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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORTS UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended SEPTEMBER 30, 1996
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Commission file number 0-10735
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THE GNI GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 76-0232338
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2525 BATTLEGROUND ROAD, DEER PARK, TEXAS 77536
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(Address of principal executive offices) (Zip Code)
(713) 930-0350
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the registrant's common stock,
$.01 par value per share, as of November 1, 1996 was 6,569,025.
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INDEX
THE GNI GROUP, INC.
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Page
PART I - FINANCIAL INFORMATION Number
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Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
September 30, 1996 and June 30, 1996 1
Consolidated Statements of Operations
Three Months ended September 30, 1996
and September 30, 1995 2
Consolidated Statements of Cash Flows
Three Months ended September 30, 1996
and September 30, 1995 3
Notes to Consolidated Financial
Statements 4-5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 6-10
Part II - OTHER INFORMATION
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Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote
of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
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<TABLE>
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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THE GNI GROUP, INC. September 30, June 30,
ASSETS 1996 1996
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CURRENT ASSETS:
Cash and time deposits $ 447,156 $ 1,122,941
Accounts receivable, less allowance of approximately $138,000
for 9/30/96 and $142,000 for 6/30/96 6,323,321 6,508,680
Inventory 771,126 661,233
Deferred tax asset - current 298,356 400,701
Prepaid expenses and other assets 1,560,947 969,762
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TOTAL CURRENT ASSETS 9,400,906 9,663,317
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PROPERTY, PLANT AND EQUIPMENT 44,535,517 43,829,344
Less accumulated depreciation (12,714,397) (11,682,703)
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NET PROPERTY, PLANT AND EQUIPMENT 31,821,120 32,146,641
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Intangibles 20,896,225 3,938,751
Restricted time deposits 1,594,990 1,495,681
Deferred tax asset 110,635 222,309
Other assets 1,312,969 1,611,519
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TOTAL ASSETS $ 65,136,845 $ 49,078,218
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable $ 3,757,885 $ 3,887,395
Accrued liabilities 3,263,612 2,599,503
Federal income taxes payable 376,437 549,256
Notes payable 531,450 --
Current portion of long-term debt 2,495,652 2,620,652
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TOTAL CURRENT LIABILITIES 10,425,036 9,656,806
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Accrued liability 4,257,772 518,804
Long-term debt, less current portion 27,119,565 16,568,478
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STOCKHOLDERS' EQUITY:
Non-redeemable convertible preferred stock, $.01 par value.
Authorized 1,000,000 shares; issued 0 shares. -- --
Common stock, $.01 par value.
Authorized 20,000,000 shares; issued 6,609,209 shares 66,092 66,059
at 9/30/96 and 6,605,876 at 6/30/96
Additional paid-in capital 19,264,347 19,251,048
Retained earnings 4,051,039 3,064,029
Less cost of treasury stock (40,184 shares) (47,006) (47,006)
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TOTAL STOCKHOLDERS' EQUITY 23,334,472 22,334,130
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 65,136,845 $ 49,078,218
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</TABLE>
Notes to Consolidated Financial Statements are an integral
part of these statements.
NOTE: The Balance Sheet at September 30, 1996 is unaudited. The Balance Sheet
at June 30, 1996 has been derived from the audited financial statements at that
date.
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<TABLE>
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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THE GNI GROUP, INC. Three Months Ended
September 30,
1996 1995
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REVENUES $ 9,959,627 $ 9,461,639
COST AND EXPENSES:
Cost of services 5,701,841 5,602,683
Selling, general and administrative 1,116,594 1,129,456
Depreciation and amortization 1,235,668 1,194,155
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TOTAL COST AND EXPENSES 8,054,103 7,926,294
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OPERATING INCOME 1,905,524 1,535,345
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Interest income 22,433 18,708
Interest expense 370,973 343,738
Other income (expense) (3,772) 21,759
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INCOME BEFORE TAX 1,553,212 1,232,074
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Income tax 566,200 446,510
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NET INCOME $ 987,012 $ 785,564
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NET INCOME PER COMMON SHARE $ .15 $ .12
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SHARES USED TO CALCULATE EARNINGS PER SHARE 6,752,098 6,824,313
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</TABLE>
Notes to Consolidated Financial Statements are an integral part of these
statements.
2
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<TABLE>
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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THE GNI GROUP, INC. Three Months Ended
September 30,
1996 1995
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Cash flows from operating activities:
NET INCOME $ 987,012 $ 785,564
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and amortization 1,235,668 1,194,155
Deferred taxes 214,019 92,789
Gain on sale of assets (7,683) (21,305)
Change in assets and liabilities:
Decrease (increase) in accounts receivable 185,359 (1,047,382)
Decrease (increase) in inventory (109,893) 50,997
Increase in prepaid expenses and other (591,186) (944,767)
Increase in other assets (139,831) (40,657)
Increase (decrease) in accounts payable (129,511) 876,680
Increase (decrease) in accrued liabilities (296,923) 529,398
Decrease in federal income taxes payable (172,819) (178,529)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 1,174,212 1,296,943
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Cash flows from investing activities:
Increase in restricted time deposits (99,309) (100,583)
Payment of cash in connection with
EMPAK transaction (12,000,000) --
Proceeds from sale of assets 15,700 24,317
Purchases of fixed assets (737,264) (2,052,494)
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NET CASH USED IN INVESTING ACTIVITIES (12,820,873) (2,128,760)
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Cash flows from financing activities:
Cash proceeds from notes payable 852,144 933,095
Net cash from exercise of stock options 13,332 --
Net proceeds from revolving line -- 250,000
Proceeds from issuance of long-term debt 12,000,000 --
Principal payments of long-term debt and notes payable (1,894,600) (861,530)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 10,970,876 321,565
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NET DECREASE IN CASH AND CASH EQUIVALENTS (675,785) (510,252)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,122,941 852,370
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 447,156 $ 342,118
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</TABLE>
Notes to Consolidated Financial Statements are an integral part of these
statements.
3
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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THE GNI GROUP, INC. September 30, 1996
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SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly-owned. All significant intercompany
transactions are eliminated.
The Consolidated Balance Sheet as of September 30, 1996 and the related
Statements of Operations and Cash Flows for the three month periods ended
September 30, 1996 and 1995 are unaudited; in the opinion of management, all
adjustments necessary for a fair presentation of such financial statements have
been included. Such adjustments consisted of normal, recurring items. Interim
results are not necessarily indicative of results for a full year. The
financial statements and Notes are presented as permitted by Form 10-Q and do
not contain certain information included in the Company's Annual Financial
Statements and Notes.
Statement of Cash Flows
For purposes of reporting cash flows, cash and time deposits include cash
on hand and certificates of deposit.
Earnings Per Share
The average number of common and common equivalent shares includes the
weighted average number of common shares outstanding, shares issuable assuming
conversion of the non-redeemable convertible preferred stock and shares
issuable pursuant to the assumed exercise of stock options (by application of
the treasury stock method). Primary and fully diluted earnings per share are
equivalent due to the insignificance of other dilutive securities.
EMPAK Agreement
On September 30, 1996, the Company participated in a consolidation with
EMPAK Inc. ("EMPAK"), whereby EMPAK exited the third-party commercial waste
management business and agreed to assist in the transfer of EMPAK's third-party
commercial waste management customers to the Company. EMPAK will continue to
use its facility in Deer Park, Texas for the disposal of its own waste and the
waste of its affiliates and customers of its related businesses. The Company
paid EMPAK the sum of $12,000,000 at closing. Additionally, the Company has
agreed to pay EMPAK $1,200,000 per year for five years in exchange for the use
of EMPAK's deepwell for five years in case of a force majeure at the Company's
facilities, thus allowing the Company to mitigate any business disruption that
may occur should one of its deepwells have operational or mechanical
difficulties.
4
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Income Taxes
The provision for income taxes related to continuing operations in the
consolidated statements of operations is summarized below (unaudited):
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Three Months Ended
September 30, 1996
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Provision:
Federal-Current $ 302,181
Federal-Deferred 214,019
State 50,000
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Total $ 566,200
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The significant components of deferred income tax expense for the three months ended September 30, 1996 are as
follows:
Deferred tax expense (exclusive of the effect of the component
listed below) $ 214,019
Increase in beginning-of-the-year balance of the valuation allowance for
deferred tax assets --
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Total deferred tax provision $ 214,019
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The tax effects of temporary timing differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities at September 30, 1996 are presented below:
Deferred tax assets:
Amounts deductible when paid $ 702,158
Accounts receivable, principally due to allowance for doubtful accounts 50,971
Compensated balances, principally due to accrual for financial
reporting purposes 67,196
Alternative minimum tax credit carryforward 1,331,418
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Total deferred tax assets $ 2,151,743
Less valuation allowance (20,000)
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Net deferred tax assets $ 2,131,743
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Deferred tax liabilities:
Facility and equipment, principally due to differences in depreciation
and capitalized interest $ 1,722,752
Other --
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Total deferred tax liabilities $ 1,722,752
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Net deferred tax asset $ 408,991
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</TABLE>
5
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MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS-
FISCAL 1997 FIRST QUARTER COMPARED WITH FISCAL 1996 FIRST QUARTER
Revenues. Revenues for the first quarter of fiscal 1997 were $9,959,627 as
compared to $9,461,639 for the comparable period of fiscal 1996, an increase of
$497,988, or 5.3%. This increase in revenues was primarily attributable to an
increase in revenues from the Company's chemical manufacturing and processing
subsidiary, GNI Chemicals Corporation ("GNIC"), of approximately $621,000, or
14.4%, as compared to the first quarter of fiscal 1996. The Company's GNIC
revenues were approximately $4,945,000 as compared to $4,324,000 for the fiscal
1996 period. This increase is a result of an increase in specialty chemical
sales offset by a decrease in chemical manufacturing and processing revenues.
Specialty chemical sales benefitted from the Company's acquisition of E.I. du
Pont de Nemours & Company's ("DuPont") refined acetonitrile ("ACE") business,
which was completed in the second quarter of fiscal 1996, and therefore did not
contribute to GNIC's revenues during the first quarter of fiscal 1996. GNIC's
manufacturing and processing revenues were moderately lower than the comparable
fiscal 1996 period due primarily to the long-term planning for the assimilation
of ACE production into GNIC's facility, beginning full-time on January 1, 1997.
This involved, among other things, a redefinition of market and production
strategies, including the selection of customer projects. For example, GNIC
elected to run a trial campaign of ACE in the GNIC plant during the first
quarter of fiscal 1997. As a result, the capacity utilized by this trial was
not available to generate revenues from normal, third-party business. Revenues
from the Company's treatment and disposal subsidiaries decreased by
approximately $240,000, or 5.8%, from the fiscal 1996 first quarter compared to
the fiscal 1997 first quarter. Volumes at the Company's deepwells were
negatively impacted by the lack of rainfall in the region during the fiscal
1997 period. The Company's transportation revenues increased by approximately
$118,000, or 12.2%, from the fiscal 1996 first quarter compared to the fiscal
1997 first quarter.
Cost of Services. Cost of services decreased as a percent of revenues from
59.2% during the first quarter of fiscal 1996 to 57.2% for the first quarter of
fiscal 1997. In absolute dollar terms, cost of services increased by
approximately $100,000 in support of approximately $500,000 of additional
revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses as a percent of revenues were 11.9% and 11.2%,
respectively, for the first quarter of fiscal 1996 and fiscal 1997. In
absolute dollars, SG&A expenses were approximately the same.
6
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Depreciation and Amortization. Depreciation and Amortization ("D&A")
expenses decreased as a percent of revenues, from 12.6% in the first quarter of
fiscal 1996 to 12.4% in the first quarter of fiscal 1997. D&A expenses for the
first quarter of fiscal 1997 increased by only 3.5% in absolute dollar terms
compared to the first quarter of fiscal 1996 due primarily to two offsetting
factors: (i) the increased level of D&A expense resulting from capital
improvements to its facilities during fiscal 1996 and an acquisition made by
the Company in the second quarter of fiscal 1996; and (ii) the decreased level
of D&A expense resulting from the Company's adoption of FASB No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" as of January 1, 1996.
Net Interest Expense. Net interest expense increased in the fiscal 1997
first quarter as compared with the fiscal 1996 first quarter. This increase
was primarily attributable to higher principal balances on the Company's
indebtedness during the fiscal 1997 period, associated with an acquisition by
the Company in November 1995.
Net Income. The Company recorded net income of $987,012, or $.15 per
share, for the first quarter of fiscal 1997 compared to net income of $785,564,
or $.12 per share, for the first quarter of fiscal 1996.
Inflation did not have a material impact on the Company's revenues or
income for either the first quarter of fiscal 1997 or fiscal 1996. Further, it
is not expected that inflation will have a material impact during the upcoming
quarters for either the Company's revenues or income.
LIQUIDITY AND CAPITAL RESOURCES
The Company continuously evaluates opportunities for growth and
development. Management expects that future revenue growth will be dependent
upon a corresponding increase in the fixed assets of and working capital used
by the Company. Historically, the Company has financed its growth through
funds generated from operations, borrowings under various credit arrangements
with a commercial bank, and the private placements of shares of Common Stock
and Series A Preferred Stock. Management believes that the Company's existing
cash balances, funds generated from operations, and borrowings under available
credit arrangements will be sufficient to meet the Company's current capital
requirements. In order to finance the future growth and development of the
Company, the Company will require, and from time to time evaluates, alternative
sources of additional capital.
Effective as of June 30, 1993, the Company amended and restated its credit
agreement ("Credit Agreement") with a commercial bank to provide for the
addition of an $8,000,000 advancing equipment line of credit ("Equipment
Line"). The Credit Agreement includes a $6,621,520 term loan ("Term Loan") and
a $4,000,000 revolving credit line ("Revolver"). The credit facility is
collateralized by substantially all of the assets of the Company and its
subsidiaries, including the stock of its subsidiaries.
7
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The Credit Agreement restricts the Company from incurring additional
indebtedness, prohibits the Company from making any changes to its capital
structure or dividend payments without prior approval of the bank, requires the
maintenance of minimum working capital, minimum tangible net worth, and maximum
debt-to-tangible net worth and debt coverage ratios, and contains other
provisions and restrictive covenants that management believes are customary.
The Equipment Line has been utilized to fund capital expenditures of the
Company. Effective as of October 31, 1994, the Equipment Line bears an
interest rate of either 0.25% above the bank's prime rate of interest or 2.75%
above LIBOR, at the Company's election. The Equipment Line had a two year
advancing period through October 31, 1995. As provided for in the Credit
Agreement, on October 31, 1994 funds advanced over the previous 12 months
converted to a four-year term loan. Upon its conversion to a term loan,
quarterly principal payments of $250,000 plus interest are required, with a
balloon at maturity. At the time of conversion and thereafter, the Company has
the option to fix the interest rate. As of September 30, 1996, the unpaid
principal balance outstanding on the Equipment Line was $6,000,000.
The Term Loan represents borrowings that were originally used by the
Company to finance the construction of the Company's GNIC facility, which was
completed in the first quarter of fiscal 1991. The Term Loan bears interest at
a fixed rate of 8.44%, matures December 1, 1998 and requires quarterly
principal payments of $173,913. The unpaid principal balance of the Term Loan
totalled $1,565,217 at September 30, 1996.
Effective as of March 3, 1995, the bank and the Company amended the Credit
Agreement to provide an additional $2,000,000 in term debt ("Acquisition Line")
that was used for the acquisition of Chemical Waste Management, Inc.'s ("CWM")
waste treatment, storage and disposal facility located in Corpus Christi,
Texas. The Acquisition Line has a five-year maturity and bears an interest
rate of either 0.25% above the bank's prime rate of interest or 2.75% above
LIBOR, at the Company's election. Quarterly principal payments of $200,000
plus interest were required for the first year, then quarterly payments of
$75,000 plus interest are required until maturity. As of September 30, 1996,
the unpaid principal balance outstanding on the Acquisition Line was
$1,050,000.
In connection with the acquisition of its Corpus Christi, Texas facility,
CWM took back a note in the principal amount of $2,000,000 as part of the
consideration ("CWM Note"). The CWM Note has a maturity of five years and
bears interest at the rate of 10% per year. The first year of the CWM Note was
interest-only; thereafter, quarterly principal payments of $125,000 plus
accrued interest are required until maturity. As of September 30, 1996, the
unpaid principal balance outstanding on the CWM Note was $1,625,000.
8
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Effective as of November 3, 1995, the bank and the Company amended the
Credit Agreement (i) to extend the maturity date of the Revolver to October 31,
1997 and (ii) to increase the total commitment amount of the Revolver from
$4,000,000 to $10,000,000. The Revolver is used by the Company for working
capital and other general corporate purposes. From November 3, 1995 until
September 23, 1996, the amount drawn under the Revolver could not exceed a
borrowing base limitation equal to the sum of (a) 80% of the Company's
consolidated accounts receivable plus (b) the lesser of 50% of the Company's
product inventory, or $500,000; plus (c) the flat amount of $3,250,000 until
April 30, 1996 when such amount was reduced by $200,000 per quarter, and then
would have been reduced to $0 beginning December 31, 1996 and thereafter.
However, effective as of September 23, 1996, the bank and the Company again
amended the Credit Agreement (i) to decrease the total commitment amount of the
Revolver from $10,000,000 to $7,000,000; (ii) to remove the flat amount
concept, item (c) above, from the borrowing base limitation calculation, and
(iii) to provide for a $15,000,000 term loan more fully described in the
following paragraph. The maturity date of the Revolver remained unchanged.
Effective as of October 31, 1994, advances under the Revolver bear interest at
either the bank's prime rate of interest or 2.75% above LIBOR, at the Company's
election. As of September 30, 1996, the Company has an unpaid principal
balance outstanding on the Revolver of $4,375,000.
Effective as of September 23, 1996, the bank and the Company amended the
Credit Agreement to provide an additional term note in the amount of
$15,000,000 ("Bridge Loan"). The Bridge Loan was used by the Company (i) to
fund the $12,000,000 EMPAK transaction that closed on September 30, 1996; and
(ii) to transfer the flat amount of $3,000,000, referred to in item (c) above,
from the Revolver's borrowing base calculation. The Bridge Loan bears
interest at the bank's prime rate of interest. As of September 30, 1996,
the Company has an unpaid principal balance outstanding on the Bridge Loan
of $15,000,000.
For the first quarter of fiscal 1997 and fiscal 1996, net cash provided by
operations was approximately $1,174,000 and $1,297,000, respectively. The
significant differences in the components that comprise net cash provided by
operations were: (i) a slight decrease in accounts receivable in the fiscal
1997 period compared with an increase in the fiscal 1996 period, (ii) a slight
decrease in accounts payable for the first quarter of fiscal 1997 compared with
an increase in the fiscal 1996 period, and (iii) a decrease in accrued
liabilities during the first quarter of fiscal 1997 compared with an increase
in the fiscal 1996 period. Accounts receivable increased during the first
quarter of fiscal 1996 primarily as a result of an increase in the number of
days of revenue represented by the level of accounts receivable during that
period, as compared with the first quarter of fiscal 1997 when the level of
accounts receivable remained nearly unchanged. The increase in accounts
payable during the fiscal 1996 period was primarily a result of the increase in
the level of capital expenditures made by the Company during the period. The
increase in accrued liabilities during the first quarter of fiscal 1996 was
associated with increases in the Company's accruals for group medical expenses
and deepwell workover expenses.
9
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During the first quarter of fiscal 1997 and fiscal 1996, the Company's
capital expenditures were $737,000 and $2,052,000, respectively. Capital
expenditures for fixed assets for the first quarter of both fiscal 1997 and
fiscal 1996 were primarily related to general improvements to the Company's
GNIC and treatment and disposal facilities.
Cash balances decreased approximately $676,000 during the first quarter of
fiscal 1997, primarily as a result of the Company's capital expenditures made
during the period. During the first quarter of fiscal 1997, Prepaid expenses
and other current assets increased by approximately $591,000 and Notes payable
increased by approximately $531,000, each primarily as a result of the renewal
of the Company's various annual insurance coverages during the first quarter of
fiscal 1997. Primarily as a result of the EMPAK transaction, during the fiscal
1997 period, (i) Intangibles increased by approximately $16,957,000, (ii)
Accrued liabilities increased by approximately $664,000, (iii) Accrued
liabilities, long-term increased by approximately $3,739,000, and (iv)
Long-term debt, less current portion increased by approximately $10,551,000.
DIVIDEND POLICY
The Company does not pay any cash dividends on its common stock and does
not have any plans to do so in the future. The Company intends to continue a
policy of retaining income for use in its business.
10
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submissions of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.1 Seventh Amendment to Credit Agreement
effective as of September 23, 1996 by and
between the Company and NationsBank of Texas,
N.A.
Exhibit 10.2 Deepwell Access Agreement dated as of
September 30, 1996 by and between EMPAK Inc.
and Disposal Systems, Inc., a subsidiary of
the Company.
Exhibit 10.3 Assistance Agreement dated as of September
30, 1996 among Pakhoed Corporation, EMPAK
Inc. and Disposal Systems, Inc., a subsidiary
of the Company.
Exhibit 27 Financial Data Schedule
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GNI GROUP, INC.
Date: November 13, 1996 /s/Carl V Rush, Jr.
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Carl V Rush, Jr.
President and CEO
Date: November 13, 1996 /s/Donna L. Ratliff
--------------------------- -------------------------------------
Donna L. Ratliff
Treasurer
(Principal Accounting Officer)
12
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INDEX TO EXHIBITS
Exhibits and Reports on Form 8-K
Exhibit 10.1 Seventh Amendment to Credit Agreement
effective as of September 23, 1996 by and
between the Company and NationsBank of Texas,
N.A.
Exhibit 10.2 Deepwell Access Agreement dated as of
September 30, 1996 by and between EMPAK Inc.
and Disposal Systems, Inc., a subsidiary of
the Company.
Exhibit 10.3 Assistance Agreement dated as of September
30, 1996 among Pakhoed Corporation, EMPAK
Inc. and Disposal Systems, Inc., a subsidiary
of the Company.
Exhibit 27 Financial Data Schedule
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EXHIBIT 10.1
SEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT is made and entered into
effective as of this 23rd day of September, 1996 (this "Amendment") among THE
GNI GROUP, INC., a Delaware corporation ("GNI"), DISPOSAL SYSTEMS, INC., a
Delaware corporation ("DSI"), RESOURCE TRANSPORTATION SERVICES, INC., a
Delaware corporation ("RTS"), GNI CHEMICALS CORPORATION, a Delaware corporation
("GNIC") and DISPOSAL SYSTEMS OF CORPUS CHRISTI, INC., a Delaware corporation
("Corpus") (GNI, RTS, GNIC, DSI and Corpus being, collectively, the "Loan
Parties"), the address for each for purposes hereof being 2525 Battleground
Road, P.O. Box 220, Deer Park, Texas 77536-0220 and NATIONSBANK OF TEXAS,
N.A., a national banking association (the "Lender"), formerly known as NCNB
TEXAS NATIONAL BANK, the address for purposes hereof being 700 Louisiana, P.O.
Box 2518, Houston, Texas 77252-2518.
W I T N E S S E T H
WHEREAS, GNI, DSI, RTS, GNIC and the Lender entered into that certain
Credit Agreement dated as of June 30, 1993 as amended by Amendment No. 1 dated
as of March 15, 1994, Second Amendment to Credit Agreement dated as of August
31, 1994, and Third Amendment to Credit Agreement dated as of December 31,
1994, and the Loan Parties and the Lender entered into that certain Fourth
Amendment to Credit Agreement dated as of March 3, 1995, that certain Fifth
Amendment to Credit Agreement dated as of March 31, 1995 and that certain Sixth
Amendment to Credit Agreement dated as of November 3, 1995 (collectively, the
"Credit Agreement"), pursuant to which the Lender agreed to make certain loans
and issue letters of credit to the Loan Parties; and
WHEREAS, the Loan Parties have requested that, in addition to amendments
of the Credit Agreement, the Lender make an additional loan under a new
facility to GNI to refinance certain indebtedness under the Credit Agreement
and to finance the consolidation of certain waste disposal businesses of EMPAK
Inc.; and
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration and the mutual benefits, covenants and agreements herein
expressed, the Loan Parties and the Lender now agree to amend the Credit
Agreement as follows:
1. All capitalized terms used in this Amendment and not otherwise
defined herein shall have the meanings ascribed to such terms in the Credit
Agreement.
2. The definitions of "Agreement", "Applicable Margin", "EBIT",
"Facility B Borrowing Base", "Facility B Commitment", "Loan Parties", "Loans"
and "Notes" in Section 1.02 of the Credit Agreement are hereby amended in their
entirety to hereafter read as follows:
<PAGE> 2
"Agreement" shall mean this Credit Agreement and all exhibits and
schedules hereto, as amended by Amendment No. 1 dated as of March 15,
1994, the Second Amendment to Credit Agreement dated as of August 31,
1994, the Third Amendment to Credit Agreement dated December 31, 1994,
the Fourth Amendment dated as of March 3, 1995, the Fifth Amendment
dated as of March 31, 1995, the Sixth Amendment dated as of November 3,
1995, and the Seventh Amendment dated as of September 23, 1996, as the
same may from time to time be amended or supplemented.
"Applicable Margin" shall mean (a) 0% per annum with respect to
Prime Rate Loans and (b) 2.75% per annum with respect to Eurodollar
Loans.
"EBIT" shall mean, for any period, the sum of consolidated net
income of GNI and its Subsidiaries for such period plus (i) interest
expense, (ii) taxes and (iii) charges taken during the period ended June
30, 1996 on adoption of FASB No. 121 in an amount not to exceed
$6,750,000 to the extent deducted from the calculation of consolidated
net income in such period.
"Facility B Borrowing Base" shall mean, at the time of a
Borrowing Base Determination, an amount equal to the sum of (a) 80% of
the aggregate amount of all Eligible Accounts Receivable after contra
and cross netting such Eligible Accounts Receivable against accounts
payable and Inventory due to account debtors in respect of exchanges,
advances, or otherwise and further reducing the result of such
computation by the aggregate amount of the Borrowing Base, if any,
attributable to any Accounts Receivable which (i) have been collected,
charged-off or otherwise compromised since the date of the most recent
previous Borrowing Base Determination, (ii) may have declined materially
in value because of a Material Adverse Effect or other event or (iii)
for any reason are not subject to a valid and perfected first priority
Lien in favor of the Lender and (b) the lesser of (i) $1,000,000 or (ii)
50% of the aggregate value (being, as to each item of Eligible
Inventory, the lower of cost or market value as of the relevant date) of
Eligible Inventory.
"Facility B Commitment" shall mean the aggregate amount of
$7,000,000, less reductions pursuant to Section 5.03.
"Loan Parties" shall mean GNI, RTS, GNIC, DSI and Corpus.
"Loans" shall mean the Loans provided for by Articles II, IV and
IV(A) and Article IV(B).
"Notes" shall mean, collectively, Note A, the Term Note, Note B,
Note C and Note D.
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<PAGE> 3
3. Section 1.02 of the Credit Agreement is further amended by adding
the following definitions where appropriate:
"Consolidation Documents" shall mean that certain Assistance
Agreement, Deepwell Access Agreement, and all such agreements dated as
of September 23, 1996 representing the Consolidation.
"Consolidation" shall mean the consolidation of certain
businesses of EMPAK into DSI as evidenced by the Consolidation
Documents.
"Corpus" shall mean Disposal Systems of Corpus Christi, Inc. or
Newco.
"EBIDA" shall mean, for any period, the sum of consolidated net
income of GNI and its Subsidiaries for such period plus the following
expenses or charges to the extent deducted from the calculation of
consolidated net income in such period: interest, depreciation,
depletion and amortization.
"EBITDA" shall mean, for any period, the sum of consolidated net
income of GNI and its Subsidiaries for such period plus the following
expenses or charges to the extent deducted from the calculation of
consolidated net income in such period: interest, taxes, depreciation,
depletion and amortization.
"EMPAK" shall mean EMPAK Inc.
"EMPAK Contracts" shall mean the EMPAK's contracts assigned to
DSI pursuant to the Consolidation Documents.
"Facility D" shall mean the credit extended to GNI by the Lender
pursuant to Article IV(B).
"GNIC" shall mean GNI Chemicals Corporation or CRP.
"Maintenance Capital Expenditures" shall mean all expenditures,
including, without limitation, capitalized interest for any fixed assets
or improvements, or for replacements, substitutions or additions
thereto, which have a useful life of more than one year but excluding
all expenditures for Acquisitions and separately financed projects.
"Note D" shall mean that certain promissory note dated of even
date with the Seventh Amendment in the face amount of $15,000,000
executed by GNI, payable to the order of the Lender, in substantially
the form attached to the Seventh Amendment as Exhibit A, together with
all deferrals, renewals, extensions, or rearrangements thereof.
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<PAGE> 4
"Seventh Amendment" shall mean the Seventh Amendment to Credit
Agreement dated as of September 23, 1996 among the Loan Parties and the
Lender.
"Subordinated Debt" shall mean Indebtedness permitted by Section
9.01(h).
"Total Senior Funded Debt" shall mean total interest bearing
Indebtedness, specifically excluding current accounts and taxes payable,
accrued liabilities, deferred income taxes and Subordinated Debt.
4. Section 1.02 of the Credit Agreement is further amended by
deleting the definition of "Aceto Product Line Value."
5. From and after the effective date of this Amendment GNI shall
have no right to borrow any Eurodollar Loan or to continue any outstanding
Eurodollar Loan beyond its existing Interest Period or to convert a Prime Rate
Loan to a Eurodollar Loan. Any outstanding Eurodollar Loan may remain
outstanding until the last day of the Interest Period therefor, at which time
such Eurodollar Loan will be converted to a Prime Rate Loan.
6. The Credit Agreement is hereby amended by adding the following
new Article IV(B):
"ARTICLE IV(B)
TERMS OF FACILITY D
"Section 4B.01 Facility D. The Lender agrees, subject to the
terms and conditions of the Seventh Amendment, to make a Loan to GNI in
the principal amount of $15,000,000. Such Loan shall be made by way of
a single borrowing made on the effective date of the Seventh Amendment.
The Loan made by the Lender under Facility D shall be evidenced by Note
D. The proceeds of the Loan under Facility D shall be used as follows:
(i) $3,000,000 as a principal prepayment of the Loan outstanding under
Facility B and (ii) the remaining proceeds shall be paid by GNI to DSI
in connection with the Consolidation.
Section 4B.02 Interest on Facility D Note. GNI will pay to the
Lender interest on the unpaid principal amount of the Loan under
Facility D made by the Lender for the period commencing on the date of
such Loan to but excluding the date such Loan shall be paid in full, at
the Prime Rate (as in effect from time to time) plus the Applicable
Margin, but in no event to exceed the Highest Lawful Rate. Interest on
Prime Rate Loans shall be payable quarterly on the Quarterly Dates
commencing on October 1, 1996 and at the maturity of Note D.
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<PAGE> 5
Section 4B.03 Repayment of Note D. The principal balance of
Note D shall be due and payable on December 31, 1996 in the amount
necessary to pay in full the then outstanding principal balance of Note
D."
7. Section 5.06(a) of the Credit Agreement is hereby amended by
deleting the first sentence thereof, and the following is substituted therefor:
"GNI may voluntarily prepay the Prime Rate Loans upon not less than one
Business Day's prior notice to the Lender, which notice shall specify
the prepayment date (which shall be a Business Day) and the amount of
the prepayment (which shall be not less than $500,000 for Facility A,
$100,000 for Facility B, $100,000 for Facility C or $500,000 for
Facility D or the remaining principal balance outstanding on the
applicable Note, if less) and shall be irrevocable and effective only
upon receipt by the Lender, provided that interest on the principal
prepaid, accrued to the prepayment date, shall be paid on the prepayment
date."
8. Article VII of the Credit Agreement is hereby amended by adding
the following new Section 7.21:
"Section 7.21 Consolidation.
(a) Each Loan Party has the full power and authority under its
certificate or articles of incorporation, its bylaws and the laws of the
state of its incorporation to execute, deliver and perform its
obligations under any agreements, instruments, documents and
certificates executed in connection with the Consolidation
(collectively, the "Consolidation Documents") to which it is a party and
all corporate action requisite for the execution, delivery and
performance by it of the Consolidation Documents to which it is a party
has been duly and effectively taken.
(b) The execution, delivery and performance by each Loan Party
of each Consolidation Document to which it is a party does not and will
not (i) violate any provision of either (A) its certificate or articles
of incorporation and bylaws or (B) in any material respect, any material
contract, agreement, instrument or Governmental Requirement to which it
is subject to except as disclosed to the Lender in writing or (ii)
result in the creation of or imposition of any Lien upon any of its
Property, other than those permitted by the Credit Agreement.
(c) The execution, delivery and performance by each Loan Party
of any Consolidation Document to which it is a party do not require the
consent or approval of any other Person, including any Governmental
Authority, except for such consents or approvals that have been obtained
or where the failure to obtain
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<PAGE> 6
such consent or approval would not have a Material Adverse Effect or
except as disclosed to the Lender.
(d) Except as disclosed to the Lender, there are no legal or
arbitral proceedings by or before any governmental or regulatory
authority or agency, now pending or threatened against the
Consolidation, any Consolidation Document or against any of Property
involved in the Consolidation.
(e) The copies of the Consolidation Documents previously
delivered by GNI to the Lender are complete and accurate copies thereof
and have not been amended or modified in any manner. The Consolidation
Documents have been duly authorized, executed and delivered by the other
parties thereto. The Consolidation Documents are valid, binding and
enforceable against the parties thereto except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and general principles of
equity. DSI has the right to grant a Lien and has granted a Lien on the
EMPAK Contracts pursuant to the Security Instruments and the Lenders may
enforce their remedies contained in the Security Instruments against
such EMPAK Contracts. No party to a Consolidation Document is in default
thereunder. All of the conditions for closing set forth in the
Consolidation Documents have been waived or satisfied."
9. Section 8.22 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
"Section 8.22 Ratio of Total Liabilities to Net Worth.
Maintain, at all times, a ratio on a consolidated basis for GNI and its
Subsidiaries of (a) total liabilities (as determined in accordance with
GAAP) minus Subordinated Debt to (b) net worth (as determined in
accordance with GAAP) plus Subordinated Debt of no greater than 2.0 to
1.0; provided, however, that commencing on December 31, 1996, and
thereafter, such ratio shall be no greater than 1.0 to 1.0."
10. Section 8.23 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
"Section 8.23 Net Worth. Maintain, at all times, on a
consolidated basis for GNI and its Subsidiaries, net worth (as
determined in accordance with GAAP) plus Subordinated Debt equal to no
less than $23,000,000, provided, however, that commencing on December
31, 1996, and thereafter, such minimum shall be raised to $43,000,000;
provided also that such minimum amount required shall be increased
quarterly, on a cumulative basis, the first such increase to occur on
December 31, 1996 and as of the last day of each calendar quarter
thereafter, by (x) an aggregate amount equal to 80% of positive income,
if any, from operations of GNI and all Subsidiaries on a consolidated
basis, after provision for federal income tax, for the three-month
period ending on such date, and (y) an aggregate
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<PAGE> 7
amount equal to 100% of the net proceeds from the issuance, in a public
or private transaction, of any Subordinated Debt or shares of capital
stock of any of the Loan Parties for the three-month period ending on
such date, other than the issuance of any such capital stock to one or
more of the Loan Parties or the issuance of Subordinated Debt up to
$20,000,000 prior to December 31, 1996."
11. Section 8.24 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
"Section 8.24 Interest Coverage Ratio. Maintain, as of the close
of each calendar quarter for the twelve-month period ending on such
date, a ratio of EBIT for such twelve-month period to interest expense,
including capitalized interest, if any, made for such twelve-month
period of no less than 2.75 to 1.0."
12. Section 8.25 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
"Section 8.25 Fixed Charge Coverage Ratio. Beginning as of
December 31, 1996, maintain, as of the close of each calendar quarter
for the twelve-month period ending on such date, a ratio of (a) EBIDA
less Maintenance Capital Expenditures to (b) the sum of current
maturities of long term Indebtedness and interest expense for such
twelve-month period of no less than 1.25 to 1.0. For the purposes of
this Section 8.25, prior to June 30, 1997, the calculation of EBIDA,
Maintenance Capital Expenditures, and interest shall be annualized as
follows: for the six-month period ending December 31, 1996, such
amounts shall be multiplied times two, and for the nine-month period
ending March 31, 1997, such amounts shall be multiplied by 1 1/3."
13. Section 8.28 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
"Section 8.28 Cash Flow Leverage Ratio. Beginning as of
December 31, 1996, maintain, as of the close of each calendar quarter
for the twelve-month period ending on such date, a ratio of Total Senior
Funded Debt to EBITDA no greater than 1.5 to 1.0. For the purposes of
this Section 8.28, prior to June 30, 1997, the calculation of EBITDA
shall be annualized as follows: for the six-month period ending
December 31, 1996, such amounts shall be multiplied times two, and for
nine-month period ending March 31, 1997, such amounts shall be
multiplied by 1 1/3. "
14. Article 8 of the Credit Agreement is hereby amended by adding a
new section thereto:
"Section 8.29 Monthly Financial Statements. As to GNI only,
deliver to the Lender, on or before the 30th day after the end of each
calendar month, the
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<PAGE> 8
unaudited consolidated Financial Statements of GNI and the other Loan
Parties as at the end of the calendar month preceding that in which such
Financial Statements are delivered and from the beginning of the
relevant fiscal year to the end of such period, as applicable, such
statements to be certified by a Responsible Officer of GNI as prepared
in accordance with GAAP, consistently applied, and as a fair
presentation of the condition of the relevant entity subject to changes
resulting from year-end audit adjustments."
15. Section 9.01 of the Credit Agreement is hereby amended by adding
the following clauses (g) and (h) before the end of the sentence:
"(g) any obligation of DSI to pay access fees to EMPAK pursuant to the
terms of the Deepwell Access Agreement not to exceed $1,200,000 per
year; provided that such payment obligation is unsecured and paid only
as provided for in the Deepwell Access Agreement not to be amended,
extended or otherwise modified and (h) Indebtedness of GNI not to exceed
$20,000,000 to be issued in a public or private placement of
subordinated notes; provided that proceeds of such Indebtedness are used
to prepay in full the principal outstanding under Note D and that such
Indebtedness is subordinated to the Obligations on terms satisfactory to
the Lender and its counsel.
16. Section 9.11 of the Credit Agreement is hereby amended by adding
the following clauses (i) and (j):
"(i) loans or advances by GNI to DSI of $12,000,000 of the proceeds of
the Loan under Facility D and (j) investment of such $12,000,000 to
complete the Consolidation.
17. Waivers.
17.1 Financial Covenants. The Lender agrees that the Loan Parties
shall not be deemed to be in default under the Credit Agreement under Sections
8.23, 8.24, 8.25, 8.28 thereof, solely by reason of the fact that the Loan
Parties failed to meet such requirements at any time on or before September 23,
1996.
17.2 Extent of Waiver. The foregoing waiver shall not be deemed to be
a waiver by the Lender of any other covenant, condition or obligation on the
part of the Loan Parties under the Credit Agreement or any other Security
Instrument except as set forth in Section 17.1 of this Amendment. In addition,
the foregoing waiver shall in no respect evidence any commitment by the Lender
to grant any future waivers of any covenant, condition or obligation on the
part of the Loan Parties under the Credit Agreement or any other Security
Instrument. Any further waivers must be specifically agreed to in writing in
accordance with Section 11.10 of the Credit Agreement.
18. Concurrently with the execution of this Amendment, GNI will pay
to the Lender a facility fee of $30,000, with subsequent monthly facility fees
equal to $60,000 per month payable on the 12th day of each month thereafter;
provided that on the earlier of (i) the date the
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<PAGE> 9
Facility D Note is paid in full or December 31, 1996, GNI will pay to the
Lender a fee equal to the positive difference, if any, between $200,000 and the
facility fees previously paid to the Lender for Facility D including the fees
above and the $30,000 facility fee paid on September 5, 1996.
19. This Amendment shall become binding on the Lender when, and only
when, the Lender shall have received each of the following in form and
substance satisfactory to the Lender or its counsel:
(a) counterparts of this Amendment executed by the Loan
Parties and the Lender, and Note B and Note D executed and issued by
GNI;
(b) the $30,000 facility fee referred to in paragraph 17
above;
(c) copies of all amendments to the Articles of Incorporation
and bylaws of each of the Loan Parties subsequent to March 3, 1995,
accompanied by a certificate, issued by the secretary or an assistant
secretary of the relevant Loan Party to the effect that each such copy
is correct and complete and such copies, taken as a whole for each Loan
Party, constitute all amendments, modifications, or restatements of the
Articles of Incorporation and bylaws of such Loan Party since March 3,
1995;
(d) certificates of incumbency and signatures of all officers
of each Loan Party who will be authorized to execute the Loan Documents
on behalf of such Loan Party executed by the secretary or an assistant
secretary of the relevant Loan Party;
(e) copies of corporate resolutions approving this Amendment
and authorizing the transactions contemplated herein, duly adopted by
the board of directors of each Loan Party, accompanied by certificates
of the secretary or an assistant secretary of the relevant Loan Party to
the effect that such copies are true and correct copies of resolutions
duly adopted at a meeting or by unanimous consent of the board of
directors of the relevant Loan Party, and that such resolutions
constitute all the resolutions adopted with respect to such transactions
have not been amended, modified or revoked in any respect, and are in
full force and effect;
(f) the following Security Instruments creating, evidencing,
perfecting, and otherwise establishing the Liens in favor of the Lender,
in and to the Collateral:
(i) Third Amendment to Amended and Restated Security
Agreement (Pledge) from GNI, as debtor;
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<PAGE> 10
(ii) Fifth Amendment to Second Lien Deed of Trust by and
between DSI and the Lender;
(iii) Seventh Amendment to First Lien Deed of Trust by
and between DSI and the Lender;
(iv) Ninth Amendment to Deed of Trust (With Security
Agreement and Assignment of Rents and Leases) by and between DSI
and the Lender; and
(v) First Amendment to Third Lien Deed of Trust (With
Security Agreement and Assignment of Rents and Leases) by and
between Corpus and the Lender;
(g) Second Amendments to Guaranty Agreements from DSI, RTS and
GNIC and First Amendment to Guaranty Agreement from Corpus;
(h) an opinion of Bracewell & Patterson, L.L.P. as legal
counsel to the Loan Parties;
(i) a legal opinion or other satisfactory evidence from GNI's
counsel that the Hart-Scott-Rodino Act was considered and filing
thereunder is not deemed appropriate;
(j) a summary of all insurance coverage together with a
schedule of any increases or changes proposed to be made thereto;
(k) a Nothing Further Certificate covering the Mortgaged
Property from Charter Title Company;
(l) a Nothing Further Certificate covering the Mortgaged
Property from First American Title Insurance Company; and
(m) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may
reasonably request.
20. The obligation of the Lender to fund Note D shall become binding
on the Lender when, and only when, the Lender shall have received each of the
following in form and substance satisfactory to the Lender or its counsel:
(a) the Consolidation shall take place concurrently with the
funding of Note D;
(b) an opinion of Buck, Keenan & Owens, L.L.P., as legal
counsel to GNI and DSI;
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<PAGE> 11
(c) copies of corporate resolutions of EMPAK approving the
Consolidation Documents and authorizing the transactions contemplated
therein;
(d) executed copies of all Consolidation Documents, including
without limitation, an agreement of EMPAK not to compete for at least
seven (7) years; and
(e) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may
reasonably request.
21. The parties hereto hereby acknowledge and agree that, except as
specifically supplemented and amended, changed or modified hereby, the Credit
Agreement shall remain in full force and effect in accordance with its terms.
Each Loan Party hereby confirms and ratifies its liability under its respective
Security Instrument in all respects to which it is a party. Each Security
Instrument shall remain enforceable against each Loan Party which is a party
thereto in accordance with its terms and shall secure all of the Obligations,
including without limitation, the Obligations under Note D.
22. The Loan Parties hereby reaffirm that as of the date of this
Amendment, the representations and warranties contained in the Loan Documents
are true and correct on the date hereof as though made on and as of the date of
this Amendment.
23. The Loan Parties represent and warrant that (a) the execution,
delivery and performance of this Amendment are within the corporate power and
authority of the Loan Parties and have been duly authorized by appropriate
proceedings, (b) the Liens under the Security Instruments are valid and
subsisting and secure the Loan Parties' obligations under the Loan Documents as
amended hereby, and (c) this Amendment constitutes a legal, valid, and binding
obligation of the Loan Parties enforceable in accordance with its terms, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and general principles
of equity.
24. This Amendment shall be construed in accordance with and governed
by the laws of the United States of America and the State of Texas.
25. THE CREDIT AGREEMENT, THIS AMENDMENT, THE WAIVER, THE NOTES, THE
GUARANTY AGREEMENTS, THE LETTER OF CREDIT AGREEMENTS, THE SECURITY INSTRUMENTS
AND THE OTHER WRITTEN DOCUMENTS REFERRED TO IN THE CREDIT AGREEMENT OR EXECUTED
IN CONNECTION WITH OR AS SECURITY FOR THE NOTES REPRESENT, COLLECTIVELY, THE
FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN OR ORAL AGREEMENTS AMONG THE PARTIES.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed effective as of the date first above written.
LOAN PARTIES: THE GNI GROUP, INC.
- ------------
By:
-----------------------------------------
Name: Titus H. Harris, III
Title: Chief Financial Officer
DISPOSAL SYSTEMS, INC.
By:
-----------------------------------------
Name: Titus H. Harris, III
Title: Vice President
RESOURCE TRANSPORTATION SERVICES, INC.
By:
-----------------------------------------
Name: Titus H. Harris, III
Title: Vice President
GNI CHEMICALS CORPORATION
By:
-----------------------------------------
Name: Titus H. Harris, III
Title: Vice President
DISPOSAL SYSTEMS OF CORPUS CHRISTI, INC.
By:
-----------------------------------------
Name: Titus H. Harris, III
Title: Vice President
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<PAGE> 13
LENDER: NATIONSBANK OF TEXAS, N.A.
- ------
By:
-----------------------------------------
Name: William T. Griffin, Jr.
Title: Vice President
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<PAGE> 14
Exhibit "A"
NOTE D
$15,000,000.00 September 23, 1996
FOR VALUE RECEIVED, THE GNI GROUP, INC., a Delaware corporation
("GNI"), hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A. (the
"Lender"), at its principal offices at 700 Louisiana, Houston, Texas 77252-2518
the principal sum of FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) in
lawful money of the United States of America and in immediately available
funds, on the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest, at such office, in like money and funds, at the
rates per annum and on the dates provided in the Credit Agreement.
The date, interest rate and each payment made on account of the
principal hereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note D, endorsed by the Lender on the schedules attached
hereto or any continuation thereof.
This Note D is one of the Notes referred to in the Credit
Agreement dated as of June 30, 1993 among GNI, Disposal Systems, Inc., Resource
Transportation Services, Inc., GNI Chemicals Corporation, Disposal Systems of
Corpus Christi, Inc., and Lender, as amended by Amendment No. 1 dated as of
March 15, 1994, Second Amendment to Credit Agreement dated as of August 31,
1994, Third Amendment to Credit Agreement dated as of December 31, 1994, Fourth
Amendment dated as of March 3, 1995, Fifth Amendment to Credit Agreement dated
as of March 31, 1995, Sixth Amendment to Credit Agreement dated as of November
3, 1995 and Seventh Amendment to Credit Agreement dated as of September 23,
1996 (such Credit Agreement, as amended and as the same may from time to time
be further amended, the "Credit Agreement"), and evidences Loans made by the
Lender thereunder. Capitalized terms used in this Note D have the respective
meanings assigned to them in the Credit Agreement.
This Note D is issued pursuant to the Credit Agreement and is
entitled to the benefits provided for in the Credit Agreement and the Security
Instruments. The Credit Agreement provides for the acceleration of the
maturity of this Note D upon the occurrence of certain events and for
prepayments of Loans upon the terms and conditions specified therein.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS.
THE GNI GROUP, INC.
By:
---------------------------------
Titus H. Harris, III
Chief Financial Officer
A-1
<PAGE> 1
EXHIBIT 10.2
DEEPWELL ACCESS AGREEMENT
This Deepwell Access Agreement ("Agreement") dated as of September 30,
1996 is between EMPAK Inc. ("EMPAK"), a Texas corporation and Disposal Systems,
Inc., a Delaware corporation ("DSI").
WHEREAS, pursuant to that certain Assistance Agreement among EMPAK,
Pakhoed Corporation ("Pakhoed"), a Delaware corporation, and DSI of even date
herewith ("Assistance Agreement"), EMPAK agreed to provide certain deepwell
waste disposal services to DSI on a backup basis in the event of interruption
in the operation of DSI's deepwell waste disposal facilities; and
WHEREAS, EMPAK and DSI desire to enter into this Agreement to establish
the terms and conditions upon which such services shall be provided.
NOW THEREFORE, in consideration of the mutual promises set forth herein
and other valuable consideration, the sufficiency of which is hereby
acknowledged, EMPAK and DSI agree as follows:
1. Definitions. Certain capitalized terms used herein shall have
the following meanings unless the context otherwise requires:
(i) Acceptance Criteria means:
(a) Receipt by EMPAK in Proper Form of a description of
each Waste Material for which disposal is sought in
sufficient detail (together with other analytical
data and profiling conducted by DSI) to enable
EMPAK to determine whether such Waste Material may
be accepted at the EMPAK Deepwell in compliance
with the EMPAK Permit, its waste analysis plan, or
any of its operating procedures;
(b) Receipt by EMPAK in Proper Form of a description of
any special handling instructions or indicia of
special health and/or safety considerations in
sufficient detail such that such Waste Material may
be accepted for disposal at the EMPAK Deepwell in
compliance with the EMPAK Permit, its waste
analysis plan, or any operating procedures;
(c) Receipt by EMPAK in Proper Form of a description of
any special considerations necessary for the
transportation, storage, handling, offloading, or
containerization (including, without limitation
texture, consistency and compatibility) of any
Waste Material in
<PAGE> 2
sufficient detail that EMPAK can conclude that such
Waste Material may be accepted for disposal at the
EMPAK Deepwell in compliance with the EMPAK Permit
without the incurrence of any additional
expenditure or modification of the EMPAK Deepwell,
EMPAK Permit, facility, its waste analysis plan, or
any operating procedures;
(d) Receipt by EMPAK in Proper Form of records of the
DSI customer at issue for each waste stream at
issue in sufficient detail to enable EMPAK to
determine the tolerances of compounds within each
waste stream and the likelihood that the Waste
Material at issue is within the customer's existing
profile.
(e) Receipt by EMPAK in Proper Form of documentation
sufficient to allow EMPAK to conclude that
acceptance of the Waste Material at issue will not
or will potentially not violate any term or
condition of the EMPAK Permit either based upon
acceptance of the Waste Materials proposed to be
accepted from DSI or collectively taking into
account ongoing operations at the Companies'
business facility located at 2759 Battleground
Road, Deer Park, Texas;
(f) Adequate storage as to both spacial requirements
and compatibility exists at the EMPAK Deepwell
facility to accommodate the Waste Material proposed
for disposal;
(g) Receipt by EMPAK of documentation in Proper Form
establishing:
(i) An Interruption Event has occurred;
(ii) The DSI customer(s) at issue have been
advised of the utilization of an alternate
facility and any revised timing for
disposal;
(iii) The Waste Materials at issue have been re-
manifested in accordance with all
Environmental Laws or the current manifest
denotes the EMPAK Deepwell as an
appropriately listed alternate disposal
facility.
(iv) Any approval process and/or laboratory upon
which DSI or a customer of DSI has relied
and complies with the EMPAK Permit, its
operating procedures and waste analysis
plan;
2
<PAGE> 3
(iv) All other aspects of treatment, storage,
management, handling, and recordkeeping of
any party involved with such Waste Materials
complies in all respects with the EMPAK
Permit, Environmental Laws, and any
operating procedure of EMPAK; and
(h) Receipt by EMPAK in Proper Form of any other
documentation or analyses reasonably required for
EMPAK to conclude that the acceptance of any such
Waste Materials at issue will not result in
liability under Environmental Laws or a violation
of the EMPAK Permit, its waste analysis plan or any
of its operating procedures.
(ii) Companies means collectively EMPAK and Pakhoed.
(iii) DSI Deepwells means the three deepwell facilities and any
ancillary structures, devices, equipment, or facilities reasonably required or
necessary for its operation to be in compliance with applicable Environmental
Laws, maintained by DSI at 2525 Battleground Road, Deer Park, Texas, and 6901
Greenwood Drive, Corpus Christi, Texas, and permitted under permit Nos. WDW-
169, WDW-249, and WDW-70 issued by the TNRCC.
(iv) DSI Permit means collectively permit nos. WDW-169 and WDW-
249, as well as any permit application, registration, permit, permit by rule,
exemption or any other authorization necessary for the DSI Deepwells to operate
in compliance with applicable laws, including without limitation, Environmental
Laws.
(v) EMPAK Deepwell means the deepwell facility and any
ancillary structures, devices, equipment, or facilities reasonably required or
necessary for its operation to be in compliance with applicable Environmental
Laws, maintained by EMPAK at 2759 Battleground Road, Deer Park, Texas, and
permitted under permit No. WDW-157 issued by the TNRCC.
(vi) EMPAK Permit means permit No. WDW-157 in effect as of the
effective date hereof as well as any permit application, registration, permit,
permit by rule, exemption, or any other authorization necessary for the EMPAK
Deepwell to operate in compliance with applicable laws, including without
limitation, Environmental Laws.
(vii) Environmental Laws means any and all laws, rules,
regulations, ordinances, orders or guidance documents now or hereafter in
effect of any federal, state or local executive, administrative decision
relating thereto or common law that relate to (i) wetlands or other protected
land or wildlife species; (ii) noise; (iii) radioactive materials (including
naturally occurring radioactive materials); (iv) explosives; (v) pollution,
contamination, preservation, protection, remediation, removal, or clean-up of
the air, surface water, ground water, soil or wetlands; (vi) solid, gaseous or
liquid waste generation, handling, discharge, release, recycling reclamation,
threatened release, treatment, storage, disposal or transportation; (vii)
exposure or
3
<PAGE> 4
persons or property to hazardous substances or wastes and the effects thereof;
(viii) injury to, death of or threat to the safety or health of employees and
any other persons; (ix) the manufacture, processing, distribution in commerce,
use, treatment, storage, disposal or remediation of hazardous substances; (x)
destruction, contamination of, or the release onto any property (whether real
or personal) directly or indirectly connected with hazardous substances; (xii)
the implementation of spill prevention and/or disaster plans relating to
hazardous substances or wastes; (xii) community right-to-know and other
disclosure laws or (xiii) maintaining, disclosing or reporting information to
governmental authorities under any Environmental Law.
(viii) Force Majeure Event means in the reasonable judgment of
EMPAK the occurrence of any condition exceeding 96 hours in duration in which
the EMPAK Deepwell shall be both unable to accept and store (at one of the
Companies' storage or transfer facilities) or is materially impaired from both
accepting injection of Waste Material and legally storing (at one of the
Companies' transfer or storage facilities) any Waste Materials prior to
disposal, which it is currently authorized to accept pursuant to the EMPAK
Permit in commercial quantities by reason of (i) fire, explosion, flood, storm,
earthquake, tidal wave, war, insurrection, civil disorder, military operations,
national emergency, strike, or other labor dispute; (ii) the order,
requisition, request, recommendation, requirement of any governmental agency;
(iii) the revocation, cancellation, modification, suspension or receipt of a
notice of proposed violation, of any regulatory permit (in whole or in part),
including without limitation the EMPAK Permit, or any variance or authorization
necessary for operation of the EMPAK Deepwell in accordance with Environmental
Laws; (iv) any safety concerns regarding the EMPAK Deepwell or mechanical
malfunction (including interruption of power sources) of pumps or other
injection equipment, hole blockage or collapse, casing leakage or rupture or
other mechanical condition or failure disabling the EMPAK Deepwell or causing
safety concerns should the EMPAK Deepwell continue to be operated absent
corrective action; (v) civil or administrative suit or injunctions; or (vi) any
interruption or delay due to any cause beyond EMPAK's control, similar or
dissimilar to the causes enumerated above.
(ix) Interruption Event means in the reasonable judgment of DSI
the occurrence of any condition exceeding 96 hours in duration pursuant to
which all DSI Deepwells shall be unable to accept injection of Waste Material
which either is authorized to accept pursuant to the DSI Permit in commercial
quantities by reason of (i) fire, explosion, flood, storm, earthquake, tidal
wave, war, insurrection, civil disorder, military operations or national
emergency, (ii) any mechanical malfunction (including interruption of power
sources) of pumps or other injection equipment, hole blockage or collapse,
casing leakage or rupture or other mechanical condition or failure disabling
the DSI Deepwells, or (iii) any interruption due to any cause not attributable
in whole or in part to DSI's negligence or willful acts, but beyond DSI's
control, similar or dissimilar to the causes enumerated above. In no event
shall an Interruption Event be deemed to exist if (a) one of the DSI Deepwells
remains active and is legally able to accept injection of Waste Material or (b)
any DSI Permit shall be revoked for any reason.
4
<PAGE> 5
(x) Ongoing Deepwell Costs means:
(a) for each calendar year (or portion thereof) during
the term of this Agreement, the aggregate of all
costs, expenses and liabilities of every kind or
nature paid or incurred by EMPAK in connection with
owning, maintaining, and operating the EMPAK
Deepwell facility and the EMPAK Permit including,
without limitation, Taxes, Insurance Premiums, the
costs of providing or performing the following:
maintaining, cleaning, and repairing the EMPAK
Deepwell; inspecting the EMPAK Deepwell and
preparing and maintaining all legally required
records or records that a prudent business operator
would keep, lighting the EMPAK Deepwell facility
(including replacement of bulbs and ballasts and
repair of light standards); supplying water,
electricity, gas, security, laboratory, sewer
disposals or other services to the EMPAK Deepwell;
providing signage; providing traffic control;
constructing, repairing and maintaining any on-site
or off-site utilities necessary or appropriate for
its operation; wages, salaries, and benefits of
personnel performing or providing services to the
EMPAK Deepwell including without limitation legal,
consulting, expert, and engineering fees; providing
and maintaining any planting and landscaping;
providing security services; maintenance of
equipment associated with the EMPAK Deepwell and
the EMPAK Permit, including laboratory equipment;
the costs of providing insurance, financial
responsibility/assurance, including liability,
pollution, casualty and extended coverage and
including payments by EMPAK of the deductible
therefrom and costs incurred by them in obtaining
payments of insurance proceeds; costs and expenses
of inspecting and depreciation of equipment used in
the operation and maintenance of the EMPAK Deepwell
and the EMPAK Permit; plus all other costs and
expenses of every kind or nature paid or incurred
by EMPAK relative to maintaining, managing,
operating, owning, permitting and equipping the
EMPAK Deepwell.
(b) The phrase "Taxes," as used herein, shall mean all
taxes, assessments, impositions, levies, charges,
excises, fees, licenses and other sums (whether now
existing or hereafter arising, whether foreseen or
unforeseen and whether under the present system of
real estate taxation or some other system), levied,
assessed, charged or imposed by any governmental
authority or other taxing authority or which accrue
on the land (comprising the EMPAK Deepwell or
operations conducted on it) for each calendar year
(or
5
<PAGE> 6
portion thereof) during the term of this Agreement
associated with the EMPAK Permit and any Waste
Materials handling fees. In no event shall the
phrase "Taxes" be deemed to include any of EMPAK's
income taxes.
(c) The phrase "Insurance Premiums" shall mean the
total annual insurance premiums and costs
associated with financial responsibility/financial
assurance which accrue on all insurance, which,
from time to time, may be carried by EMPAK with
respect to the EMPAK Deepwell during any applicable
calendar year (or portion thereof) occurring during
the term of this Agreement together with any
deductible therefrom paid by EMPAK and all costs
related to realizing upon the proceeds of any such
insurance.
(xi) Proper Form means in form and substance acceptable to
EMPAK in its reasonable judgment.
(xii) Proportionate Share means an amount equal to the product
obtained by multiplying (a) the number of whole days Waste Materials for which
disposal is sought by DSI are either stored or disposed at the EMPAK Deepwell
or any of the Companies' storage or transfer facilities by (b) 1/365.
(xiii) Related Documents means this Agreement, the Assistance
Agreement, between the Companies and DSI, the Assignment and Assumption
Agreement, between the Companies and DSI each dated concurrently with this
Agreement, and any other document, instrument, or agreement relating thereto.
(xiv) TNRCC means the Texas Natural Resource Conservation
Commission and any successor organization to it.
(xv) Waste Material means hazardous and non-hazardous waste in
containerized or bulk quantities.
2. Access Fees. Subject to adjustment only pursuant to Paragraph 5,
in consideration of EMPAK's agreement to provide the limited access to the
EMPAK Deepwell as provided in this Agreement, DSI shall pay to EMPAK access
fees in the amount of $1,200,000 cash per year during the term of this
Agreement, payable in equal semi-annual installments throughout the term of
this Agreement beginning on the date six (6) months after the date hereof.
6
<PAGE> 7
3. Term. The term of this Agreement shall commence on the date
hereof and continue until September _____, 2001.
4. Disposal Upon Occurrence of Interruption Event. Upon the
occurrence of an Interruption Event at any time during the term of this
Agreement, DSI shall give prompt written notice ("Access Notice") thereof to
EMPAK specifying the following: (i) the nature of the Interruption Event,
described in reasonable detail; (ii) the time (no less than seven (7) business
days after EMPAK's receipt of the Access Notice) at which the delivery of the
Waste Material to EMPAK will commence; and (iii) the kind, chemical
composition, and approximate quantities of Waste Material to be delivered,
described in reasonable detail. Promptly upon receipt of an Access Notice, the
appropriate operational and technical personnel of EMPAK and DSI shall confer
regarding the quantities, flow rates, and timing of deliveries and other
logistical matters. DSI shall be responsible for arranging all tank truck and
other transport, paying all freight, insurance and other costs thereof, and
bearing all risk of loss and other liability associated therewith, in
connection with the delivery of the Waste Material to the EMPAK Deepwell.
Subject to the terms and conditions of Paragraph 6, hereof, upon transport and
delivery of such Waste Material to the EMPAK Deepwell, EMPAK shall take custody
and control thereof and dispose of the same in the EMPAK Deepwell in accordance
with the facility's standard operating procedures. The disposal of the Waste
Material by EMPAK at the request of DSI pursuant to this Agreement shall be
without charge to DSI other than the Access Fees provided in Paragraph 2 above,
its Proportionate Share pursuant to Paragraph 9 above, and DSI's payment of
expenses described in Paragraph 8 above. Promptly upon the cessation of the
Interruption Event, DSI shall cease deliveries of Waste Material to the EMPAK
Deepwell until such time as any subsequent Access Notice is duly issued
pursuant to this Paragraph 4. DSI shall use commercially reasonable and
continuous efforts to cure any Interruption Event as soon as possible.
5. Availability of EMPAK Deepwell.
(i) During the term of this Agreement, EMPAK shall use
commercially reasonable efforts to keep the EMPAK Deepwell capable of injecting
Waste Material which it is currently authorized to accept for disposal under
the EMPAK Permit; provided however, EMPAK shall not be required to accept any
Waste Material that does not meet the Acceptance Criteria for the EMPAK
Deepwell or for which procedures outlined in Paragraph 6 have not been
followed. Subject to the existence of a Force Majeure Event, in the event that
any condition shall exist that would result in EMPAK's inability to dispose of
or accept for storage (at one of the Companies' storage or transfer facilities)
Waste Material at the EMPAK Deepwell (the acceptance and disposal of which
would not result in violation of the EMPAK Permit) within legally permissible
time periods under Environmental Laws, and such condition exists for more than
ninety (90) days, the semi-annual access fees next payable by DSI to EMPAK
shall be reduced by an amount equal to the product obtained by multiplying (a)
the number of whole days during which such unexcused condition exists beyond 90
days by (b) $3,287.67. EMPAK shall give DSI prompt notice of the commencement
and cessation of any such condition. Any reduction in the semi-annual access
fees
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<PAGE> 8
required pursuant to this Paragraph 5(i) shall have no effect on any succeeding
access payments due and owing EMPAK by DSI.
(ii) A Force Majeure Event shall suspend EMPAK's performance
for the duration of the condition giving rise to the Force Majeure Event, but
shall not result in any reduction in the Access Fees payable by DSI pursuant to
Paragraph 2 above.
6. Procedure for Acceptance of Waste Materials. Subject to the
terms and conditions of Paragraph 7, in no event shall EMPAK be obligated to
accept any Waste Material for disposal at the EMPAK Deepwell originally
intended for disposal at a DSI Deepwell unless and until the following
conditions are satisfied:
(i) All Acceptance Criteria shall have been satisfied at least
five (5) days prior to delivery of such Waste Materials to the EMPAK Deepwell
or other storage/transfer facility authorized by EMPAK;
(ii) An Interruption Event shall have occurred;
(iii) EMPAK shall be satisfied in its reasonable discretion as
to the nature, source, and composition of such Waste Material and have had a
reasonable opportunity, not to exceed five (5) days, to (a) review all records
associated with the generation, management and transportation of such Waste
Material including any analytical data, and profiling of such conducted at or
in connection with the DSI Facility and (b) conduct independent analyses and
profiling of the Waste Materials as is reasonably necessary for EMPAK to
conclude that such materials may be accepted at the EMPAK Deepwell in
accordance with the EMPAK Permit and will not result in a violation or
potential violation of the EMPAK Permit; and
(iv) EMPAK shall have received from DSI a signed statement in
the form attached as Exhibit A pertaining to each shipment of Waste Materials
and/or waste stream.
(v) Subject to the terms and conditions of the EMPAK Permit,
EMPAK's waste analysis plan and operating procedures, the total volume of Waste
Materials for which DSI has requested disposal does not exceed one hundred
twenty (120) million gallons annually, on a prorated basis.
7. Rejection of Waste Materials. Notwithstanding anything to the
contrary in this Agreement, EMPAK shall have the right in its sole and absolute
discretion to decline the acceptance of any Waste Materials which in its
reasonable judgment could or is reasonably likely to be or lead to potential
allegations of or notices of violation relating to a violation of Environmental
Laws, or a claim of liability under Environmental Laws including without
limitation those pertaining to nuisance associated with air emissions, or
personal injury by third parties.
8
<PAGE> 9
8. Allocation of Ongoing Expenditures.
In the event DSI seeks to dispose or store Waste Material at the
EMPAK Deepwell or any other EMPAK storage or transfer facility under this
Agreement, then EMPAK and DSI agree that costs associated with the ongoing
operation of the EMPAK Deepwell will be allocated as follows:
a. DSI shall bear all cost and expense as reasonably
determined by EMPAK for additional personnel in addition to EMPAK's then
standard number of personnel at the EMPAK Deepwell to handle and dispose of
Waste Materials. Such costs may be attributable to temporary personnel or
individuals employed by EMPAK that are not typically assigned to the EMPAK
Deepwell.
b. DSI shall bear its Proportionate Share of all cost,
expense, and liability associated with any (i) capital expenditures necessary
to maintain the EMPAK Deepwell and EMPAK Permit and (ii) all other, capital
costs, and other costs and expenses associated with maintaining and assuring
that the EMPAK Deepwell is in compliance with all applicable Environmental Laws
during the term of this Agreement.
c. Except where attributable to the gross negligence or
willful misconduct by EMPAK or Pakhoed, DSI shall bear its Proportionate Share
of all costs, expenses, and liability associated with any fines or penalties
attributable in whole or in part to any activities occurring in, at, or around
the EMPAK Deepwell or under the EMPAK Permit.
d. DSI shall pay its Proportionate Share of EMPAK's Ongoing
Deepwell Costs.
9. Payment of DSI's Proportionate Share. Within ninety (90) days
after the end of each calendar year during which Waste Materials
are disposed at the EMPAK Deepwell or stored at any EMPAK
facility during the term hereof EMPAK shall furnish to DSI a
statement ("Statement") in reasonable detail setting forth the
computation of the actual Taxes, maintenance costs, Insurance
Premiums and other Ongoing Deepwell Costs for the preceding year
(the "Actual Costs"). In no event shall EMPAK's failure to
timely provide the Statement impair or otherwise operate to
modify DSI's obligation to pay its Proportionate Share. DSI
shall pay to EMPAK a sum of money equal to its Proportionate
Share of the Ongoing Deepwell Costs within thirty (30) days after
its receipt of the Statement. These obligations shall survive
the expiration or termination of this Agreement.
9
<PAGE> 10
10. Events of Default.
a. If any of the following events occur, EMPAK shall have the
right to unilaterally suspend its performance under this
Agreement upon written notification to DSI and DSI's
failure to cure within thirty (30) for nonmonetary
defaults and fifteen (15) days for those defaults that can
be cured by a liquidated sum of money:
(i) Failure by DSI to make timely any payment to EMPAK
or Pakhoed due hereunder.
(ii) Failure by DSI to materially perform any covenant
(other than payment obligations), it is obligated
to perform under this Agreement.
(iii) Any statement, representation, or warranty made by
DSI under this Agreement shall be materially false
or misleading;
(iv) Any investigation shall be commenced of which DSI
has actual knowledge pertaining to Waste Materials
or waste streams that have been accepted for
disposal at a DSI Deepwell and for which DSI seeks
or has sought the services of EMPAK under this
Agreement pursuant to which DSI or any customer of
DSI whose Waste Materials have been disposed or
scheduled to be disposed at the EMPAK Deepwell are
(a) accused of criminal violations under applicable
Environmental Laws; or (b) alleged to be arranging
for disposal of Waste Materials that are not of the
nature as documented by DSI or its customer.
b. Upon the occurrence of any Event of Default under this
Agreement EMPAK may at its sole option pursue any one or
more of the following remedies without any notice or
demand and without limiting the generality of the
foregoing DSI hereby specifically waives notice and demand
for the failure of any obligation it may have hereunder
and waives any and all notice or demand requirements
imposed by any applicable law:
(i) Suspend its performance under this Agreement
whereupon EMPAK may (a) seek to recover any damages
available to it at law or in equity and (b)
exercise any and all other remedies available to
EMPAK under this Agreement, or at law, or in
equity.
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<PAGE> 11
(ii) It is expressly understood and agreed that EMPAK
shall to the full extent permitted by applicable
law, have no obligation and DSI hereby releases
EMPAK from any obligation, to mitigate damages.
11. Independent Knowledge Obtained.
DSI acknowledges and agrees that the Companies have made no
representation, warranty, or agreement as to the nature or volume of Waste
Materials that may be accepted at the EMPAK Deepwell at any given time.
Moreover, the Companies have made no representation, warranty, or agreement
concerning the time period within which Waste Materials proposed for disposal
by DSI may be processed at the EMPAK Deepwell. DSI agrees (i) that it has made
its own independent judgment as to whether the EMPAK Deepwell may accept waste
from DSI for disposal; (ii) that it has reviewed the EMPAK Permit, EMPAK
Deepwell facility records, and any necessary federal, state, or local laws,
rules, or agency files necessary to determine the economic viability of the
utilization of the EMPAK Deepwell for a back-up disposal facility; and (iii)
that other factors over which the Companies have no control may determine
whether Waste Materials may be disposed at the EMPAK Deepwell.
12. Indemnity. DSI hereby agrees unconditionally, absolutely and
irrevocably to indemnify, defend and hold harmless each of the Companies from
and against any loss, cost, expense, liability, or claim which at any time or
from time to time may be claimed, suffered or occurred in connection with any
violation or alleged violation of Environmental Law by any governmental
authority or any other person, or claim for personal injury, the breach of any
representation or warranty of DSI set forth herein or the failure of DSI to
perform any obligation herein required to be performed by DSI. DSI expressly
agrees to indemnify the Companies for any claim, demand, cause of action, suit,
lost cost damage, punitive damage, fine, penalty, expense, liability, strict
liability, criminal liability, judgment, governmental or private investigation
relating to compliance with requirements of Environmental Laws, personal injury
suit or property damage whether threatened, sought, brought, or imposed that is
related to or seeks to recover costs, damages, expenses, or fees, arising or
occurring in whole or in part, after the execution of this Agreement and during
any Interruption Event at which time any Waste Materials are treated, stored or
disposed at the EMPAK Deepwell facility or any other storage or transfer
facility of the Companies as a result of an Interruption Event.
EFFECT OF NEGLIGENCE. DSI SHALL INDEMNIFY THE COMPANIES
REGARDLESS OF WHETHER THE ACT, OMISSION, FACT, CIRCUMSTANCES OR CONDITIONS
GIVING RISE TO SUCH INDEMNIFICATION WERE CAUSED IN WHOLE OR IN PART BY EITHER
COMPANY'S SIMPLE (BUT NOT GROSS) NEGLIGENCE.
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<PAGE> 12
13. Notices. Any notice, request or other communication given
pursuant to this Agreement shall be given in the manner provided in the
Assistance Agreement; provided, however, that any Access Notice shall be
delivered by hand delivery.
14. Miscellaneous.
(i) This Agreement is not assignable by any party without the
prior written consent of the other.
(ii) This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements or undertakings, oral or written, with respect to the subject matter
hereof.
(iii) No amendment, modification or waiver of all or part of
this Agreement shall be of any force or effect unless in writing and signed by
authorized representatives of the parties hereto.
(iv) This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
(v) The captions in this Agreement are for convenience of
reference only and shall be given no effect in the construction hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective representatives thereunto duly authorized as of
the date first set forth above.
EMPAK Inc.
By:
-----------------------------------------
Jean S. Warren,
Senior Vice President
Disposal Systems, Inc.
By:
-----------------------------------------
Carl V Rush, Jr.,
President and Chief Executive Officer
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Pakhoed Corporation joins herein solely to evidence its consent to the terms of
this Agreement to the extent necessary under any applicable law.
Pakhoed Corporation
By:
-----------------------------------------
Jean S. Warren,
Senior Vice President
13
<PAGE> 14
GUARANTY
In consideration of the transactions contemplated by the foregoing
Deepwell Access Agreement (which the Board of Directors of The GNI Group, Inc.,
has determined may reasonably be expected to benefit, directly or indirectly,
The GNI Group, Inc.), The GNI Group, Inc., hereby absolutely, unconditionally
and irrevocably guarantees the full and timely payment by Disposal Systems,
Inc., of all access fees due and owing pursuant to Section 2 thereof. On any
default by Disposal Systems, Inc. in the payment of such fees, EMPAK, Inc. may,
at its option, proceed directly and at once against The GNI Group, Inc. to
enforce its obligations under this unconditional guaranty, without the
necessity of proceeding or taking any action against Disposal Systems, Inc.
The amendment or any other change to the Deepwell Access Agreement or any
party's waiver or failure to enforce any provision of it shall have no effect
on the GNI Group, Inc.'s obligation hereunder which shall remain absolute.
The GNI Group, Inc.
By:
-----------------------------------------
Carl V Rush, Jr.
President and Chief Executive Officer
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EXHIBIT A
COUNTY OF HARRIS )
)
STATE OF TEXAS )
AFFIDAVIT
BEFORE ME, the undersigned notary public, personally appeared
____________________ who, after being by me duly sworn, did depose and state
the following under oath:
My name is ___________________, and I am the _______________________ of
Disposal Systems, Inc. ("DSI"). I have personal knowledge of the facts
concerning hazardous and solid waste materials managed by DSI at its
deepwell facilities. With regard to the waste streams described on the
attachment to this Affidavit, I am aware of no fact or circumstance
which could render any record retained by DSI or furnished to EMPAK Inc.
in connection with such waste stream false or misleading in any regard.
Moreover, I have no knowledge of any tampering with the waste streams at
issue nor do I have any reason to believe that the waste stream is not
from the source or of the nature or characteristic identified by the
generator prior to its acceptance for disposal by DSI. Moreover, I am
aware of no civil, criminal, or administrative investigation into the
affairs of the generator of the specific waste materials.
Further Affiant sayeth not.
-------------------------------------
SUBSCRIBED AND SWORN TO BEFORE ME, on the ____ day of _______________,
1996, to certify which witness my hand and official seal.
-------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
15
<PAGE> 1
EXHIBIT 10.3
ASSISTANCE AGREEMENT
This Assistance Agreement dated as of September 30, 1996 ("Agreement")
is among Pakhoed Corporation, a Delaware corporation ("Pakhoed"), EMPAK Inc.,
a Texas corporation and wholly-owned subsidiary of Pakhoed ("EMPAK"), (Pakhoed
and EMPAK being hereinafter together referred to as the "Companies"), and
Disposal Systems, Inc., a Delaware corporation ("DSI").
WHEREAS, EMPAK has been previously engaged in the business of deepwell
disposal of commercial third-party hazardous and non-hazardous waste in
containerized and bulk quantities and ancillary services incidental to such
deepwell disposal services (hereinafter referred to as the "Business"), which
term expressly excludes the Companies' wastewater treatment and railcar
cleaning businesses, as well as all activities relating to Self-Generated Waste
(as defined below); and
WHEREAS, EMPAK desires to discontinue its engagement in the Business;
and
WHEREAS, DSI desires to procure the assistance of the Companies on the
terms and conditions set forth herein.
NOW THEREFORE, in consideration of the payments, mutual covenants,
representations and warranties set forth herein and other valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
agree as follows.
1. Cash Payment. Contemporaneously with the execution and delivery
of this Agreement, DSI has paid to EMPAK the sum of Twelve Million Dollars
($12,000,000) cash by wire transfer of immediately available funds to the
account heretofore designated by EMPAK and receipt thereof in the designated
account has been confirmed.
2. Deepwell Access Agreement. Contemporaneously with the execution
and delivery of this Agreement, EMPAK and DSI have executed and delivered a
Deepwell Access Agreement of even date herewith (the "Deepwell Access
Agreement") whereby EMPAK has agreed to provide DSI access to EMPAK's deepwell
disposal facility (Permit No. WDW-157) (hereinafter referred to as the "EMPAK
Facility") for the period and on the terms and conditions set forth in the
Deepwell Access Agreement.
3. Withdrawal Covenant. In consideration of the payment referred to
in Section 1 and the other transactions contemplated hereby, the Companies
jointly and severally covenant and agree that they shall not, for a period of
seven years from the date of this Agreement, directly or indirectly (including
but not limited to acting alone or through any of their respective
subsidiaries, as a member
ASSISTANCE AGREEMENT
<PAGE> 2
of a partnership or a joint venture, or as an investor in any corporation or
other entity, or otherwise), within the United States of America, conduct,
engage or participate in (i) the Business or (ii) the ownership or operation of
a solid waste landfill, waste incineration facility or cement kiln.
Notwithstanding any other provision set forth in this Agreement, the operations
and businesses restricted by the preceding sentence shall not include, and the
Companies shall at all times be permitted to engage in the following activities
(whether at the EMPAK Facility or any other location):
(i) render such waste disposal services as may be required or permitted
pursuant to the Deepwell Access Agreement, and
(ii) dispose of Self-Generated Waste.
For the purposes of this Agreement, "Self-Generated Waste" means all hazardous
and non-hazardous waste either generated or arranged for disposal by the
Companies or their customers in connection with or incidental to the businesses
of the Companies and/or their affiliates that are not restricted by this
Section 3 of the Agreement (regardless of whether the Companies are the sole
"generators" under applicable environmental laws and regardless of whether such
waste is generated or arranged for disposal at the EMPAK Facility or at any
other location), including but not limited to wastes related to or generated in
connection with tank, tankbottom, sanitary greasetrap, truck and railcar
cleaning, wastewater treatment, materials recovery, drum disposal, and/or ship
washing and deballasting and other similar or related activities now or
hereinafter conducted by the Companies.
The Companies and DSI hereby declare their desire and intent that, if
the foregoing covenant is found to be unreasonably broad or unenforceable in an
action, suit or proceeding before any state or federal court, such court shall
narrow the scope or duration of such covenant or otherwise reform it so that it
may be enforced to the fullest extent permitted by law as so reformed.
Moreover, the Companies and DSI hereby stipulate that a violation of the
foregoing covenant would cause irreparable injury to DSI for which it would
have no adequate remedy at law and, in the event of such violation, DSI shall
be entitled to (i) preliminary and other injunctive relief without necessity of
complying with any requirement as to the posting of a bond or other security
(the Companies hereby waiving any such requirement), and (ii) any other
remedies to which DSI may be entitled at law or in equity.
In the event of a default by DSI of any payment obligation under the
Deepwell Access Agreement and the failure to cure the same within fifteen (15)
days after receiving written notice of such default, the Companies shall be
released from all obligations in this Section 3 and shall not be restricted in
any manner regarding the conduct of the Business.
ASSISTANCE AGREEMENT
2
<PAGE> 3
4. Representations and Warranties of the Companies. As a material
inducement to DSI to enter into this Agreement and consummate the transactions
contemplated hereby, the Companies represent and warrant as follows:
(i) EMPAK is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas and has all requisite
corporate power and authority to enter into this Agreement and the Deepwell
Access Agreement and to carry out the transactions contemplated hereby and
thereby. Pakhoed is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
(ii) The execution and delivery of this Agreement and the
Deepwell Access Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of the Companies, and such instruments evidence the valid and
binding obligations of the Companies enforceable against each in accordance
with their respective terms.
(iii) The Companies have not employed or retained any broker or
finder or paid or agreed to pay any commission or finder's fee on account of
this Agreement or the transactions contemplated hereby.
(iv) The Disclosure Schedule delivered to DSI contemporaneously
with the execution and delivery of this Agreement sets forth accurately, in all
material respects, the gross revenues derived from the operation of the
Business during each of the calendar years ended December 31, 1991, 1992, 1993,
1994, and 1995 and the six month period ended June, 1996.
(v) Neither the execution and delivery by EMPAK of this
Agreement and the Deepwell Access Agreement, nor the performance of the
obligations contemplated herein or therein will conflict with or result in any
violation of or constitute a breach or default under the terms of the articles
of incorporation or bylaws of EMPAK or any contract, mortgage, indenture or
other agreement to which EMPAK is a party or by which EMPAK or any of EMPAK's
assets or properties are bound or affected and which could reasonably be
expected to have a material adverse effect on EMPAK or its assets or
properties, taken as a whole.
(vi) Neither the execution and delivery by Pakhoed of this
Agreement, nor the performance of the obligations contemplated herein will
conflict with or result in any violation of or constitute a breach or default
under the terms of the certificate of incorporation or bylaws of Pakhoed or
any contract, mortgage, indenture or other agreement to which Pakhoed is a
party or by
ASSISTANCE AGREEMENT
3
<PAGE> 4
which Pakhoed or any of Pakhoed's assets or properties are bound or affected
and which could reasonably be expected to have a material adverse effect on
Pakhoed or its assets or properties, taken as a whole.
5. Representations and Warranties of DSI. As a material inducement
to the Companies to enter into this Agreement and consummate the transactions
contemplated hereby, DSI represents and warrants as follows:
(i) DSI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to enter into this Agreement and the Deepwell
Access Agreement and to carry out the transactions contemplated hereby and
thereby.
(ii) The execution and delivery of this Agreement and the
Deepwell Access Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of DSI, and such instruments evidence the valid and binding
obligations of DSI enforceable against it in accordance with their respective
terms.
(iii) DSI has not employed or retained any broker or finder or
paid or agreed to pay any commission or finder's fee on account of this
Agreement or the transactions contemplated hereby.
(iv) Neither the execution and delivery by DSI of this Agreement
and the Deepwell Access Agreement, nor the performance of the obligations
contemplated herein or therein will conflict with or result in any violation of
or constitute a breach or default under the terms of the articles of
incorporation or bylaws of DSI or any contract, mortgage, indenture or other
agreement to which DSI is a party or by which DSI or any of DSI's assets or
properties are bound or affected and which could reasonably be expected to have
a material adverse effect on DSI or its assets or properties, taken as a whole.
(v) All financial information regarding The GNI Group, Inc.
("GNI") contained in its Form10-K for the period ended June 30, 1995, as
updated in its Forms 10-Q for the periods ended September 30, 1995, December
31, 1995 and March 30, 1996 present fairly the financial position and results
of operations of GNI as of and for the respective periods, and since March
30, 1996 there have been no developments or changes in such financial position
or results of operations that, in the aggregate, could reasonably be expected
to have a material adverse effect on the financial condition of GNI and its
subsidiaries, taken as a whole. GNI and DSI have the financial ability and
wherewithal separate and apart from the transactions contemplated in this
Agreement to fully satisfy
ASSISTANCE AGREEMENT
4
<PAGE> 5
their respective obligations on a timely basis under this Agreement and the
Deepwell Access Agreement.
6. Consultation and Access.
(i) The parties intend that the transition of the Business to DSI occur
as soon as reasonably possible and, in furtherance thereof, EMPAK shall
within five (5) business days of the date hereof, send notices of
termination to all of its Business customers under contracts, such
termination to be effective as soon as is permitted under the contract.
In addition, for the period commencing at the execution and delivery of
this Agreement and ending on the close of business on December 31, 1996
(the "Transition Period"), the Companies shall (x) make their managerial
(including sales management) and technical personnel available to
consult with DSI at DSI's reasonable request to assist DSI regarding the
transfer of the Business and EMPAK's customer relationships incident to
the Business (including but not limited to any Business customers with
contracts for which termination has not yet become effective) and (y)
provide access during normal business hours to DSI for the purpose of
inspecting and copying (at DSI's expense) all books and records of the
Companies pertaining solely to the Business or the operation thereof;
provided, however, EMPAK shall not be required under this Section 6 to
violate the provisions of any confidentiality agreement it may have with
its customers, and in no event shall EMPAK be liable if any customer
chooses not to use the services of DSI. Additionally, DSI shall bear
all reasonable out-of-pocket expenses related to the travel of EMPAK
personnel outside of the greater Houston metropolitan area if DSI has
expressly requested such travel.
(ii) Notwithstanding the restrictions set forth in Section 3 above,
EMPAK shall be permitted (x) to complete the performance of any waste
disposal contract for which termination has not yet become effective and
(y) during the Transition Period, to dispose of waste for Business
customers for which DSI is not an approved facility or for which DSI is
unwilling or unable, by permit or by physical capability, to provide
comparable waste disposal services.
(iii) The parties acknowledge that EMPAK will continue to have an
ongoing relationship with many of its Business customers in connection
with operations not included within the Business from which it has
agreed to withdraw pursuant to this Agreement, and accordingly, EMPAK
has an interest in ensuring that the Business customers of EMPAK
continue to have access to waste disposal services. To that end, with
respect to those Business customers for which DSI is not an approved
facility or for which DSI is unwilling or unable, by permit or by
physical capability, to provide comparable waste disposal services,
EMPAK and DSI agree to work in good faith to ensure that such customers'
waste disposal needs are served following the date hereof taking into
consideration the intent of this Agreement and the
ASSISTANCE AGREEMENT
5
<PAGE> 6
possibility that the use of the EMPAK Facility is the only feasible
alternative in the good faith reasonable opinion of EMPAK and DSI;
provided, however, DSI shall have no liability to EMPAK should an EMPAK
customer choose not to use the services of DSI and DSI shall not be
obligated to modify its operations to serve such customers.
7. Indemnification.
(i) GNI and DSI, jointly and severally, agree to and shall defend,
indemnify and hold harmless EMPAK and Pakhoed, and each of their
officers, directors, shareholders, employees, agents, affiliates,
successors and assigns (collectively, the "EMPAK Indemnified Persons")
from and against, and shall reimburse the EMPAK Indemnified Persons for
each and every loss, damage, liability, claim, award, judgement,
penalty, reasonable attorneys fees, cost and expense ( "Loss" or
"Losses") incurred, imposed on or paid by, the EMPAK Indemnified Persons
relating to, resulting from or arising out of, (x) any material
inaccuracy in any representation or warranty of DSI under this
Agreement, and (y) Losses resulting from a third-party claim arising out
of the operation of the Business by GNI or DSI after the date hereof,
including without limitation, any claim by any Business customer of
EMPAK or any customer of GNI or DSI.
(ii) EMPAK and Pakhoed, jointly and severally, agree to and shall
defend, indemnify and hold harmless GNI and DSI, and each of their
officers, directors, shareholders, employees, agents, affiliates,
successors and assigns (collectively, the "DSI Indemnified Persons")
from and against, and shall reimburse the DSI Indemnified Persons for
each and every loss, damage, liability, claim, award, judgement,
penalty, reasonable attorneys fees, cost and expense ("Loss" or
"Losses") incurred, imposed on or paid by, the DSI Indemnified Persons
relating to, resulting from or arising out of any material inaccuracy in
any representation or warranty of EMPAK under this Agreement.
(iii) For the purposes of this Section, "LOSSES" SHALL INCLUDE WITHOUT
LIMITATION THOSE LOSSES ARISING OUT OF THE STRICT LIABILITY OR
NEGLIGENCE OF ANY PARTY, INCLUDING THE INDEMNIFIED PERSONS, WHETHER SUCH
NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE; PROVIDED,
HOWEVER, THAT "LOSSES" SHALL BE LIMITED TO LOSSES RELATED SOLELY TO THE
THIRD PARTY CLAIM, TOGETHER WITH LOSSES FROM OTHER INTERTWINED BUSINESS
THAT THE INDEMNIFIED PERSON HAS WITH THE THIRD PARTY CLAIMANT; AND
LOSSES SHALL NOT INCLUDE LOSSES FOR RELATED BUSINESS FROM OTHER NON-
CLAIMANT CUSTOMERS OF THE INDEMNIFIED PERSON.
ASSISTANCE AGREEMENT
6
<PAGE> 7
(iv) In the event that any indemnified person receives written notice of
the assertion of any Loss in respect of which indemnity may be sought
hereunder ("Third Party Claim"), and such indemnified person intends to
seek indemnity hereunder, such indemnified person shall provide the
indemnifying party with notice of such Loss (provided, however, that the
failure to provide such notice shall not relieve the indemnifying party
of any of its obligations herein except to the extent the indemnifying
party is materially prejudiced thereby), and such indemnifying party
shall have the right to assume the defense or settlement of such Third
Party Claim in respect of which indemnity hereunder is sought with
counsel of its choosing; provided, however, that (a) the indemnified
person shall at all times have the right, at its option and expense, to
participate fully therein and, if such third party is a significant
customer of the indemnified person, the indemnified person shall have
the right to approve, such approval not to be unreasonably withheld, all
material actions taken in such defense or settlement, (b) the
indemnified person shall at all times have the right, at its option, at
the indemnifying party's expense, to participate fully therein to the
extent the indemnified person has defenses that are materially separate
and different from the defenses of the indemnifying party, and (c) if
the indemnifying party does not proceed diligently to defend the Third
Party Claim within 30 days after the receipt of such notice, the
indemnified person shall have the right, but not the obligation, to
undertake the defense of any such claim for the account of and at the
risk of the indemnifying party and the indemnifying party shall be bound
by any defense or settlement that the indemnified person may make as to
such Third Party Claim. The indemnifying party shall not settle or
compromise any such Third Party Claim without the indemnified person's
prior written consent, unless the terms of such settlement or compromise
releases the indemnified person from any and all liability with respect
to such Third Party Claim.
8. Miscellaneous.
(i) This Agreement is not assignable by any party without the
prior written consent of the other.
(ii) This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements or undertakings, oral or written, with respect to the subject matter
hereof.
(iii) No amendment, modification or waiver of all or part of
this Agreement shall be of any force or effect unless in writing and signed by
authorized representatives of the parties hereto.
ASSISTANCE AGREEMENT
7
<PAGE> 8
(iv) Any notice, request or other communication given pursuant
to this Agreement shall be in writing and addressed to the other party at the
address as set forth below, and any such notice, request or other communication
shall be effective three days after depositing the same in the United States
Mail, first class and postage prepaid, or if delivery is by hand delivery, then
upon actual receipt:
If to the Companies or either of them:
2000 West Loop South, Suite 2200
Houston, Texas 77027-3597
Attn: Ms. Jean S. Warren,
Senior Vice President
If to DSI:
Disposal Systems, Inc.
P. O. Box 1914
2525 Battleground Road
Deer Park, Texas 77536
Attn: Mr. Richard M. Cochrane,
Vice President - Marketing
(v) This Agreement shall be construed and enforced in accordance
with the laws of the State of Texas.
(vi) The captions in this Agreement are for convenience of
reference only and shall be given no effect in the construction hereof.
(vii) The representations and warranties set forth in Sections 4
and 5 of this Agreement and the indemnification covenants set forth in Section
7 of this Agreement shall survive for a period of eighteen (18) months after
the date hereof, with the exception of the representation and warranty set
forth in Section 5(v), which shall survive until all of DSI's payment
obligations under the Deepwell Access Agreement have been fully satisfied.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective representatives thereunto duly authorized as of
the date first set forth above.
ASSISTANCE AGREEMENT
8
<PAGE> 9
EMPAK Inc.
By:
---------------------------------
Jean S. Warren
Senior Vice President
Disposal Systems, Inc.
By:
---------------------------------
Carl V Rush, Jr.
President
AGREED, solely for the purpose of evidencing its joinder in the
covenants set forth at Section 3 and the representations and warranties made by
it in Section 4 and its agreement to be bound thereby.
Pakhoed Corporation
By:
---------------------------------
Jean S. Warren
Senior Vice President
AGREED, solely for the purpose of evidencing its joinder in the
representations and warranties set forth in Section 5(v) and its agreement to
be bound thereby.
The GNI Group, Inc.
By:
---------------------------------
Carl V Rush, Jr.
President and Chief Executive
Officer
ASSISTANCE AGREEMENT
9
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