 1, 1985 between BTL Inc. and
UOP Inc., as amended and as assigned on or prior to the Closing Date.
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"Working Capital Agent" means The CIT Group/Business Credit,
Inc., or any successor thereof, acting as agent for the Working
Capital Lenders pursuant to this Agreement.
"Working Capital Lenders" means each Lender that makes or
maintains a Working Capital Loan.
"Working Capital Loan" has the meaning specified in Section 2.03.
"Working Capital Loan Commitment" has the meaning specified in
Section 2.03.
"Working Capital Loan Commitment Fee" has the meaning specified
in Section 2.09.
"Working Capital Loan Commitment Termination Date" means the
earliest of (1) the fifth anniversary of the Closing Date, provided,
however, if neither the Borrower nor any Working Capital Lender gives
notice at least sixty (60) days prior to such date or any anniversary
date thereafter of its intention to terminate the Working Capital Loan
Commitment on such date then such date shall be extended to the next
anniversary date of the Closing Date, and (2) the date the Working
Capital Loan Commitment is terminated pursuant to Section 2.04.
"Working Capital Loan Dollar Commitment" means Five Million
Dollars ($5,000,000), as such amount may be reduced in accordance with
the provisions of Section 2.04.
"Working Capital Loan Note" has the meaning specified in Section
2.11.
"Working Capital Notice of Borrowing" has the meaning specified
in Section 2.05.
SECTION 1.02 Computation of Time Periods. In this Agreement
unless otherwise specified, in the computation of periods of time from
a specified date to a later specified date, the word "from" means
"from and including" and words "to" and "until" each means "to but
excluding".
SECTION 1.03 Accounting Principles and Terms. Except as otherwise
provided in this Agreement, (1) all computations and determinations as
to financial matters, and all financial statements to be delivered
under this Agreement, shall be made or prepared in accordance with
GAAP and (2) all accounting terms used in this Agreement shall have
the meaning ascribed to such terms by such principles.
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SECTION 1.04 Rules of Construction. When used in this Agreement: (1)
"or" is not exclusive; (2) a reference to a Law includes any amendment or
modification to such Law; (3) a reference to a Person includes its permitted
successors and permitted assigns; and (4) unless otherwise provided for in this
Agreement, a reference to an agreement, instrument or document shall include
such agreement, instrument or document as the same may be amended, modified or
supplemented from time to time in accordance with its terms and as permitted by
the Loan Documents.
ARTICLE II.
AMOUNT AND TERMS OF THE LOANS
SECTION 2.01 Term Loan. Subject to the terms and conditions of this
Agreement, CIT-EF agrees to make a loan ("Term Loan") to Borrower on the Closing
Date in a principal amount equal to Seventeen Million Dollars ($17,000,000).
Amounts repaid on the Term Loan cannot be reborrowed.
SECTION 2.02 Capital Expenditure Loans. Subject to the terms and
conditions of this Agreement, each of the Capital Expenditure Lenders severally
agrees to make loans ("Capital Expenditure Loans") from time to time during the
period from the Closing Date through but not including the Capital Expenditure
Loan Commitment Termination Date, provided that the aggregate principal amount
of all Capital Expenditure Loans does not exceed the lesser of (1) Two Million
Dollars ($2,000,000) or (2) the Capital Program Costs (the "Capital Expenditure
Loan Commitment"). Amounts repaid on the Capital Expenditure Loan cannot be
reborrowed.
SECTION 2.03 Working Capital Loans. Subject to the terms and
conditions of this Agreement, each of the Working Capital Lenders severally
agree to make loans ("Working Capital Loans") from time to time during the
period from the Closing Date through but not including the Working Capital Loan
Commitment Termination Date, provided that the aggregate principal amount of all
Working Capital Loans outstanding at any time does not exceed the lesser of: (1)
the then effective Working Capital Loan Dollar Commitment or (2) the then
effective Borrowing Base (the "Working Capital Loan Commitment"). Within the
limits of the Working Capital Loan Commitment, the Borrower may borrow, make an
optional prepayment pursuant to the last paragraph of Section 2.13, and reborrow
under this Section 2.03.
SECTION 2.04 Reduction or Termination of Working Capital Loan
Commitment. Borrower may elect to reduce in whole or in part the Working Capital
Loan Dollar Commitment;
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provided, that, each such reduction is in minimum amount of One Million Dollars
($1,000,000); and (2) the Borrower pays the Working Capital Lender the
Cancellation Premium (Working Capital Loan Commitment). Once the Working Capital
Loan Dollar Commitment is so reduced or terminated it cannot be reinstated.
SECTION 2.05 Notices of Borrowings. Each Working Capital Loan shall be
made on notice from Borrower to Working Capital Agent, given not later than
12:00 Noon (New York City time) on the (1) third Business Day prior to the date
of the making of a proposed Working Capital Loan if such Loan is a LIBOR Rate
Loan, and (2) on the Business Day of the making of such proposed Working Capital
Loan if such Loan is a Prime Rate Loan. Each such notice (a "Working Capital
Notice of Borrowing") shall be in writing in substantially the form of Exhibit
D-1 hereto, specifying therein (1) the requested date of making of such Loan,
which shall be a Business Day, (2) the requested aggregate amount of such Loan,
and (3) the initial Type of Loans which will comprise the requested Loan.
Upon receipt of each such Working Capital Notice of Borrowing, Working
Capital Agent shall promptly notify each Working Capital Lender of the contents
thereof and of such Lender's share of the Working Capital Loan requested
thereunder, and such Working Capital Notice of Borrowing shall not thereafter be
revocable by Borrower.
Each Working Capital Lender shall, no later than 1:00 p.m. (New York
City time) on the date a Working Capital Loan is to be made, make available to
Working Capital Agent, at Working Capital Agent's Principal Office, in
immediately available funds in New York City, such Lender's pro rata share of
such Loan. If all applicable conditions to the funding of such Loans required
under the terms of the Agreement have been satisfied, Working Capital Agent will
make the funds so received immediately available to Borrower by delivering the
proceeds of such Loan as directed by Borrower.
Each Capital Expenditure Loan shall be made on notice from Borrower to
Term Agent, given not later than 12:00 Noon (New York City time) on the fifth
Business Day prior to the date of the making of such proposed Loan. Each such
notice (a "Capital Expenditure Notice of Borrowing") shall be in writing in
substantially the form of Exhibit D-2 hereto, specifying therein (1) the
requested date of making of such Loan, which shall be a Business Day, (2) the
requested aggregate amount of such Loan, and (3) the initial Type of Loans which
will comprise the requested Loan.
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Upon receipt of each such Capital Expenditure Notice of Borrowing,
Term Agent shall promptly notify each Capital Expenditure Lender of the contents
thereof and of such Lender's share of the Capital Expenditure Loans requested
thereunder, and such Capital Expenditure Notice of Borrowing shall not
thereafter be revocable by Borrower.
Each Capital Expenditure Lender shall, no later than 1:00 p.m. (New
York City time) on the date a Capital Expenditure Loan is to be made, make
available to Term Agent, at Term Agent's Principal Office, in immediately
available funds in New York City, such Lender's pro rata share of such Loan. If
all applicable conditions to the funding of such Loan required under the terms
of this Agreement have been satisfied, Term Agent will make the funds so
received immediately available to Borrower by delivering the proceeds of such
Loan as directed by the Borrower.
SECTION 2.06 Method of Electing Interest Rates. The Loans shall bear
interest initially at the Type specified by Borrower on the Closing Date for the
Term Loan and in all other cases in the applicable Notice of Borrowing.
Thereafter, Borrower may from time to time elect to change or continue the Type
borne by each Loan (subject in each case to the provisions of this Article II),
as follows:
(1) if such Loans are Prime Rate Loans, Borrower may elect to convert
such Loans to LIBOR Rate Loans; and
(2) if such Loans are LIBOR Rate Loans, Borrower may elect to
convert such Loans to Prime Rate Loans or elect to continue such LIBOR Rate
Loans as LIBOR Rate Loans for an additional Interest Period, in each case
effective on the last day of the then current Interest Period applicable to
such LIBOR Rate Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Selection") to Applicable Agent by (1) 12:00 Noon (New York City time) at
least three (3) Business Days before the conversion of a Prime Rate Loan into a
LIBOR Rate Loan or a continuation of a LIBOR Rate Loan, and (2) 12:00 Noon (New
York City time) on the Business Day before the conversion of a LIBOR Rate Loan
into a Prime Rate Loan. A Notice of Interest Rate Selection may, if it so
specifies, apply to only a portion of the aggregate principal amount of the
relevant Loan; provided that the portion to which such notice applies, and the
remaining portion to which it does not apply, each are sufficient to meet the
minimum amount specified in Section 2.08.
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Each Notice of Interest Rate Selection relating to a Prime Rate Loan
or LIBOR Rate Loan shall specify:
(1) the Loan (or portion thereof) to which such notice applies;
(2) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause
of the first paragraph of this Section 2.06;
(3) if the Loans are to be converted to LIBOR Rate Loans, the duration
of the initial Interest Period applicable thereto: and
(4) if such Loans are to be continued as LIBOR Rate Loans for an
additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Selection
shall comply with the provisions of the definition of Interest Period. No
conversion into a LIBOR Rate Loan and no continuation of a LIBOR Rate Loan shall
be permitted when a Default or Event of Default has occurred and is continuing.
If Borrower fails to deliver a timely Notice of Interest Rate Selection to
Applicable Agent for any LIBOR Rate Loans, such Loans shall be converted into
Prime Rate Loans, on the last day of the then current Interest Period applicable
thereto.
Anything herein to the contrary notwithstanding, at no time shall
there be outstanding more than four (4) different Interest Periods relating to
LIBOR Rate Loans.
SECTION 2.07 Interest. All Loans may include: (1) Prime Rate Loans;
(2) LIBOR Rate Loans; or (3) subject to the requirements of Section 2.08 Minimum
Amounts, any combination of the foregoing as Borrower shall elect and notify
Applicable Agent in accordance with Section 2.06.
Borrower shall pay interest on the outstanding unpaid principal amount
of each Loan for each day from and including the date of making such Loan until
but excluding the date such Loan is paid in full at a rate per annum set forth
in this Section 2.07. All accrued and unpaid interest on the Loans will be
payable in arrears on each Monthly Date. All interest and principal amounts not
paid when due (when scheduled, at acceleration or otherwise) shall bear interest
thereafter, payable on demand, at the Default Rate. Interest on the Loans shall
not exceed the maximum amount permitted under applicable Law.
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Borrower shall pay interest on the outstanding unpaid principal amount
of the Loans for each day from and including the date such Loan is made until
but excluding the date such Loan is paid in full, at one of the following rates
per annum:
(1) Prime Rate Loan. For a Prime Rate Loan, a rate per annum equal at
all times to the sum of the Prime Rate in effect for such day plus the
Applicable Margin;
(2) LIBOR Rate Loan. For a LIBOR Rate Loan, a rate per annum equal at
all times during each Interest Period of such Loan to the sum of the LIBOR Rate
for such Interest Period plus the Applicable Margin.
The interest rate on Prime Rate Loans on any day shall be the Prime
Rate in effect on the first Business Day of the month in which such day occurs.
Interest on the Prime Rate Loans and the LIBOR Rate Loans shall not exceed the
maximum amount permitted under applicable Law.
Applicable Agent shall determine each interest rate applicable to the
Loans hereunder. Applicable Agent shall give prompt notice to Borrower and each
appropriate Lender of each rate of interest so determined, and its determination
thereof shall be conclusive in the absence of manifest error.
SECTION 2.08 Minimum Amounts. Each Capital Expenditure Loan and
Working Capital Loan which shall not utilize in full the applicable Commitment
shall be in the minimum amount set forth in this Section 2.08.
The amount of each Loan borrowed on any given day and the aggregate
amount of each Loan with the same interest rate after giving effect to the
conversions and continuations provided for in Section 2.06 (other than
conversions or continuations of Prime Rate Loans) shall, (1) in the case of
Prime Rate Loans which are Non-Working Capital Loans, be in an amount at least
equal to One Hundred Thousand Dollars ($100,000) and in integral multiples of
Ten Thousand Dollars ($10,000), (2) in the case of Prime Rate Loans that are
Working Capital Loans, be in an amount at least equal to Five Thousand Dollars
($5,000) or a greater amount which is an integral multiple of One Thousand
Dollars ($1,000), and (3) in the case of LIBOR Rate Loans, be in an amount at
least equal to One Hundred Thousand Dollars ($100,000) or a greater amount which
is an integral multiple of Ten Thousand Dollars ($10,000) (LIBOR Rate Loans
having different Interest Periods outstanding at the same time shall be deemed
separate Loans for purposes of the foregoing, one for each Interest Period).
There shall be no
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minimum amount of principal applicable to a conversion or continuation of a
Prime Rate Loan.
SECTION 2.09 Fees. (l) Capital Expenditure Loan Commitment Fees.
During the period from the Closing Date to the making of the Capital Expenditure
Loan, Borrower agrees to pay to Term Agent for the benefit of the Capital
Expenditure Lenders a commitment fee ("Capital Expenditure Loan Commitment Fee")
on the average daily difference between (a) Two Million Dollars ($2,000,000) and
(b) the aggregate principal amount of all Capital Expenditure Loans made under
the terms of this Agreement, at the rate on one-half of one percent (.50%) per
annum. The Capital Expenditure Loan Commitment Fee is payable in arrears on each
Quarterly Date and on the making of the Capital Expenditure Loan.
(2) Working Capital Loan Commitment Fee. During the period from the
Closing Date to the Working Capital Loan Commitment Termination Date, Borrower
agrees to pay Working Capital Agent for the benefit of Working Capital Lenders a
commitment fee ("Working Capital Loan Commitment Fee") on the average daily
difference between (a) the then effective Working Capital Loan Dollar
Commitment, and (b) the aggregate principal amount of the then outstanding
Working Capital Loans, at a rate of one-half of one percent (.50%) per annum.
The Working Capital Commitment Fee is payable in arrears on each Monthly Date.
(3) Collateral Evaluation Fees. Borrower shall pay to Working Capital
Agent on the Closing Date a collateral evaluation fee of Fifty Thousand Dollars
($50,000) ("Collateral Evaluation Fee").
(4) Facility Fee. Borrower shall pay to [Applicable] Agent for the
account of the Lenders on the Closing Date a loan facility fee ("Facility Fee")
in the amount of Two Hundred Seventy-Five Thousand Dollars ($275,000); provided,
however, the Agents and Lenders acknowledge receipt of One Hundred Fifty
Thousand Dollars ($150,000) of such Fee prior to the Closing Date.
(5) Management Fee. Borrower shall pay to CIT-BC on the Closing Date a
collateral management fee in the amount of Twenty-Five Thousand Dollars
($25,000). On each anniversary date of the Closing Date until all Loans are
repaid in full and all Commitments are cancelled or terminated Borrower shall
pay to CIT-BC a collateral management fee in the amount of Twenty-Five Thousand
Dollars ($25,000). All the fees under this provision (5) are called "Management
Fees" and shall be fully earned when paid and are non-refundable in any event.
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SECTION 2.10 Payments and Computations. Borrower shall make each
Principal Payment and Interest Payment on all Loans and Commitment Fees not
later than 12:00 Noon (New York time) on the day when due in Dollars in
immediately available funds in New York City to Applicable Agent at its
Principal Office.
All computations of Fees and interest on Loans shall be made by
Applicable Agent on the basis of a year of three hundred sixty (360) days, and
paid, in each case, for the actual number of days elapsed (including the first
day but excluding the last day). Each determination by Applicable Agent of an
interest rate or Fees hereunder shall be conclusive and binding for all purposes
absent manifest error.
Whenever any Principal Payment or Interest Payment on the Loans or of
Fees shall be due on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day. If the date for any Principal Payment
is extended by operation of Law or otherwise, interest thereon shall be payable
for such extended time.
All payments under this Agreement and the other Loan Documents will be
deemed made when the Applicable Agent receives immediately available funds in
its bank account in New York, New York.
SECTION 2.11 Notes; Amortization.
(1) Term Loan. The Term Loan shall be evidenced by, and repaid with
interest in accordance with, one or more promissory notes (each, a "Term Loan
Note") of Borrower in substantially the form of Exhibit A hereto. On the Closing
Date, Borrower shall deliver to CIT-EF a Term Loan Note in the principal amount
equal to the Term Loan, payable to CIT-EF for the account of its Applicable
Lending Office, dated the Closing Date. In the event there shall be any
assignment by CIT-EF or an Assignee of its interest in a Term Loan Note in
accordance with the provisions hereof, Borrower shall, upon surrender of such
Note, issue to each of CIT-EF, or such Assignee and its Assignee a new Term Loan
Note in a principal amount equal to its respective interest in the Term Loan
(after giving effect to such assignment). Each Lender is hereby authorized by
Borrower to endorse on the schedule attached to the Term Loan Note held by it,
the Type of each Term Loan and each renewal, conversion, continuation and
payment of principal amount received by such Lender.
The principal of the Term Loan shall be payable commencing on
September 30, 1995 and thereafter on each succeeding Quarterly Payment Date
through and including,
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unless prepaid in full in accordance with the terms of this Agreement, June 30,
2002, in equal quarterly installments, such that on each such date Six Hundred
Seven Thousand One Hundred Forty-Two Dollars and Eighty-Six Cents ($607,142.86)
of the Term Loan is paid, provided, however, the last such payment on the last
such date shall be in the amount required to repay the Term Loan in full.
(2) Capital Expenditure Loans. The Capital Expenditure Loan shall be
evidenced by, and repaid with interest in accordance with, one or more
promissory notes (each, a "Capital Expenditure Loan Note") of Borrower in
substantially the form of Exhibit B hereto. On the Closing Date, Borrower shall
deliver to each Capital Expenditure Lender a Capital Expenditure Loan Note in a
principal amount equal to the amount of such Lender's Capital Expenditure Loan
Commitment, payable to such Lender for the account of its Applicable Lending
Office, and dated the Closing Date. In the event there shall be any assignment
by any such Capital Expenditure Lender, or an Assignee of its interest in a
Capital Expenditure Loan Note in accordance with the provisions hereof, Borrower
shall upon surrender of such Note, issue to each of such Lender, or such
Assignee, as the case may be, and its Assignee a new Capital Expenditure Loan
Note in a principal amount equal to its respective Capital Expenditure Loan
Commitment (after giving effect to such assignment). Each Capital Expenditure
Lender is hereby authorized by Borrower to endorse on the schedule attached to
the Capital Expenditure Loan Note held by it the amount of each Loan, the Type
of each Loan, and each renewal, conversion, continuation and payment of
principal amount received by such Lender.
The principal of the Capital Expenditure Loans shall be payable
commencing on the first Quarterly Payment Date occurring after the earlier of:
(1) the date of making the last Capital Expenditure Loan available to be made
under this Agreement, or (2) the Capital Expenditure Loan Commitment Termination
Date and thereafter on each succeeding Quarterly Payment Date through and
including, unless prepaid in full in accordance with the terms of this
Agreement, June 30, 2002 in equal quarterly installments, such that on each date
an equal amount of the total principal amount of the Capital Expenditure Loan is
paid, provided, however, the last such payment on the last such date shall be in
the amount required to repay the Capital Expenditure Loans in full.
(3) Working Capital Loans. The Working Capital Loans shall be
evidenced by, and repaid with interest in accordance with, a promissory note
("Working Capital Loan Note") of Borrower in substantially the form of Exhibit C
hereto duly completed, in the principal amount equal to Five
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Million Dollars ($5,000,000), payable to CIT-BC for the account of its
Applicable Lending Office, and dated the Closing Date. In the event there shall
be an assignment by CIT-BC or an Assignee of its interest in a Working Capital
Loan Note in accordance with the provisions hereof, Borrower shall, upon
surrender of such Note, issue to each of CIT-BC, or such Assignee and its
Assignee a new Working Capital Loan Note in a principal amount equal to its
respective Working Capital Loan Commitment (after giving effect to such
assignment). Each Working Capital Lender is hereby authorized by the Borrower to
endorse on the schedule attached to the Working Capital Loan Notes held by it
the amount of each Working Capital Loan evidenced thereby, the date on which
each Loan is made, the Type of the Working Capital Loan and each renewal,
conversion, continuation and payment of principal amount received by such Lender
for the account of its Applicable Lending Office on account of such Working
Capital Loans, which endorsement shall, in the absence of manifest error, be
conclusive as to the outstanding balance of the Working Capital Loans made by
such Working Capital Lender and evidenced by such Working Capital Loan Note;
provided, however, that the failure to make such notation with respect to any
such Working Capital Loan or renewal, conversion, continuation or payment shall
not limit or otherwise affect the obligations of the Borrower under this
Agreement or the Working Capital Loan Note held by such Working Capital Lender.
Principal on the Working Capital Loans shall be due and payable on the
Working Capital Loan Commitment Termination Date.
SECTION 2.12 Optional Prepayments. Borrower may prepay the Non-Working
Capital Loans upon at least one (1) Business Day's notice to Term Agent in the
case of Prime Rate Loans, and at least three (3) Business Day's notice to Term
Agent in the case of LIBOR Rate Loans, in whole or in part with accrued interest
to the date of such prepayment on the amount prepaid, provided that (1) each
partial prepayment shall be (a) in the case of a Prime Rate Loan, in a principal
amount of not less than Five Hundred Thousand Dollars ($500,000) and integral
multiples of One Hundred Thousand Dollars ($100,000), and (b) in the case of a
LIBOR Rate Loan, in a principal amount of not less than One Million Dollars
($1,000,000) and integral multiples of Two Hundred Thousand Dollars ($200,000);
(2) LIBOR Rate Loans prepaid on any Business Day other than the last day of the
Interest Period applicable for such Loan shall require the Borrower to make the
Broken Funding Payments; and (3) the Borrower Pays the Term Lenders or Capital
Expenditure Lenders, as the case may be, the Cancellation Premium (Non-Working
Capital Loans) on the amount prepaid.
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Payments on Non-Working Capital Loans made pursuant to this Section
2.12 shall be applied in the inverse order of maturity and shall include all
interest accrued on the amount of principal prepaid.
At any time, Borrower may prepay, in whole or in part, the Working
Capital Loans upon at least one (1) Business Day's notice to Working Capital
Agent in the case of Prime Rate Loans, and at least three (3) Business Day's
notice to Working Capital Agent in the case of LIBOR Rate Loans, in whole or in
part with accrued interest to the date of such prepayment on the amount prepaid,
provided, that (1) each partial prepayment shall be (a) in the case of Prime
Rate Loans, in a principal amount not less than Five Thousand Dollars ($5,000)
and integral multiples of One Thousand Dollars ($1,000), and (b) in the case of
a LIBOR Rate Loan, in a principal amount not less than One Million Dollars
($1,000,000) and integral multiples of Two Hundred Thousand Dollars ($200,000);
and (2) LIBOR Rate Loans prepaid on any Business Day other than the last day of
the Interest Period applicable for such Loan shall require the Borrower to pay
the Broken Funding Fee.
SECTION 2.13 Mandatory Prepayments. Within sixty (60) days following
each Quarterly Date, Borrower shall apply fifty percent (50%) of Excess Cash
Flow for the Quarterly Period ended on the immediately preceding Quarterly Date
as a mandatory prepayment of the Non-Working Capital Loans ("Excess Cash Flow
Mandatory Prepayment"). Prepayments made pursuant to this paragraph will include
all interest accrued on the principal amount prepaid and be applied (1) on a
proportionate basis to the Non-Working Capital Loans based upon then outstanding
aggregate principal amounts of such Loans, and (2) in inverse order of maturity.
All Eminent Domain Proceeds shall be applied to prepay the Loans as
follows: first, to the Non-Working Capital Loans, and second, to the Working
Capital Loans. Except to the extent provided in Section 2.15, Insurance Proceeds
shall be applied to prepay the Loans as follows: first, to the Non-Working
Capital Loans, and second, to the Working Capital Loans.
To the extent the outstanding Working Capital Loans exceeds the
Borrowing Base, then the Borrower shall immediately prepay the Working Capital
Loans in an amount equal to the excess of the outstanding Working Capital Loans
over the then effective Borrowing Base.
If the Borrower terminates the entire Working Capital Loan Dollar
Commitment then the Borrower shall prepay in full all of the Non-Working Capital
Loans and pay
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all fees and expenses accrued through such date. If the Borrower repays in full
the Term Loan and the Capital Expenditure Loan as the result of optional
prepayments under Section 2.12, then the Borrower shall (1) prepay in full all
of the Working Capital Loans, (2) terminate the entire Working Capital Loan
Commitment, and (3) pay all fees and expenses accrued through such date.
Prepayments of Working Capital Loans under this Section 2.13 (other
than prepayments under the third paragraph of this Section 2.13) shall
automatically result in a reduction in the Working Capital Loan Dollar
Commitment Amount equal to the amount of such principal prepayment.
SECTION 2.14 Contingent Interest. Within sixty (60) days of each
Quarterly Date, commencing with the September 30, 1995 Quarterly Date, and
ending with the March 31, 2002, Quarterly Date, Borrower shall pay to the Term
Agent for the benefit of the Term Lenders an amount equal to twenty percent
(20%) of Distributable Cash Flow for the Quarterly Period ending on the
immediately preceding Quarterly Date ("Contingent Interest"); provided, however,
that the total amount of Contingent Interest payable by Borrower in respect of
all such periods shall not exceed Two Million Dollars ($2,000,000). Upon the
earlier of (1) the seventh anniversary of the Closing Date, or (2) an Optional
Prepayment in full of all the Loans pursuant to Section 2.14, the Borrower must
pay the Term Agent for the benefit of the Term Lenders the difference between
One Million Dollars ($1,000,000) and the amount of Contingent Interest
previously paid, provided, however, no such payment is required if the
difference is zero or less. Upon such a payment the Borrower will be released
from its obligations under this Section 2.14.
SECTION 2.15 Application of Insurance Proceeds. Except as provided
below, each of Borrower, Collateral Agent and Lenders agree that all proceeds
(including instruments) in respect of any casualty insurance policy ("Insurance
Proceeds") shall be paid by the respective insurers directly to the Collateral
Agent, and if paid to the Borrower such Insurance Proceeds shall be received
only in trust for the Collateral Agent, shall be segregated from other funds of
the Borrower and shall be forthwith paid over to the Agent in the same form as
received (with any necessary endorsement). Borrower and Lenders agree that
Collateral Agent shall apply all such Insurance Proceeds received by it in
accordance with this Section 2.15.
If there shall occur any damage or destruction of the Facility with
respect to which Insurance Proceeds (provided, that amounts applied pursuant to
this sentence shall not exceed Twenty-Five Thousand Dollars ($25,000) in
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any one fiscal year) are payable, such Insurance Proceeds shall be paid to
Borrower and applied to the prompt payment of the cost of the repair or
restoration of such damage or destruction.
If (1) a Default or an Event of Default shall have occurred and be
continuing, (2) there shall have occurred an Event of Loss, or (3) there shall
have occurred any loss of any property of Borrower where the Insurance Proceeds
with respect thereto exceed Twenty-Five Thousand Dollars ($25,000) per
occurrence or the total within any one fiscal year, all Insurance Proceeds shall
be paid to and applied by the Collateral Agent as a mandatory prepayment of the
Loans; provided, however, that notwithstanding the foregoing, so long as clauses
(1) and (2) hereof shall not apply, the Borrower shall be entitled to use the
Insurance Proceeds in respect of any loss described in clause (3) hereof as
reimbursement for, or payment of, the costs of repair and replacement of such
property if, and only if, prior to application by Collateral Agent of such
Insurance Proceeds, Borrower shall have provided to the satisfaction of Required
Lenders (1) contracts for such repair or replacement demonstrating Borrower's
ability to effect such repair or replacement at a cost not greater than such
Insurance Proceeds (or, if such cost is greater, accompanied by an explanation
of the source of funds for such excess amounts satisfactory to Required
Lenders), (2) assurances satisfactory to the Required Lenders demonstrating
Borrower's ability to meet its obligations under the Loan Documents during the
period from such loss until and following completion of such repair or
replacement, and (3) assurances that all Facility Agreements or replacements
thereof acceptable to the Required Lenders shall remain in full force and effect
during such period and thereafter to the satisfaction of the Required Lenders.
Pending disbursement of any funds held by the Collateral Agent
hereunder, the disposition of which are covered by this Section 2.15, such funds
shall be held in a separate account (the "Insurance Account"). Funds in the
Insurance Account shall be invested, at the expense and direction of the
Borrower, in Permitted Investments. Any such Permitted Investments may be sold
or reduced to cash (without regard to maturity) in such manner as the Collateral
Agent shall deem reasonable and prudent under the circumstances whenever
necessary to make any application required by this Section 2.15. As security for
the Borrower's Obligations, the Borrower hereby irrevocably conveys, pledges and
sets over to the Collateral Agent, and grants the Collateral Agent, for the
benefit of the Secured Parties, a security interest in, all of its right, title
and interest in, and to the Insurance Account and all Permitted Investments
purchased with the funds in the Insurance
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Account, which shall be in the name, sole dominion and control of the Collateral
Agent. All funds in the Insurance Account will be disbursed by the Collateral
Agent directly to the Person entitled to receive payment.
Any funds remaining in the Insurance Account shall, after all
disbursements required by this Section 2.15 have been made and after the
completion of all necessary repairs, replacements, and restorations of the
Facility, be released by the Collateral Agent to the Borrower, provided that the
Collateral Agent shall not release any funds in the Insurance Account to the
Borrower if a Default or Event of Default shall have occurred and be continuing.
Upon the occurrence of an Event of Default and acceleration of the Loans in
accordance with the terms of this Agreement, the Collateral Agent shall apply
all funds in the Insurance Account to the satisfaction of the Borrower's
Obligations.
SECTION 2.16 Application of Eminent Domain Proceeds. The Borrower
agrees that all Eminent Domain Proceeds shall be paid directly to the Collateral
Agent for the benefit of the Lenders, and if paid to the Borrower such Proceeds
shall be received only in trust for the Collateral Agent for the benefit of the
Lenders, shall be segregated from other funds of the Borrower, and shall be
forthwith paid over to the Collateral Agent for benefit of the Lenders in the
same form as received (with any necessary endorsement). All Eminent Domain
Proceeds shall be applied to prepay the Loans.
SECTION 2.17 Use of Proceeds. The proceeds of the Loans will be used
as follows:
(1) Term Loan. The proceeds of the Term Loan shall be used by Borrower
solely to pay a portion of the acquisition and closing costs related to the
Acquisition and the transaction contemplated herein.
(2) Capital Expenditure Loans. The proceeds of the Capital Expenditure
Loans shall be used by the Borrower solely to pay Capital Program Costs.
(3) Working Capital Loans. The proceeds of the Working Capital Loans
shall be used by the Borrower solely for general corporate purposes, provided,
that, such proceeds can not be used to pay any Capital Program Cost.
(4) Margin Stock. Borrower will not, directly or indirectly, use any
Loan proceeds for the purpose of purchasing or carrying any margin stock within
the meaning of Regulation U of the Board of Governors or to extend credit to any
Person for the purpose of purchasing or carrying any such margin stock.
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SECTION 2.18 Priority of Special Dividends. Contingent Interest and
Excess Cash Flow Mandatory Prepayments. Notwithstanding any provision of this
Agreement to the contrary, if at the time the Borrower is permitted to declare
and pay a Special Dividend and is required to pay Contingent Interest and make
an Excess Cash Flow Mandatory Prepayment, and there is insufficient cash to
declare and pay such Special Dividend and to make such prepayments and pay such
interest, then the available cash can be applied as follows: (1) to the extent
permitted under this Agreement, to declare and pay the Special Dividend, (2) to
make the Excess Cash Flow Mandatory Prepayment, and (3) to pay Contingent
Interest. The parties agree that to the extent there are insufficient funds to
pay Contingent Interest and make an Excess Cash Flow Mandatory Prepayment due to
the declaration and payment of the Special Dividend the Borrower is not required
to pay such Contingent Interest and/or make the Excess Cash Flow Mandatory
Prepayment, but the failure to pay such Contingent Interest will not reduce the
Borrower's obligation to pay Contingent Interest in the future.
SECTION 2.19 Deposit Account. The Borrower shall direct all of its
Account Debtors to deposit any and all proceeds of Accounts and/or Collateral
into an account designated by the Working Capital Agent to receive all such
proceeds ("Deposit Account"), and any checks, cash, notes, chattel paper or
other instruments or property received by the Borrower with respect to any
Accounts or proceeds of Collateral shall be promptly deposited into such Deposit
Account. As long as there is no Default or Event of Default outstanding and the
aggregate principal amount of the Working Capital Loans has not exceeded Two
Million Dollars ($2,000,000) for any two (2) consecutive Business Days all funds
in such Account will be transferred to an account designated by the Borrower. If
(1) the aggregate principal amount of Working Capital Loans outstanding exceeds
Two Million Dollars ($2,000,000) for two (2) consecutive Business Days, or (2)
there is a Default or Event of Default, upon the instructions of the Working
Capital Agent, the bank holding such Deposit Account shall immediately
thereafter remit all funds in the Account to an account designated by the
Working Capital Agent to be applied prior to the acceleration of the Loans to
the repayment of the Working Capital Loans, and after the acceleration of the
Loans, to the repayment of all the Loans in such order as the Agents may
designate. Upon written waiver of any Defaults or Events of Default, or if the
aggregate principal amount of the Working Capital Loans is repaid or reduced to
an amount of less than Two Million Dollars ($2,000,000) for two (2) consecutive
Business Days and funds in the Deposit Account are then being transferred to the
account designated by the Working Capital Agent, the Working Capital Agent will
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direct the bank holding the Deposit Account to transfer funds to the account
designated by the Borrower.
If the Borrower receives any checks, cash, notes, chattel paper or
other instruments or other property with respect to any Accounts or any other
proceeds of Collateral they shall be held by the Borrower in trust for the
Collateral Agent separate from the Borrower's own property and funds and
immediately turned over to the Working Capital Agent with proper assignments or
endorsements for deposit to the Deposit Account. All amounts received by Working
Capital Agent (in the Working Capital Agent's account) in payment of Accounts
will be credited to the Borrower's account upon Working Capital Agent's receipt
of "collected funds" at the Working Capital Agent's bank account in New York,
New York on the business day of receipt if received no later than 1:00 p.m. or
on the next succeeding business day if received after 1:00 p.m. No checks,
drafts or other instrument received by the Working Capital Agent shall
constitute final payment to the Working Capital Agent unless and until such
instruments have actually been collected.
ARTICLE III.
CONDITIONS PRECEDENT
SECTION 3.01 Conditions Precedent to All Loans. The obligation of the
Lenders to provide any Loan on the Closing Date or thereafter shall be subject
to the condition precedent that Collateral Agent shall have received, on or
before the Closing Date, each of the following, in form and substance
satisfactory to both Agents and their counsel, dated where applicable on the
date of delivery thereof, and each of the following requirements shall have been
fulfilled:
(1) Structure of Borrower. Required Lenders shall be satisfied with
the corporate, legal, ownership and capital structure of Borrower.
(2) Evidence of Incorporation of Borrower Certified by the Secretary
or Assistant Secretary of the Borrower (as of the Closing Date) copy of the
articles of incorporation and bylaws of Borrower, with all amendments thereto,
all filed in accordance with applicable state law and a certificate (dated
within ten (10) days of the Closing Date) of the Secretary of State of its
jurisdiction of incorporation as to its good standing.
(3) Evidence of Incorporation of Pledqor. Certified by the Secretary
or Assistant Secretary of the Pledgor (as of the Closing Date) copy of the
articles of
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incorporation and bylaws of Pledgor, with all amendments thereto, all filed in
accordance with applicable state law and a certificate (dated within ten (lO)
days of the Closing Date) of the Secretary of State of its jurisdiction of
incorporation as to its good standing.
(4) Evidence of All Corporate Action by Borrower. Certified by the
Secretary or Assistant Secretary of Borrower (as of the Closing Date) copies of
all resolutions evidencing corporate action taken by Borrower authorizing the
execution, delivery and performance of the Loan Documents and each other
document to be delivered by Borrower pursuant to this Agreement, including the
Facility Agreements.
(5) Evidence of All Corporate Action by Pledgor. Certified by the
Secretary or Assistant Secretary of Pledgor (as of the Closing Date) copies of
all resolutions evidencing corporate action taken by Pledgor authorizing the
execution, delivery and performance of the Pledge Agreement and each other
document to be delivered by Pledgor pursuant to this Agreement.
(6) Incumbency and Signature Certificate of Borrower. A certificate
(dated as of the Closing Date) of the Secretary or Assistant Secretary of
Borrower certifying the names and true signatures of each officer authorized to
sign any Loan Documents on behalf of Borrower.
(7) Incumbency and Signature Certificates of Pledgor. A certificate
(dated as of the Closing Date) of the Secretary or Assistant Secretary of
Pledgor certifying the names and true signature of each officer authorized to
sign the Pledge Agreement on behalf of Pledgor.
(8) Good Standing Certificates of Borrower and Pledger. A Certificate,
dated reasonably near the Closing Date, from the Secretary of State (or other
appropriate official) of the jurisdiction of incorporation of Borrower and
Pledgor certifying as to the due incorporation and good standing of Borrower or
Pledgor, as the case may be, and certificates, dated reasonably near the Closing
Date, from the Secretary of State (or other appropriate official) of each other
jurisdiction where Borrower and Pledgor, as the case may be, is required to be
qualified to conduct business, certifying that Borrower or Pledgor is duly
qualified to do such business and is in good standing in such state;
(9) Release of Liens. All documentation required from all parties with
Liens on any of the Assets to release all such Liens.
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(10) Security Agreement. Security Agreement duly executed by the
Borrower together with duly executed financing statements (Form UCC-1) for
filing under the Uniform Commercial Code in all jurisdictions necessary, or in
the opinion of Collateral Agent, desirable to perfect the Lien created by the
Security Agreement.
(11) Searches. Uniform Commercial Code searches identifying all of the
financing statements on file with respect to Borrower in all jurisdictions where
Collateral Agent will file financing statements indicating that no Person other
than Collateral Agent has a Lien on any of the Collateral.
(12) Consents. A duly executed Consent covering each Facility
Agreement for which a Consent is required, all as set forth on Schedule 1.01C.
(13) Pledge Agreement. Pledge Agreement duly executed by Pledgor
together with all stock certificates evidencing one hundred percent (100%) of
the stock of Borrower pledged pursuant to such Pledge Agreement, together with
undated blank stock powers for each such certificate.
(14) Opinions of Counsel. Favorable opinions of counsel to Borrower
and Pledgor and Seller, including but not limited to opinions covering Approvals
and Permits required for the operation of the Facility and the implementation
and operation of the Capital Program, perfection of security interest in the
Collateral, real estate matters relating to the Site and the Mortgage, that the
Acquisition was effected in compliance with the Hart-Scott-Rodino Act and that
the Borrower is not subject to the provisions of the Public Utility Holding
Company Act.
(15) Evidence of Insurance. A certificate from each insurance carrier
evidencing the coverage required by Section 5.06 and evidence showing compliance
with all of the terms and conditions of Section 5.06.
(16) Environmental Audit. A written report to the satisfaction of
Required Lender of an investigation conducted by the Environmental Consultant
addressing any significant violations, hazards or liabilities under
Environmental Laws to which Borrower, Seller, the Assets or the Site are
subject, and any follow-up assessment or information deemed to be necessary by
Required Lenders.
(17) Environmental Requirements. Documentation deemed adequate by
Required Lenders demonstrating, in connection with the actions contemplated to
be taken pursuant to the Loan Documents and Facility Agreements, the full
compliance of Borrower, Seller, and any other necessary
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Person with any Environmental Law that (a) conditions, restricts or prohibits
the transfer, mortgage, sale, lease or closure of any property, including
without limitation, the Illinois Responsible Property Transfer Act, (b) requires
the transfer, modification or reissuance of any Approvals or Permits, or (c)
requires the posting of financial responsibility, including, without limitation,
financial responsibility in connection with any underground storage tanks.
(18) Acquisition. The consummation of the Acquisition in accordance
with the terms of the Acquisition Documents.
(19) Solvency Certificate. A Solvency Certificate duly executed by the
Borrower.
(20) Inventory and Accounts Receivable Analysis. An analysis of
Borrower's inventory and accounts receivables and personal property by CIT-BC
indicating that such assets and the systems related thereto are satisfactory to
CIT-BC.
(21) Mortgage. Borrower shall have executed and delivered to
Collateral Agent, the Mortgage, and such Mortgage shall have been delivered to
the Title Company for recording.
(22) Survey. A survey of the Site, prepared not more than three (3)
weeks prior to the Closing Date and certified to Collateral Agent and to the
Title Company by a surveyor satisfactory to Required Lenders, showing no state
of facts unsatisfactory to Required Lenders.
(23) Title Insurance Policy. A Lenders' A.L.T.A Policy of Title
Insurance, together with such endorsements or affirmative insurance as may be
reasonably required by CIT (such policy, endorsements and affirmative insurance,
the "Title Insurance Policy") in the amount of Twenty-Four Million Dollars
($24,000,000) with such reinsurance issued by such title companies as is
satisfactory to the Required Lenders, issued by the Title Company in form and
substance satisfactory to Required Lenders, insuring (or agreeing to insure) as
follows:
(a) Borrower has a good marketable and insurable fee interest to the
property purported to be covered thereby, free and clear of Liens, encumbrances
or other exceptions to title except Permitted Liens and other exceptions
acceptable to CIT; and
(b) the Mortgage is a valid Lien on the property purported to be
covered thereby and on all existing assets of the Facility constituting real
property, free
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and clear of all Liens, encumbrances and exceptions to title, except
Permitted Liens.
(24) Approvals and Permits. Evidence satisfactory to the Term Agent
that all Approvals and Permits required for the operation of the business of the
Borrower are in effect and have either been transferred to the Borrower or can
readily be transferred to the Borrower.
(25) Liquidity. Evidence that after giving effect to all the
transactions required to occur on or before the Closing Date and the payment of
all fees and expenses related thereto and the bringing of all Debts of the
Borrower current, the Liquidity shall be equal to or greater than Two Million
Dollars ($2,000,000).
(26) Equity Contribution. Evidence that cash equity contributions in
the amount of at least Five Million Dollars ($5,000,000) have been made by the
Pledgor in the Borrower in exchange for the common stock of the Borrower.
(27) Officer's Certificate. The following statements shall be true and
Collateral Agent shall have received a certificate signed by a duly authorized
officer of Borrower dated the Closing Date stating that:
(a) The representations and warranties contained in this Agreement and
in each of the other Loan Documents are on and as of the Closing Date
as though made on and as of such date correct in all material respects
in the case of such representations and warranties which are not subject
to a Material Adverse Change exception, and in all cases where such
representation and warranty is subject to such an exception, are correct;
and
(b) After giving effect to the execution of the Loan Documents and the
borrowing of the Loans borrowed on the Closing Date, no Default or Event of
Default has occurred and is continuing.
(28) Fees and Expenses. The payment of all fees and expenses due on
the Closing Date, including the Facility Fees, the Collateral Evaluation Fee,
the Management Fee, the fees and expenses of legal counsel to the Agents, and
the payment of all reasonable out of pocket expenses of both Agents.
(29) Other Matters. Agent shall have received such other statements,
certificates, agreements, documents and information as Agent or any of the
Lenders may reasonably request.
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SECTION 3.02 Conditions Precedent to Term Loan. The obligations of
CIT-EF to make the Term Loan on the Closing Date shall be subject to the
conditions precedent that Agent shall have received on or before the Closing
Date, in form and substance satisfaction to Term Agent and its counsel, dated
where applicable on the date of delivery thereof, and each of the following
requirements shall have been fulfilled:
(1) Term Loan Note. A Term Loan Note for CIT-BC duly executed by
Borrower.
(2) Asset Purchase Documents. Evidence that (a) each transaction
contemplated to occur on or prior to the Closing Date by the Asset Purchase
Documents has occurred prior to the Closing Date, including but not limited to
the transfer of the rights to the Facility to Borrower free and clear of any
Liens, including any Environmental Liens, other than Permitted Liens and (b)
copies of the Asset Purchase Documents certified by an officer of the Borrower
(as of the Closing Date).
(3) Notice of Assignment of Asset Purchase Agreement. Written notice
of the security interest granted by Borrower to Term Agent and the Lenders in
Borrower's rights under the Asset Purchase Agreement shall have been given to
Seller.
(4) Hart-Scott-Rodino. Evidence that the Acquisition was effected in
accordance with the Hart-Scott-Rodino Act.
SECTION 3.03 Conditions Precedent to Making a Capital Expenditure
Loan. The obligation of Capital Expenditure Lenders to make a Capital
Expenditure Loan shall be subject to the conditions precedent that Term Agent
shall have received on or before the date of each such Capital Expenditure Loan,
each of the following, in form and substance satisfactory to Term Agent and its
counsel, dated where applicable on the date of delivery thereof:
(1) Capital Expenditure Loan Note. A Capital Expenditure Loan Note for
each Capital Expenditure Lender duly executed by Borrower.
(2) Notice of Borrowing. Term Agent shall have received a Capital
Expenditure Notice of Borrowing accompanied by the items set forth below:
(a) a certificate of Borrower breaking down the use of proceeds of the
Capital Expenditure Loan requested for individual Capital Program Costs, and
attaching such bills or invoices as requested by Term
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Agent describing the items purchased [and/or the services rendered];
and
(b) such other certifications or statements as Term Agent
shall reasonably request to confirm the information delivered pursuant
to clauses (a) of this Section 3.04(1).
(3) Lien Waivers. Each Person that has delivered or installed
items related to the Capital Program or rendered services related to the Capital
Program shall have executed and delivered mechanic's lien waivers.
(4) Approvals and Permits. Satisfactory evidence of receipt
of all Approvals and Permits required (a) for the operation of the Facility and
(b) to commence and to continue as of such date the implementation of the
Capital Program.
(5) Other Matters. Agent shall have received such other
statements, certificates, agreements, documents and information as Agent or any
of the Lenders may reasonably request.
SECTION 3.04 Conditions Precedent to Working Capital Loan. The
obligation of the Working Capital Lenders to make any Working Capital Loans
shall be subject to the conditions precedent that Working Capital Lenders shall
have received on or before the date of such Working Capital Loan, each of the
following, in form and substance satisfactory to Working Capital Agent and its
counsel, dated where applicable on the date of delivery thereof:
(1) Working Capital Loan Note. A Working Capital Loan Note for
each Working Capital Lender duly executed by Borrower;
(2) Notice of Borrowing. A Working Capital Notice of Borrowing;
(3) Borrowing Base Certificate. Certificate in the form of
Exhibit L; and
(4) Deposit Agreement. A duly executed copy of the Deposit
Agreement.
SECTION 3.05 Conditions Precedent to All Loans. The obligations
of any Lenders to make any Loan other than the Loan to be funded on the Closing
Date, shall be subject to the further conditions precedent that on the date of
providing such Loan:
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(1) The following statements shall be true:
(a) each of the representations and warranties of the Borrower
contained in this Agreement and in each of the other Loan Documents is correct
in all material respects if such representation and warranty is not subject to a
Material Adverse Change exception, and if such representation and warranty is
subject to such an exception, is correct, on and as of the date of providing
such Loan, as though made on and as of such date; and
(b) prior to making such Loans, no Default or Event of Default
exists and after giving effect to such Loan, no Default or Event of Default will
have occurred and be continuing.
(2) Working Capital Agent shall have received such other
approvals, opinions, reports or documents as Agent or any Lender may reasonably
request.
SECTION 3.06 Deemed Representation. Each Notice of Borrowing and
acceptance by the Borrower of any Loan proceeds, shall constitute a
representation and warranty that the statements contained in Section 3.05(1) are
true and correct both on the date of such Notice and, unless Borrower otherwise
notifies the Applicable Agent prior to the receipt of such Loan, as of the date
of receiving the proceeds of such Loan.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Agent and each of the Lenders
as follows:
SECTION 4.01 Organization and Qualification of Borrower. Borrower
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and the Borrower is duly authorized to do
business in the State of Illinois and in each other jurisdiction where the
character of its properties or the nature of its activities makes such
qualification necessary. Borrower has all requisite corporate power and
authority to own or hold under lease and operate the property it purports to own
or hold under lease and to carry on its business as now being conducted and as
proposed to be conducted including, but not limited to, the implementation of
the Capital Program.
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SECTION 4.02 Authorization and Enforceability. Borrower has
taken all necessary corporate and legal action to authorize the
transactions pursuant to the Loan Documents to which it is a party and
the Facility Agreements, and to grant the mortgages and security
interests provided for in the Security Documents. Each of this Agreement,
the other Loan Documents to which Borrower is a party and each of the
Facility Agreements has been duly executed and delivered by Borrower and
constitutes the Borrower's legal, valid and binding obligation,
enforceable against or its property in accordance with its terms, except
as the enforceability thereof may be limited by (1) bankruptcy,
insolvency, reorganization or other similar laws affecting creditors'
rights generally, and (2) general equitable principles regardless of
whether the issue of enforceability is considered in a proceeding in
equity or at law.
SECTION 4.03 Compliance with Law. Borrower is in compliance
with all Laws applicable to it or its activities except in the case of
Laws (including tax laws) which impose obligations to pay money, such
failure is the subject of a Good Faith Contest.
SECTION 4.04 Approvals and Permits. As of the Closing Date,
all Approvals and Permits required to be obtained or made by the Borrower
(1) in connection with the construction, ownership, operation and
maintenance of the Facility and/or the implementation of the Capital
Program, (2) in connection with the granting of any Liens under the
Security Documents, and (3) in connection with the execution, delivery
and performance of the Facility Agreements, are set forth in Schedule
4.04. Part A of Schedule 4.04 specifies all such Approvals and Permits
required to be obtained by the Closing Date. Part B of Schedule 4.04
specifies all such Approvals and Permits which as of the Closing Date are
not required to be obtained by the Closing Date. Borrower has no reason
to believe that any of the Approvals and Permits set forth in Part B of
Schedule 4.04 will not be obtained on or before the date such Approval or
Permit is required for the construction of the portion of the Capital
Program for which such Approval or Permit is required. Borrower has and
is in compliance with all of the Approvals and Permits necessary to own,
operate and maintain the Facility as of the date of making such
representation and warranty. No activity in furtherance of the Capital
Program for which an Approval or Permit is required has occurred in the
absence of such Approval or Permit.
Borrower possesses all non-governmental licenses, permits,
franchises, patents, copyrights, trademarks and trade names, or rights
thereto, to conduct its business
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substantially as now conducted and as proposed to be conducted.
As of the Closing Date, Borrower does not perform any
operations or conduct any activities that utilize the license under the
Kalama License.
SECTION 4.05 No Conflicts: No Default. Neither the
execution, delivery and performance of this Agreement nor any other Loan
Document to which the Borrower is a party and each Facility Agreement,
nor the consummation of any of the transactions contemplated hereby or
thereby, nor performance of or compliance with the terms and conditions
hereof or thereof, (1) contravenes any Law applicable to the Borrower or
any of its properties or other assets, t2) conflicts with, breaches or
contravenes any provisions of any contract, agreement, instrument or
undertaking of Borrower, or (3) results in the creation or imposition of
any Liens (other than Permitted Liens) on any property of Borrower under,
or results in the acceleration of any obligation under, or in a condition
or event that constitutes (or that, upon notice or lapse of time or both,
would constitute) an event of default under any contract, agreement,
instrument or undertaking of Borrower. Borrower has not given or received
any notice of default under any Consent, which notice relates to a
default that has not been cured, and each of the Consents is in full
force and effect or has been terminated (other than as a result of a
breach) or all obligations of all parties thereunder have been performed
or waived.
SECTION 4.06 No Litigation. There are no actions, suits or
proceedings at law or in equity or by or before any Governmental
Authority now pending or, to the Borrower's knowledge, threatened against
or affecting -Borrower or property or other assets or rights of Borrower
or with respect to this Agreement, any other Loan Document, any Facility
Agreement, any Asset Purchase Document the Capital Program or otherwise,
which, if adversely determined, could result in a Material Adverse Change
nor, to Borrower's knowledge, is there any basis for any such suit,
action or proceeding.
SECTION 4.07 Obligations: No Default; Event of Loss.
Borrower is not in default under or with respect to either (1) any
Facility Agreement, or (2) any other contract, agreement, undertaking or
instrument in any respect. No contract, agreement, undertaking or
instrument to which Borrower is bound and no Law applicable to Borrower
could result in a Material Adverse Change. No Event of Loss has occurred.
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SECTION 4.08 Taxes. Borrower has filed all tax and
information returns that are required to have been filed by it in any
jurisdiction, and have paid all taxes shown to be due and payable on such
returns and all other taxes and assessments payable by it, to the extent
the same have become due and payable, except to the extent they are the
subject of a Good Faith Contest.
Except for (1) registration, recordation and other
miscellaneous taxes and fees payable in connection with the recordation
of the Mortgage and the filing of financing statements required to
perfect the Collateral Agent's and Lenders' rights under the Security
Documents, all of which taxes and fees will have been paid in full by
Borrower on or before the Closing Date to the extent then required, (2)
other taxes or fees, if any, that are indemnified against by Borrower
pursuant to Section 11.06 hereof and that shall have been paid in full by
Borrower on or before the Closing Date to the extent then required, and
(3) income or franchise taxes imposed with respect to Lenders as of the
date hereof, neither the execution and delivery of this Agreement or any
other Facility Agreement, nor the consummation of any of the transactions
contemplated hereby or thereby, will result in any tax, levy, impost,
duty, charge or withholding imposed by the State of Illinois or any
political subdivision or taxing authority thereof or therein, on or with
respect to such execution, delivery or consummation, upon or with respect
to any Agent or any Lenders.
SECTION 4.09 ERISA. The Borrower and each ERISA Affiliate
are in compliance in all material respects with all applicable provisions
of ERISA and the Code relating to Employee Benefit Plans. Neither the
Borrower nor any other Person, including any fiduciary, has engaged in
any prohibited transaction (as defined in Section 4975 of the Code or
Section 406 of ERISA) which could subject the Borrower, or any entity
which they have an obligation to indemnify, to any tax or penalty imposed
under Section 4975 of the Code or Section 502(i) of ERISA. No Reportable
Event has occurred with respect to any Employee Benefit Plan; there is no
Lien outstanding or Lien given in connection with a Pension Plan; no
notice of intent to terminate a Pension Plan has been given nor has any
such Plan been terminated; no circumstances exist which constitute
grounds under Section 4042 of ERISA on which the PBGC could institute
proceedings to terminate, or appoint a trustee to administer, a Pension
Plan or a Multiemployer Plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any ERISA Affiliate has completely
or partially withdrawn under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or incurred liability with respect to Section 515 of
ERISA; the Borrower and each ERISA Affiliate
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has met its minimum funding requirements under ERISA with respect to each
of their Pension Plans subject to Section 412 of the Code or Section 302
of ERISA and all benefit liabilities under each such Plan are being
funded in accordance with all applicable Laws and reasonable actuarial
assumptions and methods as set forth in the Code and ERISA, and neither
the Borrower nor any ERISA Affiliate has incurred any liability under
Title IV of ERISA (other than for the payment of annual premiums, all
which have been paid). No Multiemployer Plan is in Reorganization, is
Insolvent or is terminating; neither the Borrower nor any ERISA Affiliate
has received a notice from the administrator of a Multiemployer Plan that
indicates the existence of potential withdrawal liability under such
Multiemployer Plan: as of the Closing Date each Employee Benefit Plan
that is intended to be qualified under Section 401(a) or 401(k) of the
Code is so qualified and, as of any subsequent date of providing a Loan,
each Employee Benefit Plan that is intended to be qualified under Section
401(a) or 401(k) of the Code is so qualified.
SECTION 4.10 Full Disclosure. Neither this Agreement nor
any certificate, written statement or other document furnished to any
Agent, any of the Lenders, the Title Company, the Independent Engineer,
the Environmental Consultant, or to any Person submitting a report to any
Agent or any Lender, by or, on behalf of Borrower in connection with the
transactions contemplated by this Agreement and the other Loan Documents
and the Facility Agreements, or the design, description, testing or
operation of the Capital Program, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements contained herein or therein not misleading. There is
no fact known to Borrower which has not been disclosed to any Lender
which could result in a Material Adverse Change. No information, exhibit,
or report furnished prior to the date hereof by Borrower to any Agent or
any Lender in connection with the negotiation of this Agreement,
contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained
therein not materially misleading.
SECTION 4.11 Broker's or Finder's Commissions. Except for
the investment banking fees paid or to be paid on the Closing Date by
Borrower to The Gemstone Group, Inc., no broker's or finder's fee or
commission or similar fee is payable by the Borrower with respect to the
Loans to be made hereunder or the other transactions contemplated by this
Agreement or any other Loan Document.
SECTION 4.12 Budget and Projections. Borrower has prepared
the Projections and they (1) are based on
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reasonable, fair and proper assumptions as to all legal and factual
matters material to the matters set forth therein, (2) represent the
Borrower's best estimate as of the Closing Date of Borrower's future
financial performance, and (3) are consistent with the provisions of the
Loan Documents and the Facility Agreements.
SECTION 4.13 Environmental Matters. The operations of the
Borrower comply in all respects with all Environmental Laws.
The Borrower has obtained all Approvals and Permits
required under Environmental Laws for ownership and operation of the
Facility and all such Approvals and Permits are in full force and effect
and the Borrower is in compliance with all terms and conditions of such
Approvals and Permits.
Neither the Borrower nor the Facility nor any of its assets
or operations, nor any prior owner or operator of or at the Site is
subject to any order from, agreement with, or to the knowledge of the
Borrower, an investigation by, or judicial or administrative proceeding
by any Person respecting any Environmental Laws or any Environmental
Discharges.
Except for the Borrowers's obligations under the Asset
Purchase Documents and the Facility Agreements, Borrower has not entered
into any negotiations or agreements with any Person relating to any
Environmental Discharge or liability under any Environmental Law. Notice.
The Borrower has not received any Environmental Notice.
No Environmental Lien has attached to any of the Assets,
the Facility or to the Site.
The Facility has not been included on the National Priority
List published by the United States Environmental Protection Agency to
identify the highest priority sites for clean-up of Hazardous Materials
released to and present on, in or under the Site or on any similar list
maintained under Illinois law, nor has the Borrower received an
Environmental Notice which notifies or indicates that clean-up,
remediation or removal action pursuant to Environmental Laws will be
required, nor has the Borrower received notice of any claim, lawsuit, or
demand by any third party seeking damages or equitable relief for
injuries or harm to persons or property attributable to, or to complete
remedial action with respect to, releases of Hazardous Materials at, on,
in or under the Facility, nor have there been any releases of Hazardous
Materials at, on, in or under the Facility except
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as disclosed in the report of the Environmental Consultant or in de
minimis amount and concentration.
To the best of Borrower's knowledge, Hazardous Materials
released and present on the Site have been properly reported to the
appropriate agencies according to applicable laws, and that there are no
claims, litigation, administrative or other proceedings, whether actual
or threatened, relating to the release or presence of Hazardous Materials
on the Site relating in any way to the Site or the improvements thereto.
To the best of Borrower's knowledge, there are no claims,
litigation, administrative or other proceedings, whether actual or
threatened, relating to non-compliance with the terms and conditions of
permits, authorizations, or any other documents required by Law for the
treatment and disposal of wastes, discharge of wastewater, and emissions
of air contaminants.
To the best of Borrower's knowledge, all permits,
authorizations, or any other documents required by Law for the treatment
and disposal of wastes, discharge of wastewater, and emissions of air
contaminants, have been acquired and maintained for operations of the
Site, that the operations on the Site are in material compliance with all
such permits, authorizations, and other documents, and that applications
for transfer of such permits, authorizations, and other such documents
required by Law, have timely filed such that there will be no
interruption in the ability to operate the manufacturing processes at the
Site.
SECTION 4.14 No Material Adverse Change. Since the Closing
Date, no Material Adverse Change has occurred. Since December 31, 1994,
there has been no material adverse change in the status of the business,
assets, liabilities, results of operations, conditions (financial or
otherwise), property or prospects of Pledgor.
SECTION 4.15 Borrower Financial Statement. To the best of
Borrower's knowledge, the special purpose financial statements of the
predecessor to Borrower's business set forth on Schedule 4.15 are
complete and correct and fairly present the financial condition of such
predecessor of the Borrower with respect to the Business (as defined in
the Asset Purchase Agreement) as at such dates and the results of the
operations of such predecessor to the Borrower in respect of the Business
for the periods covered by such statements, all in accordance with GAAP
(as in effect on the date thereof) except as otherwise noted therein.
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SECTION 4.16 Pro Forma Financial Statement. Borrower has
prepared a pro forma balance sheet as of the Closing Date and such pro
forma balance sheet is based on reasonable assumptions.
SECTION 4.17 Labor Disputes and Acts of God. Neither the
business nor the properties of Borrower are affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty (whether or not covered by insurance).
SECTION 4.18 Governmental Regulation. Borrower is not
subject to regulation under the Public Utility Holding Company Act of
1935, the Investment Company Act of 1940, the Interstate Commerce Act,
the Federal Power Act or any statute or regulation limiting its ability
to obtain the Loans in accordance with this Agreement.
SECTION 4.19 Partnerships. Borrower is not a partner in any
partnership.
SECTION 4.20 Solvency. Borrower is, and upon consummation
of the transactions contemplated by this Agreement and the other Loan
Documents, and the Facility Agreements and any other documents,
instruments or agreements relating thereto to which Borrower is bound,
will be Solvent.
SECTION 4.21 Asset Purchase Documents. The Asset Purchase
Documents have been duly authorized, executed and delivered by each of
the parties thereto and such Documents are a legal, valid and binding
obligation of each of the parties thereto, enforceable in accordance with
the terms of each such Document. The sale of assets contemplated by the
Asset Purchase Documents became effective on the Closing Date, and such
sale of assets was duly consummated pursuant to the terms of the Asset
Purchase Documents. After giving effect to the sale of assets in
accordance with the Asset Purchase Documents, the representations and
warranties contained in this Agreement and each of the other Loan
Documents are correct in all respects and no Default or Event of Default
has occurred or could result from such sale of assets. As of the Closing
Date all the representations and warranties in the Asset Purchase
Documents are true and correct in all material respects.
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ARTICLE V.
AFFIRMATIVE COVENANTS OF BORROWER
So long as any Loans are outstanding or the Lenders have
any Commitments hereunder or any other amount is owing to any Agent or
any Lender under any Loan Documents, Borrower agrees with Lenders as
follows:
SECTION 5.01 Reporting Requirements. Borrower shall furnish
to each Lender:
(1) Annual Reporting Requirements: as soon as available and
in any event within one hundred twenty (120) days after the end of each
fiscal year of Pledgor, a consolidated and consolidating balance sheet of
Pledgor and its Consolidated Subsidiaries as at the end of such year and
the related consolidated and consolidating statements of income and cash
flows for such year, all in reasonable detail and setting forth in each
case, in comparative form the figures for the previous year, and all
prepared in accordance with generally accepted accounting principles
consistently applied, and with regard to the consolidated financial
statements accompanied by a report thereon by, and certified without
qualification arising out of the scope of the audit by, a nationally
recognized firm of independent public accountants or other independent
public accountants satisfactory to Required Lenders.
As soon as available and in any event within one hundred
twenty (120) days after the end of each Fiscal Year, the balance sheet of
Borrower as of the end of such Fiscal Year, the statement of income and
retained earnings, and statement of cash flows of Borrower for such
Fiscal Year, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the prior
Fiscal Year, and all prepared in accordance with then effective generally
accepted accounting principles consistently applied, provided,-however,
if there is a change in generally accepted accounting principles after
the Closing Date, which affects the presentation of the financial
statements noted above in this paragraph, then, in addition to the
financial statements required above, the Borrower will furnish such
additional information as is required to enable the Agents and the
Lenders to determine whether or not the Borrower is in compliance with
the provisions of Article VII.
(2) Quarterly Reporting Requirements: as soon as
available, and in any event within sixty (60) days after the end of the
first, second and third fiscal quarters of each fiscal year of the
Pledgor, the unaudited consolidated and consolidating balance sheet of
the Pledgor and its
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Consolidated Subsidiaries as at the end of such fiscal quarter and the
related unaudited consolidated and consolidating statements of income and
cash flows, setting forth in each case, in comparative form the figures
of the comparable period for the previous year, and all prepared in
accordance with generally accepted accounting principles consistently
applied and certified as to accuracy by Borrower (subject to normal
year-end audit adjustments).
As soon as available and in any event within sixty (60)
days after the end of each of the first three quarters of each Fiscal
Year, the balance sheet of Borrower as of the end of such quarter and
statements of income and retained earnings, and statements of cash flows
of Borrower for the period commencing at the end of the previous Fiscal
Year and ending with the end of such quarter, all in reasonable detail
and stating in comparative form the respective figures for the
corresponding date and period in ' Year and all prepared in accordance
with the previous Fiscal generally accepted accounting principles
consistently applied, provided, however, if there is a change in
generally accepted accounting principles after the Closing Date which
affects the presentation of the financial statements noted above in this
paragraph, then, in addition to the financial statements required above,
the Borrower will furnish such additional information as is required to
enable the Agents and the Lenders to determine whether or not the
Borrower is in compliance with the provisions of Article VII.
(3) Audit: as soon as available and in any event within
thirty (30) days after the Closing Date, an examination of the books and
records of the Borrower by a nationally recognized firm of independent
public accountants where the scope of such examination is set forth in
Schedule 5.01.
(4) Monthly Inventory Statements: As soon as available
and in any event within thirty (30) days after . end of each month, a
report in form and substance satisfactory to the Working Capital Agent
and the Lenders indicating, with respect to the Borrower, monthly aged
inventory levels (both in-house and in-transit), imputed inventory,
inventory purchased on open account, monthly open orders and gross profit
and shipping levels relative to the prior year.
(5) Monthly and Quarterly Accounts Receivable Reports.
Within thirty (30) days after the end of each month, accounts receivable
aging summaries with respect to Borrower, and within thirty (30) days
after the end of each quarter of each Fiscal Year, detailed accounts
receivable aging schedules with respect to Borrower, prepared in
accordance with GAAP.
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(6) Borrowing Base Certificate: (a) on the first
Business Day of each week based upon information as of the last Business
Day of the prior week, a Borrowing Base Certificate, and (b) as soon as
practical after the Working Capital Agent requests a new Borrowing Base
Certificate, and in any event within three (3) days of such request, a
Borrowing Base Certificate;
(7) Management Letter: promptly after receipt thereof, a
copy of each report delivered to Borrower by the independent public
accountants which certify Pledgor's financial statements in connection
with any annual or interim audit of its books, including any management
reports or letters, if any, addressed to Pledgor or Borrower or any of
their respective officers by such accountants;
(8) Annual Budget. By not later than December 31 of each
Fiscal Year (commencing with December 31, 1995), a budget (satisfactory
in form and substance to the Required Lenders) for the immediately
succeeding Fiscal Year, which budget shall contain a projected balance
sheet, a projected statement of profit and loss for each month in such
Fiscal Year, projected usage of the Working Capital Facility, expected
amortization of the Non-Working Capital Loans, and shall describe the
assumptions on which such projections were based.
(9) Report on Transactions with Affiliates. Within
thirty (30) days after each Quarterly Date, a certificate of an officer
of Borrower (a) certifying that the Borrower is in compliance with the
requirements of Section 6.06, Transactions with Affiliates, together with
market information satisfactory to the Required Lenders which confirm
such certification or, if the Borrower is not in compliance with such
Section a statement as to the nature of such non-compliance and the
action which is proposed to be taken with respect thereto; and
(10) Other Information: from time to time, with
reasonable promptness, such other information with respect to Borrower as
any Agent or a Lender may from time to time reasonably request.
SECTION 5.02 Notices. Borrower will, promptly upon
obtaining knowledge of any of the following occurrences and promptly upon
the giving or receipt of any of the following notices, deliver to each
Lender:
(1) written notice of the occurrence of any Default or
Event of Default, specifically stating that a Default or an Event of
Default, as the case may be, has occurred and describing such Default or
Event of Default;
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(2) written notice of the occurrence of any casualty,
damage or loss to or in respect of the Collateral, in an amount greater
than One Hundred Thousand Dollars ($100,000), whether or not giving rise
to a claim under any insurance policy, together with copies of any
document relating thereto (including copies of any such claim) in
possession or control of Borrower or any agent of Borrower: Change;
(3) written notice of any Material Adverse Change;
(4) written notice of any litigation or proceeding
affecting Borrower which if adversely determined could result in a
Material Adverse Change;
(5) a copy of each written notice or other demand given
by or received by Borrower under any Facility Agreement alleging a breach
of or default under any such Facility Agreement;
(6) written notice of the assertion of any Lien (other
than Permitted Liens) against the Collateral or the occurrence of any
event that could have a material adverse effect on the value of the
Collateral or the Liens created under the Security Documents;
(7) written notice of any cancellation of any insurance
policy required to be maintained by Borrower pursuant to Section 5.06
hereof;
(8) copies of all Environmental Notices except for such
Notices received in the ordinary course of business where such Notice
does not relate to the Borrower's failure to comply with any
Environmental Law;
(9) Written notice of any required changes or additions
to the Facility, including changes to the Capital Program required
pursuant to any Law;
(10) all written communications amending, modifying or
materially affecting any Approvals or Permits then required to be in
effect for the ownership or operation of the Facility and/or the
implementation of the Capital Program;
(11) if and when Borrower or any other ERISA Affiliate
(a) gives or is required to give notice to the PBGC of any Reportable
Event with respect to any Pension Plan, a copy of the notice of such
Reportable Event given or required to be given to the PBGC; (b) receives
notice of a complete or partial withdrawal liability under Title IV of
ERISA or that any Multiemployer Plan is in Reorganization, is Insolvent
or has been terminated, a copy of such notice; (c) receives notice from
the PBGC under Title IV of ERISA of
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an intent to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to administer
any Pension Plan or Multiemployer Plan, a copy of such notice; (d)
applies for a waiver of the minimum funding standard under Section 412 of
the Code, a copy of such application; (e) gives notice of intent to
terminate any Pension Plan under Section 4041(c) of ERISA a copy of such
notice and other information filed with the PBGC; (f) gives notice of
withdrawal from any Pension Plan pursuant to Section 4063 of ERISA, a
copy of such notice; or (g) fails to make any required payment or
contribution to any Pension Plan or Multiemployer Plan or makes any
amendment to any Plan which has resulted or is reasonably likely to
result in the imposition of a Lien, an accumulated funding deficiency (as
defined in Section 302 of ERISA or Section 412 of the Code), whether or
not waived, or the posting of a bond or other security, a certificate of
the appropriate financial officer setting forth details as to such
occurrence and action, if any, which Borrower or other ERISA Affiliate is
required or proposes to take; or
(12) if and when (a) a transaction prohibited under
Section 4975 of the Code or Section 406 of ERISA occurs resulting in
liability to Borrower, (b) a Pension Plan intended to qualify under
Section 401(a) or 401(k) of the Code fails to so qualify or (c) liability
is imposed to enforce Section 515 of ERISA with respect to any
Multiemployer Plan, a certificate of the appropriate financial officer
setting forth details as to such occurrence and action, if any, which
Borrower or other ERISA Affiliate is required or proposes to take.
Each notice pursuant to this Section 5.02 shall be accompanied by a
statement of Borrower setting forth details of the occurrence referred to
therein and stating what action Borrower proposes to take with respect
thereto.
SECTION 5.03 Payment of Taxes and Claims. Borrower shall
pay and discharge or cause to be paid and discharged all taxes,
assessments and governmental charges or levies lawfully imposed upon it
or upon its income or profits or upon any of the Collateral and all
lawful claims or obligations that, if unpaid, could become a Lien,
including an Environmental Lien, upon any Collateral or any part thereof;
Provided, however, that Borrower shall not be required to pay any such
tax, assessment, charge, levy, claim or obligation that is the subject of
a Good Faith Contest.
SECTION 5.04 Maintenance of Existence. Properties. Facility
Agreements. Construction and Maintenance of Property Etc. Borrower shall
preserve and maintain its legal existence and form, all of its rights,
privileges and franchises necessary for the operation of its
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business, including the Facility and the maintenance of its existence,
and, shall continue to hold a valid interest in the Site and the
Facility, subject only to Permitted Liens.
Borrower will maintain and operate or cause the Facility to
be maintained and operated in good order and repair in accordance with
prudent industry practices, and in compliance in all material respects
with all material contracts, agreements, undertakings or instruments to
which Borrower is bound, including, without limitation, those obligations
imposed pursuant to the terms of the Facility Agreements. Borrower will
only perform operations or conduct business that rely on the license
under the Kalama License if Borrower obtains a Consent covering such
license.
Borrower will do or cause to be done all things necessary
to obtain and maintain in full force and effect all Approvals and Permits
required from time to time to be in effect (1) for the execution,
delivery or performance by Borrower of its obligations, or the exercise
of its rights, under the Facility Agreements, or (2) for the ownership or
operation of Facility.
SECTION 5.05 Compliance with Laws. Borrower will do or
cause to be done all things necessary to comply with all Laws except (1)
in the case of Laws (including tax laws) which impose obligations to pay
money, such failure is the subject of a Good Faith Contest and (2) where
the failure to so comply could not result in a Material Adverse Change.
SECTION 5.06 Insurance. The Borrower shall at all times,
effect, maintain and keep in force, or cause to be effected, maintained
and kept in force, including but not limited to the insurance listed on
Schedule 5.06, with respect to the Facility against such hazards, and in
such form as shall be required by the Lenders from time to time.
Insurance required pursuant to this Section 5.06 shall include but not be
limited to each of the following: All Risk (Real and Personal Property),
Boiler and Machinery, Business Interruption, Commercial General
Liability, Excess, Auto Liability, Workman's Compensation, and when
available to the Borrower, Pollution Liability. Insurance required
pursuant to this Section 5.06 shall be with responsible insurance
carriers which (1) are authorized to do business in the State of
Illinois; and (2) have a rating from A.M. Best Company, Inc. of B+, Class
VI or better.
All policies of insurance required under the provisions of
this Section 5.06 (except for Workers' Compensation Insurance and
Property Insurance and Pollution Liability) shall name the Collateral
Agent and each Lender as additional insured. All such policies covering
risks of physical loss to (1) the Facility shall provide that all losses
payable thereunder shall be paid to the Collateral
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Agent to be allocated thereby in accordance with the provisions of the
Loan Documents, and (2) personal property belonging to the Borrower shall
have attached thereto a standard non-contributory lender's loss payable
endorsement in favor of the Collateral Agent in scope and form approved
by the Required Lenders prior to the Closing Date. The Borrower shall
furnish the Collateral Agent with originals of all such policies or
certificates thereof. All policies of insurance required under the
provisions of this Section 5.06 shall contain an endorsement by the
insurer that any loss shall be payable in accordance with the terms of
such policy notwithstanding any act or negligence of the Borrower that
might otherwise give rise to a defense by the insurer to its payment of
such loss, and (2) a waiver by the insured of all rights of subrogation
to any rights of the additional insureds against the Borrower, and (3) a
disclaimer of all rights of setoff, counterclaim or deduction against the
insureds other than the Borrower. The Borrower shall not take out
separate insurance concurrent in form or contributing in the event of
loss with that require Agreement unless the same shall contain a standard
non-contributory lender's loss payable endorsement in scope and form of
approved by the Required Lenders prior to the Closing Date with loss
payable to the Collateral Agent as its interests may appear. All
retentions and deductibles under policies where the Collateral Agent is
loss payee or additional insured shall be the sole responsibility or the
Borrower and subject to the Lender's approval.
Without limiting any of the foregoing, each of the
insurance policies required by this Section 5.06 which is required to
name the Collateral Agent and Lenders as an additional insured or loss
payee thereunder shall provide:
(1) that no cancellation, reduction in amount or
material change in coverage thereof shall be effective until at least
thirty (30) days after receipt by the Collateral Agent of written notice
thereof;
(2) that the interests of the Collateral Agent and
Lenders will be insured regardless of any breach by the Borrower or any
other Person of any warranties, declarations or conditions contained
therein;
(3) that, in the case of the all-risk course of
construction policy and any other policies covering property loss or
damage in respect of the Facility, all payments thereunder shall be made
directly to the Collateral Agent to be held and applied in accordance
with the provisions of the Loan Documents;
(4) that neither the Collateral Agent nor any of the
Lenders shall have any obligation or liability for
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premiums, commissions, assessments, calls, warranties or representations
in connection with such insurance;
(5) as respects liability coverages, all the provisions
thereof, except the limit of liability, shall operate in the same manner
as if there were a separate policy covering each insured; and
(6) the Facility shall be insured for the greater of: (a)
its full replacement value, or (b) the sum of (i) the outstanding
principal amount of the Term Loan, plus (ii) the amount of Capital
Expenditure Loan Commitment on the Closing Date, plus (iii) the amount of
the Working Capital Loan Commitment on the Closing Date.
On or before the Closing Date and prior to each policy
expiration thereafter, the Borrower shall deliver to the Collateral Agent
an original certificate or binder signed by the insurer or its duly
authorized representative showing the insurance then maintained by the
Borrower pursuant to this Section 5.06 and stating that such insurance
complies with the terms of this Section 5.06, together with evidence that
payment of the premiums on such insurance is current. The Borrower shall
effect such changes in the form (but not the amount or types) of the
policies required pursuant to this Section 5.06, as may be required by
the Collateral Agent; provided, that such changes are commercially
available at reasonable rates.
SECTION 5.07 Books and Records; Inspection. Borrower will
keep proper books of record and account in conformity with generally
accepted accounting principles and all applicable Laws.
Borrower shall permit representatives of any Agent,
including but not limited to the Independent Engineer, during normal
business hours, upon notice from such Agent, to visit and inspect
properties and examine and make copies reasonable any of its thereof or
abstracts from any of its books and records, and to discuss the business,
operations, properties and condition (financial or otherwise) of Borrower
with officers and employees of Borrower and with their respective
independent public accountants and engineers.
Borrower agrees that any Agent may at any time request
Environmental Consultants to inspect and prepare reports with respect to
the Facility, the Site or the Capital Program. With respect to one such
inspection in each calendar year and all such inspections requested after
the occurrence of an Event of Default, Borrower shall reimburse such
Agent for all reasonable costs and expenses incurred with respect to the
services of any such Environmental Consultant. Such Agent agrees to give
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Borrower reasonable notice prior to any such inspection by an
Environmental Consultant.
SECTION 5.08 Property Rights. Utilities Etc. Borrower shall
maintain, and if necessary procure, all easements, leasehold and other
property interests, utility and other services, and other rights that are
necessary for the operation of the Facility and, if the Capital Program
is implemented, for construction, installation and completion of the
Capital Program.
SECTION 5.09 Compliance With Environmental Laws. The
Borrower (1) shall comply in all material respects with all Environmental
Laws applicable to the ownership, operation, maintenance or use of the
Facility and the Site, (2) will pay or cause to be paid all costs and
expenses in connection with such compliance, and (3) shall keep or cause
to be kept the Facility and the Site free and clear of any Environmental
Liens. The Borrower shall not generate, manufacture, process, distribute,
use, treat, store, release or dispose of, or permit the generation,
manufacturing, processing, distribution, use, treatment, storage, release
or disposal of Hazardous Materials on or in the Facility or the Site, or
transport or permit the transportation of Hazardous Materials to or from
the Facility or the Site, or dispose of Hazardous Materials at any other
location, except in material compliance with all applicable Environmental
Laws.
Borrower will, without cost to the Agents or the Lenders,
remove or cause the removal of, Hazardous Materials released onto or
under the Site at such time that removal is required by Law or by the
order or other action of federal, state or local environmental regulatory
authorities, in accordance with the regulations or requirements of such
authorities, or at such time as required by an order or judgment of
federal state court of competent jurisdiction in the State of Illinois;
provided that Borrower will promptly remove any Hazardous Materials
released to the environment and thereupon onto or under the Site after
the date of execution of this Agreement.
SECTION 5.10 Event of Eminent Domain. If an Event of
Eminent Domain shall be threatened in writing or occur with respect to
any Collateral, the Borrower shall (1) promptly upon any such threat of
which it is aware or occurrence provide written notice thereof to the
Collateral Agent, (2) diligently pursue or cause to be pursued all its
rights to compensation against the State of Illinois or the United
States, as the case may be, or against any Governmental Authority in
respect of such Event of Eminent Domain, (3) not, without the written
consent of the Required Lenders, compromise or settle any claim relating
to an Event of Eminent Domain, (4) hold all amounts and proceeds
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(including instruments) received in respect of any Event of Eminent
Domain ("Eminent Domain Proceeds")) in trust for the benefit of the
Collateral Agent segregated from other funds of the Borrower and (5)
forthwith pay over to the Collateral Agent for benefit of the Lenders all
Eminent Domain Proceeds in the same form as received (with any necessary
endorsement) to be held and applied in accordance with the provisions of
Section 2.14. To the extent that participation is legally available to
the Collateral Agent, the Collateral Agent may participate in any eminent
domain proceedings, and the Borrower shall from time to time deliver to
the Collateral Agent all instruments requested by it to permit such
participation.
SECTION 5.11 ERISA. Borrower shall, and shall cause its
ERISA Affiliates to, comply in all material respects with the applicable
provisions of ERISA and all provisions of the Code as applied to Employee
Benefit Plans.
ARTICLE VI.
NEGATIVE COVENANTS
So long as any Loans are outstanding or any Lender has any
Commitment hereunder or any other amount is owing to any Agent or any
Lender under any Loan Documents, Borrower shall not:
SECTION 6.01 Debt. Create or incur or suffer to exist any
Debt except:
(1) Debt of Borrower to Lenders pursuant to this Agreement
and the other Loan Documents;
(2) accounts payable to trade creditors for goods or
services which are not aged more than thirty (30) days from the due date
for if there is no specified due date or if such account payable is due
immediately, are not aged more than ninety (90) days) and current
operating liabilities (other than for borrowed money) which are not more
than ninety (90) days past due, in each case incurred in the ordinary
course of business and paid within the specified time, unless subject to
a Good Faith Contest; 6.03
(3) Guaranties permitted pursuant to Section 6.03;
(4) Debt under the Boiler Lease; and
(5) Debt secured by Liens permitted to be incurred under
Section 6.02.
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SECTION 6.02 Liens. Create or suffer to exist or permit any Lien
upon or with respect to any of its properties except for the following,
(which collectively shall constitute "Permitted Liens"):
(1) Liens under or pursuant to any Loan Document;
(2) Liens in respect of property or assets of Borrower imposed
by Law, which were incurred in the ordinary course of business, such as
carriers', warehousemen's and mechanics' Liens and other senior Liens
arising in the ordinary course of business, and which (a) do not in the
aggregate materially detract from the value of such property or assets
(b) materially impair the use thereof in the operation of the business of
Borrower or (c) secure obligations which in the aggregate exceed Two
Hundred Thousand Dollars ($200,000);
(3) Liens for taxes which are either not yet due, are due but
payable without penalty or are the subject of a Good Faith Contest and
which Liens are not similar to the Liens of the Lenders or for taxes due
the United States of America or any state thereof having similar priority
statutes;
(4) Liens in connection with worker's compensation,
unemployment insurance or other social security obligations (other than
ERISA);
(5) Liens disclosed in the Title Insurance Policy and such
minor defects, irregularities, encumbrances and clouds on title and
statutory Liens which do not materially impair the Site or the ability to
operate the Facility and which do not individually or in the aggregate
materially impair the value of the security granted under the Security
Documents;
(6) Liens, deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money),
leases (permitted the terms of this Agreement), public or statutory
obligations, surety, stay, appeal, indemnity, performance or similar
bonds, or other similar obligations arising in the ordinary course of
business in a total aggregate amount at any one time not in excess of Two
Hundred Fifty Thousand Dollars ($250,000);
(7) Judgment and other similar Liens arising in connection with
court proceedings, provided the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are both the
subject of a Good Faith Contest and do not secure obligations which
exceed in the aggregate Fifty Thousand Dollars ($50,000);
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(8) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with
the occupation, use, and enjoyment by Borrower of the Site or assets
encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto;
(9) purchase money Liens on any real property, fixtures or
equipment hereafter acquired or the assumption of any Lien on real
property, fixtures or equipment existing at the time of such acquisition,
or a Lien incurred in connection with any conditional sale or other title
retention agreement or a Capital Lease; provided that:
(a) any property subject to any of the foregoing is acquired by
the Borrower in the ordinary course of its business, such property is not
integral to the manufacturing process of the Facility and the Lien on any
such property is created or assumed contemporaneously with such
acquisition;
(b) each such Lien shall attach only to the property so
acquired and fixed improvements thereon;
(c) the Debt secured by any Lien so created, assumed or
existing shall not exceed one hundred percent (100%) of the lesser of
cost or fair market value as of the time of acquisition of the property
covered thereby;
(d) each such Lien shall attach only to the property so
acquired and fixed improvements thereon; and
(e) the incurrence of such Debt does not result in a violation
of any other term or provision of this Agreement; and
(f) all Debt secured by all such Liens shall not exceed in the
aggregate Five Hundred Thousand Dollars ($500,000);
SECTION 6.03 Guarantees. Agree, contingently or otherwise, to
guaranty, endorse or otherwise become or remain liable (including, but
not limited to an agreement to purchase any obligation, stock, assets,
goods or services or to supply or advance any funds, assets, goods or
services, or an agreement to maintain or cause such Person to maintain a
minimum working capital or net worth or otherwise to assume creditors of
such Person against loss), for the obligations of any Person, except
guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
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SECTION 6.04 Prohibition of Fundamental Chances. Enter into any
transaction of merger or consolidation, or change its form of
organization or business, or liquidate or dissolve (or suffer any
liquidation or dissolution), or purchase or otherwise acquire all or
substantially all or material portion of the assets of any Person, or
sell, assign, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all or a material
portion of its assets (whether now owned or hereafter acquired) to any
Person.
SECTION 6.05 Investments. Make any loan or advance to any Person
or purchase or otherwise acquire any capital stock, assets, obligations
or other securities of, make any capital contribution to, or otherwise
invest in, or acquire any interest in, any Person, except for Permitted
Investments.
SECTION 6.06 Transactions with Affiliates. Enter into any
transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate,
except (1) in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms no
less favorable to Borrower than it would obtain in a comparable arm's
length transaction with a Person not an Affiliate, and (2) the Phenol
Sales Agency Agreement and Acetone Sales Agreement both dated April 1,
1995 between Borrower and JLM Marketing, Inc.
SECTION 6.07 Operating Leases. Create, incur, assume, or suffer to
exist any obligation as lessee for the rental or hire of any real or
personal property except: (1) Capital Leases permitted under Section
6.03(9), (2) leases that do not in the aggregate require Borrower to make
payments (including taxes, insurance, maintenance, and similar expenses
which Borrower is required to pay under the terms of the lease but
excluding all payments based upon a percentage of sales or revenues) in
any Fiscal Year in excess of Seven Hundred Fifty Thousand Dollars
($750,000).
SECTION 6.08 Abandonment. Abandon the operation of the Facility or
after the Borrower has commenced the Capital Program the construction of
the Capital Program or otherwise cease to diligently pursue the operation
of the Facility or after the Borrower has commenced the Capital Program,
construction of the Capital Program.
SECTION 6.09 Prohibition on Disposition of Assets. Sell, lease (as
lessor), transfer or otherwise dispose of any of its owned property or
assets except (l) property that is worn out or no longer usable in
connection with the operation of the Facility and, if necessary, is
replaced by property having a utility comparable to that of
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the property being sold, leased, transferred or otherwise disposed, and
(2) Inventory sold in the ordinary course of business.
SECTION 6.10 Capital Program. Enter into any Capital Program
Contract if the aggregate Capital Program Cost will exceed Two Million
Five Hundred Thousand Dollars ($2,500,000).
SECTION 6.11 Nature of Business. Engage in any business other than
the use and operation and financing of the Facility.
SECTION 6.12 Dividends. Declare or pay any dividends, or purchase,
redeem, retire, or otherwise acquire for value any of its capital stock
or securities convertible into capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders, as
such, whether in cash, assets, or in obligations of Borrower, or allocate
or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption, or retirement of any
shares of its capital stock, or make any other distribution by reduction
of capital or otherwise in respect of any shares of its capital stock, or
purchase or otherwise acquire for value any stock of Pledgor, except that
the Borrower can declare and pay cash dividends (1) of up to seventy-five
percent (75%) of the Equity Cash Flow for the Fiscal Year ended on the
immediately preceding December 31 if at the time of and paying such
dividend there are no Defaults or Default outstanding, no Default or
Event of result from the declaration or payment of such the Borrower has
made all Excess Cash Flow Prepayments and made all payments of Contingent
required to be made or paid prior to the date of declaration or payment
of such dividend; (2) on or after September 1, 1995 of up to One Million
Dollars ($1,000,000) if at the time of declaring and paying such dividend
each of the following conditions are satisfied: (a) at the time of making
such dividend and after giving effect thereto there are no Defaults or
Events of Default to such dividend the declaring Events of Default would
dividend, and Mandatory Interest such deal outstanding; (b) after giving
effect Borrower has a Liquidity of at least Two Million Dollars
($2,000,000): (c) the Borrower has delivered the Audit referred to in
Section 5.01 to the Lenders and all the Lenders have found such Audit
satisfactory in their sole discretion, and (d) prior to either declaring
or paying such dividend each Lender will have received a certificate
supplied by the Borrower's chief financial officer certifying the
Borrower's compliance with the conditions under (a) and (b) above; (3) on
or after December 31, 1995, up to fifty percent (50%) of the difference
between One Million Eight Hundred Eighty-Five Thousand Dollars
($1,885,000) and the amount of the dividends declared or
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paid on or after September 1, 1995 pursuant to exception (2) above, if at
the time of such declaration and payment each of the following conditions
are satisfied: (a) at the time of declaring and paying such dividend and
after giving effect thereto there are no Defaults or Events of Default
outstanding; and (b) the Borrower has delivered to the Lender the
Pledgor's certified consolidated financial statements and the Borrower's
annual financial statements both for the Fiscal Year ended December 31,
1995 all in accordance with Section 5.01; and such statements indicates
that the Borrower is in compliance with all the financial covenants set
forth in Article VII; and (4) on and after June 30, 1996 up to the
difference between One Million Eight Hundred Eighty-Five Thousand Dollars
($1,885,000) and the amount of the dividends declared and paid pursuant
to exceptions (2) and (3) above, if at the time of declaring and paying
such dividend each of the following conditions are satisfied: (a) at the
time of making such prepayment and after giving effect thereto there are
no Defaults or Events of Default outstanding; (b) the Borrower has
delivered to the Lenders the Borrower's quarterly financial statements
for each of the fiscal quarters ended March 31, 1996 and June 30, 1996 in
accordance with Section 5.01, and (c) such statements indicate that the
Borrower is in compliance with all the financial covenants set forth in
Article VII.
SECTION 6.13 Changes, Amendments and Modifications. Change, amend,
modify or supplement any of the following: (1) its certificate of
incorporation, (2) its by-laws, (3) the Asset Purchase Documents, or (4)
any of the Facility Agreements.
ARTICLE VII.
FINANCIAL COVENANTS OF BORROWER
So long as any Loans are outstanding, or the Lenders have any
commitment hereunder, or any other amount is owing to any Lender under
any Loan Document, Borrower agrees with Lenders as follows:
SECTION 7.01 Minimum Tangible Net Worth. Borrower shall maintain
at all times during each period specified below a Tangible Net Worth of
not less than the amount specified below for such period:
<TABLE>
<CAPTION>
Period Minimum Amount
------ --------------
<S> <C>
From the Closing Date to and
including December 31, 1995 $5,000,000
From January 1, 1996 to and
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
including December 31, 1996 $5,000,000 plus 50%
of the amount of the
Net Income (but not
minus the amount of
a Net Loss) for the
period from the
Closing Date to
December 31, 1995
During each Fiscal Year thereafter The amount specified
for the prior Fiscal
Year plus 50% of the
Net Income (but not
minus the amount of
a Net Loss) for such
prior Fiscal Year
</TABLE>
SECTION 7.02 Debt to Equity Ratio. Borrower shall maintain during
each period specified below a Debt to Equity Ratio of not greater than
the Ratio specified below for such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From Closing Date to and
including December 31, 1996 4.5 to 1
From January 1, 1996 to and
including March 31, 1996 4.4 to 1
From April 1, 1996 to and
including June 30, 1996 4.25 to 1
From July 1, 1996 to and
including December 31, 1996 4.10 to 1
On January 1, 1997 and at all
times thereafter 4 to 1
</TABLE>
SECTION 7.03 Cash Flow Coverage Ratio. Borrower shall have for
each period specified below a Cash Flow Coverage Ratio of not less than
the Ratio specified below for such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From July 1, 1995 to and
including September 30, 1995 1.35 to 1
From July 1, 1995 to and
including December, 1995 1.35 to 1
From July 1, 1995 to and
including March 31, 1996 1.35 to 1
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
For the four quarters (taken
together as a whole) ending on
each Quarterly Date on or after
June 30, 1996 1.35 to 1
</TABLE>
SECTION 7.04 Maximum Capital Expenditures. During the period from
the Closing Date to December 31, 1995, Borrower shall not make or permit
to be made Capital Expenditures (other than Capital Expenditures for or
in connection with the Capital Program) in excess of Three Hundred
Thousand Dollars ($300,000). In any Fiscal Year commencing with the
Fiscal Year of January 1, 1996 to December 31, 1996, Borrower shall not
make or permit to be made Capital Expenditures (other than Capital
Expenditures for or in connection with the Capital Program) in excess of
Five Hundred Thousand Dollars ($500,000), plus, commencing with the
Fiscal Year of January 1, 1997 to December 31, 1997 an amount equal to
the lesser of: (1) Two Hundred Thousand Dollars ($200,000), or (2) the
difference between Five Hundred Thousand Dollars ($500,000) and the
amount of Capital Expenditures (other than Capital Expenditures for or in
connection with the Capital Program) actually made during the prior
Fiscal Year.
ARTICLE VIII.
EVENTS OF DEFAULT
SECTION 8.01 Events of Default. If any of the following events
("Events of Default") shall occur and be continuing for any reason
whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about or be effected by operation by Law or otherwise):
(1) if the Borrower shall fail to make any principal payments
on any Loan after the same shall become due and payable (whether by
scheduled maturity, required prepayment, acceleration or otherwise); or
(2) if the Borrower shall fail to pay interest on any Loan
within two (2) days after the same shall become due and payable; or
(3) if the Borrower shall fail to pay any Fees payable under
this Agreement or any other fees payable under any of the Loan Documents,
within two (2) days after the same shall become due and payable; or
(4) if any representation or warranty made by Borrower or
Pledgor in any Loan Document, or any representation, warranty or
statement in any certificate, financial statement or other document
furnished to any Agent or any of the Lenders by or on behalf of Borrower
or Pledqor
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under any Loan Document shall as of the time made, confirmed or furnished
prove to have been (a) in the case of such representations and warranties
which are not subject to a Material Adverse Change exception, incorrect
in any material respect or (b) in all cases where such representations
and warranty is subject to such an exception, incorrect; or
(5) if the Borrower shall fail to perform or observe any of its
covenants or agreements contained in Section 5.06 or Article VI or VII of
this Agreement or any of the other Loan Documents or any of the Facility
Agreements; or if the Borrower shall fail to perform or observe any of
its covenants or agreements contained in this Agreement (other than those
in Section 5.06 and Articles VI or VII) and such failure shall continue
unremedied for thirty (30) days after the date of the occurrence thereof;
or
(6) if Borrower or Pledgor shall (a) apply for or consent to
the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial
part of its property, (b) admit in writing its inability, or be generally
unable, to pay its debts as such debts become due, (c) make a general
assignment for the benefit of its creditors, (d) commence a voluntary
case under the Federal Bankruptcy Code or similar law, (e) file a
petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding up, or composition or
readjustment of debts, (f) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against such
Person in an involuntary case under the Federal Bankruptcy Code or
similar Law or (g) take any corporate or other action for the purpose of
effecting any of the foregoing; or
(7) if a proceeding or case shall be commenced without the
application or consent of Borrower or Pledgor in any court of competent
jurisdiction, seeking (a) the liquidation, reorganization, dissolution,
winding-up, or the composition or readjustment of debts of such Person,
or (b) the appointment of a trustee, receiver, custodian, liquidator or
the like of such Person under any Law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, or a
warrant of attachment, execution or similar process shall be issued
against property of such Person and such proceeding, case, warrant or
process shall continue undismissed, or any order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of ninety (90) days or more days, or
any order for relief against such Person shall be entered in an
involuntary case under the Federal Bankruptcy Code or similar law; or
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(8) if a judgment or judgments for the payment of money in excess of
Two Hundred Fifty Thousand Dollars ($250,000) shall be rendered against either
Borrower or Pledgor and the same shall remain in effect and unstated or bonded
pending appeal for a period of thirty (30) or more consecutive days; or
(9) Borrower or Pledgor shall: (a) fail to pay all or any portion of a
Debt of Borrower or Pledgor owed to a Lender when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or (b) fail
to perform or observe any term, covenant or condition on its part to be
performed or observed under any agreement or instrument relating to any such
Debt, when required to be performed or observed, if the effect of such failure
to perform or observe is to accelerate, or to permit the acceleration of, after
the giving of notice or the lapse of time, or both, of the maturity of such
Debt; or any such Debt shall be declared to be due and payable, or required be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof;
(10) Borrower shall: (a) fail to pay all or any portion of a Debt, or
any monetary obligation under an Operating Lease when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); (b) fail to
perform or observe any term, covenant or condition on its part to be performed
or observed under any agreement or instrument relating to any such Debt or
Operating Lease, as the case may be, when required to be performed or observed,
if the effect of such failure to perform or observe is to accelerate, or to
permit the acceleration of, after the giving of notice or the lapse of time, or
both, of the maturity of such Debt or Operating Lease, as the case may be; or
any such Debt shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof; or any such Operating Lease shall be terminated prior to its
scheduled expiration date;
(11) Pledgor shall: (a) fail to pay all or any portion of a Debt which
is equal to or greater than Five Hundred Thousand Dollars ($500,000) when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) or fail to pay all or any portion of its obligations under an
Operating Lease with a total remaining monetary obligations equal to or greater
than Five Hundred Thousand Dollars ($500,000) when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or (b) fail
to perform or observe any term, covenant or condition on its part to be
performed or observed under any agreement or instrument relating to any such
Debt or Operating Lease, as the case may be, within
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thirty (30) days of when required to be performed or observed if such failure
allows for the acceleration of such Debt or Operating Lease; or any such Debt
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof; or any such Operating Lease shall be terminated prior to its scheduled
expiration date;
(12) if any Loan Document shall cease, for any reason, to be in full
force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by any party thereto, or any party
thereto shall deny it has any further liability or obligation under or shall
fail to perform its obligations under such Loan Document; or
(13) if the Collateral Agent, as agent for Lenders, shall cease to
have a perfected Lien on any of the Collateral with the priority purported to be
created thereby other than due to the Collateral Agent's actions or failure to
act; or
(14) if any Facility Agreement (other than in the case of a Facility
Agreement that, if not in effect, could not result in a Material Adverse Change)
shall cease, for any reason, to be in full force and effect or shall be declared
null and void, or the validity or enforceability thereof shall be contested by
any party thereto, or any party thereto shall deny it has any further liability
or obligation under or shall fail to perform its obligations under such Facility
Agreement; or
(15) if any of the following events occur or exist with respect to the
Borrower or any ERISA Affiliate: (a) a transaction prohibited by Section 4975 of
the Code or Section 406 of ERISA has occurred which could subject the Borrower,
or any entity which they have an obligation to indemnify, to any tax or penalty
imposed under Section 4975 of the Code or Section 502(i) of ERISA; (b) any
Reportable Event with respect to any Pension Plan; (c) the giving under Section
4041 of ERISA of a notice of intent to terminate any Pension Plan or the
termination of any Pension Plan; (d) any event or circumstance that might
constitute grounds entitling the PBGC to institute proceedings under Section
4042 of ERISA for the termination of, or for the appointment of a trustee to
administer, any Pension Plan, or the institution by the PBGC of any such
proceedings; (e) an accumulated funding deficiency (as defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived, exists with respect to
any Pension Plan; (f) the imposition of liability to enforce Section 515 of
ERISA; (g) the failure of a Pension Plan intended to qualify under Section
401(a) or 401(k) of the Code to so qualify; (h) complete or partial withdrawal
under Section 4201 or 4204 of ERISA from
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a Multiemployer Plan or the Reorganization, Insolvency, or termination of any
Multiemployer Plan; (i) the imposition of liability in respect of any Pension
Plan or Multiemployer Plan subject to Title IV of ERISA; (j) a Lien arises or a
Lien is given in connection with a Pension Plan; or (k) any other similar event
or condition shall occur with respect to an Employee Benefit Plan, and in each
case above, such event or condition, individually or in the aggregate, together
with all other events or conditions, if any, could in the opinion of the
Required Lenders subject the Borrower or any ERISA Affiliates to any tax,
penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, or
otherwise (or any combination thereof) which in the aggregate exceeds or could
exceed Fifty Thousand Dollars ($50,000); or
(16) the failure to receive any Approval or Permit required by the
Borrower or any other Person as shall at the time of such failure be necessary
(a) for the execution, delivery or performance by such Person of its
obligations, or the exercise of its rights, under a Facility Agreement or
Capital Program Contract, or (b) for the development, design, construction,
start-up, testing or operation of the Capital Program, or (c) for the ownership
or operation of Facility; or any such Approval or Permit shall be revoked,
terminated, withdrawn, suspended, modified adversely to the Borrower or shall
cease to be in full force and effect;
(17) if Pledgor does not own at least one hundred (100%) percent of
the outstanding capital stock of Borrower; or
(18) if either Wilfred J. Kimball or William Moffatt shall for any
reason (including death) cease to be actively involved in the operation of the
Borrower, unless within one hundred twenty (120) days of such event the Borrower
hires or promotes a Person with the skills and abilities to perform the
functions previously performed by Wilfred J. Kimball or William Moffatt, as the
case may be;
(19) there shall occur either (a) an Event of Loss or (b) an Event of
Eminent Domain;
(20) if any Capital Program Contract is entered into and such Capital
Program Contract shall cease, for any reason, to be in full force and effect or
shall be declared null and void, or the validity or enforceability thereof shall
be contested by any party thereto, or any party thereto shall deny it has any
further liability or obligation under or shall fail to perform or observe any of
its covenants or agreements contained in such Capital Program Contract;
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(21) except in the case where the occurrence of any of the items
covered by this subsection (21) could not result in a Material Adverse Change,
if any Asset Purchase Documents shall cease, for any reason, to be in full force
and effect or shall be declared null and void, or the validity or enforceability
thereof shall be contested by any party thereto, or any party thereto shall deny
it has any further liability or obligation under or shall fail to perform its
obligations under any such Asset Purchase Document; or
(22) if any Event of Default (as defined in the Mortgage) shall occur;
then, and in any such event, any Applicable Agent, may or if directed to do so
by either the Required Term Lenders or the Required Working Capital Lenders
shall, by notice to Borrower, take any or all of the following actions, without
prejudice to the rights of any of the Agents to enforce its or their claims
against Borrower on behalf of the applicable Lenders: (l) declare the
Commitments terminated, whereupon such Commitments shall forthwith terminate
immediately and any accrued Fees shall forthwith become due and payable without
any other notice of any kind, (2) declare the principal of and any accrued
interest in respect of all Borrower's Obligations, including but not limited to
the Loans, the Contingent Interest, and all other amounts payable under this
Agreement and any other Loan Documents to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by Borrower, (3) proceed to enforce
or cause to be enforced any remedies provided under any of the Security
Documents, (4) exercise any other remedies available at Law or in equity, either
by suit in equity or by action at law, or both, whether for specific performance
of any covenant or other agreement contained in this Agreement or any other Loan
Documents or in aid of the exercise of any power granted in this Agreement or
any other Loan Documents and (5) apply any or all funds in any account of the
Borrower constituting Collateral to repay the Borrower's Obligations; Provided
that upon the occurrence of any Event of Default referred to in Section 8.01(7)
and (8) then (without prejudice to the rights and remedies specified in clauses
(3) and (4) above) automatically, without notice, demand or any other act by any
Agent or any Lender, (a) the Commitments shall terminate immediately and any
accrued Fees shall be immediately due and payable, and (b) the principal of and
any accrued interest in respect of the Notes, and all other amounts payable
under this Agreement, including but not limited to the Contingent Interest, and
any other Loan Documents shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by Borrower, anything contained
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in this Agreement to the contrary notwithstanding. No remedy conferred in this
Agreement or any other Loan Documents upon any Agent or any Lender is intended
to be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereinafter existing at Law or in equity or by statute or otherwise.
Notwithstanding anything to the contrary contained in this Agreement,
even if an Event of Default has occurred and is continuing the Working Capital
Lenders can, in their sole discretion, agree to make Working Capital Loans to
the Borrower and may, in their sole discretion, without the prior request or
consent of Borrower, make Working Capital Loans to satisfy any of the Borrower's
Obligations or to provide funds to pay or perform any of the Borrower's other
obligations under this Agreement.
ARTICLE IX.
CHANGE OF CIRCUMSTANCES
SECTION 9.01 Taxes. Any and all payments by Borrower made hereunder
shall be made free and clear of and without deduction for any and all taxes,
levies, imposts, deductions, charges or withholdings imposed by any Governmental
Authority, and all liabilities with respect thereto, excluding taxes imposed on
or measured by the net income of any of the Lenders by the jurisdiction under
the laws of which such Lender is organized or any political subdivision thereof
or in which such Lender maintains an office or conducts business (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Non-Excluded Taxes"). If Borrower
shall be required by Law to withhold or deduct any Non-Excluded Taxes from or in
respect of any sum payable hereunder, (1) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 9.01) Lender
receives an amount equal to the sum it would have received had no such
deductions been made, (2) Borrower shall make such deductions, and (3) Borrower
shall pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable Law.
In addition, Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise under the laws of the United States of America or the State of
New York or any other state from any payment made hereunder or from the
execution or delivery or otherwise with respect to
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this Agreement or any other Loan Document (hereinafter referred to an "Other
Taxes").
Borrower shall indemnify each Lender for the full amount of
Non-Excluded Taxes and Other Taxes (including, without limitation, any
Non-Excluded Taxes or Other Taxes imposed by any jurisdiction on amounts payable
under this Section 9.0l) paid by such Lender or any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Non-Excluded Taxes or Other Taxes were correctly or legally
asserted. Payments by Borrower pursuant to this indemnification shall be made
within thirty (30) days from the date a Lender makes written demand therefor.
Within thirty (30) days after the date of any payment of Non-Excluded
Taxes or Other Taxes by Borrower, Borrower shall furnish to the applicable
Lender the original or a certified copy of a receipt evidencing payment thereof.
Borrower shall compensate the applicable Lender for all reasonable losses and
expenses sustained by such Lender as a result of any failure by Borrower to so
furnish such copy of such receipt.
Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this Section
9.01 shall survive the payment in full of the Loans.
Each Lender that is organized under the laws of any jurisdiction other
than the United States of America or any State thereof (including the District
of Columbia) agrees to furnish to the Borrower and the Collateral Agent, prior
to the first Interest Payment Date, two copies of either U.S. Internal Revenue
Service Form 4224 or U.S. Internal Revenue Service Form 1001 or any
successor forms thereto (wherein such Lender claims entitlement to complete
exemption from U.S. federal withholding tax on all payments made by the Borrower
hereunder) and upon request of the Borrower to provide to the Borrower and the
Collateral Agent a new Form 4224 or Form 1001 or any successor form thereto
(claiming a complete exemption from U.S. federal withholding tax on all payments
made by the Borrower hereunder) if any previously delivered form is found to be
incomplete or incorrect in any material respect or upon the obsolescence of any
previously delivered form.
The Borrower shall not be required to pay any increased amounts on
account of Non-Excluded Taxes pursuant to this Section 9.01 to any Lender to the
extent that such Non-Excluded Taxes would not have been payable if the Lender
had furnished a form (properly and accurately completed in all respects) which
it was otherwise required to furnish in
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accordance with the preceding paragraph of this Section 9.01.
With respect to any Non-Excluded Taxes which are paid by the Borrower
in accordance with the provisions of this Section 2.22, each Lender receiving
the benefits of such payments hereby agrees to pay to the Borrower any amounts
(1) refunded to the Lender or (2) by which the Lender's tax liability was
reduced as a result of such payments.
SECTION 9.02 Additional Costs. Borrower shall pay directly to the
applicable Lender from time to time on demand such amounts as such Lender may
determine to be necessary to compensate it for any increased costs which such
Lender determines are attributable to its making or maintaining any LIBOR Rate
Loan, or its obligation to convert any Prime Rate Loan to a LIBOR Rate Loan
hereunder, or any reduction in any amount receivable by such Lender hereunder in
respect of any of such LIBOR Rate Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change which:
(1) changes the basis of taxation of any amounts payable to such
Lender under this Agreement or the Notes in respect of any of such LIBOR Rate
Loans (other than changes in the rate of general corporate, franchise, branch
profit, net income or other income tax imposed on such Lender by the
jurisdiction in which such Lender is incorporated or organized, in which such
Lender has its principal office or the jurisdiction in which the Applicable
Lending Office is located); or
(2) (other than to the extent the Eurocurrency Liability Reserve
Requirement is taken into account indetermining the LIBOR Rate at the
commencement of the applicable Interest Period) imposes or modifies any reserve,
special deposit, deposit insurance or assessment, minimum capital, capital ratio
or similar requirements relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of, such Lender (including any LIBOR
Rate Loans or any deposits referred to in the definition of "LIBOR Rate" in
Section 1.01 hereof), or any Commitment of such Lender; or
(3) imposes any other condition affecting this Agreement or the Notes
(or any of such extensions of credit or liabilities).
Without limiting the effect of the provisions of the first paragraph
of this Section 9.01, in the event that, by reason of any Regulatory Change, a
Lender either (1) incurs Additional Costs based on or measured by the excess
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above a specified level of the amount of a category of deposits of other
liabilities of such Lender which includes deposits by reference to which the
LIBOR Rate is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender which includes Loans based
on the LIBOR Rate or (2) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if such Lender so
elects by notice to Borrower and Applicable Agent, the obligation of such Lender
to make or continue, or to convert Prime Rate Loans into LIBOR Rate Loans shall
be suspended until such Regulatory Change ceases to be in effect (in which case
the provisions of Section 9.05 hereof shall be applicable).
A certificate of any Lender claiming compensation under this Section,
setting forth the additional amount or amounts to be paid to it hereunder, shall
be conclusive in the absence of manifest error.
SECTION 9.03 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of a LIBOR Rate
for any Interest Period:
(1) Applicable Agent or any of the Lenders determines (which
determination shall be conclusive) that quotations of interest rates for the
relevant deposits referred to in the definition of "LIBOR Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for LIBOR Rate Loans as
provided in this Agreement; or
(2) Any Lender determines (which determination shall be conclusive)
that the relevant rates of interest referred to in the definition of "LIBOR
Rate" in Section 1.01 hereof upon the basis of which the rate of interest for
LIBOR Rate Loans for such Interest Period are to be determined do not adequately
cover the cost to such Lender of making or maintaining such LIBOR Rate Loans for
such Interest Period;
then Applicable Agent shall give Borrower prompt notice thereof, and so long as
such condition remains in effect, such Lenders shall be under no obligation to
make such LIBOR Rate Loans, convert Prime Rate Loans into such LIBOR Rate Loans
or continue such LIBOR Rate Loans and the Borrower shall, on the last day(s) of
the then current Interest Period(s) for such outstanding LIBOR Rate Loans,
either prepay such LIBOR Rate Loans or convert such LIBOR Rate Loans into a
Prime Rate Loan in accordance with Section 2.06.
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SECTION 9.04 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender to honor its
obligation to make or maintain LIBOR Rate Loans hereunder or convert Prime Rate
Loans into LIBOR Rate Loans, then such Lender shall promptly notify Borrower
thereof and such Lender's obligation to make or continue, or to convert a Prime
Rate Loan into the affected LIBOR Rate Loan shall be suspended until such time
as such Lender may again make and maintain such LIBOR Rate Loans (in which case
the provisions of Section 9.05 hereof shall be applicable).
SECTION 9.05 Treatment of Affected Loans. If the obligations of a
Lender to make or continue a LIBOR Rate Loan, or to convert Prime Rate Loans
into LIBOR Rate Loans are suspended pursuant to Section 9.02 or 9.04 hereof
(LIBOR Rate Loans so affected being herein called "Affected Loans"), such
Lender's Affected Loans shall be automatically converted into Prime Rate Loans
on the last day(s) of the then current Interest Period(s) for the Affected Loans
(or, in the case of a conversion required by Section 9.02 or 9.04, on such
earlier date as such Lender may specify to the Borrower).
To the extent that such Lender's Affected Loans have been so
converted, all payments and prepayments of principal which would otherwise be
applied to such Lender's Affected Loans shall be applied instead to its Prime
Rate Loans. All Loans which would otherwise be made or continued by Lenders as
LIBOR Rate Loans shall be made or continued instead as Prime Rate Loans and all
Prime Rate Loans of Lenders which would otherwise be converted into LIBOR Rate
Loans shall remain as Prime Rate Loans.
SECTION 9.06 Certain Compensation.
(1) LIBOR Rate Loan. Borrower shall pay to the Applicable Agent for
the account of the applicable Lender, upon the request of such Lender through
the Applicable Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense which such Lender determines is attributable to:
(a) any payment, prepayment, conversion or continuation of a
LIBOR Rate Loan made by such Lender on a date other than the last day
of an Interest Period for such Loan whether by reason of acceleration
or otherwise; or
(b) any failure by the Borrower for any reason to borrow, convert or
continue a LIBOR Rate Loan to be made, converted or continued by such
Lender on the date specified therefor in the relevant Notice of Borrowing
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or Notice of Interest Rate Selection issued by the Borrower.
Without limiting the foregoing, such compensation ("Broken Funding
Fee") shall include an amount equal to the excess, if any, of (1) the amount of
interest which otherwise would have accrued on the principal amount so paid,
prepaid, converted or continued or not borrowed, converted or continued for the
period from the date of such payment, prepayment, conversion or continuation or
failure to borrow, convert or continue to the last day of the then current
Interest Period for such LIBOR Rate Loan (or, in the case of a failure to
borrow, convert or continue, to the last day of the Interest Period for such
LIBOR Rate Loan which would have commenced on the date specified therefor in the
relevant Notice) at the applicable rate of interest for such LIBOR Rate Loan
provided for herein; over (2) the amount of interest (as reasonably determined
by such Lender) which such Lender, or in the case of CIT-EF or CIT-BC, Chemical
Bank, N.A., would have bid in the London interbank market for Dollar deposits,
for amounts comparable to such principal amount and maturities comparable to
such period. A determination by a Lender as to the amounts payable pursuant to
this Section 9.06 shall be conclusive absent manifest error.
SECTION 9.07 Adequacy. If any of the Lenders shall have determined
that, after the date hereof, the adoption of any applicable Law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of Law) of any such Governmental Authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of such Lender (or its Parent) as a consequence of
such Lender's obligations hereunder to a level below that which such Lender
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, Borrower shall pay
to such Lender such additional amount or amounts as will compensate such Lender
for such reduction. A certificate of a Lender claiming compensation under this
Section 9.07, shall be conclusive in the absence of manifest error.
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ARTICLE X.
AGENCY
SECTION 10.01 The Working Capital Agent. Each Working Capital Lender
hereby irrevocably designates and appoints CIT-BC as Working Capital Agent for
such Working Capital Lender under this Agreement, the Loan Documents and all
ancillary documents, and irrevocably authorizes CIT-BC as Working Capital Agent
for such Working Capital Lender, to take such action on its behalf under the
provisions of this Agreement, the Loan Documents and all ancillary documents,
and to exercise such powers and perform such duties as are expressly delegated
to the Working Capital Agent by the terms of this Agreement and all ancillary
documents together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement or any
Loan Document, the Working Capital Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Working Capital Lender and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement, any other Loan Document or any of the ancillary documents
or otherwise exist against the Working Capital Agent.
SECTION 10.02 The Term Agent. Each Term Lender and Capital Expenditure
Lender hereby irrevocably designates and appoints CIT-EF as Term Agent for each
such Term Lender and Capital Expenditure Lender under this Agreement, the Loan
Documents and all ancillary documents, and irrevocably authorizes CIT-EF as Term
Agent for each such Term Lender and Capital Expenditure Lender, to take such
action on its behalf under the provisions of this Agreement, the Loan Documents
and all ancillary documents, and to exercise such powers and perform such duties
as are expressly delegated to the Term Agent by the terms of this Agreement and
all ancillary documents together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or any Loan Document, the Term Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Term Lender or Capital Expenditure Lender and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement, any other Loan Document or any of the ancillary
documents or otherwise exist against the Term Agent.
SECTION 10.03 The Collateral Agent. Each Lender hereby irrevocably
designates and appoints CIT-EF as Collateral Agent for such Lender under this
Agreement, the Loan Documents and all ancillary documents, and irrevocably
authorizes CIT-EF as Collateral Agent for such Lender, to
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take such action on its behalf under the provisions of this Agreement, the Loan
Documents and all ancillary documents, and to exercise such powers and perform
such duties as are expressly delegated to the Collateral Agent by the terms of
this Agreement and all ancillary documents together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or any Loan Document, the Collateral Agent shall not
have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement, any other Loan Document or any of the ancillary documents or
otherwise exist against the Collateral Agent.
SECTION 10.04 The Agent. Each Lender hereby irrevocably designates and
appoints CIT-EF as Agent for each such Lender under this Agreement, the Loan
Documents and all ancillary documents, and irrevocably authorizes CIT-EF as
Agent for each such Lender, to take such action on its behalf under the
provisions of this Agreement, the Loan Documents and all ancillary documents,
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and all ancillary documents together
with such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement or any Loan Document, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Lender and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement, any other Loan Document or any of the ancillary
documents or otherwise exist against the Agent.
SECTION 10.05 Delegation of Duties. Each Applicable Agent may execute
any of its duties under this Agreement or any other Loan Document and all
ancillary documents by or through agents or attorneys-in-fact and shall be
entitled to the advice of counsel concerning all matters pertaining to such
duties.
SECTION 10.06 Exculpatory Provisions. No Applicable Agent nor any of
its officers, directors, employees, agents, or attorneys-in-fact shall be (1)
liable to any Lender for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other
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Loan Document and all ancillary documents (except for its or such Person's own
gross negligence or willful misconduct), or (2) responsible in any manner to any
of the Lenders for any recitals, statements, representations or warranties made
by Borrower or Pledgor or any officer thereof contained in this Agreement or any
other Loan Document and all ancillary documents or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Applicable Agent under or in connection with, this Agreement or any other Loan
Document and all ancillary documents or (3) responsible for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document and all ancillary documents or for any failure of
Borrower or Pledgor to perform its obligations thereunder. No Applicable Agent
shall be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document and ancillary documents or to
inspect the properties, books or records of Borrower or Pledgor.
SECTION 10.07 Reliance by each Applicable Agent. Each Applicable Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, an opinion of
counsel to Borrower or Pledgor), independent engineers, including the
Independent Engineer, and Environmental Consultants, including the Environmental
Consultant, and other experts selected by the Applicable Agent. Each Applicable
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document and all ancillary documents unless it
shall first receive such advice or concurrence of the Term Lenders and/or
Working Capital Lender and/or the Lenders, as the case may be, as it deems
appropriate or it shall first be indemnified to its satisfaction by the Required
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. Each Applicable Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document and all ancillary documents in
accordance with a request of the Term Lenders and/or Working Capital Lender
and/or the Lenders, as the case may be, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders.
SECTION 10.08 Notice of Default. No Applicable Agent shall be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Applicable Agent has received written notice from a Lender
for which it acts as Agent or Borrower describing such Default or Event of
Default. In the event that the Applicable Agent receives such a notice, such
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Applicable Agent shall promptly give notice thereof to Lenders for which it acts
as Agent. The Applicable Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; Provided that unless and until the Applicable Agent shall have received
such direction, the Applicable Agent may in the interim (but shall not be
obligated to) take such action, or refrain from taking any such action, with
respect to such Default or Event of Default as it shall deem advisable and in
the best interests of Lenders for which it is an Agent.
SECTION 10.09 Non-Reliance on any Applicable Agent and other Lenders.
Each Lender expressly acknowledges that no Applicable Agent nor any of its
respective officers, directors, employees, agents or attorneys-in-fact has made
any representations or warranties to it and that no act by Applicable Agent
hereinafter taken, including any review of the affairs of Borrower or Pledgor,
shall be deemed to constitute any representation or warranty by the Applicable
Agent to such Lender. Each Lender represents to Applicable Agent that it has,
independently and without reliance upon its Applicable Agent or any other Lender
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of Borrower and Pledgor and
made its own decision to enter into this Agreement and any other Loan Document.
Each Lender also represents that it will, independently and without reliance
upon its Applicable Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement or any other Loan Document and to make such investigation as it
deems necessary to inform itself as- to the business, operations, property,
financial and other condition or creditworthiness of Borrower and Pledgor.
SECTION 10.10 Indemnification. Each Lender agrees to indemnify its
Applicable Agent in its capacity as such (to the extent not reimbursed by
Borrower, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time be imposed on, incurred by or
asserted against such Applicable Agent in any way relating to or arising out of
this Agreement, any other Loan Document or any ancillary documents or any
documents contemplated by or referred to herein or the transactions contemplated
hereby or any action taken or omitted by such Applicable Agent under or in
connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties,
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actions, judgments, suits, costs, expenses or disbursements resulting solely
from such Applicable Agent's gross negligence or willful misconduct. Nothing set
forth in this paragraph shall be construed to expand or limit the obligations of
Borrower hereunder for indemnity set forth in Article XI hereof. The agreements
in this paragraph shall survive the payment of the Borrower's Obligations.
SECTION 10.11 Agent in its Individual Capacity. Each Applicable Agent
may make loans to, and generally engage in any kind of business with Borrower
and Pledgor as though such Applicable Agent were not an Applicable Agent
hereunder. With respect to Loans made or renewed by it or loan obligations
hereunder as Lenders, each Applicable Agent shall have the same rights and
powers, duties and liabilities under this Agreement as any Lenders and may
exercise the same as though it were not an Applicable Agent and the "Lender" and
"Lenders" shall include an Applicable Agent in its individual capacity.
SECTION 10.12 Successor Applicable Agent. Each Applicable Agent may
resign as an Applicable Agent upon thirty (30) days' notice to Lenders for which
it acts as Agent and Borrower and such resignation shall be effective upon the
appointment of a successor Applicable Agent. If an Applicable Agent shall resign
as Agent, then Lenders for which it acts as Agent shall appoint a successor
agent for the Lenders whereupon such successor agent shall succeed to the
rights, powers and duties of the Applicable Agent and the term "Applicable
Agent" shall mean such successor agent effective upon its appointment, and the
former Applicable Agent's rights, powers and duties as Applicable Agent shall be
terminated, without any other or further act or deed on the part of such former
Applicable Agent or any of the parties to this Agreement. After any retiring
Applicable Agent's resignation hereunder as Applicable Agent the provisions of
this Section 10.10 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Applicable Agent.
SECTION 10.13 Amendments Concerning Agency Function. No Applicable
Agent shall be bound by any waiver, amendment, supplement or modification of
this Agreement or any other Loan Document which affects its duties hereunder or
thereunder unless it shall have given its prior consent thereto.
SECTION 10.14 Liability of each Applicable Agent. Each Applicable
Agent shall not have any liabilities or responsibilities to Borrower on account
of the failure of any Lenders (other than such Applicable Agent in its capacity
as Lender) to perform its obligations hereunder or to any Lenders on account of
the failure of Borrower or
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Pledgor to perform its obligations hereunder or under any other Loan Document or
Facility Agreement.
SECTION 10.15 Transfer of Applicable Agency Function. Without the
consent of Borrower or Pledgor or any Lenders, each Applicable Agent may at any
time or from time to time transfer its functions as an Applicable Agent
hereunder to any of its offices wherever located, provided that such Applicable
Agent shall promptly notify the Borrower and Lenders thereof.
SECTION 10.16 Withholding Taxes. Each Lender will furnish to the
Applicable Agent such forms, certifications, statements and other documents as
the Applicable Agent may request from time to time to evidence such Lender's
exemption from the withholding of any tax imposed by any jurisdiction it is
otherwise entitled to do so or to enable the Applicable Agent to comply with any
applicable Laws relating thereto. Without limiting the effect of the foregoing,
if any Lender is not created or organized under the laws of the United States of
America or any state thereof, such Lender will furnish to the Applicable Agent
Form 4224 or Form 1001 of the Internal Revenue Service, or such other forms,
certifications, statements or documents, duly executed and completed by such
Lender as evidence of such Lender's exemption from the withholding of U.S. tax
with respect thereto. No Applicable Agent shall be obligated to make any
payments hereunder to such Lenders in respect of any Loan until such Lender
shall have furnished to the Applicable Agent the requested form, certification,
statement or document.
SECTION 10.17 Shared Liability. In the event that any Applicable
Agent, Lenders or any one of them are sued or threatened with suit by Borrower
or Pledgor or by any receiver, trustee, creditor or any committee of creditors
of Borrower or Pledgor on account of any preference, voidable transfer or lender
liability issue, alleged to have occurred or been received as a result of, or
during the transactions contemplated under this Agreement or any other Loan
Document, then in such event any money paid in satisfaction or compromise of
such suit, action, claim or demand and any expenses, costs and attorneys' fees
paid or incurred in connection therewith, whether by any Applicable Agent,
Lenders or any one of them, shall be shared pro rata by Lenders. In addition,
any costs, expenses, fees or disbursements incurred by outside agencies or
attorneys retained by any Applicable Agent to effect collection or enforcement
of any rights in the Collateral, including enforcing (including, without
limitation, appearing, monitoring and participating as a party-in-interest in
any bankruptcy case involving the Borrower), preserving or maintaining rights
under this Agreement or any other Loan Document shall be shared pro rata between
the Lenders to the
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extent not reimbursed by Borrower, or from the proceeds of Collateral. The
provisions of this paragraph shall not apply to any suits, actions, proceedings
or claims that (1) predate the date of this Agreement or (1) are based on
transactions, actions or omissions that predate the date of this Agreement.
SECTION 10.18 Non-Receipt of Funds by any Applicable Agent. Unless any
Applicable Agent shall have received notice from a Lender for which it acts as
Agent prior to the date of any Loan that such Lender will not make available to
the Applicable Agent such Lender's pro rata share of such Loan, the Applicable
Agent may assume that such Lender has made such pro rata share available to the
Applicable Agent on the date of such Loan in accordance with Section 2.05 and
the Applicable Agent may, in reliance upon such assumption, make a corresponding
amount available to the Borrower on such date. If and to the extent that such
Lender shall not have so made such pro rata share available to the Applicable
Agent, such Lender and the Borrower severally agree to repay to the Applicable
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to Borrower,
until the date such amount is repaid to the Applicable Agent. If such amount is
repaid to the Applicable Agent by Borrower, interest on such amount shall be
payable at a rate per annum equal to the Prime Rate plus the Applicable Margin
for the applicable Loan, and if such amount is advanced to the Applicable Agent
by any such Lender, interest on such amount shall be payable at a rate per annum
equal to the Federal Funds Rate for the first two (2) Business Days after such
funds were made available to the Borrower and thereafter a rate per annum equal
to the Prime Rate plus the Applicable Margin for the applicable Loan.
Each Lender is solely responsible for its pro rata share of each
Commitment and no Applicable Agent nor any Lender shall be responsible for, nor
assume any obligations for, the failure of any Lender to make available its pro
rata share of any such Loan.
Nothing contained herein shall be deemed to obligate any Applicable
Agent to make available to Borrower the full amount of a requested Loan when
such Applicable Agent has not received any Lender's pro rata share of such Loan
or if the such Applicable Agent otherwise has any notice that any of the Lenders
will not advance its pro rata share thereof.
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ARTICLE XI.
MISCELLANEOUS
SECTION 11.01 Participations and Assignments. Lenders may at any time
grant to one or more banks or other institutions (each a "Participant")
participating interests in its Commitments and/or any or all of its Loans. In
the event of any such grant by any Lender of a participating interest to a
Participant, whether or not upon notice to the Borrower, such Lender shall
remain responsible for the performance of its obligations hereunder, and
Borrower shall continue to deal solely and directly with such Lender in
connection with Lender's rights and obligations under this Agreement. Any
agreement pursuant to which any Lender may grant such a participating interest
shall provide that such Lender shall retain the sole right and responsibility to
enforce the obligations of Borrower under this Agreement and under any other
Loan Document including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
participation agreement may provide that Lender will not agree to any
modification, amendment or waiver of this Agreement requiring the consent of all
Lenders under Section 11.03 without the consent of the Participant.
Lenders may at any time assign to one or more banks or other
institutions (each an "Assignee"), all or a portion of its rights and
obligations under this Agreement and its Notes, and such Assignee shall assume
rights and obligations, pursuant to an Assignment and Assumption Agreement
executed by such Assignee and Lender. Each such Assignee which is organized
under the Laws of any jurisdiction other than the United States of America must
comply with the requirement to deliver a Form 4224 as required under Section
9.01. Upon execution and delivery of such Assignment and Assumption Agreement by
such Assignee to such Lender of an amount equal to the purchase price agreed
between Lender and such Assignee, such Assignee shall be a "Lender" and shall
have all the rights and obligations of a Lender with a Commitment as set forth
in such Assignment and Assumption Agreement, and Lender shall be released from
its obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this paragraph, a new Note shall be issued in exchange for the
existing Note, all as provided in this Agreement.
Borrower agrees to provide all assistance reasonably requested by any
Lender to enable such Lender either to sell participations in or to make
assignments permitted under this Section.
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SECTION 11.02 Survival. All representations and warranties contained
herein or made in writing by Borrower or Pledgor in connection herewith shall
survive the execution and delivery of this Agreement, the other Loan Documents
and repayment of the Loans.
Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in Section 11.06
hereof shall survive the payment in full of the Loans, and termination of this
Agreement.
SECTION 11.03 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document nor consent to any
departure by Borrower or Pledgor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Required Lenders and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given provided, however, that no amendment,
waiver or consent shall, unless in writing and signed by all the Lenders do any
of the following: (l) reduce the principal of, or interest on, the Notes or any
fees due hereunder or any other amount of principal, interest or fees due
hereunder or under any Loan Document; (2) postpone any date fixed for any
payment of principal of, or interest on, the Notes or any fees due hereunder or
under any Loan Document, or waive any default in the payment of principal,
interest or any other amount due hereunder or under any Loan Documents; (3)
change the Commitments, (4) change the definition of Required Banks; (5) release
any material portion of the Collateral otherwise than in accordance with the
Loan Documents; (6) amend this Section 11.03 or any other provision requiring
the consent of all the Lenders. No failure on the part of any Agent or any
Lenders to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof or preclude any other or further exercise thereof or
the exercise of any other right.
SECTION 11.04 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given (1) in the case of
Borrower, any Agent or Lenders to such party at its address, telex number or
facsimile number set forth on the signature pages hereof, or (2) in the case of
any Assignee, at its address, telex number, or facsimile number, set forth in
such Assignee's Assignment and Assumption Agreement. Each such notice, request
or other communication shall be effective (1) if given by telex, when such telex
is transmitted to the telex number specified in this Section 11.04 and the
appropriate answerback is received, (2) if given by facsimile, when such
facsimile is transmitted to
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the facsimile number specified in this Section 11.04, (3) if given by mail,
seventy two (72) hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid, or (4) if given by any
other means, when delivered at the address specified in this Section 11.04;
provided that notices to each Agent and Lenders under Article II shall not be
effective until received.
SECTION 11.05 Payment of Expenses. All statements, reports,
certificates, opinions and other documents or information required to be
furnished by Borrower to any Agent or any Lender under this Agreement or any
other Loan Document shall be supplied without cost to such Agent or any Lenders.
Borrower shall pay, on demand, (1) all reasonable out-of-pocket costs and
expenses of each Agent and Lenders, including, without limitation, the fees and
disbursements of Dewey Ballantine, counsel to Agents and Lenders, incurred in
connection with (a) the negotiation, preparation, execution and delivery of the
Loan Documents, (b) any waiver or amendment of, or supplement or modification
to, the Loan Documents, and (c) the review of any of the other agreements,
instruments or documents referred to in this Agreement or relating to the
transactions contemplated hereby or any other Facility Agreement including,
without limitation, ongoing review of environmental matters; (2) the reasonable
fees and disbursements of the Independent Engineer for its services rendered to
Lenders once during each calendar year and at all times after the occurrence of
an Event of Default; (3) the reasonable fees and disbursements of the
Environmental Consultant for its services rendered to Lenders once during each
calendar year and at all times after the occurrence of an Event of Default; (4)
all premiums for the Title Insurance Policy; (5) all costs and expenses of
Agents and Lenders (including the reasonable fees and disbursements of legal
counsel) incident to the successful enforcement, collection, protection or
preservation of any right or claim of Agents or Lenders under the Loan
Documents.
SECTION 11.06 Indemnification. Borrower hereby indemnifies and holds
harmless each Agent, each Lender and their respective officers, directors,
employees and Affiliates from and against any and all claims, actions, suits,
judgments, demands, damages, losses, liabilities (including, without limitation,
liabilities for penalties), costs or expenses (exclusive of salaries, overhead
and other ordinary operating and administrative costs and income taxes of such
Person) whatsoever, including reasonable attorneys' fees (each, an "Indemnity
Claim"), that such Person may incur by reason of, arising out of or in
connection with (1) the execution, delivery, enforcement (including the
foreclosure or other sale of the property subject to any Security Document and
the ownership and/or possession of
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such property by any such Person or any representative thereof), performance or
administration of this Agreement and the other Loan Documents, (2) any and all
excise, sales or other taxes that may be payable or determined to be payable
with respect to the Site or the Facility or the Capital Program, and (3) any
failure by Borrower to comply with any applicable Law, (4) the actual or
proposed use of the proceeds of the Loans, Provided, that Borrower shall not be
required to indemnify such Person for any Indemnity Claim to the extent, but
only to the extent, caused by such Person's gross negligence or willful
misconduct as determined by a court of competent jurisdiction or for any
Indemnity Claim based upon a dispute between any of the Persons as to which the
Borrower is providing an indemnity under this Section 11.06. The rights granted
under this Section 11.06 are in addition to the rights granted under any other
provision of this Agreement, under any other Loan Document or otherwise;
Provided, however, in no event will Borrower be required to pay the same
indemnified item twice.
SECTION 11.07 Environmental Matters. Notwithstanding anything to the
contrary contained herein or any other Loan Document, Borrower hereby
indemnifies each Agent, Lenders and the respective officers, directors,
employees and Affiliates of each from and against all loss, liability, damage,
cost and expense, including attorneys' fees and expenses, expert and consulting
fee and costs of investigation and feasibility studies incurred in response to a
liability asserted or threatened against such indemnified person, whether direct
or indirect, known or unknown, absolute or contingent, past, present or future,
suffered or incurred by such indemnified Person arising out of, relating to, or
in connection with (1) any Environmental Law or any Environmental Lien, or (2)
any event, activity, or condition involving Hazardous Materials at any location;
in each case, arising out of, attributable to, or associated with (a) the Assets
or operations of Borrower or the operations of any prior owner or operator of
the Assets or the Facility or the Site; and in each case, whether or not the
same emanates or originates at or from the Assets or the Facility or the Site,
whether or not caused by, or within the control of, Borrower; provided, however,
that Borrower shall not be required to indemnify such Person for any indemnity
under this Section 11.07 to the extent, but only to the extent, caused by such
Person's gross negligence or willful misconduct which actually occurs on the
premises of the Borrower, all as determined by a court of competent
jurisdiction. The rights granted under this Section 11.07 are in addition to the
rights granted under any other provision of this Agreement, under any other Loan
Document, or otherwise, provided, however, in no event will Borrower be required
to pay the same indemnified item twice. This indemnification shall not be
limited in any way by the passage of time or occurrence of any event and shall
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expressly cover time periods when any Agent or any Lender may have come into
possession or control of any of the Assets and any time thereafter, provided,
however, this indemnity shall not cover any violations of Environmental Laws by
any actions by the Agents or the Lenders after they have actual possession or
control of the Assets.
SECTION 11.08 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that the Borrower may not assign or
transfer any of its rights, duties or obligations under this Agreement without
the prior written consent of all Lenders.
SECTION 11.09 Lenders Beneficiary. All conditions to the obligation of
Lenders to make Loans hereunder are imposed solely and exclusively for the
benefit of each Lender and its assigns, and no other Person shall have standing
to require satisfaction of such conditions in accordance with their terms and no
Person shall, under any circumstances, be deemed to be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by
Lenders at any time if in its sole discretion it deems it advisable to do so.
Inspections and approvals of the Capital Program, and the workmanship and
materials used therein impose no responsibility or liability of any nature
whatsoever on Agents or Lenders, and no Person shall, under any circumstances,
be entitled to rely upon such inspections and approvals by Agents or Lenders for
any reason.
SECTION 11.10 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
SECTION 11.11 Descriptive Headings. The table of contents and the
descriptive headings of the several Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement and shall not
affect the meaning or construction of any provision hereof.
SECTION 11.12 Severability. If any provision of this Agreement shall
be held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative or unenforceable to any
extent whatever.
SECTION 11.13 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED
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AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 11.14 Consent to Jurisdiction. With respect to any legal
action or proceeding against Borrower arising out of or in connection with this
Agreement and all other Loan Documents to which Borrower is a party, Borrower
hereby irrevocably (1) consent to the jurisdiction of any state or federal court
located in the State of New York and (2) waive any objection to the venue of the
aforesaid courts.
SECTION 11.15 WAIVER OF JURY TRIAL. BORROWER HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their duly authorized officers as
of the day and year first above written.
JLM CHEMICALS, INC.,
as Borrower
By /s/ John White
--------------------------
Name: John White
Title: President
Addresses for Notices:
3350 West 131st Street
Blue Island, Illinois 60406
Attn: President
Telecopy: (708) 388-9379
with a copy to:
JLM Industries, Inc.
8675 Hidden River Parkway
Tampa, Florida 33637
Attn: Vice President and General
Counsel
Telecopy: (813) 632-3301
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Term Lender and Capital
Expenditure Lender
By /s/ R. Blair McBeth
---------------------------
Name: R. Blair McBeth
Title: Vice President
Applicable Lending Office:
New York
Address for Notices:
1211 Avenue of the Americas
New York, New York 10036
Attn: Kenneth Brown
Telecopy: (212) 536-1385
92a
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THE CIT GROUP/BUSINESS CREDIT, INC.,
as Working Capital Lender
By /s/ Ellis B. Hilton, III
---------------------------
Name: Ellis B. Hilton, III.
Title: Vice President
Applicable Lending Office:
New York
Address for Notices:
1211 Avenue of the Americas
New York, New York 10036
Attn: Mr. John Healy
Telephone: (212) 536-1285
Telecopy: (212) 536-1295
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Term Agent
By /s/ R. Blair McBeth
---------------------------
Name: R. Blair McBeth
Title: Vice President
Address for Notices:
1211 Avenue of the Americas
New York, New York 10036
Attn: Kenneth Brown
Telecopy: (212) 536-1385
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Working Capital Agent
By /s Ellis B. Hilton, III
---------------------------
Name: Ellis B. Hilton, III
Title: Vice President
Address for Notices:
1211 Avenue of the Americas
New York, New York 10036
Attn: Mr. John Healy
Telephone: (212) 536-1285
Telecopy: (212) 536-1295
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THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Collateral Agent
By /s/ R. Blair McBeth
---------------------------
Name: R. Blair McBeth
Title: Vice President
Applicable Lending Office:
New York
Address for Notices:
1211 Avenue of the Americas
New York, New York 10036
Attn: Kenneth Brown
Telecopy: (212) 536-1385
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Agent
By /s/ R. Blair McBeth
---------------------------
Name: R. Blair McBeth
Title: Vice President
Address for Notices:
1211 Avenue of the Americas
New York, New York 10036
Attn: Kenneth Brown
Telecopy: (212) 536-1385
94
<PAGE> 101
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of April 12, 1996
("First Amendment") among JLM CHEMICALS, INC. (the "Borrower"), THE CIT
GROUP/EQUIPMENT FINANCING, INC. ("CIT-EF"), THE CIT GROUP/BUSINESS CREDIT, INC.
("CIT-BC"), each other lender which may hereafter execute and deliver an
Assignment and Assumption Agreement with respect to the Loans and Commitments
pursuant to Section 11.01 of the Credit Agreement referred to below (CIT-EF,
CIT-BC, each assignee under an Assignment and Assumption Agreement, each a
"Lender" and collectively, the "Lenders") and THE CIT GROUP/EQUIPMENT FINANCING,
INC. as agent for the Term Lenders and the Capital Expenditure Lenders (in such
capacity, together with its successors in such capacity, "Term Agent") and THE
CIT GROUP/BUSINESS CREDIT, INC., as agent for the Working Capital Lenders (in
such capacity, together with its successors in such capacity, "Working Capital
Agent") and THE CIT GROUP/EQUIPMENT FINANCING, INC. as collateral agent for the
Lenders (in such capacity, together with its successors in such capacity,
"Collateral Agent") and THE CIT GROUP/EQUIPMENT FINANCING, INC., as agent for
the Lenders (in such capacity, together with its successors in such capacity,
"Agent").
PRELIMINARY STATEMENT. The Borrower, each Lender, the Term Agent, the
Working Capital Agent, the Collateral Agent and the Agent have entered into a
Credit Agreement dated as of June 14, 1995 (as amended, modified, or
supplemented from time to time, the "Credit Agreement"). Any term used in this
First Amendment and not otherwise defined in this First Amendment shall have the
meaning assigned to such term in the Credit Agreement.
Each party hereto has agreed to amend certain provisions of the Credit
Agreement as hereinafter set forth.
SECTION 1. Amendments to Credit Agreement. The Credit Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(a) The following definitions are added in their proper alphabetical
order:
"Construction Contract (Pritchard)" means the construction
contract dated as of September 25, 1995 between Pritchard and the
Borrower.
<PAGE> 102
"Construction Contract (Starcon)" means the construction contract
dated as of September 25, 1995 between Starcon and the Borrower.
" Cumene Turnaround Project" means the capital improvements made
to the cumene process during the fourth quarter of 1995.
"First Amendment" means the First Amendment to Credit Agreement
dated as of April 12, 1996 among the Borrower, each Lender, and each
of the Agents.
"Pritchard" means The Pritchard Corporation.
"Schedule A" means the Schedule A to the First Amendment which
sets forth the schedule for completion of the construction and
installation of the Capital Program along with the corresponding
budget of costs and expenses for each portion of such Capital Program.
"Starcon" means Starcon, Inc.
(b) The definition of "Capital Program Costs" is amended by adding
after "expenses" in the last line thereof the following:
"but excluding, without limitation, any fee paid by the Borrower to
Starcon and/or Pritchard in connection with Starcon's and Pritchard's
completion of the Capital Program for less than Three Million Dollars
($3,000,000)."
(c) Subsection (5) of the definitions of Excess Cash Flow is amended
in full to read as follows:
"(5) all Capital Expenditures permitted to be made in accordance with
the terms of this Agreement which are made during such period other
than all Capital Expenditures in excess of Six Hundred Thousand
Dollars ($600,000) incurred in connection with the Capital Program.
(d) Section 2.02, Capital Expenditure Loans is amended by (i) adding
after "from time to time" in the fourth line thereof the following: "but not
more often than once in any calendar month", and (ii) deleting "Two Million
Dollars ($2,000,000)" in the eighth and ninth lines thereof and inserting in its
place the following: "Two Million Four Hundred Thousand Dollars ($2,400,000)".
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(e) Section 2.05, Notice of Borrowings is amended by (i) deleting
"fifth" in the third line of the fourth paragraph thereof and inserting in its
place the following: "tenth".
(f) Section 3.03, Conditions Precedent to Making a Capital Expenditure
Loan is amended by (i) deleting subsection "(a)" of clause "(2)" thereof and
inserting in its place the following:
"(a) a certificate of the Borrower breaking down the use of
proceeds of the Capital Expenditure Loan requested for individual Capital
Expenditure Costs and such certificate shall (i) show that the cost and expenses
to be paid with such proceeds are not greater than the Capital Program Costs
scheduled on Schedule A for such items purchased or services rendered, (ii) have
a reconciliation of actual Capital Program Costs to the budget set forth on
Schedule A which shall demonstrate that after giving effect to the proposed
Capital Program Loan, the funds available to pay Capital Program Costs are
sufficient to pay all Capital Program Costs remaining to be paid or incurred,
and (iii) show that the construction and installation of the Capital Program is
on schedule in accordance with the timetable set forth on Schedule A, as such
Schedule may be amended from time to time with the consent of the Lenders;
and is further amended by (ii) renumbering subsection "(b)" to be subsection
"(d)" and adding after subsection "(a)" thereof the following:
"(b) each bill or invoice received by the Borrower during the
prior month and each such item shall clearly describe the items
purchased and/or the services rendered that are covered by such item;
(c) evidence in form and substance satisfactory to the Term Agent
(such as copies of invoices marked "paid in full" or invoices along
with cancelled checks) that each bill or invoice received by the
Borrower prior to the previous month has been paid in full; and"
and is further amended by (iii) renumbering clause "(5)" to be clause "(7)" and
adding after clause "(4)" thereof the following:
"(5) Evidence of Payment. Term Agent shall have received evidence
that the Borrower has first
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paid Six Hundred Thousand Dollars ($600,000) of the Capital Program
Costs and such evidence shall be in form and substance satisfactory to
the Term Agent in its sole discretion and such evidence shall
demonstrate that no such Costs were paid with the proceeds of any
Loan.
(6) Progress Reports. Term Agent shall have received from each
of Pritchard and Starcon any available updated information relating to
the construction and installation of the Capital Program and all such
information shall be in form and substance satisfactory to the Term
Agent in its sole discretion."
The obligation of Capital Expenditure Lenders to make the initial Capital
Expenditures Loan after April 12, 1996 and each Capital Expenditure Loan
thereafter shall be subject to the conditions precedent that Term Agent shall
have received on or before the date of such initial Capital Expenditure Loan,
each of the following, in form and substance satisfactory to Term Agent and its
counsel:
(1) Consent to Construction Contract (Pritchard). The Agents shall
receive a duly executed Consent covering the Construction Contract (Pritchard);
(2) Consent to Construction Contract (Starcon). The Agents shall
receive a duly executed Consent covering the Construction Contract (Starcon).
(g) Article V, Affirmative Covenants of the Borrower, is amended by
adding at the end thereof the following:
"SECTION 5.12 Term Agent Authorization. Borrower hereby
authorizes the Term Agent to contact each of Pritchard or Starcon
regarding the status of performance under the Construction Contract
(Pritchard) or the Construction Contract (Starcon), respectively."
(h) Section 6.10, Capital Program is amended by deleting "Two Million
Five Hundred Thousand Dollars ($2,500,000)" in the third and fourth line thereof
and inserting in its place the following: "Three Million Two Hundred Eighty-Five
Thousand Dollars ($3,285,000)".
(i) Section 6.13, Changes Amendments and Modifications is amended by
deleting "or" in the third line thereof and inserting after "Agreements" in the
last line thereof the following: ", (5) the Construction Contract (Pritchard),
or (6) the Construction Contract (Starcon)".
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(j) Section 7.04 Maximum Capital Expenditures is amended in full to
read as follows:
"On and after the Closing Date Borrower shall not make or permit to be
made Capital Expenditures for or in connection with the Capital
Program in an aggregate among greater than Three Million Three Hundred
Twenty-Five Thousand Dollars ($3,325,000). During the period from the
Closing Date to December 31, 1995, Borrower shall not make or permit
to be made Capital Expenditures (other than Capital Expenditures for
or in connection with the Capital Program) other than (1) up to Six
Hundred Fifty Thousand Dollars ($650,000) of Capital Expenditures
incurred during the fourth quarter of 1995 in connection with the
Cumene Turnaround Project, and (2) in addition to the Capital
Expenditures noted under (1) above, up to Three Hundred Thousand
Dollars ($300,000) of other Capital Expenditures. During the period
from January 1, 1996 to December 31, 1996, Borrower shall not make or
permit to be made Capital Expenditures (other than Capital
Expenditures for or in connection with the Capital Program) in excess
of Five Hundred Thousand Dollars ($500,000) less the amount of Capital
Expenditures made for or in connection with the Capital Program in
excess of Three Million Two Hundred Eighty-Five Thousand Dollars
($3,285,000). In any Fiscal Year commencing with the Fiscal Year of
January 1, 1997 to December 31, 1997, Borrower shall not make or
permit to be made Capital Expenditures (other than Capital
Expenditures for or in connection with the Capital Program) in excess
of Five Hundred Thousand Dollars ($500,000), plus, commencing with the
Fiscal Year of January 1, 1997 to December 31, 1997 an amount equal to
the lesser of: (1) Two Hundred Thousand Dollars ($200,000), or (2) the
difference between Five Hundred Thousand Dollars ($500,000) and the
amount of Capital Expenditures (other than Capital Expenditures for or
in connection with the Capital Program) actually made during the prior
Fiscal Year.
SECTION 2. Conditions of Effectiveness. This First Amendment shall
become effective as of the date of this First Amendment when and if the
Collateral Agent shall have received on or before such date each of the
following documents, in form and substance satisfactory to both Agents and their
counsel, and each of the following conditions has been fulfilled:
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<PAGE> 106
(1) First Amendment. This First Amendment duly executed by each of the
parties hereto;
(2) Amended and Restated Capital Expenditure Note. The Term Agent
shall receive the Amended and Restated Capital Expenditure Note duly executed by
the Borrower;
(3) Evidence of All Corporate Action of the Borrower. Certified
copies, dated the date hereof, of all corporate action taken by the Borrower,
including resolutions of its Board of Directors, authorizing the execution,
delivery, and performance of this First Amendment and each of the other
documents the Borrower is delivering in connection with this First Amendment;
(4) Schedule A. The Borrower shall deliver Schedule A hereto which sets forth
the schedule for completion of the construction and installation of the Capital
Program along with the corresponding budget of costs and expenses for each
portion of such Capital Program;
(4) Schedule A. The Borrower shall deliver Schedule A hereto which
sets forth the schedule for completion of the Construction Contract (Pritchard)
and the Construction Contract (Starcon) and each such Contract shall be in form
and substance satisfactory to both agents in their sole discretion.
(5) Copies of Construction Contracts. The Borrower shall deliver
copies of each of the Construction Contract (Pritchard) and the Construction
Contract (Starcon) and each such Contract shall be in form and substance
satisfactory to both Agents in their sole discretion.
(6) Officer's Certificate. The following statements shall be true and
the Collateral Agent shall have received a certificate signed by a duly
authorized officer of the Borrower dated the date hereof stating that, after
giving effect to this First Amendment and the transactions contemplated hereby:
(a) The representations and warranties contained in the Credit
Agreement and in each of the other Loan Documents are correct in
all material respects on and as of the date hereof as though made
on and as of such date in the case of such representations and
warranties which are not subject to a Material Adverse Change
exception, and in all cases where such representation and
warranty is subject to such an exception, are correct; and
(b) No Default or Event of Default has occurred and is continuing;
and
(7) Other Documents. The Collateral Agent shall have received such
other approvals, opinions or documents as the any Agent or Lender may reasonably
request.
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SECTION 3. Reference to and Effect on the Loan Documents. (a) Upon the
effectiveness of Section 1 hereof, on and after the date hereof each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import, and each reference in the other Loan Documents to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended hereby.
(b) The execution, delivery and effectiveness of this First Amendment
shall not operate as a waiver of any right, power or remedy of any Lender or
Agent under any of the Loan Documents, nor constitute a waiver of any provision
of any of the Loan Documents, and, except as specifically provided herein, the
Credit Agreement and each other Loan Document shall remain in full force and
effect and are hereby ratified and confirmed.
SECTION 4. Costs, Expenses and Taxes. The Borrower agrees to reimburse
any Agent or Lender on demand for all out-of-pocket costs, expenses and charges
(including, without limitation, all fees and charges of Dewey Ballantine,
counsel to the Agents and the Lenders) incurred by the Agents in connection with
the preparation, reproduction, execution and delivery of this First Amendment
and any other instruments and documents to be delivered hereunder. In addition,
the Borrower shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution and delivery, filing
or recording of this First Amendment and the other instruments and documents to
be delivered hereunder, and agrees to save the Lenders and the Agents harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes or fees.
SECTION 5. Governing Law. This First Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 6. Headings. Section headings in this First Amendment are
included herein for convenience of reference only and shall not constitute a
part of this First Amendment for any other purpose.
SECTION 7. Counterparts. This First Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this First Amendment by
signing any such counterpart.
7
<PAGE> 108
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed as of the day and year first above written.
JLM CHEMICALS, INC.,
as Borrower
By /s/ Frank A. Musto
-------------------------------
Name: Frank A. Musto
Title: V.P & CFO
THE CIT GROUP/EQUIPMENT
FINANCING, INC.,
as Term Lender and Capital
Expenditure Lender
By /s/
------------------------------
Name:
Title: VP
THE CIT GROUP/BUSINESS CREDIT,
INC.,
as Working Captial Lender
By /s/ Edward A. Jesser
-------------------------------
Name: Edward A. Jesser
Title:Vice President
THE CIT GROUP/EQUIPMENT
FINANCING, INC.,
as Term Agent
By /s/
-------------------------------
Name:
Title: VP
THE CIT GROUP/BUSINESS CREDIT,
INC.,
as Working Capital Agent
By /s/ Edward A. Jesser
-------------------------------
Name: Edward A. Jesser
Title:Vice President
8
<PAGE> 109
THE CIT GROUP/EQUIPMENT
FINANCING, INC.,
as Collateral Agent
By /s/
-------------------------------
Name:
Title: VP
THE CIT GROUP/EQUIPMENT
FINANCING, INC.,
as Agent
By /s/
-------------------------------
Name:
Title: VP
9
<PAGE> 110
AMENDMENT NO. 2
TO CREDIT AGREEMENT
AMENDMENT NO. 2, dated as of 28 Febr., 1997 ("Amendment No. 2"), TO
CREDIT AGREEMENT dated as of June 14, 1995, as amended by a First Amendment to
Credit Agreement dated as of April 12, 1996, by and among JLM CHEMICALS, INC.,
(the "Borrower"), THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT-EF"), THE
CIT GROUP/BUSINESS CREDIT, INC. ("CIT-BC"), each other lender which may
hereafter execute and deliver an Assignment and Assumption Agreement with
respect to the Loans and Commitments pursuant to section 11.01 of the Credit
Agreement referred to below (CIT-EF, CIT-BC and each assignee under an
Assignment and Assumption Agreement, a "Lender" and collectively, the "Lenders")
and THE CIT GROUP/EQUIPMENT FINANCING, INC. as agent for the Term Lenders and
the Capital Expenditure Lenders (in such capacity, together with its successors
in such capacity, "Term Agent") and THE CIT/GROUP/BUSINESS CREDIT, INC., as
agent for the Working Capital Lenders (in such capacity, together with its
successors in such capacity, "Working Capital Agent") THE CIT GROUP/EQUIPMENT
FINANCING, INC., as collateral agent for the Lenders (in such capacity,
together with its successors in such capacity, "Collateral Agent"), and THE
CIT GROUP/EQUIPMENT FINANCING, INC., as agent for the Lenders (in such
capacity, together with its successors in such capacity, "Agent").
PRELIMINARY STATEMENT. The Borrower, each lender, the Term Agent,
the Working Capital Agent, the Collateral Agent and the Agent have entered into
a Credit Agreement dated as of June 14, 1995 (as amended, modified, or
supplemented from time to time, the "Credit Agreement"). Any term used in this
Amendment No. 2 and not otherwise defined in this Amendment No. 2 shall have the
meaning assigned to such term in the Credit Agreement.
Each party hereto has agreed to amend certain provisions of the
Credit Agreement as hereinafter set forth.
Section 1. Amendments to Credit Agreement. The Credit Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(a) Section 6.10 Capital Program. Captial Program is hereby
amended in its entirety to read as follows:
Section 6.10 Capital Program. Enter into any Capital
Program Contract if the aggregate Capital Program Cost
will exceed Four Million Six Hundred Thousand Dollars
($4,600,000).
(b) Section 7.04 Maximum Capital Expenditures is hereby
amended in its entirety to read as follows:
During the period from the Closing Date to December
31, 1995, Borrower shall not make or permit to be
made Capital Expenditures (other than Capital
Expenditures for or in connection with the Capital
Program) other than (1) up to Six Hundred Fifty
Thousand Dollars ($650,000) of Capital Expenditures
incurred during the fourth quarter of 1995 in
connection with the Cumene Turnaround Project, and
(2) in addition to the Capital Expenditures noted
under (1) above, up to Three Hundred Thousand Dollars
($300,000) of other Capital Expenditures. During the
period from January 1, 1996 to December 31, 1996,
Borrower shall not make or permit to be made Capital
Expenditures (other than Capital Expenditures for or in
connection with the Capital
1
<PAGE> 111
Program) in excess of Six Hundred Fifty Thousand Dollars
($650,000). During the period from January 1, 1997 to December
31, 1997, Borrower shall not make or permit to be made Capital
Expenditures (other than Capital Expenditures for or in
connection with the Capital Program) in excess of Seven Hundred
Thousand Dollars ($700,000). In any Fiscal Year commencing with
the Fiscal Year of January 1, 1998 to December 31, 1998,
Borrower shall not make or permit to be made Capital Expendi-
tures (other than Capital Expenditures for or in connection
with the Capital Program) in excess of Five Hundred Thousand
Dollars ($500,000), plus, commencing with the Fiscal Year of
January 1, 1998 to December 31, 1998 an amount equal to the
lesser of: (1) Two Hundred Thousand Dollars ($200,000), or
(2) the difference between Five Hundred Thousand Dollars
($500,000) and the amount of Capital Expenditures (other than
Capital Expenditures for or in connection with the Capital
Program) actually made during the prior Fiscal Year.
(c) Section 11.04 Notices is hereby amended to provide that CIT-EF's
address in all its capacities under the Credit Agreement shall be as follows:
for financial statements and other financial matters:
The CIT Group/Equipment Financing, Inc.
650 CIT Drive
Livingston, New Jersey 08039
Attn: Vice President, Credit
Telecopier: (201)-740-5005
for all other notice purposes:
The CIT Group/Equipment Financing, Inc.
900 Ashwood Parkway
Suite 600
Atlanta, Georgia 30038
Attn: William Hickey
Telecopier: (770)-551-7867.
Section 2. Conditions of Effectiveness. This Amendment No. 2 shall
become effective as of the date of this Amendment No. 2 when and if the
Collateral Agent shall have received on or before such date each of the
following documents, in form and substance satisfactory to both Agents and
their counsel, and each of the following conditions has been fulfilled:
(1) Amendment No. 2. This Amendment No. 2 duly executed by each
of the parties hereto;
(2) Evidence of All Corporate Action of the Borrower. Certified
copies, dated the date hereof, of all corporate action taken by the Borrower,
including resolutions of its Board of Directors, authorizing the execution,
delivery, and performance of this Amendment No. 2 and each of the other
documents the Borrower is delivering in connection with this Amendment No. 2;
(3) Officer's Certificate. The following statements shall be
true and the Collateral Agent shall have received a certificate signed by a duly
authorized officer of the Borrower dated the date hereof stating that, after
giving effect to this Amendment No. 2 and the transactions contemplated hereby:
(a) The representations and warranties contained in the Credit
Agreement and in each of the other Loan Documents are
correct in all material respects on and as of the date
hereof as though made on and as of such date in the case
of such representations and
2
<PAGE> 112
warranties which are not subject to a Material Adverse
Change exception, and in all cases where such representation
and warranty is subject to such an exception, are correct;
and
(b) No Default or Event of Default has occurred and is
continuing;
(4) Other Documents. The Collateral Agent shall have received
such other approvals, opinions or documents as any Agent or Lender may
reasonably request; and
(5) Administrative Fee. The Borrower shall have paid to the
Collateral Agent an administrative fee in the amount of $10,000.
Section 3. Reference to and Effect on the Loan Documents. (a) Upon
the effectiveness of Section 1 hereof, on and after the date hereof each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference in the other Loan Documents
to the Credit Agreement, shall mean and be a reference to the Credit Agreement
as amended hereby.
(b) The execution, delivery and effectiveness of this Amendment
No. 2 shall not operate as a waiver of any right, power or remedy of any Lender
or Agent under any of the Loan Documents, nor constitute a waiver of any
provision of any of the Loan Documents, and, except as specifically provided
herein, the Credit Agreement and each other Loan Document shall remain in full
force and effect and are hereby ratified and confirmed.
Section 4. Cost, Expenses and Taxes. The Borrower agrees to
reimburse any Agent or Lender on demand for all out-of-pocket costs, expenses
and charges incurred by the Agents in connection with the preparation,
reproduction, execution and delivery of this Amendment No. 2 and any other
instruments and documents to be delivered hereunder. In addition, the Borrower
shall pay any and all stamp and other taxes and fees payable or determined to
be payable in connection with the execution and delivery, filing or recording
of this Amendment No. 2 and the other instruments and documents to be delivered
hereunder, and agrees to save the Lenders and the Agents harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes or fees.
Section 5. Governing Law. This Amendment No. 2 shall be governed by
and construed in accordance with the laws of the State of New York.
Section 6. Headings. Section headings in this Amendment No. 2 are
included herein for convenience of reference only and shall not constitute a
part of this Amendment No. 2 for any other purpose.
Section 7. Counterparts. This Amendment No. 2 may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any party hereto may execute this Amendment No. 2 by
signing any such counterpart.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to
be duly executed as of the day and year first above written.
JLM CHEMICALS, INC.
as Borrower
By: /s/ Frank A. Musto
-----------------------------
Name: Frank A. Musto
Title: Vice President & CEO
3
<PAGE> 113
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Term Lender and Capital Expenditure Lender
By: /s/ Wendy Berney
-------------------------------------
Name: Wendy Berney
Title: Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Working Capital Lender
By: /s/ Edward A. Jesser
-------------------------------------
Name: Edward A. Jesser
Title: Vice President
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Term Agent
By: /s/ Wendy Berney
-------------------------------------
Name: Wendy Berney
Title: Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Working Capital Agent
By: /s/ Edward A. Jesser
-------------------------------------
Name: Edward A. Jesser
Title: Vice President
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Collateral Agent
By: /s/ Wendy Berney
-------------------------------------
Name: Wendy Berney
Title: Vice President
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Agent
By: /s/ Wendy Berney
-------------------------------------
Name: Wendy Berney
Title: Vice President
Pledgor agrees with the foregoing and ratifies and reaffirms the terms of the
Pledge Agreement.
JLM INDUSTRIES, INC.
By: /s/ Frank A. Musto
-------------------------------------
Title: Vice President & CEO
4
<PAGE> 1
EXHIBIT 10.10
SECURITY AGREEMENT dated as of June 14, 1995 ("Security
Agreement"), made by JLM CHEMICALS, INC., (the "Borrower") to each of the
Lenders (as defined below) party to the Credit Agreement (as defined
below) and THE CIT GROUP/EQUIPMENT FINANCING, INC., as collateral agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "Collateral Agent").
PRELIMINARY STATEMENTS. 1. Reference is made to the Credit
Agreement, dated as of June 14, 1995 among the Borrower, THE CIT
GROUP/EQUIPMENT FINANCING, INC. ("CITEF"), THE CIT GROUP/BUSINESS CREDIT,
INC. ("CIT-BC"), each other lender which may hereafter execute and
deliver an Assignment and Assumption Agreement with respect to the Loans
and Commitments pursuant to Section 11.01 of the Credit Agreement
(CIT-EF, CIT-BC, each assignee under an Assignment and Assumption
Agreement, each a "Lender" and collectively, the "Lenders") and THE CIT
GROUP/EQUIPMENT FINANCING, INC. as agent for the Term Lenders (in such
capacity, together with its successors in such capacity, "Term Agent")
and THE CIT GROUP/BUSINESS CREDIT, INC., as agent for the Working Capital
Lenders (in such capacity, together with its successors in such capacity,
Working Capital Agent") and the Collateral Agent and THE CIT
GROUP/EQUIPMENT FINANCING, INC., as agent for the Lenders, (in such
capacity, together with its successors in such capacity, "Agent") (the
Credit Agreement, as it may hereafter be amended or otherwise modified
from time to time, being the "Credit Agreement"). The terms defined in
the Credit Agreement and not otherwise defined in this Security Agreement
which are used in this Security Agreement shall have the meanings set
forth in the Credit Agreement.
2. It is a condition precedent to the obligation of the
Lenders to provide the Loans and Commitments to the Borrower as provided
in the Credit Agreement that the Borrower shall have granted the security
interest contemplated by this Security Agreement.
NOW, THEREFORE, in consideration of the premises and in
order to induce the Lenders to provide the Loans and Commitments in
accordance with the terms of the Credit Agreement, the Borrower hereby
agree as follows:
SECTION 1. Grant of Security. The Borrower hereby grants a
security interest to each Lender and to the
<PAGE> 2
Collateral Agent for the benefit of each Lender, in and to all of the
Borrower's right, title and interest in and to all of the following,
whether now owned or hereafter acquired or existing (all of the
following, the "Collateral"):
(1) all equipment in all of its forms, wherever located,
including, without limitation, all machinery fork lifts, furniture,
furnishings, fixtures, office supplies and all other similar types of
tangible personal property and all parts thereof and all accessions
thereto, together with all parts, fittings, special tools, alterations,
substitutions, additions, accessories, replacements and accessions
thereto (any and all such equipment, parts and accessions being the
"Equipment");
(2) all inventory in all of its forms, wherever located,
including, but not limited to, (a) all raw materials, work in process,
finished goods, and materials used or consumed in manufacture or
production, (b) goods in which the Borrower has an interest in mass or a
joint or other interest or right of any kind (including, without
limitation, goods in which the Borrower has an interest or right as
consignee), and (c) goods which are returned to or repossessed by the
Borrower, and all accessions thereto and products thereof (any and all
such inventory, accessions, and products being the "Inventory");
(3) all documents and documents of title relating to or
covering any Inventory ("Documents");
(4) all accounts, accounts receivable, contract rights,
chattel paper, instruments, acceptances, drafts, and other obligations of
any kind evidencing a right to receive money, whether or not arising out
of or in connection with the sale or lease of goods or the rendering of
services, together with all ledger sheets, files, records and documents
relating to any of the foregoing, including all computer records,
programs, storage media and computer software used or useful in
connection therewith (the "Receivables"), and all of the Borrower's
right, title and interest, powers, privileges and other benefits under
each and every one of the security agreements and other contracts
securing or otherwise relating to any such Receivables;
(5) all Approvals and Permits and all other approvals,
permits, licenses, franchises, certificates that are, by their terms or
pursuant to applicable Law, assignable without the consent of the
Governmental
2
<PAGE> 3
Authority or the counterparty thereto, as the case may be;
(6) all rights under all contracts or agreements to
which Borrower is a party, including, but not limited to, all the
Facility Agreements (the "Assigned Agreements");
(7) all trademarks, trade names, trade styles, service
marks, prints and labels on which said trademarks, trade names, trade
styles and service marks have appeared or appear, designs and general
intangibles of like nature, and all registrations and recordings thereof,
including, without limitation, applications, registrations and recordings
in the United States Patent and Trademark Office or in any similar office
or agency of the United States, any State thereof, or any other country
or any political subdivision thereof, together with the goodwill
associated therewith, and all reissues, amendments, extensions or
renewals thereof and all licenses thereof (the "Trademarks") ;
(8) all patents of the United States or any other
country, and all applications therefor, all right, title and interest
therein and thereto, and all registrations and recordings thereof,
including, without limitation, applications, registrations and recordings
in the United States Patent and Trademark Office or in any similar office
or agency of the United States, any State thereof or any other country or
any political subdivision thereof, and all reissues, continuations,
divisionals, continuations-in-part or extensions thereof and all licenses
thereof (the "Patents");
(9) all copyrights, copyrighted works or any item which
embodies such copyrighted work of the United States or any other country,
and all applications therefor, all right, title and interest therein and
thereto, and all registrations and recordings thereof, including, without
limitation, applications, registrations and recordings in the United
States Copyright Office or in any similar office or agency of the United
States, any State thereof or any other country or any political
subdivision thereof, and all derivative works, extensions or renewals
thereof (the "Copyrights");
(10) all general intangibles, including but not limited
to, goodwill and tax refunds;
(11) the Deposit Account, the Insurance Account and any
other cash collateral account established
3
<PAGE> 4
pursuant to the terms of the Credit Agreement, all assets held in each
such account, together with all monies, proceeds or sums due or to become
due thereon or therefrom, and all bank accounts now or hereafter held by
the Borrower and all funds in such accounts together with all monies,
proceeds or sums due or to become due thereon or therefrom (each of the
Deposit Account, the Insurance Account and any other cash collateral
account established pursuant to the Credit Agreement, and all such bank
accounts, the "Bank Accounts"), and all documents or instruments
(including but not limited to passbooks, certificates of deposit and
receipts but excluding periodically rendered statements of account and
similar correspondence) necessary to be presented to withdraw funds or
investments held in the Bank Accounts (the "Account Documents");
(12) all motor vehicles (the "Motor Vehicles");
(13) all rolling stock (the "Rolling Stock"); and
(14) all proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds which constitute
property of the types described in any of the clauses of this Section 1
and, to the extent not otherwise included, all payments under insurance
(whether or not the Collateral Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to
or otherwise with respect to any of the foregoing Collateral.
SECTION 2. Security for Borrower's Obligations This
Security Agreement secures the prompt and complete payment when due of
all Borrower's Obligations. .
SECTION 3. Borrower Remains Liable. Anything herein to the
contrary notwithstanding, (l) the Borrower shall remain liable under the
contracts and agreements included in the Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to
the same extent as if this Security Agreement had not been executed, (2)
the exercise by the Collateral Agent for its own account or on behalf of
any of the Lenders of any of the rights hereunder shall not release the
Borrower from any of its duties or obligations under the contracts and
agreements included in the Collateral, and ( 3 ) neither the Collateral
Agent nor any Lender shall have any obligation or liability under the
contracts and agreements included in the Collateral by reason of this
Security Agreement, nor shall the Collateral Agent or any Lender be
obligated to perform any of the obligations or duties of the Borrower
thereunder
4
<PAGE> 5
or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 4. Representations and Warranties. The Borrower
represents and warrants to the Collateral Agent and each Lender as
follows:
(1) Location of Collateral. All of the Equipment and
Inventory are located at the places specified in Schedule I attached
hereto and made a cart hereof. The chief place of business and chief
executive office of the Borrower and the office where the Borrower keens
its records concerning Receivables are located at the address specified
on Schedule III or at a place determined in accordance with the
provisions of Section 5(4) hereof. All originals of all chattel paper
which evidence Receivables in excess of Five Thousand Dollars ($5,000)
have been delivered to the Collateral Agent or have been legended to
reflect the security interest under this Security Agreement. None of the
Receivables is evidenced by a promissory note or other instrument in
excess of Five Thousand Dollars ($5,000), unless such note or instrument
has been delivered to the Collateral Agent. As of the Closing Date, the
Borrower does not own any Patents, Copyrights or Trademarks.
(2) Ownership and Liens. The Borrower owns the
Collateral free and clear of any Lien or encumbrance except for (i) the
security interest created by this Security Agreement, and (ii) Permitted
Liens. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any
recording office, except those filed in favor of the Collateral Agent
and/or the Lenders relating to this Security Agreement and those
constituting or giving notice of Permitted Liens.
(3) Trade Names. As of the Closing Date, the Borrower
conducts no business under any name or trade name other than the
Borrower's name first recited above.
(4) Possession of Collateral. The Borrower has exclusive
possession and control of the Equipment and Inventory all of which is
located at the Site.
(5) Patents, Trademarks, Copyrights, Computer Programs,
etc. The Borrower has the right to use all Patents, Trademarks, and
Copyrights held by it at that time and all computer programs and other
rights, free from materially burdensome restrictions, which are necessary
for the operation of its business as conducted or as proposed to be
conducted. There is not pending or to Borrower's knowledge threatened any
claim or litigation against or affecting the Borrower contesting the
validity of any of the Patents, Trademarks, Copyrights or computer
programs which,
5
<PAGE> 6
if adversely determined, could result in a Material Adverse Change.
(6) Perfection of Lien. This Security Agreement creates
a valid security interest in the Collateral, subject only to Permitted
Liens, securing the payment of the Borrower's Obligations and all actions
necessary to perfect such security interest have been duly taken.
(7) Authorization and Approval. Except for the filings
contemplated herein under the Uniform Commercial Code of Illinois (the
"UCC") no authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority is required either (a) for the
grant by the Borrower of the security interest granted hereby or for the
execution, delivery or performance of this Security Agreement by the
Borrower, or (b) for the perfection of or the exercise by the Collateral
Agent or the Lenders of their respective rights and remedies hereunder.
(8) The Receivables. (a) The Borrower is the sole owner
of the Receivables; (b) all Receivables are based on actual and bona fide
sales of goods and/or services to customers, made by the Borrower in the
ordinary course of its business; (c) Receivables created by the sale of
goods or the rendering of services are the exclusive property of the
Borrower and are not and shall not be subject to any Lien; (d) the
Borrower has not made any prior assignment or transfer of any kind of
said Receivables, the proceeds thereof or interest(s) thereon or therein,
except such as may have been created in favor of the Collateral Agent and
the Lenders; (e) the invoices evidencing such Receivables are in the name
of the Borrower; (f) the customers of the Borrower have accepted the
goods or services, owe and are obligated to pay the full amounts stated
in the invoices according to their terms, without dispute, offset,
defense, counterclaim or contra.
(9) Valid Existence. The Borrower is a duly and validly
existing corporation and is qualified in all states where required to
enable the Borrower to enforce collection of Receivables due from
customers residing in that state.
SECTION 5. Covenants and Agreements. The Borrower covenants
and agrees that:
(1) Further Assurances. (a) The Borrower will from time
to time, at the expense of the Borrower, promptly execute and deliver all
further instruments and documents, and take all further action that the
Collateral Agent may request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable
the Collateral Agent or any Lender to exercise and
6
<PAGE> 7
enforce their respective rights and remedies hereunder with respect to
any Collateral.
(b) Without limiting the generality of the foregoing, the
Borrower will: (1) upon the request of the Collateral Agent, mark
conspicuously each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Collateral Agent,
indicating that such Collateral is subject to the security interest
granted hereby; (2) if any Receivable shall be evidenced by a promissory
note or other instrument in a face amount in excess of Five Thousand
Dollars ($5,000), deliver such to the Collateral Agent duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all
in form and substance satisfactory to the Collateral Agent; (3) if any
Receivable in excess of Five Thousand Dollars ($5,000) shall be evidenced
by chattel paper, either deliver such chattel paper to the Collateral
Agent duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the
Collateral Agent, or place a legend on such chattel paper to reflect the
security interest under this Security Agreement; and (4) execute and file
such financing or continuation statements, or amendments thereto, and
such other instruments or notices as the Collateral Agent may request in
order to perfect and preserve the security interest granted or purported
to be granted hereby.
(c) The Borrower hereby authorizes the Collateral Agent
to file one or more financing statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of
the Borrower where permitted by Law. The Borrower hereby authorizes the
Collateral Agent to file one or more continuation statements relative to
all or any part of the Collateral without the signature of the Borrower
where permitted by Law. A carbon, photographic or other reproduction
of this Security Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing
statement where permitted by Law.
(d) The Borrower will furnish to the Collateral Agent
from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may request, all in reasonable detail,
including, without limitation, copies of agreements with, or purchase or
service orders from, the Borrower's customers, and copies of invoices to
customers, proof of shipment or delivery. The Borrower's failure,
however, to promptly give such statements or schedules to the Collateral
Agent shall not affect, diminish, modify or otherwise limit or the
Collateral Agent's or any Lender's security interests in the
7
<PAGE> 8
Collateral. The Borrower agrees to maintain such books and records
regarding Receivables as the Collateral Agent may reasonably require. All
of the books and records of the Borrower will be available to the
Collateral Agent upon reasonable prior notice at normal business hours,
including any records handled or maintained for the Borrower by any other
Person.
(e) If requested by the Collateral Agent, the Borrower
will at its cost and expense obtain the consent of any Person or
Governmental Authority to the assignment hereunder of any collateral if
such consent may be required by the terms of any such Collateral or by
any Governmental Approval.
(2) Protection Against Liens. The Borrower will defend
the Collateral against all claims and demands of all Persons (other than
the Collateral Agent and the Lenders) claiming an interest therein. The
Borrower will pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against, the
Collateral, except to the extent the validity thereof is the subject of a
Good Faith Contest.
(3) As to Equipment. Inventory, Trademarks, Patents,
Copyrights, Motor Vehicles, and Rolling Stock. The Borrower shall:
(a) Keep the Equipment and Inventory (other than
Inventory sold in the ordinary course of business) at the places therefor
specified in Schedule III.
(b) Cause the Equipment to be maintained and preserved
in accordance with Section 5.04 of the Credit Agreement.
(c) Permit the Collateral Agent or any Lender or any of
the agents of any of them at reasonable times and on reasonable prior
notice to have access to the Inventory and Equipment for purposes of
inspection.
(d) Promptly notify the Collateral Agent in writing of
any material loss or damage to the Inventory or Equipment, Motor
Vehicles, Rolling Stock or other Collateral.
(e) Not use or permit the Inventory or Equipment or
Motor Vehicles or Rolling Stock or other Collateral to be used for any
unlawful purpose or in violation of any Law or for hire.
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<PAGE> 9
(f) Advise the Collateral Agent of all Trademarks,
Patents, or Copyrights or applications for or registration of the same,
created or obtained by Borrower on or after the date of this Security
Agreement.
(g) Take all steps to maintain and enforce the
Trademarks, Patents and Copyrights then held by the Borrower, including
but not limited to (i) payment of all fees, (ii) prosecuting infringers
if any such Trademarks, Patents and Copyrights are material to the
operation of the Borrower's business, and (iii) diligently pursuing any
application or registration related thereto.
(h) As soon as practicable, advise the Collateral Agent
of all Motor Vehicles acquired by Borrower.
(i) As soon as practicable, advise the Collateral Agent
of all Rolling Stock acquired by Borrower.
(4) As to Receivables. The Borrower shall keen its chief
place of business and chief executive office and the office where it
keeps its records concerning the Receivables at the location therefor
specified in Schedule III. The Borrower will hold and preserve such
records and will permit representatives of the Collateral Agent and any
Lender to inspect and make abstracts from such records during normal
business hours.
Except as otherwise provided in this paragraph or under any
of the Loan Documents, the Borrower shall continue to collect, at its own
expense, all amounts due or to become due to the Borrower under the
Receivables. Notwithstanding the foregoing, the Collateral Agent shall
have the right at any time, to notify the account debtors or obligers
under any Receivables of the assignment of such Receivables to the
Collateral Agent and the Lenders and to direct such account debtors or
obligors to make payment of all amounts due or to become due to the
Borrower thereunder directly to the Collateral Agent and, upon such
notification and at the expense of the Borrower, to enforce collection of
any such Receivables, and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as the
Borrower might have done. After receipt by the Borrower of notice from
the Collateral Agent that the Collateral Agent is collecting the
Receivables, (a) all amounts and proceeds (including instruments), if
any, received by the Borrower in respect of the Receivables shall be
received in trust for the benefit of the Collateral Agent and the
Lenders, shall be segregated from other funds of the Borrower and shall
be forthwith paid over to the Collateral Agent in the same form as so
received (with any necessary endorsement) to be applied as provided in
the Intercreditor Agreement, and (b) the Borrower shall not adjust,
settle or
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<PAGE> 10
compromise the amount or payment of any Receivable, or release wholly or
partly any account debtor or obligors thereof, or allow any credit or
discount thereon.
The Borrower agrees to notify the Collateral Agent promptly
of any matters materially adversely affecting the value, enforceability
or collectability of any Account in excess of Five Thousand Dollars
($5,000) and of all material customer disputes, offsets, defenses,
counterclaims, returns, rejections and all material reclaimed or
repossessed merchandise or goods.
(5) Insurance. The Borrower will maintain such insurance
with respect to the Collateral and its use as required under the Credit
Agreement. Further, the Borrower shall, at the request of the Collateral
Agent, duly execute and deliver instruments of assignment of such
insurance policies in accordance with the terms of the Credit Agreement.
The Borrower will use and apply all Insurance Proceeds in accordance with
the terms of the Credit Agreement.
(6) As to the Bank Accounts. In furtherance of the
security interest granted by Section 1, the Borrower shall upon
establishment of the respective Bank Accounts, deliver copies of all
existing Account Documents to the Collateral Agent. With respect to the
Bank Accounts, the Collateral Agent may (a) execute any and all
instruments required for the withdrawal or repayment of such Bank
Accounts, and (b) in all respects deal with such Bank Accounts as the
owner thereof.
The Borrower hereby irrevocably authorizes and empowers the
Collateral Agent at its option, at any time following the occurrence and
during the continuance of an Event of Default, either in its own name or
in the name of the Borrower: (a) to invest any and all monies or proceeds
representing the Bank Accounts, to renew the Bank Accounts on such terms
and for such period(s) as the Collateral Agent may deem appropriate; (b)
to demand, collect and receive payment of any and all monies or proceeds
due or to become due under the Bank Accounts or any part thereof; (c) to
execute any and all instruments required for the withdrawal or repayment
of same, or any part thereof; and (d) to complete in any respect any
instrument for the withdrawal or repayment of funds. The Borrower waives
any presentation, demand of payments, protest and notice of non-payment
or protest.
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<PAGE> 11
(7) Assigned Agreements. The Borrower will perform and
comply in all respects with the terms and conditions of all of the
Assigned Agreements. The Borrower will not, without the consent of the
Collateral Agent (a) cancel or terminate any of the Assigned Agreements
or consent to or accept any cancellation or termination thereof, (b)
amend, supplement or otherwise modify any of the Assigned Agreements (in
each case as in effect on the date hereof), (c) waive any default under
or breach of any of the Assigned Agreements or waive, fail to enforce,
forgive or release any right, interest, or entitlement of any kind,
howsoever arising, under or in respect of the Assigned Agreements, or
vary or agree to the variation of any of the provisions of any of the
Assigned Agreements or of the performance of any other Person under any
of such Assigned Agreements, or (d) petition, request or take any other
legal or administrative action which seeks, or may reasonably be
expected, to rescind, terminate or suspend, any of the Assigned
Agreements or amend or modify any thereof.
SECTION 6. Transfer and Other Liens. Except as permitted in
the Credit Agreement, the Borrower shall not:
(1) Sell, assign (by operation of Law or otherwise)
lease, mortgage, transfer or otherwise dispose of any interest in
the Collateral; or
(2) Create or suffer to exist any Lien upon or with
respect to any of the Collateral other than the Lien hereof and
Permitted Liens.
SECTION 7. Collateral Agent Appointed Attorney-in-Fact. The
Borrower hereby irrevocably appoints the Collateral Agent as the
Borrower's attorney-in-fact, with full authority in the place and stead
of the Borrower and in the name of the Borrower, to take any action and
to execute any instrument which the Collateral Agent may deem necessary
or advisable to accomplish the purposes of this Security Agreement,
including, without limitation:
(1) to obtain and adjust insurance on the Collateral
required to be paid to the Borrower or the Collateral Agent
pursuant to the Credit Agreement;
(2) to ask, demand, collect, sue for, recover, settle,
compromise, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the
Collateral;
(3) to receive, endorse, assign, and collect any and all
checks, notes, drafts and other negotiable and non-negotiable
instruments, documents and chattel
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paper, in connection with clause (1) or (2) above, and the
Borrower waives notice of presentment, protest and non-payment of
any instrument, document or chattel paper so endorsed or assigned;
(4) to file any claims or taken any action or institute
any proceedings which the Collateral Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise
to enforce the rights of the Collateral Agent and the Lenders with
respect to any of the Collateral;
(5) to sell, transfer, assign or otherwise deal in or
with the Collateral or the proceeds or avails thereof, as a
secured party;
(6) to make any reasonable allowances and other
reasonable adjustments with respect to any of the Collateral;
(7) to sign the Borrower's name on any document, on
invoices relating to any account, on drafts against customers, on
schedules of assignments of accounts, on notices of assignment, on
financing statements under the UCC and other public records, on
verifications of accounts, and on notices to customers;
(8) to notify the post office authorities to change the
address for delivery of the Borrower's mail to an address
designated by the Collateral Agent;
(9) to receive, open and dispose of all mail addressed
to the Borrower;
(10) to send requests for verification of accounts to the
Borrower's customers;
(11) to pay or discharge taxes, Liens, or other
encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by
the terms of this Security Agreement or the Credit Agreement and
to pay all or any part of the premiums therefor and the costs
thereof;
(12) to direct any party liable for any payment under any
Collateral to make payment of any and all moneys due and to become
due thereunder directly to the Collateral Agent for its benefit
and the benefit of the Lenders and to receive payment of and
receipt for any and all money, claims and other amounts due and to
become due at any time in respect of or arising out of any
Collateral; and
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<PAGE> 13
(13) to take any and all actions with regard to the
Receivables as provided for in this Security Agreement.
The Borrower hereby ratifies and approves all acts of the
Collateral Agent, as its attorney in-fact, pursuant to this Section 7,
and the Collateral Agent, as its attorney in-fact, will not be liable for
any acts of commission or omission, nor for any error of judgment or
mistake of fact or Law other than acts constituting gross negligence or
wilful misconduct. This power, being coupled with an interest, is
irrevocable so long as this Security Agreement remains in effect.
The Borrower also authorizes the Collateral Agent, at any
time and from time to time, to communicate in its own name with any party to
any contract, agreement or instrument included in the Collateral with regard
to the assignment of such contract, agreement or instrument and other
matters relating thereto.
All amounts received by the Collateral Agent in the
exercise of its rights under this Section 7 shall be applied by Collateral
Agent in reduction of the Borrower's Obligations in the order as selected by
the Collateral Agent.
SECTION 8. Collateral Agent May Perform. If the Borrower
fails to perform any agreement contained herein, the Collateral Agent may
(but is not obligated to) itself perform, or cause performance of, such
agreement, and the expenses of the Collateral Agent incurred in connection
therewith shall be payable by the Borrower.
SECTION 9. Remedies. If any Event of Default shall have
occurred, the Collateral Agent and the Lenders may exercise in respect of
the Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured party
on default under the UCC (whether or not the UCC applies to the affected
Collateral) and also may (1) require the Borrower to, and the Borrower
hereby agrees that it will at its expense and upon the request of the
Collateral Agent forthwith, assemble all or part of the Collateral as
directed by the Collateral Agent and make it available to the Collateral
Agent at a place to be designated by the Collateral Agent, (2) enter the
premises where any of the Collateral is located and take and carry away the
same, by any of its representatives, with or without legal process, to the
Collateral Agent's place of storage, and (3) without notice, except as
specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Collateral Agent's offices
or elsewhere,
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<PAGE> 14
for cash, on credit or for future delivery and upon such other terms as
the Collateral Agent deems to be commercially reasonable. The Borrower
agrees that, to the extent notice of sale shall be required by Law, at
least five (5) Business Days' notice to the Borrower of the time and
place of any public or private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place it
was so adjourned.
SECTION 10. Application of Proceeds. All cash proceeds
received by the Collateral Agent in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral shall
be applied in whole or in part by the Collateral Agent against all or any
part of the Borrower's Obligations in the order as selected by the
Collateral Agent. If the proceeds of the sale of the Collateral are
insufficient to pay all the Borrower's Obligations, the Borrower agrees
to pay upon demand any deficiency to the Collateral Agent and the
Lenders.
SECTION 11. Concerning the Collateral Agent and the
Lenders. (1) Collateral Agent's and Lenders' Rights. The powers conferred
on the Collateral Agent and the Lenders hereunder are solely to protect
their interests in the Collateral and shall not impose any duty upon them
to exercise any such powers.
The Collateral Agent is authorized to take all such action
as is provided to be taken by it hereunder and all other action
reasonably incidental thereto.
The Collateral Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the security
interests in any of the Collateral, whether impaired by operation of Law
or by reason of any action or omission to act on its part hereunder. The
Collateral Agent shall not have any duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by
the Borrower.
(2) Limitation on Duty of Collateral Agent and Lenders
in Respect of Collateral. Beyond the exercise of reasonable care in the
custody thereof, the Collateral Agent and the Lenders shall have no duty
as to any Collateral in their possession or control or in the possession
or control of any agent or bailee or any income thereon or as to the
preservation of rights against prior parties or any other
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<PAGE> 15
rights pertaining thereto. The Collateral Agent and the have exercised
reasonable care in the custody of the Collateral in their possession if
the is accorded treatment substantially equal to that accord their own
property, and shall not be liable or responsible for any loss or damage
to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any warehouseman, carrier, forwarding
agency, consignee or other agent or bailee selected by the Collateral
Agent or such Lenders in good faith.
(3) The Receivables. Neither the Collateral Agent nor
any Lender shall under any circumstances be deemed to assume any
responsibility for or obligations or duty with respect to the Receivables
or any proceeds thereof, and shall not be required to take any action of
any kind to collect, preserve or protect its or the Borrower's rights in
the Receivables.
SECTION 12. Amendments; Etc. No amendment or waiver of any
provision of this Security Agreement nor consent to any departure by the
Borrower herefrom shall in any event be effective unless the same shall
be in writing and signed by the Collateral Agent and then such waiver or
consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 13. Addresses for Notices. All notices and other
communications to any party hereunder shall be in writing, addressed or
transmitted to such Person at such Person's address or transmission
number as provided in or pursuant to the Credit Agreement.
SECTION 14. Continuing Security Interest. This Security
Agreement shall create a continuing security interest in the Collateral
and shall (1) remain in full force and effect until payment in full of
all of the Borrower's Obligations (after the later of the Capital
Expenditure Loan Commitment Termination Date or the Working Capital Loan
Commitment Termination Date), (2) be binding upon each of the Borrower,
the Collateral Agent and the Lenders and their respective successors and
assigns, and t3) inure to the benefit of the Collateral Agent and the
Lenders and their respective successors, transferees and permitted
assigns.
SECTION 15. Governing Law; Terms. This Security Agreement
shall be governed by and construed in accordance with the laws of the
State of New York, except as to matters which under the laws of Illinois
must be governed by the law of Illinois. Unless otherwise defined herein
or in the
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Credit Agreement terms used in Article 9 of the UCC are used herein as
therein defined.
SECTION 16. Miscellaneous. This Security Agreement is in
addition to, and not in limitation of, any other rights and remedies the
Collateral Agent or any Lender may have by virtue of any other instrument
securing the Borrower's Obligations or agreement heretofore, or
contemporaneously herewith executed by Borrower or by Law or otherwise.
If any provision of this Security Agreement is contrary to applicable
Law, such provision shall be deemed ineffective without invalidating the
remaining provisions hereof. If and to the extent that applicable Law
confers any rights or imposes any duties inconsistent with or in addition
to any of the provisions of this Security Agreement, the affected
provision shall be considered amended to conform thereto.
The Collateral Agent shall not by any act, delay, omission
or otherwise be deemed to have waived any of its rights or remedies
hereunder. A waiver by the Collateral Agent of any right or remedy
hereunder on any one occasion shall not be construed as a bar to or
waiver of any such right or remedy which the Collateral Agent would have
had on any future occasion nor shall the Collateral Agent or the Lender
be liable for exercising or failing to exercise any such right or remedy.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused
this Security Agreement to be duly executed and delivered by its
representative "Thereunto duly authorized as of the date first above
written.
JLM CHEMICALS, INC.
By:/s/ John T. White
-------------------------
Name: John T. White
Title: President
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SCHEDULE I
to
Security Agreement
Principal Place of Business and Location of Collateral
Principal Place of Business: 3350 West 131st Street
Blue Island, Illinois
Locations of Equipment: 3350 West 131st Street
Blue Island, Illinois
Locations of Inventory: 3350 West 131st Street
Blue Island, Illinois
18
<PAGE> 1
EXHIBIT 10.11
PLEDGE AGREEMENT dated as of June 14, 1995 ("Pledge Agreement"), made
by JLM INDUSTRIES, INC., (the "Pledgor") to each of the Lenders (as defined
below) party to the Credit Agreement (as defined below) and THE CIT
GROUP/EQUIPMENT FINANCING, INC., as collateral agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Collateral
Agent").
PRELIMINARY STATEMENTS. 1. Reference is made to the Credit Agreement,
dated as of June 14, 1995 among JLM CHEMICALS, INC. ("Borrower"), THE CIT
GROUP/EQUIPMENT FINANCING, INC. ("CIT-EF"), THE CIT GROUP/BUSINESS CREDIT, INC.
("CIT-BC"), each other lender which may hereafter execute and deliver an
Assignment and Assumption Agreement with respect to the Loans and Commitments
pursuant to Section 11.01 of the Credit Agreement (CIT-EF, CIT-BC, each assignee
under an Assignment and Assumption Agreement, each a "Lender" and collectively,
the "Lenders") and THE CIT GROUP/EQUIPMENT FINANCING, INC. as agent for the Term
Lenders (in such capacity, together with its successors in such capacity, "Term
Agent") and THE CIT GROUP/BUSINESS CREDIT, INC., as agent for the Working
Capital Lenders (in such capacity, together with its successors in such
capacity, "Working Capital Agent") and the Collateral Agent and THE CIT
GROUP/EQUIPMENT FINANCING, INC., as agent for the Lenders (in such capacity,
together with its successors in such capacity, "Agent") (the Credit Agreement,
as it may hereafter be amended or otherwise modified from time to time, being
the "Credit Agreement"). The terms defined in the Credit Agreement and not
otherwise defined in this Pledge Agreement which are used in this Pledge
Agreement shall have the meanings set forth in the Credit Agreement.
2. It is a condition precedent to the obligation of the Lenders to
provide the Loans and Commitments to Borrower as provided in the Credit
Agreement that the Pledgor shall have granted the security interest contemplated
by this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to provide the Loans and Commitments under and in accordance
with the terms of the Credit Agreement, the Pledgor hereby agrees as follows:
SECTION 1. Pledge. The Pledgor hereby pledges and grants a security
interest to each Lender and hereby pledges and grants a security interest to the
Collateral
<PAGE> 2
Agent for the benefit of each Lender in all of the following (the "Pledged
Collateral"):
(i) all of the stock described in Schedule I (the "Pledged Shares")
and the certificates representing the Pledged Shares, and all dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the Pledged
Shares; and
(ii) all additional shares of stock of the Borrower from time to time
acquired by the Pledgor in any manner, and the certificates representing such
additional shares, and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares; and
(iii) all proceeds of any and all of the foregoing.
SECTION 2. Security for Borrower's Obligations. The Pledged Collateral
secures the prompt and complete payment when due of all Borrower's Obligations.
SECTION 3. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by the Collateral Agent pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Collateral Agent. The Collateral Agent shall have the right,
at any time in its discretion and without notice to the Pledgor, to transfer to
or to register in the name of the Collateral Agent or any of its nominees any or
all of the Pledged Collateral. In addition, the Collateral Agent shall have the
right at any time to exchange certificates or instruments representing or
evidencing Pledged Collateral for certificates or instruments of smaller or
larger denominations.
SECTION 4. Representations and Warranties. The Pledgor represents and
warrants to the Collateral Agent and each Lender as follows:
(i) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(ii) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any Lien,
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<PAGE> 3
option or other charge or encumbrance, except for the security interest created
by this Pledge Agreement.
(iii) The pledge of the Pledged Shares pursuant to this Pledge
Agreement creates a valid and perfected first priority security interest in the
Pledged Collateral securing the payment of the Borrower's Obligations.
(iv) No authorization, approval or other action by, and no notice to
or filing with, any Governmental Authority is required either (i) for the pledge
by the Pledgor of the Pledged Collateral pursuant to this Pledge Agreement or
for the execution, delivery or performance of the Pledge Agreement by the
Pledgor, or (ii) for the exercise by the Collateral Agent of the voting or other
rights provided for in this Pledge Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Pledge Agreement (except as may be required
in connection with such disposition by Laws affecting the offering and sale of
securities generally).
(v) The Pledged Shares constitute all of the issued and outstanding
shares of stock of Borrower.
SECTION 5. Affirmative Covenant of Pledgor. So long as any Loans are
outstanding or the Lenders have any Commitments under the Credit Agreement or
any other amount is owing to any Agent or any Lender under any Loan Documents,
Pledgor shall furnish to each Lender:
(i) Annual Reporting Requirements: as soon as available and in any
event within one hundred twenty (120) days after the end of each fiscal year of
Pledgor, a consolidated and consolidating balance sheet of Pledgor and its
Consolidated Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income and cash flows for such
year, all in reasonable detail and setting forth in each case, in comparative
form the figures for the previous year, and all prepared in accordance with
generally accepted accounting principles consistently applied, and with regard
to the consolidated financial statements accompanied by a report thereon by, and
certified without qualification arising out of the scope of the audit by, a
nationally recognized firm of independent public accountants or other
independent public accountants satisfactory to Required Lenders; and
(ii) Quarterly Reporting Requirements: as soon as available, and in
any event within sixty (60) days after the end of the first, second and third
fiscal quarters of each fiscal year of the Pledgor, the unaudited consolidated
and consolidating balance sheet of the Pledgor and its Consolidated Subsidiaries
as at the end of such fiscal
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<PAGE> 4
quarter and the related unaudited consolidated and consolidating statements of
income and cash flows, setting forth in each case, in comparative form the
figures of the comparable period for the previous year, and all prepared in
accordance with generally accepted accounting principles consistently applied
and certified as to accuracy by Borrower (subject to normal year-end audit
adjustments).
SECTION 6. Further Assurances. The Pledgor agrees that at any time and
from time to time, at the expense of the Pledgor, it will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Collateral Agent or any Lender may
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent or any Lender
to exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral.
SECTION 7. Voting Rights; Dividends; Etc. (a) So long as no Default or
Event of Default shall have occurred:
(i) The Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms of
this Pledge Agreement or the Credit Agreement; provided, however, that
the Pledgor shall not exercise or refrain from exercising any such
right if, in the Collateral Agent's judgment, such action would modify
or in any way adversely change the Pledgor's rights under the Pledged
Collateral or any part thereof.
(ii) To the extent permitted (if at all) under the Credit
Agreement, the Pledgor shall be entitled to receive and retain any and all
dividends paid in respect of the Pledged Collateral, provided, however,
that any and all
(A) dividends paid or payable, other than in cash, in respect
of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a total
liquidation or dissolution, and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in
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<PAGE> 5
redemption of, or in exchange for, any Pledged Collateral,
shall be, and shall be forthwith delivered to the Collateral Agent to hold
as, Pledged Collateral and shall, if received by the Pledgor, be received
in trust for the benefit of the Collateral Agent and the Lenders, be
segregated from the other property or funds of the Pledgor, and be
forthwith delivered to the Collateral Agent as Pledged Collateral in the
same form as so received (with any necessary indorsement).
(b) Upon the occurrence of a Default or an Event of Default:
(i) Upon the request of the Collateral Agent, all rights of the
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 7(a)(i) and to
receive the dividends which it would otherwise be authorized to receive
and retain pursuant to Section 7(a)(ii) shall cease, and all such rights
shall thereupon become vested in the Collateral Agent and the Lenders, and
the Collateral Agent shall thereupon have the sole right to exercise such
voting and other consensual rights and to receive and hold as Pledged
Collateral such dividends.
(ii) All dividends which are received by the Pledgor contrary to the
provisions of paragraph (i) of this Section 7(b) shall be received in
trust for the benefit of the Collateral Agent and the Lenders, shall be
segregated from other funds of the Pledgor and shall be forthwith paid
over to the Collateral Agent as Pledged Collateral in the same form as so
received (with any necessary indorsement).
SECTION 8. Transfers and Other Liens; Additional Shares.
(a) The Pledgor agrees that it will neither (i) sell or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral,
nor (ii) create or permit to exist any Lien, security interest, or other charge
or encumbrance upon or with respect to any of the Pledged Collateral, except for
the security interest under this Pledge Agreement.
(b) The Pledgor agrees that it will (i) cause Borrower not to
issue any stock or other securities in addition to or in substitution for the
Pledged Shares, except to Pledgor so that after giving effect to such issuance
the Pledgor still owns one hundred percent (100%) of the outstanding stock of
Borrower, and (ii) pledge hereunder, immediately upon its acquisition (directly
or
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<PAGE> 6
indirectly) thereof, any and all additional shares of stock or other securities
of Borrower.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. The Pledgor
hereby appoints the Collateral Agent, the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Pledge Agreement, including, without limitation, to receive, endorse and
collect all instruments made payable to the Pledgor representing any dividend or
other distribution in respect of the Pledged Collateral or any part thereof and
to give full discharge for the same.
SECTION 10. Collateral Agent May Perform. If the Pledgor fails to
perform any agreement contained herein, the Collateral Agent or any Lender may
itself perform or cause performance of, such agreement, and the expenses of the
Collateral Agent or such Lender incurred in connection therewith shall be
payable by the Pledgor under Section 13.
SECTION 11. The Collateral Agent's and Each Lender's Duties and
Reasonable Care. The powers conferred on the Collateral Agent and each of the
Lenders hereunder are solely to protect their interests in the Pledged
Collateral and shall not impose any duty upon them to exercise any such powers.
The Collateral Agent and the Lenders shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in
their possession if the Pledged Collateral is accorded treatment substantially
equal to that which the Collateral Agent or such Lender accords its own
property, it being understood that neither the Collateral Agent nor any Lender
shall have any responsibility for (a) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Pledged Collateral, whether or not the Collateral Agent or such Lender
has or is deemed to have knowledge of such matters, or (b) taking any necessary
steps to preserve rights against any parties with respect to any Pledged
Collateral.
SECTION 12. Remedies. If any Event of Default shall have occurred:
(a) The Collateral Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code (the "Code") in effect in the State of
New York at that time, and the Collateral Agent may also, without notice, except
as specified below, sell
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<PAGE> 7
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Collateral
Agent's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Collateral Agent may deem commercially reasonable.
The Pledgor agrees that, to the extent notice of sale shall be required by Law,
at least five (5) days' notice to the Pledgor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having been
given. The Collateral Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Any cash held by the Collateral Agent as Pledged Collateral and
all cash proceeds received by the Collateral Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral may, in the discretion of the Collateral Agent, be held by the
Collateral Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Collateral Agent and the
Lenders pursuant to Section 13) in whole or in part by the Collateral Agent
against, all or any part of the Borrower's Obligations in such order as the
Collateral Agent shall elect. Any surplus of such cash or cash proceeds held by
the Collateral Agent and remaining after payment in full of all Borrower's
Obligations shall be paid over to the Pledgor or to whosoever may be lawfully
entitled to receive such surplus.
SECTION 13. Indemnity and Expenses. (a) The Pledgor hereby
indemnifies the Collateral Agent and each of the Lenders from and against any
and all claims, losses, damages and liabilities growing out of or resulting from
this Pledge Agreement (including, without limitation, enforcement of this Pledge
Agreement), except claims, losses, damages or liabilities resulting from the
Collateral Agent's or such Lender's gross negligence and willful misconduct.
(b) The Pledgor will upon demand pay to the Collateral Agent and each
of the Lenders the amount of any and all expenses, including the fees and
expenses of its counsel and of any experts and agents, which the Collateral
Agent or any of the Lenders may incur in connection with (i) any amendment to
this Pledge Agreement; (ii) the administration of this Pledge Agreement; (iii)
the custody or preservation of, or the sale of, collection from, or
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<PAGE> 8
other realization upon, any of the Pledged Collateral; (iv) the exercise or
enforcement of any of the rights of the Collateral Agent or any of the Lenders
hereunder or (v) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 14. Amendments,_Etc. No amendment or waiver of any provision
of this Pledge Agreement, nor consent to any departure by the Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent and the Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 15. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and, if to the
Pledgor, mailed or delivered by messenger or sent by facsimile, addressed to it
at the address of the Pledgor specified on the signature page of this Pledge
Agreement; if to a Lender, mailed or delivered by messenger or sent by facsimile
to it, addressed to it at the address of such Lender specified in the Credit
Agreement; or if to the Collateral Agent, mailed or delivered by messenger or
sent by facsimile to it, addressed to it at the address of such Lender specified
in the Credit Agreement. All such notices and other communications shall, when
mailed or delivered by messenger or sent by facsimile, respectively, be
effective when deposited in the mails or delivered to the messenger or sent by
facsimile, respectively, addressed as aforesaid.
SECTION 16. Continuing Security Interest: Transfer of Loans and
Commitments. This Pledge Agreement shall create a continuing security interest
in the Pledged Collateral and shall (i) remain in full force and effect until
payment in full (after the later of the Capital Expenditure Loan Commitment
Termination Date or the Working Capital Loan Commitment Termination Date) of the
Borrower's Obligations, (ii) be binding upon the Pledgor, its successors and
assigns, and (iii) inure to the benefit of the Collateral Agent, the Lenders and
their successors, transferee and assigns. Without limiting the generality of the
foregoing clause (iii), the Collateral Agent and each Lender may assign or
otherwise transfer all or a portion of its rights or obligations under the
Credit Agreement and the Loans and Commitments to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to the Collateral Agent or such Lender herein or otherwise. Upon
the payment in full (after the later of the Capital Expenditure Loan Commitment
Termination Date or the Working Capital Loan Commitment Termination Date) of the
Borrower's Obligations, the Pledgor
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<PAGE> 9
shall be entitled to the return, upon its request and at its expense, of such of
the Pledged Collateral as shall not have been sold or otherwise applied pursuant
to the terms hereof.
SECTION 17. Governing Law; Terms. This Pledge Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
Unless otherwise defined herein or in the Credit Agreement, terms defined in
Article 9 of the Uniform Commercial Code in the State of New York are used
herein as therein defined.
SECTION 18. Miscellaneous. This Pledge Agreement is in addition to and
not in limitation of any other rights and remedies the Collateral Agent or any
of the Lenders may have by virtue of any other instrument or agreement
heretofore, contemporaneously herewith or hereafter executed by the Pledgor or
any other Person or by law or otherwise. If any provision of this Pledge
Agreement is contrary to applicable law, such provision shall be deemed
ineffective without invalidating the remaining provisions hereof. Neither the
Collateral Agent nor the Lenders shall, by any act, delay, omission or
otherwise, be deemed to have waived any of their rights or remedies hereunder.
[Intentionally Left Blank]
9
<PAGE> 10
IN WITNESS WHEREOF, the Pledgor has caused this Pledge Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
JLM INDUSTRIES, INC.
By /s/John T. White
--------------------------------
Name: John T. White
Title: President
Address for Notices:
8675 Hidden River Parkway
Tampa, F1orida 33637
Attn: General Counsel
10
<PAGE> 11
SCHEDULE I
Attached to and forming a part of that certain Pledge Agreement dated as of
June 14, 1995, by the Pledgor to the Collateral Agent and the Lenders.
<TABLE>
<CAPTION>
% Total Par
of Value Number
Class of Certificate Stock of of
Stock Issuer Stock No(s). Issuer Shares Shares
- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
JLM Chemicals, Common l 100% None 3,000
Inc.
</TABLE>
<PAGE> 1
EXHIBIT 10.12
================================================================================
Date: June 8, 1995
MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS AND SECURITY AGREEMENT
("this Mortgage")
FROM
JLM CHEMICALS, INC.,
a Delaware corporation
("Mortgagor")
Address: 8675 Hidden River Parkway
Tampa, Florida 33637
TO
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
a New York corporation,
as Collateral Agent
Address: 1211 Avenue of the Americas
New York, New York 10036
("Mortgagee")
Mortgage Amount: $24,000,000
================================================================================
This instrument prepared by, and after recording please return to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Rodger Tighe, Esq.
<PAGE> 2
RECITAL
Mortgagor is the owner of a fee interest in a portion of the premises
described in Schedule A hereto and a leasehold interest in the remainder
thereof. Mortgagor will borrow up to the Mortgage Amount from the Lenders as
defined in and pursuant to a Credit Agreement among Mortgagor and THE CIT
GROUP/EQUIPMENT FINANCING, INC. ("CIT-EF"), THE CIT GROUP/BUSINESS CREDIT, INC.
("CIT-BC"), each other lender which may thereafter execute and deliver an
Assignment and Assumption Agreement with respect to the Loans and Commitments
pursuant to Section 11.01 of the Credit Agreement (CIT-EF, CIT-BC, each
assignee under an Assignment and Assumption Agreement, each a "Lender" and
collectively, the "Lenders") and THE CIT GROUP/EQUIPMENT FINANCING, INC. as
agent for the Term Lenders and Capital Expenditure Lenders (in such capacity,
together with its successors in such capacity, "Term Agent") and THE CIT
GROUP/BUSINESS CREDIT, INC., as agent for the Working Capital Lenders (in such
capacity, together with its successors in such captivity, "Working Capital
Agent"), and the Mortgagee as collateral agent for the Lenders (in such
capacity, together with its successors in such capacity, "Collateral Agent")
dated as of the date hereof (as the same may be amended from time to time, the
"Credit Agreement") and has executed and delivered to the Term Lenders its
Term Loan Notes in the amount of $17,000,000 (as the same may be amended from
time to time, the "Term Loan Notes"), its Capital Expenditure Loan Notes in the
amount of $2,000,000 (as the same may be amended from time to time, the
"Capital Expenditure Loan Notes") and to its Working Capital Lenders its
Working Capital Loan Notes in the amount of $5,000,000 (as the same may be
amended from time to time, the "Working Capital Loan Notes"; and together with
the Term Loan Note and the Capital Expenditure Loan Notes, herein collectively
referred to as the "Notes") all dated the date hereof, each of which obligates
Mortgator to pay such specified portion of the Mortgage Amount, or so much
thereof as may be advanced in accordance with the terms of the Credit
Agreement. Amounts advanced under the Working Capital Loan Note may be repaid
and reborrowed by Mortgagor from time to time, all in accordance with the terms
of the Credit Agreement. Amounts repaid under the Term Loan Note and the
Capital Expenditure Loan Note may not be reborrowed. The Notes bear interest,
payable periodically, and mature at various times but in no event later than
July 1, 2002, unless accelerated or extended as more particularly provided in
the Credit Agreement and the principal amounts of the Notes are subject to
prepayment, as provided in the Credit Agreement.
CERTAIN DEFINITIONS
Mortgagor and Mortgagee agree that, unless the context otherwise
specifies or requires, the following terms shall have the meanings herein
specified, such definitions to be applicable equally to the singular and the
plural forms of such terms.
"Borrower's Obligations" shall have the meaning assigned to such term
in the Credit Agreement, and shall include, without limitation, all
indebtedness, obligations and liabilities of Mortgagor to Mortgagee now
existing or hereafter incurred under or arising out of or in connection with
the Credit Agreement and the Notes.
"Chattels" means all fixtures, furnishings, fittings, appliances,
apparatus, equipment, building materials and components, machinery and articles
of personal property, of whatever kind or nature, including any replacements,
proceeds or products thereof and additions thereto, other than those owned by
lessees, now or at any time hereafter intended to be or actually affixed to,
attached to, placed upon, or used in any way in connection with the complete
and comfortable use, enjoyment, development, occupancy or operation of the
Premises, and whether located on or off the Premises.
<PAGE> 3
"Events of Default" means the events and circumstances described as such in
Section 2.01 hereof.
"Ground Lease" means the lease identified in Schedule A covering that
portion of the Premises described in Schedule A which is subject to such Ground
Lease.
"Improvements" means all structures or buildings, and replacements
thereof, now or hereafter located upon the Premises, including all plant
equipment, apparatus, machinery and fixtures of every kind and nature
whatsoever forming part of said structures or buildings.
"lease or leases" means any lease or leases of all or any portion of the
Premises, whether affecting the fee or leasehold portion thereof.
"Premises" means the premises described in Schedule A hereto, including the
leasehold interest in a portion thereof created by the Ground Lease, and
including, with respect to the portion thereof owned in fee and the portion
composed of the leasehold interest, all of the present and future easements,
rights, privileges and appurtenances (including air rights) thereunto belonging
or in anywise appertaining (including, without limitation, the easements,
rights, privileges and appurtenances granted under the agreements referred to
in Parcel 3 of Schedule A), and all of the estate, right, title, interest,
claim or demand whatsoever of Mortgagor therein and in the streets and ways
adjacent thereto, either in law or in equity, in possession or expectancy, now
or hereafter acquired, and as used in this Mortgage, shall, unless the context
otherwise requires, be deemed to include the Improvements.
"Involuntary Rate" means the rate (or, if more than one, the highest of
the rates) of interest per annum provided in the Notes plus 2%, but in no event
to exceed the maximum rate allowed by law.
All terms of this Mortgage which are not defined above shall have the
meaning set forth elsewhere in this Mortgage.
GRANTING CLAUSE
NOW, THEREFORE, Mortgagor, in consideration of the premises and in order
to secure the payment of both the principal of, and the interest and any other
sums payable on, Borrower's Obligations or this Mortgage and the performance
and observance of all the provisions hereof and of Borrower's Obligations,
hereby gives, grants, bargains, sells, warrants, aliens, remises, releases,
conveys, assigns, transfers, mortgages, hypothecates, deposits, pledges, sets
over and confirms unto Mortgagee, all its estate, right, title and interest in,
to and under any and all of the following described property (the "Mortgaged
Property") whether now owned or held or hereafter acquired:
(i) the Premises;
(ii) the Improvements;
(iii) the Chattels;
(iv) all rents, royalties, issues, profits, revenue, income and other
benefits of the Mortgaged Property (the "Rents") and all leases of the
Mortgaged Property or portions thereof now or hereafter entered into and
all right, title and interest of Mortgagor thereunder, including, without
limitation, cash or securities deposited thereunder to secure performance
by the lessees of their obligations thereunder, whether such cash or
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<PAGE> 4
securities are to be held until the expiration of the terms of such leases
or applied to one or more of the installments of rent coming due
immediately prior to the expiration of such terms, including any
guaranties of such leases, all subject, however, to the provisions of
Section 3.01 hereof; and
(v) all proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards, and all rights of Mortgagor to
refunds of real estate taxes and assessments.
TO HAVE AND TO HOLD unto Mortgagee, its successors and assigns forever.
ARTICLE I
PARTICULAR COVENANTS OF MORTGAGOR
Mortgagor covenants and agrees as follows:
SECTION 1.01. Mortgagor warrants that, with respect to the fee interest in
the Premises, it has a good and marketable title to an indefeasible fee estate
subject to no lien, charge or encumbrance, that the Ground Lease is subject to
no lien, charge or encumbrance of any kind and is prior to all liens, charges
and encumbrances whatsoever on the fee interest of the landlord thereunder,
except in either case such as are listed as exceptions to title in the title
policy insuring the lien of this Mortgage; and, further, with respect to the
leasehold interest in the Premises, that it is the owner of a valid and
subsisting interest as tenant under the Ground Lease, to the best of its
knowledge that the Ground Lease is in full force and effect, there are no
defaults thereunder and no event has occurred or is occurring which after
notice or passage of time or both will result in such a default; that it owns
the Chattels, all leases and the Rents in respect of the Mortgaged Property and
all other personal property encumbered hereby free and clear of liens and
claims; and that this Mortgage is and will remain a valid and enforceable lien
on the Mortgaged Property subject only to the exceptions referred to above.
Mortgagor has full power and lawful authority to mortgage the Mortgaged
Property in the manner and form herein done or intended hereafter to be done.
Mortgagor will preserve such fee title, will preserve such leasehold estate
created by the Ground Lease (as such leasehold estate may be modified pursuant
to the terms of the Ground Lease), and will forever warrant and defend the same
to Mortgagee and will forever warrant and defend the validity and priority of
the lien hereof against the claims of all persons and parties whomsoever.
Mortgagor will perform or cause to be performed all of the covenants and
conditions required to be performed by it under the Ground Lease, will do all
things necessary to preserve unimpaired its rights thereunder, and will not
enter into any agreement modifying or amending the Ground Lease or releasing
the landlord thereunder from any obligations imposed upon it thereby. If
Mortgagor receives a notice of default under the Ground Lease, it shall
immediately notify the Mortgagee thereof and cause a confirmation of such
notice to be sent by registered United States mail to Mortgagee.
SECTION 1.02. (a) Mortgagor will, at its sole cost and expense, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers and
assurances as Mortgagee shall. from time to time require, for the better
assuring, conveying, assigning, transferring and confirming unto Mortgagee the
property and rights hereby conveyed or assigned or intended now or hereafter so
to be, or which Mortgagor may be or may hereafter become bound to convey or
assign to Mortgagee, or for carrying out the intention or facilitating the
performance of the terms of this Mortgage, or for filing, registering or
recording this Mortgage and, on demand, will execute and deliver, and hereby
authorizes
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<PAGE> 5
Mortgagee to execute and file in Mortgagor's name, to the extent it may lawfully
do so, one or more financing statements, chattel mortgages or comparable
security instruments, to evidence or perfect more effectively Mortgagee's
security interest in and the lien hereof upon the Chattels and other personal
property encumbered hereby.
(b) Mortgagor will, at its sole cost and expense, do, execute,
acknowledge and deliver all and every such acts, information reports, returns
and withholding of monies as shall be necessary or appropriate to comply fully,
or to cause full compliance, with all applicable information reporting and
back-up withholding requirements of the Internal Revenue Code of 1986, as
amended (including all regulations promulgated thereunder) in respect of the
Premises and all transactions related to the Premises, and will at all times
provide Mortgagee with satisfactory evidence of such compliance and notify
Mortgagee of the information reported in connection with such compliance.
SECTION 1.03. (a) Mortgagor forthwith upon the execution and delivery of
this Mortgage, and thereafter from time to time, will cause this Mortgage and
any security instrument creating a lien or evidencing the lien hereof upon the
Chattels and each instrument of further assurance to be filed, registered or
recorded in such manner and in such places as may be required by any present or
future law in order to publish notice of and fully to protect the lien hereof
upon, and the interest of Mortgagee in, the Mortgaged Property.
(b) Mortgagor will pay all filing, registration or recording fees,
and all expenses incident to the execution and acknowledgment of this Mortgage,
any mortgage supplemental hereto, any security instrument with respect to the
Chattels, and any instrument of further assurance, and any expenses (including
attorneys' fees and disbursements) incurred by Mortgagee in connection with the
loan secured hereby, and will pay all federal, state, county and municipal
stamp taxes and other taxes, duties, imposts, assessments and charges arising
out of or in connection with the execution and delivery of Borrower's
Obligations, this Mortgage, any mortgage supplemental hereto, any security
instrument with respect to the Chattels or any instrument of further assurance.
SECTION 1.04. Mortgagor will punctually pay and perform all of the
Borrower's Obligations.
SECTION 1.05. Mortgagor, if other than a natural person, will, so long as
it is owner of all or part of the Mortgaged Property, do all things necessary
to preserve and keep in full force and effect its existence, franchises, rights
and privileges as a business or stock corporation, partnership, trust or other
entity under the laws of the state of its formation and under the laws of the
state where the Mortgaged Property is situated and will comply with all
regulations, rules, statutes, orders and decrees of any governmental authority
or court applicable to it or to the Mortgaged Property or any part thereof.
SECTION 1.06. All right, title and interest of Mortgagor in and to all
extensions, improvements, betterments, renewals, substitutes and replacements
of, and all additions and appurtenances to, the Mortgaged Property, hereafter
acquired by, or released to, Mortgagor or constructed, assembled or placed by
Mortgagor on the Premises, and all conversions of the security constituted
thereby, immediately upon such acquisition, release, construction, assembling,
placement or conversion, as the case may be, and in each such case, without any
further mortgage, conveyance, assignment or other act by Mortgagor, shall
become subject to the lien of this Mortgage as fully and completely, and with
the same effect, as though now owned by Mortgagor and specifically described in
the granting clause hereof, but at any and all times Mortgagor will execute and
deliver to Mortgagee any and all such further assurances, mortgages,
conveyances or
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<PAGE> 6
assignments thereof as Mortgagee may reasonably require for the purpose of
expressly and specifically subjecting the same to lien of this Mortgage.
SECTION 1.07. (a) Mortgagor, from time to time when the same shall become
due and payable, will pay and discharge all taxes of every kind and nature
(including real and personal property taxes and income, franchise, withholding,
profits and gross receipts taxes), all general and special assessments, levies,
permits, inspection and license fees, all water and sewer rents and charges,
and all other public charges whether of a like or different nature, imposed
upon or assessed against it or the Mortgaged Property or any part thereof or
upon the revenues, rents, issues, income and profits of the Mortgaged Property
or arising in respect of the occupancy, use or possession thereof. Mortgagor
will, upon Mortgagee's request, deliver to Mortgagee receipts evidencing the
payment of all such taxes, assessments, levies, fees, rents and other public
charges imposed upon or assessed against it or the Mortgaged Property or the
revenues, rents, issues, income or profits thereof.
After the occurrence of an Event of Default hereunder, Mortgagee may, at
its option, to be exercised by thirty (30) days' written notice to Mortgagor,
require the deposit by Mortgagor, at the time of each payment of an instalment
of interest or principal under Borrower's Obligations, of an additional amount
sufficient to discharge the obligations under this clause (a) when they become
due. The determination of the amount so payable and of the fractional part
thereof to be deposited with Mortgagee, so that the aggregate of such deposits
shall be sufficient for this purpose, shall be made by Mortgagee in its sole
discretion. Such amounts shall be held by Mortgagee without interest and
applied to the payment of the obligations in respect of which such amounts were
deposited or, at Mortgagee's option, to the payment of said obligations in such
order or priority as Mortgagee shall determine, on or before the respective
dates on which the same or any of them would become delinquent. If one month
prior to the due date of any of the aforementioned obligations the amounts then
on deposit therefor shall be insufficient for the payment of such obligation in
full, Mortgagor within ten (10) days after demand shall deposit the amount of
the deficiency with Mortgagee. Nothing herein contained shall be deemed to
affect any right or remedy of Mortgagee under any provisions of this Mortgage
or of any statute or rule of law to pay any such amount and to add the amount so
paid, together with interest at the Involuntary Rate, to the indebtedness
hereby secured.
(b) Mortgagor will pay, from time to time when the same shall become
due, all lawful claims and demands of mechanics, materialmen, laborers, and
others which, if unpaid, might result in, or permit the creation of, a lien on
the Mortgaged Property or any part thereof, or on the revenues, rents, issues,
income and profits arising therefrom and in general will do or cause to be done
everything necessary so that the lien hereof shall be fully preserved, at the
cost of Mortgagor and without expense to Mortgagee.
(c) Nothing in this Section 1.07 shall require the payment or
discharge of any obligation imposed upon Mortgagor by this Section so long as
Mortgagor shall in good faith and at its own expense contest the same or the
validity thereof by appropriate legal proceedings which shall operate to
prevent the collection thereof or other realization thereon and the sale or
forfeiture of the Mortgaged Property or any part thereof to satisfy the same;
provided that during such contest Mortgagor shall, at the option of Mortgagee,
provide security satisfactory to Mortgagee, assuring the discharge of
Mortgagor's obligation hereunder and of any additional charge, penalty or
expense arising from or incurred as a result of such contest; and provided
further, that if at any time payment of any obligation imposed upon Mortgagor
by clause (a) above shall become necessary to prevent the delivery of a tax
deed conveying the Mortgaged Property or any portion thereof because of non-
payment, then Mortgagor shall pay the same in sufficient time to prevent the
delivery of such tax deed.
5
<PAGE> 7
SECTION 1.08. Mortgagor will pay any taxes, except income taxes, imposed
on Mortgagee by reason of its ownership of Borrower's Obligations or this
Mortgage.
SECTION 1.09. (a) Mortgagor will keep the Improvements and Chattels
insured against loss by fire, casualty and such other hazards as may be
specified by Mortgagee for the benefit of Mortgagee. Such insurance shall be
written in forms, amounts, and by companies satisfactory to Mortgagee, and
losses thereunder shall be payable to Mortgagee pursuant to a standard first
mortgage endorsement substantially equivalent to the New York standard mortgage
endorsement. The policy or policies of such insurance shall be delivered to
Mortgagee. Mortgagor shall give Mortgagee prompt notice of any loss covered by
such insurance and Mortgagee shall have the right to join Mortgagor in
adjusting any loss in excess of $50,000. Subject to the Ground Lease and the
other Agreements described in Parcel 3 of Schedule A, any moneys received as
payment for any loss under any such insurance shall be paid over to Mortgagee
to be applied, at Mortgagee's option, either to the prepayment of the Notes or
to the reimbursement of Mortgagor from time to time for expenses incurred by it
in the restoration of the Improvements.
(b) Mortgagor shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 1.09 unless Mortgagee is included thereon as a named insured
with loss payable to Mortgagee under a standard mortgage endorsement of the
character above described. Mortgagor shall immediately notify Mortgagee
whenever any such separate insurance is taken out and shall promptly deliver to
Mortgagee the policy or policies of such insurance.
(c) If the Premises are located in an area which has been identified by
the Secretary of the United States Department of Housing and Urban Development
as a flood hazard area, Mortgagor will keep the Improvements covered, until all
sums secured hereby have been repaid in full, by flood insurance in an amount
at least equal to the full amount of the Note or the maximum limit of coverage
available for the Premises under the National Flood Insurance Act of 1968,
whichever is less.
SECTION 1.10. If Mortgagor shall fail to perform any of the covenants
contained in Section 1.01, 1.03, 1.07, 1.08, 1.09 or 1.12, Mortgagee may make
advances to perform the same on its behalf, and all sums so advanced shall be a
lien upon the Mortgaged Property and shall be secured hereby. Mortgagor will
repay on demand all sums so advanced on its behalf together with interest
thereon at the Involuntary Rate. The provisions of this Section 1.10 shall not
prevent any default in the observance of any covenant contained in said Section
1.01, 1.03, 1.07, 1.08, 1.09 or 1.12 from constituting an Event of Default.
SECTION 1.11. (a) Mortgagor will keep adequate records and books of
account in accordance with generally accepted accounting principles and will
permit Mortgagee, by its agents, accountants and attorneys, to visit and
inspect the Mortgaged Property and examine its records and books of account and
to discuss its affairs, finances and accounts with the officers or general
partners, as the case may be, of Mortgagor, at such reasonable times as may be
requested by Mortgagee.
(b) Mortgagor, within three (3) days upon request in person or within
five (5) days upon request by mail, will furnish a written statement, duly
acknowledged, of the amount due whether for principal or interest on this
Mortgage and whether any offsets, counterclaims or defenses exist against the
indebtedness secured hereby.
SECTION 1.12. Mortgagor will not commit any waste on the Premises or make
any change in the use of the Premises which will in any way increase any
ordinary fire or other hazard arising out of construction or operation.
Mortgagor will, at all times, maintain the Improvements
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and Chattels in good operating order and condition and will promptly make, from
time to time, all repairs, renewals, replacements, additions and improvements
in connection therewith which are needful or desirable to such end. The
Improvements shall not be demolished or substantially altered, nor shall any
Chattels be removed without the prior written consent of Mortgagee except where
appropriate replacements free of superior title, liens and claims are
immediately made of value at least equal to the value of the removed Chattels.
SECTION 1.13. Mortgagor, immediately upon obtaining knowledge of the
institution or pending institution of any proceedings for the condemnation of
the Premises or any portion thereof, will notify Mortgagee thereof. Mortgagee
may participate in any such proceedings and may be represented therein by
counsel of its selection. Mortgagor from time to time will deliver to
Mortgagee all instruments requested by it to permit or facilitate such
participation. In the event of such condemnation proceedings, subject to the
Ground Lease and the other Agreements described in Parcel 3 of Schedule A, the
award or compensation payable is hereby assigned to and shall be paid to
Mortgagee. Mortgagee shall be under no obligation to question the amount of
any such award or compensation and may accept the same in the amount in which
the same shall be paid. The proceeds of any award or compensation so received
shall, at Mortgagee's option, be applied either to the prepayment of the Notes
at the rate of interest provided therein regardless of the rate of interest
payable on the award by the condemning authority, or shall be paid over to
Mortgagor from time to time for restoration of the Improvements.
SECTION 1.14. Mortgagor will not execute any lease of any or all of the
Premises, or any assignment of the rents or any part thereof from the Premises,
and Mortgagor may sell, transfer or otherwise dispose of any of the Mortgaged
Property only if, and to the extent, permitted pursuant to Section 6.09 of the
Credit Agreement.
SECTION 1.15. Mortgagor will indemnify and hold Mortgagee harmless
against any loss or liability, cost or expense, including, without limitation,
any judgments, attorney's fees, costs of appeal bonds and printing costs,
arising out of or relating to any proceeding instituted by any claimant
alleging a violation by Mortgagor of any applicable lien law.
ARTICIE II
EVENTS OF DEFAULT AND REMEDIES
SECTION 2.01. if one or more of the following Events of Default shall
happen, that is to say:
(a) if (i) default shall be made in the payment of any principal,
interest or other sums under Borrower's Obligations, in any such case, when and
as the same shall become due and payable, whether at maturity or by
acceleration or as part of any payment or prepayment or otherwise, in each
case, as provided in the Credit Agreement, the Notes and this Mortgage or (ii)
default shall be made in the payment of any tax required by Section 1.07 to be
paid; or
(b) if it shall be illegal for Mortgagor to pay any tax referred to
in Section 1.08 hereof or if the payment of such tax by Mortgagor would result
in the violation of applicable usury laws and Borrower's Obligations are not
repaid in full within sixty (60) days after notice from Mortgagee to Mortgagor
of either such occurrence; or
(C) if there should occur a default which is not cured within the
applicable grace period, if any, under any other mortgage or deed of trust of
all or part of
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Mortgagor's interest in the Mortgaged Property regardless of whether any
such other mortgage or deed of trust is prior or subordinate to this
Mortgage; it being further agreed by Mortgagor that an Event of Default
hereunder shall constitute an Event of Default under any such other
mortgage or deed of trust held by Mortgagee; or
(d) if Mortgagor shall transfer, or agree to transfer, in any manner,
either voluntarily or involuntarily, by operation of law or otherwise, all or
any portion of the Mortgaged Property, or any interest therein (including any
air or development rights);
(e) if, without Mortgagee's consent which may be granted or withheld
in Mortgagee's sole discretion, Mortgagor shall encumber, or agree to encumber,
in any manner, either voluntarily or involuntarily, by operation of law or
otherwise, all or any portion of the Mortgaged Property, or any interest
therein (including any air or development rights);
(f) if an Event of Default shall occur under the Credit Agreement;
then and in every such case:
I. During the continuance of any such Event of Default, Mortgagee,
in accordance with the Credit Agreement, by notice given to Mortgagor, may
declare all of Borrower's Obligations to be due and payable immediately, and
upon any such declaration all of Borrower's Obligations shall become and be
immediately due and payable.
II. During the continuance of any such Event of Default, Mortgagee
personally, or by its agents or attorneys, may, to the extent permitted by
applicable law, enter into and upon all or any part of the Premises, and each
and every part thereof, and is hereby given a right and license and appointed
Mortgagors attorney-in-fact and exclusive agent to do so, and may exclude
Mortgagor, its agents and servants wholly therefrom; and having and holding the
same, may use, operate, manage and control the Premises and conduct the
business thereof, either personally or by its superintendents, managers, agents,
servants, attorneys or receivers; and upon every such entry, Mortgagee, at the
expense of the Mortgaged Property, from time to time, either by purchase,
repairs or construction, may maintain and restore the Mortgaged Property,
whereof it shall become possessed as aforesaid; and likewise, from time to
time, at the expense of the Mortgaged Property, Mortgagee may make all
necessary or proper repairs, renewals and replacements and such useful
alterations, additions, betterments and improvements thereto and thereon as to
it may seem advisable; and in every such case Mortgagee shall have the right to
manage and operate the Mortgaged Property and to carry on the business thereof
and exercise all rights and powers of Mortgagor with respect thereto either in
the name of Mortgagor or otherwise as it shall deem best; and Mortgagee shall
be entitled to collect and receive the Rents and every part thereof, all of
which shall for all purposes constitute property of Mortgagor; and in
furtherance of such right Mortgagee may collect the rents payable under all
leases of the Premises directly from the lessees thereunder upon notice to each
such lessee that an Event of Default exists hereunder accompanied by a demand
on such lessee for the payment to Mortgagee of all rents due and to become due
under its lease, and Mortgagor FOR THE BENEFIT OF MORTGAGEE AND EACH SUCH
LESSEE hereby covenants and agrees that the lessee shall be under no duty to
question the accuracy of Mortgagee's statement of default and shall
unequivocally be authorized to pay said rents to Mortgagee without regard to
the truth of Mortgaee's statement of default and notwithstanding notices from
Mortgagor disputing the existence of an Event of Default such that the payment
of rent by the lessee to Mortgagee pursuant to such a demand shall constitute
performance in full of the lessee's obligation under the lease for
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the payment of rents by the lessee to Mortgagor; and after deducting the
expenses of conducting the business thereof and of all maintenance,
repairs, renewals, replacements, alterations, additions, betterments and
improvements and amounts necessary to pay for taxes, assessments,
insurance and prior or other proper charges upon the Mortgaged Property or
any part thereof, as well as just and reasonable compensation for the
services of Mortgagee and reasonable fees and expenses of attorneys,
counsel, agents, clerks, servants and other employees by it engaged and
employed, Mortgagee shall apply the moneys arising as aforesaid, first, to
the payment of Borrower's Obligations in accordance with the Credit
Agreement and second, to the payment of any other sums required to
be paid by Mortgagor under this Mortgage.
III. Mortgagee, with or without entry, personally or by its agents or
attorneys, insofar as applicable, may:
(1) sell the Mortgaged Property to the extent permitted
and pursuant to the procedures provided by law, and all estate, right, title
and interest, claim and demand therein, and right of redemption thereof, at
one or more sales as an entity or in parcels or parts, and at such time and
place upon such terms and after such notice thereof as may be required or
permitted by law; or
(2) institute proceedings for the complete or partial
foreclosure of this Mortgage; or
(3) take such steps to protect and enforce its rights
whether by action, suit or proceeding in equity or at law for the specific
performance of any covenant, condition or agreement in the Notes, Borrower's
Obligations, the Credit Agreement or this Mortgage, or in aid of the execution
of any power herein granted, or for any foreclosure hereunder, or for the
enforcement of any other appropriate legal or equitable remedy or otherwise as
Mortgagee shall elect.
SECTION 2.02. (a) Mortgagee may adjourn from time to time any sale by it
to be made under or by virtue of this Mortgage by announcement at the time and
place appointed for such sale or for such adjourned sale or sales; and, except
as otherwise provided by any applicable provision of law, Mortgagee, without
further notice or publication, may make such sale at the time and place to
which the same shall be so adjourned.
(b) Upon the completion of any sale or sales made by Mortgagee under
or by virtue of this Article II, Mortgagee, or an officer of any court
empowered to do so, shall execute and deliver to the accepted purchaser or
purchasers a good and sufficient instrument or instruments conveying, assigning
and transferring all estate, right, title and interest in and to the property
and rights sold. Mortgagee is hereby appointed the true and lawful attorney
irrevocable of Mortgagor, in its name and stead, to make all necessary
conveyances, assignments, transfers and deliveries of the Mortgaged Property
and rights so sold and for that purpose Mortgagee may execute all necessary
instruments of conveyance, assignment and transfer, and may substitute one or
more persons with like power, Mortgagor hereby ratifying and confirming all
that its said attorney or such substitute or substitutes shall lawfully do by
virtue hereof other than acts constituting gross negligence or willfull
misconduct. Nevertheless, Mortgagor, if requested by Mortgaee, shall ratify and
confirm any such sale or sales by executing and delivering to Mortgagee or to
such purchaser or purchasers all such instruments as may be advisable, in the
judgment of Mortgagee, for the purpose, and as may be designated in such
request. Any such sale or sales made under or by virtue of this Article II,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, shall
operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in
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equity, of Mortgagor in and to the properties and rights so sold, and shall be
a perpetual bar both at law and in equity against Mortgagor and against any and
all persons claiming or who may claim the same, or any part thereof from,
through or under Mortgagor.
(c) In the event of any sale or sales made under or by virtue of this
Article II (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale), all of Borrower's Obligations, if not previously due and payable, and
all other sums required to be paid by Mortgagor pursuant to this Mortgage,
immediately thereupon shall, anything in the Notes or in this Mortgage to the
contrary notwithstanding, become due and payable.
(d) The purchase money, proceeds or avails of any sale or
sales made under or by virtue of this Article I, together with any other
sums which then may be held by Mortgagee under this Mortgage, whether
under the provisions of this Article II or otherwise, shall be applied
as follows:
First: To the payment of the costs and expenses of such
sale, including reasonable compensation to Mortgagee, its agents and
counsel, and of any judicial proceedings wherein the same may be made, and
of all expenses, liabilities and advances made or incurred by Mortgagee
under this Mortgage, together with interest at the Default Rate on all
advances made by Mortgagee from the date of such advance to the date of
repayment, and of all taxes, assessments or other charges, except any
taxes, assessments or other charges subject to which the Mortgaged
Property shall have been sold.
Second: To the payment of Borrower's Obligations in the manner
provided in the Credit Agreement.
Third: To the payment of the surplus, if any, to whomsoever may
be lawfully entitled to receive the same.
(e) Upon any sale or sales made under or by virtue of this Article
II, whether made under the power of sale herein granted or under or by virtue
of judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof
and in lieu of paying cash therefor may make settlement for the purchase price
by crediting upon the indebtedness secured by this Mortgage the net sales price
after deducting therefrom the expenses of the sale and the costs of the action
and any other sums which Mortgagee is authorized to deduct under this Mortgage.
SECTION 2.03. (a) In case an Event of Default hereof shall have happened
and be continuing, then, upon written demand of Mortgagee, Mortgagor will pay
to Mortgagee the whole amount which then shall have become due and payable in
respect of the Borrower's Obligations, and in addition thereto such further
amount as shall be sufficient to cover the costs and expenses of collection,
including reasonable compensation to Mortgagee, its agents and counsel and any
expenses incurred by Mortgagee hereunder. In the event Mortgagor shall fail
forthwith to pay such amounts upon such demand, Mortgagee shall be entitled and
empowered to institute such action or proceedings at law or in equity as may be
advised by its counsel for the collection of the sums so due and unpaid, and
may prosecute any such action or proceedings to judgment or final decree, and
may enforce any such judgment or final decree against Mortgagor and collect,
out of the property of Mortgagor wherever situated, as well as out of the
Mortgaged Property, in any manner provided by law, moneys adjudged or decreed
to be payable.
(b) Mortgagee shall be entitled to recover judgment as aforesaid
either before, after or during the pendency of any proceedings for the
enforcement of the provisions of this Mortgage;
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and the right of Mortgagee to recover such judgment shall not be affected by
any entry or sale hereunder, or by the exercise of any other right, power or
remedy for the enforcement of the provisions of this Mortgage, or the
foreclosure of the lien hereof; and in the event of a sale of the Mortgaged
Property, and of the application of the proceeds of sale, as in this Mortgage
provided, to the payment of the debt hereby secured, Mortgagee shall be
entitled to enforce payment of, and to receive all amounts then remaining due
and unpaid upon, the Notes, and to enforce payment of all other charges,
payments and costs due under this Mortgage or under the Credit Agreement, and
shall be entitled to recover judgment for any portion of the debt remaining
unpaid, with interest at the Default Rate. In case of proceedings against
Mortgagor in insolvency or bankruptcy or any proceedings for its reorganization
or involving the liquidation of its assets, then Mortgagee shall be entitled to
prove the whole amount of Borrower's Obligations to the full amount thereof and
all other payments, charges and costs due under this Mortgage or under the
Credit Agreement, without deducting therefrom any proceeds obtained from the
sale of the whole or any part of the Mortgaged Property, provided, however,
that in no case shall Mortgagee receive a greater amount than such principal
and interest, including, without limitation, Contingent Interest, and such
other payments, charges and costs from the aggregate amount of the proceeds of
the sale of the Mortgaged Property and the distribution from the estate of
Mortgagor.
(c) No recovery of any judgment by Mortgagee and no levy of
an execution under any judgment upon the Mortgaged Property or upon any
other property of Mortgagor shall affect in any manner or to any extent, the
lien of this Mortgage upon the Mortgaged Property or any part thereof, or any
liens, rights, powers or remedies of Mortgagee hereunder, but such liens,
rights, powers and remedies of Mortgagee shall continue unimpaired as before.
(d) Any moneys thus collected by Mortgagee under this Section 2.03
shall be applied by Mortgagee in accordance with the provisions of clause (d)
of Section 2.02 hereof.
SECTION 2.04. After the happening of any Event of Default and immediately
upon the commencement of any action, suit or other legal proceedings by
Mortgagee to obtain judgment for Borrower's Obligations, other sums required to
be paid by Mortgagor pursuant to any provision of this Mortgage or the Credit
Agreement, or of any other nature in aid of the enforcement of the Notes or of
this Mortgage or of the Credit Agreement, Mortgagor will (a) enter its
voluntary appearance in such action, suit or proceeding and (b) if required by
Mortgagee, consent to the appointment of a receiver or receivers of all or part
of the Mortgaged Property and of any or all of the Rents in respect thereof.
After the happening of any Event of Default and during its continuance, or upon
the commencement of any proceedings to foreclose this Mortgage or to enforce
the specific performance hereof or in aid thereof or upon the commencement of
any other judicial proceeding to enforce any right of Mortgagee, Mortgagee
shall be entitled, as a matter of right, if it shall so elect, without the
giving of notice to any other party and without regard to the adequacy or
inadequacy of any security for the indebtedness secured hereby, forthwith
either before or after declaring the unpaid principal of the Notes to be due
and payable, to the appointment of such a receiver or receivers. Such
appointment may be made either before or after any foreclosure sale without
regard to the solvency or insolvency of Mortgagor at the time of the
application for such receiver and without regard to the then sale of the
Premises or whether the same shall be then occupied as a homestead or not and
Mortgagee hereunder may be appointed as such receiver. Such receiver shall
have power: (a) to collect the rents, issues and profits of the Premises and, in
case of a foreclosure sale and a deficiency, during the full statutory period
of redemption, whether there be redemption or not, as well as during any
further times when Mortgagor, except for the intervention of such receiver,
would be entitled to collect such rents, issues and profits, (b) to extend or
modify any then existing leases and to make new leases, which extensions,
modifications and new leases may provide for terms to expire, or for options to
lessees to extend or renew terms to expire, beyond the maturity date of the
indebtedness secured hereby and beyond the date of the issuance of a deed or
deeds to a purchaser or purchasers at foreclosure
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sale, it being understood and agreed that any such leases, and the options or
other such provisions to be contained therein, shall be binding upon Mortgagor
and all persons whose interests in the Premises are subject to the lien hereof
and upon the purchaser or purchasers at any foreclosure sale, notwithstanding
any redemption from sale, discharge of the indebtedness secured hereby,
satisfaction of any foreclosure decree, or issuance of any certificate of sale
or deed to any purchaser, and (c) all other powers which may be necessary or
are usual in such cases for the protection, possession, control, management and
operation of the Premises during the whole of the sale period. The court from
time to time may authorize the receiver to apply the net income in his or her
hands in payment in whole or in part of: (i) the indebtedness secured hereby,
or by any decree foreclosing this Mortgage, or any tax, special assessment or
other lien which may be or become superior to the lien hereof or of such decree,
provided such application is made prior to foreclosure sale, and (ii) the
deficiency in case of a foreclosure sale and deficiency.
SECTION 2.05. Notwithstanding the appointment of any receiver, liquidator
or trustee of Mortgagor, or of any of its property, or of the Mortgaged
Property or any part thereof, Mortgagee shall be entitled to retain possession
and control of all property now or hereafter held under this Mortgage.
SECTION 2.06. No remedy herein conferred upon or reserved to Mortgagee is
intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative, and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute.
No delay or omission of Mortgagee to exercise any right or power accruing upon
any Event of Default shall impair any such right or power, or shall be
construed to be a waiver of any such Event of Default or any acquiescence
therein; and every power and remedy given by this Mortgage to Mortgagee may be
exercised from time to time as often as may be deemed expedient by Mortgagee.
Nothing in this Mortgage, in the Credit Agreement or in the Notes shall affect
the obligation of Mortgagor to pay Borrower's Obligations to Mortgagee in the
manner and at the time and place provided in the Credit Agreement and the
Notes.
SECTION 2.07. Mortgagor will not at any time insist upon, or plead, or in
any manner whatever claim or take any benefit or advantage of any stay or
extension or moratorium law, any exemption from execution or sale of the
Mortgaged Property or any part thereof, wherever enacted, now or at any time
hereafter in force, which may affect the covenants and terms of performance of
this Mortgage, nor claim, take or insist upon any benefit or advantage of any
law now or hereafter in force providing for the valuation or appraisal of the
Mortgaged Property, or any part thereof, prior to any sale or sales thereof
which may be made pursuant to any provision herein, or pursuant to the decree,
judgment or order of any court of competent jurisdiction; nor, after any such
sale or sales, claim or exercise any right under any statute heretofore or
hereafter enacted to redeem the property so sold or any part thereof and
Mortgagor hereby expressly waives, to the extent it lawfully may, all benefit
or advantage of any such law or laws, and covenants not to hinder, delay or
impede the execution of any power herein granted or delegated to Mortgagee, but
to suffer and permit the execution of every power as though no such law or laws
had been made or enacted. Mortgagor, for itself and all who may claim under
it, waives, to the extent that it lawfully may, all right to have the Mortgaged
Property marshaled upon any foreclosure hereof. Mortgagor hereby waives any
and all rights of redemption from sale under any order or decree of
foreclosure of this Mortgage, for Mortgagor's own sake and on behalf of each
and every person acquiring any interest in or title to the Premises subsequent
to the date of this Mortgage. The foregoing waiver of the right of redemption
is made pursuant to the provisions of Chapter 110, Section 15-161 of the
Illinois Code of Civil Procedure.
SECTION 2.08. In any suit to foreclosure the lien hereof (including, to
the extent permitted by law, any partial foreclosure) or to enforce other
remedy of Mortgagee under this
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Mortgage, the Credit Agreement or the Notes, there shall be allowed and
included as additional indebtedness in the decree for sale or other judgment or
decree all expenditures and expenses which may be paid or incurred by or on
behalf of Mortgagee for reasonable attorneys' fees, appraiser's fees, outlays
for documentary and expert evidence, stenographer's charges, publication costs,
and costs (which may be estimated as to items expended after entry of the
decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates, and similar data
and assurances with respect to title and value as Mortgagee may deem necessary
either to prosecute such suit or to evidence to bidders at any sale which may
be had pursuant to such decree the true condition of the title to or the value
of the Premises.
SECTION 2.09. During the continuance of any Event of Default and pending
the exercise by Mortgagee of its right to exclude Mortgagor from all or any
part of the Premises, Mortgagor agrees to pay the fair and reasonable rental
value for the use and occupancy of the Premises or any portion thereof which
are in its possession and which it is actually using for such period and, upon
default of any such payment, will vacate and surrender possession of the
Premises to Mortgagee or to a receiver, if any, and in default thereof may be
evicted by any summary action or proceeding for the recovery of possession of
premises for non-payment of rent, however designated.
SECTION 2.10. No action for the enforcement of the lien or any provision
hereof shall be subject to any defense which would not be good and available to
the party interposing the same in an action at law upon Borrower's Obligations.
SECTION 2.11. Upon the occurrence of an Event of Default, Mortgagee may
apply, to the extent permitted by law, any amount collected hereunder to
principal, interest or any other sum due under Borrower's Obligations in such
order and amounts as Mortgagee shall elect in its sole and absolute discretion.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. This Mortgage is intended to constitute a present, absolute
and irrevocable assignment of all of the Rents now or hereafter accruing, and
Mortgagor, without limiting the generality of the Granting Clause hereof,
specifically hereby presently, absolutely and irrevocably assigns all of the
Rents now or hereafter accruing to Mortgagee. The aforesaid assignment shall
be effective immediately upon the execution of this Mortgage and is not
conditioned upon the occurrence of any Event of Default hereunder or any other
contingency or event, provided, however, that Mortgagee hereby grants to
Mortgagor the right and license to collect and receive the Rents as they become
due, and not more than one rental period in advance, so long as no Event of
Default exists hereunder. Immediately upon the occurrence, and during the
continuance of any such Event of Default, the foregoing right and license shall
be automatically terminated and of no further force or effect. Nothing
contained in this Section 3.01 or elsewhere in this Mortgage shall be construed
to make Mortgagee a mortgagee in possession unless and until Mortgagee actually
takes possession of the Mortgaged Property, nor to obligate Mortgagee to take
any action or incur any expense or discharge any duty or liability under or in
respect of any leases or other agreements relating to the Mortgaged Property or
any part thereof.
SECTION 3.02. In the event any one or more of the provisions contained in
this Mortgage or in the Notes or Credit Agreement shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any
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other provision of this Mortgage, but this Mortgage shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein or therein.
SECTION 3.03. No provision of this Mortgage may be changed, waived,
discharged or terminated orally or by any other means except an instrument in
writing executed in accordance with the Credit Agreement and signed by the
party against whom enforcement of the change, waiver, discharge or termination
is sought. Any agreement hereafter made by Mortgagor and Mortgagee relating to
this Mortgage shall, to the extent permitted by law, be superior to the rights
of the holder of any intervening or subordinate lien or encumbrance.
SECTION 3.04. All notices hereunder shall be given in accordance with the
notice provisions of the Credit Agreement.
SECTION 3.05. All of the grants, covenants, terms, provisions and
conditions herein, so long as any of Borrower's Obligations remain unpaid or
there are any Commitments outstanding, shall run with the land and shall apply
to, bind and inure to the benefit of, the successors and assigns of Mortgagor
and the successors and assigns of Mortgagee.
SECTION 3.06. Anything herein, in the Credit Agreement or in the Notes to
the contrary notwithstanding, the obligations of Mortgagor under the Credit
Agreement, this Mortgage and the Notes shall be subject to the limitation that
payments of interest shall not be required to the extent that receipt of any
such payment by Mortgagee would be contrary to provisions of law applicable to
Mortgagee limiting the maximum rate of interest that may be charged or
collected by Mortgagee.
SECTION 3.07. This Mortgage may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original; and all such counterparts shall together constitute but one and the
same mortgage.
SECTION 3.08. Mortgagor recognizes that Mortgagee may sell and transfer
interests in the Loans to one or more participants and that, subject to the
applicable provisions of the Credit Agreement with respect thereto, all
documentation, financial statements, appraisal and other data, or copies
thereof relevant to Mortgagor, or the Loans, may be exhibited to and retained
by any such participant or prospective participant.
SECTION 3.09. Unless expressly provided otherwise, in the event that
ownership of this Mortgage and title to the fee and/or leasehold estates in the
Premises encumbered hereby shall become vested in the same person or entity,
this Mortgage shall not merge in said title but shall continue to be and remain
a valid and subsisting lien on said estates in the Premises for the amount
secured hereby.
SECTION 3.10. Mortgagor represents and agrees that the obligations
secured by this Mortgage: (a) constitute a business loan which comes within the
purview of subparagraph (1)(c) of Section 4, and a loan secured by a mortgage
on real estate which comes within the purview of subparagraph (1)(1) of Section
4, of "An Act in relation to the rate of interest and other charges in
connection with sales on credit and the lending of money," approved May 24,
1979, as amended (III. Rev. Stat., 1987 ed., Ch. 17, Sec. 6404(l)(c) and Sec.
6404(1) (1)) and (b) are exempted transactions under the Truth-in-Lending Act,
15 U.S.C. Sec. 1601, at seq.
SECTION 3.11. This Mortgage is given to secure not only existing
indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee, or otherwise, as are
made within ten (10) years from the date hereof, to the extent (except as may be
otherwise provided by applicable law) as if such future advances were made on
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the date of the execution of this Mortgage. In addition, all advances and
indebtedness arising and accruing under the Credit Agreement from time to time,
whether or not the resulting indebtedness secured hereby may exceed the
aggregate face amount of the Notes, shall be secured hereby to the same extent
as though said Credit Agreement were fully incorporated in this Mortgage. The
total amount of the indebtedness that may be secured hereby may decrease or
increase from time to time, but the total unpaid balance so secured at any one
time shall not exceed $100,000,000.
SECTION 3.12. This Mortgage may be discharged only by payment in full of
all of Borrower's Obligations secured hereby and cancellation of all
Commitments, and shall continue as a lien on the Mortgaged Property to secure
the payment of Contingent Interest notwithstanding payment of all other of
Borrower's Obligations secured hereby. The terms and provisions of the Credit
Agreement are hereby incorporated by reference in this Mortgage.
SECTION 3.13. MORTGAGOR HEREBY EXPRESSLY AND UNCONDITIONALLY WAIVES, IN
CONNECTION WITH ANY FORECLOSURE OR SIMILAR ACTION OR PROCEDURE BROUGHT BY
MORTGAGEE ASSERTING AN EVENT OF DEFAULT UNDER SECTION 2.01 OF THIS MORTGAGE,
ANY AND EVERY RIGHT IT MAY HAVE TO (I) INJUNCTIVE RELIEF, (II) A TRIAL BY JURY,
(III) INTERPOSE ANY COUNTERCLAIM THEREIN (OTHER THAN COMPULSORY COUNTERCLAIMS)
AND (IV) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE SUIT, ACTION OR
PROCEEDING. NOTHING HEREIN CONTAINED SHALL PREVENT OR PROHIBIT MORTGAGOR FROM
INSTITUTING OR MAINTAINING A SEPARATE ACTION AGAINST MORTGAGEE WITH RESPECT TO
ANY ASSERTED CLAIM.
SECTION 3.14. Upon the payment in full of the Borrower's Obligations (after
the cancellation of all Commitments), the security interest granted hereby
shall terminate and all rights to the Mortgaged Property shall revert to
Mortgagor. Upon any such termination, Mortgagee will, at Mortgagor's expense,
execute and deliver to Mortgagor such documents as the Mortgagor shall
reasonably request to evidence such termination.
SECTION 3.15. This Mortgage constitutes a security agreement under the
applicable Uniform Commercial Code with respect to the Chattels and such other
of the Mortgaged Property which is personal property. In addition to the
rights and remedies granted to Mortgagee by other applicable law or by this
Mortgage, Mortgagee shall have all of the rights and remedies with respect to
the Chattels and such other personal property as are granted to a secured party
under the applicable Uniform Commercial Code. Upon Mortgagee's request,
Mortgagor shall promptly and at its expense assemble the Chattels and such
other personal property and make the same available to Mortgagee at a
convenient place acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on
demand, with interest at the Involuntary Rate, any and all expenses, including
attorneys' fees, incurred by Mortgagee in protecting its interest in the
Chattels and such other personal property and in enforcing its rights with
respect thereto. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Chattels and such other personal property sent to
Mortgagor in accordance with the provisions hereof at least five days prior to
such action shall constitute reasonable notice to Mortgagor. The proceeds of
any such sale or disposition, or any part thereof, may be applied by Mortgagee
to the payment of the indebtedness secured hereby in such order and proportions
as Mortgagee in its sole discretion shall deem appropriate.
SECTION 3.16. Mortgagor shall not claim or demand or be entitled to
receive any credit or credits on the principal indebtedness to be secured by
this Mortgage, or on the interest payable thereon, for any part of the taxes
assessed against the Premises and no deduction shall be made or claimed from
the taxable value of the Premises by reason of this Mortgage.
15
<PAGE> 17
SECTION 3.17. The information set forth on the cover hereof is hereby
incorporated herein
IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor.
JLM CHEMICAL, INC.,
a DELAWARE corporation
By /s/ John T. White[SEAL]
-----------------------
Name: John T. White
Title: President
Attest:
/s/ William M. Flynn
---------------------
Name: William M. Flynn
Title: Assistant Secretary
16
<PAGE> 18
STATE OF NEW YORK )
:
COUNTY OF NEW YORK )
On this 8th day of June, 1995, before me, the undersigned, a Notary
Public in and for the State of New York, personally appeared John T. White and
William M. Flynn to me personally known, who, being by me duly sworn, did say
that they are the President and Assistant Secretary, respectively, of JLM
Chemicals, Inc., a Delaware corporation, that the instrument was signed and
sealed on behalf of the corporation by authority of the corporation's Board of
Directors; and that the foregoing officers acknowledged execution of the
instrument to be the voluntary act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
/s/ Jean Stein
---------------------------------
Notary Public
JEAN STEIN
Notary Public, State of New York
No. 24-3826525
Qualified in Kings County
Commission Expires June 30, 1995
My commission expires:
- ---------------------
<PAGE> 19
SCHEDULE A
Parcel 1
Description of Fee Premises
That part of Lot 1 in Clark Oil and Refinancing Corporation Subdivision in
Section 35, Township 37 North, Range 13 East of the Third Principal Meridian, in
Cook County, Illinois described as follows:
NOTE: The East line of said Lot is assumed as "Due North" for the
following courses.
Beginning at the Southeast corner of said Lot 1; thence North 89 degrees 25
minutes 20 seconds West on the South line of said Lot, 149.0 feet to the place
of beginning; thence continuing North 89 degrees 25 minutes 20 seconds West on
said South line of said Lot, 515.26 feet; thence North 0 degrees 20 minutes 30
seconds East 1110.0 feet; thence South 89 degrees 25 minutes 20 seconds East
parallel with the said South line of said Lot, 657.64 feet to a point in the
said East line of said Lot; thence due South on said line, 685.15 feet to a
point that is 424.90 feet North of the aforesaid Southeast corner of said Lot,
thence North 89 degrees 25 minutes 20 seconds West parallel with the said South
line of said Lot, 48 feet; thence due South parallel with the said East line,
282.15 feet; thence North 89 degrees 25 minutes 20 seconds West parallel with
said South line 101.0 feet; thence due South parallel with said East line,
142.75 feet to the place of beginning, in Cook County, Illinois.
Tax Parcel Identification Number 24-35-200-013, Volume 249.
A-1
<PAGE> 20
Parcel 2
Description of Ground Lease and Premises Covered by Ground Lease
Leasehold Estate, created by the instrument (herein referred to as the "Ground
Lease"), executed by and between Clark Oil and Refinancing Corporation, a
Wisconsin corporation, Lessor, and B.T.L. of Illinois, Inc., an Illinois
corporation, Lessee, dated September 16, 1985, a Memorandum thereof dated
September 16, 1985 recorded October 10, 1985 as Document Number 85230543 in the
Records of Cook County, Illinois, for a term commencing on September 16, 1985
and ending on September 15, 2084, subject to such term commencing, terminating
or expiring on such other date(s) as provided in the Ground Lease; the
Leasehold Estate in the Ground Lease assigned by an Assignment and Assumption
of Clark Lease by and between BTL Specialty Resins Corp., a Delaware
corporation, successor by merger to B.T.L. of Illinois, Inc., an Illinois
corporation, Assignor, and JLM Chemicals, Inc., Assignee, and recorded
immediately prior to this Mortgage, whereby Assignor assigns to Assignee all
of Assignor's right, title and interest in, to and under the Ground Lease and
Assignee assumes and accepts the Ground Lease; the Ground Lease demising and
leasing the following described premises:
PARCEL A:
One propane/propylene storage tank located on the following described property,
together with the right of ingress and egress granted to Lessee for the purpose
of repair, operation, maintenance and replacement of the tank, over the
following described property.
That part of Lot 1, in Clark Oil and Refining Corporation Subdivision in Section
35, Township 37 North, Range 13 East of the Third Principal Meridian, in Cook
County, Illinois described as follows:
NOTE: The East of line of said Lot is assumed as "Due North" for the
following courses.
Beginning at the Southeast corner of said Lot 1; thence North 89 degrees 25
minutes 20 seconds West of the South line of said Lot, 149.0 feet; thence due
North, parallel with said East line of Lot 1, 112.75 feet to the Place of
Beginning; thence North 89 degrees, 25 minutes, 20 seconds East 30 feet;
thence due North 30 feet; thence North 89 degrees, 25 minutes 20 seconds West
30 feet; thence due South 30 feet to the Place of Beginning
The Ground Lease further provides: "The description mentioned above is intended
to include the existing propylene tank on Clark Oils property and sufficient
land around the tank for access, maintenance and use of the tank.
A portion of Tax Parcel Identification Number 24-35-200-014, Volume 249.
A-2
<PAGE> 21
PARCEL B:
Two benzene storage tanks, Tanks 71 and 72, located on the following described
property, plus the land located in the area outlined in red on Exhibit C in the
Ground Lease located within the dikes surrounding the benzene storage tanks,
together with the right of ingress and egress granted to Lessee for the purpose
of repair, operation, maintenance and replacement of the tanks, over the
following described property.
Lot 3 in Clark Oil and Refining Corporation Subdivision in Section 35, Township
37 North, Range 13 East of the Third Principal Meridian, in Cook County,
Illinois except the following:
The South 100 feet of said Lot, the West 400 feet of said Lot, the North 125
feet of said Lot, and the East 500 feet of said Lot.
Said Lease further provides: "The description mentioned above is intended to
include benzene tanks 71 and 72 on Clark Oil's property and sufficient land
adjacent to the tanks, including land to the center of the existing dikes
protecting the tanks".
A portion of Tax Parcel Identification Number 24-35-401-003, Volume 249.
Parcel 3
Description of Easements, Licenses and other rights
The easement and other rights appurtenant to the owner of Parcel 1 contained
within the following Agreements dated September 16, 1985 between B.T.L. of
Illinois, Inc. and Clark Oil & Refining Corporation and, if recorded, recorded
October 10, 1985 in the Records of Cook County, Illinois:
1. Easement Agreement recorded as Document Number 85230534.
2. Easement Agreement recorded as Document Number 85230535.
3. Easement Agreement recorded as Document Number 85230537.
4. Throughput Agreement, a Memorandum of which recorded as Document
Number 85230544.
5. Fuel Agreement.
6. Propane/Propylene Agreement.
7. Easement Agreement regarding parking.
8. Water License.
9. Potable Water license.
10. Right to Purchase or Lease.
11. License Agreement.
A-3
<PAGE> 22
: Dept-01 RECORDING $35.5
: T#0001 TRAN 3913 05/14/96 12:20:00
: #5452 #RC * -96-363078
: COOK COUNTY RECORDER
================================================================================
Date: April 19, 1996
CORRECTIVE MORTGAGE MODIFICATION AGREEMENT
("this Agreement")
By and between
JLM CHEMICALS, INC.,
a Delaware corporation
("Mortgagor")
Address: 8675 Hidden River Parkway
Tampa, Florida 33637
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
a New York corporation, as Collateral Agent
("Mortgagee")
Address: 1211 Avenue of the Americas
New York, New York 10036
Mortgage Amount: $24,000,000
================================================================================
This instrument prepared by, and after recording please return to:
Dewey Ballatine
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Rodger Tighe, Esq.
LAWYERS TITLE INSURANCE CORPORATION
<PAGE> 23
RECITAL
WHEREAS, Mortgagor has heretofore granted to Mortgagee a Mortgage,
Assignment of Leases and Rents and Security Agreement, in the principal amount
of $24,000,000, dated June 8, 1995, recorded with the Recorder of Deeds, Cook
County, Illinois on June 15, 1995 as Document #95388800 (the "Mortgage"); and
WHEREAS, the Recital to the Mortgage contains certain scrivener's errors
and Mortgagor and Mortgagee desire to correct the same;
NOW, THEREFORE, for and in consideration of one dollar in hand paid, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Mortgagee and Mortgagor hereby agree as follows:
1. The Recital of the Mortgage is restated in its entirety to read as
follows:
"Mortgagor is the owner of a fee interest in a portion
of the premises described in Schedule A hereto and a leasehold
interest in the remainder thereof. Mortgagor will borrow up to
the Mortgage Amount from the Lenders as defined in and pursuant to
a Credit Agreement among Mortgagor and THE CIT GROUP/EQUIPMENT
FINANCING, INC. ("CIT-EF"), THE CIT GROUP/BUSINESS CREDIT, INC.
("CIT-BC"), each other Lender which may thereafter execute and
deliver an Assignment and Assumption Agreement with respect to the
Loans and Commitments pursuant to Section 11.01 of the Credit
Agreement CIT-EF, CIT-BC, each assignee under an Assignment and
Assumption Agreement, each a "Lender" and collectively, the
"Lenders") and THE CIT GROUP/EQUIPMENT FINANCING, INC. as agent
for the Term Lenders and Capital Expenditure Lenders (in such
capacity, together with its successors in such capacity, "Term
Agent) and THE CIT GROUP/BUSINESS CREDIT, INC., as agent for the
Working Capital Lenders (in such capacity, together with its
successors in such capacity, "Working Capital Agent"), and the
Mortgagee as collateral agent for the Lenders (in such capacity,
together with its successors in such capacity, "Collateral
Agent") dated as of June 14, 1996 (as the same may be amended
from time to time, the "Credit Agreement" and has executed and
delivered to the Term Lenders its Term Loan Notes in the
amount of $17,000,000 (as the same may be amended from time to
time, the "Term Loan Notes"), its Capital Expenditure Loan Notes
in the amount of $2,000,000 (as the same may be amended from time
to time, the "Capital Expenditure Loan Notes") and to its
Working Capital Lenders its Working Capital Loan Notes in the
amount of $5,000,000 (as the same may be amended from time to
time, the "Working Capital Loan Notes"; and together with the
Term Loan Notes and the Capital Expenditure Loan Notes, herein
collectively referred to as the "Notes") all dated June 14, 1995,
each of which obligates Mortgagor to pay such specified portion
of the Mortgage Amount, or so much thereof as may be advanced in
accordance
<PAGE> 24
with the terms of the Credit Agreement. Amounts advanced under
the Working Capital Loan Note may be repaid and reborrowed by
Mortgagor from time to time, all in accordance with the terms of
the Credit Agreement. Amounts repaid under the Term Loan Note and
the Capital Expenditure Loan Note may not be reborrowed. The Notes
bear interest, payable periodically, and mature at various times
but in no event later than July 1, 2002, unless accelerated or
extended as more particularly provided in the Credit Agreement and
the principal amounts of the Notes are subject to prepayment, as
provided in the Credit Agreement."
2. Except as modified above, the Mortgage remains unmodified and in
full force and effect.
IN WITNESS WHEREOF, this Agreement has been duly executed by
Mortgagor and Mortgagee.
JLM CHEMICALS, INC.
Attest: a Delaware corporation
/s/ William J. Moffatt By /s/ Wilfred J. Kimball
- ------------------------------- -------------------------------
Name: William J. Moffatt Name: Wilfred J. Kimball
Title: Secretary Title: President
THE CIT GROUP/EQUIPMENT
FINANCING, INC., as
Attest: Collateral Agent
/s/ Naitomy Martinez By /s/ John Zakoworcty
- ------------------------------- ------------------------------
Name: Naitomy Martinez Name: John Zakoworcty
Title: Secretary Title: Vice President
2
<PAGE> 25
STATE OF ILLINOIS )
) ss.
COUNTY OF COOK )
On this 19th day of April, 1996, before me, the undersigned, a Notary
Public in and for the State of Illinois, personally appeared Wilfred J. Kimball
and William J. Moffatt to me personally known, who, being by me duly sworn, did
say that they are the President and Secretary, respectively, of JLM Chemicals,
Inc., a Delaware corporation, that the instrument was signed and sealed on
behalf of the corporation by authority of the corporation's Board of Directors;
and that the foregoing officers acknowledged execution of the instrument to be
the voluntary act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
/s/ R.J. Sloan
---------------------------------
Notary Public
My commission expires:
6/2/97
- --------------------
<PAGE> 26
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 16th day of May, 1996, before me, the undersigned, a Notary
Public in and for the State of New York, personally appeared John Zakoworski
and Newnan Martinez to me personally known, who, being by me duly sworn, did
say that they are a Vice President and a Secretary, of THE CIT GROUP/EQUIPMENT
FINANCING, INC. a New York corporation, that the instrument was signed and
sealed on behalf of the corporation by authority of the corporation's Board of
Directors; and that the foregoing officers acknowledged execution of the
instrument to be the voluntary act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
/s/ Marian Valesky
---------------------------------
Notary Public
My commission expires:
6/2/97
- --------------------
[SEAL]
<PAGE> 27
SCHEDULE A
Parcel 1
Description of Fee Premises
That part of Lot 1 in Clark Oil and Refining Corporation Subdivision in Section
35, Township 37 North, Range 13 East of the Third Principal Meridian, in Cook
County, Illinois described as follows:
NOTE: The East line of said Lot is assumed as "Due North" for the following
courses.
Beginning at the Southeast corner of said Lot 1; thence North 89 degrees 25
minutes 20 seconds West on the South line of said Lot, 149.0 feet to the place
of beginning; thence continuing North 89 degrees 25 minutes 20 seconds West on
said South line of said Lot, 515.26 feet; thence North 0 degrees 20 minutes 30
seconds East 1110.0 feet; thence South 89 degrees 25 minutes 20 seconds East
parallel with the said South line of said Lot, 657.64 feet to a point in the
said East line of said Lot; thence due South on said line, 685.15 feet to a
point that is 424.90 feet North of the aforesaid Southeast corner of said Lot;
thence North 89 degrees 25 minutes 20 seconds West parallel with the said South
line of said Lot, 48 feet; thence due South parallel with the said East line,
282.15 feet; thence North 89 degrees 25 minutes 20 seconds West parallel with
said South line 101.0 feet; thence due South parallel with said East line,
142.75 feet to the place of beginning, in Cook County, Illinois.
Tax Parcel Identification Number 24-35-200-013, Volume 249.
A-1
<PAGE> 28
Parcel 2
Description of Ground lease and Premises Covered by Ground Lease
Leasehold Estate, created by the instrument (herein referred to as the "Ground
Lease"), executed by and between Clark Oil and Refinancing Corporation, a
Wisconsin corporation, Lessor, and B.T.L. of Illinois, Inc., an Illinois
corporation, Lessee, dated September 16, 1985, a Memorandum thereof dated
September 15, 1985 recorded October 10, 1985 as Document Number 85230543 in the
Records of Cook County, Illinois, for a term commencing on September 16, 1985
and ending on September 15, 2084, subject to such term commencing, terminating
or expiring on such other date(s) as provided in the Ground Lease; the Leasehold
Estate in the Ground Lease assigned by an Assignment and Assumption of Clark
Lease by and between BTL Speciality Resins Corp., a Delaware corporation,
successor by merger to B.T.L. of Illinois, Inc., an Illinois corporation,
Assignor, and JLM Chemicals, Inc., Assignee, and recorded immediately prior to
this Mortgage, whereby Assignor assigns to Assignee all of Assignor's right,
title and interest in, to and under the Ground Lease and Assignee assumes and
accepts the Ground Lease; the Ground Lease demising and leasing the following
described premises:
PARCEL A:
One propane/propylene storage tank located on the following described property,
together with the right of ingress and egress granted to Lessee for the purpose
of repair, operation, maintenance and replacement of the tank, over the
following described property:
That part of Lot 1 in Clark Oil and Refining Corporation Subdivision in Section
35, Township 37 North, Range 13 East of the Third Principal Meridian, in Cook
County, Illinois described as follows:
NOTE: The East of line of said Lot is assumed as "Due North" for the following
courses.
Beginning at the Southeast corner of said Lot 1; thence North 89 degrees 25
minutes 20 seconds West of the South line of said Lot, 149.0 feet; thence due
North, parallel with said East line of Lot 1, 112.75 feet to the Place of
Beginning; thence North 89 degrees, 25 minutes, 20 seconds East 30 feet; thence
due North 30 feet; thence North 89 degrees, 25 minutes 20 seconds West 30 feet;
thence due South 30 feet to the Place of Beginning.
The Ground Lease further provides: "The description mentioned above is intended
to include the existing propylene tank on Clark Oil's property and sufficient
land around the tank for access, maintenance and use of the tank".
A portion of Tax Parcel Identification Number 84-35-200-014. Volume 249.
A-2
<PAGE> 29
Parcel B:
Two benzene storage tanks, Tanks 71 and 72, located on the following described
property, plus the land located in the area outlined in red on Exhibit C in the
Ground Lease located within the dikes surrounding the benzene storage tanks,
together with the right of ingress and egress granted to Lessee for the purpose
of repair, operation, maintenance and replacement of the tanks, over the
following described property:
Lot 3 in Clark Oil and Refining Corporation Subdivision in Section 35, Township
37 North, Range 13 East of the Third Principal Meridian, in Cook County,
Illinois except the following:
The South 100 feet of said Lot, the West 400 feet of said Lot, the North 125
feet of said Lot, and the East 500 feet of said Lot.
Said Lease further provides: "The description mentioned above is intended to
include benzene tanks 71 and 72 on Clark Oil's property and sufficient land
adjacent to the tanks, including land to the center of the existing dikes
protecting the tanks".
A portion of Tax Parcel Identification Number 24-35-401-003, Volume 249.
Parcel 3
Description of Easements, Licenses and other rights
The easement and other rights appurtenant to the owner of Parcel 1 contained
within the following Agreements dated September 16, 1985 between B.T.L. of
Illinois, Inc. and Clark Oil & Refining Corporation and, if recorded, recorded
October 10, 1985 in the Records of Cook County, Illinois:
1. Easement Agreement recorded as Document Number 85230534.
2. Easement Agreement recorded as Document Number 85230535.
3. Easement Agreement recorded as Document Number 85230537.
4. Throughout Agreement, a Memorandum of which recorded as Document
Number 85230544.
5. Fuel Agreement.
6. Propane/Propylene Agreement.
7. Easement Agreement regarding parking.
8. Water License.
9. Potable Water License.
10. Right to Purchase or Lease.
11. License Agreement.
A-3
<PAGE> 1
EXHIBIT 10.13
PARTNERSHIP AGREEMENT
OF
MT. VERNON PHENOL PLANT PARTNERSHIP
An Indiana Partnership
(Specific Purpose)
Effective As Of
November 1, 1987
<PAGE> 2
PARTNERSHIP AGREEMENT
OF
MT. VERNON PHENOL PLANT PARTNERSHIP
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
SECTION I. GENERAL; FORMATION OF PARTNERSHIP 1
1.01. Defined Terms....................................... 1
1.02. Formation........................................... 1
1.03. Statement of Partnership............................ 2
SECTION II. NAME, TERM AND OFFICES 2
2.01. Name................................................ 2
2.02. Term................................................ 2
2.03. Offices............................................. 2
SECTION III. BUSINESS PURPOSE AND LIMITATIONS 3
3.01. Business Purpose.................................... 3
3.02. No Other Business Without Mutual
Consent........................................... 4
SECTION IV. MANAGEMENT OF PARTNERSHIP........................... 4
4.01. General Management.................................. 4
4.02. Operating Agreements..... .......................... 5
4.03. Purchase and Supply Agreements...................... 6
4.04. Ground Lease ....................................... 6
4.05. Partner Representatives............................. 6
4.06. Execution of Documents.............................. 7
4.07. Meetings of Partners ............................... 7
4.08. Action Without Meeting..... ........................ 8
4.09. Other Activities of Partners........................ 8
4.10. Partnership Property................................ 8
4.11. Restriction on Authority of Partners................ 8
4.12. Waiver of Right of Partition
and Dissolution .................................. 9
4.13. Partnership Reserve Account......................... 10
4.14. Partnership Expense..... ........................... 10
4.15. Partner Indemnification............................. 11
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION V. INTERESTS, CONTRIBUTIONS AND ACCOUNTS 13
5.01. Partnership Interests............................... 13
5.02. Initial Contribution of General Electric............ 13
5.03. Initial Contribution of TPP......................... 13
5.04. Initial Contribution of JLM......................... 14
5.05. Additional Contributions............................ 14
5.06. Capital Account..................................... 17
5.07. Negative Capital Account............................ 18
5.08. Interest on Capital................................. 18
5.09. Determination of Capital Accounts and
Transfers of Partners............................. 18
5.10. Return of Capital................................... 19
5.11. Distributions in Kind............................... 19
SECTION VI. ALLOCATION OF PROFITS AND LOSSES 20
6.01. Net Income and Losses From Operations
and Net Gains and Losses From
Capital Transactions.............................. 20
6.02. Section 704(b) Limitation........................... 20
6.03. Qualified Income Offset ............................ 21
6.04. Section 704(c) Compliance........................... 21
SECTION VII. DISTRIBUTIONS 21
7.01. Optional Distributions.............................. 21
7.02. Mandatory Distributions............................. 22
SECTION VIII. OPTIONAL LOANS 23
8.01. Optional Loans...................................... 23
8.02. Subordination....................................... 23
8.03. Personal Liability.................................. 24
SECTION IX. TAX AND ACCOUNTING REPORTS AND STATEMENTS 24
9.01. Tax Returns......................................... 24
9.02. Tax Decisions and Elections......................... 24
9.03. Tax Information..................................... 24
9.04. Fiscal Year......................................... 24
9.05. Books and Records................................... 24
9.06. Access to Books and Records......................... 25
9.07. Reports............................................. 25
9.08. Accounting Decisions................................ 25
9.09. Bank Accounts and Investments....................... 26
9.10. Appointment of Tax Matters Partner.................. 26
9.11. Continuation of Tax Partnership Status.............. 28
9.12. Tax Profits and Losses.............................. 28
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION X. TRANSFER OF PARTNERSHIP INTEREST 28
10.01. Transfers Restricted; No Relief
Of Liability...................................... 28
10.02. Permitted Transfers................................. 28
10.03. Requirements of Permitted Transfers................. 29
10.04. Basis Adjustment.................................... 29
10.05. Allocations Between Transferor and
Transferee........................................ 29
10.06. Continued Liability of General Electric.............. 29
SECTION XI. BUY - SELL 30
11.01. Transfer to Non-Affiliate........................... 30
11.02. Transfer to General Electric........................ 31
11.03. TPP and JLM Options................................. 33
11.04. Nonproduction of Phenol............................. 36
11.05. Indemnifications.................................... 39
SECTION XII. DISSOLUTION AND LIQUIDATION 42
12.01. Events of Dissolution .............................. 42
12.02. Liquidation and Distributions....................... 42
12.03. Continuation of the Business........................ 42
12.04. Effect of New Partners;
Reconstituted Partnership......................... 42
SECTION XIII. NOTICES 43
13.01. Notices............................................. 43
13.02. Effective Date...................................... 44
SECTION XIV. INSURANCE 44
14.01. Insurance........................................... 44
14.02. Named Insureds...................................... 45
SECTION XV. DEFINITIONS 45
SECTION XVI. GENERAL PROVISIONS 49
16.01. Interpretation...................................... 49
16.02. Counterparts........................................ 50
16.03. Additional Acts..................................... 50
16.04. This Agreement...................................... 50
16.05. No Third-Party Beneficiary Rights................... 50
16.06. Third-Party Beneficiaries........................... 50
16.07. Retroactive Amendments.............................. 50
16.08. Exhibits............................................ 51
16.09. Captions............................................ 51
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
16.10. Construction........................................ 51
16.11. Waiver.............................................. 51
16.12. Severability........................................ 51
16.13. Binding Agreement................................... 51
16.14. Language............................................ 51
</TABLE>
EXHIBIT A - Legal Description of the Land
EXHIBIT B - Description of Plant
EXHIBIT C - Partner Representatives
-iv-
<PAGE> 6
PARTNERSHIP AGREEMENT
OF
MT. VERNON PHENOL PLANT PARTNERSHIP
This PARTNERSHIP AGREEMENT (this "Agreement") is made and entered into on
the 18th day of November, 1987, to be effective as of the 1st day of November,
1987, by and between GENERAL ELECTRIC COMPANY, a New York corporation having an
office and mailing address at One Plastics Avenue, Pittsfield, Massachusetts
01201 (hereinafter sometimes referred to as "General Electric"), TEXAS PHENOL
PLANT LIMITED PARTNERSHIP, a Texas limited partnership having an office and
mailing address at 801 Cherry Street, Fort Worth, Texas 76102 (hereinafter
sometimes referred to as "TPP"), and JLM (IND.), INC., a Indiana corporation
having an office and mailing address at 66 Field Point Road, Greenwich, CT 06830
(hereinafter sometimes referred to as "JLM"). General Electric, TPP and JLM are
hereinafter sometimes referred to collectively as the "Partners" and
individually as a "Partner".
WITNESSETH:
The Partners desire and intend to form a general partnership under the laws
of the State of Indiana for a specific business purpose.
Therefore, in consideration of the mutual covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Partners, intending to be
legally bound, hereby agree as follows:
SECTION I
GENERAL
FORMATION OF PARTNERSHIP
1.01. Defined Terms. Reference is herein made to Section XV of this
Agreement for the meaning assigned to certain defined terms used throughout this
Agreement.
1.02. Formation. The Partners hereby enter into and form a general
partnership (hereinafter the "Partnership") pursuant to the provisions of the
Uniform Partnership Act of the State
<PAGE> 7
of Indiana, as amended from time to time, and this Agreement, as amended from
time to time in accordance with this Agreement; provided, however, that the
Partnership shall be solely for the business purposes set forth in Section 3.01
hereof.
1.03. Statement of Partnership. Promptly after the execution and delivery of
this Agreement, the Partners shall execute, acknowledge and/or swear to, as
appropriate, and the Partnership shall file or record with the proper offices in
the State of Indiana and each other jurisdiction and political subdivision in
which the Partnership does business, such certificates or other documents as are
required or permitted by any applicable partnership, assumed or fictitious name
statutes, or similar statutes or laws in effect in such jurisdiction or
political subdivision. The Partners shall further execute, acknowledge and/or
swear to, as appropriate, and the Partnership shall promptly file or record as
aforesaid, such amended certificates or additional certificates or other from
time to time be required by such statutes or laws to permit the continued
existence and operation of the Partnership.
SECTION II
NAME, TERM AND OFFICES
2.01. Name. The name of the Partnership shall be the MT. VERNON PHENOL PLANT
PARTNERSHIP; provided, however, the Partners may from time to time change the
name of the Partnership or adopt such trade or fictitious names as agreed to by
the Partners. The Partners shall cause the name of the Partnership and such
other trade, fictitious or other name or names as deemed appropriate by the
Partners to be registered or filed where required in the applicable local or
state records. In the event any trade, fictitious or other name is required to
comply with any such laws, the Partners shall promptly agree on such name and
shall promptly cause such name to be filed or recorded as provided above.
2.02. Term. The term of the Partnership shall commence on the date of
signing and delivering this Agreement and shall continue for a period of
approximately fifty-five (55) years and end on December 31, 2042, unless
extended or earlier terminated, as provided in Section XII hereof.
2.03. Offices. The principal office and place of business of the Partnership
shall be at Lexan Lane, Mt. Vernon, Indiana 47620, or at such other place as
may from time to time be
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<PAGE> 8
approved by the Partners. As agreed to by the Partners, the Partnership may from
time to time change its principal office and place of business or may change or
establish such additional offices or places of business of the Partnership as
necessary or appropriate for the operation of the Partnership's business. The
Partnership shall promptly make any and all necessary filings with governmental
authorities and agencies in connection with the establishment, relocation or
discontinuance of any place of business of the Partnership.
SECTION III
BUSINESS PURPOSE AND LIMITATIONS
3.01. Business Purpose. The purpose of the Partnership shall be as follows:
(a) to lease certain land located in Mt. Vernon, Indiana, as more
particularly described in Exhibit "A" attached hereto and by this reference made
a part hereof, together with certain related easements, rights of way, and other
rights and privileges (hereinafter sometimes referred to as the "Land"), all as
more fully set forth in the Ground Lease; and to purchase a certain phenol
manufacturing plant which is located upon the Land and currently in operation,
as more particularly described in Exhibit "B" attached hereto and by this
reference made a part hereof (hereinafter sometimes referred to as the "Plant"),
as more fully set forth in the Plant Purchase Agreement (the Land and the Plant
being hereinafter sometimes referred to collectively as the "Phenol Facility");
(b) to construct, invest in, expand, manage, operate, maintain,
improve, repair, alter, redevelop and in any manner deal with the Phenol
Facility;
(c) to manufacture products at the Phenol Facility and sell such
products;
(d) to purchase, lease, or otherwise acquire software, licenses,
patents, technology, intellectual property, machinery, equipment, facilities,
and other intangibles, personal property, and real property of every type
necessary or desirable to operate or expand the Phenol Facility;
(e) to borrow money or incur indebtedness from time to time as approved
by the Partners;
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<PAGE> 9
(f) to mortgage, pledge, encumber, and grant security interests in the
Phenol Facility or any part thereof or interest therein or in any other assets
of the Partnership as approved by the Partners from time to time to secure
borrowings and other indebtedness of the Partnership; and
(g) to enter into all contracts and do all things necessary or
desirable in connection with the foregoing or otherwise as contemplated in this
Agreement and to pursue such other purposes as may be specifically agreed to by
the Partners from time to time.
3.02. No Other Business Without Mutual Consent. It is the intent of the
Partners to create hereby a joint venture, and the scope of the Partnership
shall strictly adhere to the purposes set forth in Section 3.01 of this
Agreement. No other business shall be conducted by the Partnership without the
prior agreement of the Partners, and no Partner shall have the power to bind, to
act for, or to assume any obligation or responsibility on behalf of the other
Partners or the Partnership except as specifically provided in this Agreement.
SECTION IV
MANAGEMENT OF PARTNERSHIP
4.01. General Management. Except to the extent delegated by the written
agreement of the Partners or as otherwise herein specifically provided to the
contrary, the control and management of the business and affairs of the
Partnership shall be vested jointly in the Partners owning in the aggregate
between them at least 66% of the Partnership Interests in the Partnership. All
decisions with respect to the control, management, business and affairs of the
Partnership, including without limitation, all decisions required or permitted
to be made by the Partners pursuant to this Agreement, which are approved or
agreed to by Partners owning in the aggregate between them at least 66% of the
Partnership Interests in the Partnership (but not otherwise), shall be binding
upon the Partnership and all the Partners. As used in this Agreement, the phrase
"agreed to by the Partners", "approved by the Partners" or "agreement of the
Partners" shall mean a written agreement, consent or approval signed by Partners
owning in the aggregate between them at least 66% of the Partnership Interests
in the Partnership, provided, however, that in determining any Partnership
action on or approval of any contract that has the Partnership as one
contracting party and
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<PAGE> 10
a Partner or an Affiliate of a Partner as the other contracting party
("Interested Partner"), the Interested Partner and the Partnership Interest held
by the Interested Partner shall not be considered in the determination of the
66% Partnership Interest and any decision with regard to any amendment,
modification, waiver or enforcement of any right of the Partnership pursuant to
such contract, shall be taken by Partners owning in the aggregate at least 66%
of the Partnership Interests in the Partnership owned by the Partners other than
the Interested Partner. In the event of any default by any Partner pursuant to
Section 5.05(b) hereof, and such default is not cured within the applicable
grace and cure period, if any, the Defaulting Partner (as defined in Section
5.05(b) hereof) and the Partnership Interest held by the Defaulting Partner
shall not be considered in the determination of the 66% Partnership Interest and
all decisions with respect to the control, management, business, and affairs of
the Partnership shall be made or taken by Partners owning in the aggregate at
least 66% of the Partnership Interests in the Partnership owned by the
Non-Defaulting Partners (as defined in Section 5.05(b) hereof). Partner
Representatives designated as provided in Section 4.05 hereof may grant such
written approval or consent or execute such agreement on behalf of the Partner
they represent. Thus, except as otherwise expressly provided in this Agreement
or delegated by written agreement of the Partners, all decisions with respect to
the control, management, business and affairs of the Partnership shall be made
by agreement of the Partners owning in the aggregate between them at least 66%
of the Partnership Interests in the Partnership.
4.02. Operatinq Agreements. By their signatures hereto each of the
Partners has approved, and the Partnership shall concurrently herewith (or as
soon as reasonably practical following the execution and delivery of this
Agreement) enter into, that certain Operation and Maintenance Agreement with
General Electric, pursuant to which General Electric will manage, operate and
maintain the Phenol Facility for the Partnership. By their signatures hereto
each of the Partners has approved, and the Partnership shall concurrently
herewith (or as soon as reasonably practical following the execution and
delivery of this Agreement) enter into, that certain Utilities, Waste and Site
Services Agreement with General Electric, pursuant to which General Electric
will provide or arrange for the provisions of all utilities, waste and site
services required for operation of the Phenol Facility.
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<PAGE> 11
4.03. Purchase and Supply Agreements. By their signatures hereto each of
the Partners has approved, and the Partnership shall concurrently herewith (or
as soon as reasonably practical following the execution and delivery of this
Agreement) enter into, the Phenol and Acetone Supply Agreement as seller, with
General Electric as buyer, pursuant to which the Partnership will provide
General Electric with phenol and acetone. By their signatures hereto each of the
Partners has approved, and the Partnership shall concurrently herewith (or as
soon as reasonably practical following the execution and delivery of this
Agreement) enter into, that certain Phenol Plant Cumene Purchase/Sale Agreement
as purchaser, with Champlin Refining Company as seller, pursuant to which
Champlin Refining Company will supply the Partnership with Cumene. By their
signatures hereto each of the Partners has approved, and the Partnership shall
concurrently herewith enter into, that certain License Agreement as licensee,
with General Electric as licensor, pursuant to which General Electric will
furnish technical information and grant patent licenses to the Partnership
related to phenol and acetone manufacturing.
4.04. Ground Lease. By their signature hereto each of the Partners has
approved, and the Partnership shall concurrently herewith (or as soon as
reasonably practical following the execution and delivery of this Agreement)
enter into the Ground Lease as lessee, with General Electric as lessor, pursuant
to which the Partnership shall lease the Land from General Electric.
4.05. Partner Representatives. Each Partner hereby designates the
respective two (2) individuals specified in Exhibit "C" attached hereto as the
Partner Representatives of such Partner. Each such Partner Representative of a
Partner shall be and hereby is singly authorized and empowered as agent for such
Partner to speak, act, direct, consent and sign on behalf of and to bind such
Partner in all matters pertaining to the control and management of the
Partnership and its business and affairs. Each Partner Representative of a
Partner is specifically and expressly authorized to exercise any and all rights,
powers and duties expressly granted in this Agreement or by law to the Partner
such Partner Representative represents, and any action by a Partner
Representative pursuant to this Agreement shall, except as provided in this
Section 4.05, be binding upon the Partner represented by such Partner
Representative. All consents, agreements, directions, approvals, signatures or
other actions by or of a Partner required or permitted under this Agreement or
by law shall be deemed to mean and refer to the consent, agreement, direction,
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<PAGE> 12
approval, signature or other action of any one of such Partner's Partner
Representatives. Each of the persons referred to in this Section 4.05 as a
Partner Representative shall be authorized to act on behalf of the Partner such
Partner Representative represents, unless and until such Partner Representative
shall have been removed, as set forth below. A Partner may remove one or more of
its Partner Representatives at any time by giving prior written notice thereof
to the Partnership and the other Partners; provided, however, that each Partner
shall at all times have at least one (1) Partner Representative appointed for it
as provided in this Section 4.05. A Partner may appoint substitute or additional
Partner Representatives at any time by giving prior written notice thereof to
the Partnership and the other Partners; such notice to provide the names and
addresses of such substitute or additional Partner Representatives and the
effective date of such appointment. No Partner Representative of a Partner
appointed under this Section 4.05 shall be personally liable for any obligations
of such Partner and each such Partner Representative shall be deemed for all
purposes merely to be an agent of the Partner such Partner Representative
represents.
4.06 Execution of Documents. Except to the extent delegated by the
written agreement of the Partners or as otherwise specifically provided herein
to the contrary, all leases, contracts, agreements, deeds, mortgages, notes,
encumbrances and other documents or instruments purporting to bind the
Partnership shall be executed by Partners owning in the aggregate between them
at least 66% of the Percentage Interests in the Partnership, computed in
accordance with Section 4.01 hereof.
4.07. Meetings of Partners. The Partners shall hold regular meetings at
times and places approved by the Partners from time to time. In addition, any
Partner may call a special meeting of the Partners to be held in Mt. Vernon,
Indiana at any reasonable time after the giving of not less than five (5)
business days' written notice to the Partnership and the other Partners of such
meeting and setting forth in reasonable detail in such notice an outline of the
items to be taken up at such meeting. Any Partner may waive notice of or
attendance at any meeting of the Partners, and may attend by telephone or any
other electronic communication device, or may execute a signed written consent
to action taken at such meeting. At such meeting, the Partners shall transact
such business as may properly be brought before the meeting; provided, however,
all such business transacted and all decisions with respect to the control and
management of the business and affairs of the
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<PAGE> 13
Partnership shall be made by agreement of the Partners. A secretary of such
Partnership meetings shall keep regular minutes of the proceedings. When
approved by the Partners, the minutes of such proceedings shall be placed in the
minute book of the Partnership.
4.08. Action Without Meeting. Any action required by statute or by this
Agreement to be taken at a meeting of the Partners, or any action which may be
taken at a meeting of the Partners, may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be agreed to by the
Partners, and such consent shall have the same force and effect as an approval
by the Partners. Any such signed consent, or a signed copy thereof, shall be
placed in the minute book of the Partnership.
4.09. Other Activities of Partners. The Partners may engage in, acquire or
possess other business ventures or property of any nature or description for
their own respective individual accounts or jointly with other parties or in
other capacities, whether or not competitive with the business of the
Partnership, and may enter into joint ventures, partnerships or other business
organizations with other parties organized to pursue businesses similar or
dissimilar to the purposes of the Partnership, and neither the Partnership nor
any Partner shall have any rights to or in such independent ventures or the
income or profits derived therefrom. No Partner shall be obligated to present
any particular investment opportunity to the Partnership or to the other
Partners, even if such opportunity is of a character which, if presented to the
Partnership or the other Partners, could or would be taken by the Partnership or
the other Partners.
4.10. Partnership Property. Unless otherwise approved by the Partners, all
property and assets of the Partnership shall be held in the name of the
Partnership and not in the name or names of any Partner or Partners. All
property acquired by or standing in the name of any Partner, other than the
Phenol Facility, shall be conclusively presumed not to be Partnership property,
unless an instrument in writing, signed by such Partner, shall specify to the
contrary.
4.11. Restriction on Authority of Partners. Unless approved in writing by
all of the Partners, one or more of the Partners shall not have any authority
with respect to the Partnership and this Agreement to:
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<PAGE> 14
(a) possess Partnership property or assign the right of the
Partnership or the Partners in specific Partnership property for other than a
Partnership purpose;
(b) make, execute or deliver any general assignment for the benefit of
creditors, or any bond, guaranty, indemnity bond, surety bond, accommodation
paper or accommodation endorsement;
(c) assign, transfer, pledge, compromise or release any claim of the
Partnership except for full payment, or arbitrate, or consent to the arbitration
of, any of its disputes or controversies;
(d) amend or otherwise change this Agreement so as to modify the
rights or obligations of the Partners as set forth herein;
(e) do any act in contravention of this Agreement;
(f) except as otherwise permitted herein, admit a person as a Partner
or the Partnership;
(g) change or reorganize the Partnership into any other legal form;
or
(h) require any Partner to make any contribution to the capital of the
Partnership not provided for herein.
4.12. Waiver of Right of Partition and Dissolution. Having previously
been advised that it may have a right to bring an action for partition, each of
the Partners does hereby agree to waive and does irrevocable waive for the
duration of this Agreement any right or power any such Partner might have to
cause the Partnership or any of its assets to the partitioned, to cause the
appointment of a receiver for the assets of the Partnership, to compel any sale
of all or any portion of the assets of the Partnership pursuant to any portion
of the assets of the Partnership pursuant to any applicable law or laws or to
file a complaint or institute any proceeding at law or in equity or to
voluntarily do any act (other than any bankruptcy act, or acts permitted by this
Agreement) to cause the termination or dissolution of this Partnership. Each of
the Partners hereby acknowledges and agrees that such Partner has been induced
to enter into this Agreement in reliance upon the mutual waivers set forth in
this Section 4.12 and that without such waivers, no Partner would have entered
into this Agreement. The interest of all the Partners in the Partnership are,
for all purposes, personal property.
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4.13. Partnership Reserve Account. The Partnership, as agreed to by the
Partners, may establish a separate operating and replacement reserve account
(the "Reserve Account") and may deposit therein from time to time amounts deemed
reasonably necessary by the Partners for the purposes set forth below in this
Section 4.13. The Reserve Account may be charged with any expenditure for the
operation of the Phenol Facility or the Partnership and for the maintenance or
repair of any item and any expenditure for the acquisition, repair or
construction of items in the Phenol Facility, whether such items are treated as
current expense deductions or as capital expenditures under generally accepted
accounting practices. Nothing contained in this Section 4.13 shall in any way
limit or restrict the right of the Partnership to use other assets of the
Partnership (other than deposits to the Reserve Account) for the acquisition,
repair or construction of items which are treated as capital expenditures under
generally accepted accounting principles.
4.14. Partnership Expense. Except as herein otherwise provided or as
otherwise provided in the Ground Lease, the Operation and Maintenance Agreement,
the Utilities, Waste and Site Services Agreement or the License Agreement, the
Partnership shall be responsible for paying all direct costs and expenses of
holding, owning, developing, constructing and operating the Phenol Facility,
including, without limitation, costs of construction and materials therefor,
engineering, planning and financing fees, compensation of supervisory personnel,
debt service, compensation of managers, costs of maintenance and repair of
buildings, qrounds and facilities costs of utilities, costs of supplies,
insurance premiums, taxes, advertising expenses, costs for bookkeeping and
accounting directly related to the Phenol Facility or the Partnership, legal
expenses, office supplies, reimbursements of expenses of the Partners and all
other fees, costs and expenses directly attributable to the operation of the
Phenol Facility and the Partnership, and all such expenses shall be expenses of
the Partnership. In the event any such costs and expenses are or have been paid
by a Partner on behalf of the Partnership, then, except as expressly provided
herein to the contrary, such Partner shall be entitled to be reimbursed for such
payment so long as such payment is reasonably necessary for Partnership
business, is reasonable in amount and has been approved by the Partners. The
fees and expenses of any counsel retained by a Partner on behalf of itself or
the Partnership in connection with the formation and organization of the
Partnership and the closing of the transactions contemplated by the Operative
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Documents shall be at the sole cost and expense of and for the account of such
Partner (without any right of reimbursement from the Partnership).
4.15. Partner Indemnification. (a) Notwithstanding any other provision
of this Agreement or any other agreement to the contrary, the Partnership shall
(but not any Partner in its capacity as a Partner of the Partnership) defend the
Indemnified Parties (as defined below) and absolutely and irrevocably indemnify
and hold the Indemnified Parties harmless from and against any and all (i) (A)
claims, liabilities or obligations arising from, asserted against or related to
the Partnership, the Phenol Facility or any of the transactions undertaken in
connection with or contemplated by the Operative Documents or any other
agreement to which the Partnership may be a party (other than claims of the
Partnership against an Indemnified Party pursuant to contracts between the
Partnership and such Indemnified Party or resulting from an actual breach by an
Indemnified Party of an Operative Document), including, without limitation, any
and all claims, liabilities or obligations relating to environment, health,
safety, personal injury, property damage, employment claims, product liability,
merchantability or fitness for any particular purpose of goods, conformity of
goods to contractual requirements or any other alleged or actual breach or
violation of any obligation of or requirement binding on the Partnership; or (B)
claims, liabilities or obligations arising from, related to or based upon
allegations of any of the foregoing (other hen costs and expenses of defending
and investigating such claim or action, which are indemnified, if at all, as
provided below in subparagraph (b) of this Section 4.15); and (ii) claims,
liabilities or obligations (including costs, expenses, fines, assessments,
charges, penalties, damages (whether actual, punitive or consequential) or
judgments of any kind or nature whatsoever assessed in litigation or similar
proceedings) arising from, asserted against or associated with any claim,
liability or obligation described above in clause (i) of this Section 4.15
(clauses (i) and (ii) of this Section 4.15 being referred to herein collectively
as the "Indemnified Liabilities") regardless of how or when they arose or arise
and regardless of by whom or when asserted and whether the facts on which any
Indemnified Liability is based occurred prior to, on or subsequent to the date
hereof and regardless of whether known or unknown, fixed or contingent or
asserted or unassorted, or arising out of strict liability, malfeasance,
misfeasance, or nonfeasance, provided, however, that this Section 4.15 shall not
apply to and shall not indemnify any Indemnified Party with respect to any claim
or liability
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arising out of such Indemnified Party's gross negligence, willful misconduct,
intentional wrong doing or any breach of any agreement by such Indemnified Party
which is based on such Indemnified Party's actions (but not actions of the
Partnership or any Partner which are imputed to such Indemnified Party), or any
federal, state or local income tax liability of such Indemnified Party (other
than the tax liability arising from any indemnification payment made to such
Indemnified Party pursuant to this Section 4.15), provided further that
Indemnified Liabilities shall not include any claim, liability or obligation (i)
of or asserted against a Partner or an Indemnified Party, the basis of which
does not relate to the status of the Partner as a partner in the Partnership or
in the case of an Indemnified Party, the basis of which does not relate to the
status of the Indemnified Party's relationship to a partner in the Partnership
and such partner as a Partner in the Partnership or (ii) of an Indemnified
Party, the sole basis of which is the actual active negligence of such
Indemnified Party as finally determined by a court of competent jurisdiction.
"Indemnified Parties" shall mean the Partners, any shareholder or partner of any
Partner, any Person which directly or indirectly controls, is controlled by or
is under common control with any Partner or any shareholder or partner of any
Partner, any shareholder, partner, officer, employee, agent, successor or assign
of any of the foregoing and any officer of a partner of a Partner, provided,
however, that any Person that is an Indemnified Party on the date of this
Agreement shall always be an Indemnified Party.
(b) Promptly after notice of any action or claim against any
Indemnified Party indemnified pursuant to this Section 4.15, such Indemnified
Party shall notify the Partnership in writing of such action or claim, in which
case The Partnership shall assume the defense thereof pursuant to this Section
4.15, including the appointment of counsel as necessary and the payment of all
expenses in connection with such defense. The failure of any Indemnified Party
to so notify the Partnership shall not relieve the Partnership of any liability
which it may have hereunder, provided the Partnership has otherwise received
notice or actual knowledge of such action or claim. In the event the Partnership
fails to assume, in accordance with the first sentence of this paragraph, the
defense of any action or claim indemnified pursuant to this Section 4.15 within
thirty (30) days of notice by an Indemnified Party or fails to acknowledge in
writing that such claim or action relates to an alleged liability that if proven
would constitute an Indemnified Liability pursuant to this Section 4.15, such
Indemnified Party shall be entitled to
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defend and investigate such claim or action (including by employment of counsel)
and the cost and expenses (including fees and disbursements of counsel) shall be
indemnified by the Partnership pursuant to this Section 4.15 for such period
until after the Partnership acknowledges such claim or action is an Indemnified
Liability and effectively assumes such claim and liability and the defense
thereof, in which event the Partnership shall only be liable for costs and
expenses incurred pursuant to this Section 4.15(b) prior to such acknowledgement
and assumption; provided that within said thirty (30) day period and prior to
the assumption by the Partnership of the defense of a claim, the Indemnified
Party may take reasonable action required to prevent the entry of any
injunction, judgment or determination by a court or other authority which would
constitute an adjudication of such claim or have an adverse impact on the
defense against such claim without adversely affecting the right of said
Indemnifed Party to indemnification for the expense of such actions under this
Agreement.
SECTION V
INTERESTS, CONTRIBUTIONS AND ACCOUNTS
5.01. Partnership Interests. Each Partner shall have an interest in the
Partnership expressed as a percentage of the whole ("Percentage Interest").
Except as otherwise provided herein to the contrary (and in particular, except
as provided in Sections 5.05(b), 10.02 and XI hereof), throughout the term of
this Agreement, the Partners shall have the following respective Percentage
Interests in the Partnership:
<TABLE>
<CAPTION>
PARTNER PERCENTAGE INTEREST
------- -------------------
<S> <C>
General Electric Company 49%
Texas Phenol Plant Limited 49%
Partnership
JLM (IND.), Inc. 2%
</TABLE>
5.02. Initial Contribution of General Electric. As its initial
contribution to the capital of the Partnership, General Electric shall
concurrently with the execution and delivery of this Agreement contribute to the
Partnership in cash the sum of Seven Million Fifty-One Thousand One Hundred and
no/100 Dollars ($7,051,100.00), which amount shall be credited to the capital
account of General Electric as provided in Section 5.06 hereof.
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5.03. Initial Contribution of TPP. As its initial contribution to the
capital of the Partnership, TPP shall concurrently with the execution and
delivery of this Agreement contribute to the Partnership in cash the sum of
Seven Million Fifty One Thousand One Hundred and no/100 Dollars ($7,051,100.00),
which amount shall be credited to the capital account of TPP as provided in
Section 5.06 hereof.
5.04. Initial Contribution of JLM. As its initial contribution to the
capital of the Partnership, JLM shall concurrently with the execution and
delivery of this Agreement contribute to the Partnership in cash the sum of Two
Hundred Eighty Seven Thousand Eight Hundred and no/100 Dollars ($287,800.00),
which amount shall be credited to the capital account of JLM as provided in
Section 5.06 hereof.
5.05. Additional Contributions. (a) It is anticipated that at some
future time or times the Partnership may purchase certain additional phenol
manufacturing related facilities (such as a boiler house and a barge unloading
facility) from General Electric and may expand the existing Phenol Facility. In
the event such purchase and/or expansion is (i) undertaken and completed within
forty-eight (48) months from the date of this Agreement or (ii) approved by the
Partners if (A) undertaken after forty-eight (48) months from the date of this
Agreement or (B) undertaken within forty-eight (48) months from the date of this
Agreement but at a time when it may not be reasonably anticipated that such
expansion may be completed within sixty (60) months from the date of this
Agreement, the Partners agree to make additional cash contributions to the
capital of the Partnership, as is required for such purchases and expansion up
to a maximum aggregate contribution, pursuant to this Section 5.05, by all the
Partners of an amount equal to ten percent (10%) of the aggregate cost (not
however in excess of fair market value) of such purchases and expansion, but in
no event shall the Partners be obligated to make additional contributions
pursuant to this Section 5.05 which total in the aggregate in excess of Twelve
Million and no/100 Dollars ($12,000,000,00); provided however that no additional
contributions in excess of an aggregate of $5,000,000 in total will be required
unless the Phenol Facility's capacity is increased contribute proportion
Partnership and contribution by at least ten (10) percent. Partners shall such
additional capital to the Partnership in to their respective Percentage
Interests in the and in accordance with a schedule of contributions dates as
agreed to by the Partners.
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(b) If any Partner fails to pay when due all or any part of any
additional capital contribution required pursuant to Section 5.05(a) (and such
failure continues for a period of 30 days after receipt of written notice of
such failure), such Partner ("Defaulting Partner") shall be in default as of the
date such contribution was due pursuant to Section 5.05(a) hereof (and such date
of default shall sometimes be referred to herein as the "Date of Default"). Upon
the occurrence of such default, the other Partners ("Non-Defaulting Partners")
(without prejudice to any other rights they or the Partnership may have at law
or in equity, including a suit for damages) may, in the sole and absolute
discretion of such Non-Defaulting Partners owning at least 66% of the Percentage
Interests in the Partnership owned by such Non-Defaulting Partners, proceed in
any one or more of the following manners:
(i) Require such Defaulting Partner to sell its interest in the
Partnership to the Non-Defaulting Partners or their designee or assignee for
a sum equal to fifty percent (50%) of the capital contributions previously
made by such Defaulting Partner pursuant to Section V hereof, and the
purchaser of such Defaulting Partner's interest in the Partnership shall
contribute to the capital of the Partnership the installments in default,
and agree to assume the remaining liabilities of the Defaulting Partner
pursuant to this Agreement and shall be admitted to the Partnership as a
substitute Partner, succeeding to the rights and obligations of such
Defaulting Partner.
(ii) Deem a proportionate portion of the additional contribution of the
Non-Defaulting Partners made pursuant to Section 5.05(a) to be a lean
("Capital Loan") by such Non-Defaulting Partners to the Partnership at a
rate of interest equal to the lesser of 12% or the highest rate permitted by
law. Notwithstanding any provision of Section VII hereof to the contrary,
such Capital Loans shall be repaid as soon as possible from Partnership
funds, and in any event, prior to repayment of any Optional Loans and prior
to any other distributions to the Partners.
(iii) Loan or arrange for a loan ("Contribution Loan") to the Partner-
ship from any party, including any Partner ("Contribution Lender"), in an
amount equal to all or part of the defaulted capital contribution
installment at a rate of interest equal to the lesser of 12% or the highest
rate permitted by law (such loans to be repaid out of such Defaulting
Partner's share of the Partnership distributions and such Defaulting Partner
shall be entitled to receive no
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distributions from the Partnership until such Contribution Loan and accrued
interest have been paid in full). During the period in which Contribution
Loans are outstanding, all distributions to such Defaulting Partner shall
be deemed distributed to such Defaulting Partner for purposes of determining
the capital account balance of such Defaulting Partner and for purposes of
Section VII hereof, but sha11 be paid to the Contribution Lender in
satisfaction of the Contribution Loans. Such payments shall first be applied
to interest and then in reduction of principal of such Contribution Loans.
(c) Each Partner acknowledges and agrees that the other Partners would
not be entering into this Agreement were it not for (i) all the Partners
agreeing to make the capital contributions required by this Section 5.05 and
(ii) the remedy provisions set forth in this Agreement, and in particular
Section 5.05(b) hereof. Each Partner acknowledges and agrees that (i) in the
event that it rails to satisfy its obligations pursuant to this Agreement, the
other Partners will suffer substantial damages and (ii) the purchase price for
their interest in the Partnership and the other remedies set forth above in
Section 5.05(b) are fair, just and equitable in all respects and the
determination of the purchase price in Section 5.05(b)(i) is administratively
superior to any other method for determining such purchase price and each
Partner hereby waives any rights it may have or be said to have to use any other
method or procedure to determine the purchase price of its interest in the
Partnership. If the Non-Defaulting Partners (or their assignee or designee)
elect to purchase the interest or a Defaulting Partner, as set forth above,
price, determined in the manner provided above, shall be paid in full in cash on
the date set by the Non-Defaulting Partners within sixty (60) days following the
date the Non-Defaulting Partners shall have notified the Defaulting Partner of
their election to purchase the interest of the Defaulting Partner in the
Partnership, and the interest of the Defaulting Partner in the Partnership shall
be assigned to the Non-Defaulting Partners or their assignee or designee and the
Defaulting Partner shall cease to have any interest in the Partnership as of the
date of such assignment. No distributions of cash or assets of the Partnership
shall be made by the Partnership to a Defaulting Partner from the Date of
Default to the date of assignment. Each Partner hereby agrees that in the event
its interest in the Partnership is purchased or reduced, as provided above in
Section 5.05(b)(i), it shall execute and deliver such conveyances, agreements,
notes, instruments other documents which may be necessary, in the sole or and
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absolute discretion of the Non-Defaulting Partners, to confirm and render fully
effective the remedies set forth in this Agreement, including, but not limited
to, an assignment of interest in the Partnership and any amendments to this
Agreement.
5.06. Capital Account. An individual Capital account shall be
established and maintained for each Partner. The capital accounts of the
Partners shall be determined and maintained throughout the full term of the
Partnership in accordance with the capital accounting rules of Section
1.704-l(b)(2)(iv) of the Section 704(b) Regulations (relating to maintenance of
capital accounts). Each Partner's capital account shall be credited (increased)
by:
(a) the amount of its cash capital contributions to the Partnership and
the agreed net fair market value of property other than cash contributed to the
Partnership by such Partner (net of liabilities secured by such contributed
property that the Partnership is considered to assume or take subject to for
purposes of Section 752 of the Code);
(b) the amount of gain, net income and items of income and gain
allocated to it pursuant to Section VI hereof;
(c) the amount of any "deemed" gain allocated to such Partner pursuant
to Section 5.11 hereof; and
(d) any other increase required to be made to the capital account of
the Partner by the Section 704(b) Regulations, to the extent not otherwise
provided for herein; and shall be debited (decreased) by:
(e) the amount of net losses Partner pursuant to Section VI hereof;
allocated to such Partner pursuant to Section VI hereof
(f) all amounts paid or distributed to it pursuant to Section VI hereof
(other than any amount paid or distributed on account of Partner Loans), and the
fair market value (as determined for purposes of Section 5.11) of property
distributed to it other than in payment of Partner Loans (in each case, net of
liabilities securing such distributed property that such Partner is considered
to have assumed or taken subject to under Section 752 of the Code);
(g) such Partner's distributive share of expenditures of the
Partnership described in Section 705(a)(2)(B) of the
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Code (relating to expenditures which are neither deductible nor properly
chargeable to capital), and expenditures which are treated as expenditures
described in Section 705(a)(2)(B) of the Code under the Section 704(b)
Regulations for purposes of capital account maintenance;
(h) the amount of the Partner's allocable share of any decrease
(relating to investment tax credits) in the aggregate basis of Partnership
property under Sections 48(q)(1) or 48(q)(3) of the Code, such decrease to be
allocated among the Partners in the same proportion as the adjusted tax basis or
cost of the property giving rise to such decrease is allocated among the
Partners under Treasury regulation Section 1.46-3(f);
(i) the amount of any loss "deemed" allocated to the Partner pursuant
to Section 5.11 hereof; and
(j) any other reductions in the capital account of the Partner required
by the Section 704(b) Regulations, to the extent not otherwise provided for
herein.
5.07. Negative Capital Account. No Partner with a negative balance in its
capital account shall have any obligation to the Partnership or the other
Partners to restore said negative balance
5.08. Interest on Capital. No interest shall be paid on any capital
contribution to the Partnership or capital account of a Partner.
5.09. Determination of Capital Accounts and Transfers of Partners.
Except as otherwise provided in this Agreement, whenever it is necessary to
determine the balance in the capital account of any Partner for purposes of this
Agreement, such balance shall be determined after giving effect to all
allocations of net income, net losses, gains and losses, and deemed gain and
deemed losses of the Partnership for the current year and all distributions or
deemed distributions for such year (other than payments with respect to Partner
Loans) in respect of transactions effected prior to the date as of which such
determination is to be made. A Partner shall not be entitled to withdraw any
part of its capital account or to receive any distribution from the Partnership,
except as specifically provided in this Agreement, and no Partner shall be
entitled to make any additional capital contributions to the Partnership other
than as provided herein. Any Partner, including any additional or substitute
Partner, who shall
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receive an interest in the Partnership or whose interest in the Partnership
shall be increased by means of a transfer to him or it of all or part of the
interest of another Partner, shall have a capital account which reflects such
transfer. Loans by any Partner to the Partnership shall not be considered
contributions to the capital of the Partnership and shall not increase the
capital account of the lending Partner.
5.l0. Return of Capital. No Partner shall be liable for the return of
the capital contributions, or any portion thereof, of any other Partner, it
being expressly understood and agreed that such return shall be made solely from
the assets of the Partnership. No Partner shall be entitled to demand and
receive property other than cash in return for its capital contributions to the
Partnership.
5.11. Distributions in Kind. In the event that the Partnership
distributes to a Partner property other than cash, solely for purposes of
computing the capital accounts of the respective Partners, such distribution
shall be treated as a sale by the Partnership of the property so distributed for
an amount equal to the fair market value of such property (with appropriate
adjustments for any liability which is assumed by the distributes Partner or to
which such distributed property is taken subject by the distributes Partner),
and the resulting "deemed" gain or "deemed" loss, as the case may be, shall be
allocated in accordance with Section VI hereof. To the extent that the aggregate
fair market value of such assets exceeds the aggregate basis thereof, such
excess shall be deemed allocated to the Partners' respective capital accounts in
the same manner as gain is allocated pursuant to Section VI hereof. To the
extent that the aggregate fair market value of such assets is less than the
aggregate basis thereof, such difference shall be deemed allocated to the
Partners' respective capital accounts in the same manner as losses are allocated
pursuant to Section VI hereof. The fair market values used for purposes of this
Section 5.ll in determining the amount of deemed gain or deemed loss shall be
determinative of the values of such assets for purposes of determining the
amounts of distributions to Partners under Section VII hereof. Such fair market
value shall be determined in the following manner, should the Partners fail to
agree on the determination of fair market value within thirty (30) days after
such property is proposed to be distributed. Each Partner shall select an
appraiser who is a member of the Appraisal Institute, or its successors. If any
Partner fails to name an appraiser within thirty (30) days after written notice
by the first Partner to appoint an appraiser that such Partner has selected an
appraiser (such
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notice to contain the name of such appraiser), the Partner or Partners who have
named an appraiser in written notice to the other Partners within such 30-day
period may select the appraiser for the Partner or Partners who have failed to
name an appraiser. The appraisers so selected shall proceed promptly to
determine the fair market value of the property in question, taking into
consideration any outstanding indebtedness, liabilities, liens and obligations
relating to such property. The determination of such fair market value by the
appraisers so selected shall be final and binding upon all parties; and if the
appraisers so selected are unable to agree upon a fair market value within
thirty (30) days after the appointment of the last appraiser, the fair market
value of such property shall be the average of the two appraisals closest in
value to each other, and the determination of the appraisers as to fair market
value shall be conclusive as to such fair market value and shall be final and
binding upon all parties. The Partnership shall pay the fees and expenses of the
appraisers selected pursuant to the provisions of this Section 5.ll.
SECTION Vl
ALLOCATION OF PROFITS AND LOSSES
6.01. Net Income and Losses From Operations and Net Gains and Losses
From Capital Transactions. All net income and net losses of the Partnership from
operations (and each item of income, loss, deduction or tax preference
attributable thereto), all gains and losses of the Partnership in connection
with an Interim Capital Transaction (including each item of gain, loss, credit
or tax preference attributable thereto), for each fiscal year of the Partnership
(or part thereof), and all gains and losses of the Partnership in connection
with a dissolution and winding up of the Partnership, as determined for federal
income tax purposes, shall be allocated as of the last day of each taxable year
to the Partners in the following manner and order of priority:
(a) To each Partner in proportion to their respective Percentage
Interests in the Partnership.
(b) If for any reason, losses (and hence deductions) are allocated
other than in accordance with the Partners' relative Percentage Interests in the
Partnership (pursuant to Section 6.01(a) above), so that one Partner has losses
allocated to it in excess of those that would have been
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allocated to such Partner pursuant to Section 6.01(a), then notwithstanding
Section 6.01(a), income and gain shall thereafter be allocated to the
Partner to whom such excess losses were allocated, until the aggregate net
amount of all aggregate losses and income or gain allocated to each Partner
in relation to the aggregate net amount of all losses and income or gain
allocated to all Partners, stand in the same ratio as their relative
Percentage Interests in the Partnership, at which point, the allocations of
income and gain shall revert to that of Section 6.01(a) above. Thereafter,
should there again be losses allocated other than in accordance with the
Partners' relative Percentage Interests in the Partnership (as provided in
Section 6.01(a) above), then the above procedure shall be repeated so that
income or gain is again allocated to the Partner to whom such excess losses
were allocated, until the aggregate net amount of all aggregate losses and
income or gain allocated to each Partner, in relation to the aggregate net
amount of all aggregate losses and income or gain allocated to all Partners,
stance in the same ratio as their relative Percentage Interests in the
Partnership.
6.02. Section 704(b) Limitation. Notwithstanding any other provision of this
Agreement to the contrary, no allocation of income, gain or loss shall be made
to a Partner if such allocation would not have "economic effect" pursuant to
Treasury regulation Section 1.704-l(b)(2)(ii) or otherwise be in accordance with
its interest in the Partnership within the meaning of Treasury regulation
sections 1.704-l(b)(3) and 1.704-l(b)(4)(iv) and this Agreement shall be deemed
to incorporate the minimum gain chargeback provisions of Treasury regulation
Section 1.704-l(b)(4)(iv)(e). To the extent an allocation cannot be made to a
Partner due to the application of this Section 6.02, such allocations shall be
made to the other Partner or Partners entitled to receive such allocation
hereunder.
6.03. Qualified Income Offset. If a Partner unexpectedly receives an
adjustment, allocation or distribution described in paragraph (4), (5), or (6)
of Section 1.704-l(b)(2)(ii)(d) of the Section 704(b) Regulations, gross income
of the Partnership or gain from a sale of assets shall be allocated to such
Partner or Partners in an amount sufficient to eliminate any deficit balance in
such Partner's capital account caused by such adjustment, allocation or
distribution as quickly as possible to the extent such deficit balance exceeds
the amount such Partner is deemed obligated to restore to the Partnership
pursuant to the Section 704(b) Regulations. It is the intent
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of the parties hereto that any allocation pursuant to this subsection
constitutes a "qualified income offset" under Treasury regulation section
1.704-l(b)(2)(ii)(d).
6.04. Section 704(c) Compliance. In accordance with Section 704(c) of the
Code and the applicable Treasury regulations thereunder, income, gain, loss,
deduction and tax depreciation with respect to any property contributed to the
capital of the Partnership, or with respect to any property which has a book
basis different than its adjusted tax basis, shall, solely for federal income
tax purposes, be allocated among the Partners so as to take into account any
variation between the adjusted tax basis of such property to the Partnership and
the book basis of such property.
SECTION VII
DISTRIBUTIONS
7.01. Optional Distributions. After providing for the satisfaction of all
the debts and obligations of the Partnership and after any required payments on
any loan or other financing, the Partnership may, by agreement of the Partners
(except as otherwise required in this Agreement), make distributions of all or
any portion of the Net Cash Flow of the Partnership or net proceeds from any
Interim Capital Transaction, to the extent available (after establishment of
appropriate and reasonable reserves), to the Partners in the following manner
and order of priority:
(a) first, an amount up to the aggregate balance of the Optional Loan
Accounts of the Partners shall be distributed to the Partners first to make
the Optional Loan Accounts of the Partners stand in the same ratio as their
respective Percentage Interests in the Partnership, and then, in proportion
to their respective shares of such aggregate additional balance, if any, of
the Optional Loan Accounts of the Partners; and
(b) any remaining Net Cash Flow of the Partnership which is approved by
the Partners for distribution shall be distributed to the Partners in
accordance with their respective Percentage Interests in the Partnership.
7.02. Mandatory Distributions. Notwithstanding the foregoing provisions of
Section 7.01 to the contrary, the Partners agree, except as set forth below,
that after providing
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for the satisfaction of all the current portion of debts and obligations of the
Partnership, including without limitation, Optional Loans, and after any
required current payments on any loan or other financing, the Partnership shall
as soon as reasonably practical (but in any event within forty-five (45) days
after the end of the fiscal year) make annual distributions of Net Cash Flow of
the Partnership and net proceeds from any Interim Capital Transaction, to the
extent available (after establishment of appropriate and read reserves in
accordance with generally accepted accounting principles), to the Partners in an
amount up to the aggregate balance of the Preferred Distribution Accounts of the
Partners in proportion to the relative balance in each such Partner's Preferred
Distribution Account. Notwithstanding the foregoing provisions of this Section
7.02 to the contrary, the Partners agree that a distribution to a Partner,
pursuant to this Section 7.02, of net proceeds from an insurance award
("Casualty") shall not exceed an amount equal to the product of (i) the amount
of income or gain of the Partnership properly allocated to such Partner pursuant
to Section VI of this Agreement as a result of such Casualty (without regard to
any other income, gain or loss of the Partnership) times (ii) the sum of the
highest marginal federal and applicable state and local income tax rates
applicable to domestic corporations at the time of such distribution (adjusted
to take into account the deduction of state and local taxes for federal income
tax purposes).
SECTION VIII
OPTIONAL LOANS
8.01. Optional Loans. To the extent required by Partnership business, any
Partner may, but shall not be obligated or required to, advance or lend moneys
to the Partnership ("Optional Loans"), and the amount of any such advance or
loan shall not, unless otherwise agreed to by the Partners, be deemed an
increase in or contribution to the capital account of such Partner or entitle
such Partner to any increased share in distributions or allocations of the
Partnership; rather the amount of any such advance or loan shall be deemed to be
an Optional Loan to and an obligation of the Partnership to such Partner and
shall bear interest at a rate per annum equal to one per cent (1%) over the
prime rate from time to time quoted by The Chase Manhattan Bank, N.A. in New
York, New York, or at such other rate as may be agreed to by the Partners.
Notwithstanding any provision of Section VII hereof to the contrary, but subject
to Section 8.02 hereof, all
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interest on Optional Loans to the Partnership by any Partner shall be payable
quarterly out of the Net Cash Flow of the Partnership and the net proceeds from
any Interim Capital Transaction and principal shall be paid in accordance with
the terms of such Optional Loan; provided, however, that all such advances or
loans, together with accrued and unpaid interest thereon, shall become
immediately due and payable upon termination and dissolution of the Partnership.
Each Partner shall have an account ("Optional Loan Account") which shall be
increased by Optional Loans made by such Partner, plus interest on such Optional
Loans, and decreased by payments on Optional Loans made as provided in Section
VII hereof. Distributions specified in Section VII hereof which decrease the
Optional Loan Account of any Partner shall be treated first as in payment of
accumulated interest on such Optional Loans and next as in payment of principal
of such Optional Loans. Subject to Section 8.02 and this Section 8.01, Optional
Loan repayment terms shall be specified by the lending Partners at the time the
Optional Loan is made.
8.02. Subordination. If at any time the Partnership is indebted to a third
person and if the debt instrument(s) evidencing such indebtedness require that
loans or advances from any Partner to the Partnership be subordinated to such
indebtedness, then the Partners and the Partnership shall take such action with
respect to the subordination of such loans as may be required to comply with the
provisions of such debt instrument(s).
8.03. Personal Liability. No Partner shall be personally liable for the
repayment of any Optional Loan, or any portion thereof, of any other Partner, it
being expressly understood and agreed that such repayment of principal and
interest of such Optional Loans shall be made solely from the assets of the
Partnership.
SECTION IX
TAX AND ACCOUNTING REPORTS AND STATEMENTS
9.01. Tax Returns. General Electric shall prepare and file or cause to be
prepared and filed a federal partnership information return in compliance with
Section 6031 of the Code and all other federal, state and local income tax
returns and statements of the Partnership, if any, which must be filed on behalf
of the Partnership with any taxing authority. Copies of all such tax returns of
the Partnership shall be promptly
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furnished to each Partner. Each return shall be prepared on the basis of an
allocation of income, gains and losses of the Partnership to the Partners in
accordance with Section 6.01 hereof, unless General Electric elects to file on a
different basis after it shall have received an opinion of tax counsel selected
by the Partners to the effect that there is not a reasonable basis under the
relevant provisions of the Code on which such a return could be filed.
9.02. Tax Decisions and Elections. Except as otherwise expressly provided in
this Agreement, all tax decisions and elections for the Partnership shall be
made and approved by the Partners.
9.03. Tax Information. By the first day of March of each fiscal year of the
Partnership, General Electric shall furnish or shall cause to be furnished to
each Partner such tax information as shall be necessary (including a statement
for the previous year of each Partner's share of any net income, net gains, net
losses and other items of the Partnership) for the preparation and filing of
federal income tax returns, state income tax returns and any other applicable
tax returns, reports or filings of the Partners.
9.04. Fiscal Year. The Fiscal year of the Partnership shall be the calendar
year.
9.05. Books and Records. The Partnership shall keep or cause to be kept
current and complete accounts, books and records of all transactions and
dealings of the Partnership. The Partnership's accounts, books and records shall
be maintained on an accrual basis and in accordance with generally accepted
accounting principles applied on a consistent basis from year to year. The books
and records of the Partnership shall at all times be maintained at the principal
office of the Partnership or at such other place or location as shall be agreed
to by the Partners.
9.06. Access to Books and Records. Each Partner shall have the right, at all
reasonable times during usual business hours and at the expense of such Partner,
to audit, examine and make copies of or extracts from the accounts, books and
records of the Partnership. Such right may be exercised through any agent or
employee of such Partner or by an independent accountant or attorney designated
by such Partner.
9.07. Reports. The Partnership shall retain General Electric to prepare and
furnish or cause to be prepared and
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furnished to the Partners monthly, quarterly and annual statements showing the
revenue and expenses of the Partnership for each period, a cash flow report of
the Partnership containing a statement of receipts and disbursements of the
Partnership, the balances in the capital accounts of each Partner, a balance
sheet of the Partnership as of the end of each such period and such other
information as shall be reasonably requested by a Partner in order for such
Partner to be reasonably advised of the financial status and results of
operations of the Partnership. The Partnership shall have an annual audit of its
financial books, records and reports, including its balance sheet and statement
of revenue and expenses, by Deloitte Haskins & Sells or another firm of
certified public accounts of nationally recognized standing approved by the
Partners, and shall furnish to each Partner copies of such balance sheet,
statement of revenue and expenses, and a statement of such Partner's share of
the Partnership's profit or loss and the balance of its capital account as at
year end, together with the opinion of said accountants covering such balance
sheet and statements, within ninety (90) days after the end of each fiscal year.
The Partnership shall also promptly furnish to the Partners copies of all
written reports, documents or notices which are material to the Partnership or
its business or which are requested from time to time by any Partner.
9.08. Accounting Decisions. All accounting decisions for the Partnership,
other than those accounting decisions specifically provided for in this
Agreement, shall be made and approved by the Partners.
9.09. Bank Accounts and Investments. The funds of the Partnership shall be
maintained in such bank or depository account or accounts, or invested in such
interest-bearing investments, as shall from time to time be approved by the
Partners. One or more accounts shall be maintained for and in the name of the
Partnership in such bank or depository as shall from Lime to time be approved by
the Partners. Temporary excess cash of the Partnership may be deposited in a
central interest-bearing account in the name of General Electric or an entity
affiliated with General Electric (the "Depository"), so long as separate entries
are made on the books and records of the Partnership and on the books and
records of the Depository reflecting that deposits in the bank account of such
Depository with respect to amounts received from the Partnership are payable on
demand, have been deposited therein for the account of the Partnership and that
withdrawals from such bank account have been made for the purpose of disbursing
funds to the
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Partnership or for the purpose of paying costs, expenses or liabilities of the
Partnership. Such funds shall be disbursed only for Partnership purposes. All
withdrawals from any such account or accounts shall require the signature of
duly authorized signatories from time to time approved by the Partners.
9.10. Appointment of Tax Matters Partner. General Electric is hereby
designated Tax Matters Partner (hereinafter "TMP") as defined in Section
6231(a)(7) of the Internal Revenue Code (as amended) (the "Code"). The TMP and
the other Partners shall use their best efforts to comply with the
responsibilities outlined in this Section 9.10 and in Sections 6221 through 6232
of the Code (including any Treasury regulations promulgated thereunder) and in
doing so shall incur no liability to any other Partner. The following provisions
shall be applicable to the TMP and the other Partners:
(a) The Partners shall furnish the TMP with such information (including
information specified in Section 6230(e) of the Code) as it may reasonably
request to permit it to provide the Internal Revenue Service with sufficient
information to allow proper notice to the Partners in accordance with Section
6223 of the Code. The TMP shall keep the Partners informed of all audits or
investigations of the Partnership and of all administrative and judicial
proceedings, as required by Section 6223 of the Code, and shall furnish each
Partner with a copy of each notice or other communication received by the TMP
from the Internal Revenue Service (except such notices as are sent directly to
the Partners by the Internal Revenue Service).
(b) If any Partner intends to file a notice of inconsistent treatment
under Section 6222(b) of the Code, such Partner shall, at least thirty (30) days
prior to the filing of such notice, notify the other Partners of such intent and
the manner in which the Partner's intended treatment of a partnership item is
(or may be) inconsistent with the treatment of that item by the Partnership.
(c) The TMP shall not enter into any extension of the period of
limitations for making assessments on behalf of the other Partners without first
securing the written consent of the other Partners.
(d) No Partner shall file, pursuant to Section 6227 of the Code, a
request for an administrative adjustment of partnership items for any
Partnership taxable year without
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first notifying the other Partners. If the other Partners agree with the
requested adjustment, the TMP shall file the request for administrative
adjustment on behalf of the Partnership. If unanimous consent is not obtained
within thirty (30) days, or within the period required to file timely the
request for administrative adjustment, if shorter, any Partner, including the
TMP, may file a request for administrative adjustment on its own behalf.
(e) Any Partner intending to file a petition under Sections 6226, 6228,
or other sections of the Code with respect to any partnership item, or other tax
matters involving the Partnership, shall notify the other Partners of such
intention and the nature of the contemplated proceeding. In the case where the
TMP is the Partner intending to file such petition, such notice shall be given
within a reasonable time to allow the other Partners to participate in the
choosing of the forum in which such petition will be filed.
(f) The TMP shall not bind any other Partner to a settlement agreement
without obtaining the written concurrence of any such Partner who would be bound
by such agreement. Any other Partner who enters into a settlement agreement with
the Secretary of the Treasury with respect to any partnership items, as defined
by Section 6231(a)(3) of the Code, shall notify the other Partners of such
settlement agreement and its terms within ninety (90) days from the date of
settlement.
(g) The TMP shall be entitled to reimbursement by the Partnership for
all expenses, including without limitation expenses of tax counsel and
accountants, reasonably incurred by the TMP in representing the Partnership in
any audit or investigation of the Partnership by the Internal Revenue Service
and in any administrative or judicial proceeding relating to the tax treatment
by the Partnership of Partnership items.
(h) The provisions of this Section 9.10 shall survive the termination
of the Partnership or the termination of any Partner's interest in the
Partnership and shall remain binding on the Partners for a period of time
necessary to resolve with the Internal Revenue Service or the Department of the
Treasury any and all matters regarding the federal income taxation of the
Partnership.
9.11. Continuation of Tax Partnership Status. The Partners agree not to
elect to be, or to have the Partnership, excluded from the application of all or
any part of
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Subchapter K of Chapter One of Subtitle A of the Code, as amended, from any
successor provisions thereto under the Code, or from any provisions of state
income tax laws of substantially the same effect.
9.12. Tax Profits and Losses. For federal income tax purposes, the
profits and losses of the Partnership shall be determined each year in
accordance with the accounting methods followed for federal income tax purposes
and shall be allocated among the Partners and credited or debited to their
respective capital accounts, as set forth in Section VI hereof.
SECTION X
TRANSFER OF PARTNERSHIP INTERESTS
10.01. Transfers Restricted; No Relief of Liability. Except as otherwise
provided in this Section X or Section XI hereof, no Partner shall have any right
to directly or indirectly Transfer any part or all of its interest in the
Partnership or otherwise withdraw or resign from the Partnership. Any attempt to
Transfer its interest in the Partnership, without the prior written consent of
the other Partners, shall be void and without force and effect.
10.02. Permitted Transfers. Notwithstanding the foregoing provisions of
Section 10.01 hereof, TPP may Transfer all of its interest in the Partnership
(provided the requirements of Section 10.03 hereof are otherwise complied with)
to a person or entity which is 90% (directly or indirectly) owned and controlled
by TPP, Champlin Refining Company, Properchamp, Inc., Union Pacific Refining
Inc. or their Affiliates (for purposes of this Section 10.02, the term "control"
as used in the definition of "Affiliate" shall mean the ownership of 90% or more
of the beneficial interest in the firm or entity referred to).
10.03. Requirements of Permitted Transfers. Notwithstanding the foregoing
provisions of Section 10.02, no permitted Transfer by a Partner (whether direct
or indirect) of its interest in the Partnership shall be effective, unless and
until the provisions of this Section 10.03(a)-(b) below are satisfied.
(a) A counterpart of the instrument of Transfer, executed and
acknowledged by the parties thereto, has been delivered to the Partnership
and to the other Partners.
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(b) The Transfer will not result in the transferring Partner (but only
if such transferring Partner continues to hold an interest in the
Partnership) or the transferee holding an interest in the Partnership of
less than one percent (1%).
10.04. Basis Adjustment. In the event of a Transfer of all or part of
the interest of a Partner in the Partnership pursuant to Section 10.02
hereof, at the request of the transferee, the Partnership shall elect,
pursuant to Section 754 of the Code, or the corresponding provision of
subsequent law, to adjust the basis of Partnership property as provided by
Sections 734 and 743 of the Code.
10.05. Allocations Between Transferor and Transferee. Upon the Transfer
of all or any part of the interest of a Partner as hereinabove provided, the
net income, net losses, net gains and credits attributable to the interest
so transferred shall be allocated between the transferor and the transferee
in accordance with the daily proration allocation method as authorized by
the Code and applicable Treasury Regulations and Internal Revenue Service
policies. Distributions shall be made to the holder of record of the
interest on the date of distribution.
10.06. Continued Liability of General Electric. Notwithstanding any
other provision of this Agreement to the contrary, neither the Transfer of
all or any part of General Electric's interest in the Partnership, nor
General Electric's ceasing, for any other reason, to be a Partner of the
Partnership or the sale of all or any portion of the assets of the
Partnership shall be effective to relieve General Electric of any of its
obligations under this Agreement, regardless of whether such obligations may
have been assumed by any other party.
SECTION XI
BUY - SELL
11.01. Transfer to Non-Affiliate. At any time after the execution and
delivery of this Agreement, General Electric may require the sale, transfer and
assignment of all of (but not less than all of) TPP's interests in the
Partnership to a third party entity nominated by General Electric and which is
not an Affiliate of General Electric (the "Purchasing Entity"), as set forth in
this Section 11.01. At any time after the execution and delivery of this
Agreement, General Electric may require
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the sale, transfer and assignment of all of (but not less than all of) JLM's
interests in the Partnership to a Purchasing Entity, as set forth in this
Section 11.01.
(a) The right of General Electric to require the sale and transfer of TPP's
and/or JLM's interests in the Partnership to a Purchasing Entity as set forth
above may be exercised at any time by General Electric by written notice given
by General Electric to TPP or JLM, as the case may be. The purchase and sale of
TPP's or JLM's interests in the Partnership, as the case may be, by such
Purchasing Entity shall be consummated at a closing (the "11.01 Closing") which
shall be held at the principal office of the Partnership at 10:00 a.m. central
time, on a date to be mutually agreed upon, but in no event later than sixty
(60) days after the date that General Electric shall have exercised its right
pursuant to this Section 11.01 by serving written notice on TPP or JLM, as the
case may be. At the 11.01 Closing, the Purchasing Entity and General Electric
(as set forth below) shall pay to TPP or JLM, as the case may be, the amount of
the 11.01 Purchase Price for such Partner's respective interest in the
Partnership (as defined below in subparagraph (b) of this Section 11.01) by
delivery of a certified or official bank check or the effecting of a bank wire
transfer to an account designated therefor by TPP or JLM, as the case may be,
(in either case, in immediately available funds) in such amount, and General
Electric shall duly execute and deliver to TPP or JLM, as the case may be,
releases from and indemnity against all obligations (actual or contingent) as
provided in Section 11.05, provided, however, that in any event, TPP's or JLM's
rights to indemnity pursuant to this Section ll.Ol(a) and Section 11.05 hereof
shall survive such transactions and the Closings and the termination and
dissolution of the Partnership. At the respective 11.01 Closings, the Purchasing
Entity, General Electric and TPP or JLM, as the case may be, shall execute and
deliver, such other deeds, assignments, bills of sale, releases and other
instruments as may be reasonably necessary to effect the sale and transfer of
TPP's or JLM's entire interest in the Partnership being purchased and sold
hereunder free and clear of all liens or encumbrances.
(b) For purposes of this Section 11.01, the purchase price of each of TPP's
and/or JLM's respective interest in the Partnership ("11.01 Purchase Price")
shall be the sum of (i) one hundred ten percent (110%) of the aggregate of all
actual cash contributions of such Partner to the Partnership (regardless of such
Partner's capital account balance), (ii) all of such Partner's Percentage
Interest in the
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undistributed profits of the Partnership as determined (as of the date of
transfer) in accordance with generally accepted accounting principles and (iii)
any payment and the fair market value of any benefit furnished directly or
indirectly to General Electric or any of its Affiliates from or by the
Purchasing Entity in consideration for General Electric exercising its rights
under Section 11.01(a). The portions of the 11.01 Purchase Price referred to in
clause (i) and clause (ii) of the preceding sentence shall be paid by the
Purchasing Entity and the portion of the 11.01 Purchase Price referred to in
clause (iii) of the preceding sentence shall be paid by General Electric. In the
event that either or both of TPP's and/or JLM's interests in the Partnership are
purchased pursuant to this Section 11.01, the balance in such Partner's Optional
Loan Account, together with any amount owed to such Partner on account of any
Capital Loan or Contribution Loan, shall become immediately due and payable. THE
payment of such loan amounts by the Partnership to TPP and/or JLM shall be a
condition precedent to the closing of the sale and transfer of such Partner's
interest in the Partnership pursuant to this Section 11.01.
11.02. Transfer to General Electric. Upon any date ("Purchase Date") on or
after December 31, 2008 or as provided in Section XII hereof, General Electric,
or its Affiliate, designee or assign ("Purchaser"), may purchase all of (but not
less than all of) TPP's interest in the Partnership, as set forth in this
Section 11.02. Upon any Purchase Date or as provided in Section XII hereof, the
Purchaser may purchase all of (but not less than all of) JLM's interest in the
Partnership, as set forth in this Section 11.02. The right of General Electric
to substitute its Affiliate, designee or assign shall not relieve it of any of
its obligations pursuant to this Section 11.02.
(a) The right of Purchaser to purchase TPP's or JLM's interest in the
Partnership as set forth above may be exercised by Purchaser by written notice
given by General Electric to TPP or JLM, as the case may be, not less than one
hundred eighty (180) calendar days prior to such Purchase Date (such notice to
specify the Purchase Date). The purchase and sale of TPP's and/or JLM's
interests in the Partnership, as the case may be, by Purchaser shall be
consummated at a closing (the "11.02 Closing") which shall be held at the
principal office of the Partnership at 10:00 a.m. central time, on a date to be
mutually agreed upon, but in no event later than 30 days after the Purchase
Date, to be effective as of the Purchase Date. At the 11.02 Closing, the
Partnership shall distribute to TPP
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and/or JLM, as the case may be, all of such Partner's Percentage Interest in the
undistributed profits of the Partnership as determined (as of the date of
transfer) in accordance with generally accepted accounting principles and the
Purchaser shall pay to TPP and/or JLM, as the case may be, in cash the amount of
the 11.02 Purchase Price for each such Partner's respective interest in the
Partnership (as defined below in subparagraph (b) of this Section 11.02) by
delivery of a certified or official bank check or the effecting of a bank wire
transfer to an account designated therefor by TPP and/or JLM, as the case may
be, (in either case, in immediately available funds) in such amount, and General
Electric shall duly execute and deliver to TPP and/or JLM, as the case may be,
releases from and indemnity against all obligations (actual or contingent)
incurred or to be incurred, as provided in Section 11.05 hereof, provided,
however, that in any event, TPP's and JLM's rights to indemnity pursuant to this
Section 11.02(a) and Section 11.5 shall survive such transactions and their
closings and the termination and dissolution of the Partnership. At the 11.02
Closings, Purchaser and TPP or JLM, as the case may be, shall execute and
deliver such other deeds, assignments, bills of sale, releases and other
instruments as may be reasonably necessary to effect the sale and transfer of
TPP's and/or JLM's entire interests in the Partnership to Purchaser free and
clear of all liens and encumbrances.
(b) For purposes of this Section 11.02, the purchase price of each of TPP's
and JLM's respective interest in the Partnership ("11.02 Purchase Price") shall
be as follows:
(i) In the event the Partnership purchases any additional Phenol
manufacturing related facilities or expands to any degree the existing
Phenol Facility, as contemplated by Section 5.05 hereof, $13,000,000 for
TPP's interest in the Partnership and $528,000 for JLM's interest in the
Partnership; and
(ii) In the event the Partnership does not purchase any additional
Phenol manufacturing related facilities or expand to any degree the existing
Phenol Facility as contemplated by Section 5.05 hereof, $7,100,000 for TPP's
interest in the Partnership and $288,000 for JLM's interest in the
Partnership.
In the event that either or both of TPP's and/or JLM's interests in the
Partnership are purchased pursuant to this Section 11.02, the balance in such
Partner's Optional Loan Account, together with any amount owed to such Partner
on
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account of any Capital Loan or Contribution Loan, shall become immediately due
and payable. The payment of such loan amounts by the Partnership to TPP and/or
JLM shall be a condition precedent to the Closing of the sale and transfer of
such Partner's interest in the Partnership pursuant to this Section 11.02.
11.03. TPP and JLM Options. TPP may, upon the happening of any Separation
Event (as defined below), require General Electric to purchase all of (but not
less than all of) its interest in the Partnership, as set forth in this Section
11.03. JLM may, upon the happening of any one or more of the Separation Events
set forth in Sections 11.03(c)(i)-(v), inclusive, require General Electric to
purchase all of (but not less than all of) its interest in the Partnership, as
set forth in this Section 11.03. General Electric may substitute a third party
designated by General Electric as the party purchasing JLM's and/or TPP's
interest in the Partnership pursuant to this Section 11.03. The right of General
Electric to substitute a third party shall not relieve it of any of its
obligations pursuant to this Section 11.03.
(a) The right of TPP or JLM to require the purchase and transfer of its
respective interest in the Partnership to General Electric (or a third party
designated by General Electric), as set forth above, may be exercised by TPP or
JLM, as the case may be, giving General Electric written notice ("Put Notice")
of the happening of a Separation Event (without regard to any cure periods). If,
after such Put Notice is given by TPP or JLM, as the case may be, such
Separation Event is not cured within the applicable cure period, if any, as
specified below for such a Separation Event, then General Electric will be
required to purchase TPP's and/or JLM's entire interest in the Partnership, as
the case may be. In the event such Separation Event is cured within the
applicable cure period, if any, specified in Section 11.03(c), General Electric
will not be required to purchase TPP's or JLM's interest in the Partnership
pursuant to such Put Notice. The purchase and sale of TPP's or JLM's interest in
the Partnership by General Electric or its designee shall be consummated in a
closing (the "11.03 Closing") which shall be held at the principal office of the
Partnership at 10:00 a.m. central time, on a date to be mutually agreed upon,
but in no event later than one hundred and fifty (150) days after the applicable
Put Notice. At the 11.03 Closing, General Electric, or its designee, shall pay
in cash to TPP and/or JLM, as the case may be, the amount of the 11.03 Purchase
Price for such Partner's interest in the Partnership (as defined below in
subparagraph (b) of this
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Section 11.03) by delivery of a certified or official bank check or the
effecting of a bank wire transfer to an account designated therefor by TPP
and/or JLM, as the case may be, (in immediately available funds) in such amount,
and General Electric shall duly execute and deliver to TPP and/or JLM, as the
case may be, releases from and indemnity against all obligations (actual or
contingent) incurred or to be incurred, as provided in Section 11.05, provided,
however, that in any event, TPP's and JLM's rights to indemnity pursuant to this
Section 11.03(a) and Section 11.05 hereof shall survive such transaction and its
closing and the termination and dissolution of the Partnership. At the 11.03
Closing, General Electric, TPP and/or JLM, as the case may be, and, if
applicable, General Electric's designee shall execute and deliver such other
deeds, assignments, bills of sale, releases and other instruments as may be
reasonably necessary to effect the sale and transfer of TPP's and/or JLM's
entire interest in the Partnership to General Electric or its designee free and
clear of all liens and encumbrances.
(b) For purposes of this Section 11.03, the purchase price of TPP's or JLM's
interest in the Partnership (the "11.03 Purchase Price") shall be an amount
equal to the sum of (i) one hundred percent (100%) of the aggregate of all
actual cash contributions of TPP and/or JLM, as the case may be, to the
Partnership (regardless or such Partner's capital account balance), plus (ii)
all of TPP's and/or JLM's Percentage Interest in the undistributed profits of
the Partnership as determined (as of the date of transfer) in accordance with
generally accepted accounting principles; provided, however, that, if TPP
requires General Electric (or a third warty designated by General Electric) to
purchase its interest in the Partnership pursuant to this Section 11.03 solely
because of the happening of a Separation Event described in Section 11.03(c)
(vii) (resulting from the termination Refining Company of the Phenol Plant
Cumene Purchase/Sale Agreement), the 11.03 Purchase Price for TPP's interest in
the Partnership shall not exceed to the then fair market value of TPP's interest
in the Partnership.
(c) As used herein, the term "Separation Event" shall mean and refer to any
one or more of the following:
(i) The failure of General Electric to cure any material breach by
General Electric of any of its material obligations set forth in the
Operation and Maintenance Agreement, the Phenol and Acetone Purchase and
Supply Agreement, the Utilities, Waste and Site Services Agreement
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or the License Agreement within sixty (60) days after notice of such breach from
TPP or JLM;
(ii) The failure of General Electric, within the applicable grace and
cure period of Section 5.05, to make additional capital contributions to the
capital of the Partnership as required pursuant to Section 5.05 hereof;
(iii) The failure of General Electric to satisfy any of its material
obligations pursuant to Section IX hereof, if such failure is not cured
within thirty (30) days after notice of such breach from TPP or JLM; .
(iv) Any attempt by General Electric to Transfer its interest in the
Partnership, other than as permitted in this Agreement;
(v) General Electric making a general assignment for the benefit of
creditors, filing a voluntary bankruptcy petition, becoming a subject of an
order for relief or is declared insolvent in any federal or state bankruptcy
or insolvency proceeding, filing a petition or answer seeking for such party
a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law, filing an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against such party in a proceeding of the type described
above, or seeking, consenting to or acquiescing in the appointment of a
trustee, receiver or liquidator of such party or of all or any substantial
part of such party's properties; or one hundred twenty (120) days expire
after the date of commencement of a proceeding against such party seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law if the proceeding has not been
previously dismissed, or ninety (90) days expire after the date of the
appointment, without such party's consent or acquiescence, of a trustee,
receiver or liquidator of such party or of all or any substantial part of
such party's properties if the appointment has not been previously vacated
or stayed, or ninety (90) days expire after the date of expiration of a
stay, if the appointment has not previously been vacated; or solely as a
Separation Event for JLM, JLM or a party owning 80% or more of JLM does any
of the foregoing bankruptcy or insolvency events or actions set forth in
this Section 11.03(c)(v);
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(vi) The failure of the Partnership to cure any material default by the
Partnership pursuant to the Phenol Plant Cumene Purchase/Sale Agreement
within sixty (60) days after notice of such breach from TPP; and
(vii) Termination of the Phenol Plant Cumene Purchase/Sale Agreement.
11.04. Nonproduction of Phenol. (a) In the event that the Phenol Facility
does not produce any phenol acceptable to General Electric under the Phenol and
Acetone Supply Agreement (such nonproduction of acceptable phenol being referred
to as the "Phenol Failure", without regard to the duration of such nonproduction
or failure) and such Phenol Failure continues for two consecutive quarters,
General Electric shall have the right to purchase JLM's and/or TPP's interests
in the Partnership, as the case may be, at the then fair market value of each
such Partner's interest in the Partnership (as to each such Partner, the
purchase price as provided in this Section 11.04(a) shall be sometimes referred
to as the "11.04(a) Purchase Price"). The procedure and notice requirements for
such purchase shall be as set forth in Section ll.Ol(a).
(b) TPP may, upon the happening of any 11.04(b) Event (as defined below),
require General Electric to purchase all of (but not less than all of) its
interest in the Partnership, as set forth in this Section 11.04(b). JLM may,
upon the happening of any 11.04(b) Event, require General Electric to purchase
all of (but not less than all of) its interest in the Partnership, as provided
in this Section 11.04(b). In each case, General Electric may substitute a third
party designated by General Electric as the party purchasing TPP's or JLM's
interest in the Partnership pursuant to this Section 11.04(b). The right of
General Electric to substitute a third party shall not relieve it of any of its
obligations pursuant to this Section 11.04(b).
(i) The right of TPP and/or JLM, as the case may be, to require the
purchase and transfer of their respective interest in the Partnership to
General Electric (or a third party designated by General Electric), as set
forth above, may be exercised by TPP and/or JLM, as the case may be, giving
General Electric written notice ("11.04(b) Notice") of the happening of an
11.04(b) Event. After such 11.04(b) Notice is given by TPP and/or JLM, as
the case may be, General Electric will be required to purchase TPP's and/or
JLM's interest in the Partnership, as the case may be. The purchase and sale
of such interest in the Partnership by
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General Electric or its designee shall be consummated in a closing (the
"11.04(b) Closing") which shall be held at the principal office of the
Partnership at 10 a.m. central time, on a date to be mutually agreed upon,
but in no event later than thirty (30) days after the 11.04(b) Notice is
given by TPP or JLM, as the case may be, to General Electric. At the
11.04(b) Closing, General Electric, or its designee, shall pay in cash to
TPP and/or JLM, as the case may be, the amount of the 11.04(b) Purchase
Price for such Partner's interest in the Partnership [as defined below in
subparagraph (ii) of this Section 11.04(b)] by delivery of a certified or
official bank check or the effecting of a bank wire transfer to an account
designated therefor by TPP and/or JLM, as the ease may be (in immediately
available funds), in such amount, and General electric shall duly execute
and deliver to TPP and/or JLM, as the case may be, releases from and
indemnity against all obligations (actual or contingent) incurred or to be
incurred, as provided in Section 11.05 hereof, provided, however, that in
any event, TPP's and/or JLM's right to indemnity pursuant to this Section
11.04(b)(i) and Section 11.05 hereof shall survive such transaction and its
closing and the termination and dissolution of the Partnership. At the
11.04(b) Closings, General Electric, TPP, JLM and if applicable, General
Electric's designee shall execute and deliver such other deeds, assignments,
bills of sale, releases and other instruments as may be reasonably necessary
to effect the sale and transfer of TPP's and/or JLM's entire interest in the
Partnership, as the case may be, to General Electric or its designee free
and clear of all liens and encumbrances.
(ii) For purposes of this Section 11.04(b), the purchase price of each
of TPP's and/or JLM's respective interest in the Partnership shall be equal
to the then fair market value of such Partner's interest in the Partnership
(as to each of TPP and JLM, such purchase price of such Partner's interest
in the Partnership being referred to as the "11.04(b) Purchase Price"). In
the event that either or both of TPP's and/or JLM's interest in the
Partnership are purchased pursuant to this Section 11.04(b), the balance in
such Partner's Optional Loan Account, together with any amount owed to such
Partner on account or any Capital Loan or Contribution Loan, shall become
immediately due and payable.
(iii) As used herein, the term "11.04(b) Event" shall mean and refer to
any one or more of the following:
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(A) Two consecutive quarters of Phenol Failure, if no commitments
have been made during such two consecutive quarters to initiate, begin
and pursue with all reasonable diligence the necessary steps (within
twelve (12) months of the initial Gate of such Phenol Failure) to
produce phenol acceptable to General Electric (in this regard, TPP and
JLM shall not interfere with or object to the making of such
commitments, provided that neither JLM nor TPP shall have any
obligations to make capital contributions, or other commitments,
liabilities or obligations, not indemnified for by General Electric,
pursuant thereto);
(B) Genera1 Electric notifies TPP or JLM, after any Phenol Failure
of General Electric's intention not to correct or rectify such Phenol
Failure;
(C) Five (5) consecutive fiscal quarters of Phenol Failure; unless
(1) throughout such five consecutive fiscal quarters and continuing
until phenol acceptable to General Electric is produced by the Phenol
Plant, all of the current debts, obligations and liabilities of the
Partnership are being paid and satisfied when due, (2) funds have been
made fully available to the Partnership in amounts reasonably
sufficient to fully and completely take the necessary steps to correct
or rectify such Phenol Failure and such corrective or rectifying steps
shall have been initiated within such five consecutive fiscal quarters
and pursued with reasonable diligence to completion and (3) phenol
acceptable to General Electric has been produced within thirty (30)
months of the initial date of such Phenol Failure; and
(D) The Partnership makes a general assignment for the benefit of
creditors, files a voluntary bankruptcy petition, becomes a subject of
an order for relief or is declared insolvent in any federal or state
bankruptcy or insolvency proceedings, files a petition or answer
seeking for itself a reorganization, rearrangement, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any law, files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed Partnership in
a proceeding of the type described above, or seeks, consents or
acquiesces in the
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appointment of a trustee, receiver or liquidator of the
Partnership or of all or any substantial part of the
Partnership's property; or one hundred twenty (120) days expire
after the date of such commencement of a proceeding against the
Partnership seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
an: law, if the proceeding has not been previously dismissed; or
ninety (90) days days expire after the date of the appointment,
without the Partnership's consent or acquiescence, of a trustee,
receiver or liquidator of the Partnership or of all or any
substantial part of the Partnership's properties, if the
appointment has not been previously vacated or stayed; or ninety
(90) days expire after the date of expiration of a stay, if the
appointment has not been previously vacated.
11.05. Indemnifications.
(a) In the event that the partnership interest of TPP or JLM shall be
purchased (herein the "Purchased Party") as set forth in Sections 11.01,
11.02, 11.03 or 11.04 hereof or TPP ceases to be a partner by dissolution
or operation of law, General Electric shall (without any responsibility or
liability of or recourse to TPP, the Purchased Party, the Partnership or
any of TPP's or the Purchased Party's partners, directors, direct or
indirect stockholders, officers, employees, agents, or successors or
assigns) defend the Indemnified Parties (as defined below) against and
absolutely and irrevocably indemnify and hold the Indemnified Parties
harmless from and against any and all (i) (A) claims, liabilities or
obligations arising from, asserted against or related to the Partnership,
the Phenol Facility, any of the transactions undertaken in connection with
or contemplated by the Operative Documents, any other agreement to which
the Partnership may be a party (other than claims of the Partnership
against an Indemnified Party pursuant to contracts between the Partnership
and such Indemnified Party or resulting from an actual breach by an
Indemnified Party of an Operative Document), this Agreement or the purchase
of the Indemnified Party's interest in the Partnership, including, without
limitation, any and all claims, liabilities or obligations relating to
environment, health, safety, personal injury, property damage, employment
claims, product liability, merchantability or fitness for any particular
purpose of goods, conformity of goods to contractual requirements or any
other alleged or actual breach or violation of any obligation of or
requirement binding on the Partnership,
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the Indemnified Party or the purchaser of an Indemnified Party's interest
in the Partnership; or (B) claims, liabilities or obligations arising from,
related to or based upon allegations of any of the foregoing (other than
costs and expenses of defending and investigating such claim or action,
which are indemnified, if at all, as provided below in subparagraph (b) of
this Section 11.05); and (ii) claims, liabilities or obligations (including
costs, expenses, fines, assessments, charges, penalties, damages (whether
actual, punitive or consequential) or judgments of any kind or nature
whatsoever assessed in litigation or other similar proceedings) arising
from, asserted against or associated with any claim, liability or
obligation described above in clause (i) of this Section 11.05(a) (clauses
(i) and (ii) of this Section 11.05(a) being referred to herein collectively
as the "Indemnified Liabilities") regardless of how or when they arose or
arise and regardless of by whom or when asserted and whether the facts on
which any Indemnified Liability is based occurred prior to, on or
subsequent to the date hereof or the date of purchase of the Indemnified
Party's interest in the Partnership and regardless of whether known or
unknown, fixed or contingent, asserted or unassorted, or arising out of
strict liability, malfeasance, misfeasance, or nonfeasance, provided,
however, that this Section 11.05(a) shall not apply to and shall not
indemnify any Indemnified Party with respect to any claim or liability
arising out of such Indemnified Party's gross negligence, willful
misconduct, intentional wrong doing or any breach of any agreement by such
Indemnified Party which is based on such Indemnified Party's actions (but
not actions of the Partnership or any Partner which are imputed to such
Indemnified Party), or any federal, state or local income tax liability of
such Indemnified Party (other than the tax liability arising from any
indemnification payment made to such Indemnified Party pursuant to this
Section 1l.05), provided further that Indemnified Liabilities shall not
include any claim, liability or obligation (i) of or asserted against a
Partner or an Indemnified Party, the basis of which does not relate to the
status of the Partner as a partner or former partner in the Partnership or
in the case of an Indemnified Party, the basis of which does not relate to
the status of the Indemnified Party's relationship to a partner in the
Partnership and such partner as a Partner in the Partnership or (ii) of an
Indemnified Party, the sole basis of which is the actual active negligence
of such Indemnified Party as finally determined by a court of competent
jurisdiction. "Indemnified Parties" shall mean TPP, any Purchased Party,
any shareholder, officer, director or partner of TPP or any purchased
Party, any Person which directly or indirectly controls, is controlled by
or is under common control with TPP or any Purchased Party or any
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shareholder, officer, director or partner of TPP or any Purchased Party, or
any shareholder, partner, officer, employee, agent, successor or assign of
any of the foregoing and any officer of a partner of TPP or a Purchased
Party.
(b) Promptly after the notice of any action or claim against an
Indemnified Party indemnified pursuant to this Section 11.05, such
Indemnified Party shall notify General Electric in writing of such action
or claim, in which case General Electric shall assume the defense thereof
pursuant to this Section 11.05, including the employment of counsel as
necessary and the payment of all expenses in connection with such defense.
The failure of any Indemnified Party so to notify General Electric shall
not relieve General Electric of any liability which it may have hereunder,
provided General Electric has otherwise received notice or actual knowledge
of such action or claim. In the event General Electric fails to assume, in
accordance with the first sentence of this paragraph, the defense of any
action or claim indemnified pursuant to this Section 11.05 within 30 days
of notice by an Indemnified Party, or fails to acknowledge in writing that
such claim or action relates to an alleged liability that if proven would
constitute an Indemnifiable Liability pursuant to this Section 11.05, such
Indemnified Party shall be entitled to defend and investigate such claim or
action (including by employment of counsel) and the costs and expenses
(including fees and disbursements of counsel) shall be indemnified by
General Electric pursuant to this Section 11.05 for such period until after
General Electric acknowledges such claim or action is an Indemnifiable
Liability and effectively assumes such claim and liability and the defense
thereof, in which event General Electric shall only be liable for costs and
expenses incurred pursuant to this Section 11.05(b) prior to such
acknowledgment and assumption; provided that within said 30 day period and
prior to the assumption by General Electric of the defense of a claim, the
Indemnified Party may take reasonable action required to prevent the entry
of any injunction, judgment or determination by a court or other authority
which would constitute an adjudication of such claim or have an adverse
impact on the defense against such claim without adversely affecting the
right or said Indemnified Party to indemnification for the expense of such
actions under the Agreement.
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<PAGE> 48
SECTION XII
DISSOLUTION AND LIQUIDATION
12.01. Events of Dissolution. The Partnership shall be dissolved upon
the earliest to occur of the following ("Event of Dissolution"):
(a) December 31, 2042, unless such date is extended by mutual
agreement of the Partners; and
(b) The Partners unanimously agree that the Partnership should be
dissolved.
12.02. Liquidation and Distributions. Except as provided hereinbelow
in Section 12.03, upon the occurrence of any Event of Dissolution under
Section 12.03 hereof or if for any other reason the Partnership is
dissolved and not reconstituted pursuant to Section 12.03 below, General
Electric shall be deemed to have given proper and timely notice to TPP and
JLM under Section 11.02, and General Electric, TPP and JLM shall promptly
proceed with the buy-out/sale of TPP's and JLM's entire interest in the
Partnership pursuant to Section 11.02 hereof.
12.03. Continuation of the Business. In the event that TPP or JLM
becomes insolvent or bankrupt, General Electric or its affiliate, designee
or assign shall be entitled to purchase such Partner's interests in the
Partnership pursuant to Section 11.02 hereof, and the remaining Partners,
if they unanimously agree, may reconstitute the Partnership and continue
the business of the Partnership. In the event that the Partnership is
dissolved for any reason other than an Event of Dissolution, the Partners
(or the remaining Partners, as the case may be) agree that to the fullest
extent permitted by law, the business of the Partnership shall be continued
on the terms and conditions of this Agreement by the Partners (or any
reconstituted successors thereto).
12.04. Effect of New Partners; Reconstituted Partnership. It is
understood that pursuant to the provisions of this Agreement, additional
partners may be admitted to the Partnership from time to time or existing
partners may be replaced by new partners, as provided in this Agreement.
Any such additional or new partners shall (i) assume and agree to be bound
by all of the terms, covenants and conditions of this Partnership
Agreement, (ii) assume and agree to be bound by all of the obligations
(whether pre-existing or incurred
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subsequently) of the Partnership, and (iii) become signatories to this
Agreement, such signature to constitute an acceptance of all of the
provisions hereof. In the event of a reconstitution of the Partnership and
a continuation of the business of the Partnership pursuant to Section 12.03
of this Agreement or in the event that an existing Partner increases their
interest in the Partnership by purchasing the interest of another Partner,
all obligations of the Partnership hereunder are under any other agreements
of the Partnership shall continue unaffected or unimpaired by such change
in the interest or numbers of Partners.
SECTION XIII
NOTICES
13.01. Notices. All notices and other communications required under
this Agreement shall be in writing and shall be sufficient for all purposes
if personally delivered or if sent by certified or registered U.S. mail,
return receipt requested, postage prepaid, or if sent prepaid overnight
delivery via Federal Express or another nationally recognized air courier,
and in any case addressed to the Partnership or the respective Partner at
the address set forth below or at such other address as the Partnership or
such Partner may hereafter designate by notice to the Partnership and each
of the Partners as herein provided.
(a) If to General Electric, to:
General Electric Company
1 Plastics Avenue
Pittsfield, Massachusetts 01201
Attn: Senior Vice President and
Group Executive
Plastics Business Group
(b) If to TPP, to:
c/o Champlin Refining Company
InterFirst Building
801 Cherry Street
Fort Worth, Texas 76102
Attn: President
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<PAGE> 50
with a copy to:
Jones, Day, Reavis & Pogue
2300 LTV Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: W. Paul Ditto, Jr.,
(c) If to JLM, to:
JLM (IND.), INC.
c/o JLM Industries, Inc.
66 Field Point Road
Greenwich , CT 06830
(d) If to the Partnership, to:
MT. VERNON PHENOL PLANT PARTNERSHIP
c/o General Electric Company
Lexan Lane
Mt. Vernon, Indiana 47620
Attn: General Manager
Mt. Vernon Manufacturing
Department
13.02. Effective Date. If personally delivered, notices and other
communications under this Agreement shall be deemed to have been given and
received and shall be effective when personally delivered. If sent by mail
in the form specified in Section 13.01 hereof, notices and other
communications hereunder shall be deemed to have been given and received
and shall be effective three (3) business days after deposited in the U.S.
mail or upon actual receipt, whichever first occurs. If sent via Federal
Express or another nationally recognized air courier in the form specified
herein, notices and other communications under this Agreement shall be
deemed to have been given and received and shall be effective one (1)
business day after deposited with such air courier or upon actual receipt,
whichever first occurs.
SECTION XVI
INSURANCE
14.01. Insurance. The Partnership shall carry and maintain in full
force and effect such insurance as may be approved from time to time by the
Partners, including without limitation the following insurance:
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<PAGE> 51
(a) Worker's compensation insurance covering all employees of
the Partnership (if any), in the amount and form required by the laws of
the State of Indiana and any other applicable jurisdiction.
(b) Comprehensive general public liability insurance and
environmental impairment liability insurance covering the Phenol Facility
and the business and operations of the Partnership with limits of liability
from time to time approved by the Partners for injury or death of persons
or damage to property. If the coverage is provided through blanket policies
of General Electric, the Partnership will be included by endorsement, as
its interest may appear.
(c) Fire and extended coverage insurance coverage at full
replacement value including "all risk" differences in conditions insuring
all real and personal property, including boiler and machinery and business
interruption coverage, in amounts and limits of liability approved from
time to time by the Partners. If this coverage is provided through blanket
policies of General Electric, the Partnership shall be included by
endorsement, as its interest may appear.
14.02. Named Insureds. All of the above policies shall be issued by
insurance carriers approved by the Partners, and the policies required
under Section 14.01(a) and (b) above shall name the Partnership and each
Partner as insureds and each policy shall contain a provision that such
policy may not be canceled or materially modified or materially changed
without 30 days notice to each Partner.
SECTION XV
DEFINITIONS
Except as otherwise required by the context and except as otherwise
provided in this Agreement, the following terms shall have the following
respective meanings when used in this Agreement:
"Affiliate" shall mean as to any person or entity, any person, firm or
entity which controls, is controlled by, or is under common control with
such person or entity. In this definition, the term "control" shall include
the ownership of 51% or more of the beneficial interest in the firm or
entity referred to.
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<PAGE> 52
"Agreement" means this Partnership Agreement, as it may from time to
time be amended.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Excess Income Account" shall mean as to each Partner, as of any given
time, an amount equal to the excess, if any, of (a) the aggregate amount of
net income or gains properly allocated to such Partner pursuant to Section
VI hereof, over (b) the aggregate amount of the net losses of the
Partnership properly allocated to such Partner under clause (a) and the
amount of losses which decrease the Excess Income Account of any Partner
under clause (b) shall be adjusted to reflect any determinations or
adjustments made by, or a a result of any examination or audit by, the
Internal Revenue Service.
"General Electric" means General Electric Company, a New York
corporation.
"Ground Lease" means that certain Lease Agreement entered into on the
18th day of November, 1987, to be effective as of the 1st day of November,
1987, by and between General Electric as the lessor and the Partnership as
the lessee of the Land.
"Interim Capital Transaction" means an insurance award (other than for
substantially complete destruction of all of the Phenol Facility), partial
condemnation, or sales of easements, rights-of-way or similar interests in
the Phenol Facility, or sales of portions of the Phenol Facility or
interests therein, and any similar items, including a financing or
refinancing, which, in accordance with generally accepted accounting
practices, are attributable to capital but which do not result in the
dissolution of the Partnership.
"JLM " means JLM (IND.), Inc., an Indiana corporation.
"Land" means the land upon which the Plant is located and certain
related easements, ways, rights and privileges as provided in Section
3.01(a) hereof.
"License Agreement" means that certain Phenol Technical Assistance and
License Agreement entered into on the 18th of November, 1987, to be
effective as of the 1st day of November, 1987, by and between General
Electric and the Partnership.
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<PAGE> 53
"Net Cash Flow" means the total gross revenues of the Partnership from
operations less total gross expenditures of the Partnership. As used
herein, total gross revenues shall include all operating receipts of the
Partnership (excluding, without limitation funds received as capital
contributions to the Partnership or proceeds of any loan to the
Partnership). As used herein, total gross expenditures shall include all
gross expenditures of the Partnership (including, but not limited to, (i)
all cash operating expenses, including all management fees, (ii) all debt
service of the Partnership, (iii) all expenditures by the Partnership which
are treated as capital expenditures (as opposed to expense deductions)
under generally accepted accounting practices, and (iv) deposits to the
Reserve Account, but gross expenditures shall not include any payments for
capital expenditures to the extent the sources or funds used therefore are
not included in gross receipts.
"Operation and Maintenance Agreement" means that certain Phenol Plant
Operation and Maintenance Agreement entered into on the 18th of November,
1987, to be effective as of the 1st day of November, 1987, by and between
General Electric, as manager, and the Partnership, as owner, pursuant to
which General Electric will operate and maintain the Phenol Facility for
the Partnership.
"Operative Documents" shall mean the Ground Lease; Operation and
Maintenance Agreement, the Phenol and Acetone Supply Agreement between the
Partnership and General Electric, the Plant Purchase Agreement and the
Utilities, Waste and Site Services Agreement.
"Optional Loan" shall mean as defined in Section 8.01 hereof.
"Optional Loan Account" shall mean as defined in Section 8.01 hereof.
"Partner" or "partners" means any one or more, as the case may be, of
General Electric, TPP and/or JLM or their successors or assigns (as
permitted in this Agreement).
"Partner Representatives" means the representatives of each Partner
appointed as provided as Section 4.05 hereof.
"Partnership" means the special purpose general partnership created by
the Partners pursuant to this Agreement.
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<PAGE> 54
"Partnership Interest" in the Partnership and Partnership means the
interest of each Partner the property and assets of the
"Percentage Interest" means the respective percentage interest of each
Partner in the Partnership as set forth in Section 5.01 hereof.
"Person" means and includes any individual, firm, corporation,
partnership (general or limited), trust, or other entity or association or
combination thereof.
"Phenol Facility" means collectively the Plant and the Land.
"Plant" means the phenol manufacturing plant referred to in Section
3.01(a) hereof and more particularly described in Exhibit "B" attached
hereto, as it may from time to time be expanded, constructed, improved,
repaired, altered, redeveloped, or modified.
"Plant Purchase Agreement" means that certain Phenol Plant Purchase
and Sale Agreement entered into on the 18th day of November, 1987, to be
effective as of the 1st day of November, 1987, by and between General
Electric as seller and the Partnership as purchaser for the purchase of the
Plant.
"Preferred Distribution Account" shall mean, as to each of the
Partners, us of any given time, an amount equal to the excess, if any, of
(a) the Excess Income Account of such Partner over (b) the sum of all
amounts theretofore distributed to such Partner pursuant to Sections
7.01(b) and 7.02 hereof.
"Reserve Account" shall mean as defined in Section 4.13 hereof.
"Section 704(b) Requlations" shall mean the final income tax
regulations under Section 704(b) of the Code :elating to the determination
of a partner's distributive share of partnership income, gain, loss,
deduction or credit (or item thereof), and any outstanding proposed income
tax regulations under Section 704(b) of the Code.
"Separation Event" means as defined in Section 11.03(c) hereof
"TMP" means the Tax Management Partner appointed as provided in
Section 9.10 hereof.
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<PAGE> 55
"TPP" means the Texas Phenol Plant Limited Partnership, a Texas
limited partnership.
"Transfer" means the mortgage, pledge, hypothecation, transfer, sale,
assignment or other disposition of any part or 11 of an interest in the
Partnership (as the context requires), whether voluntarily, by operation of
law or otherwise.
"Utilities, Waste and Site Services Agreement" means that certain
Phenol Plant Utilities, Waste and Site Services Agreement entered into on
the 18th day of November, 1987, to be effective as of the 1st day of
November, 1987, by and between General Electric as the provider of such
services and the Partnership as the user or such services, pursuant to
which General Electric will provide or arrange for the provision of all
utilities, waste and site services required for operation of the Phenol
Facility by the Partnership.
SECTION XVI
GENERAL PROVISIONS
16.01. Interpretation. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana. Whenever the
context requires, the singular shall include the plural, the plural shall
include the singular, the whole shall include any part thereof, and any
gender shall include both other genders. This Agreement contains the entire
agreement between the parties hereto relative to the formation of a
Partnership for the business purpose herein specified. No variations,
modifications, amendment or changes herein shall be binding upon any party
hereto unless set forth in a document duly executed by each of the
Partners.
16.02. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed an
original and all of which together shall constitute one and the same
instrument.
16.03. Additional Acts. In connection with this Agreement, as well as
all transactions contemplated by this Agreement, each Partner agrees to
execute and deliver such additional documents, instruments and take all
such necessary action and to perform such additional acts as may be
necessary or appropriate to effectuate, carry out and perform all the
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<PAGE> 56
terms, provisions and conditions of this Agreement and all such
transactions.
16.04. This Agreement. The words "herein," "hereof," "hereunder,"
"hereby," "this Agreement" and other similar reference shall be construed
to mean and include this Agreement and all the amendments thereof and
supplements thereto unless the context shall clearly indicate or require
otherwise.
16.05. No Third-Party Beneficiary Rights. Except as set forth below in
Section 16.06, this Agreement is made solely and specifically between and
for the benefit of the parties hereto, and their respective successors and
assigns, subject to the express provisions hereof relating to successors
and assigns, and no other person, individual, corporation or entity,
whatsoever shall have any rights, interests or claims hereunder or be
entitled to any benefits under or on account of this Agreement as a
third-party beneficiary or otherwise.
16.06. Third-Party Beneficiaries. Notwithstanding any other provision
of this Agreement to the contrary, each Indemnified Party is specifically
intended to be a beneficiary of Sections 4.15 and 11.05 hereof and shall
have the right to enforce its rights under such Sections against the
Partnership and General Electric, respectively. No provision of Section
4.15 or Section 11.05 may be amended so as to adversely affect the rights
of any Indemnified Party.
16.07. Retroactive Amendments. In the event any Partner of the
Partnership should, for any reason, cease to be a partner of the
Partnership ("X-Partner"), then, no provision of this Agreement may be
amended after such X-Partner ceases to be a partner of the Partnership
without the written consent of such X-Partner, if such amendment (a) is
retroactive to a time when such X-Partner was a partner of the Partnership
or (b) would be adverse to any right, claim or benefit of such X-Partner
pursuant to the terms of this Agreement without regard to such amendment.
16.08. Exhibits. All exhibits, attachments, annexed instruments and
addenda referred to herein shall be considered a part of this Agreement as
fully as if and with the same force and affect as if such exhibit,
attachment, annex or addendum had been included herein in full.
16.09. Captions. The captions and headings in this agreement are for
purposes or reference only and shall not limit, expand, or otherwise affect
the interpretation of this Agreement or any provision hereof.
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<PAGE> 57
16.10. Construction. None of the provisions of this agreement shall be
for the benefit of or enforceable by any creditor of the Partnership.
16.11. Waiver. No consent or waiver, express or implied, by any
Partner to or of any breach or default by any other Partner in the
performance by such other Partner of its obligations hereunder shall be
deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such other Partner of the same or of any
other obligations of such Partner hereunder. Failure on the part of any
Partner to complain of the actions or inactions of any other Partner or to
declare any other Partner in default, irrespective of how long such failure
continues, constitute a waiver by the former Partner of its rights
hereunder.
16.12. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not
be affected thereby and shall be enforceable to the greatest extent
permitted by law. Furthermore, for purposes of application of such invalid
or unenforceable provision to such person or circumstances, there shall be
added automatically as part of this Agreement a provision as similar in
terms to such invalid or unenforceable provision as may be possible and be
valid and enforceable' against such person or in such circumstances.
16.13. Binding Agreement. Subject to the restrictions on transfers and
encumbrances set forth herein, this Agreement shall bind and insure to the
benefit of the Partners and their respective successors and assigns.
16.14. Language. The language used in this Agreement shall be deemed
to be the language chosen by the Partners to express their mutual intent,
and no rule of strict construction shall be applied against any Partner.
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<PAGE> 58
IN WITNESS WHEREOF, the Partners have executed this Agreement on the
18th day of November,1987 to be affective as of the 1st day of November,
1987.
GENERAL ELECTRIC COMPANY, a New York
corporation
By:/s/ L Donald
----------------------------------
/s/ L Donald (Name)
--------------------------
VP (Title)
--------------------------
TEXAS PHENOL PLANT LIMITED PARTNERSHIP,
a Texas limited partnership
By: Cumene Associates, Inc.,
a Delaware corporation,
General Partner
By:/s/ Allan Tomlison
------------------------------
/s/ Allan Tomlinson (Name)
----------------------
President (Title)
----------------------
JLM (IND.), INC., and Indiana
corporation
By:/s/ JL Mcdonald
------------------------------
/s/ JL Mcdonald (Name)
-----------------------
President (Title)
-----------------------
<PAGE> 1
EXHIBIT 10.14
INTERCREDITOR AGREEMENT
JLM MARKETING, INC., JLM INDUSTRIES, INC., JLM TERMINALS, INC., JLM
INTERNATIONAL, INC. and OLEFINS MARKETING, INC. (herein individually and
collectively called the "Borrower") from time to time incurs or may incur
obligations, direct and/or contingent, to STATE STREET BANK AND TRUST
COMPANY ("State Street"), CAISSE NATIONALE DE CREDIT AGRICOLE ("Credit
Agricole") and STANDARD CHARTERED BANK NEW YORK BRANCH ("SCB") (herein each
individually called a "Creditor"), some or all of which obligations are or
may be secured, either wholly or partially, by Collateral. Each Creditor
has filed or may file financing statements or otherwise perfect security
interests in the Collateral under the Uniform Commercial Code of one or
more States of the United States, and the Creditors desire to agree among
themselves as to the relative priority of their respective security
interests in Collateral.
Intending to be legally bound it is hereby agreed for the purposes of
this Intercreditor Agreement, that:
1. DEFINITIONS.
As used herein, the following terms have the following meanings:
(a) "Collateral" means such personal property and fixtures
of the Borrower, whether now or hereafter existing or now owned or
hereafter and wherever located, of every kind and description, tangible or
intangible, including, but not limited to,
<PAGE> 2
all goods, documents, instruments, chattel paper, contract rights,
equipment, accounts, general intangibles, letters of credit and advices of
credit (including the proceeds thereof), rights, and inventory, and
including the products and cash and non cash proceeds of each of the
foregoing and accessories and accessions thereto, as now or hereafter
constitute security for any Obligations of the Borrower.
(b) "General Security Interest" means any perfected and
enforceable Security Interest of a Creditor in Collateral, however arising,
other than a Specific Security Interest or a Priority Security Interest.
(c) "Obligations" means all amounts now or in the future owing
by a Borrower, whether direct, indirect, or contingent, to a Creditor and
including, without limitation, all costs and expenses, including, without
limitation, reasonable attorneys' fees, of enforcement, possession, sale,
preparation for sale, and collection of the Borrower's obligations and/or
the Collateral, as applicable.
(d) "Priority Security Interest" means a Security Interest of a
Creditor in:
(i) inventory and other goods, the acquisition or purchase
of which by the Borrower was either (A) financed by a documentary or
commercial letter of credit issued by the Creditor, (B) supported by a
standby letter of credit issued by the Creditor, (C) financed by a
direct advance from the
<PAGE> 3
Creditor, or (D) financed by a banker's acceptance of which the
Creditor is the acceptor;
(ii) Collateral of a type described in subparagraphs (i),
(ii), (iii) or (iv) of paragraph l(f) as to which the Security
Interest constitutes a purchase money security interest;
(iii) All trading accounts, margin accounts and other
hedging accounts, including all money, instruments, contracts,
contract rights and other property therein or credited thereto, which
result from trading or other hedging activities financed in whole or
in part by that Creditor and which have been assigned to that
Creditor, all cash collateral (including the accounts into which it is
deposited) provided to that Creditor for such financing or for foreign
exchange exposure or other Obligations of a Borrower with respect to
foreign exchange contracts, and all cash collateral (including the
accounts into which it is deposited) provided to that Creditor in
respect of financing provided by that Creditor of an open (in whole or
in part) position of a Borrower; and
(iv) any accounts, letter of credit proceeds, chattel paper,
goods, contract rights, general intangibles, instruments, documents,
and all other cash or non-cash proceeds, arising out of the sale or
other disposition of Collateral or proceeds described in this
paragraph l(d) and
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<PAGE> 4
all accessories and accessions of or to such Collateral, and all
products of such Collateral.
(e) "Security Interest" means a perfected and enforceable
security interest, lien, assignment or right of setoff of a Creditor in,
upon or with respect to any Collateral.
(f) "Specific Security Interest" means a Security Interest of a
Creditor in any of the following Collateral, including the products and the
cash and non-cash proceeds thereof and accessories thereto, but which is
not a Priority Security Interest:
(i) Collateral in the possession of the Creditor (or agent
or bailee on its behalf); or
(ii) Collateral made available to the Borrower by the
Creditor (or its agent or bailee) pursuant to a trust receipt or other
security agreement or arrangement, the effect of which is to continue
the Creditor's Security Interest therein; or
(iii) Collateral covered by a non-negotiable document issued
in the name of the Creditor or as to which the Creditor (or an agent
or bailee on its behalf) controls possession through a negotiable
document; or
(iv) Collateral which is a deposit account or other
obligation owed by the Creditor to the Borrower; or
(v) Collateral which is specifically identified in a
security agreement, or in another writing,
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<PAGE> 5
delivered to the Creditor at or about the time the Security Interest
attaches.
2. PRIORITIES OF SECURITY INTERESTS.
(a) The Security Interests of Credit Agricole and SCB in
Collateral pledged or furnished by or on behalf of JLM International, Inc.
or Olefins Marketing, Inc. ("JLM International/Olefins Collateral") each
have a first priority over any Security Interests of State Street Bank in
the same Collateral, to the extent of all Obligations of the Borrower to
Credit Agricole and SCB secured thereby.
(b) The Security Interests of State Street in Collateral pledged
or furnished by or on behalf of JLM Marketing, Inc. and JLM Terminals, Inc.
have priority over the respective Security Interests of Credit Agricole
and/or SCB in the same Collateral, to the extent of all Obligations of the
Borrower to State Street secured thereby.
(c) Notwithstanding any provision of this Agreement to the
contrary, (i) the Security Interests of each Creditor in Collateral pledged
or furnished by or on behalf of JLM Industries, Inc. shall rank equal in
priority (regardless of whether such Security Interests constitute
Priority, Specific or General Security Interests) and (ii) any Creditor
which has a Security Interest in any shares of stock or other equity
interests owned by JLM Industries, Inc. ("Equity Collateral") in any
company of which JLM Industries, Inc. owns, directly or indirectly, more
than 25% of
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<PAGE> 6
the outstanding equity interests shall hold such Equity Collateral as agent
for itself and the other Creditors, with each Creditor having an interest
in such Equity Collateral in an amount equal to its pro rata share of all
Obligations (contingent or otherwise) of JLM Industries, Inc. to all the
Creditors (such pro rata share of each Creditor to be determined on the
basis of the Obligations (contingent or otherwise) of JLM Industries, Inc.
to such Creditor) and, in furtherance of the foregoing, JLM Industries,
Inc. hereby grants to each Creditor a security interest in all Equity
Collateral in which any Creditor holds a Security Interest. Notwithstanding
the immediately preceding sentence, the mortgage lien granted by JLM
Industries, Inc. to State Street (the "Priority Lien") on the real property
and related fixtures located at the real property known as Lot 1, Hidden
River Corporate Park Phase 3-A, Tampa, Hillsborough County, Florida with a
25,300 square foot office building to be constructed thereon (the "Priority
Real Property") shall have priority over any lien on the Priority Real
property of any other Creditor of JLM Industries, Inc. to the extent that
such Priority Lien secures obligations for money borrowed by JLM
Industries, Inc. from State Street pursuant to the Consolidated Promissory
Note, dated as of June 1, 1994 in the principal amount of $2,000,000 to
State Street from JLM Industries, Inc. and JLM Marketing, Inc., secured by
the Priority Real Property as such note may be amended, restated, extended
or otherwise modified from time to time.
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<PAGE> 7
(d) As among SCB and Credit Agricole only (each such Creditor, a
"Transactional Creditor") and with respect only to JLM International/
Olefins Collateral:
(i) A Priority Security Interest of a Transactional
Creditor in Collateral has priority, to the extent of all Obligations
of the Borrower to such Transactional Creditor secured thereby (and
not merely the Obligations relating to the purchase or acquisition of
goods or inventory or otherwise constituting a purchase money security
interest), over any Specific Security Interest or General Security
Interest of the other Transactional Creditor in the same Collateral.
(ii) A Specific Security Interest of a Transactional
Creditor in Collateral has priority, to the extent of all Obligations
of the Borrower to such Transactional Creditor secured thereby (and
not merely the Obligations, if any, relating to such Collateral), over
any General Security Interest of the other Transactional Creditor in
the same Collateral.
(iii) If Priority Security Interests of both Transactional
Creditors attach to the same Collateral, the Security Interests shall
rank equally in priority, except that a Security Interest in
Collateral of a type referred to in paragraph l(f)(iii), which is a
Priority Security Interest by virtue of paragraph l(d)(ii) hereof,
has, in the absence of
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<PAGE> 8
notice of another Priority Security Interest stamped on or affixed to
the document (notwithstanding anything in paragraph 2(f) relating to
notice), priority over any Security Interest in Collateral of a type
referred to in paragraph l(f)(ii) which is a Priority Security
Interest by virtue of paragraph l(d)(ii).
(iv) If Specific Security Interests of both Transactional
Creditors attach to the same Collateral, the Security Interests shall
rank equal in priority, except that a Specific Security Interest in
Collateral of the type referred to in paragraph l(f)(iii) hereof has,
in the absence of notice of another Security Interest stamped on or
affixed to the document (notwithstanding anything in paragraph 2(f)
relating to notice), priority over any Specific Security Interest in
Collateral of the type referred to in paragraph l(f)(ii).
(v) General Security Interests of the Transactional
Creditors in the same Collateral rank equal in priority.
(e) The priorities specified in this Agreement are applicable
irrespective of the time or order of attachment or perfection of Security
Interests or the time or order of filing of financing statements or the
giving or failure to give notice of the acquisition or expected acquisition
of purchase money or other Security Interests.
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<PAGE> 9
(f) Except as herein otherwise specifically provided in this
Agreement, priority shall be determined in accordance with law.
3. CONDITIONS TO ENFORCEMENT.
The effectiveness and enforceability of a Creditor's entitlement to
priority or other rights as to any Security Interest provided by this
Agreement is conditioned on the existence and continuance of such Security
Interest as valid and enforceable, and in favor of such Creditor covering
the Collateral in question and securing the relevant Obligations to such
Creditor at, and in respect to, each and all relevant times that such
priority or other rights under this Agreement is enforced or attempted to
be enforced by such Creditor.
4. EFFECT OF ADDITIONAL CREDIT ACCOMMODATIONS.
Each Creditor may make additional credit accommodations to the
Borrower without notice to or the consent of the other Creditors. Upon the
written request of any Creditor, in accordance with the notice provisions
of paragraph 10 hereof, to the other Creditor, such Creditor shall promptly
provide the requesting Creditor with the total amount of the Borrower's
Obligations then outstanding to such Creditor as of the date of the reply
and a list of Collateral by type in which such Creditor has a General
Security Interest, and, in the case of a Priority Security Interest, along
with an identification of the items of Collateral and the letter of credit
or other Obligations of the Borrower under which such
-9-
<PAGE> 10
Priority Security Interest arose. If also specifically requested, the
Creditor will also supply information about any Security Interest it may
have and the Obligations under which such arose or which it secures.
However, any incorrect or misleading information provided by any Creditor
pursuant to this paragraph 4 shall not impose any liability on the
reporting Creditor unless the reporting information is a result of such
Creditor's gross negligence or willful misconduct. Borrower specifically
consents to each Creditor's making the reports required under this
paragraph.
5. NOTICE OF DEFAULT.
Each Creditor shall promptly give written notice to the other
Creditors of the occurrence and continuance of a "default" or "event of
default" under any agreement, instrument, or document, to which borrower is
a party, of which such Creditor has given written notice to a Borrower and
Borrower hereby specifically consents to such notice. Any failure of a
Creditor to provide notice of a "default" or "event of default" shall not
impose any liability on such Creditor unless such failure is a result of
such Creditor's gross negligence or willful misconduct.
6. LIQUIDATION OF COLLATERAL.
(a) With regard to Collateral in which a Creditor has a
Security Interest which has first priority pursuant to the provisions
hereof (and, in determining whether it has such priority, a Creditor
shall be entitled to rely on information provided by a Borrower), as
among the Creditors:
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<PAGE> 11
(i) Such Creditor (or such Creditors jointly if there
be more than one having first priority) shall have sole and complete
discretion to determine the time and manner of any realization on all
or any portion of such Collateral in which it has such Security
Interest having first priority and such Creditor shall have the sole
and complete discretion to determine the application of the proceeds
of any portion of the Collateral in which it has such first priority
Security Interest to the Borrower's Obligations then outstanding to
such Creditor and secured thereby.
(ii) No Creditor shall be under any duty or bear any
responsibility to liquidate or refrain from liquidating Collateral in
which it has a Security Interest having first priority.
(iii) A Creditor shall not incur any liability to the
other Creditors as a result of the manner of liquidation of Collateral
in which it has a Security Interest having first priority unless such
is a result of such Creditor's gross negligence or willful misconduct.
(iv) If a Creditor commences liquidation of
Collateral in which it has a Security Interest having first priority,
it will attempt to give prompt notice thereof to the other Creditors
within forty-eight (48) hours of commencement of such program, but any
delay or failure in giving such notice shall not affect the rights of
such Creditor or impose
-11-
<PAGE> 12
any liability on such Creditor, unless such delay or failure is a
result of such Creditor's gross negligence or willful misconduct;
(v) When that Creditor determines to its satisfaction
and in its sole discretion that (A) all of the Borrower's Obligations
to such Creditor have been fully paid or otherwise provided for, and
(B) it will not extend any further credit to any Borrower (or that it
will assign Collateral or make a balance available notwithstanding
that it might extend additional credit to a Borrower) that Creditor
shall assign to other Creditors in accordance with the priorities set
forth herein its Security Interests in any other Collateral in which
it has a Security Interest and make the balance, if any, available for
distribution to the other Creditors in accordance with the priorities
set forth herein. A Creditor assigning or delivering Collateral in
which it has a Security Interest or surplus proceeds thereof to
another Creditor pursuant to this paragraph 6 may require reasonable
indemnification from the recipient Creditor(s).
(b) With regard to Collateral in which a Creditor does not
have a Security Interest having first priority pursuant to the provisions
hereof, as among the Creditors, such Creditor shall not liquidate such
Collateral, assert any claim against or seek to foreclose upon such
Collateral or otherwise commence any enforcement action with respect to
such Collateral or with respect
-12-
<PAGE> 13
to its Security Interest, except upon notice to and written consent from
the other Creditors holding Security Interests having first or any other
priority higher than such Creditor's priority as to such Collateral
pursuant to the provisions hereof.
(c) Proceeds from Collateral in which two or more
Transactional Creditors have a Security Interest of equal priority pursuant
to the provisions hereof shall be shared pro rata based upon the relative
proportions which the total outstanding Obligations of the Borrower to each
such Creditor secured by such Security Interests having equal priority,
bear to the total amount of the Obligations of the Borrower outstanding to
each other Transactional Creditor having a Security Interest entitled to
equal priority and secured thereby. In the case of Priority Security
Interests held by two or more Transactional Creditors, the Obligations
included in the calculations to be made pursuant to the preceding sentence
as to any Collateral shall be limited to the Obligations incurred to enable
the Borrower to acquire rights in such Collateral.
(d) After the Borrower's Obligations to each Creditor have
been paid in full, all remaining proceeds of Collateral, if any, after
giving effect to this Agreement and to governing law, shall be delivered to
the Borrower.
7. TERMINATION.
Any Creditor may terminate its status as a Creditor hereunder by
giving ten (10) days prior written notice of
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<PAGE> 14
termination to the other Creditor and to the Borrower. Such termination
shall not impair any Security Interest theretofore granted to or held by
any Creditor (including the terminating Creditor), regardless of whether
such Security Interest attaches to any Collateral prior to or after the
effective date of termination, or affect the priorities thereof or rights
with respect thereto hereunder. Any security interest first granted to or
held by the terminating Creditor after the effective date of termination
shall have priority according to law and without resort to this Agreement
as between such Creditor and the non-terminating Creditor.
8. GOVERNING LAW.
This Agreement shall be governed by the substantive laws of the
State of New York. Unless the context otherwise requires, all terms used
herein which are defined in the Uniform Commercial Code of the State having
jurisdiction over the specific Collateral shall have the meanings therein
stated.
9. ASSIGNMENT; RIGHTS OF PARTIES.
This Agreement is for the benefit of each Creditor and its
successors and assigns, and no other person or persons including the
Borrower or any creditor or Creditors' representative of or for the
Borrower, shall have any right, benefit, priority or interest under, or
because of the existence of, this Agreement. Borrower has executed this
Agreement to acknowledge its understanding of the existence of this
Agreement among the Creditors and to evidence the specific consents and
agreement made
-14-
<PAGE> 15
by Borrower herein, and for no other purpose. To the extent that any
provision of this Agreement pursuant to which any Creditor has any right or
obligation with respect to any other Creditor is inconsistent with any
provision of any other agreement between any Creditor and a Borrower, the
provision contained in this Agreement shall prevail.
10. NOTICES.
All notices and other communications provided for under this
Agreement shall be in writing (including telegraphic communication) and
either mailed registered mail, return receipt requested, telegraphed,
telecopied or hand delivered as appropriate to the following persons and
their addresses:
Debtor:
JLM Marketing, Inc.
8675 Hidden River Parkway
Tampa, Florida 33637
Attn: Frank Musto, Treasurer
JLM Industries, Inc.
8675 Hidden River Parkway
Tampa, Florida 33637
Attn: Frank Musto, Treasurer
JLM Terminals, Inc.
8675 Hidden River Parkway
Tampa, Florida 33637
Attn: Frank Musto, Treasurer
JLM International, Inc.
8675 Hidden River Parkway
Tampa, Florida 33637
Attn: Frank Musto, Treasurer
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<PAGE> 16
Olefins Marketing, Inc.
8675 Hidden River Parkway
Tampa, Florida 33637
Attn: Frank Musto, Treasurer
Creditor:
State Street Bank and Trust Company
227 Franklin Street
Boston, Massachusetts 02110
Attn: William F. Zola, Loan Officer
Caisse Nationale De Credit Agricole
520 Madison Avenue
New York, New York 10022
Attn: Michael Stewart
Standard Chartered Bank
160 Water Street
New York, New York 10038
Attn: Craig Tashjian, Vice President
or as to each party, at such other address as shall be by such party in a
written notice to the other parties complying as to delivery with the terms
of this paragraph. All such notices and communications shall, when mailed
or telegraphed, by effective when deposited in the mails, or when delivered
to the telegraph office, telecopied or hand delivered to the party for whom
it is intended as appropriate to the mode of communication addressed as
aforesaid.
11. REPRESENTATIONS AND WARRANTIES.
Each party executing this Agreement warrants and represents to
each other party hereto that the execution, delivery and performance by
such party of this Agreement have been duly authorized by all necessary
corporate action and do not and will not require any other consents or
approvals and this Agreement is a legal, valid and binding obligation of
the party enforceable
-16-
<PAGE> 17
against it in accordance with the Agreement's terms, subject to bankruptcy,
reorganization and other similar laws.
12. HEADINGS.
Paragraph headings in this Agreement are included for the
convenience of reference only and shall not constitute a part of this
Agreement for any other purposes.
13. COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute but one and the same agreement.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 18
IN WITNESS WHEREOF, each party hereto by its authorized officers
has caused this Agreement to be duly executed as of the 1st day of June,
1994.
CAISSE NATIONALE DE CREDIT AGRICOLE
Attest:
By: /s/
----------------------------------
STANDARD CHARTERED BANK,
NEW YORK BRANCH
By: /s/
----------------------------------
STATE STREET BANK AND
TRUST COMPANY
By: /s/
----------------------------------
JLM MARKETING, INC.
By: /s/
----------------------------------
JLM INDUSTRIES, INC.
By: /s/
----------------------------------
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<PAGE> 19
JLM TERMINALS, INC.
By: /s/
----------------------------------
JLM INTERNATIONAL, INC.
By: /s/
----------------------------------
OLEFINS MARKETING, INC.
By: /s/
----------------------------------
-19-
<PAGE> 1
EXHIBIT 10.15
MASTER PROMISSORY NOTE
Date: May 30, 1995
US $13,000,000 New York, New York
FOR VALUE RECEIVED (and, if applicable, pursuant to the terms
and conditions contained in the Facility Letter Agreement dated May 12, 1994, as
same may be amended, extended, renewed or modified from time to time), JLM
INTERNATIONAL INC. and OLEFINS MARKETING INC., both corporations organized under
the laws of the State of Delaware, (the "Borrowers"), hereby promise to pay to
the order of CAISSE NATIONALE DE CREDIT AGRICOLE, NEW YORK BRANCH (the "Bank")
at its offices located at 520 Madison Avenue, New York, New York 10022, the
principal sum of US$13,000,000 (THIRTEEN MILLION US DOLLARS) or the outstanding
principal amount of all obligations owing to the Bank as set forth on the grid
attached hereto, whichever is less, in lawful money of the United States and in
immediately available funds, either (i) on DEMAND or (ii) on the dates agreed
upon between the Borrowers and the Bank and recorded in the Bank's Books and
records and on the grid attached hereto. The Borrowers also agree to pay
interest from the date hereof, in like money, on such principal amount at said
office upon the Bank's first DEMAND or on the applicable interest payment date
as agreed upon between the Borrowers and the Bank and at a rate per annum as
agreed, from time to time, between the Borrowers and the Bank (the interest rate
in respect of any borrowing evidenced hereby, the "Applicable Rate"); provided
that the failure to make notations on the grid attached hereto shall not limit
or otherwise affect the obligations of the Borrowers with respect to payments of
principal and interest on this Note. Interest on any overdue amount of principal
of this Note and any interest accrued thereon shall be payable on demand at a
rate per annum (computed on the basis of the actual number of days elapsed in a
year of 360 days) equal at all times to the Applicable Rate plus 2%, (unless
the Bank and the Borrowers agree, subject to the Bank's sole and absolute
discretion, to an alternative means of financing the transaction).
Unless any sums outstanding under this Note are payable on DEMAND, the
aggregate outstanding principal amount of this Note, all accrued interest
hereon, and all other monetary obligations of the Borrowers to the Bank, whether
absolute or contingent, direct or indirect, now or hereafter existing, shall
become immediately due and payable, upon notice from the Bank to the Borrowers,
after the occurrence of any of the following events (each an "Event of
Default"), without presentment, demand, protest or notice of any kind, all of
which, to the extent permitted by applicable law, are hereby expressly and
irrevocably waived by the Borrowers: (i) any Borrowers shall default in the
payment of any amount owing to the Bank including, without limitation, the
payment of any amount of the principal of or interest on this Note, when and as
the same shall become due and payable, whether at maturity, upon the demand of
the Bank, by acceleration or otherwise; (ii) the Borrowers, any subsidiary of
the Borrowers, or any guarantor or endorser hereof (a "Guarantor") shall (a)
apply for or consent to the appointment of, or the taking of possession
1
<PAGE> 2
by, a receiver, custodian, trustee, liquidator or similar official for itself or
of all or a substantial part of its properties or assets, (b) admit in writing
to its inability, or be generally unable, to pay its debts as such debts become
due, (c) make a general assignment for the benefit of creditors, (d) be
adjudicated bankrupt or insolvent, (e) commence a voluntary case under any
bankruptcy, insolvency, reorganization or similar law, in New York or any other
jurisdiction, (f) file a voluntary petition in bankruptcy, or a petition or
answer seeking an arrangement with creditors or seeking to take advantage of any
bankruptcy, insolvency, reorganization, winding-up, composition or readjustment
of debts, dissolution or liquidation law or statute or file an answer admitting
the material allegations of a petition filed against it under any such law or
statute, (g) fail to controvert in a timely or appropriate manner, or acquiesce
in writing to any such petition filed against it or (h) take any action for the
purpose of effecting any of the foregoing; (iii) a proceeding or case shall be
commenced in any court of competent jurisdiction seeking (a) the liquidation,
reorganization, dissolution, winding-up, or composition or readjustment of debts
of any one of the Borrowers, any subsidiary of the Borrowers, or any Guarantor,
(b) the appointment of a trustee, receiver, custodian, liquidator or similar
official of the Borrowers, any subsidiary of the Borrowers or any Guarantor
under any law relating to bankruptcy, insolvency, reorganization, winding-up,
composition or readjustment of debts and such proceeding or case shall continue
undismissed, or an order, judgement or decree approving or ordering any of the
foregoing shall be entered and continued unstayed and in effect for a period of
forty-five (45) days; or (iv) an order, judgment or decree relating to the
Borrowers, any subsidiary of the Borrowers, or any Guarantor shall be entered
without the application, approval or consent of the applicable debtor relating
to the insolvency, bankruptcy, reorganization, winding up, composition or
readjustment of debts of the Borrowers, such subsidiary or such Guarantor; (v)
attachment, distraint, levy or execution of judgement shall be levied on or
enforced against any one of the Borrowers, any subsidiary of the Borrowers, or
any Guarantor or their respective properties or assets which is not stayed or
dismissed within forty-five (45) days; (vi) the Borrowers, any subsidiary of the
Borrowers, or any Guarantor shall be discovered to have submitted to the Bank,
directly or indirectly, any financial statement or other information which
proves to be incorrect or misleading in any material respect; (vii) any holder
or obligee of any indebtedness of the Borrowers or any Guarantor or a trustee or
similar official on behalf of such holder or obligee shall have the right to
accelerate such indebtedness prior to its stated maturity date; (viii) the
Borrowers, any subsidiary of the Borrowers or any Guarantor shall fail, breach
or default in the performance or observance of any of the obligations, covenants
or conditions set forth in this Note or under any other agreement with the Bank
to which the Borrowers, such subsidiary or such Guarantor is a party; (ix) there
shall be a material adverse change in the financial condition of the Borrowers,
any subsidiary of the Borrowers or any Guarantor; (x) any representation or
warranty set forth in this Note or in any report, financial statement,
certificate, instrument, agreement or other document furnished by the Borrowers,
any subsidiary of the Borrowers or any Guarantor to the Bank shall prove to have
been false or misleading in any material respect; (xi) the Borrowers, any
subsidiary of the Borrowers or any Guarantor shall fail to furnish any financial
information to the Bank or permit inspection of any of its books or records at
the Bank's reasonable request; or (xii) there shall be any material tax
2
<PAGE> 3
assessment by the United States Government or any state or political subdivision
thereof against the Borrowers, any subsidiary of the Borrowers or any Guarantor.
The Borrowers covenant and agree that until this Note is
indefeasibly paid in full it will (i) promptly provide to the Bank all financial
and operational information with respect to the Borrowers as the Bank may
reasonably request; (ii) promptly after the occurrence of an Event of Default or
an event, act or condition which, with notice or lapse of time or both, would
constitute an Event of Default, provide the Bank with a certificate of an
officer of the Borrowers specifying the nature thereof and the Borrowers'
proposed response thereto; or (iii) not merge into or consolidate with any other
entity, or sell, lease or otherwise dispose of all or any substantial part of
its property or assets to any other entity outside the ordinary course of
business.
The Borrowers hereby expressly represent and warrant to the Bank
that (i) they are corporations duly formed, validly existing and in good
standing under the laws of the place of their formation; (ii) they have full
power and authority to execute, deliver and perform this Note; (iii) the
execution, delivery and performance by the Borrowers of this Note will not (a)
violate any provision of law, or any order, judgment, rule or regulation of any
court or any governmental agency, authority or regulatory body applicable to the
Borrowers, (b) violate the Charter documents and/or Bylaws of the Borrowers, (c)
violate any of the terms or provisions of any indenture, agreement, mortgage,
contract or other instrument to which the Borrowers are parties or by which any
of their property or assets are bound, or be in conflict with, result in a
breach of, or constitute (with notice or lapse of time or both) a default under
any such indenture, agreement, mortgage, contract or other instrument or (d)
result in the creation or imposition of any mortgage, pledge, lien, security
interest, charge or other encumbrance of any nature whatsoever upon any of the
property or assets of the Borrowers other than that expressly permitted hereby;
(iv) this Note has been duly executed and delivered by the Borrowers in
accordance with all requisite corporate power and authority and constitutes the
legal, valid and binding obligation of the Borrowers enforceable against the
Borrowers in accordance with its terms; (v) all consents and grants of approval
required to have been granted by any entity in connection with the execution,
delivery and performance of this Note have been granted; (vi) there is no
action, suit, proceeding or governmental investigation pending or, to the
knowledge of the Borrowers, threatened against the Borrowers or any of their
assets which, if adversely determined, would have a material adverse effect on
the business, operations, properties, assets, condition (financial or otherwise)
or prospects of the Borrowers, or the ability of the Borrowers to comply with
their obligations hereunder; and (vii) the proceeds of the loan evidenced by
this Note shall be used by the Borrowers to finance trade; provided that no part
of such proceeds will be used by the Borrowers to purchase or carry any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect or to
extend credit to others for the purpose of purchasing or carrying any such
"margin stock" or to reduce or retire any indebtedness incurred for any such
purpose, and neither the Borrowers nor any of their subsidiaries are engaged
principally or as one of their important activities in the business of
3
<PAGE> 4
extending credit for the purpose of purchasing or carrying any such "margin
stock". The foregoing representations and warranties are hereby deemed repeated
and reaffirmed by the Borrowers in respect to each advance made pursuant to this
Note at and as of the time that each advance is made. At the time that each
advance is made, the Borrowers are hereby deemed to further expressly represent
and warrant that all of the covenants and agreements contained in the previous
paragraph are true and correct as of the time of each such advance.
As a security for the payment of all amounts owing to the Bank by
the Borrowers under this Note or otherwise, the Borrowers hereby mortgage,
pledge, assign, transfer, set over and convey to the Bank a first, prior and
perfected mortgage, lien, pledge and security interest in any cash, deposits,
securities or other property, tangible or intangible, from time to time left in
or coming into the possession, control or custody of the Bank, including,
without limitation, all proceeds thereof, in accordance with the Uniform
Commercial Code as in effect in the State of New York. This Note is also secured
by a Security Agreement dated as of the date hereof between the Borrowers and
the Bank. Upon the occurrence of an Event of Default, the Bank shall be entitled
to all the rights and remedies of a secured party under the Uniform Commercial
Code. Upon the occurrence of an Event of Default, the Bank shall have the right
to set-off, without notice to the Borrowers, any amount owed by the Borrowers to
the Bank against any cash, deposits or credits of the Borrowers at or in the
possession of the Bank. The proceeds of any sale of property in which the Bank
has a mortgage, lien, pledge, security interest or right of set-off may be
applied by the Bank against indebtedness evidenced hereby or any other
indebtedness of the Borrowers to the Bank in such order as the Bank in its
reasonable discretion may determine.
If this Note at any time requires payment by the Borrowers to the
Bank of any amount of interest in excess of the maximum amount then permitted by
applicable law, the interest payment to the Bank shall be reduced to such
maximum amount. All payments of principal and interest to be made by the
Borrowers to the Bank hereunder shall be in immediately available funds.
If, as a result of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof (whether or not having the force of
law) or compliance by the Bank with any request or directive of any such
authority, central bank or comparable agency (whether or not having the force of
law)(i) the Bank shall be subjected to any tax, duty or other charge with
respect to the loan(s) or advances evidenced by this Note or any change in the
basis of taxation of the payments to the Bank hereunder; or (ii) there shall be
imposed, modified or reasonably deemed applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirements against
4
<PAGE> 5
assets of, deposits with or for the account of, or credit extended by, the Bank
and the result of any of the foregoing is to increase the cost to the Bank of
making or maintaining the loan(s) or advance(s) evidenced hereby or to reduce
the amount of any sum received by the Bank hereunder, then, after reasonable
demand by the Bank, the Borrowers shall pay to the Bank such additional amount
or amounts as will compensate the Bank on an after-tax basis for such increased
costs or reduction. A certificate of the Bank setting forth the basis for
determining such additional amount or amounts shall be conclusive in the absence
of any manifest error.
The Borrowers hereby agree to pay all reasonable costs and
expenses, including, without limitation, the reasonable fees and disbursements
of attorneys for the Bank, incurred by the Bank in connection with the
preparation of the documentation contemplated hereby, collection of amounts due
hereunder and the preservation, enforcement and protection of any of the rights
and remedies of the Bank hereunder and under applicable law.
Failure or delay of the Bank or the Borrowers to enforce any
provision of this Note shall not be deemed a waiver of any such provision, and
the Bank or the Borrowers shall not be prevented from enforcing any such
provision at a later time. Any waiver of any provision hereof must be in writing
and signed by an authorized officer of the Bank and the Borrowers. Each and
every right and remedy hereby granted to the Bank and the Borrowers or allowed
any one of them by law shall be cumulative and may be exercised by the Bank and
the Borrowers from time to time.
This Note shall inure to the benefit of the successors, assigns and
transferees of the Bank. The Bank may grant participations in this Note without
any consent of the Borrowers or any other party.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
The Borrowers unconditionally and irrevocably agree that any legal
action, suit or proceeding against them with respect to their obligations or
liabilities hereunder or arising out of or in connection with this Note or the
transactions contemplated hereby for recognition or enforcement of any judgment
rendered in any such action, suit or proceeding may be brought, on a
non-exclusive basis, in the United States Federal Court for the Southern
District of New York or in the courts of the State of New York, as the Bank or
any successor, assignee or transferee of the Bank may elect.
5
<PAGE> 6
THE BORROWS UNCONDITIONALLY AND IRREVOCABLY WAIVE THEIR RIGHT TO A TRIAL BY JURY
IN ANY ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS NOTE OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
and delivered as of the date first written above.
JLM INTERNATIONAL INC.
By: /s/ Frank A. Musto By:
------------------------- ------------------------------
Name: Frank A. Musto Name:
Title: Vice President & CFO Title:
Date: 6-16-95 Date:
OLEFINS MARKETING INC.
By: /s/ Frank A. Musto By:
------------------------- ------------------------------
Name: Frank A. Musto Name:
Title: Vice President & CFO Title:
Date: 6-16-95 Date:
6
<PAGE> 7
TRANSACTIONS ON NOTE
JLM INTERNATIONAL INC., & OLEFINS MARKETING INC., BORROWERS
<TABLE>
<CAPTION>
MATURITY OUTSTANDING
AMOUNT OF DATE OR AMOUNT OF PRINCIPAL
LOAN MADE PAYABLE ON PRINCIPAL PAID INTEREST BALANCE NOTATION
DATE BORROWERS THIS DATE DEMAND THIS DATE RATE THIS DATE MADE BY
---- --------- --------- ------ --------- ---- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
7
<PAGE> 1
EXHIBIT 10.16
GUARANTY AGREEMENT
To: CAISSE NATIONALE DE CREDIT AGRICOLE, NEW YORK BRANCH
FOR VALUE RECEIVED, and in order to induce CAISSE NATIONALE DE CREDIT
AGRICOLE, NEW YORK BRANCH ("Bank") to extend or continue credit to OLEFINS
MARKETING INC., A DELAWARE CORPORATION OR JLM INTERNATIONAL INC., A DELAWARE
CORPORATION (each a "Customer" and together the "Customers"), the undersigned
hereby guarantees, absolutely and unconditionally, the due and punctual payment
to the Bank of all debts and liabilities at any time owing by the Customers to
the Bank (for its own account or as agent or trustee), whether now existing or
hereafter incurred, whether created directly or indirectly or acquired by
assignment or otherwise, whether matured or unmatured, whether absolute or
contingent, whether characterized as principal, premium, interest, additional
interest, fees, expenses or otherwise, whether the Customers be bound singly or
with any others and whether as principal or surety (all such debts and
liabilities being hereinafter called the "Liabilities").
THE UNDERSIGNED HEREBY FURTHER AGREES WITH THE BANK AS FOLLOWS:
1. From time to time, before or after any default by the Customers or any
notice of termination of this guarantee, (a) any collateral security (which term
as used herein includes other guarantees) at any time held by or available to
the bank in respect of the Liabilities or in respect of any guarantee of the
Liabilities may be sold, exchanged, subordinated, surrendered or released in
whole or in part, (b) any obligation of the Customers or of any other guarantor
of the Liabilities may be changed, altered, renewed, extended, continued,
accelerated, surrendered, compromised, subordinated, waived or released, in
whole or in part, or any default with respect thereto waived, (c) the Bank may
set off, may refrain from setting off and may release, in whole or in part, any
balance of any deposit account or credit on its books in favor of the Customers
or of any such guarantor may take or refrain from taking or from perfecting any
collateral security and may exercise or refrain from exercising any rights
against the Customers or others, (d) the Bank may extend or refrain from
extending further credit in any manner whatsoever to, may accept compositions
from and may otherwise generally deal with, the Customers and others and with
any collateral security as the Bank may, in its sole and absolute discretion,
determine and (e) the Bank may apply all moneys at any time received from the
Customers or from others any collateral security in such manner, in such amounts
and against such part of the Liabilities (including Liabilities not covered by
this Guaranty) as the Bank, in its sole and absolute discretion, deems
appropriate, all without in any way limiting, diminishing or affecting the
liability of the undersigned under this Guaranty and without imposing any
obligation or trust upon the Bank, and no loss of or in respect of any
collateral security, whether caused by the negligence of the Bank or otherwise,
shall in any way limit, diminish or affect the liability of the undersigned
under this Guaranty.
<PAGE> 2
2. This Guaranty constitutes a Guaranty of payment and not of collection,
and the Bank shall not be obligated to initiate, pursue or exhaust any form of
recourse or obtain any judgment against the Customers or others (including,
without limitation, any other guarantor of the Liabilities) or to realize upon
or exhaust any collateral security held by or available to it or any deposit
account or credit on its books before being entitled to payment from the
undersigned hereunder. The liability of the undersigned hereunder shall not be
limited, diminished or affected by (a) any failure by the Bank to file or
enforce any claim against the estate (in administration, bankruptcy or
otherwise) of the Customers or others, (b) the fact that recovery from the
Customers or any other person is barred by any statute of limitations or for any
other reason or (c) any other circumstance which might otherwise constitute a
legal or equitable discharge of a guarantor or surety. The undersigned hereby
unconditionally and irrevocably waives diligence, presentment, protest, notice
of dishonor or protest, demand for payment upon the Customers or the
undersigned, notice of acceptance of this Guaranty, notice of any addition to or
increase or decrease in the Liabilities and all other notices and demands of any
nature whatsoever. The undersigned shall have no right to be subrogated to any
rights of the Bank until the Bank shall have received payment in full of the
Liabilities. So long as any portion of the Liabilities hereby guaranteed have
been declared to be due by the Bank and for a period of at least 366 days
thereafter, whether or not the Liabilities of the Customers have been satisfied,
the undersigned shall not exercise any right to recover the amount of any
payment made by it to the Bank by way of subrogation, reimbursement,
contribution, indemnity or otherwise arising by contract or operation of law and
the undersigned shall not exercise its rights to recourse to or make any claim
or enforce any security or other right or claim against the Customers in respect
of any payment to the Bank pursuant to this Guaranty. The exercise of all such
rights are expressly deferred by the undersigned for the aforesaid period. The
undersigned shall make no claim in any insolvency or liquidation proceeding
regarding the Customers in competition with the Bank.
3. The liability of the undersigned under this Guaranty shall be reinstated
and revived with respect to any amount at any time paid to or for the account of
the Bank in respect of the Liabilities and which thereafter is restored or
returned by the Bank to the Customers or any trustee, receiver or similar
official upon the bankruptcy, insolvency or reorganization of the Customers or
for any other reason, all as though such amount had not been paid to the Bank.
4. Upon default by the Customers under any of the Liabilities, all debts
and liabilities of the Customers to the undersigned, whether now existing or
hereafter incurred, whether created directly or acquired by the undersigned by
assignment or otherwise, whether matured or unmatured, whether absolute or
contingent, whether characterized as principal, premium, interest, additional
interest, fees, expenses or otherwise, whether the Customers be bound singly or
with any others and whether as principal or surety and held as a trustee are
hereby subordinated and postponed to the Liabilities, and all moneys received by
the undersigned in respect thereof shall be received and held as a trustee in
trust for the Bank and forthwith upon receipt shall be paid over to the Bank,
without in any way limiting or affecting the liability of the undersigned under
this Guaranty.
<PAGE> 3
5. This Guaranty shall not be affected by any change in the name of the
Customers or in the membership of the Customers's firm through the death or
retirement of one or more partners, if a partnership, or the introduction of one
or more new partners or otherwise, or by the acquisition of the Customers's
business by any person, firm or corporation, or by any change whatsoever in the
objects, capital structure or constitution of the Customers, or by any merger,
amalgamation or consolidation of the Customers with any corporation or other
person, or by any dissolution or liquidation of the Customers, but shall
notwithstanding the happening of any such event, continue to apply to all the
Liabilities whether theretofore or thereafter incurred, and in this Guaranty the
word "Customers" shall include every such person, firm, partner and corporation
and all successors of the Customers.
6. All moneys, advances, renewals and credit borrowed or obtained from the
Bank by the Customers shall be included in the Liabilities, notwithstanding (a)
any lack or limitation of status or power, (b) any incapacity, disability or
lack of authority of the Customers or of any of the directors, officers,
partners or agents thereof, (c) that the Customers may not be a legal entity or
that a Liability may not be enforceable or (d) any invalidity, irregularity,
defect or infirmity in the borrowing or obtaining of such moneys, advances,
renewals or credits. In addition to the obligations of the undersigned as
guarantor, the undersigned shall also be liable to the Bank hereunder as a
principal, primary and direct obliger in respect of the Liabilities. The
undersigned shall reimburse the Bank for all costs and expenses (including,
without limitation, the fees and disbursements of its counsel) incurred by the
Bank in collecting or compromising any of the Liabilities, in realizing upon any
collateral security for the Liabilities and in enforcing this Guaranty or any
other guaranty of the Liabilities.
7. This Guaranty is in addition to and not in substitution for (a) any
other guaranty, by whomsoever given, at any time held by the Bank and (b) any
present or future obligation to the Bank, incurred otherwise than under a
guaranty, of the undersigned or of any other obligor.
8. For the purpose of securing the undersigned's liability (contingent or
otherwise) under this Guaranty, the undersigned hereby grants to the Bank and
any affiliate of the Bank a continuing and perfected lien upon and security
interest in (a) all moneys, securities and other property of the undersigned,
and the proceeds thereof, now or hereafter held or received by the Bank, whether
for safekeeping, custody, pledge, transmission, collection or otherwise and (b)
all deposit balances (general or special) and credits of the undersigned with
the Bank. The undersigned hereby authorizes the Bank, in the event of a default
by the undersigned hereunder, to proceed, directly and without prior notice, to
the full extent of the liability of the undersigned hereunder, by right of
set-off, banker's lien and by exercise of the rights of secured party or
otherwise, against any properties and assets of the undersigned described in
subparagraphs (a) and (b) of this paragraph 8. The undersigned authorizes the
Bank to do all such acts and to execute all such documents in the name of the
undersigned or in the name of the Bank as the Bank may, in its sole and absolute
discretion, deem necessary to effectuate any of the foregoing.
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<PAGE> 4
9. All payments hereunder with respect to any Liability shall be made to
the Bank in the lawful currency in which such Liability is payable ("Primary
Currency") and in immediately available funds. Without in any manner limiting
the obligation of the undersigned contained in the preceding sentence, if any
sum is paid to and received by the Bank hereunder in a currency other than the
Primary Currency (such other currency being hereinafter referred to as the
"Alternative Currency"), whether by judgment (and notwithstanding the rate of
exchange actually applied in giving such judgment) or otherwise, the obligations
of the undersigned hereunder shall nevertheless be discharged only to the extent
of the net amount of Primary Currency that the Bank, in accordance with its
normal banking procedures, is able to purchase with such amount of Alternative
Currency to discharge such Liability in full; the obligations of the undersigned
to the Bank shall not be discharged with respect to such difference, and any
such undischarged amount will be due as a separate debt and shall not be
affected by payment of or judgment being obtained for any other sums due
hereunder.
10. This Guaranty shall extend to and inure to the benefit of and be
enforceable by the Bank and its successors and assigns. Every reference herein
to the undersigned is a reference to and shall be construed as including and be
binding upon the undersigned and the heirs, executors, administrators, legal
representatives, successors and permitted assigns of the undersigned. The
obligations of the undersigned hereunder may not be transferred or assigned
without the prior written consent of the Bank. If the undersigned is a
partnership, the agreements and obligations of the undersigned hereunder shall
remain in full force and effect notwithstanding any changes in the individuals
composing the partnership, and the term "undersigned" shall include any altered
or successive partnerships, but the predecessor partnerships and their partners
shall nevertheless continue to be bound hereunder.
11. If the Guaranty is executed by more than one party, the obligations of
each party hereunder shall be joint and several; provided, however, that this
instrument shall be construed for all purposes as if a separate instrument of
like tenor had been executed by each party. The obligations of the undersigned
hereunder shall not in any way be changed, reduced or terminated as a result of
(a) any change or reduction in or termination of the obligation of any other
guarantor of the Liabilities, (b) the death or loss or diminution of capacity of
any other such guarantor or (c) the failure of any other person to execute this
or any other guarantee of the Liabilities.
12. The undersigned represents and warrants to the Bank that (a) the
undersigned has the power and authority to execute, deliver and perform this
Guaranty, (b) the execution, delivery and performance of this Guaranty has been
duly authorized by all requisite corporate action (if applicable), (c) this
Guaranty constitutes the legal, valid and binding obligation of the undersigned
enforceable in accordance with its terms and (d) the execution, delivery and
performance of this Guaranty by the undersigned will not violate or conflict
with or constitute a breach under any agreement, contract or other instrument to
which the undersigned is a party or by which any of the property or assets of
the undersigned are bound or, if a corporation, the certificate or incorporation
and by-laws of the undersigned.
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13. The Bank shall not be obligated to exercise any right, power or
privilege hereunder, and no failure to exercise and no delay in exercising, on
the part of the Bank, any such right, power or privilege shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. No notice to or demand on the undersigned shall be deemed to be a
waiver of the right of the Bank to take further action without notice or demand
as provided herein. No waiver shall be applicable except in the specific
instance for which given, nor in any event shall any modification or waiver of
any provision of this Guaranty and any agreement related hereto be effective
unless in writing and signed on behalf of the Bank.
14. This Guaranty shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be performed
therein. In connection with this Guaranty and the transactions contemplated
hereby, the undersigned irrevocably submits to the non-exclusive jurisdiction of
all Federal District Courts for the Southern District of New York and the courts
of the State of New York and consents that any order, process or notice of
motion or other application to any of said courts or a judge thereof may be
served upon the undersigned within or without the court's jurisdiction by
registered mail or by personal service, at the undersigned's last known address
as reflected in the records of the Bank. The undersigned hereby unconditionally
and irrevocably waives any objection to the jurisdiction of the aforesaid courts
and any right to assert that any action, suit or proceeding brought in such
courts was brought in an inconvenient forum. The undersigned further
unconditionally and irrevocably waives any right to assert that it or any of its
properties or assets is entitled to immunity of any sort from suit, execution or
otherwise. Finally, the undersigned waives its rights to a trial by jury in all
actions brought by or against the Bank relating to this Guaranty.
15. Should any provision of this Guaranty be held or deemed to be illegal,
invalid or unenforceable, the remaining provisions hereof shall not in any way
be affected thereby.
16. This Guaranty sets forth the complete agreement of the parties,
supersedes all prior agreements and understandings, whether written or oral
between the undersigned and the Bank with respect to the subject matter hereof,
and may not be amended, altered or modified in any manner except by an
instrument in writing executed by the Bank and the undersigned.
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IN WITNESS WHEREOF, the undersigned has executed this Guaranty, or has caused
this Guaranty to be executed by its duly authorized officer or partner, this
__________ day of May 1994.
JLM INDUSTRIES INC.
/s/ Frank A. Musto
-------------------------------
By: Frank A. Musto
Title: V.P. & CFO
Address :
8675 Hidden River Pky
- ----------------------------
Tampa, FL 33637
- ----------------------------
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SECRETARY'S CERTIFICATE
AND
CORPORATE RESOLUTION
I, Michael J. Melina, Secretary of JLM INDUSTRIES INC., a Delaware corporation
(the "Corporation") hereby certify that the following is a true extract from the
minutes of a meeting of the Corporation's Board of Directors duly called and
held on May 27, 1994 and is in full force and effect on the date hereof:
"RESOLVED, that in consideration for loans or other credit
facilities made to Olefins Marketing Inc. or JLM International
Inc. by Caisse Nationale de Credit Agricole, New York Branch
(the "Bank") this corporation, acting through any one of its
officers, is hereby authorized and directed to execute and
deliver to the Bank the Guaranty in the form annexed hereto of
all obligations incurred by Olefins Marketing Inc. or JLM
International Inc. to the Bank which Guaranty is hereby
approved in all respects by this Corporation."
IN WITNESS WHEREOF, I have signed my name and affixed the corporate seal
this 27th day of May 1994.
[SEAL]
/s/ Michael Melina
------------------------------
Secretary
<PAGE> 1
EXHIBIT 10.17
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as it may hereafter be amended, supplemented,
restated, replaced or otherwise modified from time to time, the
"AGREEMENT") is dated as of May 12, 1994 and entered into by and between
OLEFINS MARKETING INC., (the "DEBTOR") a corporation organized under the
laws of Delaware and CAISSE NATIONALE DE CREDIT AGRICOLE, NEW YORK BRANCH
(the "SECURED PARTY").
PRELIMINARY STATEMENTS
The Debtor has issued to the Secured Party a Demand Promissory Note, of
even date herewith (as it may hereafter be amended, supplemented, restated,
renewed, replaced or otherwise modified from time to time, the "NOTE"). It
is a condition precedent to the making of loans by the Secured Party the
repayment of which is evidenced by the Note that the Debtor shall have
granted the security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Secured Party to make loans the repayment of which is evidenced by the Note
and for other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the Debtor hereby agrees with the Secured
Party as follows:
SECTION 1. DEFINITIONS. The following terms used in this Agreement shall
have the following meanings:
"CONTRACTUAL OBLIGATIONS", as applied to any Person (as deemed below),
means any provision of any security issued by that Person or of any
material indenture, mortgage, deed of trust, contract, undertaking,
agreement or other instrument to which that Person is a party or by which
it or any material amount of its properties is bound or to which it or any
material amount of its properties is subject.
"EVENT OF DEFAULT", shall have the meaning given such term in Section 17 of
this Agreement.
"LIEN", as applied to any Person, means any lien, mortgage, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, and any agreement to
give any security interest).
<PAGE> 2
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments, agencies and political subdivisions thereof.
SECTION 2. GRANT OF SECURITY. The Debtor hereby assigns to the Secured
Party, and hereby grants to the Secured Party a security interest in, all
of the Debtor's right, title and interest in and to the collateral listed
in sub-section A and B below, in each case whether now or hereafter
existing or in which the Debtor now has or hereafter acquires an interest
and wherever the same may be located (the "COLLATERAL"):
A. (i) All equipment in all of its forms, all parts thereof and all
replacements thereof, spare parts and accessions thereto (any and all
such equipment, parts, replacements, spare parts and accessions being
the "EQUIPMENT");
(ii) All inventory in all of its forms, including, but not
limited to, (a) all goods held by the Debtor for sale or to be
furnished under contracts of service or furnished (b) all raw
materials, work in process, finished goods, and materials used or
consumed in the manufacture, packing, shipping, advertising, selling,
furnishing or production of such inventory or otherwise used or
consumed in the Debtor's business, (c) goods in which the Debtor has
an interest in mass or a joint or other interest or right of any kind
and (d) goods which are returned to or repossessed by the Debtor and,
with regard to all of the above, all additions and accessions thereto
and replacements thereof (all such inventory, accessions and products
being the "INVENTORY");
(iii) All rights and claims to the payment or receipt of money or
other forms of consideration of any kind, including, but not limited
to, any and all such rights and claims in, to and under, all accounts,
contract rights, chattel paper, instruments, general intangibles,
guaranties, letters of credit, documents, drafts, acceptances, tax
refunds, rights to performance, judgments taken on any rights and
claims otherwise included in this clause (c) and all rights in, to and
under all documents, instruments, documents of title, transport or
otherwise related to the Inventory, security agreements, and other
contracts securing or otherwise relating to any such rights and claims
to the payment or receipt of money or other forms of consideration
(any and all such rights and claims to the payment or receipt of money
or other forms of consideration being the "PAYMENT RIGHTS", and any
and all such security agreements and other contracts being the
"RELATED CONTRACTS");
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(iv) All books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software
(owned by the Debtor or in which it has an interest) that at any time
evidence or contain information relating to any of the Collateral or
are otherwise necessary or helpful in the collection thereof or
realization thereupon;
(v) All plant fixtures, business fixtures and other fixtures
and storage and office facilities, and all additions and accessions
thereto and replacements thereof and products thereof;
(vi) All trademarks (including the goodwill relating
thereto), tradenames, business names, patents and copyrights of the
Debtor;
(vii) All deposit accounts of the Debtor, including, without
limitation, deposit accounts maintained with the Secured Party; and
(viii) All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under
insurance (whether or not the Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral. For purposes of this Agreement, the term "PROCEEDS"
includes whatever is receivable or received when Collateral or
proceeds are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes,
without limitation, all rights to payment, including returned
premiums, with respect to any insurance relating thereto.
B. All personal property of the Debtor which is or shall be financed
by the Secured Party or is in, or shall come into the possession or
control of the Secured Party, including without limitation, inventory,
goods, documents (including any documents made available to the Debtor
pursuant to trust receipts or other security agreements) and present
or future accounts receivable resulting from the sale of goods, the
purchase of which was financed by the Secured Party or for which the
Secured Party has made advances; and the products and proceeds
thereof, together with all improvements and additions thereto whether
same be cash, accounts, chattel paper, instruments, notes, drafts,
acceptances, contract rights or general intangibles.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures and the
Collateral is collateral security for the prompt payment or performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. sec.362(a) whether or not a claim is allowed therefor) of
all obligations of every nature of the Debtor to the Secured Party, now or
hereafter existing,
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including, without limitation, the obligations of the Debtor under the
Note, any other promissory note, document or instrument delivered pursuant
thereto and all amendments, extensions or renewals thereof, and in any case
whether for principal, interest (including, without limitation, interest
that, but for the filing of a petition in bankruptcy with respect to the
Debtor, would accrue on such obligations), attorneys' fees, expenses or
otherwise, whether now existing or hereafter arising, voluntary or
involuntary, whether or not jointly owed with others, direct or indirect,
(including participations or any interest of Secured Party in indebtedness
of the Debtor to others), absolute or contingent, liquidated or
unliquidated, and whether or not from time to time decreased or
extinguished and later increased, created or incurred and all or any
portion of such obligations that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from the
Secured Party as a preference, fraudulent transfer or otherwise (all such
obligations being the "UNDERLYING DEBT"), and including, without
limitation, all obligations of every nature of the Debtor now or hereafter
existing under this Agreement (all such obligations of the Debtor, together
with the Underlying Debt, being the "SECURED OBLIGATIONS").
SECTION 4. THE DEBTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Debtor shall remain liable under any contracts and
agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as
if this Agreement had not been executed, (b) the exercise by the Secured
Party of any of the rights hereunder shall not release the Debtor from any
of its duties or obligations under the contracts and agreements included in
the Collateral and (c) the Secured Party shall not have any obligation or
liability under any contracts and agreements included in the Collateral by
reason of this Agreement, nor shall the Secured Party be obligated to
perform any of the obligations or duties of the Debtor thereunder or to
take any action to collect or enforce any claim for payment assigned
hereunder. In the event the Secured Party shall make any disbursement in
performing the obligations of the Debtor under any such contract or
agreement such shall be added to the Secured Obligations and be secured by
the Collateral.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Debtor represents and
warrants as follows:
(a) Organization and Powers. The Debtor is a limited partnership duly
organized, validly existing and in good standing under the laws of
Delaware, and has all requisite power and authority to own and operate
its properties, to carry on its business as now conducted and proposed
to be conducted and to enter into this Agreement and carry out the
transactions contemplated hereby and thereby.
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(b) Good Standing. The Debtor is in good standing wherever necessary
to carry on its present business and operations, except in
jurisdictions in which the failure to be in good standing has not had
and will not have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise)
of the Debtor and its subsidiaries, taken as a whole.
(c) Authorization. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate action
by the Debtor.
(d) No Conflict. The execution, delivery and performance by the
Debtor of this Agreement will not (i) violate the organizational
documents of the Debtor, (ii) violate any provision of law applicable
to the Debtor, or any order, judgment or decree of any court or other
agency of government binding on the Debtor, the violation of which
could have a material adverse effect on the business, operations,
assets or financial condition of the Debtor, (iii) be in conflict
with, result in a breach of, or constitute (with due notice or lapse
of time or both) a default in any Contractual Obligation of the
Debtor, (iv) result in or require the creation or imposition of any
material Lien of any nature whatsoever upon any of its material
properties or assets (except for the security interest created by this
Agreement), or (v) require the approval of any Person under any
Contractual Obligation of the Debtor except for those institutions
listed on Schedule I hereto which institutions have given their
written approval, a copy of which has been provided to the Secured
Party.
(e) Binding Obligation. This Agreement constitutes the legally valid
and binding obligation of the Debtor, enforceable against it in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws or
equitable principles relating to or limiting creditors' rights
generally.
(f) Location of Equipment and Inventory. All of the Equipment and
Inventory is located at the places specified in Schedule II hereto.
(g) Delivery of Certain Collateral. All notes and other instruments
(excluding checks) comprising any and all items of Collateral have
been delivered to the Secured Party duly endorsed and accompanied by
duly executed instruments of transfer or assignment in blank.
(h) Payment Rights Valid. Each Payment Right constitutes the legally
valid and binding obligation of the party obligated to pay the same
(the "ACCOUNT DEBTOR"). Each such Payment Right complies with the
provisions of all applicable laws and regulations, whether federal,
state or local, applicable thereto (including, without limitation, any
usury law, the Federal Truth in Lending Act and Regulation Z of the
Federal Reserve System). None of the Payment Rights
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is evidenced by a promissory note or other instrument, other than a
check, that has not been delivered to the Secured Party, pursuant to
sub-section (g) hereof.
(i) Ownership of Collateral. Except for the interests disclosed in
Schedule III hereto and the security interest created by this
Agreement, the Debtor owns the Collateral free and clear of any Lien.
Except with respect to the interests disclosed in Schedule III hereto
and such as may have been filed in favor of the Secured Party relating
to this Agreement, no effective financing statement or other
instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office.
(j) Perfection. This Agreement creates a valid, perfected and, except
for the interests disclosed in Schedule III hereto, first priority
security interest in the Collateral, securing the payment of the
Secured Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly
taken.
(k) Governmental Authorizations. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority
or regulatory body is required either (i) for the grant by the Debtor
of the security interest granted hereby or for the execution, delivery
or performance of this Agreement by the Debtor or (ii) for the
perfection of or the exercise by the Secured Party of its rights and
remedies hereunder (except as may have been taken by or at the
direction of the Debtor).
(1) Other Information. All information heretofore, herein or
hereafter supplied to the Secured Party by or on behalf of the Debtor
with respect to the Collateral is accurate and complete in all
respects.
(m) Office Locations: Fictitious Names. The chief place of business,
the chief executive office and the office where the Debtor keeps its
records regarding the Payment Rights and all originals of all chattel
paper that evidence Payment Rights is the address indicated below the
Debtor's signature hereto. The Debtor does not do business under any
trade-name or fictitious business name.
SECTION 6. FURTHER ASSURANCES.
(a) The Debtor agrees that from time to time, at the expense of the
Debtor, the Debtor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or desirable, or that the Secured Party may request, in
order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, the
Debtor will: (i) mark conspicuously
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each chattel paper included in the Payment Rights and each Related
Contract, (ii) at the request of the Secured Party, mark conspicuously
each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Secured Party, indicating that
such Collateral is subject to the security interest granted hereby;
(iii) if any Payment Right shall be evidenced by a promissory note or
other instrument (excluding checks), deliver and pledge to the Secured
Party hereunder such note or instrument duly endorsed and accompanied
by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to the Secured Party; (iv) at the request
of the Secured Party, deliver and pledge to the Secured Party all
promissory notes and other instruments (including checks) and all
original counterparts of chattel paper constituting Collateral duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Secured
Party; (v) execute and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may
be necessary or desirable, or as the Secured Party may request, in
order to perfect and preserve the security interests granted or
purported to be granted hereby, (vi) from time to time at any
reasonable time, upon demand by the Secured Party exhibit the
Collateral to and allow inspection of the Collateral by the Secured
Party, or persons designated by the Secured Party and (vii) at the
Secured Party's request, appear in and defend any action or proceeding
that may affect the Debtor's title to or the Secured Party's security
interest in the Collateral.
(b) The Debtor hereby authorizes the Secured Party to file one or
more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of
the Debtor. A carbon, photographic or other reproduction of this
Agreement or a financing statement signed by the Debtor shall be
sufficient as a financing statement.
(c) The Debtor will furnish to the Secured Party from time to time
statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as
the Secured Party may reasonably request, all in reasonable detail.
SECTION 7. COVENANTS OF THE DEBTOR. The Debtor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement, or any applicable
statute, regulation or ordinance or any policy of insurance covering
the Collateral;
(b) notify the Secured Party of any change in the Debtor's name,
identity or structure within 15 days of such change;
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(c) give the Secured Party 30 days' prior written notice of any
change in the Debtor's chief place of business;
(d) if the Secured Party gives value to enable the Debtor to acquire
rights in or the use of any Collateral, use such value for such
purposes;
(e) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the
Collateral, except to the extent the validity thereof is being
contested in good faith; provided that Debtor shall in any event pay
such taxes, assessments, governmental charges or levies not later than
five days prior to the date of any proposed sale under any judgement,
writ or warrant of attachment entered or filed against the Debtor as a
result of the failure to make such payment;
(f) deliver to the Secured Party at its request, from time to time,
financial statements or other financial information, in form,
substance and scope satisfactory to the Secured Party; and
(g) notify the Secured Party of any Event of Default or which it has
knowledge.
SECTION 8. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY. The
Debtor shall:
(a) keep the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the places therefor specified on
Schedule II hereto or, upon 30 days' prior written notice to the
Secured Party, at such other places in jurisdictions where all action
that may be necessary or desirable, or that the Secured Party may
request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to
such Equipment and Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and
tear excepted, and shall forthwith, or in the case of any loss or
damage to any of the Equipment as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith that are
necessary or desirable to such end. The Debtor shall promptly furnish
to the Secured Party a statement respecting any loss or damage to any
of the Equipment; and
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(c) keep correct and accurate records of the Inventory, itemizing and
describing the kind, type and quantity of Inventory, the Debtor's cost
therefor and (where applicable) the current price list for such
Inventory;
SECTION 9. INSURANCE.
(a) The Debtor shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in such amounts, against such
risks, in such form and with such insurers, as shall be satisfactory
to the Secured Party from time to time. Such insurance shall include,
without limitation, property damage insurance and liability insurance.
Each policy for property damage insurance shall provide for all losses
(except for losses of less than $50,000 per occurrence) to be paid
directly to the Secured Party. Each policy shall in addition (i) name
the Debtor and the Secured Party as insured parties thereunder
(without any representation or warranty by or obligation upon the
Secured Party) as their interests may appear, (ii) contain an
agreement by the insurer that any loss thereunder shall be payable to
the Secured Party notwithstanding any action, inaction or breach of
representation or warranty by the Debtor, (iii) have attached thereto
the Lender's Loss Payable Endorsement or its equivalent, or a Loss
Payable clause acceptable to the Secured Party, (iv) provide that
there shall be no recourse against the Secured Party for payment of
premiums or other amounts with respect thereto and (v) provide that at
least 30 days' prior written notice of cancellation, material
amendment, reduction in scope or limits of coverage or of lapse shall
be given to the Secured Party by the insurer. The Debtor shall, if so
requested by the Secured Party, deliver to the Secured Party original
or duplicate policies of such insurance and, as often as the Secured
Party may reasonably request, a report of a reputable insurance broker
with respect to such insurance. Further, the Debtor shall, at the
request of the Secured Party, duly execute and deliver instruments of
assignment of such insurance policies to comply with the requirements
of Section 6(a) and cause the respective insurers to acknowledge
notice of such assignment.
(b) Reimbursement under any liability insurance maintained by the
Debtor pursuant to this Section 9 may be paid directly to the person
who shall have incurred liability covered by such insurance. In case
of any loss involving damage to Equipment or Inventory when subsection
(c) of this Section 9 is not applicable, the Debtor shall make or
cause to be made the necessary repairs to or replacements of such
Equipment or Inventory, and any proceeds of insurance maintained by
the Debtor pursuant to this Section 9 shall be paid to the Debtor as
reimbursement for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuance of any Event
of Default, or (ii) the actual or constructive total loss (in excess
of $25,000 per occurrence) of any Equipment or Inventory, all
insurance payments in respect of
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such Equipment or Inventory shall be paid to and applied by the
Secured Party as specified in Section 19 hereof.
SECTION 10. SPECIAL COVENANTS WITH RESPECT TO PAYMENT RIGHTS AND RELATED
CONTRACTS.
(a) The Debtor shall keep its chief place of business, chief
executive office and the office where it keeps its records concerning
the Payment Rights and Related Contracts, and all originals of all
chattel paper that evidence Payment Rights, at the location therefor
specified in Section 5 hereof or, upon 30 days' prior written notice
to the Secured Party, at such other locations in a jurisdiction where
all action that may be necessary or desirable, or that the Secured
Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce its rights and remedies
hereunder with respect to such Payment Rights and Related Contracts
shall have been taken. The Debtor will hold and preserve such records
and chattel paper and will permit representatives of the Secured Party
at any time during normal business hours to inspect and make abstracts
from such records and chattel paper and the Debtor agrees to render to
the Secured Party, at the Debtor's cost and expense, such clerical and
other assistance as may be reasonably requested with regard thereto.
Promptly upon the request of the Secured Party, the Debtor shall
deliver to the Secured Party complete and correct copies of each
Related Contract.
(b) The Debtor shall, for not less than 5 years from the date on
which such Payment Right arose, maintain (i) complete records of each
Payment Right, including records of all payments received, credits
granted and merchandise returned and (ii) all documentation relating
thereto.
(c) The Debtor shall duly fulfill all obligations on its part to be
fulfilled under or in connection with the Payment Rights and the
Related Contracts and shall do nothing to impair the rights of the
Secured Party therein.
(d) Except as otherwise provided in this subsection (d) of this
Section 10, the Debtor shall continue to collect, at its own expense,
all amounts due or to become due the Debtor under the Payment Rights
and Related Contracts. In connection with such collections, the Debtor
may take (and, at the Secured Party's direction, shall take) such
action as the Debtor or the Secured Party may deem necessary or
advisable to enforce collection of the Payment Rights; provided,
however, that the Secured Party shall have the right at any time,
whether or not there shall be the occurrence an Event of Default all
without prior written notice to the Debtor of its intention to do so,
to notify the Account Debtors or obligers under any Payment Rights of
the assignment of such Payment Rights to the Secured Party
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and to direct such Account Debtors or obligers to make payment of all
amounts due or to become due to the Debtor thereunder directly to the
Secured Party, to notify each Person maintaining a lockbox or similar
arrangement to which Account Debtors or obligers under any Payment
Rights have been directed to make payment to remit all amounts
representing collections on checks and other payment items from time
to time sent to or deposited in such lockbox or other arrangement
directly to the Secured Party and, upon such notification and at the
expense of the Debtor, to enforce collection of any such Payment
Rights and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as the Debtor might
have done. After notice from the Secured Party to the Account Debtors
referred to in the proviso to the preceding sentence, (i) all amounts
and proceeds (including checks and other instruments) received by the
Debtor in respect of the Payment Rights and the Related Contracts
shall be received in trust for the benefit of the Secured Party
hereunder, shall be segregated from other funds of the Debtor and
shall be forthwith paid over or delivered to the Secured Party in the
same form as so received (with any necessary endorsement) to be held
as cash collateral and applied as provided by Section 19, and (ii) the
Debtor shall not adjust, settle or compromise the amount or payment of
any Payment Right, or release wholly or partly any Account Debtor or
obligor thereof, or allow any credit or discount thereon.
SECTION 11. DEPOSIT ACCOUNTS. Upon the occurrence and during the
continuance of an Event of Default, the Secured Party may exercise dominion
and control over, and refuse to permit further withdrawals (whether of
money, securities, instruments or other property) from deposit accounts
maintained with the Secured Party constituting part of the Collateral.
SECTION 12. LICENSE OF PATENTS, TRADEMARKS AND TRADENAMES. The Debtor
hereby assigns, transfers and conveys to the Secured Party, effective upon
the occurrence of any Event of Default, the nonexclusive right and license
to use all trademarks, tradenames, copyrights, patents or technical
processes owned or used by the Debtor that relate to the Collateral and any
other collateral granted by the Debtor as security for the Secured
Obligations, together with any goodwill associated therewith, all to the
extent necessary to enable the Secured Party to use, possess and realize on
the Collateral and any successor or assign to enjoy the benefits of the
Collateral. This right and license shall inure to the benefit of the
Secured Party and its successors, assigns and transferees, whether by
voluntary conveyance, operation of law, assignment, transfer, foreclosure,
deed in lieu of foreclosure or otherwise. Such right and license is
granted free of charge, without requirement that any monetary payment
whatsoever be made to the Debtor.
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SECTION 13. Transfers and Other Liens. The Debtor shall not, without the
prior written consent of the Secured Party:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary
course of business; and
(b) except for the interests disclosed in Schedule III hereto and the
security interest created by this Agreement, create or suffer to exist
any Lien upon or with respect to any of the Collateral to secure the
indebtedness of the Debtor or other obligations of any Person.
SECTION 14. THE SECURED PARTY APPOINTED ATTORNEY-IN-FACT. The Debtor hereby
irrevocably appoints the Secured Party the Debtor's attorney-in-fact, with
full authority in the place and stead of the Debtor and in the name of the
Debtor, the Secured Party or otherwise, from time to time in the Secured
Party's discretion to take any action and to execute any instrument that
the Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be maintained by the
Debtor or paid to the Secured Party pursuant to Section 9 hereof.
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral,
(c) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clauses (a) and (b)
above,
(d) to file any claims or take any action or institute any
proceedings that the Secured Party may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the
rights of the Secured Party with respect to any of the Collateral,
(e) to pay or discharge taxes or Liens, levied or placed upon or
threatened against the Collateral, the legality or validity thereof
and the amounts necessary to discharge the same to be determined by
the Secured Party in its sole discretion, and such payments made by
the Secured Party to become obligations of the Debtor to the Secured
Party, due and payable immediately without demand,
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts and
other documents relating to the Collateral; and
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(g) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Secured Party were the absolute owner thereof
for all purposes, and to do, at the Secured Party's option and the
Debtor's expense, at any time, or from time to time, all acts and
things that the Secured Party deems necessary to protect, preserve or
realize upon the Collateral and the Secured Party's security interest
therein, in order to effect the intent of this Agreement, all as fully
and effectively as the Debtor might do.
SECTION 15. SECURED PARTY MAY PERFORM. If the Debtor fails to perform any
agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of the Secured Party
incurred in connection therewith shall be payable by the Debtor under
Section 20.
SECTION 16. THE SECURED PARTY'S DUTIES AND LIABILITIES.
(a) The powers conferred on the Secured Party hereunder are solely to
protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of
any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Secured Party shall have no
duty as to any Collateral or as to the taking of any necessary steps
to preserve rights against prior parties or any other rights
pertaining to any Collateral. The Secured Party shall be deemed to
exercise reasonable care in the custody and preservation of such
Collateral if such Collateral is accorded treatment substantially
equal to that which the Secured Party accords its own property.
(b) The Secured Party shall not be liable to the Debtor (i) for any
loss or damage sustained by it, or (ii) for any loss, damage,
depreciation or other diminution in the value of any of the Collateral
that may occur as a result of, in connection with or that is in any
way related to (x) any exercise by the Secured Party of any right or
remedy under this Agreement or (y) any other act of or failure to act
by the Secured Party, except to the extent that the same shall be
determined by a judgment of a court of competent jurisdiction to be
the result of acts or omissions on the part of the Secured Party
constituting gross negligence or willful misconduct.
(c) No claim may be made by the Debtor against the Secured Party or
its affiliates, officers, directors, employees, attorneys or agents
for any special, indirect, or consequential damages in respect of any
breach of wrongful conduct (whether the claim therefor is based on
contract, tort or duty imposed by law) in connection with, arising out
of or in any way related to the transactions contemplated and
relationship established by this agreement, or any act, omission or
event occurring in connection therewith except a claim resulting from
gross
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negligence or willful misconduct on the part of the secured party or
any of its affiliates, officers, directors, employees, attorneys or
agents; and the Debtor hereby waives, releases and agrees not to sue
upon any such claim for any such damages, whether or not accrued and
whether or not known or suspected to exist in its favor.
SECTION 17. EVENTS OF DEFAULT.
The making of a demand for payment under the Note, or the occurrence of an
Event of Default (as defined in the Note) under the Note, or the breach of
any provision or covenant of the Debtor under this Agreement or if any
representation or warranty made by Debtor hereunder or to any other lender
of the Debtor shall be or shall become false or untrue shall each
constitute an Event of Default hereunder (collectively an "Event of
Default").
SECTION 18. REMEDIES. If any Event of Default shall have occurred and be
continuing, the Secured Party may exercise in respect of the Collateral,
(a) all the rights and remedies of a secured party in connection
with a default by a debtor under the Uniform Commercial Code of
the State of New York (the "CODE") (whether or not the Code
applies to the affected Collateral),
(b) all of the rights and remedies provided for in this
Agreement and any other agreement between the Debtor and the
Secured Party and
(c) such other rights and the remedies as may be provided by law
or otherwise (such rights and remedies of the Secured Party to be
cumulative and nonexclusive).
The Secured Party also may (i) require the Debtor to, and the Debtor
hereby agrees that it will at its expense and upon the request of the
Secured Party forthwith, assemble all or part of the Collateral as
directed by the Secured Party and make it available to the Secured
Party at a place to be designated by the Secured Party that is
reasonably convenient to both parties, (ii) enter onto the property
where any Collateral is located and take possession thereof with or
without judicial process, (iii) prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or
otherwise prepare the Collateral for disposition in any manner to the
extent the Secured Party deems appropriate, (iv) take possession of
the Debtor's premises or place custodians in exclusive control
thereof, remain on such premises and use the same and any of the
Debtor's equipment for the purpose of completing any work in process,
taking any actions described in the preceding clause (iii) and
collecting any Secured Obligation and (v) without notice except as
specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, and
at such price
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or prices and upon such other terms as the Secured Party may deem
commercially reasonable. The Debtor agrees that, in the event notice
cannot be waived, at least five (5) days' notice to the Debtor of the
time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The
Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Secured Party may
adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so
adjourned.
After the occurrence of an Event of Default, the Secured Party shall
have no obligation to make further loans or financial accommodations
available to the Debtor under the Note or any other agreement and all
Secured Obligations shall be immediately due and owing to Secured
Party.
The Secured Party may retain any of the Debtor's directors, officers
and employees, in each case upon such terms as the Secured Party and
any such person may agree, notwithstanding the provisions of any
employment, confidentiality or non-disclosure agreement between any
such Person and the Debtor and the Debtor hereby waives its rights
under any such agreement and consents to each such retention.
SECTION 19. APPLICATION OF PROCEEDS. Except as expressly provided elsewhere
in this Agreement, all proceeds received by the Secured Party in respect of
any sale of, collection from or other realization upon all or any part of
the Collateral may, in the discretion of the Secured Party, be held by the
Secured Party as Collateral for, and/or then, or at any other time
thereafter applied, in full or in part by the Secured Party against the
Secured Obligations in the following order of priority:
(a) To the payment of all costs and expenses of such sale, collection
or other realization and all other expenses, liabilities and advances
made or incurred by the Secured Party in connection therewith and all
amounts for which the Secured Party is entitled to indemnification
hereunder and all advances made by the Secured Party hereunder for the
account of the Debtor and for the payment of all costs and expenses
paid or incurred by the Secured Party in connection with the exercise
of any right or remedy hereunder, all in accordance with Section 20
hereof;
(b) To the payment of the Secured Obligations in such order manner
and sequence as the Secured Party shall elect; and
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(c) After payment in full of the amounts specified in the preceding
subparagraphs, to the payment to or upon the order of the Debtor, or
whosoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
SECTION 20. INDEMNITY AND EXPENSES.
(a) The Debtor agrees to indemnify the Secured Party from and against
any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting from
the Secured Party's gross negligence or willful misconduct.
(b) The Debtor will upon demand pay to the Secured Party the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, that the
Secured Party may incur in connection with (i) the administration of
this Agreement, (ii) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of
the Secured Party hereunder or (iv) the failure by the Debtor to
perform or observe any of the provisions hereof.
SECTION 21. WAIVER OF HEARING. The Debtor expressly waives any
constitutional or other right to a judicial hearing prior to the time the
Secured Party takes possession or disposes of the Collateral as provided in
Section 18 hereof.
SECTION 22. WAIVER OF JURY TRIAL ETC.. THE DEBTOR AND THE SECURED PARTY
HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF
THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS. THE DEBTOR HEREBY ALSO WAIVES THE RIGHT TO INTERPOSE ANY DEFENSE
BASED UPON A CLAIM OF LACHES, SET-OF OR ANY COUNTER-CLAIM NATURE AND ANY
OBJECTION BASED UPON FORUM NON CONVENIENS OR VENUE, AND ANY CLAIM FOR
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES. THE DEBTOR AND THE SECURED
PARTY EACH ACKNOWLEDGE THAT THESE WAIVERS ARE A MATERIAL INDUCEMENT FOR THE
DEBTOR AND THE SECURED PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
THE DEBTOR AND THE SECURED PARTY HAVE ALREADY RELIED ON SUCH WAIVERS ARE
ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON SUCH
WAIVERS IN THEIR RELATED FUTURE DEALINGS. THE DEBTOR AND THE SECURED PARTY
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED SUCH
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WAIVERS WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
MAKE SUCH WAIVERS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THESE WAIVERS
ARE IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THE WAIVERS SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY
THE COURT.
SECTION 23. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall (a) remain in full
force and effect until the indefeasible payment in full of the Secured
Obligations and termination of the Secured Party's obligation to lend under
the Note, (b) be binding upon the Debtor, its successors and assigns and
(c) inure, together with the rights and remedies of the Secured Party
hereunder, to the benefit of the Secured Party and its successors,
transferees and assigns. Without limiting the generality of the foregoing
clause (c), the Secured Party may assign or otherwise transfer the Note to
any other person or entity, and such other benefits in respect thereof
granted to Secured Party herein or otherwise. Upon the indefeasible payment
in full of the Secured Obligations and termination of the Secured Party's
obligation to lend under the Note, the security interest granted hereby
shall terminate and all rights to the Collateral shall revert to the
Debtor. Upon any such termination, the Secured Party will, at the Debtor's
expense, execute and deliver to the Debtor such documents as the Debtor
shall reasonably request to evidence such termination.
SECTION 24. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Debtor herefrom, shall
in any event be effective unless the same shall be in writing and signed by
the Secured Party, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 25. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing (including facsimile
communication) and mailed or telecopied or delivered to the Debtor or the
Secured Party, by overnight courier or messenger, as the case may be,
addressed to it at the address of such party specified on the signature
page hereof, or as to either party at such other address as shall be
designated by such party in a written notice to each other party complying
as to delivery with the terms of this Section. All such notices and other
communications shall be effective when sent addressed as aforesaid.
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SECTION 26. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial
proceedings brought against the Debtor with respect to this Agreement may
be brought in any state or federal court of competent jurisdiction in the
State of New York and by execution and delivery of this Agreement the
Debtor accepts for itself and in connection with the Collateral, generally
and unconditionally, the nonexclusive jurisdiction of the aforesaid courts
and waives any defense of forum non conveniens and irrevocably agrees to be
bound by any judgement rendered thereby in connection with this Agreement.
The Debtor designates and appoints CT Corporation Systems, 1633 Broadway,
New York, NY, 10019, and such other Persons as may hereafter be selected by
the Debtor irrevocably agreeing in writing to so serve, as its agent to
receive on its behalf service of all process in any such proceedings in any
such court, such service being hereby acknowledged by the Debtor to be
effective and binding service in every respect. A copy of any such process
so served shall be mailed by registered mail to the Debtor, at its address
as specified in Section 25 hereof, except that unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity
of service of process. If any agent appointed by the Debtor refuses to
accept service, the Debtor hereby agrees that service upon it by mail shall
constitute sufficient notice. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right
of the Secured Party to bring proceedings against the Debtor in the courts
of any other jurisdiction.
SECTION 27. GOVERNING LAW, TERMS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. UNLESS OTHERWISE DEFINED
HEREIN, TERMS USED IN ARTICLE 9 OF THE CODE IN THE STATE OF NEW YORK ARE
USED HEREIN AS THEREIN DEFINED.
SECTION 28. HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute
a part of this Agreement or be given any substantive effect.
SECTION 29. SEVERABILITY. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
SECTION 30. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Agreement to be duly executed and delivered as of the date first above
written.
OLEFINS MARKETING INC.
By : By :
---------------------------- ----------------------------
Name: Name:
Title : Title :
------------------------- --------------------------
Date : Date :
------------------------- --------------------------
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SCHEDULE I
TO SECURITY AGREEMENT
Required Consents
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SCHEDULE II
SECURITY AGREEMENT QUESTIONNAIRE
The undersigned ("Debtor") is entering into a Security Agreement with
Caisse Nationale de Credit Agricole, New York Branch. In connection with
the Security Agreement, Debtor is required to answer the following
questions:
1. What is Debtor's exact name as it appears in its certificate of
incorporation (or, if not a corporation, the Debtor's complete
name)?
Olefins Marketing, Inc.
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2. Has Debtor ever changed its name? If so, state each other name
Debtor has had.
Yes, Olefins Trading, Inc
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3. Does Debtor do business under any other name? If so, state each
such name.
No
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<PAGE> 22
4. Does Debtor use or had Debtor used any trade names or trade
styles? If so, list each of them.
No
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5. Has Debtor changed its identity or corporate structure in any way
within the past four months? Changes in corporate structure would
include incorporation of a partnership or acquisitions. If any
such change has taken place, indicate the nature of such change
and give the names of each corporation or other entity that was
incorporated, merged or consolidated with or acquired by Debtor in
such transaction (including each name under which each such
corporation or entity has done business) and the address of each
place of business of each such incorporation, merger,
consolidation or acquisition and within four months prior to the
date of this questionnaire.
No
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6. State the complete address (including the county) of Debtor's
chief executive office and, if different from it chief executive
office, of the office where Debtor keeps its books and records
relating to its accounts or contract rights.
8675 Hidden River Parkway
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Tampa, Florida 33637
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Hillsbrough County
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Page 22
<PAGE> 23
7. Has Debtor's chief executive office or office where Debtor keeps
its books and records relating to its accounts or contract rights
been located at any other address during the past four months? If
so, specify each such address (including the county).
No
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8. State the complete address (including the county) of each other
place of business that Debtor presently has.
NA
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9. State the complete address (including the county) of each place of
business that Debtor has had in the past four months, other than
those listed in the answers to questions 6, 7 and 8.
NA
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10. State the complete address (including the county) of each location
where Debtor keeps any inventory or equipment, other than the
place of business listed in the answers to questions 6,7 and 8.
NA
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Page 23
<PAGE> 24
11. Has any of Debtor's inventory or equipment been located during the
past four months at any location other than the location listed in
the answers to questions 6,7,8,9 and 10? If so, state the complete
address (including the county) of each such location.
No
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12. Does any person or entity other than Debtor have possession of
any of Debtor's inventory or equipment? If so, state the name and
address (including the country) of each such person or entity.
No
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13. When Debtor purchases goods, are there any places in which such
goods might in the usual course of the purchase transaction be
located, even temporarily for purposes of transshipment? If so,
state the complete address (including the county) of each such
location.
No
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Page 24
<PAGE> 25
14. Has Debtor acquired any of its inventory or equipment other than
in the ordinary course of business? If so, specify the nature of
any such acquisition
No
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15. Does Debtor own or have an interest in any goods other than
inventory or equipment, such as crops, minerals or the like? If
so, please describe such goods and state the complete address
(including the county) where such goods are located.
No
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16. Federal Tax I.D. Number of Debtor
06-1192980
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Page 25
<PAGE> 26
SCHEDULE III
TO SECURITY AGREEMENT
Existing Liens and Encumbrances
Page 26
<PAGE> 1
EXHIBIT 10.18
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as it may hereafter be amended, supplemented, restated,
replaced or otherwise modified from time to time, the "AGREEMENT") is dated as
of May 12, 1994 and entered into by and between JLM INTERNATIONAL INC. (the
"DEBTOR") a corporation organized under the laws of Delaware and CAISSE
NATIONALE DE CREDIT AGRICOLE, NEW YORK BRANCH (the "SECURED PARTY").
PRELIMINARY STATEMENTS
The Debtor has issued to the Secured Party a Demand Promissory Note, of even
date herewith (as it may hereafter be amended, supplemented, restated, renewed,
replaced or otherwise modified from time to time, the "NOTE"). It is a condition
precedent to the making of loans by the Secured Party the repayment of which is
evidenced by the Note that the Debtor shall have granted the security interest
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Secured Party to make loans the repayment of which is evidenced by the Note and
for other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Debtor hereby agrees with the Secured Party as
follows:
SECTION 1. DEFINITIONS. The following terms used in this Agreement shall have
the following meanings:
"CONTRACTUAL OBLIGATIONS", as applied to any Person (as defined below), means
any provision of any security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any material amount
of its properties is bound or to which it or any material amount of its
properties is subject.
"EVENT OF DEFAULT", shall have the meaning given such term in Section 17 of this
Agreement.
"LIEN", as applied to any Person, means any lien, mortgage, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, and any agreement to give any security
interest).
<PAGE> 2
"PERSON" means and includes natural persons, corporations, limited partnerships,
general partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments, agencies and
political subdivisions thereof.
SECTION 2. GRANT OF SECURITY. The Debtor hereby assigns to the Secured Party,
and hereby grants to the Secured Party a security interest in, all of the
Debtor's right, title and interest in and to the collateral listed in
sub-section A and B below, in each case whether now or hereafter existing or in
which the Debtor now has or hereafter acquires an interest and wherever the same
may be located (the "COLLATERAL").
A. (i) All equipment in all of its forms, all Parts there of and all
replacements thereof, spare parts and accessions thereto (any and all
such equipment, parts, replacements, spare parts and accessions being
the "EQUIPMENT");
(ii) All inventory in all of its forms, but not limited to,
(a) all goods held by the Debtor for sale or to be furnished under
contracts of service or furnished (b) all raw materials, work in
process, finished goods, and materials used or consumed in the
manufacture, packing, shipping, advertising, selling, furnishing or
production of such inventory or otherwise used or consumed in the
Debtor's business, (c) goods in which the Debtor has an interest in
mass or a joint or other interest or right of any kind and (d) goods
which are returned to or repossessed by the Debtor and, with regard to
all of the above, all additions and accessions thereto and replacements
thereof (all such inventory, accessions and products being the
"INVENTORY");
(iii) All rights and claims to the payment or receipt of money
or other forms of consideration of any kind, including, but not limited
to, any and all such rights and claims in, to and under, all accounts,
contract rights, chattel paper, instruments, general intangibles,
guaranties, letters of credit, documents, drafts, acceptances, tax
refunds, rights to performance, judgments taken on any rights and
claims otherwise included in this clause (c) and all rights in, to and
under all documents, instruments, documents of title, transport or
otherwise related to the Inventory, security agreements, and other
contracts securing or otherwise relating to any such rights and claims
to the payment or receipt of money or other forms of consideration (any
and all such rights and claims to the payment or receipt of money or
other forms of consideration being the "PAYMENT RIGHTS", and any and
all such security agreements and other contracts being the "RELATED
CONTRACTS");
Page 2
<PAGE> 3
(iv) All books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and related data
processing software (owned by the Debtor or in which it has an
interest) that at any time evidence or contain information
relating to any of the Collateral or are otherwise necessary or
helpful in the collection thereof or realization thereupon;
(v) All plant fixtures, business fixtures and other
fixtures and storage and office facilities, and all additions and
accessions thereto and replacements thereof and products thereof;
(vi) All trademarks (including the goodwill relating
thereto), tradenames, business names, patents and copyrights of the
Debtor;
(vii) All deposit accounts of the Debtor, including,
without limitation, deposit accounts maintained with the
Secured Party; and
(viii) All proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments
under insurance (whether or not the Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral. For purposes of this Agreement, the term "PROCEEDS"
includes whatever is receivable or received when Collateral or proceeds
are sold, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes, without
limitation, all rights to payment, including returned premiums, with
respect to any insurance relating thereto.
B. All personal property of the Debtor which is or shall be
financed by the Secured Party or is in, or shall come into the
possession or control of the Secured Party, including without
limitation, inventory, goods, documents (including any documents made
available to the Debtor pursuant to trust receipts or other security
agreements) and present or future accounts receivable resulting from
the sale of goods, the purchase of which was financed by the Secured
Party or for which the Secured Party has made advances; and the
products and proceeds thereof, together with all improvements and
additions thereto whether same be cash, accounts, chattel paper,
instruments, notes, drafts, acceptances, contract rights or general
intangibles.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures and the Collateral
is collateral security for the prompt payment or performance in full when due,
whether at stated maturity, by acceleration or otherwise (including the payment
of amounts that would become due but for the operation of the automatic stay
under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a) whether or
not a claim is allowed therefor) of all obligations of every nature of the
Debtor to the Secured Party, now or hereafter existing,
Page 3
<PAGE> 4
including, without limitation, the obligations of the Debtor under the Note, any
other promissory note, document or instrument delivered pursuant thereto and all
amendments, extensions or renewals thereof, and in any case whether for
principal, interest (including without limitation, interest that, but for the
filing of a petition in bankruptcy with respect to the Debtor, would accrue on
such obligations), attorneys' fees, expenses or otherwise, whether now existing
or hereafter arising, voluntary or involuntary, whether or not jointly owed with
others, direct or indirect, (including participations or any interest of Secured
Party in indebtedness of the Debtor to others), absolute or contingent,
liquidated or unliquidated, and whether or not from time to time decreased or
extinguished and later increased, created or incurred and all or any portion of
such obligations that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from the Secured Party as a
preference, fraudulent transfer or otherwise (all such obligations being the
"UNDERLYING DEBT"), and including, without limitation, all obligations of every
nature of the Debtor now or hereafter existing under this Agreement (all such
obligations of the Debtor, together with the Underlying Debt, being the "SECURED
OBLIGATIONS").
SECTION 4. THE DEBTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Debtor shall remain liable under any contracts and
agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Secured Party of
any of the rights hereunder shall not release the Debtor from any of its duties
or obligations under the contracts and agreements included in the Collateral and
(c) the Secured Party shall not have any obligation or liability under any
contracts and agreements included in the Collateral by reason of this Agreement,
nor shall the Secured Party be obligated to perform any of the obligations or
duties of the Debtor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder. In the event the Secured Party shall
make any disbursement in performing the obligations of the Debtor under any such
contract or agreement such shall be added to the Secured Obligations and be
secured by the Collateral.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Debtor represents and warrants as
follows:
(a) Organization and Powers. The Debtor is a limited partnership
duly organized, validly existing and in good standing under the laws of
Delaware, and has all requisite power and authority to own and operate
its properties, to carry on its business as now conducted and proposed
to be conducted and to enter into this Agreement and carry out the
transactions contemplated hereby and thereby.
Page 4
<PAGE> 5
(b) Good Standing. The Debtor is in good standing wherever
necessary to carry on its present business and operations, except in
jurisdictions in which the failure to be in good standing has not had
and will not have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of
the Debtor and its subsidiaries, taken as a whole.
(c) Authorization. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate action
by the Debtor.
(d) No Conflict. The execution, delivery and performance by the
Debtor of this Agreement will not (i) violate the organizational
documents of the Debtor, (ii) violate any provision of law applicable
to the Debtor, or any order, judgment or decree of any court or other
agency of government binding on the Debtor, the violation of which
could have a material adverse effect on the business, operations,
assets or financial condition of the Debtor, (iii) be in conflict with,
result in a breach of, or constitute (with due notice or lapse of time
or both) a default in any Contractual Obligation of the Debtor, (iv)
result in or require the creation or imposition of any material Lien of
any nature whatsoever upon any of its material properties or assets
(except for the security interest created by this Agreement), or (v)
require the approval of any Person under any Contractual Obligation of
the Debtor except for those institutions listed on Schedule I hereto
which institutions have given their written approval, a copy of which
has been provided to the Secured Party.
(e) Binding Obligation. This Agreement constitutes the legally
valid and binding obligation of the Debtor, enforceable against it in
accordance with its terms, except as enforcement may limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws or
equitable principles relating to or limiting creditors' rights
generally.
(f) Location of Equipment and Inventory. All of the Equipment and
Inventory is located at the places specified in Schedule II hereto.
(g) Delivery of Certain Collateral. All notes and other
instruments (excluding checks) comprising any and all items of
Collateral have been delivered to the Secured Party duly endorsed and
accompanied by duly executed instruments of transfer or assignment in
blank.
(h) Payment Rights Valid. Each Payment Right constitutes the
legally valid and binding obligation of the party obligated to pay the
same (the "ACCOUNT DEBTOR"). Each such Payment Right complies with the
provisions of all applicable laws and regulations, whether federal,
state or local, applicable thereto (including, without limitation, any
usury law, the Federal Truth in Lending Act and Regulation Z of the
Federal Reserve System). None of the Payment Rights
Page 5
<PAGE> 6
is evidenced by a promissory note or other instrument, other than a
check, that has not been delivered to the Secured Party, pursuant to
sub-section (g) hereof.
(i) Ownership of Collateral. Except for the interests disclosed in
Schedule III hereto and the security interest created by this
Agreement, the Debtor owns the Collateral free and clear of any Lien.
Except with respect to the interests disclosed in Schedule III hereto
and such as may have been filed in favor of the Secured Party relating
to this Agreement, no effective financing statement or other
instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office.
(j) Perfection. This Agreement creates a valid, perfected and,
except for the interests disclosed in Schedule III hereto, first
priority security interest in the Collateral, securing the payment of
the Secured Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly
taken.
(k) Governmental Authorizations. No authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either (i) for the grant by
the Debtor of the security interest granted hereby or for the
execution, delivery or performance of this Agreement by the Debtor or
(ii) for the perfection of or the exercise by the Secured Party of its
rights and remedies hereunder (except as may have been taken by or at
the direction of the Debtor).
(1) Other Information. All information heretofore, herein or
hereafter supplied to the Secured Party by or on behalf of the Debtor
with respect to the Collateral is accurate and complete in all
respects.
(m) Office Locations; Fictitious Names. The chief place of
business, the chief executive office and the office where the Debtor
keeps its records regarding the Payment Rights and all originals of all
chattel paper that evidence Payment Rights is the address indicated
below the Debtor's signature hereto. The Debtor does not do business
under any trade-name or fictitious business name.
SECTION 6. Further Assurances.
(a) The Debtor agrees that from time to time, at the expense of the
Debtor, the Debtor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or desirable, or that the Secured Party may request, in order
to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce
its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, the Debtor will: (i)
mark conspicuously
Page 6
<PAGE> 7
each chattel paper included in the Payment Rights and each Related
Contract, (ii) at the request of the Secured Party, mark conspicuously
each of its records pertaining to the Collateral with a legend, in form
and substance satisfactory to the Secured Party, indicating that such
Collateral is subject to the security interest granted hereby; (iii)
if any Payment Right shall be evidenced by a promissory note or other
instrument (excluding checks), deliver and pledge to the Secured Party
hereunder such note or instrument duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance satisfactory to the Secured Party; (iv) at the request of the
Secured Party, deliver and pledge to the Secured Party all promissory
notes and other instruments (including checks) and all original
counterparts of chattel paper constituting Collateral duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all
in form and substance satisfactory to the Secured Party; (v) execute
and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Secured Party may request, in order to perfect and
preserve the security interests granted or purported to be granted
hereby, (vi) from time to time at any reasonable time, upon demand by
the Secured Party exhibit the Collateral to and allow inspection of the
Collateral by the Secured Party, or persons designated by the Secured
Party and (vii) at the Secured Party's request, appear in and defend
any action or proceeding that may affect the Debtor's title to or the
Secured Party's security interest in the Collateral.
(b) The Debtor hereby authorizes the Secured Party to file one or
more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of
the Debtor. A carbon, photographic or other reproduction of this
Agreement or a financing statement signed by the Debtor shall be
sufficient as a financing statement.
(c) The Debtor will furnish to the Secured Party from time to time
statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as
the Secured Party may reasonably request, all in reasonable detail.
SECTION 7. COVENANTS OF THE DEBTOR. The Debtor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement, or any applicable
statute, regulation or ordinance or any policy of insurance covering
the Collateral;
(b) notify the Secured Party of any change in the Debtor's name,
identity or structure within 15 days of such change;
Page 7
<PAGE> 8
(c) give the Secured Party 30 days' prior written notice of any
change in the Debtor's chief place of business;
(d) if the Secured Party gives value to enable the Debtor to
acquire rights in or the use of any Collateral, use such value for such
purposes;
(e) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Collateral, except to the extent the validity thereof is being
contested in good faith; provided that Debtor shall in any event pay
such taxes, assessments, governmental charges or levies not later than
five days prior to the date of any proposed sale under any judgement,
writ or warrant of attachment entered or filed against the Debtor as a
result of the failure to make such payment;
(f) deliver to the Secured Party at its request, from time to
time, financial statements or other financial information, in form,
substance and scope satisfactory to the Secured Party, and
(g) notify the Secured Party of any Event of Default of which it
has knowledge.
SECTION 8. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY. The Debtor
shall:
(a) keep the Equipment and Inventory (other than Inventory sold
in the ordinary course of business) at the places therefor specified on
Schedule II hereto or, upon 30 days' prior written notice to the
Secured Party, at such other places in jurisdictions where all action
that may be necessary or desirable, or that the Secured Party may
request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to
such Equipment and Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and shall forthwith, or in the case of any loss or damage to
any of the Equipment as quickly as practicable after the occurrence
thereof, make or cause to be made all repairs, replacements, and other
improvements in connection therewith that are necessary or desirable to
such end. The Debtor shall promptly furnish to the Secured Party a
statement respecting any loss or damage to any of the Equipment; and
Page 8
<PAGE> 9
(c) keep correct and accurate records of the Inventory, itemizing
and describing the kind, type and quantity of Inventory, the Debtor's
cost therefor and (where applicable) the current price list for such
Inventory;
SECTION 9. INSURANCE.
(a) The Debtor shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in such amounts, against such
risks, in such form and with such insurers, as shall be satisfactory to
the Secured Party from time to time. Such insurance shall include,
without limitation, property damage insurance and liability insurance.
Each policy for property damage insurance shall provide for all losses
(except for losses of less than $50,000 per occurrence) to be paid
directly to the Secured Party. Each policy shall in addition (i) name
the Debtor and the Secured Party as insured parties thereunder (without
any representation or warranty by or obligation upon the Secured Party)
as their interests may appear, (ii) contain an agreement by the insurer
that any loss thereunder shall be payable to the Secured Party
notwithstanding any action, inaction or breach of representation or
warranty by the Debtor, (iii) have attached thereto the Lender's Loss
Payable Endorsement or its equivalent, or a Loss Payable clause
acceptable to the Secured Party, (iv) provide that there shall be no
recourse against the Secured Party for payment of premiums or other
amounts with respect thereto and (v) provide that at least 30 days'
prior written notice of cancellation, material amendment, reduction in
scope or limits of coverage or of lapse shall be given to the Secured
Party by the insurer. The Debtor shall, if so requested by the Secured
Party, deliver to the Secured Party original or duplicate policies of
such insurance and, as often as the Secured Party may reasonably
request, a report of a reputable insurance broker with respect to such
insurance. Further, the Debtor shall, at the request of the Secured
Party, duly execute and deliver instruments of assignment of such
insurance policies to comply with the requirements of Section 6(a) and
cause the respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by the
Debtor pursuant to this Section 9 may be paid directly to the person
who shall have incurred liability covered by such insurance. In case of
any loss involving damage to Equipment or Inventory when subsection (c)
of this Section 9 is not applicable, the Debtor shall make or cause to
be made the necessary repairs to or replacements of such Equipment or
Inventory, and any proceeds of insurance maintained by the Debtor
pursuant to this Section 9 shall be paid to the Debtor as reimbursement
for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuance of any
Event of Default, or (ii) the actual or constructive total loss (in
excess of $25,000 per occurrence) of any Equipment or Inventory, all
insurance payments in respect of
Page 9
<PAGE> 10
such Equipment or Inventory shall be paid to and applied by the Secured
Party as specified in Section 19 hereof.
SECTION 10. SPECIAL COVENANTS WITH RESPECT TO PAYMENT RIGHTS AND RELATED
CONTRACTS.
(a) The Debtor shall keep its chief place of business, chief
executive office and the office where it keeps its records concerning
the Payment Rights and Related Contracts, and all originals of all
chattel paper that evidence Payment Rights, at the location therefor
specified in Section 5 hereof or, upon 30 days' prior written notice to
the Secured Party, at such other locations in a jurisdiction where all
action that may be necessary or desirable, or that the Secured Party
may request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder with
respect to such Payment Rights and Related Contracts shall have been
taken. The Debtor will hold and preserve such records and chattel paper
and will permit representatives of the Secured Party at any time during
normal business hours to inspect and make abstracts from such records
and chattel paper and the Debtor agrees to render to the Secured Party,
at the Debtor's cost and expense, such clerical and other assistance as
may be reasonably requested with regard thereto. Promptly upon the
request of the Secured Party, the Debtor shall deliver to the Secured
Party complete and correct copies of each Related Contract.
(b) The Debtor shall, for not less than 5 years from the date on
which such Payment Right arose, maintain (i) complete records of each
Payment Right, including records of all payments received, credits
granted and merchandise returned and (ii) all documentation relating
thereto.
(c) The Debtor shall duly fulfill all obligations on its part to
be fulfilled under or in connection with the Payment Rights and the
Related Contracts and shall do nothing to impair the rights of the
Secured Party therein.
(d) Except as otherwise provided in this subsection (d) of this
Section 10, the Debtor shall continue to collect at its own expense,
all amounts due or to become due the Debtor under the Payment Rights
and Related Contracts. In connection with such collections, the Debtor
may take (and, at the Secured Party's direction, shall take) such
action as the Debtor or the Secured Party may deem necessary or
advisable to enforce collection of the Payment Rights; provided,
however, that the Secured Party shall have the right at any time,
whether or not there shall be the occurrence an Event of Default all
without prior written notice to the Debtor of its intention to do so,
to notify the Account Debtors or obligors under any Payment Rights of
the assignment of such Payment Rights to the Secured Party
Page 10
<PAGE> 11
and to direct such Account Debtors or obligors to make payment of all
amounts due or to become due to the Debtor thereunder directly to the
Secured Party, to notify each Person maintaining a lockbox or similar
arrangement to which Account Debtors or obligors under any Payment
Rights have been directed to make payment to remit all amounts
representing collections on checks and other payment items from time to
time sent to or deposited in such lockbox or other arrangement directly
to the Secured Party and, upon such notification and at the expense of
the Debtor, to enforce collection of any such Payment Rights and to
adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as the Debtor might have done. After
notice from the Secured Party to the Account Debtors referred to in the
proviso to the preceding sentence, (i) all amounts and proceeds
(including checks and other instruments) received by the Debtor in
respect of the Payment Rights and the Related Contracts shall be
received in trust for the benefit of the Secured Party hereunder, shall
be segregated from other funds of the Debtor and shall be forthwith
paid over or delivered to the Secured Party in the same form as so
received (with any necessary endorsement) to be held as cash collateral
and applied as provided by Section 19, and (ii) the Debtor shall not
adjust, settle or compromise the amount or payment of any Payment
Right, or release wholly or partly any Account Debtor or obligor
thereof, or allow any credit discount thereon.
SECTION 11. DEPOSIT ACCOUNTS. Upon the occurrence and during the continuance of
an Event of Default, the Secured Party may exercise dominion and control over,
and refuse to permit further withdrawals (whether of money, securities,
instruments or other property) from deposit accounts maintained with the Secured
Party constituting part of the Collateral.
SECTION 12. LICENSE OF PATENTS, TRADEMARKS AND TRADENAMES. The Debtor hereby
assigns, transfers and conveys to the Secured Party, effective upon the
occurrence of any Event of Default, the nonexclusive right and license to use
all trademarks, tradenames, copyrights, patents or technical processes owned or
used by the Debtor that relate to the Collateral and any other collateral
granted by the Debtor as security for the Secured Obligations, together with any
goodwill associated therewith, all to the extent necessary to enable the
Secured Party to use, possess and realize on the Collateral and any successor or
assign to enjoy the benefits of the Collateral. This right and license shall
inure to the benefit of the Secured Party and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license is granted free of charge, without requirement that any monetary payment
whatsoever be made to the Debtor.
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SECTION 13. TRANSFERS AND OTHER LIENS. The Debtor shall not, without the prior
written consent of the Secured Party:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary
course of business; and
(b) except for the interests disclosed in Schedule III hereto and
the security interest created by this Agreement, create or suffer to
exist any Lien upon or with respect to any of the Collateral to secure
the indebtedness of the Debtor or other obligations of any Person.
SECTION 14. THE SECURED PARTY APPOINTED ATTORNEY-IN-FACT. The Debtor hereby
irrevocably appoints the Secured Party the Debtor's attorney-in-fact, with full
authority in the place and stead of the Debtor and in the name of the Debtor,
the Secured Party or otherwise, from time to time in the Secured Party's
discretion to take any action and to execute any instrument that the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be maintained by
the Debtor or paid to the Secured Party pursuant to Section 9 hereof.
(b) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral,
(c) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clauses
(a) and (b) above,
(d) to file any claims or take any action or institute any
proceedings that the Secured Party may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the
rights of the Secured Party with respect to any of the Collateral,
(e) to pay or discharge taxes or Liens, levied or placed upon or
threatened against the Collateral, the legality or validity thereof and
the amounts necessary to discharge the same to be determined by the
Secured Party in its sole discretion, and such payments made by the
Secured Party to become obligations of the Debtor to the Secured Party,
due and payable immediately without demand,
(f) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts and
other documents relating to the Collateral; and
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<PAGE> 13
(g) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Secured Party were the absolute owner thereof
for all purposes, and to do, at the Secured Party's option and the
Debtor's expense, at any time, or from time to time, all acts and
things that the Secured Party deems necessary to protect, preserve or
realize upon the Collateral and the Secured Party's security interest
therein, in order to effect the intent of this Agreement, all as fully
and effectively as the Debtor might do.
SECTION 15. SECURED PARTY MAY PERFORM. If the Debtor fails to perform any
agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of the Secured Party incurred
in connection therewith shall be payable by the Debtor under Section 20.
SECTION 16. THE SECURED PARTY'S DUTIES AND LIABILITIES.
(a) The powers conferred on the Secured Party hereunder are
solely to protect its interest in the Collateral and shall not impose
any duty upon it to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Secured Party
shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral. The Secured Party shall be deemed
to exercise reasonable care in the custody and preservation of such
Collateral if such Collateral is accorded treatment substantially
equal to that which the Secured Party accords its own property.
(b) The Secured Party shall not be liable to the Debtor (i) for
any loss or damage sustained by it, or (ii) for any loss, damage,
depreciation or other diminution in the value of any of the Collateral
that may occur as a result of, in connection with or that is in any way
related to (x) any exercise by the Secured Party of any right or remedy
under this Agreement or (y) any other act of or failure to act by the
Secured Party, except to the extent that the same shall be determined
by a judgment of a court of competent jurisdiction to be the result of
acts or omissions on the part of the Secured Party constituting gross
negligence or willful misconduct
(c) No claim may be made by the Debtor against the Secured Party
or its affiliates, officers, directors, employees, attorneys or agents
for any special, indirect, or consequential damages in respect of any
breach of wrongful conduct (whether the claim therefor is based on
contract, tort or duty imposed by law) in connection with, arising out
of or in any way related to the transactions contemplated and
relationship established by this agreement, or any act, omission or
event occurring in connection therewith except a claim resulting from
gross
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<PAGE> 14
negligence or willful misconduct on the part of the secured party or
any of its affiliates, officers, directors, employees, attorneys or
agents; and the Debtor hereby waives, releases and agrees not to sue
upon any such claim for any such damages, whether or not accrued and
whether or not known or suspected to exist in its favor.
SECTION 17. EVENTS OF DEFAULT.
The making of a demand for payment under the Note, or the occurrence of an Event
of Default (as defined in the Note) under the Note, or the breach of any
provision or covenant of the Debtor under this Agreement or if any
representation or warranty made by Debtor hereunder or to any other lender of
the Debtor shall be or shall become false or untrue shall each constitute an
Event of Default hereunder (collectively an 'Event of Default").
SECTION 18. REMEDIES. If any Event of Default shall have occurred and be
continuing, the Secured Party may exercise in respect of the Collateral,
(a) all the rights and remedies of a secured party in connection with a
default by a debtor under the Uniform Commercial Code of the State of
New York (the "CODE") (whether or not the Code applies to the affected
Collateral),
(b) all of the rights and remedies provided for in this Agreement and
any other agreement between the Debtor and the Secured Party and
(c) such other rights and the remedies as may be provided by law or
otherwise (such rights and remedies of the Secured Party to be
cumulative and nonexclusive).
The Secured Party also may (i) require the Debtor to, and the Debtor
hereby agrees that it will at its expense and upon the request of the
Secured Party forthwith. assemble all or part of the Collateral as
directed by the Secured Party and make it available to the Secured
Party at a place to be designated by the Secured Party that is
reasonably convenient to both parties, (ii) enter onto the property
where any Collateral is located and take possession thereof with or
without judicial process, (iii) prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or
otherwise prepare the Collateral for disposition in any manner to the
extent the Secured Party deems appropriate, (iv) take possession of the
Debtor's premises or place custodians in exclusive control thereof,
remain on such premises and use the same and any of the Debtors
equipment for the purpose of completing any work in process, taking any
actions described in the preceding clause (iii) and collecting any
Secured Obligation and (v) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, and at such
price
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<PAGE> 15
or prices and upon such other terms as the Secured Party may deem
commercially reasonable. The Debtor agrees that, in the event notice
cannot be waived, at least five (5) days' notice to the Debtor of the
time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The
Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Secured Party may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
After the occurrence of an Event of Default, the Secured Party shall
have no obligation to make further loans or financial accommodations
available to the Debtor under the Note or any other agreement and all
Secured Obligations shall be immediately due and owing to Secured
Party.
The Secured Party may retain any of the Debtor's directors, officers
and employees, in each case upon such terms as the Secured Party and
any such person may agree, notwithstanding the provisions of any
employment, confidentiality or non-disclosure agreement between any
such Person and the Debtor and the Debtor hereby waives its rights
under any such agreement and consents to each such retention.
SECTION 19. APPLICATION OF PROCEEDS. Except as expressly provided elsewhere in
this Agreement, all proceeds received by the Secured Party in respect of any
sale of, collection from or other realization upon all or any part of the
Collateral may, in the discretion of the Secured Parry, be held by the Secured
Party as Collateral for, and/or then, or at any other time thereafter applied,
in full, or in part by the Secured Party against the Secured Obligations in the
following order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization and all other expenses, liabilities and
advances made or incurred by the Secured Party in connection therewith
and all amounts for which the Secured Party is entitled to
indemnification hereunder and all advances made by the Secured Party
hereunder for the account of the Debtor and for the payment of all
costs and expenses paid or incurred by the Secured Party in connection
with the exercise of any right or remedy hereunder, all in accordance
with Section 20 hereof;
(b) To the payment of the Secured Obligations in such order manner
and sequence as the Secured Party shall elect; and
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<PAGE> 16
(c) After payment in full of the amounts specified in the
preceding subparagraphs, to the payment to or upon the order of the
Debtor, or whosoever may be lawfully entitled to receive the same or as
a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
SECTION 20. INDEMNITY AND EXPENSE
(a) The Debtor agrees to indemnify the Secured Party from and
against any and all claims, losses and liabilities growing out of or
resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or liabilities
resulting from the Secured Party's gross negligence or willful
misconduct.
(b) The Debtor will upon demand pay to the Secured Party the
amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel and of any experts and agents,
that the Secured Party may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use
or operation of, or the sale of, collection from, or other realization
upon, any of the Collateral, (iii) the exercise or enforcement of any
of the rights of the Secured Party hereunder or (iv) the failure by
the Debtor to perform or observe any of the provisions hereof.
SECTION 21. WAIVER OF HEARING. The Debtor expressly waives any constitutional or
other right to a judicial hearing prior to the time the Secured Party takes
possession or disposes of the Collateral as provided in Section 18 hereof.
22. WAIVER OF JURY TRIAL ETC.. THE DEBTOR AND THE SECURED PARTY HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY ANF ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE DEBTOR HEREBY ALSO WAIVES THE
RIGHT TO INTERPOSE ANY DEFENSE BASED UPON A CLAIMS OF LACHES SET-OF OR ANY
COUNTER-CLAIM NATURE AND ANY OBJECTION BASED UPON FORUM NON CONVENIENS OR
VENUE, AND ANY CLAIM FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES. THE DEBTOR
AND THE SECURED PARTY EACH ACKNOWLEDGE THAT THESE WAIVERS ARE A MATERIAL
INDUCEMENT FOR THE DEBTOR AND THE SECURED PARTY TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT THE DEBTOR AND THE SECURED PARTY HAVE ALREADY RELIED ON
SUCH WAIVERS ARE ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO
RELY ON SUCH WAIVERS IN THEIR RELATED FUTURE DEALINGS. THE DEBTOR AND THE
SECURED PARTY FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED SUCH
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<PAGE> 17
WAIVERS WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY MAKE
SUCH WAIVERS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THESE WAIVERS ARE
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVERS SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
SECTION 23. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall (a) remain in full
force and effect until the indefeasible payment in full of the Secured
Obligations and termination of the Secured Party's obligation to lend under the
Note, (b) be binding upon the Debtor, its successors and assigns and (c) inure,
together with the rights and remedies of the Secured Party hereunder, to the
benefit of the Secured Party and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), the Secured Party
may assign or otherwise transfer the Note to any other person or entity, and
such other benefits in respect thereof granted to Secured Party herein or
otherwise. Upon the indefeasible payment in full of the Secured Obligations and
termination of the Secured Party's obligation to lend under the Note, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Debtor. Upon any such termination, the Secured
Party will, at the Debtor's expense, execute and deliver to the Debtor such
documents as the Debtor shall reasonably request to evidence such termination.
SECTION 24. AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement nor consent to any departure by the Debtor herefrom, shall in any
event be effective unless the same shall be in writing and signed by the Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 25. ADDRESSES FOR NOTICES. All notices and other communications provided
for hereunder shall be in writing (including facsimile communication) and mailed
or telecopied or delivered to the Debtor or the Secured Party, by overnight
courier or messenger, as the case may be, addressed to it at the address of such
party specified on the signature page hereof, or as to either party at such
other address as shall be designated by such party in a written notice to each
other party complying as to delivery with the terms of this Section. All such
notices and other communications shall be effective when sent addressed as
aforesaid.
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SECTION 26. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial
proceedings brought against the Debtor with respect to this Agreement may be
brought in any state or federal court of competent jurisdiction in the State of
New York and by execution and delivery of this Agreement the Debtor accepts for
itself and in connection with the Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and waives any defense of
forum non conveniens and irrevocably agrees to be bound by any judgement
rendered thereby in connection with this Agreement. The Debtor designates and
appoints CT Corporation Systems, 1633 Broadway, New York, NY, 10019, and such
other Persons as may hereafter be selected by the Debtor irrevocably agreeing in
writing to so serve, as its agent to receive on its behalf service of all
process in any such proceedings in any such court, such service being hereby
acknowledged by the Debtor to be effective and binding service in every respect.
A copy of any such process so served shall be mailed by registered mail to the
Debtor, at its address as specified in Section 25 hereof, except that unless
otherwise provided by applicable law, any failure to mail such copy shall not
affect the validity of service of process. If any agent appointed by the Debtor
refuses to accept service, the Debtor hereby agrees that service upon it by mail
shall constitute sufficient notice. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of
the Secured Party to bring proceedings against the Debtor in the courts of any
other jurisdiction.
SECTION 27. GOVERNING LAW, TERMS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. UNLESS OTHERWISE DEFINED HEREIN, TERMS
USED IN ARTICLE 9 OF THE CODE IN THE STATE OF NEW YORK ARE USED HEREIN AS
THEREIN DEFINED.
SECTION 28. HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.
SECTION 29. SEVERABILITY. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
SECTION 30. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement.
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<PAGE> 19
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this Agreement
to be duly executed and delivered as of the date first above written.
JLM INTERNATIONAL INC.
By: By:
----------------------- ------------------------
Name: Name:
Title: Title:
----------------------- ------------------------
Date: Date:
----------------------- ------------------------
Page 19
<PAGE> 1
EXHIBIT 10.20
[Standard Chartered Letterhead]
October 23, 1996
JLM International, Inc./Olefins Marketing Corp.
8675 Hidden River Parkway
Tampa, FL 33637
Attention: Mr. Frank Musto
Ladies and Gentlemen:
Standard Chartered Bank (the "Bank") is pleased to advise that it may continue
to make available an uncommitted line of credit (the "Facility") to JLM
International, Inc. and/or Olefins Marketing Corp. (each a "Borrower" and
collectively the "Borrowers") pursuant to the following terms and conditions.
All previous Letter Agreements between the Bank and the Borrowers are hereby
superseded and replaced. No commitment to lend, to issue any letter of credit
or to enter into any foreign exchange transactions can be assumed or inferred
hereby. The purpose of this letter agreement is to outline the general
parameters of the transactions that the Bank would consider entering into with
the Borrower from time to time.
1. AMOUNT: An aggregate principal amount at any time outstanding of
up to USD18,000,000 (including amounts available under any
letters of credit, bankers' acceptances, outstanding
drawings and outstanding advances; the "Aggregate
Exposure") may be made available to the Borrower at the
sole discretion of the Bank to be allocated as follows.
A. DOCUMENTARY Within the Aggregate Exposure, up to USD18,000,000
LETTERS OF may be made available for the issuance of sight
CREDIT: and/or usance documentary letters of credit with
terms of up to 90 days ("Documentary Letters of
Credit") for the purchase, shipment and sale of
petrochemicals and related products.
Documentary Letters of Credit will require the
originals of all shipping documents, including
full sets of original title documents, to be
consigned to the order of the Bank and to be
presented as a condition of payment at the Bank's
counters.
Within this Limit, delivery of documents against
bankers' acceptances may be permitted up to USD
18,000,000 such that the maximum combined tenor
does not exceed the 90 day usance period.
B. ADVANCES/ Within the Aggregate Exposure and subject to the
ACCEPTANCES: terms and conditions contained in existing
Promissory Note, up to USD6,000,000 may be made
available for advances (each an "Advance") with
maturities of up to but not exceeding 90 days,
and/or for bankers' acceptances (each a "B/A") for
refinancing documents presented under letters of
credit. The amount of the financing shall not
exceed the FOB value of purchased merchandise or
90% of the value of accounts receivable, and in
any event, shall be at the Bank's sole discretion.
C. STAND-BY LETTERS Within the Aggregate Exposure. up to USD
OF CREDIT 13,000,000 may be made available for the
issuance of stand-by letters of credit ("Stand-by
Letters of Credit") with tenors of up to 90 days.
NOTWITHSTANDING THE ABOVE, THE MAXIMUM AGGREGATE EXPOSURE UNDER THE ABOVE
LIMITS [1.A. THROUGH AND INCLUDING 1.C.] SHALL NOT EXCEED USD18,000,000 AT ANY
ONE TIME.
Incorporated in England with limited liability by Royal Charter 1853
The Principal Office of the Company is situated in England at
1 Aldermanbury Square London EC2V 7SB Reference Number ZC 18
<PAGE> 2
2. FOREIGN In addition to the above, up to USD1,000,000 may be
EXCHANGE: made available to Borrowers to engage in spot foreign
exchange transactions, and up to USD5,000,000 for
forward foreign exchange transaction in support of the
Borrower's foreign business. The spot and forward
foreign exchange transactions described herein shall be
staggered to ensure that the maximum net amount coming
due for settlement on any given day, for both spot and
forward transactions combined, does not exceed USD
1,000,000.
3. REVIEW DATE: The Facility shall be reviewed by the Bank on
or before July 31, 1997 (the "Review Date"); provided,
however, the Bank may terminate the Facility at any
time in its sole discretion and with immediate effect by
written notice to the Borrower. Should the Bank continue
to make credit facilities available to the Borrower
after the Review Date has passed, such credit facilities
shall be made under the terms and conditions contained
in this letter agreement. The Bank shall at all times
reserve the right to alter or extend the Review Date or
other terms of the Facility.
4. SECURITY: The Borrower shall have executed and delivered to the
Bank the Bank's forms of Security Agreement (the
"Security Agreement"), UCC Financing Statements and
other documents as may be required to perfect its
security interest in the personal property of the
Borrower as described in the Security Agreement. In
addition, the Bank shall continue to hold cross
guarantees of JLM International, Inc. and Olefins
Marketing Corp., as well as the guarantees of JLM
Marketing, Inc. JLM Industries, Inc. and JLM Chemicals
Canada.
5. INTEREST AND (i) Interest on Advances shall be charged at the
FEES: rates specified in the Promissory Note.
(ii) The rate for B/A's will be as quoted by the Bank
from time to time.
(iii) The Borrower agrees to pay the fees established by
the Bank from time to time for Documentary and/or
Stand-by Letters of Credit (collectively, Letters of
Credit). The Bank's current fees for Letters of Credit
are as follows:
<TABLE>
<CAPTION>
For Documentary Letters of Credit:
----------------------------------
<S> <C>
Issuance: 1/4% per quarter, minimum USD400.00
Negotiation/Payment: 1/4%, minimum USD400.00
Acceptance Commission: 1.5% per annum
</TABLE>
<TABLE>
<CAPTION>
For Stand-by Letters of Credit:
-------------------------------
<S> <C>
Issuance: 1/4% flat per 90 days, minimum USD400.00
Negotiation/Payment: 1/4%, minimum USD400.00
</TABLE>
6. TAXES All payments relating to the Facility (including
payments relating to any Letter of Credit, B/A,
Advance or foreign exchange transaction) shall be made
free and clear of and without deduction or withholding
for any present or future taxes, levies, imposts or
duties imposed by any governmental authority in any
jurisdiction, or by any political subdivision or taxing
authority thereof or therein. If any such taxes, levies,
imposts or duties are required to be withheld from any
payments relating to this Facility, the amounts so
payable shall be increased to the extent necessary to
yield to the Bank (after deduction of all such taxes,
levies, imposts or duties) interest or any such other
amounts specified herein or in any letter of credit
reimbursement agreement, promissory note or other
documents relating to the Facility.
<PAGE> 3
7. EVIDENCE OF The Borrower agrees that the Bank's internal books and
INDEBTEDNESS: records shall be conclusive evidence (absent manifest
error) of the Borrower's indebtedness to the Bank.
8. CONDITIONS As a precondition to the Bank's considering to extend
PRECEDENT: the credit contemplated by this letter agreement
(but with the Bank retaining full discretion as to
whether to extend any credit from time to time), the
Borrower shall have executed and delivered to the Bank,
in form and substance satisfactory to the Bank the
following documents:
(a) Facility letter: the duplicate copy of this letter
agreement and the following documents duly signed by an
officer empowered to sign on the Borrower's behalf:
(b) Corporate Standing: a certificate of the Secretary
or Assistant Secretary of the Borrower certifying the
incumbency and specimen signatures of the officers of
the Borrower executing this Letter Agreement and each of
the related documents and that attached hereto are (i) a
true and complete copy of the resolutions of the
Borrower's board of directors which authorize the
acceptance of the credit (including if applicable,
foreign exchange transactions) and the related
obligations contemplated by this Letter Agreement
(which resolutions shall not have been rescinded as of
the date of such certification) and (ii) true and
complete copies of the Borrower's articles or
certificate of incorporation and all amendments thereto
as in effect as of the date of such certification; and
(c) Any and all other documents that the Bank may
reasonably request from time to time.
8. COVENANTS: From the date hereof until all amounts outstanding under
this Facility have been repaid in full, the Borrower
shall:
(a) Ensure that John L. MacDonald does not borrower in
excess of USD500,000 from either of the Borrowers or
from JLM Industries, Inc.;
(b) Ensure that if either Borrower requests that the
Bank finance a partially open position, the requesting
Borrower shall post a 15% cash margin with the Bank
until such position unwound or hedged;
(d) Ensure that funds from assigned accounts receivable
are remitted prior to the maturity of Advances and B/A's
and are deposited in a cash collateral account under
lien to the Bank;
(e) Ensure that when the Borrowers assign accounts
receivable to the Bank that the debtors are instructed
to pay the account(s) of Borrowers at Standard Chartered
Bank, New York;
(f) Ensure that the Bank or its agent(s) have at all
times access to the Borrowers' books, records and
storage locations:
(g) Ensure that the combined bank lines of the Borrowers
does not exceed USD31,000,000;
<PAGE> 4
(h) Ensure that the leverage ratio, defined at total
liabilities less subordinated shareholder debt divided
by capital funds, does not exceed 9.5:1.0 as measured
at the Borrowers' fiscal year end 1996;
(i) Ensure that the capital funds ratio (which shall be
measured quarterly), defined as shareholders' equity
plus subordinated shareholder debt less intangible
assets does not fall below USD13,000,000 measured at
Borrowers' fiscal year end 1996;
(j) Ensure that the Borrowers' cumulative net income in
any two consecutive quarters does not fall below
USD1,000,000 and does not fall below USD2,000,000 at
Borrowers' fiscal year end; and
(k) Ensure that Borrowers' cash flow, measured at their
fiscal year end and defined as net income plus non-cash
expenses less unfinanced capital expenditures divided by
current maturities of long-term debt does not fall below
1.3:1.0.
9. RIGHT OF In addition to the rights granted to it by applicable
SET-OFF: law, the Bank has the right to set-off and apply to any
of the Borrower's obligations hereunder any amount
received by it from the Borrower, including any balance
in any deposit account of the Borrower maintained with
the Bank or with any of its branches.
10. LEGAL FEES The Borrower agrees to pay to the Bank on its first
AND EXPENSES: demand all costs and expenses incurred by the Bank in
connection with the preparation, execution and/or
amendment of this letter agreement and the enforcement
or collection of any obligations arising in connection
with the transactions contemplated hereby, including,
without limitation, reasonable attorneys' fees, a
reasonable estimate of the allocated cost of Bank's
in-house counsel and other legal expenses.
11. WAIVERS: No modification or waiver of any provisions of
this letter agreement shall be effective unless in
writing, signed by the Bank, and only to the extent
specifically set forth therein; nor shall any such
waiver or modification be applicable except in the
specific instance for which given.
12. WAIVER OF TRIAL THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY
BY JURY;CONSENT WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY
TO JURISDICTION; ACTION OR PROCEEDING ARISING OUT OF OR OTHERWISE
GOVERNING LAW: RELATING TO THIS LETTER AGREEMENT. THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK. THIS LETTER AGREEMENT AND THE OBLIGATIONS
CONTEMPLATED HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
<PAGE> 5
If the terms and conditions specified in this letter agreement are acceptable
to you, please indicate your acceptance thereof by signing and returning the
attached copy of this letter agreement to us.
Very truly yours,
STANDARD CHARTERED BANK
<TABLE>
<CAPTION>
<S> <C>
By: /s/ Marguerite J. Felsenfeld, Esq. By: /s/ Craig A. Tashijian
----------------------------------- ------------------------------------
Marguerite J. Felsenfeld, Esq. Craig A. Tashjian
Administrative Officer Senior Vice President
AGREED TO AND ACCEPTED BY:
JLM International, Inc.
By: /s/ Frank A. Musto By:
------------------------------------ ------------------------------------
Name: Frank A. Musto Name:
---------------------------------- ----------------------------------
Title: Vice President & CFO Title:
---------------------------------- ---------------------------------
Olefins Marketing Corp.
By: /s/ Frank A. Musto By:
------------------------------------ ------------------------------------
Name: Frank A. Musto Name:
----------------------------------- ----------------------------------
Title: Vice President & CFO Title:
---------------------------------- ----------------------------------
ACKNOWLEDGED: JLM Marketing, Inc. as Guarantor
By: /s/ Frank A. Musto By:
------------------------------------ ------------------------------------
Name: Frank A. Musto Name:
----------------------------------- ----------------------------------
Title: Vice President & CFO Title:
---------------------------------- ---------------------------------
ACKNOWLEDGED: JLM Industries, Inc. as Guarantor
By: /s/ Frank A. Musto By:
------------------------------------ ------------------------------------
Name: Frank A. Musto Name:
---------------------------------- ----------------------------------
Title: Vice President & CFO Title:
--------------------------------- ---------------------------------
ACKNOWLEDGED: JLM Chemicals Canada as Guarantor
By: /s/ Frank A. Musto By:
------------------------------------ ------------------------------------
Name: Frank A. Musto Name:
---------------------------------- ----------------------------------
Title: Vice President & CFO Title:
--------------------------------- ---------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.21
SECURITY AGREEMENT
In consideration of one dollar and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and to induce STANDARD
CHARTERED BANK ("Bank"), having an office at 160 Water Street, New York, New
York, 10038 to extend credit and other financial accommodations to Olefins
Marketing, Inc. ("Borrower") on the terms set forth in the Financing
Agreements, as hereinafter defined, between Borrower and Bank, Borrower hereby
agrees that Bank shall have the rights, remedies and benefits hereinafter set
forth.
A. DEFINITIONS. As used in this Security Agreement:
1. All terms used herein which are defined in Article 1 or Article 9 of the
New York Uniform Commercial Code shall have the meanings set forth therein
unless otherwise defined in this Agreement, and all references to the
plural herein shall also mean the singular.
2. If there is more than a single borrower that is a signatory hereto, all
references to the term "Borrower" wherever used herein shall be deemed to
mean and include each of them, jointly and severally, individually and
collectively, and shall include the successors and assigns of each. All
references to the term "Bank" wherever used herein shall be deemed to mean
and include its parent, affiliates, subsidiaries, agents, correspondents,
representatives, bailees, and any participants in the financing of
Borrower; provided that the rights and remedies of Bank set forth herein
may only be exercised by Standard Chartered Bank and its successors or
assigns.
3. "Collateral" shall mean and include:
a. all personal and real property of Borrower whether now or hereafter
existing or now owned or hereafter acquired and wherever located, of
every kind and description, tangible or intangible, including but not
limited to, all accounts, instruments, documents, notes, claims,
chases in action, money, contract rights, general intangibles
(including, but not limited to, good will, tax refunds, copyrights,
trademarks, trademark applications, trade styles, trade names, patents
and patent applications), securities, stock, chattel paper, credits,
license agreements, inventory (including, but not limited to, raw
materials, work-in-process, semi-finished and finished goods, returned
goods, in transit goods, goods under letters of credit or trust
receipts and bill and hold goods), leases with respect to both real
and personal property, demands, security deposits, bank accounts,
machinery and equipment (whether or not attached or affixed to real
property), furniture, futures, tools, dies, molds, jigs, blueprints,
customer lists, motor vehicles, and any other real and personal
property, rights and interests of Borrower and the proceeds (including
any insurance proceeds), products and accessions of and to any
thereof, and all books and records pertaining to all of the foregoing;
and
b. all personal property of Borrower which is or shall be financed by
Bank or is in, or shall come into the possession or control of Bank,
including without limitation, inventory, goods, documents (including
any documents made available to Borrower pursuant to trust receipts or
other security agreements) and present or future accounts receivable
resulting from the sale of goods, the purchase of which was financed
by Bank or for which Bank has made advances; and the products and
proceeds thereof, together with all improvements and additions thereto
whether same be cash, accounts, chattel paper, instruments notes,
drafts, acceptances, contract rights or general intangibles.
<PAGE> 2
4. "Event of Default" shall mean and include the occurrence or existence of
any event or condition described in Section E hereof.
5. "Financing Agreements" shall mean and include the agreements described on
Exhibit A hereto, all amendments and supplements thereto, and all other
agreements, documents, instruments and guaranties granting collateral
security or creating or evidencing indebtedness, executed by Borrower or
its subsidiaries, affiliates or guarantors in favor of Bank, together with
all present and future agreements, supplements or instruments relating
thereto, as all of the foregoing may now exist or may hereafter be amended,
modified or supplemented.
6. "Obligations" shall mean and include any and all indebtedness, liabilities
and obligations of every kind, nature and description of Borrower to Bank,
however evidenced, whether arising under the Financing Agreements, this
Agreement or otherwise, whether now existing or hereafter arising, whether
direct or indirect, absolute or contingent, joint and/or several, due or
not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, or on original, renewed or extended terms and whether arising
directly or acquired by Bank from any other entity outright, conditionally
or as collateral security, by assignment, by merger with any other entity,
by assumption, by subrogation, by operation of law or otherwise (including,
without limitation, Bank participations or interests of Bank in the
obligations of Borrower to others), including, but without limiting the
generality of the foregoing, indebtedness, obligations or liabilities of
Borrower to Bank as member of any partnership, syndicate, association or
other group, principal, interest, fees and whether incurred by Borrower as
principal, surety, endorser, guarantor, accommodation party, indemnitor or
otherwise; provided, however, that the term "Obligation" shall not include
or be deemed to include any indebtedness of Borrower to Bank which is, at
the time of its creation, subject to the provisions of any state or federal
consumer credit or truth-in-lending disclosure statute or regulation, nor
shall the term "Obligation" include or be deemed to include any
indebtedness of Borrower to Bank which does not arise under the Financing
Agreements and which is secured by real property, unless the note or other
evidence of such indebtedness specifically states that it is secured by the
security interests granted in this Agreement.
7. "Obligor" shall mean and include any guarantor, co-maker, endorser,
acceptor, surety or other person or entity liable on the Obligations in
addition to the Borrower.
B. GRANT OF SECURITY INTEREST.
1. To secure payment, performance and observance in full of all Obligations,
Borrower hereby grants to Bank a continuing security interest in, a lien
upon, and a right of set-off against, and Borrower hereby assigns,
transfers, pledges and sets over to Bank all of the Collateral. All
Collateral shall be security for the payment, performance and observance of
all Obligations notwithstanding the maintenance of separate accounts by
Bank or the existence of any instruments evidencing any of the Obligations.
2. Borrower hereby constitutes Bank and any designee of Bank as Borrower's
attorney-in-fact and authorizes Bank or such designee, at Borrower's sole
cost and expense, to exercise at any time or times in Bank's discretion all
or any of the following powers, at the sole expense of Borrower, which
power-of-attorney being coupled with an interest shall be irrevocable until
all Obligations have been paid in full: (a) receive, take, endorse, assign,
deliver, accept, and deposit, in the name of Bank or Borrower, any and all
cash, checks, commercial paper, drafts, remittances and other instruments
and documents relating to the Collateral, (b)
<PAGE> 3
receive, open and dispose of all mail addressed to Borrower and notify
postal authorities to change the address for delivery thereof to such
address as Bank may designate, (c) transmit to account debtors and any
bailees notice of the interest of Bank in the Collateral or request from
account debtors or such bailees at any time, in the name of Borrower or
Bank or any designee of Bank. information concerning the Collateral and any
amount owing with respect thereto, (d) notify account debtors to make
payment directly to Bank, (e) take or bring, in the name of Bank or
Borrower, all steps, actions, suits or proceedings deemed by Bank necessary
or desirable to effect collection of the Collateral, (f) enter Borrower's
premises for the purpose of inspecting, verifying, auditing, maintaining,
preserving, protecting and removing the Collateral, (g) obtaining,
adjusting, compromising, settling and cancelling insurance policies on the
Collateral and any claims thereunder, and (h) execute in the name and on
behalf of Borrower one or more Uniform Commercial Code financing statements
or amendments with respect to the Collateral, naming Borrower as debtor and
Bank as secured party and indicating and describing therein the types and
the items of Collateral. Borrower hereby releases Bank, its officers,
employees and designees from any liability arising from any act or acts
under such power-of-attorney or otherwise under this Agreement, the
Financing Agreements or in furtherance hereof or thereof, whether by
omission or commission, and whether based upon any error of judgment or
mistake of law or fact.
C. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to
Bank the following, each of which is a continuing representation and warranty,
the continuing truth and accuracy of each of such representations and warranties
being a continuing condition of financing of Borrower by Bank:
1. If Borrower is a corporation, Borrower is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction of
its organization with perpetual corporate existence, and has the corporate
power and authority to own its properties and to transact the business in
which it is engaged or presently proposes to engage. Borrower has qualified
as a foreign corporation in all states or other jurisdictions where the
nature of its business or ownership or use of its property requires such
qualification and where the failure to so quality would have an adverse
effect on the business of Borrower.
2. If Borrower is a corporation, Borrower has the corporate power to borrow
and to execute, deliver and perform the terms and provisions of this
Agreement, the Financing Agreements and all other instruments and documents
delivered by it pursuant hereto and thereto. Borrower has taken or caused
to be taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement, the Financing Agreements and
such other instruments and documents.
3. If Borrower is a partnership, Borrower is duly organized and existing under
the laws of its jurisdiction of organization, and the execution, delivery
and performance of this Agreement is within Borrower's powers.
4. This Agreement, the Financing Agreements and such other instruments and
documents constitute and will constitute legal, valid and binding
obligations of Borrower, enforceable in accordance with their respective
terms.
5. Borrower is not in default under any indenture, mortgage, deed of trust,
agreement or other instrument to which it is a party or by which it or its
properties may be bound. Neither the execution and delivery by Borrower of
this Agreement, the Financing Agreements or any of the instruments and
documents to be delivered pursuant hereto or thereto, nor the consummation
of the transactions herein or therein contemplated, nor compliance with the
provisions hereof or thereof, will violate any law or regulation, or any
order or decree
<PAGE> 4
of any court or governmental instrumentality in any respect, or will
conflict with, or result in the breach of, or constitute a default under,
any indenture, mortgage, deed of trust, agreement, or other instrument to
which Borrower is a party or by which it or its properties may be bound, or
result in the creation or imposition of any lien, charge or encumbrance
upon any of the property of Borrower (except as contemplated hereunder) or
violate any provision of the Articles of Incorporation, Bylaws or other
organizational documents of Borrower.
6. Borrower is in compliance with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority relating to its
business as presently conducted or contemplated, including, without
limitation, all licensing and approval requirements, the Employee
Retirement Income Security Act of 1974, as amended, and the Internal
Revenue Code of 1954, as amended.
7. No action of, or filing with, any governmental or public body or authority
(other than the filing or recording of Uniform Commercial Code financing
statements or other documents evidencing security interests and liens of
Bank) is required in connection with the execution, delivery and
performance of this Agreement, the Financing Agreements or any of
the instruments or documents to be delivered pursuant hereto or thereto.
8. There is no investigation by any governmental agency pending or threatened
against Borrower and there is no action, suit, proceeding or claim pending
or threatened against Borrower or its assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, the Financing
Agreements or other instruments or documents related hereto, which if
adversely determined with respect to it would result in any material
adverse change in its business, properties, assets, goodwill or condition,
financial or otherwise.
9. None of the information contained in the representations and warranties
made by Borrower set forth in this Agreement, the Financing Agreements or
in any other instruments, documents, list, certificate, statement,
financial statements, schedule or exhibit heretofore delivered or to be
delivered to Bank, as contemplated herein or therein, contains or will
contain any untrue statement of a material fact or omits or will omit to
state a fact necessary in order to make the statements contained herein or
therein not misleading.
10. The principal place of business and chief executive office and the records
of Borrower are maintained at the address set forth in Schedule I annexed
hereto, which address is a mailing address for such principal place of
business and chief executive office. All of the Collateral is kept at the
locations set forth on Schedule I annexed hereto, which are the only
premises of Borrower. Borrower does not use any trade styles, trade names
or fictitious corporate names except as set forth in Schedule I hereto.
11. The security interest and liens granted by Borrower to Bank under this
Agreement constitute valid and perfected first priority security interests
in and liens upon the Collateral, subject only to the liens and security
interest set forth in Schedule II annexed hereto.
12. Borrower has good and marketable title to all of its properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances
or charges of any kind, except in favor of Bank and as set forth in
Schedule II annexed hereto.
13. After giving effect to the transactions contemplated by this Agreement, the
Financing Agreements and any and all other instruments or documents
delivered in connection herewith or therewith, there does not exist at the
<PAGE> 5
date hereof any condition or event which constitutes an Event of Default
hereunder or which after notice or lapse of time, or both, would constitute
such an Event of Default hereunder.
D. COVENANTS. Borrower covenants and agrees that from and after the date of
this Agreement, until the Obligations are fully and indefeasibly satisfied:
1. At any time and from time to time, upon the demand of Bank, Borrower shall
deliver and pledge to Bank duly endorsed and/or accompanied by such
instruments of assignment and transfer in such form and substance as Bank
may reasonably request, any and all instruments, documents, securities
and/or chattel paper which are included in the Collateral as Bank may
request.
2. Borrower shall not, without the prior written consent of Bank, assign,
sell, mortgage, lease, transfer, set over, pledge, grant any security
interest in or lien upon, encumber, or otherwise dispose of or abandon any
of its real or personal property, whether now owned or hereafter acquired,
nor will Borrower permit any such lien, encumbrance or disposition to exist
or occur with respect to such property, except for (a) the sale from time
to time in the ordinary course of business of such property as may
constitute inventory of Borrower; (b) the existing liens set forth in
Schedule II annexed hereto; (c) tax, mechanic's and other like liens
arising in the ordinary course of business securing obligations which are
not overdue or (unless or until foreclosure or other similar proceedings
shall have commenced) are being contested in good faith by appropriate
proceedings and are adequately reserved against in the opinion of Bank; and
(d) liens, encumbrances and security interests in favor of Bank.
3. Borrower shall not directly or indirectly sell, lease, transfer, abandon or
otherwise dispose of all or any substantial portion of its property or
assets or consolidate with or merge with or into any other entity, or
permit any other entity to consolidate with or merge with or into Borrower,
except with the prior written consent of Bank.
4. Borrower shall not change its name or principal place of business and chief
executive office or any of the locations of Collateral, as set forth in
Schedule I annexed hereto, without the prior written consent of Bank; and
prior to any such change to which Bank so consents, Borrower agrees to
execute and deliver or cause to be delivered to Bank, any additional
documents, instruments and agreements, including, without limitation,
financing statements, waivers and subordinations, as Bank may request.
5. Borrower shall at all times (a) preserve, renew and keep in full force and
effect its existence as a corporation and its rights and franchises with
respect thereto, (b) continue to engage in business of the same type as it
is now engaged, and (c) maintain in full force and effect all permits,
licenses, trademarks, trade names, approvals, authorizations, leases and
contracts necessary to carry on its business as the same is being operated
as of the date hereof.
6. Borrower shall maintain and safeguard any and all documents, instruments
and chattel paper in its possession and its individual books and records
relating to the Collateral in a commercially reasonable manner and cause
the security interest granted herein to Bank to be marked thereon.
7. Borrower shall permit representatives of Bank at any time during normal
business hours or upon twenty-four (24) hours prior notice at any time to
(a) inspect its inventory, equipment and other tangible Collateral, (b)
have
<PAGE> 6
free access to and right of inspection of any papers, instruments and
records pertaining to any of the Collateral, and (c) make abstracts or
photocopies, at Borrower's sole cost and expense, from or of Borrower's
books and records pertaining to inventory, accounts, contract rights,
chattel paper, instruments, documents, and other Collateral.
8. Borrower shall at all times maintain, with financially sound and reputable
insurers acceptable to Bank, insurance with respect to the Collateral for
not less than its full market value and against all risks to which it is
exposed, including, without limitation, fire, explosion, theft and such
other casualties as are customarily insured against by companies engaged in
the same or similar business as that of Borrower. All policies shall be in
such form, substance, amounts and coverage as shall be satisfactory to Bank
and shall provide for not less than ten (10) days' prior written
cancellation notice to Bank. Bank may act as attorney for Borrower in
obtaining, adjusting, compromising, settling and cancelling such insurance
and any claims thereunder. Borrower shall promptly (a) obtain endorsements
to all existing and future insurance policies with respect to the
Collateral specifying that the proceeds of such insurance shall be payable
to Bank and Borrower as their interests may appear and further specifying
that Bank shall be paid notwithstanding any act or omission by Borrower;
and (b) deliver to Bank an original executed copy of, or executed
certificate of the insurance carrier with respect to, such endorsement and,
at Bank's request, the original or a certified duplicate original of each
underlying insurance policy. At its option, Bank may apply any insurance
monies received by Bank at any time to the cost of repairs or replacement
of Collateral and/or to payment of the Obligations, whether or not due, in
any order and in such manner as Bank at its sole discretion may determine.
9. Borrower shall use, maintain and protect, for lawful purposes only, the
Collateral, with all reasonable care and in conformity with all applicable
laws, ordinances, regulations and insurance policies.
10. Borrower shall promptly pay when due all taxes, assessments and
governmental charges or levies imposed upon the Collateral or for its use
or operation or upon the proceeds thereof or upon any instrument evidencing
the Obligations, as well as claims of any kind against the Collateral
(including claims for labor, materials and supplies) unless such taxes,
assessments, charges, levies or claims are being contested in good faith
and are adequately reserved for in the opinion of Bank.
11. At its option, Bank may discharge taxes, liens or security interests or
other encumbrances or charges at any time levied or placed on the
Collateral and may pay for the insurance, maintenance and preservation of
Collateral. Borrower agrees to reimburse Bank on demand, together with
interest thereon at the rate specified in the Financing Agreements, for any
payment made or expense incurred by Bank in connection with the foregoing
or otherwise under this Agreement, and any such payment or expense shall
constitute a part of the Obligations secured hereby.
12. If all or any part of the Collateral is or is about to become affixed to
realty, Borrower shall, at Bank's request, furnish Bank with a writing
executed by the owner and mortgagee of the realty whereby the owner and
mortgagee subordinates its rights and priorities to Bank's interest in the
Collateral. If the Collateral is or may become subject to a landlord's
lien, Borrower shall, at Bank's request, furnish Bank with a landlord's
waiver satisfactory in form and substance to Bank.
13. Borrower shall, at the request of Bank, at any time and from time to time,
at Borrower's sole cost and expense, give, execute, deliver, file and/or
record any notice, statement, instrument, document, agreement or other
<PAGE> 7
papers which may be necessary or desirable in Bank's opinion to create,
preserve, perfect or validate any security interest or lien granted
pursuant to this Agreement, any of the Financing Agreements or any other
agreement between Borrower and Bank or to enable Bank to exercise and
enforce its rights hereunder or with respect to such security interest or
lien. Bank is irrevocably authorized, at Bank's discretion, to execute in
the name and on behalf of Borrower one or more Uniform Commercial Code
financing statements, naming Borrower as debtor and Bank as secured party
and describing therein the items and types of Collateral and to file same
in any jurisdiction in which any of the Collateral is or may hereafter be
located. Bank, at its discretion, may file a carbon, photographic or other
reproduction of this Agreement or any other security agreement between
Borrower and Bank as a Uniform Commercial Code financing statement in any
jurisdiction in which any of the Collateral is or may hereafter be located.
14. Borrower shall pay Bank, on Bank's demand, any and all sums, costs and
expenses which Bank may pay or incur in connection with the preparation and
negotiation of this Agreement, the Financing Agreements and any related
agreements or instruments, together with any amendments or supplements
hereto or thereto, or in defending, protecting or enforcing the security
interest granted herein or in defending, collecting or attempting to
collect the Obligations; or which may otherwise be paid or incurred by Bank
in connection with the provisions hereof including, without limitation, all
search, filing and recording fees, taxes, attorneys' fees, legal expenses
and all fees and expenses for the service and fling of papers, marshals,
sheriffs, custodians, auctioneers and others, and all court costs and
collection charges, all of which shall be part of the Obligations.
15. Borrower shall promptly notify Bank in writing of the details of (a) any
loss, damage, investigation, action, suit, proceeding or claim relating to
the Collateral or which would result in any material adverse change in
Borrower's business, properties, assets, goodwill or condition, financial
or otherwise, and (b) the occurrence of any Event of Default or event
which, with the passing of time or giving of notice or both, would
constitute an Event of Default.
E. EVENTS OF DEFAULT. At the option of Bank, all Obligations shall be and
become immediately due and payable, without notice or demand, upon the
occurrence or existence of any one or more of the following events:
1. Borrower shall fail to pay or perform when due any of the Obligations or
shall breach any of the terms, covenants, conditions or provisions
contained in this Agreement, the Financing Agreements or any other
agreement between Bank and Borrower.
2. Any representation, warranty or statement of fact made to Bank by Borrower
or any Obligor is false or misleading at any time, whether made in this
Agreement, the Financing Agreements, any other agreement or otherwise.
3. A default or event of default with respect to any of the Financing
Agreements or any other agreement, document or instrument executed by
Borrower in favor of Bank.
4. Any Obligor shall terminate, attempt to terminate or breach any of the
terms, covenants, conditions or provision of any guarantee, endorsement,
subordination or other agreement of such Obligor in favor of Bank, or any
guarantee or subordination required by Bank becomes ineffective.
<PAGE> 8
5. Any judgment, injunction or attachment is obtained against Borrower or any
Obligor in any court; or any proceeding, procedure or remedy supplementary
to or in enforcement of any judgment shall be commenced against, or with
respect to any property of, Borrower or any Obligor.
6. Borrower or any Obligor (who is a natural person or a general partner of
any Borrower or Obligor which is a partnership) shall die, or Borrower or
any Obligor (which is a partnership or corporation) shall be dissolved, or
Borrower or any Obligor which is a corporation shall fail to maintain its
corporate existence in good standing, or the usual business of Borrower or
any Obligor shall be substantially terminated or suspended.
7. Borrower or any Obligor shall breach any other material agreement by which
it is bound, including, without limitation, any agreement relating to the
borrowing of money.
8. Borrower or any Obligor shall become insolvent (however defined or
evidenced), make an assignment for the benefit of creditors, make or send
notice of a bulk transfer, or call a meeting of its creditors or principal
creditors; or any petition or application for any relief under the
bankruptcy laws of the United States now or hereafter in effect or under
any insolvency, arrangement, reorganization, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or
hereafter in effect (whether at law or in equity) is filed by or against
Borrower or any Obligor; or any petition or application to any court or
tribunal, at law or in equity, shall be filed by or against Borrower or any
Obligor for the appointment of a receiver or trustee for all or any part of
its property.
9. In the good faith opinion of Bank there is a material adverse change in the
condition, financial or otherwise, of any Obligor, or for any reason Bank
in good faith believes that the prospect of payment or performance of the
Obligations has been impaired or is insecure.
F. RIGHTS AND REMEDIES. Upon the occurrence of any Event of Default and at any
time thereafter, in addition to all other rights and remedies of Bank, whether
provided under the Uniform Commercial Code or other applicable law, this
Agreement, the Financing Agreements or otherwise, Bank shall have the following
rights and remedies which may be exercised, at Bank's discretion, at any time or
times with or without judicial process, with or without the assistance of others
and without notice to or consent by Borrower except as such notice or consent is
expressly provided for hereunder or required by law.
1. Bank may, at its discretion, accelerate payment of all Obligations and
demand immediate payment thereof to Bank.
2. Bank at its discretion and without limitation, may enter upon any premises
on or in which the Collateral may be located and take possession thereof
and remove all or any of the Collateral from such premises for the purposes
of effecting the sale, foreclosure or other disposition thereof or for any
other purpose. Borrower shall, at the request of Bank, assemble the
Collateral at such place or places as Bank designates in its request. Bank
shall have the right to take possession of the Collateral or any portion
thereof pursuant to the Uniform Commercial Code or other applicable law. In
the event Bank institutes an action to recover any Collateral, or seeks
recovery of any Collateral by way of prejudgment remedy, Borrower waives
the posting of any bond which might otherwise be required.
<PAGE> 9
3. Bank may, at its discretion and without limitation, (a) collect, foreclose,
receive, appropriate, set off and realize upon any and all Collateral, or
(b) sell, lease, transfer, assign, deliver or otherwise dispose of any and
all Collateral (including, without limitation, entering into contracts with
respect thereto and by public or private sales at any exchange, broker's
board, premises of Borrower, office of Bank or elsewhere) at such prices or
terms as Bank may deem reasonable, for cash upon credit or for future
delivery, with Bank having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free
from any right or equity of redemption of Borrower, which right or equity
or redemption is hereby expressly waived and released by Borrower. If any
of the Collateral is sold or leased by Bank upon credit terms or for future
delivery, the Obligations shall not be reduced as a result thereof until
indefeasible payment therefor is finally collected by Bank. Ten (10) days
prior notice by Bank to Borrower designating the time and place of any
public auction of Collateral or the time after which any private sale or
other disposition of Collateral may take place shall be deemed to be
reasonable notice thereof, and Borrower waives any other notice.
4. Bank may apply the cash proceeds of Collateral actually received by Bank
from any sale, lease, foreclosure or other disposition of the Collateral to
payment of (a) all costs and expenses of every kind or nature incurred or
paid by Bank in connection therewith, including, without limitation,
reasonable attorneys' fees and a reasonable estimate of the allocated cost
of Bank's in-house counsel and legal staff, and (b) all and any of the
other Obligations, in whole or in part and in such order as Bank may elect,
whether then due or not due. Borrower shall be liable to Bank for the
payment on demand of all such costs and expenses and any deficiency with
interest at the rate set forth in the Financing Agreements, together with
any reasonable attorneys' fees if placed with an attorney for collection or
enforcement. The costs and expenses incurred or paid by Bank with respect
to any sale, lease, foreclosure or other disposition of the Collateral may
include, without limitation, (i) expenses of retaking, holding, assembling,
preparing for sale or lease, advertising, storing, repairing, completing,
selling, leasing, foreclosing or otherwise disposing of the Collateral,
(ii) premiums on bonds and undertakings, (iii) sales, use and other taxes,
(iv) fees and expenses of custodians, warehousemen, brokers, appraisers,
auctioneers, sheriffs and others, (v) legal expenses and attorneys' fees
(vi) travel and hotel expenses, (vii) a reasonable estimate of the
allocated cost of Bank's in-house counsel and legal staff end (viii) all
other expenses which may be incurred or paid by Bank in attempting to
collect the Obligations and to foreclose upon the Collateral.
5. Bank shall have the right, at any time or times, to set off against the
Obligations all money owed by Bank in any capacity to Borrower or any
Obligor, whether or not due.
6. Bank shall have the right at its sole discretion to determine which rights
and remedies and in which order any of the same are to be exercised, and
Bank may at any time pursue, relinquish, subordinate, modify or take any
other action with respect thereto, without in any way modifying or
affecting any of the Obligations. Bank may, at any time or times, proceed
directly against Borrower or any Obligor to enforce payment of the
Obligations and shall not be required to take any action of any kind to
preserve, collect or protect Bank's or Borrower's rights in the Collateral.
7. All rights, remedies, powers and benefits granted to Bank by Borrower or
any Obligor under this Agreement, the other Financing Agreements or any
oral or other written agreement, or granted by applicable law, whether
expressly granted or implied in law, are cumulative, not exclusive and
enforceable alternatively, successively, or concurrently on any one or more
occasions and shall include, without limitation, the right to apply to a
court of
<PAGE> 10
equity for an injunction to restrain a breach or threatened breach by
Borrower or any Obligor of this Agreement, the Financing Agreements or such
other agreements.
G. MISCELLANEOUS.
1. Notwithstanding that Bank, whether on its own behalf and/or on behalf of
others, may continue to hold Collateral, and regardless of the value
thereof, Borrower and each Obligor shall be and remain jointly and
severally liable for the payment in full, including principal and interest,
of any balance of the Obligations and expenses hereunder at any time
unpaid.
2. Borrower hereby expressly waives demand, presentment, protest, notice of
protest and notice of dishonor with respect to any and all instruments and
commercial paper included in or evidencing any of the Obligations or the
Collateral, and any and all other demands and notices of any kind or nature
whatsoever with respect to the Obligations, the Collateral this Agreement
and the Financing Agreements, except such as are expressly provided for
herein or therein.
3. Bank shall not, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer
of Bank. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Bank of any default, right,
power and/or remedy on any one occasion shall not be construed as a bar to
or waiver of any such default, right, power and/or remedy which Bank would
otherwise have on any future occasion, whether similar in kind or
otherwise.
4. Neither this Agreement nor any provision hereof shall be amended, modified
or discharged orally or by course of conduct, but only by a written
agreement signed by an authorized officer of Bank expressly referring to
this Agreement and to the provision so amended, modified or discharged.
5. EACH OF BORROWER AND BANK WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST THE OTHER WHICH PERTAINS
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE FINANCING AGREEMENTS, THE
OBLIGATIONS, THE COLLATERAL OR ANY MATTER ARISING THEREFROM OR RELATING
HERETO OR THERETO.
6. Borrower waives all rights to interpose any setoffs or counterclaims of any
nature in any action or proceeding instituted by Bank with respect to this
Agreement, the Financing Agreements, the Obligations, the Collateral or any
matter arising therefrom or relating hereto or thereto.
7. BORROWER HEREBY IRREVOCABLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
SUPREME COURT OF THE STATE OF NEW YORK, IN THE COUNTY OF NEW YORK, AND THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN
CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE FINANCING AGREEMENTS, THE OBLIGATIONS, THE COLLATERAL OR ANY
DOCUMENT OR INSTRUMENT DELIVERED PURSUANT HERETO OR THERETO. IN ANY SUCH
LITIGATION BORROWER WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT OR
OTHER PROCESS AND PAPERS ISSUED THEREIN AND AGREES THAT THE
<PAGE> 11
SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO
BORROWER AT ITS CHIEF EXECUTIVE OFFICE SET FORTH HEREIN OR OTHER ADDRESS
THEREOF OF WHICH BANK HAS RECEIVED NOTICE AS PROVIDED HEREIN. WITHIN THIRTY
(30) DAYS AFTER SUCH MAILING, BORROWER SHALL APPEAR OR ANSWER TO SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS.
8. All notices, requests and demands hereunder shall be (a) made to Bank at
its address set forth above and to Borrower at its chief executive office
set forth below, or to such other address as either party may designate by
written notice to the other in accordance with this provision, and
(b) deemed to have been given or made, if by hand, immediately upon
delivery; if by telex or telegram, immediately upon sending; if by Federal
Express, Express Mail or other overnight delivery service, one day after
dispatch; and if by ordinary or certified mail, return receipt requested,
five (5) days after mailing.
9. If any provision of this Agreement is held to be invalid or unenforceable,
such invalidity or unenforceability shall not invalidate this Agreement as
a whole, but this Agreement shall be construed as though it did not contain
the particular provision held to be invalid or unenforceable, and the
rights and obligations of the parties shall be construed and enforced only
to such extent as shall be permitted by applicable law.
10. Under no circumstances shall Bank be deemed to have assumed any
responsibility for or obligation or duty of any nature or kind with respect
to any Collateral, or any matter or proceedings arising out of or relating
thereto, but the same shall be at the sole risk of Borrower at all times.
Borrower hereby releases Bank from any claims, causes of action and demands
at any time arising out of, relating to or with respect to this Agreement,
the Financing Agreements, the Obligations, the Collateral and/or any
actions taken or omitted to be taken by Bank with respect thereto, and
Borrower hereby agrees to indemnify and hold Bank harmless from and with
respect to any and all such claims, causes of action and demands by any
person or entity.
11. This Agreement shall be binding upon and inure to the benefit of each of
the parties hereto and their respective successors and assigns, except that
any obligation of Bank under this Agreement or the Financing Agreements
shall not be assignable nor inure to the successors and assigns of
Borrower.
12. The provisions of this Agreement shall be construed and interpreted and all
rights and obligations hereunder determined in accordance with the laws of
the State of New York, except to the extent that the law of any other
jurisdiction is required to be applied with respect to the enforcement of
Bank's rights in Collateral located in such jurisdiction.
IN WITNESS WHEREOF, Borrower has executed this Agreement as of this 23 day of
June, 1995.
Olefins Marketing, Inc.
By: /s/ Frank A. Musto By:
- ------------------------------ ------------------------------
Title: VP & CFO Title:
<PAGE> 12
EXHIBIT A
FINANCING AGREEMENTS
SCHEDULE I
LIST OF LOCATIONS OF BORROWER AND COLLATERAL
Chief Executive Office,
Principal Place of Business
and Locations of Records: Owner/Landlord
Other Locations:
Trade Styles, Trade Names and Fictitious Corporate Names
SCHEDULE II
LIST OF EXISTING LIENS OR COLLATERAL
Secured Creditor Amount Secured Collateral
<PAGE> 1
EXHIBIT 10.23
[STANDARD CHARTERED BANK LOGO] ORIGINATING OFFICE: STANDARD CHARTERED BANK
___________________________________________
Name of Office
___________________________________________
Street Address
___________________________________________
City State Zip Code
CONTINUING GUARANTY
The undersigned (herein called "Guarantor") at the solicitation of JLM
INTERNATIONAL, INC. AND OLEFINS MARKETING CORP. (herein called "Debtor")
requests STANDARD CHARTERED BANK (herein called "Bank") to grant Credit to
Debtor. In consideration thereof and the benefits therefrom accruing to
Guarantor by virtue of its business relationship with Debtor, Guarantor agrees
as follows:
1. The term "Credit" is used throughout this agreement in its most
comprehensive sense and means and includes, without limitation, any and all
loans, advances, debts, obligations and liabilities of any kind or nature
owed by Debtor to Bank and other financial accommodations extended by Bank
to Debtor, heretofore, now, or hereafter made, incurred or created, whether
voluntary or involuntary and however arising, whether owed directly to Bank
or acquired by Bank by assignment, subrogation, or succession (including,
without limitation, Bank participations and interests of Bank in the
obligations of Debtor to others), whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, secured
or unsecured, whether on original, renewed or extended terms, whether
principal, interest or fees, whether Debtor may be liable individually or
jointly with others, whether recovery upon such indebtedness may be or
hereafter become barred by any statute of limitations, and whether such
indebtedness may be or hereafter become otherwise unenforceable. In the
event a petition under the U.S. Bankruptcy Code is filed by or against
Debtor, the term "Debtor" shall also mean and include Debtor in its status
as a debtor and debtor-in-possession under the U.S. Bankruptcy Code.
2. If there is more than a single entity or person included in the terms
"Guarantor" or "Debtor," respectively, (a) each reference herein to such
terms shall mean all and any one or more of such entities and persons both
jointly and severally, and (b) if more than one person or entity executes
this Guaranty, the obligations and liabilities hereunder of Guarantors are
and shall be both joint and several.
3. Unless specified herein to the contrary, Guarantor's liability hereunder
shall be unlimited. In addition to any maximum liability hereunder,
Guarantor agrees to bear and be liable to Bank for the interest and
expenses enumerated in paragraph 14 hereof. Notwithstanding the foregoing,
Bank, at its discretion, may allow Credit to exceed Guarantor's maximum
liability hereunder. Any payment by Guarantor shall not reduce the maximum
obligation of Guarantor hereunder unless written notice to that effect is
actually received by Bank at or prior to the time of such payment. Any
payment received by Bank from Debtor, any other person or from proceeds of
collateral granted reduce Guarantor's maximum liability hereunder.
4. Subject to paragraph 3 hereof, Guarantor unconditionally guarantees and
agrees to pay to Bank or its order, on demand, an amount equal to the
amount of the credit, or otherwise perform any obligation of Debtor
undertaken pursuant to any Credit. This Guaranty is a guaranty of payment
and not of collection.
5. Either before or after revocation hereof, Guarantor authorizes Bank at its
sole discretion, with or without notice, and without affecting Guarantor's
continuing liability hereunder, from time to time to (a) change the time or
manner of payment of any Credit by renewal, extension, acceleration or
otherwise, (b) alter or change any other provision of any Credit including
the rate of interest thereon, (c) release, substitute or add one or more
endorsers, cosigners, or guarantors for any Credit, (d) obtain collateral
for the payment of Credit and/or any guaranty thereof, (e) release or
substitute, in whole or in part, existing or after-acquired collateral
securing payment of the Credit or any guaranty therefor on such terms as
Bank at its sole discretion shall determine, (f) apply any sums received
from Debtor, any other guarantor, endorser or cosigner or from the sale or
collection of collateral or its proceeds to any indebtedness whatsoever in
any order and regardless of whether or not such indebtedness is guaranteed
hereby, is secured by collateral or is due and payable, and (g) apply any
sums received from Guarantor or from the sale of collateral granted by
Guarantor to any, all, or any portion of the Credit in any order regardless
of whether the Credit is secured by collateral or is due and payable. Bank
may foreclose, either by judicial foreclosure or by exercise of power of
sale, any deed of trust or mortgage securing the Credit, even though the
foreclosure may destroy or diminish Guarantor's rights against Debtor,
Guarantor shall be liable to Bank for any part of the Credit remaining
unpaid after the foreclosure whether or not the foreclosure was for fair
market value. Guarantor waives any defense based upon its loss of any right
against Debtor arising from Bank's election of a remedy on the Credit under
bankruptcy or other debtor relief laws.
6. Guarantor waives any and all rights to require Bank to (a) proceed against
Debtor or any other person, (b) proceed against collateral granted by
Debtor or others, (c) pursue or refrain from pursuing any other remedy in
Bank's power whatsoever or (d) disclose any information with respect to the
Credit, the financial condition or character of Debtor, any collateral,
other guarantors or any action or nonaction on the part of Bank, Debtor,
any other guarantor or other persons. Guarantor waives any defense arising
by reason of any disability or other defense of Debtor, its
successor(s), any endorser or co-maker or other guarantor, or relating to
the validity, value or enforce ability of any collateral. Without
limitation of the foregoing, Guarantor's liability hereunder shall not be
discharged or impaired in any respect by reason of any failure by Bank to
perfect or continue perfection of any lien, security interest or mortgage
securing the Credit or any delay with respect thereto. Until all Credit
has been indefeasibly paid in full, even though it may be in excess of the
liability incurred hereby, Guarantor shall not have any right of
subrogation, and Guarantor waives any benefit of and any right to share in
the collateral now or hereafter held by Bank. Guarantor waives all
presentments, demands for performance, notices of nonperformance, pro-
tests, notices of protest, notices of dishonor, notices of acceptance of
this Guaranty, notices of the existence, creation or incurring of new or
additional Credit and all other notices and demands of any kind or nature
whatsoever except as expressly set forth herein.
7. In addition to all liens upon and rights of setoff against the money,
securities or other property of Guarantor given to Bank by law or otherwise
as security for this Guaranty, Bank shall have a security interest in and a
right of setoff against all money, securities and other property of
Guarantor now or hereafter in the possession of or on deposit with Bank,
whether held in general or special account or deposit or for safekeeping
or otherwise; and each such security interest or right of setoff may be
exercised without demand upon, or notice to, Guarantor. In addition, all
property of Guarantor on which Bank shall at any time have a lien or
security interest shall secure payment and performance of this Guaranty.
No action or lack of action by Bank with respect to any security interest
or right of setoff or otherwise shall be deemed a waiver thereof, and every
right of setoff or security interest or otherwise shall continue in full
force and effect until specifically released by Bank in writing. The
security interests created hereby shall secure all Guarantor's obligations
under this Guaranty or otherwise owed to Bank.
8. Any indebtedness of Debtor now or hereafter owed to Guarantor is hereby
subordinated to the Credit and assigned to Bank as additional collateral.
If Bank so requests, any note or other instrument evidencing such
indebtedness shall be delivered to Bank, and such indebtedness shall be
collected, enforced and received by Guarantor as trustee for Bank and be
paid over to Bank on account of the Credit but without reducing or
affecting in any manner the liability of Guarantor hereunder. Should
Guarantor fail to collect proceeds of debt owed to it by Debtor and pay the
proceeds to Bank, Bank as Guarantor's attorney-in-fact may do such acts and
sign such documents in Guarantor's name as Bank considers necessary, at its
discretion, to effect such collection.
9. Guarantor agrees that to the extent Debtor makes a payment or payments or
is credited for any payment or payments made for the account of or on
behalf of Debtor to Bank, which payment or payments, or any part thereof,
is subsequently invalidated, determined to be fraudulent or preferential,
voided, set aside and/or required to be repaid to any trustee, receiver,
assignee or any other party whether under any
<PAGE> 2
Bankruptcy, State or Federal Law, common law or equitable cause or
otherwise, then to the extent thereof, the obligation or part thereof
intended to be satisfied thereby, together with the guaranty thereof
hereunder, shall be revived, reinstated and continued in full force and
effect as if said payment or payments had not originally been made by or
for the account of or on behalf of Debtor.
10. Guarantor's obligations hereunder are independent of the obligations of
Debtor, and separate action or actions may be brought and prosecuted
against any Guarantor whether action is brought against Debtor or any other
guarantor or whether Debtor or any other guarantor be joined in any such
action or actions, and Guarantor waives the benefit of the statute of
limitations affecting its liability hereunder or the enforcement hereof.
11. Any married person who signs this Guaranty expressly agrees that recourse
may be had against his/her separate property for all his/her obligations
hereunder.
12. Should any one or more provisions of this Guaranty be determined to be
illegal or unenforceable, all other provisions shall remain effective.
13. Bank may, with or without notice, assign this Guaranty in whole or in part.
This Guaranty shall inure to the benefit of Bank, its successors and
assigns, and shall bind Guarantor and Guarantor's heirs, executors,
administrators, representatives, successors and assigns.
14. Guarantor agrees to pay Bank on demand reasonable attorneys' fees and all
other costs and expenses which may be incurred in the collection or
attempted collection from Debtor of any Credit and in the enforcement or
attempted enforcement by Bank of this Guaranty or any collateral therefor,
whether or not legal proceedings or suit are instituted, together with
interest thereon at the rate applicable to the Credit and including,
without limitation, a reasonable estimate of the allocated cost of Bank's
in-house legal counsel and staff and other legal expenses.
15. If Debtor is a corporation or partnership, Bank need not inquire into the
power of Debtor or the authority of its officers, directors, partners or
agents acting or purporting to act in its behalf, and any Credit granted in
reliance upon the purported exercise of such power or authority is
guaranteed hereunder.
16. Receipt of a true copy of this Guaranty is hereby acknowledged by each
Guarantor. Guarantor understands and agrees that this Guaranty shall not
constitute a commitment, of any nature whatsoever, by Bank to renew or
hereafter extend Credit to Debtor. Guarantor agrees that this Guaranty
shall be effective with or without notice from Bank of its acceptance of
the Guaranty.
17. If Guarantor has executed more than one Guaranty of the indebtedness of
Debtor owed to Bank, any limits of liability thereunder and hereunder shall
be cumulative.
18. GUARANTOR WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
INSTITUTED BY BANK OR GUARANTOR WHICH PERTAINS DIRECTLY OR INDIRECTLY TO
THIS GUARANTY, THE CREDIT, THE COLLATERAL THEREFOR OR ANY MATTER ARISING
THEREFROM OR RELATING HERETO OR THERETO.
19. Guarantor waives all rights to interpose any setoffs or counterclaims of
any nature in any action or proceeding instituted by Bank with respect to
this Guaranty, the collateral therefor or any matter arising therefrom or
relating thereto and the posting of any bond which may otherwise be
required.
20. GUARANTOR HEREBY IRREVOCABLY SUBMITS AND CONSENTS TO THE JURISDICTION THE
SUPREME COURT OF THE STATE OF NEW YORK, IN THE COUNTY OF NEW YORK, AND THE
UNITED STATES DISTRICT COURT FOR THE SUPREME DISTRICT OF NEW YORK IN
CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY. IN ANY SUCH LITIGATION GUARANTOR WAIVES PERSONAL SERVICE OF THE
SUMMONS AND COMPLAINT OR OTHER PROCESS AND PAPERS ISSUED THEREIN AND AGREES
THAT THE SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL
DIRECTED TO GUARANTOR AT ITS ADDRESS SET FORTH BELOW OR OTHER ADDRESS
THEREOF WHICH BANK HAS RECEIVED WRITTEN NOTICE BY CERTIFIED OR REGISTERED
MAIL. WITHIN THIRTY (30) DAYS AFTER SUCH MAILING, GUARANTOR SHALL APPEAR OR
ANSWER TO SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS.
21. All rights, remedies, powers benefits granted to Bank under this Guaranty,
the Credit, any oral or other written agreement or applicable law, whether
expressly granted or implied in law or otherwise, are cumulative, not
exclusive and enforceable alternatively, successively, or concurrently on
any one of more occasions at Bank's discretion.
22. Bank shall not, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer
of Bank. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Bank of any default, right,
power and/or remedy on any one occasion shall not be construed as a bar to
waiver or any such default, right, power, and/or remedy which Bank would
otherwise have on any future occasion, whether similar in kind or
otherwise.
23. Neither this Guaranty or any related agreement, document or instrument nor
any provision hereof or thereof shall be amended modified or discharged
orally or by course of conduct, but only by a written agreement signed by
an authorized officer of Bank expressly referring to this Guaranty and to
the provisions so amended, modified or discharged.
24. Bank's books and records showing the account(s) between Bank and Debtor
shall be admissible in evidence in any action or proceeding as prima facie
proof of the items set forth therein. Bank's statements rendered to Debtor,
to the extent to which no objection is made within thirty (30) days after
date thereof, shall be deemed conclusively correct and constitute an
account stated, which shall be binding on Guarantor.
25. This is a continuing guaranty. Revocation shall be effective only upon the
close of the next business day after written notice thereof is received by
an officer of Bank at the originating office indicated above by certified
or registered mail, return receipt requested. Such notice shall be
delivered to any other office of Bank designated in a written notice mailed
by Bank to Guarantor at its address set forth below. Any such revocation
shall be effective only as to the revoking party shall not affect that
party's obligations with respect to Credit existing before the revocation
became effective or for post-termination interest and collection expenses
accruing or incurred by Bank with respect thereto.
26. The provisions of this Guaranty shall be construed and interpreted and all
rights and obligations hereunder determined in accordance with the laws of
the State of New York.
[Limit of liability (if any)$____________, plus interest at the rate applicable
to the Credit and expenses enumerated in Paragraph 14 hereof.] Executed on
September 15, 1995.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Signature of Guarantor(s)
JLM Marketing, Inc.
- ---------------------------- ---------------------------------------------
By: /s/ Frank Musto
Title: Vice President & CFO
- ---------------------------- ---------------------------------------------
- ---------------------------- ---------------------------------------------
<PAGE> 1
EXHIBIT 10.24
[LOGO GENERALE BANK LETTERHEAD]
CONFIDENTIAL DEPARTMENT
JLM Industries (Europe) B.V. Commodity & Trade
attn. the Management Finance
Building Gemini, Brainpark 1
K.P. van der Mandelelaan 70 DIRECT EXTENSION
3062 MB ROTTERDAM 010-2721152
YOUR REFERENCE ORIGINATOR/REFERENCE DATE
Jolanda T. M. Borst 8 April 1997
Dear Sirs,
It gives us great pleasure to confirm that we are prepared to grant
you the following credit arrangement:
A. A multi purpose transaction facility with an authorized limit
of USD 10,000,000.-- (say: ten million United States Dollars)
Borrower : JLM Industries (Europe) B.V.
Purpose : Financing of chemical trade transactions
and stocks.
Use : This facility can be used in the form of
- overdrafts in current account;
- issuing guarantees for your account and
at your own risk;
- opening of (stand-by) Documentary
Credits (L/C's) for your account and at your own
risk.
All transactions will be handled on a case-to-case basis,
subject to our prior approval.
With this facility a sublimit of USD 2,000,000.-- will be
applicable with regard to financing unsold stocks for a maximum
period of 3 months.
<PAGE> 2
[GENERALE BANK LOGO]
Re: General credit arrangement Page 2/6
F.a.o.: JLM Industries (Europe) B.V.
The debit balance which may result from this facility, taking into
account the authorised limit, may never exceed the aggregate of:
- a stand-by L/C of USD 1,000,000.-- issued by an
acceptable United States bank by order of JLM Industries Inc. and
favouring ourselves;
- 90% of the accounts receivable on 'major' customers not
older than 90 days and excluding intercompany receivables,
assigned and found acceptable to us;
- 90% of the accounts receivable backed by guarantees or
(stand-by) L/C's issued in favour of yourselves, assigned
and found acceptable to us;
- 90% of the purchase price of the pledged, fully paid
and presold stocks and/or of the value of documents in our
possession related to presold trade transactions. These
documents will either be title documents, or otherwise matching
documents under a back-to-back instrument;
- 70% of the purchase price of the pledged, fully paid
but unsold stocks and/or the value of title documents in our
possession related to unsold trade transactions, however with a
maximum of USD 2,000,000. - and for a maximum period of 3 months.
We will receive, at least once a month, duly signed and
dated pledge lists of your current receivables and specification
lists of your current stocks, along with a recent list of creditors.
B. A Forward Term Facility for maintaining an open position
in a foreign currency by way of a Forward Term Contract (in a
currency acceptable to us) in order to cover the exchange risks
arising from your trade transactions. For these contracts which may
have a maximum duration of 12 months we will apply a risk margin
of 10%.
The limit arising from the risk margin will amount to a
maximum of USD 500,000.-- (say: fivehundredthousand United States
Dollars). The utilised risk margin will be subtracted from this
limit.
Borrower : JLM Industries (Europe) B.V.
The facilities mentioned under A. and B. will be available to you
until further notice.
<PAGE> 3
[GENERALE BANK LOGO]
Re: General credit arrangement Page 3/6
F.a.o.: JLM Industries (Europe) B.V.
The following conditions will be applicable until further notice:
Sub A. Dutch Guilders
--------------
Debit interest based on a yearly interest rate of
1.25% above the present rate of Generale Bank Nederland
N.V. at present 3.25% per annum. Changes in the
abovementioned base rate of Generale Bank Nederland
N.V. will be announced in several large Dutch daily
newspapers.
Credit interest based on a yearly interest rate of 1.5%
below the Official Call interest rate. The Official Call
rates will be published in the national newspaper
"Het Financieele Dagblad". At the moment this rate is
1.75%.
Other currencies
----------------
Debit interest on your foreign currency account(s) will
be based on the tariffs of the Eurocurrency market to be
increased with a margin of 1.5%.
Credit interest on your foreign currency account(s) will
be based on the tariffs of the Eurocurrency market
to be decreased with a margin of 1.5%.
Import (standby) L/C's and guarantees
-------------------------------------
commission for opening
- 1 o/oo all-in for maturities not exceeding 1 month;
- 1.25 o/oo all-in for maturities not exceeding 3 months.
commission for handling documents
- 0.75 o/oo
Export L/C's
------------
advice commission
- NLG 100.--
commission for handling documents
- 0.50 o/oo
Transfer commission
-------------------
- NLG 145.-- per transfer.
<PAGE> 4
[GENERALE BANK LOGO]
Re: General credit arrangement Page 4/6
F.a.o.: JLM Industries (Europe) B.V.
Other costs, whether or not specified or customary to the bank will
also be charged. If so desired, we can supply you with further
information concerning these costs.
The interest mentioned above will be charged each calendar quarter,
at the end of the quarter.
As security for the fulfilment of all of your obligations, present and future
indebtedness to the bank, we received:
- - Pledge of accounts receivable.
- - Pledge of stocks.
- - Confirmation of Transmare- Chemie HmbH that 50% of the stocks with
Paktank Industrial Distillation B.V. is pledged to the bank.
Moreover, we will receive in addition:
- - Pledge of title documents.
- - A stand-by L/C, acceptable to us, amounting to USD 1,000,000.--, valid
until 1st March 1998.
- - A corporate guarantee, the draft of which will require our prior
approval, from JLM Industries, Inc. amounting to USD 10,000,000.--
We will receive weekly a specification of Paktank Industrial Distillation B.V.
mentioning the current stocks of JLM Industries and Transmare- Chemie HmbH.
We are prepared to consider a decrease of the stand-by L/C, whenever the
solvency of JLM Industries (Europe) B.V. will increase up to a for us
acceptable rate.
In granting this credit arrangement it is stipulated that until further notice
no dividend payments will take place without our prior written consent.
In granting this credit arrangement it is also stipulated that as far as
possible all banking services should be handled by the bank.
Furthermore we assume that these credit facilities will not be used for
interest profits which cannot be considered to be a part of your normal daily
business.
<PAGE> 5
[GENERALE BANK LOGO]
Re: General credit arrangement Page 5/6
F.a.o.: JLM Industries (Europe) B.V.
We kindly request you to send us your annual report as soon as possible after
completion, but no later than June 30, together with a statement by a chartered
accountant.
Furthermore we assume that we will be informed of special developments within
the company.
Also, we will receive interim financial reports concerning the company, at
minimum once a quarter.
The movable property, to be financed by the bank, will at all times be fully
insured.
With respect to the above we will be pleased to introduce our insurance account
manager, under no obligations, to advise you on your insurance portfolio.
Payment orders should, as far as possible, be ready for automatic processing.
The General Terms and Conditions of the bank are also applicable to this
agreement and ought to be seen as an integral part of this offer and should be
included word for word. A copy thereof is already in your possession.
By accepting this offer you state explicitly that no existing obligations
against third parties are being violated.
As an indication of your acceptance of the above mentioned loan agreement, we
kindly request you to initial each page and duly sign and date the enclosed
duplicate of this letter and return it.
On acceptance hereof we will forward you the necessary creditdocumentation for
your signature.
This offer is valid until 28 April 1997.
Finally we would like to inform you that the credit facilities are available
after receipt and verification of the contracts as well as of the legal
documents.
<PAGE> 6
Re: General credit arrangement Page 6/6
F.a.o.: JLM Industries (Europe) B.V.
If after reading the above, there are any questions please do not hesitate in
contacting Mrs. Jolanda T.M. Borst, telephone 010-2721152.
Yours faithfully,
GENERALE BANK NEDERLAND N.V.
As agreed:
/s/ Illegible signature
Date: 4-29-97
<PAGE> 1
EXHIBIT 10.25
CORPORATE GUARANTEE
TO: Generale Bank
Commodity & Trade Financing Department
Attention: Mr. Paul M. Kok
Coolsingel 63
3012 AB Rotterdam
The undersigned, JLM Industries, Inc., a corporation organized under the laws
of Delaware, USA, having its registered office at 8675 Hidden River Parkway,
Tampa, FL 33637, USA, in consideration of your granting of a transaction credit
facility to JLM Industries (Europe) B.V., K.P. van de Mandelelaan 70,
Rotterdam, up to a maximum amount of USD 10,000,000 (ten million United States
Dollars), hereby irrevocably and unconditionally guarantees repayment by JLM
Industries (Europe) B.V. of any outstandings under this credit facility to be
accrued with interest and reasonable legal costs of collecting the same, on
your first demand by letter or telex stating that JLM Industries (Europe) B.V.
has defaulted upon a monetary obligation owed you under this credit facility for
more than thirty (30) days, with a full description of the specific obligation,
and the nature of the default.
The undersigned, JLM Industries, Inc., may terminate this guarantee by giving
thirty (30) days written notice to the Bank by registered letter, but shall
remain liable for the principal debtor's monetary obligations to the Bank in
existence on the effective date of termination.
Generale Bank agrees that it will negotiate the need for the continued
existence of this guarantee in good faith on or before March 31, 1998, taking
into consideration JLM Industries (Europe) B.V.'s credit history in meeting all
of its monetary obligations to the Bank as of that date.
Signed by JLM Industries, Inc., Tampa, FL, USA on April 30, 1997.
JLM Industries, Inc. Generale Bank
By: /s/ Illegible signature By:
---------------------------------- -----------------------------
Vice President & CFO Date:
--------------------------
<PAGE> 1
EXHIBIT 24.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement NO. 333-_______ of JLM
Industries, Inc. and subsidiaries on Form S-1 of our reports relating to the
consolidated financial statements of JLM Industries, Inc. and subsidiaries
dated February 19, 1997 (except for Note 18 as to which the date is May 22,
1997 and Note 19 as to which the date is July ____, 1997), appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Tampa, Florida
___________, 1997
The above mentioned consolidated financial statements retroactively reflect the
combination of JLM Industries, Inc. and subsidiaries with two interrelated
predecessor businesses previously under common control and management, which is
to be effected prior to the effective date of this Registration Statement.
However, the consolidated financial statements do not reflect the contemplated
common stock split. The above consent is in the form which will be signed by
Deloitte & Touch LLP upon consummation of such combination and stock split,
which are described in Note 19 of notes to consolidated financial statements,
and assuming that from February 19, 1997 to the date of the combination, no
other events shall have occurred that would effect the above mentioned
consolidated financial statements and notes thereto, except for events
described in Note 18 of notes to the consolidated financial statements as to
which the date is May 22, 1997.
DELOITTE & TOUCHE LLP
Tampa, Florida
May 27, 1997
<PAGE> 1
EXHIBIT 24.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement No. 333-_____ of JLM
Industries, Inc. and subsidiaries on Form S-1 of our report relating to the
statement of revenues and direct costs of the Blue Island, Illinois, location of
BTL Specialty Resins Corp. for the period from April 1, 1995 through June 7,
1995 dated January 29, 1997 appearing in the Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
Tampa, Florida
May 27, 1997
<PAGE> 1
EXHIBIT 24.4
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
As a person named in this registration statement as being about to
become a director of JLM Industries, Inc., I hereby consent to my
identification in that capacity and to all references to me and information
about me included in or made a part of this registration statement.
/s/ J. Robert Mehall
-------------------------
J. Robert Mehall
As of May 27, 1997
<PAGE> 1
EXHIBIT 24.5
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
As a person named in this registration statement as being about to
become a director of JLM Industries, Inc., I hereby consent to my
identification in that capacity and to all references to me and information
about me included in or made a part of this registration statement.
/s/ Jerry L. Weinstein
--------------------------
Jerry L. Weinstein
As of May 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JLM INDUSTRIES, INC., FOR THE YEAR ENDED DECEMBER 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,792
<SECURITIES> 0
<RECEIVABLES> 28,945
<ALLOWANCES> (454)
<INVENTORY> 13,284
<CURRENT-ASSETS> 52,191
<PP&E> 33,488
<DEPRECIATION> 4,119
<TOTAL-ASSETS> 87,292
<CURRENT-LIABILITIES> 52,253
<BONDS> 0
0
0
<COMMON> 540
<OTHER-SE> 12,904
<TOTAL-LIABILITY-AND-EQUITY> 87,292
<SALES> 236,521
<TOTAL-REVENUES> 236,521
<CGS> 208,282
<TOTAL-COSTS> 208,282
<OTHER-EXPENSES> 17,651
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,815
<INCOME-PRETAX> 7,774
<INCOME-TAX> 3,417
<INCOME-CONTINUING> 4,357
<DISCONTINUED> (428)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,929
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JLM INDUSTRIES, INC., FOR THE THREE MONTHS ENDED
MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,829
<SECURITIES> 0
<RECEIVABLES> 48,066
<ALLOWANCES> (454)
<INVENTORY> 14,615
<CURRENT-ASSETS> 73,678
<PP&E> 33,900
<DEPRECIATION> 4,694
<TOTAL-ASSETS> 108,745
<CURRENT-LIABILITIES> 74,502
<BONDS> 0
0
0
<COMMON> 540
<OTHER-SE> 14,195
<TOTAL-LIABILITY-AND-EQUITY> 108,745
<SALES> 80,518
<TOTAL-REVENUES> 80,518
<CGS> 73,671
<TOTAL-COSTS> 73,671
<OTHER-EXPENSES> 3,823
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 628
<INCOME-PRETAX> 2,396
<INCOME-TAX> 836
<INCOME-CONTINUING> 1,560
<DISCONTINUED> (85)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,476
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
