<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[Mark One]
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From _____ To _____
Commission File Number 33-11634
TRANS-RESOURCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 36-2729497
- - ---------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
9 West 57th Street, New York, New York 10019
- - ---------------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (212) 888-3044
-------------
---------------
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---- ----
At August 11, 1994, there were outstanding 3,000 shares of common stock, par
value of $.01 per share, all which were owned by TPR Investment Associates,
Inc., a privately-held Delaware corporation.
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Form 10-Q
TRANS-RESOURCES, INC.
Form 10-Q Index
June 30, 1994
<TABLE>
<CAPTION>
Page
PART I Number
- - ------ ------
<S> <C> <C>
Item 1. - Financial Statements (Unaudited):
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Common Stockholder's Equity . . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . 6
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . 7
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II
- - -------
Item 1. - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
<PAGE> 3
Form 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Six Month Period
Ended June 30, Ended June 30,
-------------------- --------------------
1994 1993 1994 1993
-------- -------- -------- --------
(000's)
<S> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . . . . . $92,963 $99,592 $174,995 $184,606
COST AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . . . . 72,856 78,579 138,939 144,232
General and administrative . . . . . . . . . . . 9,748 10,481 19,532 19,479
------- ------- -------- ----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . 10,359 10,532 16,524 20,895
Interest expense . . . . . . . . . . . . . . . . (7,452) (7,499) (14,368) (14,103)
Interest and other income - net . . . . . . . . (4,490) 1,145 15,251 3,354
------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM . . . . . . . . . . . . . (1,583) 4,178 17,407 10,146
------- ------- -------- --------
INCOME TAX PROVISION:
Current . . . . . . . . . . . . . . . . . . . . 956 2,067 4,946 5,308
Deferred . . . . . . . . . . . . . . . . . . . . 883 556 6,795 749
------- ------- -------- --------
1,839 2,623 11,741 6,057
------- ------- -------- --------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM . . . . . . . . . . . . . . . (3,422) 1,555 5,666 4,089
EXTRAORDINARY ITEM - Loss on repurchase of
subordinated debt (no income tax benefit) . . . - (5,106) - (8,830)
-------- -------- -------- --------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . $ (3,422) $ (3,551) $ 5,666 $ (4,741)
======== ======== ======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE> 4
Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---------- --------------
(Unaudited)
(000's)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 58,654 $ 25,742
Accounts receivable . . . . . . . . . . . . . . . . . . . . 73,602 55,681
Inventories:
Finished products . . . . . . . . . . . . . . . . . . . 34,966 50,327
Raw materials . . . . . . . . . . . . . . . . . . . . . 12,096 10,602
Other current assets . . . . . . . . . . . . . . . . . . . . 47,680 56,090
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 14,831 17,485
-------- --------
Total Current Assets . . . . . . . . . . . . . . . . . . 241,829 215,927
PROPERTY, PLANT AND EQUIPMENT - NET . . . . . . . . . . . . . . . 160,700 131,001
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 120,911 18,937
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $523,440 $365,865
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . $ 23,475 $ 24,801
Short-term debt . . . . . . . . . . . . . . . . . . . . . . 28,888 22,481
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 44,581 34,924
Accrued expenses and other current liabilities . . . . . . . 36,194 30,027
--------- ---------
Total Current Liabilities . . . . . . . . . . . . . . . 133,138 112,233
--------- ---------
LONG-TERM DEBT:
Senior indebtedness, notes payable and other obligations . . 190,396 61,328
Senior subordinated indebtedness - net . . . . . . . . . . . 140,255 140,133
Junior subordinated debentures - net . . . . . . . . . . . . 15,720 15,495
--------- ---------
Long-Term Debt - net . . . . . . . . . . . . . . . . . . 346,371 216,956
--------- ---------
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 26,923 20,882
--------- ---------
COMMON STOCKHOLDER'S EQUITY:
Common stock, $.01 par value, 3,000 shares authorized,
issued and outstanding . . . . . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . 505 500
Retained earnings . . . . . . . . . . . . . . . . . . . . . 16,773 15,348
Cumulative translation adjustment . . . . . . . . . . . . . (250) (54)
Unrealized gains (losses) on securities . . . . . . . . . . (20) -
--------- ---------
Total Common Stockholder's Equity . . . . . . . . . . . 17,008 15,794
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $523,440 $365,865
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE> 5
Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDER'S EQUITY
Six Month Period Ended June 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE UNREALIZED
COMMON PAID-IN RETAINED TRANSLATION GAINS (LOSSES)
STOCK CAPITAL EARNINGS ADJUSTMENT ON SECURITIES TOTAL
----- ------- -------- ----------- ------------- -----
(000'S)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994 . . . $ - $500 $15,348 $(54) - $15,794
Activity for the six month
period ended June 30, 1994:
Net income . . . . . . . . . . 5,666 5,666
Dividends paid . . . . . . . . (4,241) (4,241)
Net change during period . . . 5 (196) (20) (211)
------- ------ --------- ------ ------- -------
BALANCE, June 30, 1994 . . . . $ - $505 $16,773 $(250) $ (20) $17,008
======= ==== ======= ===== ======= =======
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE> 6
Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Month Period
Ended June 30,
--------------------
1994 1993
---- ----
(000's)
<S> <C> <C>
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ 5,666 $(4,741)
Items not requiring (providing) cash:
Depreciation and amortization . . . . . . . . . . . . . . 11,308 13,629
Increase in other liabilities . . . . . . . . . . . . . . 112 537
Deferred taxes and other - net . . . . . . . . . . . . . . 7,368 (577)
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . 24,454 8,848
Working capital management:
Accounts receivable and other current assets . . . . . . . . . (34,331) (43,811)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 13,867 2,080
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 2,654 1,085
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 9,657 6,300
Accrued expenses and other current liabilities . . . . . . . . 6,952 (1,885)
-------- --------
Cash provided (used) by operations and working
capital management . . . . . . . . . . . . . . . . . 23,253 (27,383)
-------- --------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment . . . . . . . . . . . . (43,191) (11,098)
Purchases of marketable securities and other short-term investments (103,829) -
Sales of marketable securities and other short-term investments . 23,790 6,700
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . (141) (1,632)
--------- --------
Cash used by investment activities . . . . . . . . . . . . (123,371) (6,030)
-------- --------
FINANCING ACTIVITIES:
Increase in short-term debt . . . . . . . . . . . . . . . . . . . 6,407 655
Increase in long-term debt . . . . . . . . . . . . . . . . . . . . 161,132 111,946
Repurchases, payments and current maturities of long-term debt . . (34,509) (97,641)
Distributions to stockholder . . . . . . . . . . . . . . . . . . . - (6,911)
-------- --------
Cash provided by financing activities . . . . . . . . . . 133,030 8,049
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 32,912 (25,364)
CASH AND CASH EQUIVALENTS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . 25,742 54,745
------- -------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . $58,654 $29,381
======= =======
</TABLE>
See notes to unaudited consolidated financial statements.
6
<PAGE> 7
Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation and Other Matters
The consolidated financial statements of Trans-Resources, Inc. (the
"Company") include the Company and its direct and indirect subsidiaries, after
elimination of intercompany accounts and transactions. The Company's principal
subsidiaries are Cedar Chemical Corporation ("Cedar"), and Cedar's two
wholly-owned subsidiaries, New Mexico Potash Corporation ("NMPC") and Vicksburg
Chemical Company; Eddy Potash, Inc. ("Eddy"); and Haifa Chemicals Ltd., an
Israeli corporation ("HCL"), and HCL's wholly-owned subsidiary, Haifa Chemicals
South Ltd. ("HCSL"). The Company is a wholly-owned subsidiary of TPR
Investment Associates, Inc., a privately-held corporation. Certain prior
period amounts have been reclassified to conform to the manner of presentation
in the current period.
The Company is a multinational manufacturer of specialty plant
nutrients, organic chemicals, industrial chemicals and potash and distributes
its products in over 80 countries. The Company is the world's largest producer
of potassium nitrate, which is marketed by the Company principally under the
brand names K-Power domestically and Multi-K internationally. The Company is
also the world's largest producer of propanil, the leading rice herbicide. In
addition, the Company is the largest United States producer of potash.
On February 7, 1994, the smaller of HCL's two potassium nitrate
production units was damaged by a fire, causing a temporary reduction of the
Company's potassium nitrate production capacity. The Company currently expects
to replace the damaged unit in early 1995. The Company believes that the
impact of the loss of the facility, including the effect of business
interruption, will be substantially covered by insurance. While the ultimate
amount of the insurance recovery has not yet been fully determined, the Company
expects that the insurance proceeds relating to the property damage will be for
replacement value, which is estimated to be $20 to $25 million greater than the
recorded carrying value of the damaged assets. Accordingly, during the six
month period ended June 30,1994, HCL has recorded an estimated gain of
approximately
7
<PAGE> 8
$20 million less a provision for certain estimated costs related to the fire of
approximately $1.1 million. Such pre-tax gain of approximately $18.9 million
is included in the caption "interest and other income-net" in the accompanying
Consolidated Statements of Operations.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Capital Resources and Liquidity" for certain
information regarding a loan agreement with a bank entered into by the Company
on June 30, 1994.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). This statement requires the Company to
classify its equity and fixed maturity securities as available-for-sale and
reported at fair value, with unrealized gains and losses included as a separate
component of stockholder's equity. The adoption of SFAS 115 did not have a
significant effect on the Company's consolidated financial position or results
of operations.
In the opinion of management, the unaudited consolidated financial
statements for the six month periods ended June 30, 1994 and 1993,
respectively, include all adjustments, which comprise only normal recurring
accruals, necessary for a fair presentation of the results for such periods.
The results of operations for the six month period ended June 30, 1994 are not
necessarily indicative of results that may be expected for any other interim
period or the full fiscal year. It is suggested that these unaudited
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993 (the "Form 10-K") which has
been filed with the Securities and Exchange Commission.
8
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of revenues and the
percentage dollar change of those items as compared to the prior period,
certain items appearing in the unaudited consolidated financial statements of
the Company.
<TABLE>
<CAPTION>
Percentage Percentage
of Revenues Period of Revenues Period
----------- to ----------- to
Three Month Period Six Month Period
Period Ended Changes Period Ended Changes
June 30, ------- June 30, -------
------------- Increase ------------ Increase
1994 1993 (Decrease) 1994 1993 (Decrease)
---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . 100.0% 100.0% (6.7)% 100.0% 100.0% (5.2)%
Costs and expenses:
Cost of goods sold . . . . . . . . . . 78.4 78.9 (7.3) 79.4 78.1 (3.7)
General and administrative expense. . . 10.5 10.5 (7.0) 11.2 10.6 .3
---- ---- ---- ----
Operating income . . . . . . . . . . . . . 11.1 10.6 (1.6) 9.4 11.3 (20.9)
Interest expense . . . . . . . . . . . (8.0) (7.5) (.6) (8.2) (7.6) 1.9
Interest and other income - net . . . (4.8) 1.1 (492.1) 8.7 1.8 354.7
---- ---- ---- ----
Income (loss) before income taxes and
extraordinary item . . . . . . . . . . (1.7) 4.2 (137.9) 9.9 5.5 71.6
Income tax provision . . . . . . . . . . . 2.0 2.6 (29.9) 6.7 3.3 93.8
---- ---- ---- ----
Income (loss) before
extraordinary item . . . . . . . . . . (3.7) 1.6 (320.1) 3.2 2.2 38.6
Extraordinary item - net . . . . . . . . . - (5.2) 100.0 - (4.8) 100.0
---- ---- ---- ----
Net income (loss) . . . . . . . . . . . . . (3.7)% (3.6)% 3.6% 3.2% (2.6)% 219.5%
===== ===== ==== ==== ===== =====
</TABLE>
9
<PAGE> 10
Form 10-Q
RESULTS OF OPERATIONS
Three month period ended June 30, 1994 compared with the three month period
ended June 30, 1993:
Revenues decreased by 6.7% to $92,963,000 in 1994 from $99,592,000 in 1993,
a decrease of $6,629,000, resulting from decreased sales of (i) specialty plant
nutrients and industrial chemicals ($4,300,000), principally due to the
unfavorable effect of certain weakened European currencies in relation to the
U.S. dollar (including those covered by forward exchange contracts) in the 1994
period as compared to the corresponding prior period, and (ii) potash and
chlorine ($3,400,000), partially offset by increased sales of organic chemicals
($1,100,000).
Cost of goods sold as a percentage of revenues decreased to 78.4% in 1994
compared with 78.9% in 1993, primarily due to certain cost reductions, which
served to offset the adverse effects of (i) the above-mentioned weakened
European currencies, (ii) the cancellation of the program of exchange rate
insurance by the Israeli Government in August 1993 and (iii) lower margins
realized in the organic chemicals business. Gross profit was $20,107,000 in
1994 compared with $21,013,000 in 1993, a decrease of $906,000, with such
decrease primarily being the result of the decline in revenues as well as the
net effect of the items described in the previous sentence. General and
administrative expense decreased to $9,748,000 in 1994 from $10,481,000 in 1993
(10.5% of revenues in both 1994 and 1993).
As a result of the matters described above, the Company's operating income
decreased by $173,000 to $10,359,000 in 1994 as compared with $10,532,000 in
1993.
Interest expense did not significantly change during the periods
($7,452,000 in 1994 compared with $7,499,000 in 1993). Interest and other
income - net decreased in 1994 by $5,635,000, principally as the result of
lower investment income and security gains in the 1994 period together with a
provision for loss in 1994 on certain foreign currency transactions.
As a result of the above factors, income before income taxes and
extraordinary item decreased by $5,761,000 in 1994. The Company's provisions
for income taxes are impacted by the mix between domestic
10
<PAGE> 11
and foreign earnings and vary from the U.S. Federal statutory rate principally
due to the impact of foreign operations and certain losses for which there is
no current tax benefit.
In the 1993 period the Company acquired $60,997,000 principal amount of its
13 1/2% Senior Subordinated Debentures which resulted in a loss of $5,106,000.
Such loss (which has no current tax benefit) is classified as an extraordinary
item in the accompanying Consolidated Statements of Operations. No such debt
was acquired in the 1994 period.
Six month period ended June 30, 1994 compared with the six month period
ended June 30, 1993:
Revenues decreased by 5.2% to $174,995,000 in 1994 from $184,606,000 in
1993, a decrease of $9,611,000, resulting from decreased sales of (i) specialty
plant nutrients and industrial chemicals ($8,200,000), principally due to the
unfavorable effect of certain weakened European currencies in relation to the
U.S. dollar (including those covered by forward exchange contracts) in the 1994
period as compared to the corresponding prior period, and (ii) organic
chemicals ($1,800,000), partially offset by increased sales of potash and
chlorine ($400,000).
Cost of goods sold as a percentage of revenues increased to 79.4% in 1994
compared with 78.1% in 1993, primarily due to the adverse effects of (i) the
above-mentioned weakened European currencies, (ii) cancellation of the program
of exchange rate insurance by the Israeli Government in August 1993 and (iii)
lower margins realized in the organic chemicals business, with these items
being partially offset by certain cost reductions. Gross profit was
$36,056,000 in 1994 compared with $40,374,000 in 1993, a decrease of
$4,318,000, with such decrease primarily being the result of the decline in
revenues as well as the net effect of the items described in the previous
sentence. General and administrative expense increased to $19,532,000 in 1994
from $19,479,000 in 1993 (11.2% of revenues in 1994 compared with 10.6% in
1993).
As a result of the matters described above, the Company's operating income
decreased by $4,371,000 to $16,524,000 in 1994 as compared with $20,895,000 in
1993.
Interest expense did not significantly change during the periods
($14,368,000 in 1994 compared with $14,103,000 in 1993). Interest and other
income - net increased in 1994 by $11,897,000, principally as the result of a
gain relating to the February, 1994 fire at HCL (see Notes to Unaudited
Consolidated Financial
11
<PAGE> 12
Statements), partially offset by lower investment income and security gains in
the 1994 period and a provision for loss in 1994 on certain foreign currency
transactions.
As a result of the above factors, income before income taxes and
extraordinary item increased by $7,261,000 in 1994. The Company's provisions
for income taxes are impacted by the mix between domestic and foreign earnings
and vary from the U.S. Federal statutory rate principally due to the impact of
foreign operations and certain losses for which there is no current tax
benefit.
In the 1993 period the Company acquired $65,497,000 principal amount of its
13 1/2% Senior Subordinated Debentures and $21,500,000 principal amount of its
Senior Subordinated Reset Notes, which resulted in a loss of $8,830,000. Such
loss (which has no current tax benefit) is classified as an extraordinary item
in the accompanying Consolidated Statements of Operations. No such debt was
acquired in the 1994 period.
CAPITAL RESOURCES AND LIQUIDITY
The Company's consolidated working capital at June 30, 1994 and December
31, 1993 was $108,691,000 and $103,694,000, respectively. During the six month
period ended June 30, 1994, the Company dividended certain short-term
investments to its parent. The carrying value of these investments on the
dividend date ($4,241,000) approximated market value.
On June 30, 1994, the Company entered into a loan agreement with a bank
(the "Loan Agreement") and borrowed $40,000,000 (repayable quarterly over a
four year period) and utilized the proceeds to prepay approximately $19,000,000
then owed to such bank. Pursuant to the Loan Agreement, the Company also
borrowed an additional $100,000,000, repayable in January, 1996. Under certain
specified circumstances prior to such date, the Company can convert such loan
into a term loan maturing five years from the date of conversion. The Company
pledged certificates of deposit ("CD's") with a principal amount of
$100,000,000 as collateral to such loan (such CD's are included in "other
assets" in the accompanying Consolidated Balance Sheets). In addition, the
Company has pledged 79% of the capital stock of HCL to secure its obligations
under the Loan Agreement.
12
<PAGE> 13
CAPITAL EXPENDITURES
During the first six months of 1994 (excluding the HCSL facility (the "K3
Plant") described below and the reconstruction of the production unit damaged
by fire in February 1994) the Company invested approximately $11,000,000 in
capital expenditures. The Company currently anticipates that capital
expenditures for the remainder of the fiscal year (excluding the K3 Plant and
the reconstruction of the damaged production unit) will aggregate approximately
$24,000,000, which will be used primarily for increasing certain production
capacity and efficiency and for product diversification, including the
construction of a new potassium carbonate manufacturing facility scheduled for
completion in the fourth quarter of 1994. During 1993 the Company commenced
construction of the K3 Plant, a new facility in Israel, with initial capacity
to produce approximately 100,000 metric tons of potassium nitrate annually.
The K3 plant is estimated to cost approximately $88,000,000, with approximately
$37,000,000 of such cost being provided by grants and other entitlements from
the Israeli Government. Capital expenditures in connection with the K3 Plant
(net of Israeli Government grants) amounted to approximately $16,000,000 in
1993. The Company currently anticipates completing the construction of the K3
Plant in the fourth quarter of 1994. During the six month period ended June
30, 1994, the Company invested approximately $26,000,000 in connection with the
K3 plant (net of Israeli Government grants) and approximately $6,000,000 in
connection with the replacement of the damaged production unit. The Company
expects to be able to finance its capital expenditures from internally
generated funds, borrowings from traditional lending sources and, where
applicable, Israeli Government grants and entitlements and, with respect to the
damaged production unit, insurance proceeds.
13
<PAGE> 14
Form 10-Q
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As previously disclosed (most recently in the Form 10-K and in the
Company's March 31, 1994 Form 10-Q), beginning in April 1993 a number of class
of action lawsuits were filed in several United States District Courts against
the major Canadian and United States potash producers, including Eddy and NMPC.
The purported class actions were on behalf of all purchasers of potash from any
of the defendants or their respective affiliates, at any time during the period
of April 1987 to the present, and alleged that the defendants conspired to fix,
raise, maintain and stabilize the prices of potash in the United States
purchased by the plaintiffs and the other members of the class in violation of
the United States antitrust laws. The complaints sought unspecified treble
damages, attorneys fees and injunctive relief against the defendants. In
addition, on or about May 27, 1993 a purported class action seeking similar
relief was filed against the major potash producers, including Eddy and NMPC,
in the Superior Court of the State of California for the County of Los Angeles
on behalf of Angela Coleman and a class consisting of all California indirect
purchasers of potash, alleging violation of specified California statutes.
This action was removed to the United States District Court for the Central
District of California. Pursuant to an order of the Judicial Panel for
Multidistrict Litigation, all of these actions have been consolidated for
pretrial purposes in the United States District Court for Minnesota, where the
initial such action and several others had been commenced. On March 14, 1994,
the Court scheduled the trial to begin on or about January 1, 1996. Several
additional and/or amended complaints were filed in the Minnesota Federal
District Courts making substantially the same allegations as the earlier
complaints. These complaints have been superseded by or deemed included in the
Third Amended and Consolidated Class Action Complaint, to which NMPC and Eddy
served and filed answers denying all the material allegations thereof on or
about July 22, 1994.
On or about March 29, 1994, an action captioned Neve Bros. et al. v. Potash
Corporation of Saskatchewan, et al., was commenced in the Superior Court of
California for the City and County of San Francisco. Eddy,
14
<PAGE> 15
NMPC, Cedar, Nine West Corporation (a subsidiary of the Company which is the
direct parent corporation of Cedar) and the Company are among the named
defendants. This action, brought under California statutes on behalf of a
class of indirect purchasers of potash, makes substantially the same
allegations as made in the Coleman action and seeks substantially the same
legal and equitable remedies and relief. The action was removed to the United
States District Court for the Northern District of California. Defendants
sought to consolidate this action for pretrial purposes with the actions
pending in Minnesota and plaintiffs moved to remand the action to state court.
Pursuant to court order on or about June 9, 1994, this action has been
transferred to the Minnesota District Court for the purpose of consolidation.
Management has no knowledge of any conspiracy of the type alleged in these
complaints.
On or about November 26, 1993 Eddy and NMPC (and other major potash
producers) were served with subpoenas issued by the United States District
Court for the Northern District of Ohio to produce documents to a grand jury
authorized by the U.S. Department of Justice Antitrust Division ("DOJ") to
investigate possible violations of the antitrust laws in connection with the
allegations made in the civil actions described above. A salesman employed by
the sales group for Eddy and NMPC testified before the grand jury pursuant to a
subpoena. Eddy and NMPC are cooperating with DOJ in connection with the
subpoenas.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 10.1 - Loan Agreement dated as of June 30, 1994 between the Company
and Bank Hapoalim (certain exhibits and schedules omitted).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this report
is filed.
15
<PAGE> 16
Form 10-Q
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.
TRANS-RESOURCES, INC.
-----------------------------
(Registrant)
Date: August 11, 1994 Lester W. Youner
-------------------------------
Vice President, Treasurer and
Chief Financial Officer
16
<PAGE> 17
TRANS-RESOURCES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description Page No.
- - ------- ----------- --------
<S> <C> <C>
10.1 Loan Agreement, dated as of June 30, 1994, between the Company and Bank
Hapoalim (certain exhibits and schedules omitted). 18
</TABLE>
17
<PAGE> 1
EXHIBIT 10.1
------------
EXECUTION COPY
LOAN AGREEMENT
AGREEMENT, dated as of June 30, 1994, by and between
TRANS-RESOURCES, INC., a Delaware corporation (the "Company"), and BANK
HAPOALIM B.M., an Israeli banking corporation acting through its New York
Branches (the "Bank").
The Company has requested the Bank to make available to the
Company the Loans described below, and the Bank is willing to extend such Loans
to the Company upon and subject to the following terms and conditions.
NOW, THEREFORE, IT IS AGREED:
1. DEFINITIONS.
1.1 Certain General Definitions. For all purposes of
this Agreement and the other Loan Documents, unless the context otherwise
requires:
"Acquisition Financing Conditions" means, at the
applicable date, that HCL shall have a (i) Consolidated Tangible Net Worth of
not less than $75,000,000, and (ii) a ratio of Consolidated Indebtedness to
Consolidated Tangible Net Worth not greater than 1.5:1.
"Adjusted Net Worth" of the Company means the sum of
(i) the total amount of preferred stockholders' equity and common stockholders'
equity which would appear on an unconsolidated balance sheet of the Company, as
at such date prepared in accordance with generally accepted accounting
principles, plus (ii) the aggregate outstanding principal amount at that date
of the Senior Subordinated Notes, the Senior Reset Notes and all other
Subordinated Debt.
"Agreement" means this Agreement, including all
Exhibits hereto, as the same may be amended or otherwise modified from time to
time, and the terms "herein", "hereof", "hereunder" and like terms shall be
taken as referring to this Agreement in its entirety and shall not be limited
to any particular section or provision thereof.
"Approved Change" means any change in Control of the
Company or TPR which has been approved in writing by the Bank, which approval
shall not unreasonably be withheld if the Bank has determined that after review
of such financial and other information concerning the Person that would become
in Control of
<PAGE> 2
the Company or TPR and receipt of such additional guarantees or
security, if any, as the Bank may reasonably request, there will be no material
adverse change in the creditworthiness of the Company or the likelihood of the
Loans being repaid in accordance with their terms.
"Bank Money-Market Account" means the money market
account no. 01034446-02 maintained by the Company with the Bank.
"Business Day" means a day on which both (i) banks
are regularly open for business in both London and New York City and (ii) the
Bank's New York branch shall be open for ordinary business. In the Bank's
discretion, the New York branch may be closed on any Saturday, Sunday, legal
holiday or other day on which it is lawfully permitted to close.
"C.D." means a negotiable certificate of deposit
and all reinvestments, 'rollovers' and proceeds thereof.
"Closing Date" shall mean the date mutually
convenient to the Bank and the Company, on or prior to June 30, 1994, for the
closing of Loan #1 and Loan #2.
"Company Pledge Agreement" means collectively the
1990 Pledge Agreement, as amended by 1990 Pledge Agreement Amendment No. 1, and
as further amended by the 1990 Pledge Agreement Amendment No. 2 under which the
Company grants to the Bank a valid perfected first priority lien, charge and
security interest in certain HCL Stock and the proceeds thereof under Israeli
law.
"Converted Term Loan" shall have the meaning provided
therefor in Section 2.1 hereof.
"Commitment Letter" means the commitment letter from
the Bank to the Company dated May 13, 1994.
"Consolidated Indebtedness" of any Person means, as
of any date, the aggregate Indebtedness which would appear on a consolidated
balance sheet of that Person and its consolidated Subsidiaries, as at such
date, prepared in accordance with generally accepted accounting principles.
"Consolidated Net Income," for any period, means the
aggregate of the net income of the Company and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with generally
accepted accounting principles; provided that (i) the net income of any Person
(other than a Subsidiary) in which the Company or any Subsidiary has a joint
interest with a third party shall be included only to the extent of the amount
of dividends or distributions paid to the Company or such Subsidiary, (ii) the
net income of any Person acquired in
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<PAGE> 3
a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iii) all charges incurred and credits
realized which are unusual in nature and infrequently occurring shall be
excluded, from net income.
"Consolidated Tangible Net Worth" of any Person
means, as of any date, the total amount of non-redeemable preferred stock and
common stockholders' equity which would appear on a consolidated balance sheet
of that Person and its consolidated Subsidiaries, as at such date prepared in
accordance with generally accepted accounting principles, except that there
shall be deducted therefrom all intangible assets (determined in accordance
with generally accepted accounting principles) including, without limitation,
organization costs, patents, trademarks, copyrights, franchises, research and
development expenses, and any amount reflected as treasury stock; provided,
however, that costs in excess of fair value of net assets of businesses
acquired shall not be deducted.
"Control" means the power to direct or cause the
direction of the management and policies of a Person, either alone or in
conjunction with others and whether through the ownership of voting securities,
by contract or otherwise.
"Current Assets" of any Person means as of the date
of any determination thereof, the aggregate amount carried as current assets on
the books of such Person, in accordance with generally accepted accounting
principles.
"Current Liabilities" of any Person means as of the
date of any determination thereof, the aggregate amount carried as current
liabilities on the books of such Person, in accordance with generally accepted
accounting principles.
"Current Ratio" of any Person means the ratio of such
Person's Current Assets to such Person's Current Liabilities.
"Custodian" means Chemical Bank.
"Custodian Money-Market Account" means the Hanover
U.S. Treasury Money Market Fund held by the Custodian in the Treasury and C.D.
Account.
"Default" means any condition, event or act which,
with notice or lapse of time, or both, would constitute an Event of Default.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, including the rules and regulations
promulgated thereunder.
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<PAGE> 4
"Event of Default" shall have the meaning provided
therefor in Section 8.1 hereof.
"Facility Fees" shall mean the fees payable by the
Company to the Bank pursuant to Section 2.3 hereof.
"Financial Statements" shall have the meaning
provided therefor in Section 4.6 hereof.
"Governmental Person" means any United States,
Israeli, or other national, state or local government, political subdivision,
or governmental, quasi-governmental, judicial, public or statutory
instrumentality, agency, authority, body or entity including the Federal
Deposit Insurance Corporation, any central bank or any comparable authority.
"Governmental Rule" means any law, rule, regulation,
ordinance, order, code, interpretation, judgment, decree, directive, guideline,
policy or similar form of decision of any Governmental Person.
"HCL" means Haifa Chemicals Ltd., an Israeli
corporation.
"HCL Stock" means the ordinary shares, par value NIS
1 per share, issued by HCL.
"Indebtedness" of any Person means indebtedness
incurred by that Person in respect of (i) money borrowed, (ii) any note, loan,
debenture or similar instrument, (iii) deferred payments for assets or services
acquired (except for payments deferred by unaffiliated persons on terms
consistent with industry standards), (iv) capitalized rentals under any
capitalized lease (whether in respect of land, machinery, equipment or
otherwise), but excluding rentals under any operating lease, (v) guarantees,
bonds, stand-by letters of credit or other instruments issued in support of
Indebtedness of any other Person, and (vi) guarantees or other assurances
equivalent to guarantees against financial loss in respect of Indebtedness as
defined under any of clauses (i) to (v) above.
"Interest Payment Date" means any date on which
interest is payable under either Note.
"Interest Period" has the meaning ascribed to such
term in the Notes for each respective Loan.
"Israeli Resident" means an individual who, under the
laws of the State of Israel, is a citizen or resident of the State of Israel or
any other Person of which 25% or more of any class of equity securities are
owned, directly or indirectly, by one or more Israeli Residents. The term
"Israeli Resident" shall
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<PAGE> 5
not include any "exempted person" under the laws of the State of Israel.
"Junior Indenture" means any indenture or agreement
pursuant to which any Junior Subordinated Debt has been or will be issued or
incurred by the Company.
"Junior Subordinated Capital" of any Person means, as
of any date, the total of the Consolidated Tangible Net Worth of such Person
and the outstanding aggregate principal amount of Junior Subordinated Debt and
the outstanding aggregate liquidation value of any outstanding shares of
redeemable preferred stock having no mandatory redemption requirements earlier
than the later of (i) the final maturity of the Senior Reset Notes or (ii) the
final maturity of the Senior Subordinated Notes.
"Junior Subordinated Debt" means obligations of the
Company as reflected on the Company's books which are subordinated in right of
payment to the Senior Subordinated Notes and Senior Reset Notes (to at least
the same extent as the Senior Subordinated Notes and Senior Reset Notes are
subordinated to Senior Indebtedness, including without limitation any class of
equity securities convertible into obligations so subordinated) and shall
include an agreement by holders of such obligations and any transferees not to
receive any payments during the continuation of any default with respect to the
Senior Subordinated Notes or Senior Reset Notes or (without the prior written
consent of the holders of the Senior Subordinated Notes and the Senior Reset
Notes) enforce any remedies with respect to such obligations during the
continuation of a default with respect to such obligations as long as the
Senior Subordinated Notes and Senior Reset Notes are outstanding.
"Lien" means any charge, lien, mortgage, pledge,
security interest or other encumbrance of any nature whatsoever upon, of or in
property or other assets of a Person, whether absolute or conditional,
voluntary or involuntary, whether created pursuant to agreement, arising by
force of statute, by judicial proceedings or otherwise.
"Loan #1" shall have the meaning provided therefor in
Section 2.1 hereof.
"Loan #2" shall have the meaning provided therefor in
Section 2.1 hereof.
"Loan Documents" means this Agreement, the Notes, the
Company Pledge Agreement, the Treasury and C.D. Security Agreement, and any
other instruments, agreements or other documents delivered by the Company or
HCL to the Bank pursuant to any of the foregoing Loan Documents.
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<PAGE> 6
"Loans" shall mean, collectively, Loan #1, Loan #2
and any Converted Term Loans.
"Money-Market Accounts" means the collective
reference to the Bank Money-Market Account and the Custodian Money- Market
Account.
"Net Income" of any Person for any fiscal period
means the difference between gross revenues and all costs, expenses and other
proper charges (including taxes on income) as determined in accordance with
generally accepted accounting principles.
"Net Book Value" means the value for accounting
purposes of an asset after taking into consideration any deductions required
therefrom all as determined in accordance with generally accepted accounting
principles.
"1988 Loan Agreement" means the Loan Agreement dated
as of February 26, 1988, between the Company and the Bank, as amended by
amendments dated June 13, 1988, December 29, 1988, March 17, 1989, April 13,
1989, December 24, 1990 and April 25, 1991.
"1988 Note" means the Promissory Note in the
principal amount of $12,700,000, dated February 28, 1988, signed by the Company
in favor of the Bank, as amended.
"1990 Loan Agreement" means the Loan Agreement dated
as of December 24, 1990, between the Company and the Bank, as amended by the
amendments dated August 16, 1991 and September 25, 1992.
"1990 Notes" means the promissory notes in the
original maximum aggregate principal amount of $48,000,000 dated as of December
24, 1990, signed by the Company in favor of the Bank, as amended.
"1990 Pledge Agreement" means the Pledge Agreement
dated as of December 21, 1990 between the Bank, the Trust Company and the
Company.
"1990 Pledge Agreement Amendment No. 1" means
Amendment No. 1 to the 1990 Pledge dated as of November 29, 1993.
"1990 Pledge Agreement Amendment No. 2" means an
amendment to the 1990 Pledge Agreement in form and substance satisfactory to
the Bank.
"Note #1" shall have the meaning provided therefor in
Section 2.1 hereof.
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<PAGE> 7
"Note #2" shall have the meaning provided therefor in
Section 2.1 hereof.
"Notes" shall mean, collectively, Note #1 and Note #2.
"PBGC" means the Pension Benefit Guarantee
Corporation and any entity succeeding to any or all of its functions under
ERISA.
"Permitted Acquisition" means an acquisition by the
Company of a business or lines of businesses to which the Bank, in its sole and
absolute discretion, shall give its prior written consent.
"Person" shall include an individual, a partnership,
a joint venture, a corporation (including, without limitation, the Company or
any Subsidiary), a trust, an estate, an unincorporated organization or
association and a Governmental Person. If any Person is a corporation, unless
otherwise provided, the use of the term Person to refer to that corporation
means that corporation as a single entity and not as consolidated with its
Subsidiaries.
"Plan" means an employee benefit plan or other plan,
including both single-employer and multi-employer plans, maintained for
employees of the Company or any Subsidiary or any controlled group of trades or
businesses under common control, as defined respectively in Sections 1563 and
414(c) of the Internal Revenue Code of 1986, as amended, of which the Company
or Subsidiary is or becomes a part, and covered by Title IV of ERISA.
"Reportable Event" shall have the meaning set forth
in Section 4043(b) of Title IV of ERISA.
"Senior Indebtedness" means (a) the principal of and
interest on all Indebtedness of the Company whether short or long-term and
whether secured or unsecured (including all Indebtedness evidenced by notes,
bonds, debentures or other securities sold by such Person for money), (b) the
principal of and interest on all Indebtedness incurred by the Company in the
acquisition (whether by way of purchase, merger, consolidation or otherwise and
whether by such Person or another Person) of any capital stock, business, real
property or other assets (except assets acquired in the ordinary course of the
conduct of the acquiror's business), (c) guarantees by the Company of
Indebtedness of a Subsidiary of the Company, and (d) renewals, extensions,
refundings, deferrals, restructurings, amendments and modifications of any such
Indebtedness, obligation or guarantee; provided that Senior Indebtedness shall
not include (i) any Indebtedness which, by the terms of the instrument
creating,
-7-
<PAGE> 8
governing or evidencing such Indebtedness, is not senior or superior in right
of payment to the Senior Subordinated Notes and the Senior Reset Notes; (ii)
any Indebtedness of the Company to any of its Subsidiaries; or (iii) any Junior
Subordinated Debt.
"Senior Reset Note Indenture" means the Indenture
dated as of March 1, 1989 between the Company and First Alabama Bank, as
Trustee.
"Senior Reset Note Repurchase Event" shall have the
meaning set forth in Section 6.11 hereof.
"Senior Reset Notes" means the Company's 14 1/2%
Senior Subordinated Reset Notes due September 1, 1996, issued under the Senior
Reset Note Indenture.
"Senior Subordinated Note Indenture" means the
Indenture dated as of March 30, 1993 between the Company and First Alabama
Bank, as Trustee.
"Senior Subordinated Notes" means the Company's
11-7/8% Senior Subordinated Notes due July 1, 2002, issued under the Senior
Subordinated Note Indenture.
"Significant Subsidiary" means a significant
subsidiary of the Company other than Eddy Potash, Inc., as such term is defined
in Rule 1-02 of Regulation S-X promulgated under the Securities Act of 1933.
"Subordinated Debt" means (a) unsecured obligations
of the Company as reflected on the Company's books which (i) are not due until
the later of (x) July 5, 1998 or (y) the last Interest Payment Date of the
latest to mature of any Converted Term Loan, and (ii) are fully subordinated in
right of payment to the Notes (to at least the same extent as the Senior
Subordinated Notes are subordinated to Senior Indebtedness) and shall include
an agreement by holders of such obligations and any transferees not to receive
any payments with respect to such obligations as long as there exists and is
continuing a default in payment of principal or interest on the Notes, (b)
Junior Subordinated Debt (including any such Junior Subordinated Debt converted
to such after the date hereof) and (c) the obligations of the Company evidenced
by the Senior Reset Notes.
"Subsidiary" means, when used with reference to any
corporation, any corporation of which at least a majority of the outstanding
stock having, by the terms thereof, ordinary voting power to elect a majority
of the Board of Directors of such corporation is at the time directly or
indirectly owned by such first-mentioned corporation.
-8-
<PAGE> 9
"Tangible Net Worth" means tangible net worth as
determined in accordance with generally accepted accounting principles on an
unconsolidated basis but including and excluding specific items in the same
manner as is provided in the definition of "Consolidated Tangible Net Worth".
"TPR" means TPR Investment Associates, Inc., a
Delaware corporation.
"Treasuries" means notes, bills or bonds issued by
the United States Treasury Department as full faith and credit obligations of
the United States and all reinvestments, 'rollovers' and proceeds thereof.
"Treasury and C.D. Account" means the corporation
custodian account no. 7383606 maintained by the Company with the Custodian in
which the Treasuries, C.D.s and shares of the Custodian Money-Market Account
shall be held.
"Treasury and C.D. Account Agreement" means the
account agreement between the Custodian and the Company relating to the
Treasury and C.D. Account.
"Treasury and C.D. Security Agreement" means the
security agreement delivered by the Company to the Bank pursuant to Section 5.2
hereof.
"TRIL" means Trans-Resources (Israel) Ltd., an
Israeli Corporation.
"Trust Company" means Trust Company of Bank Hapoalim
B.M., ([HEBREW TEXT]) a company duly incorporated and existing under the laws
of the State of Israel, having its registered office at 55 Rothschild Boulevard,
Tel-Aviv 65124.
"United States of America", when used in a
geographical sense, means all of the States of the United States of America and
the District of Columbia and, so long as they continue as possessions or
territories of the United States, Puerto Rico and the Virgin Islands.
1.2 Use of Accounting Terms. Accounting terms used
herein shall be construed, calculations hereunder shall be made and financial
data required hereunder shall be prepared, both as to classification of items
and as to amounts, in accordance with generally accepted accounting principles
in effect in the United States (except that any reference in this Agreement to
generally accepted accounting principles with respect to financial statements
of HCL shall be deemed to be references to Israeli generally accepted
accounting principles, unless otherwise provided herein) as of the date thereof
consistently applied,
-9-
<PAGE> 10
which principles shall be consistent with those used in the preparation of the
most recent reviewed financial statements of such Person delivered to the Bank.
All statements relating to earnings and expenses shall set forth separately or
otherwise identify all extraordinary and nonrecurring items.
2. THE LOANS.
2.1 Amount and Terms of Credit.
(a) The Bank agrees, subject to and upon the
terms and conditions herein set forth, to lend to the Company the aggregate sum
of ONE HUNDRED FORTY MILLION DOLLARS ($140,000,000), in the following manner.
On the Closing Date, the Bank shall fund (i) a term loan in the principal
amount of $40,000,000 ("Loan #1") and (ii) a term loan in the principal amount
of $100,000,000 ("Loan #2").
(b) Loan #1 shall be evidenced by and repayable
in accordance with a promissory note ("Note #1") of the Company, substantially
in the form of Exhibit A annexed hereto, and shall be repayable in installments
in the amounts and at the times, and bear interest at the rates, payable at the
times, set forth in Exhibit A.
(c) Loan #2 shall be evidenced by and repayable in
accordance with a promissory note ("Note #2") of the Company, substantially in
the form of Exhibit B annexed hereto, and shall be repayable in the amounts and
at the times, and bear interest at the rates, payable at the times, set forth
in Exhibit B. Subject to paragraph (d) of this Section 2.1, Loan #2 shall be
repayable in full, in one lump sum payment, no later than January 5, 1996.
(d) Any amount in excess of $1,000,000 outstanding
under Loan #2 which has been utilized to fund a Permitted Acquisition in
accordance with Section 3 hereof, shall be deemed converted effective on and as
of the date specified in Section 3.6 hereof to a five-year term loan (upon such
conversion, a "Converted Term Loan"). Each such Converted Term Loan shall be
repayable in installments in the amounts and at the times set forth in the
provisions of Note #2 relating specifically to Converted Term Loans. Each
Converted Term Loan shall bear interest at the rates, and be payable at the
times, set forth in the provisions of Note #2 relating specifically to
Converted Term Loans. On the date of conversion of each Converted Term Loan,
the then outstanding aggregate principal amount of Note #2 not constituting a
Converted Term Loan shall be reduced by the principal amount of such Converted
Term Loan, and the then outstanding principal amount of Converted Term Loans
shall be correspondingly increased by the principal amount of such Converted
Term Loan. The Bank shall make appropriate
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<PAGE> 11
notations on Schedule A and Schedule B of Note #2 evidencing such increase and
decrease. Any failure by the Bank to make any endorsement on Schedule A or
Schedule B of Note #2 shall in no way mitigate or discharge the obligations of
the Company to repay Loan #2, whether as an initial loan or as a Converted Term
Loan, as the case may be.
2.2 Voluntary and Mandatory Prepayments.
(a) The Company may prepay either Note in part
or in full at any time subject to the provisions set forth in such Note, upon
not less than seven days prior written notice to the Bank, provided that each
such prepayment shall be in the amount of $100,000 or any integral multiple
thereof; except that (i) prepayment of the entire outstanding principal amount
of such Note, and (ii) any prepayment of Loan #2 made by liquidation of
Treasuries or C.D.s or funds or shares in the Money-Market Accounts in
accordance with Subsection (c) of this Section 2.2, need not be in the amount
of $100,000 or any integral multiple thereof.
(b) Any voluntary or mandatory prepayments of the
principal of either Note, whether partial or full, shall be accompanied by the
payment of any accrued interest on the principal amount so prepaid and any
other payment or charge required by such Note.
(c) Subject to the provisions of Subsection (a)
of this Section 2.2, the Company may prepay Loan #2 at any time, in part or in
full, by liquidation of Treasuries and/or C.D.s or funds or shares in the
Money-Market Accounts, in the manner set forth in this Subsection (c) and in
Note #2. The Company shall include, in its written notice given to the Bank
pursuant to Subsection (a), a list of particular Treasuries and/or C.D.s, if
any, to be liquidated and applied to Loan #2. The aggregate net proceeds of
the Treasuries and C.D.s proposed to be liquidated pursuant to such notice
shall be not less than $100,000. Upon its receipt of such notice, the Bank
shall make arrangements through the Custodian to sell such specified Treasuries
and CDs at least one Business Day prior to the specified date of prepayment, if
such prepayment date does not coincide with the maturity dates of the specified
Treasuries and CDs, and in any event to apply the proceeds thereof to amounts
outstanding under Loan #2, effective as of the specified date of prepayment.
(d) In the event any notice given to the Bank by
the Company pursuant to subsection 2.2(c) hereof specifies a Treasury the market
value of which, as of the date of such notice, has diminished as compared to
its original cost, then the Bank shall have no obligation to sell such Treasury
and make the proceeds thereof available to the Company in accordance with
Subsection 2.2(c) hereof, unless and until the Company grants to
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<PAGE> 12
the Bank a first priority security interest in additional collateral (which may
be cash) which the Bank determines to be of at least equal liquidity and
collateral value as the difference between the market value as of the date of
such notice and the original cost of such Treasury.
(e) If a particular Treasury or C.D. is not
subject to liquidation pursuant to a request by the Company and consent by the
Bank, within at least three Business Days prior to its maturity date, the Bank
shall reinvest the proceeds of such Treasury or C.D. in other Treasuries or
C.D.s which (i) have been selected by the Bank, after consultation with the
Company but subject to the Bank's approval in its sole discretion, and (ii)
have the attributes set forth in Section 3.2 hereof with respect to Treasuries
and C.D.s purchased initially with the proceeds of Loan #2.
(f) If, during any period a Converted Term Loan
is outstanding, HCL pays any cash dividends or makes any other cash
distributions to its shareholders which, in the aggregate, exceed in value 75%
of HCL's cumulative Net Income (as determined in accordance with generally
accepted accounting principles in effect in Israel during the respective
periods such cumulative Net Income was earned), calculated from the Closing
Date to the date of such payment or distribution, then the Company shall pay to
the Bank upon receipt such amount in excess of 75% of such cumulative Net
Income, as a mandatory prepayment, provided, that, for the purposes of this
subsection 2.2(f), dividends paid by HCL after the Closing Date but before June
30, 1995 in amounts not exceeding HCL's Net Income for the period January 1,
1994 through June 30, 1994 will not be subject to this subsection 2.2(f).
(g) Notwithstanding anything in this Section 2.2
to the contrary, any prepayment, whether voluntary or mandatory, may be applied
by the Bank to any principal or interest of any Note, in such amounts and order
of priority as the Bank deems appropriate in its sole discretion; provided,
however, that any prepayment will be applied first to Loan #2 and then to Loan
#1. The Bank shall have no liability to the Company for any failure to apply
prepayments in accordance with any instructions which the Bank may receive from
the Company which are inconsistent with the provisions of this Subsection
2.2(g).
2.3 Fees.
(a) The Company shall pay to the Bank a Facility
Fee of $340,000 for making this credit facility available to the Company. The
non-refundable amount of $136,000 in respect of the Facility Fee was paid upon
the execution of the Commitment Letter. The balance of the Facility Fee shall
be payable as follows and, once paid, shall be nonrefundable: $136,000 shall
be paid on the Closing Date, and $68,000 shall be paid on the
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<PAGE> 13
first anniversary of the Closing Date, whether or not any Loans are then
outstanding or this Agreement otherwise remains in effect.
(b) The Company shall pay the usual and customary
fees and charges of the Trust Company for its services in holding, as trustee
for the Bank, the certificates representing HCL Stock, in accordance with the
Company Pledge Agreement.
(c) The Company shall pay the usual and customary
fees and charges of the Custodian, for its services in acting as custodian in
connection with the Treasury and C.D. Account and for selling or purchasing
Treasuries or C.D.s thereunder, including any commissions or other brokerage
charges.
2.4 Evidence of Debt. The books and records of the Bank
shall be conclusive evidence, absent manifest error, of all amounts of
principal, interest, fees and other charges advanced, due, outstanding or paid
pursuant to this Agreement, the Notes and any other Loan Document. The Bank
agrees to provide statements of such amounts to the Company upon the Company's
written request; provided, however, that, in the event of any conflict between
such statement and the Bank's books and records, the latter shall be
controlling absent manifest error.
2.5 Increased Costs. If, after the date of this
Agreement, the adoption of any applicable Governmental Rule, any change in any
applicable Governmental Rule, any change in the interpretation or
administration of any applicable Governmental Rule by any Governmental Person
charged with the interpretation or administration thereof, or compliance by the
Bank with any request or directive (whether or not having the force of law) of
any such Governmental Person
(a) shall subject the Bank to any tax, duty or
other charge with respect to all or any portion of
any Loan, or its obligation to make all or any
portion of any Loan or shall change the basis of
taxation of payments to the Bank of any amounts due
under this Agreement, or any Note (except for changes
in the rate of tax on the overall net income of the
Bank or any of its offices imposed by the tax laws of
any jurisdiction in the world); or
(b) shall impose, modify or deem applicable any
reserve (including, without limitation, any imposed
by the Board of Governors of the Federal Reserve
System), special deposit, capital adequacy
requirement, capital equivalency, ratio of assets to
liabilities or any other capital substitute or
similar requirement against assets of, deposits
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<PAGE> 14
with or for the account of, credit extended by,
letters of credit issued and maintained by, or
collateral subject to a lien in favor of the Bank, or
shall impose on the Bank any other condition
affecting all or any portion of any Loan;
and the result of any of the foregoing is to increase the cost to or to impose
a cost on the Bank of making or maintaining all or any portion of any Loan, or
to reduce the amount of any sum received or receivable by the Bank under this
Agreement or any Note, or (in the case of a capital adequacy or similar
requirement) to reduce the rate of return on the Bank's capital as a
consequence of maintaining all or any portion of any Loan to a level below that
which could have been achieved but for the imposition of such requirement
(taking into consideration the Bank's capital adequacy policies), then, within
30 days after demand by the Bank, the Company shall pay the Bank for its own
account such additional amount or amounts as will compensate the Bank for such
increased cost or reduction actually incurred. The Bank will promptly notify
the Company of any event of which it has knowledge, occurring after the date of
this Agreement, which will entitle the Bank to compensation pursuant to this
Section 2.5. A certificate of the Bank claiming compensation for itself under
this Section 2.5 and setting forth in reasonable detail the additional amount
or amounts to be paid to the Bank shall be conclusive evidence of the amount of
such compensation absent manifest error. In determining such amount, the Bank
may use any reasonable averaging and attribution methods.
2.6 Net Payments. All payments to the Bank under this
Agreement or any Note shall be made without defense, setoff or counterclaim and
in such amounts as may be necessary in order that all such payments (after
deduction or withholding for or on account of any present or future taxes,
levies, imposts, duties, or other charges of whatsoever nature imposed by any
government, any political subdivision or any taxing authority, other than any
tax owed and measured by the overall net income of the Bank or any of its
offices pursuant to the tax laws of any jurisdiction in the world
(collectively, the "Taxes")), shall not be less than the amounts otherwise
specified to be paid under this Agreement or the Note. A certificate as to any
additional amounts payable to the Bank under Section 2.6 submitted to the
Company by the Bank shall show in reasonable detail the amounts payable and the
calculations used to determine in good faith such amounts and shall be
conclusive absent manifest error. Any amounts payable by the Company under
this Section 2.6 with respect to past payments shall be due within three
Business Days following receipt by the Company of such certificate from the
Bank; any such amounts payable with respect to future payments shall be due
concurrently with such future payments. With respect to each deduction or
withholding for or on account of any Taxes, the Company shall promptly furnish
to the Bank such certificates,
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<PAGE> 15
receipts and other documents as may be required (in the reasonable judgment of
the Bank) to establish any tax credit to which the Bank may be entitled.
2.7 Security for the Loans.
(a) The Loans shall be secured by a first priority
lien upon and security interest in all Treasuries and C.D.s from time to time
held in the Treasury and C.D. Account or held directly by the Bank, pursuant to
the Treasury and C.D. Security Agreement in the form of Exhibit C hereto. In
addition, the Loans shall be secured by a first priority lien upon and security
interest in 79% of the issued and outstanding HCL Stock pursuant to the Company
Pledge Agreement.
(b) The Bank may release and terminate its security
interest in certain shares of the HCL Stock, in accordance with the terms and
conditions set forth in this Subsection 2.7(b). In the event that the
principal of and interest on and all other fees and charges in respect of Loan
#2 are paid in full, but amounts in respect of Loan #1 remain unpaid, then,
provided no Default or Event of Default has occurred and is continuing, the
Bank shall release within 30 days such number of shares of the HCL Stock as
shall be necessary so that HCL Stock representing the percentage of all issued
and outstanding shares of HCL Stock set forth below opposite the outstanding
amount of Loan #1 shall remain pledged.
<TABLE>
<CAPTION>
Percentage of HCL
Outstanding amount Stock retained as
of Loan #1 less than collateral by the Bank
-------------------- ----------------------
<S> <C>
$35,000,001 65%
$16,000,001 43%
$10,000,001 22%
</TABLE>
In the event that the principal of and interest on and all other fees and
charges in respect of Loan #1 and Loan #2 have been paid in full the Bank shall
release all of the HCL Stock.
3. USE OF PROCEEDS.
The Company represents, warrants and covenants that the
proceeds of the Loan will be used as follows.
3.1 General Use of Proceeds.
(a) The proceeds of Loan #1 shall be used (i) first,
to repay in full on the Closing Date all outstanding principal, interest, fees
and charges in respect of (x) the 1990 Notes (y) the 1988 Note, and, (ii)
second, all proceeds in excess of such foregoing amount for general corporate
purposes of the
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<PAGE> 16
Company. Upon such repayment, the 1990 Notes and the 1988 Note shall be
cancelled and the 1988 Loan Agreement and the 1990 Loan Agreement shall
terminate and have no further force or effect.
(b) All of the proceeds of Loan #2 shall initially
be deposited in the Custodian Money-Market Account in the Treasury and C.D.
Account. Thereafter the proceeds shall be used for the purchase of Treasuries
and C.D.s or allocation to the Custodian Money-Market Account or the Bank
Money-Market Account, and may thereafter be used solely to fund Permitted
Acquisitions in accordance with Section 3.4 hereof (except as set forth in
sub-sections 2.2(c) or 3.4(g) hereof).
3.2 Initial Purchase of Treasuries and C.D.s. The
Company shall provide to the Bank, on the Closing Date, a list of particular
Treasuries and C.D.s the Company proposes be purchased with all or a portion of
the proceeds of Loan #2. Provided the Bank has approved the proposed list, the
Bank shall arrange directly or through the Custodian for the purchase of such
Treasuries and C.D.s, on the Closing Date or as soon thereafter as practicable.
Unless otherwise agreed between the Company and the Bank (i) each such
purchased Treasury shall be in an amount not less than $10,000, have a maturity
date not more than 360 days from the date of purchase, and have such other
terms and conditions as the Company may select, subject to the Bank's approval
in its sole discretion, and (ii) each such purchased C.D. (x) shall have a
minimum principal amount of $500,000, a maturity date not more than 360 days
from the date of issuance, and such other terms and conditions as the Company
may select, subject to the Bank's approval in its sole discretion, and (y) be
issued by one of the following banks: Morgan Guaranty and Trust Company,
Chemical Bank or the New York branch of any of the following: Swiss BancCorp,
Union Bank of Switzerland, Deutsche Bank, Commerz Bank, Societe Generale,
Lloyds, Barclays or Credit Lyonnais as selected by the Company, subject to the
Bank's approval in its sole discretion. Any proceeds of Loan #2 not applied
to such purchases on the Closing Date shall be retained at the option of the
Bank in either of the Money-Market Accounts, which shall be blocked pending
such application, with accrued interest on such funds to be credited to such
appropriate Money-Market Account.
3.3 The Treasury and C.D. Account. The Treasuries,
C.D.s and shares of the Custodian Money-Market Account purchased with proceeds
of Loan #2 shall be held in the Treasury and C.D. Account maintained in the
name of the Company with the Custodian, pursuant to the Treasury and C.D.
Account Agreement, and shall be subject to the Bank's security interest under
the Treasury and C.D. Security Agreement. In accordance with the Treasury and
C.D. Security Agreement, the Bank shall have the exclusive right to direct the
disposition of the Treasuries, C.D.s and shares of the Custodian Money-Market
Account in the Treasury and C.D.
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<PAGE> 17
Account and the proceeds thereof, and, if no Default or Event of Default has
occurred and is continuing, shall cause any interest or accretions of principal
with respect thereto to be credited, at the Bank's option, to the Bank
Money-Market Account or the Custodian Money- Market Account. The Treasury and
C.D. Account Agreement, or the related Notice and Acknowledgment, shall
provide, among other things, that monthly statements regarding the Treasury and
C.D. Account shall be furnished to both the Company and the Bank. The Bank
agrees to provide monthly statements regarding the Bank Money-Market Account to
the Company, if and to the extent funds are held in such account.
3.4 Liquidation of Treasuries and C.D.s for Permitted
Acquisitions; Interest Payments.
(a) The Company may, by giving written notice to the
Bank in accordance with Subsection (b) hereof, effect a liquidation of
Treasuries and C.D.s for the purpose of using the proceeds thereof, or use
funds in the Money-Market Accounts, up to an aggregate cumulative amount of
$100,000,000, for the funding, after the Closing Date and prior to January 5,
1996, of any Permitted Acquisition.
(b) The Company shall give the Bank written
notice of any proposed acquisition to be funded from the proceeds of proposed
liquidations of the Treasury and C.D. Account or funds or shares in the
Money-Market Accounts, which notice shall set forth in reasonable detail all
information relevant to the proposed acquisition and any other information or
certifications the Bank in its sole discretion may from time to time request.
The notice shall be accompanied by a certificate of the Company's chief
financial officer dated as of the date of such notice certifying that each of
the Acquisition Financing Conditions, computed immediately prior to giving
effect to such proposed acquisition, has been satisfied and requesting the
Bank's consent thereto. The Bank shall, within 30 days following the receipt
of such notice together with such additional information and certifications as
it shall have requested, notify the Company in writing of its consent to or
rejection of the proposed acquisition. The Bank may condition its consent to
any Permitted Acquisition in any manner it determines to be necessary or
appropriate in its sole and absolute discretion, including, without limitation,
the granting to the Bank of a first priority security interest in additional
collateral (including property or securities of the business to be acquired).
(c) In the event the Bank shall have consented to a
proposed acquisition, the Company shall, within five Business days prior to any
proposed liquidation of Treasuries and C.D.s or application of funds or
liquidation of shares in the Money-Market Accounts, or as the case may be, for
the purpose of funding the Permitted Acquisition, give written notice to the
Bank of such
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<PAGE> 18
proposed liquidation specifying the particular Treasuries and/or C.D.s, if any,
to be liquidated. The aggregate net proceeds of such proposed liquidation
shall be not less than $1,000,000. Unless the Bank shall have notified the
Company of its objection to a proposed liquidation within three Business Days
after the Bank's receipt of a notice of proposed liquidation, it shall sell or
cause the Custodian to sell the Treasuries or C.D.s specified in such notice at
least one Business Day prior to the liquidation date specified by the Company
in its above- mentioned notice of proposed liquidation, if such prepayment date
does not coincide with the maturity dates of the specified Treasuries and
C.D.s, and within one Business Day of the receipt of the proceeds, or on the
day of such receipt if practicable, the Bank shall deposit or cause the
Custodian to deposit such proceeds in the Money-Market Account specified by the
Bank. The Company's chief financial officer shall, on the date any amounts are
to be released from such Money-Market Accounts to fund a Permitted Acquisition,
furnish the Bank with a certificate, dated as of such date, to the effect that
(i) the Acquisition Financing Conditions remain satisfied and (ii) there has
been no material adverse change in the financial condition of the target of the
Permitted Acquisition since the date of the Company's initial notice to the
Bank requesting approval of the Permitted Acquisition, and there is no
impending change which could reasonably be expected to have a material adverse
effect on the financial condition of the target company. The Bank may refuse
to release any amounts from the Money-Market Accounts unless the conditions to
such Permitted Acquisition required by the Bank have been fulfilled, as
determined by the Bank in its sole and absolute discretion, including, without
limitation, the receipt by the Bank of a first priority perfected security
interest in such additional collateral (including property or security of the
business acquired) as the Bank may determine. All such proceeds of Treasuries
and C.D.s or such Money-Market Accounts shall be used by the Company solely for
the Permitted Acquisition specified in the aforementioned written notices of
proposed acquisition and liquidation.
(d) Within seven Business Days after any
liquidation of Treasuries and C.D.s or application of funds or shares from the
Money-Market Accounts in accordance with this Section 3.4, the Company shall
provide to the Bank evidence reasonably satisfactory to the Bank that the
proceeds of such liquidation were used for the purpose of funding the
Permitted Acquisition specified in the aforementioned written notice of
proposed liquidation.
(e) In no event shall the Bank have any
responsibility or liability to the Company in connection with any diminution in
the market value of the Treasuries, C.D.s or shares of the Custodian
Money-Market Account subject to the Treasury and C.D. Security Agreement or
held in the Treasury and C.D. Account
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<PAGE> 19
or for any loss from any sale thereof or for any other loss whatever in respect
thereof, except as a result of the Bank's gross negligence or willful
misconduct.
(f) Any such proceeds made available to the
Company for the funding of a Permitted Acquisition shall be deemed to be, on
and as of the date such proceeds are made available, converted into Converted
Term Loans, in accordance with Section 2.1(d) hereof.
(g) Interest earned on the securities in the
Treasury and C.D. Account and the balance in the Bank Money-Market Account may
be applied by the Bank, at the request of the Company, to the payment of
interest on Loan #2 provided, that prior to each such application, the Bank, in
its sole and absolute discretion, shall have approved such request for such
application of such payment in writing. Nothing contained herein shall limit
the Bank's rights pursuant to Section 9.6 hereof.
4. REPRESENTATIONS AND WARRANTIES.
In order to induce the Bank to enter into this Agreement and
to make the Loan, the Company represents and warrants to the Bank that:
4.1 Corporate Existence. The Company is a duly organized
and validly existing corporation in good standing under the laws of the State
of Delaware and has the corporate power and authority to own its properties and
other assets and to transact the business in which it is now engaged or
proposes to engage. HCL is a duly organized and validly existing corporation
in good standing under the laws of the State of Israel and has the corporate
power and authority to own its properties and other assets and to transact the
business in which it is now engaged or proposes to engage. Each of the Company
and HCL is duly qualified as a foreign corporation and is in good standing in
each jurisdiction in which the failure to qualify would have a material adverse
effect on its business.
4.2 Holdings. TPR owns both beneficially and of record
all of the issued and outstanding capital stock of the Company. The Company
owns beneficially (including 3,662,830 shares owed of record by TRIL)
52,480,013 shares of HCL Stock, which represent 100% of the issued and
outstanding HCL Stock, of which 48,817,183 shares, representing 93%, are owned
of record by the Company. As of the date hereof, (i) the shareholders of TPR
and their respective interests therein, and (ii) the identity of the principal
stockholder of the Company and its interest therein, are as set forth in the
Company's Form 10-K for the fiscal year ended December 31, 1993. As of the
date hereof, the Company has no Subsidiaries other than those listed on Exhibit
21 to such Form 10-K, and certain other Subsidiaries which, if
-19-
<PAGE> 20
considered in the aggregate as a single Subsidiary, would not constitute a
Significant Subsidiary.
4.3 Authorization and Execution. The Company has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Loan Documents executed by it. The execution, delivery and
performance by the Company of such Loan Documents and the borrowing hereunder
have been duly authorized by all requisite corporate action. This Agreement,
the 1990 Pledge Agreement and the 1990 Pledge Agreement Amendment No. 1, are,
and the Notes, the 1990 Pledge Agreement Amendment No. 2 and the Treasury and
C.D. Pledge Agreement, when executed and delivered by the Company pursuant
hereto, will be legal, valid and binding obligations of the Company,
enforceable against the Company, in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the application by a court of equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). The 1990 Pledge Agreement and the 1990 Pledge
Agreement Amendment No. 1 remain in full force and effect and upon the
execution and delivery of the 1990 Pledge Amendment No. 2 they shall constitute
a valid, binding and enforceable pledge of 41,459,225 shares of HCL Stock, as
security for the obligation of the Company to the Bank under the Notes.
4.4 Compliance with Other Instruments. Neither the
Company nor HCL is in default in the performance, observance or fulfillment of
any of the material obligations, covenants or conditions contained in any
evidence of Indebtedness of the Company or HCL, or contained in any instrument
under or pursuant to which any such evidence of Indebtedness has been issued or
made and delivered. Neither the execution and delivery of the Loan Documents,
nor the consummation of the transactions herein contemplated, including but not
limited to the use of the proceeds of Loan #2 for the funding of Permitted
Acquisitions, nor compliance with the Acquisition Financing Conditions will
conflict with or result in a breach of any of the terms, conditions or
provisions of the Certificate of Incorporation or By-laws or other
organizational charter and instruments of the Company, or of any agreement or
instrument to which the Company is now a party or otherwise bound or to which
any of the Company's properties or other assets is subject, or of any law,
statute, rule or regulation or any order or decree of any court or governmental
instrumentality, or of any arbitration award, franchise or permit, or
constitute a default thereunder, or result in the creation or imposition of any
Lien upon any of the properties or other assets of the Company, except as
herein contemplated.
-20-
<PAGE> 21
4.5 Consents. No consent or approval of, or exemption
by, any Person (including, without limitation, the shareholders of the
Company), and no waiver of any right by any Person is required to authorize or
permit, or is otherwise required in connection with, the execution, delivery
and performance of the Loan Documents, or with respect to the required use by
the Company of the proceeds of any Loan, except those which shall have been
obtained on or prior to the Closing Date.
4.6 Financial Statements. The Company has heretofore
furnished to the Bank copies of the unqualified audited consolidated financial
statements of the Company as of December 31, 1993 and for the year then ended,
the unaudited consolidated financial statements of the Company as of March 31,
1994 and for the three-month period then ended, and the unqualified audited
consolidated financial statements of HCL as of December 31, 1993 and for the
year then ended and the unaudited consolidated financial statements of HCL as
of March 31, 1994 and for the three-month period then ended (collectively, the
"Financial Statements"). All of the Financial Statements present fairly the
financial position of the Company or HCL, as the case may be, on the date of
the balance sheet included therein and the results of the operations of the
Company or HCL, as the case may be, for the period involved, and have been
prepared in accordance with, in the case of the Company, generally accepted
accounting principles in effect in the United States and in the case of HCL,
generally accepted accounting principles in effect in Israel, applied on a
consistent basis throughout the periods involved.
4.7 No Material Changes. There has been no material
adverse change in the business, properties or other assets or in the condition,
financial or otherwise, of the Company or HCL including, without limitation,
any loss from operations, since the date of the most recent balance sheets
included in their respective Financial Statements.
4.8 Litigation. Except as set forth on Schedule A, there
are no actions, suits, investigations or proceedings (whether or not
purportedly on behalf of the Company or HCL) pending or, to the knowledge of
the Company threatened against or affecting the Company or HCL, at law or in
equity or before or by any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind, which involve the possibility of any material liability or of any
material adverse effect on the business, operations, prospects, properties or
other assets or in the condition, financial or otherwise, of the Company or
HCL.
4.9 Compliance with Law. Each of the Company and HCL is
in compliance, in all material respects, with all applicable requirements of
law and all applicable rules and regulations of
-21-
<PAGE> 22
each Federal, state, municipal or other governmental department, agency or
authority, domestic or foreign, the noncompliance with which would have a
material adverse effect on the business, affairs, or financial condition of the
Company or HCL, as the case may be.
4.10 Investment Company. The Company is not an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, or the regulations under such
act.
4.11 Residency and Citizenship Status of Company. The
Company (i) is not an "Israel resident" for purposes of Israeli Exchange
Control Law, 5738-1978, (ii) maintains its chief executive offices and
principal place of business in the State of New York, (iii) is not registered
in Israel as a foreign company and does not have a registered office in Israel,
and (iv) is not a representative, branch or agency in Israel for any other
Person.
4.12 Ownership of Company. As of the date of this Agreement,
none of the issued and outstanding shares of each class of the Company's
capital stock are owned, directly or indirectly, of record and/or beneficially,
by Israeli Residents.
4.13 Regulation U, Etc. None of the proceeds of any Loan
will be used, directly or indirectly, for any purpose which will violate, or
cause the Bank to be in violation of, or which will require the Bank to file or
obtain any forms or notices or applications of any kind so as not to be in
violation of, Regulation U (12 CFR, Part 221) of the Board of Governors of the
Federal Reserve System. Neither the Company nor any agent acting on its behalf
has taken or will take any action which might cause this Agreement or any Note
or the making of any Loan to violate Regulation U or any other regulation of
the Board of Governors of the Federal Reserve System.
4.14 ERISA. (a) Each single-employer Plan has been
maintained and funded, in all material respects, in accordance with its terms
and with all provisions of ERISA applicable thereto, and the Company and its
Subsidiaries have each taken all actions required to be taken by them to cause
each multi-employer Plan to be maintained and funded, in all material respects,
in accordance with its terms and with all provisions of ERISA applicable
thereto; (b) no Reportable Event has occurred and is continuing with respect to
any single-employer Plan or, to the Company's knowledge, any multi-employer
Plan; and (c) no liability to PBGC has been incurred by the Company or any
Subsidiary with respect to any single-employer Plan or, to the Company's
knowledge, any multi-employer Plan, other than for premiums due and payable.
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<PAGE> 23
4.15 Control of the Company. TPR (i) is a Delaware
corporation, the economic equity interest of which is 100% owned by Arie Genger
and members of his family, and (ii) owns all of the issued and outstanding
common stock of the Company and Controls the Company.
4.16 Senior Subordinated Note Indenture. The Company has
delivered to the Bank a true and correct copy of the Senior Subordinated Note
Indenture and all amendments and supplements thereto as in effect on the date
hereof.
4.17 Senior Reset Note Indenture. The Company has delivered
to the Bank a true and correct copy of the Senior Reset Note Indenture and all
amendments and supplements thereto as in effect on the date hereof.
4.18 Priority of Loans. All indebtedness of the Company to
the Bank arising from the Loan Documents, including but not limited to the
Company's obligations to pay the principal of and interest on the Notes, is and
at all times will be senior in right of payment to the Senior Subordinated
Notes and the Senior Reset Notes.
4.19 No Bank of Israel Approval Needed. No exchange control
approval permit issued by the Bank of Israel is required in connection with the
transactions contemplated in this Agreement.
5. CONDITIONS TO LOANS.
The obligation of the Bank to make any Loan to the Company
hereunder is subject to the satisfaction, on or before the date of the making
of such Loan, of each of the following conditions precedent which are solely
for the benefit of the Bank:
5.1 Note. The Note #1 and Note #2 corresponding to Loan
#1 and Loan #2 shall have been duly executed and delivered to the Bank.
5.2 Pledge and Security Agreements. The Company shall
have delivered to the Bank (i) a duly executed copy of the Company Pledge
Agreement, together with certificates representing 41,459,225 shares of HCL
Stock, and undated stock powers or other instruments of assignment therefor
duly executed in blank by the Company and in form acceptable to the Bank, (ii)
a duly executed copy of the Treasury and C.D. Security Agreement in the form of
Exhibit C, (iii) a copy of the Treasury and C.D. Account Agreement along with a
letter of acknowledgment duly executed by the Custodian, in the form of Exhibit
D, and (iv) a duly executed copy of the 1990 Pledge Agreement Amendment No. 2
and (v) any other instruments and documents as the Bank may reasonably
-23-
<PAGE> 24
require to perfect its lien on such collateral under both United States and
Israeli law, as appropriate, including UCC-1 financing statements, and the Bank
shall have a valid and enforceable first priority lien and security interest in
all of such collateral.
5.3 Opinions of Counsel. The Bank shall have received
(i) from United States counsel for the Company a favorable written opinion
addressed to the Bank and dated the Closing Date, satisfactory to the Bank and
substantially in the form set forth in Exhibit E-1 annexed hereto, and (ii)
from Israeli counsel to the Company and HCL, a favorable written opinion
addressed to the Bank and dated the Closing Date, satisfactory to the Bank and
substantially in the form set forth in Exhibit E-2.
5.4 Supporting Documents. The Bank shall have received
the following from the Company: (i) a certificate of its Secretary or an
Assistant Secretary, dated the Closing Date, certifying as to (A) its By-laws;
(B) resolutions of its Board of Directors authorizing the execution, delivery
and performance of this Agreement, the Notes and any Loan Documents executed by
it; (C) the full force and effect of such resolutions on the Closing Date; (D)
the incumbency and signature of each of the officers of the Company who sign
the Loan Documents and all other closing papers hereunder; (E) the Senior
Subordinated Note Indenture; and (F) the Senior Reset Note Indenture; (ii)
certified copies of its Certificate of Incorporation listing all charter papers
on file, as amended through the Closing Date; (iii) a good standing certificate
from the Secretary of State of the State of Delaware; and (iv) such additional
supporting documents as the Bank may reasonably request.
5.5 Bank's Satisfaction as to Pending or Threatened
Proceedings. The Company shall have provided to the Bank full and accurate
information, current as of the Closing Date, of all material litigation,
arbitration, administrative or other proceedings or investigations, pending or
threatened against the Company and the Bank shall be satisfied, in its sole and
absolute discretion, as to the nature and scope of the Company's exposure to
liability and as to any potential exposure to liability on the Bank's part.
5.6 No Default. Both before and after giving effect to
the Loans, there shall exist no Default or Event of Default.
5.7 Representations. All representations and warranties
by the Company contained herein and all representations and warranties
contained in the other Loan Documents shall be true and correct, with the same
force and effect as if made on and as of the date of the Loan.
5.8 Officers' Certificate. The Company shall have
delivered to the Bank a certificate signed by the chief financial
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<PAGE> 25
officer and the Chairman, President or any Vice President (other than the chief
financial officer) of the Company dated the date of the Loan, certifying and
confirming that (i) no Default or Event of Default exists as set forth in
Section 5.6 and (ii) the representations and warranties referred to in Section
5.7 are true and correct.
5.9 Fees. All applicable fees and charges payable by the
Company to the Bank or with respect to the transactions described in this
Agreement shall have been paid.
5.10 Proceedings. All corporate and legal proceedings and
all instruments and agreements in connection with the transactions contemplated
by this Agreement shall be satisfactory in form, scope and substance to the
Bank and its counsel, and the Bank and such counsel shall have received all
information and copies of all documents, including records of corporate
proceedings, which the Bank or its counsel may reasonably have requested in
connection therewith, such documents where appropriate to be certified by
proper corporate and governmental authorities.
6. AFFIRMATIVE COVENANTS.
The Company covenants and agrees that from and after the date
hereof and so long as any Loan or any other obligation incurred hereunder or
under any other Loan Document is outstanding, unless the Bank shall otherwise
consent in a writing delivered to the Company:
6.1 Pay Principal and Interest. The Company will
punctually pay or cause to be paid the principal and interest to become due in
respect of any Note according to the terms hereof and thereof.
6.2 Maintenance of Company Office. The Company will
maintain an office in New York, New York (or such other place in the United
States of America as the Company may designate in writing to the Bank or to any
subsequent holder of the Note), where notices and demands to or upon the
Company in respect of any Note may be given or made.
6.3 Keep Books. The Company will keep proper books of
record and account in which true, correct and complete entries will be made of
its transactions in accordance with generally accepted accounting principles.
6.4 Payment of Taxes; Corporate Existence; Maintenance of
Properties. The Company will, as to itself, and will cause HCL to:
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(a) Pay and discharge promptly all taxes (including,
without limitation, all payroll withholdings), assessments and governmental
charges or levies imposed upon it or upon its income or profits or upon any of
its property, real, personal or mixed, or upon any part thereof, before the
same shall become in default, as well as all claims for labor, materials and
supplies which, if unpaid, might by law become a Lien upon its property;
provided, however, that it shall not be required to pay any such tax,
assessment, charge, levy or claim or discharge any such Lien if the validity
thereof shall be contested in good faith by appropriate proceedings and if it
shall have set aside on its books such reserves, if any, as may be required in
accordance with generally accepted accounting principles with respect to the
tax, assessment, charge, levy or claim so contested;
(b) (i) Conduct continuously and operate actively, its
business according to good business practices; (ii) keep in full force and
effect its corporate existence, and material rights, licenses, permits and
franchises (except those the Company determines to be no longer material) and
comply in all material respects with all of the laws, rules and regulations
governing its business (except such non- compliance as does not have a material
adverse effect on the Company or HCL); and (iii) make all such reports and pay
all such franchise and other taxes and license fees and do all such other
things as may be lawfully required, to maintain its material rights, licenses,
powers and franchises under the laws of the United States of America and of the
States or jurisdictions in which it is organized or does business; and
(c) Maintain and keep, or cause to be maintained and
kept, its properties in good repair, working order and condition, and from time
to time make or cause to be made all needful repairs, renewals, replacements
and improvements so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
6.5 Financial Statements and Reports. The Company will
furnish to the Bank, in duplicate:
(a) As soon as practicable, and in any event
within 90 days after the end of each fiscal year of the Company, annual
unqualified audited consolidated balance sheets of the Company and its
Subsidiaries as at the end of such year and related consolidated statements of
income, retained earnings and cash flows of the Company and its Subsidiaries
for such year, setting forth in comparative form the corresponding figures for
the preceding fiscal year, audited by independent certified public accountants
of recognized standing selected by the Company and acceptable to the Bank;
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(b) As soon as practicable, and in any event
within 105 days after the end of each fiscal year of the Company, annual
unaudited consolidating balance sheets of the Company and its Subsidiaries as
at the end of such year and related consolidating statement of income of the
Company and its Subsidiaries for such year, certified by the chief financial
officer of the Company as to (i) fair presentation of the financial position
and the results of operations of the Company and (ii) having been prepared in
accordance with generally accepted accounting principles consistently applied;
(c) As soon as practicable, and in any event
within 60 days after the end of each fiscal quarter of the Company, a
consolidated balance sheet, related consolidated statements of income, retained
earnings and cash flows of the Company showing its financial condition as of
the last day of such fiscal quarter and the results of operations for such
fiscal quarter, certified by the chief financial officer of the Company as to
(i) fair presentation of the financial position and the results of operations
of the Company and (ii) having been prepared in accordance with generally
accepted accounting principles consistently applied;
(d) As soon as practicable, and in any event
within 60 days after the end of each fiscal quarter of the Company, a
consolidating balance sheet and related consolidating statement of income of
the Company showing its financial condition as of the last day of such fiscal
quarter and the results of operations for the fiscal year to date, certified by
the chief financial officer of the Company as to (i) fair presentation of the
financial position and of the Company and the results of operations (ii) having
been prepared in accordance with generally accepted accounting principles
consistently applied;
(e) As soon as practicable, and in any event
within 180 days after the end of each fiscal year of HCL, unqualified audited
consolidated balance sheets, related statements of income, retained earnings
and cash flows showing HCL's financial condition, as of the close of such
fiscal year and its results of operations during such year, setting forth in
each case in comparative form the corresponding figures for the preceding
fiscal year, audited by independent certified public accountants of recognized
standing selected by the Company or HCL and acceptable to the Bank;
(f) Promptly upon filing with the United States
Securities and Exchange Commission, copies of the Company's Forms 10-K and 10-Q
as well as all other reports required of the Company under Sections 13 or 15(d)
of the Securities Exchange Act of 1934;
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(g) Promptly following the occurrence thereof,
notice of any material adverse change in the business, affairs or financial
condition of the Company or HCL;
(h) Promptly following the occurrence thereof,
notice that the operations of Eddy Potash, Inc. have been put on a standby
basis or discontinued;
(i) Promptly following the occurrence thereof,
notice of any Default hereunder or of any default under any other Loan
Document, the Senior Subordinated Note Indenture, the Senior Reset Note
Indenture, any Senior Indebtedness, any Junior Indenture, or any Indebtedness
to any institutional lender;
(j) When any quarterly or annual financial
statements are required under this Section 6.5, or more often at the Bank's
request, a certificate signed by the chief executive officer or chief financial
officer of the Company (or, if requested by the Bank, by the Company's
independent certified public accountants) certifying that no Default has
occurred and is continuing; and
(k) Such other information as to the financial
condition, operations, business, properties and other assets of the Company or
HCL as the Bank may from time to time reasonably request.
The Company shall cause all audited financial statements required to be
delivered to the Bank pursuant to this Section 6.5 to be addressed to the Bank
by the independent certified public accountant who performed the audit.
6.6 Application of Proceeds. The Company will apply all
proceeds of each Loan as provided in Section 3 hereof, and the Company will
promptly furnish the Bank with evidence reasonably satisfactory to the Bank
that all proceeds of such Loans have been properly applied by the Company.
6.7 ERISA Compliance. The Company will comply, in all
material respects, and cause each of its Subsidiaries to comply, in all
material respects, with the provisions of ERISA, if applicable, with respect to
each of its or their respective Plans and as soon as possible after the Company
knows or has reason to know that any Reportable Event with respect to any Plan
has occurred, furnish to the Bank a statement signed by its chief executive
officer or its chief financial officer setting forth details as to such
Reportable Event and the action, if any, which the Company or its Subsidiary
proposes to take with respect thereto, together with a copy of the notice of
such Reportable Event furnished to PBGC.
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6.8 Issuance of Securities. The Company shall not issue
any shares of capital stock or securities convertible into shares of capital
stock, or grant any options or rights to acquire any shares of capital stock,
to any Israeli Resident, if, upon such issuance or upon the conversion of all
outstanding convertible securities of the Company or upon the exercise of all
existing options or rights, 25% or more of the issued and outstanding shares of
any class of the Company's capital stock would be owned, directly or
indirectly, beneficially and/or of record by Israeli Residents.
6.9 Refinancing Commitment for Senior Reset Notes. The
Company shall obtain, on or before June 30, 1996, a firm written commitment to
refinance the Senior Reset Notes, on terms and conditions acceptable to the
Bank in its sole discretion.
6.10 HCL Dividends. In the event the Company is unable
to make any payment when due under either Note, the Company shall cause HCL to
declare and pay cash dividends to the Company in amounts sufficient so that the
Company may make such payments, and the Company shall use such dividends for
such purpose; provided, however, that if the declaration and payment of such
dividends would be prohibited by any applicable Governmental Rule, the Company
shall not be required to cause such declaration and payment, but shall use its
best efforts to obtain any necessary approvals and permits so that such
declaration and payment can be made in compliance with applicable Governmental
Rules.
6.11 Senior Subordinated Notes Repurchase Event or Senior
Reset Notes Repurchase Event. In the event of either (i) a "Change of
Control", as defined in the Senior Subordinated Note Indenture, of the Company
giving rise to an offer by the Company to purchase Senior Subordinated Notes
pursuant to Section 4.18 of the Senior Subordinated Note Indenture (a "Senior
Subordinated Notes Repurchase Event") or (ii) a "Change of Control", as defined
in the Senior Reset Note Indenture, of the Company giving rise to an offer by
the Company to purchase Senior Reset Notes pursuant to Section 4.17 of the
Senior Reset Note Indenture, the Company shall give the Bank notice of such
event not more than five Business Days thereafter.
6.12 Senior Reset Note Indenture Covenants. So long as the
Senior Reset Note Indenture is in force and effect, the Company agrees to do
and perform, in favor of and for the benefit of the Bank, all things set forth
in Sections 4.02, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16,
4.19 and 4.20 of the Senior Reset Note Indenture, as in effect on the date
hereof, and such sections are incorporated herein by reference, as if set out
herein in full, with such modifications as may be appropriate, mutatis
mutandis.
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6.13 Senior Subordinated Note Indenture. The Company agrees
to do and perform, in favor of and for the benefit of the Bank, all things set
forth in Section 4.02, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12,
4.13, 4.14, 4.15 and 4.16 of the Senior Subordinated Note Indenture, as in
effect on the date hereof, and such sections are incorporated herein by
reference, as if set out herein in full, with such modifications as may be
appropriate, mutatis mutandis.
7. NEGATIVE COVENANTS.
The Company covenants and agrees that from and after the date
hereof and so long as the Loan or any other obligation incurred hereunder or
under any other Loan Document is outstanding, unless the Bank shall otherwise
consent in a writing delivered to the Company, the Company, after giving effect
to any Loan hereunder, will not:
7.1 Indebtedness to Adjusted Net Worth Ratio of the
Company. Permit the ratio of the Company's total Indebtedness to the Company's
Adjusted Net Worth to exceed, at any time, (a) 3 to 1, or (b) on a consolidated
basis, 5 to 1.
7.2 Maintenance of Adjusted Net Worth of the Company.
Permit the Company's Adjusted Net Worth to be less than $87,000,000.
7.3 Maintenance of Tangible Net Worth of the Company.
Permit the Company's Tangible Net Worth (a) to be less than $16,000,000, or (b)
on a consolidated basis, to be less than $10,000,000.
7.4 Maintenance of Tangible Net Worth of HCL. Permit
HCL's Tangible Net Worth on a consolidated basis, as calculated according to
Israeli generally accepted accounting principles, to be less than $70,000,000.
7.5 Maintaining Current Ratios. Permit (a) the Company's
Current Ratio to be less than 1.5 to 1 at any time, or (b) the Company's
Current Ratio, on a consolidated basis, to be less than 1.5 to 1 at any time,
or (c) HCL's Current Ratio, on a consolidated basis, to be less than 1.5 to 1
at any time. In making the computations in clauses (a) and (b) hereof, Current
Liabilities shall exclude all amounts outstanding under Loan #2 and Current
Assets shall exclude the lower of book value or fair market value of the C.D.s
and Treasuries then held by the Bank as collateral.
7.6 Maintenance of Working Capital. Permit the Company's
Working Capital, on a consolidated basis, to be less than $75,000,000 at any
time.
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7.7 No Net Losses. Permit the Company to have, on a
consolidated basis, a net loss at the end of any fiscal year, or HCL to have a
net loss at the end of any fiscal year.
7.8 Restrictions on Dividends. Pay dividends during the
period beginning July 1, 1994 and ending on January 6, 2001 which exceed, in
the aggregate, $4,000,000 per annum plus an additional amount not greater than
$500,000 for every Interest Period, on a cumulative basis, provided, that each
such additional amount shall be payable only after the payment of all amounts
payable in such Interest Period in respect of Loan #1. All cumulative amounts
shall be calculated from the Closing Date to such date of determination.
7.9 Maintenance of Average Net Income. Permit the
average of the Consolidated Net Income of HCL for the most recently completed
fiscal year and for the next preceding fiscal year to be less than $8,000,000
per year.
7.10 Amendment of Subordinated Debt. Amend or otherwise
change the terms of any Subordinated Debt, or make any payment consistent with
an amendment or change thereto, if the effect of such amendment or change is to
increase the interest rate or the liquidation preference of such debt
securities, accelerate the dates upon which payments of principal or interest
are due thereon, change any event of default or condition to an event of
default with respect to such indenture or agreement, change the redemption
provisions thereof or change the subordination provisions thereof, or which,
together with all such other amendments or changes made, increase the
obligations of the obligor or confer additional rights on the holder of such
debt securities.
7.11 Amendments of Junior Subordinated Capital. Amend or
otherwise change the terms of any Junior Subordinated Capital, or make any
payment consistent with an amendment or change thereto, if the effect of such
amendment or change is to increase the interest rate, the dividend rate or the
liquidation preference on such Junior Subordinated Capital, accelerate the
dates upon which payments of principal, dividends or interest are due thereon,
change any event of default or condition to an event of default with respect to
such Junior Subordinated Capital, change the redemption provisions thereof or
change the subordination provisions thereof, or which, together with all other
amendments or changes made, increase the obligations of the obligor or confer
additional rights on the holder of such Junior Subordinated Capital.
7.12 Use of Loan Proceeds. Use any part of the proceeds of
any Loan hereunder for any purpose other than those specified in Section 3
hereof.
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7.13 Disposal of Property; Merger. (a) Wind up,
liquidate or dissolve; (b) sell, exchange, lease, transfer or otherwise
dispose of all or substantially all of (or agree to do any of the foregoing)
its properties or other assets (unless the net proceeds are applied to prepay
the Notes in accordance with Section 2.2 hereof) other than in transactions with
Subsidiaries of the Company; or (c) consolidate with or merge with or into any
other corporation, firm or entity.
7.14 HCL Disposal of Property; Merger.
(a) Permit HCL to sell, exchange, lease, transfer
or otherwise dispose of all or substantially all of its assets, except in the
ordinary course of business.
(b) Permit HCL to sell, exchange or otherwise
transfer the shares of any of HCL's controlled Subsidiaries except to another
HCL-controlled Subsidiary.
(c) Permit HCL to consolidate with or merge with
or into any other corporation, firm or entity.
7.15 Release of Obligations. Discharge or release HCL
from, or extend or otherwise modify in any material way any or all of HCL's
material obligations to the Company, now or hereafter incurred.
7.16 Certain Liens. Contract, create, assume, incur or
suffer to be created, assumed or incurred any Lien upon, or pledge of, any
property or other assets of the Company or any of its Subsidiaries which will
secure any other Senior Indebtedness, Senior Subordinated Notes, Senior Reset
Notes, any Junior Subordinated Debt or any Subordinated Debt other than (i)
Liens securing the purchase price of goods acquired in the ordinary course of
business, not exceeding, in aggregate amount, $1,000,000 and (ii) Liens
existing on the date hereof upon the Company's stock ownership of certain
Subsidiaries, other than HCL, securing loans made to such Subsidiaries by
Persons unaffiliated with TPR, the Company or any Subsidiary, and Liens which
may arise hereafter upon such stock ownership in connection with the
refinancing of such loans.
7.17 Maintenance of Priority. Permit or cause the
Indebtedness of the Company to the Bank arising under the Loan Documents,
including but not limited to the Company's obligations to pay the principal of
and interest on the Notes, to not be fully senior in right of payment in all
respects to the Senior Subordinated Notes, the Senior Reset Notes, any Junior
Subordinated Debt and all other Subordinated Debt.
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7.18 HCL Stock. Permit HCL to issue any additional
shares of capital stock or sell, assign or transfer or permit HCL to sell,
assign or transfer, any of the HCL Stock owned by the Company or, anything
herein to the contrary notwithstanding, permit the creation of any liens or
encumbrances on any of the HCL Stock, whether or not pledged pursuant to the
Company Pledge Agreement, except pursuant to the Company Pledge Agreement.
Nothing in this Section 7.18 shall prohibit HCL from issuing additional shares
of HCL Stock if required to do so pursuant to a Governmental Rule, provided
that such number of such additional shares are expressly pledged and made
subject to a first priority security interest in favor of the Bank as are
necessary, so that the percentage of the issued and outstanding shares of HCL
Stock, after giving effect to such issuance of additional shares, then held by
the Bank under the Company Pledge Agreement shall not have been reduced.
8. DEFAULTS AND REMEDIES.
8.1 Events of Default. In the case of the occurrence of
any of the following events for any reason whatsoever, and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any governmental body or
otherwise (each herein sometimes called an "Event of Default"):
(a) Any representation or warranty made herein or
in any certificate hereafter delivered to the Bank pursuant to this Agreement,
any Note or any other Loan Document shall prove to have been false or
misleading in any material respect when made; or
(b) Any default shall occur in the payment of
principal of or interest on any Note, as and when the same shall become due and
payable, whether at the due date thereof, by acceleration, mandatory prepayment
or otherwise; or
(c) Any default shall occur in the due observance
or performance by the Company of any other covenant, agreement or condition
contained herein or in any Note, the Company Pledge Agreement, the Treasury and
C.D. Security Agreement, or any other Loan Document to be performed by the
Company; or
(d) (i) TPR, the Company, HCL, or any
Significant Subsidiary shall suspend or discontinue its business, or (ii) TPR,
the Company, HCL, Eddy Potash, Inc. or any Significant Subsidiary shall call a
meeting of its creditors for the purpose of postponing or adjusting its
liabilities or seeking an arrangement with its creditors, shall make an
assignment for the benefit of creditors or a composition with creditors, shall
be unable or admit in writing its inability to pay its debts
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generally as they mature, shall generally not pay its debts when they are due,
shall file a petition in bankruptcy, shall become insolvent (howsoever such
insolvency may be evidenced), shall suffer an order for relief to be entered
against it under any bankruptcy law which shall remain undismissed or unstayed
for a period of 45 days or more, shall petition or apply to any tribunal for
the appointment of any receiver, custodian, liquidator or trustee of or for it
or any substantial part of its property or other assets or shall commence any
proceeding relating to it under any bankruptcy, reorganization, arrangement,
readjustment of debt, receivership, dissolution or liquidation law or statute
of any jurisdiction, whether now or hereafter in effect; or there shall be
commenced against TPR, the Company, HCL, Eddy Potash, Inc. or any Significant
Subsidiary any such proceeding which shall remain undismissed or unstayed for a
period of 45 days or more; or TPR, the Company, HCL, Eddy Potash, Inc., or any
Significant Subsidiary shall take any action for the purpose of effecting any
of the foregoing; or
(e) Any order, judgment or decree shall be
entered in any proceeding against TPR, the Company, HCL, Eddy Potash, Inc. or
any Significant Subsidiary decreeing the dissolution of TPR, the Company, HCL,
Eddy Potash, Inc. or any Significant Subsidiary and such order, judgment or
decree shall remain undischarged or unstayed for a period in excess of 30 days;
or
(f) Any Loan Document shall become invalid or
unenforceable, in whole or in part, or any default or event of default shall
have occurred thereunder; or the Bank shall not have a valid perfected first
priority security interest in the Treasuries and the C.D.s, under the laws of
the State of New York and a valid perfected first priority lien, pledge and
charge with respect to the HCL Stock under the laws of the State of Israel;
except to the extent the Bank's security interest, lien, pledge and charge with
respect to certain of the HCL Stock has been released in accordance with
Section 2.7 hereof; or
(g) Any default (unless duly waived in writing by
the obligee) shall occur with respect to any Indebtedness (other than the
Indebtedness evidenced by the Notes) of the Company aggregating more than
$250,000, any of its Subsidiaries for or relating to borrowed money (including,
without limitation, for the deferred purchase price of property or for the
payment of rent under any lease), aggregating more than $250,000, or under any
agreement under which any evidence of Indebtedness may be issued by the Company
or any of its Subsidiaries and such default shall continue for more than the
period of grace, if any, specified therein, if the effect of such default is to
accelerate the maturity of such Indebtedness or to permit the holder thereof,
or any trustee, to cause the same to become due prior to
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its stated maturity or if any such Indebtedness shall not be paid when due; or
(h) Final judgment for the payment of money in
excess of $250,000 shall be rendered by a court of record against the Company
or any of its Subsidiaries, and the Company or any of its Subsidiaries shall
not discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof within 30 days from the date of
entry thereof and within such period of 30 days, or such longer period during
which execution of such judgment shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or
(i) Any Reportable Event which the Bank
determines in good faith might constitute grounds for the termination of any
Plan or for the appointment by the appropriate United States District Court of
a trustee to administer any Plan shall have occurred and be continuing 30 days
after notice to such effect shall be given to the Company by the Bank, or any
Plan shall be terminated (with the exception of any Plan covering employees at
Eddy Potash, Inc.), or a trustee shall be appointed by an appropriate United
States District Court to administer any Plan, or PBGC shall institute
proceedings to terminate any Plan or appoint a trustee to administer any Plan,
or the Company or any of its Subsidiaries shall completely or partially
withdraw from any multi-employer Plan (with the exception of any Plan covering
employees at Eddy Potash, Inc.) or appoint a trustee to administer any such
Plan or shall cease operation at any facility where such cessation could
reasonably be expected to result in a separation from employment of more than
20% of the total number of employees who are participants under a Plan (with
the exception of any Plan covering employees at Eddy Potash, Inc.); and in each
case such event or condition, together with all such other events or
conditions, if any, would subject the Company or any of its Subsidiaries to any
tax, penalty or other liability aggregating in excess of $250,000, provided,
however, that in determining whether such taxes, penalties or other liabilities
exceed such limitation, there shall be excluded therefrom any tax, penalty or
other liability which (i) within 30 days of being imposed, is paid or
satisfied, or (ii) is being contested in good faith and by appropriate
proceedings, with respect to which adequate reserves have been set aside by the
Company and its Subsidiaries in conformity with generally accepted accounting
principles and with respect to which none of the property or assets of the
Company or any of its Subsidiaries has become or is about to become subject to
any Lien; or
(j) An Event of Default as defined under the
Senior Subordinated Note Indenture or the Senior Reset Note Indenture shall
occur; or
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<PAGE> 36
(k) The Company shall be in default under any
other obligation to Bank Hapoalim B.M. for the payment of money; or
(l) TPR shall no longer Control the Company, or
shall cease to own a majority of the issued and outstanding common stock of the
Company, or Arie Genger and members of his immediate family shall cease to own,
in the aggregate, directly or indirectly, more than a majority of the equity
and voting interests in TPR, unless any such change constitutes an Approved
Change, or Arie Genger shall at any time for a reason other than death or
serious disability, fail to maintain beneficial ownership, directly or
indirectly, of at least 20% of the voting stock of the Company; or
(m) The Company or any Subsidiary shall become an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, or the regulations
under such Act; or
(n) a Senior Subordinated Note Repurchase Event or
Senior Reset Note Repurchase Event shall occur;
then, if any Event of Default described in subsection (e) above shall have
occurred the Notes shall immediately become due and payable, and if any Event
of Default described in any other subsection of this Section 8.1 shall have
occurred, and at any time thereafter, if any such event shall then be
continuing, the Bank may, by written notice to the Company, declare the
principal of and accrued interest on the Notes, and any other amounts owed
under this Agreement, the Notes or any Loan Document, to be due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived.
8.2 Suits for Enforcement. In case any one or more of
such Events of Default shall occur and be continuing, the holder of any Note
may proceed, to the extent permitted by law, to protect and enforce such
holder's rights either by suit in equity or by action at law, or both, whether
for the specific performance of any covenant, condition or agreement contained
in the Loan Documents or in aid of the exercise of any power granted in the
Loan Documents, or proceed to enforce the payment of such Note or to enforce
any other legal or equitable right of the holder of any Note.
8.3 Remedies Cumulative. No right or remedy herein or in
any other agreement or instrument conferred upon the Bank or the holder of any
Note is intended to be exclusive of any other right or remedy, and each and
every such right or remedy shall be cumulative and shall be in addition to
every other right and remedy given hereunder or under any Loan Document or now
or hereafter existing at law or in equity or by statute or
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otherwise. Without limiting the generality of the foregoing, if any Note or
any of the other obligations of the Company to the Bank shall not be paid when
due, whether at the stated maturity thereof, by acceleration or otherwise, the
Bank shall not be required to resort to any particular security, right or
remedy or to proceed in any particular order of priority, and the Bank shall
have the right at any time and from time to time, in any manner and in any
order, to enforce its security interests, liens, rights and remedies, or any of
them, as it deems appropriate in the circumstances and apply the proceeds of
its collateral to such obligations of the Company as it determines in its sole
discretion.
9. MISCELLANEOUS.
9.1 Notices. All notices, requests and other
communications to any party under this Agreement and the other Loan Documents
shall be in writing and shall be given to such party, by mail, telecopy, telex,
personal delivery or other customary means of delivery, addressed to it as set
forth below or such other address or telex number as such party may in the
future specify for such purpose by notice to the other party. Each such
notice, request or communication shall be effective (a) if given by telex, when
such telex is transmitted to the telex number specified below and the
appropriate answerback is received, (b) if given by mail, two days after such
communication is deposited in the United States mails and sent by certified or
registered mail, return receipt requested, with first class postage prepaid,
addressed as aforesaid or (c) if given by telecopy, personal delivery or any
other means, when received at the address specified below.
Party Address
----- -------
If to the Company: Trans-Resources, Inc.
9 West 57th Street
Suite 3900
New York, New York 10019
Attention: President
Telephone: (212) 888-3044
Telecopier: (212) 888-3708
with a copy to: Lester W. Youner
Vice President, Treasurer and
Chief Financial Officer
Trans-Resources, Inc.
9 West 57th Street
New York, New York 10019
Telephone: (212) 888-3044
Telecopier: (212) 888-3708
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<PAGE> 38
and with
a copy to: Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Edward Klimerman, Esq.
Telephone: (212) 698-7700
Telex: 147264
Answerback: RBLNYK
Telecopier: (212) 698-7825
If to the Bank: Bank Hapoalim B.M. New York Branches
1177 Avenue of the Americas
New York, New York 10038
Attention: Mordechai Kremer
First Vice President
Telephone: (212) 782-2165
Telecopier: (212) 782-2222
with a copy to: Bank Hapoalim B.M.
New York Branches
1177 Avenue of the Americas
New York, New York 10019
Attention: Lawrence Lefkowitz, Esq.
Telephone: (212) 782-2141
Telecopier: (212) 782-2222
and with
a copy to: Kronish, Lieb, Weiner & Hellman
1114 Avenue of the Americas
New York, New York 10036-7798
Attention: Steven K. Weinberg, Esq.
Telephone: (212) 479-6240
Telecopier: (212) 479-6275
9.2 Survival of Representations; Successors and Assigns.
All covenants, agreements, representations and warranties made herein and in
any certificate delivered pursuant hereto shall survive the making by the Bank
of the Loans contemplated herein and the execution and delivery to the Bank of
the Notes evidencing the Loans regardless of any investigation made by the Bank
and of the Bank's access to any information and shall continue in full force
and effect so long as any indebtedness or obligation created hereunder is
outstanding and unpaid. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such party, subject to the provisions hereof. All covenants,
agreements, representations and warranties by the Company which are contained
or incorporated in this Agreement or in any other Loan Document shall inure to
the benefit of the successors and assigns of the Bank and any holder of any
Note. Except for the parties hereto and their respective
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<PAGE> 39
successors and assigns, no other Person shall be entitled to the benefits of
this Agreement or to rely thereon.
9.3 Effect of Delay. No failure or delay on the part of
the Bank in exercising any right, power or privilege hereunder or under the
Note, nor any course of dealing between the Company and the Bank, shall operate
as a waiver thereof, nor shall a single or partial exercise thereof preclude
any other or further exercise or the exercise of any other right, power or
privilege.
9.4 Expenses. The Company agrees to pay all
out-of-pocket costs and expenses (including the reasonable fees and
disbursements of special counsel) incurred by the Bank in connection with (a)
the preparation and execution of the commitment letter and this Agreement and
the other Loan Documents and the making of the Loans hereunder; provided,
however, that whether or not the Loans are ever made, the Company agrees to pay
the Bank all of its costs and expenses, including the reasonable fees and
disbursements of the Bank's counsel, incurred in connection with the
preparation and negotiation of the commitment letter and the Loan Documents,
and in addition the Company shall pay the reasonable fees and disbursements of
Israeli counsel to the Bank, (b) any modifications or waivers of this Agreement
or any other Loan Document requested by the Company, and (c) the enforcement
and preservation of the rights of the Bank under or in connection with the Loan
Documents. All of such expenses shall be paid by the Company on demand as
incurred. The provisions of this Section 9.4 shall survive any termination of
this Agreement, whether by reason of bankruptcy of the Company or otherwise.
9.5 Modifications and Waivers. No modification or waiver
of any provisions of this Agreement or of any other agreement or instrument
made or issued pursuant hereto or contemplated hereby, nor consent to any
departure by the Company therefrom, shall in any event be effective,
irrespective of any course of dealing between the parties, unless the same
shall be in a writing executed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on the Company in any case shall thereby entitle
the Company to any other or further notice or demand in the same, similar or
other circumstances. Any transaction or matter excepted from the operation of
any Section of this Agreement shall nevertheless be subject to the prohibitions
and limitations contained elsewhere in this Agreement, unless expressly stated
otherwise.
9.6 Set-Off of Accounts. The balance of every account of
the Company with the Bank existing from time to time at any of the Bank's
offices worldwide including, without limitation, the Bank Money-Market Account,
or under the Treasury and C.D. Account Agreement and in any currency, shall be
subject to being setoff
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<PAGE> 40
against any obligations of the Company to the Bank arising under this Agreement
or other Loan Documents, and the Bank may at any time and from time to time
after an Event of Default shall have occurred and be continuing at its option
and without notice to the Company, except as may be required by law,
appropriate and apply toward the payment of any of such obligations of the
Company to the Bank all or any part of the balance of each such account with
the Bank.
9.7 Counterparts. This Agreement may be executed in any
number of counterparts and by telecopier, each of which shall constitute an
original, and all of which taken together shall constitute one and the same
agreement.
9.8 Construction and Jurisdiction. This Agreement, the
Notes and the other Loan Documents, except the Company Pledge Agreement, shall
be governed by and construed and enforced in accordance with the laws of the
State of New York applicable to contracts made and to be performed wholly
within such State. The Company Pledge Agreement shall be governed by the laws
of Israel applicable to contracts made and to be performed wholly within such
nation. Any action or proceeding in connection with this Agreement or the
Notes may be brought in a court of record of the State of New York, County of
New York or any federal court located therein, the parties hereby consenting to
the jurisdiction thereof, and service of process may be made upon any party by
mailing a copy of the summons to such party, by registered mail, at its address
to be used for the giving of notices under this Agreement. IN ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS,
THE PARTIES MUTUALLY WAIVE TRIAL BY JURY AND ANY CLAIM THAT NEW YORK COUNTY IS
AN INCONVENIENT FORUM. The Company hereby irrevocably appoints Rubin Baum
Levin Constant & Friedman, and any successor firm or professional corporation,
as its agent for service of process for any and all matters related to or
arising out of any of the Loan Documents or any transactions contemplated
thereby.
9.9 Headings. Section headings are for convenience only
and shall not affect the interpretation or construction of this Agreement or
the Notes.
9.10 Transfers and Booking of Loans. (a) Without limiting
any of the Bank's rights hereunder, the Bank may, after any Loan is made
hereunder, book any of the Loans in any of its branches anywhere in the world,
or negotiate, assign, grant security interests in, delegate or otherwise
transfer (each of the foregoing acts, a "Transfer") all of, or sell one or more
participations in any portion of, any or all of the following: (i) the Notes,
and (ii) the Bank's rights and related obligations under this Agreement and the
other Loan Documents (any of the foregoing which is subject to a Transfer, a
"Transferred Item");
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<PAGE> 41
provided, however, that at no time shall the Company be required, as a result
of any such Transfer or participation, to (x) to give notices required by this
Agreement to more than one Person and that one Person's designated department,
employees and/or counsel, or (y) to obtain any consent or approval required
under this Agreement from more than one Person, or (z) be subject to any
additional taxes, fees, costs or expenses (including withholding taxes).
(b) In the event the Bank Transfers any
Transferred Item, then to the extent provided by the Bank with respect to such
Transfer, the Person to whom such Transfer is made (the "Transferee") shall
have, and may exercise and enjoy, the rights, powers, privileges and remedies
of the Bank with respect to such Transferred Item. The Bank shall, after any
Transfer, and to the extent of such Transfer, be forever relieved and fully
discharged from all liability and responsibility, if any, that it may
thereafter have to the Company with respect thereto, but not with respect to
matters occurring prior to such Transfer. The Bank shall retain all its rights
and powers with respect to any Transferred Item to the extent not so
Transferred.
(c) The provisions of Section 9.6 (regarding
setoff rights) shall apply to any account of the Company with, and any claim of
the Company against, any Transferee to the extent of such Transfer which shall
have purchased the Loan or any portion thereof and shall become a "Bank"
hereunder. This paragraph (c) of Section 9.11 shall not limit any other rights
of the Bank or such Transferee whether arising under this Section 9.11, or
otherwise hereunder or under applicable law.
(d) The Bank is authorized to disclose any
information it may have or acquire about the Company and the Subsidiaries to
any prospective or actual Transferee.
IN WITNESS WHEREOF, the Company and the Bank have caused this
Agreement to be duly executed and delivered in the
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<PAGE> 42
City of New York by their duly authorized officers, all as of the date first
above written.
TRANS-RESOURCES, INC.
By
----------------------------------
Title:
BANK HAPOALIM B.M.
AN ISRAELI BANK ACTING THROUGH
ITS NEW YORK BRANCHES
By
----------------------------------
Title:
By
----------------------------------
Title:
<PAGE> 43
EXHIBIT A
PROMISSORY NOTE
U.S. $40,000,000.00
June 30, 1994
New York, New York
1. Obligation and Repayment:
FOR VALUE RECEIVED, TRANS-RESOURCES, INC., a Delaware corporation (the
"Borrower"), promises to pay to the order of BANK HAPOALIM B.M. (the
"Bank") at the Bank's office at 1177 Avenue of the Americas, New York,
New York 10038 or at such other place in the United States as the Bank
may specify by notice (the "Office"), the principal amount of FORTY
MILLION DOLLARS ($40,000,000.00), in lawful money of the United
States, together with interest, as specified below. Payment of
principal shall be made in sixteen consecutive installments, the first
such installment to be payable on October 5, 1994, and the remaining
installments to be payable on the last day of each Interest Period
occurring after October 5, 1994. The first fifteen principal
installments shall each be in the amount of $2,500,000.00. The last
principal installment shall be in the then outstanding unpaid
principal balance of this Note and shall be due and payable on July 5,
1998, together with all unpaid interest accrued through that date.
2. Interest:
a. Generally. Interest shall be payable on the last day of each
Interest Period and at any time that any part of the principal
of this Note is due or is paid, or any time that this Note is
paid in full. Interest shall be calculated on a daily basis
on the outstanding principal amount of this Note at the
LIBOR-Based Rate or the Default Rate, as the case may be,
divided by 360 on the actual days elapsed from the date
hereof, or from the date the entire principal balance of this
Note shall have become due and payable, or from the stated
date of maturity, as appropriate, until paid. Any payment by
other than immediately available funds shall be subject to
collection. Interest shall continue to accrue until the funds
by which payment of principal is made are available to the
Bank for its use. Interest
<PAGE> 44
shall never exceed the maximum lawful rate of interest
applicable to this Note.
b. Interest Rates. Subject to subparagraphs (c) and (d) below,
interest on the outstanding principal amount of this Note for
each Interest Period shall be payable at a rate per year (the
"LIBOR-Based Rate") equal to 2.25 per annum above the LIBOR
for that Interest Period.
c. Absence of LIBOR Determination; Unenforceability.
Notwithstanding subparagraph (b) of this paragraph 2, if the
Bank determines, on any Date of Determination, that (A) by
reason of circumstances affecting the London Interbank Market
generally, adequate and fair means do not exist for
ascertaining an applicable LIBOR or it is impractical for the
Bank to continue to fund the outstanding principal amount of
this Note during the applicable Interest Period, or (B) London
Eurodollar Deposit Rates are no longer being quoted
(temporarily or permanently) on the Reuters Monitor Money
Rates Service or such Service is no longer functioning
(temporarily or permanently) in substantially the same manner
as on the date hereof, and, after negotiating in good faith,
the Bank has failed to agree with the Borrower with respect to
a substitute, publicly available reference for the
determination of LIBOR, or (C) quotes for funds in United
States Dollars in sufficient amounts comparable to the then
outstanding principal amount of this Note and for the duration
of the applicable Interest Period would not be available to
the Bank in the London Interbank Market, or (D) quotes for
funds in United States Dollars in the London Interbank Market
will not accurately reflect the cost to the Bank of funding
the outstanding principal amount of this Note during the
applicable Interest Period, or (E) the making or funding of
loans, or charging of interest at rates, based on LIBOR shall
be unlawful or unenforceable for any reason, then as long as
such circumstance(s) shall continue, interest on the
outstanding principal amount of this Note shall be payable at
a variable rate per year which shall be equal to the Prime-
Based Rate and such interest shall be payable on the last day
of each Interest Period until the principal amount of this
Note is paid in full.
d. Default Rate. Regardless of the applicability of any other
interest rate hereunder, whether pursuant to subparagraph (c)
of this paragraph 2 or otherwise, interest on the outstanding
principal amount of this Note shall be payable at a variable
rate per year (the "Default Rate") which shall at all times be
equal to
2
<PAGE> 45
two percent (2%) per year above the Prime-Based Rate, at any
date after the entire outstanding principal balance of this
Note shall have become due and payable (whether by reason of
stated maturity, acceleration or otherwise; provided, however,
in the case of acceleration, such Default Rate also shall
apply retroactively from the earliest date an Event of
Default, by reason of nonpayment or otherwise, first
occurred).
3. Prepayment:
a. Voluntary and Mandatory Prepayments.
(i) Generally. The Borrower shall be entitled to prepay
the outstanding principal amount of this Note in
whole or in part on any Business Day without the
prior consent of the Bank and shall be required to
prepay the outstanding principal of this Note in
whole or in part as set forth in Section 2.2 of the
Loan Agreement. Any such prepayment, whether
voluntary or mandatory, shall be together with all
interest due on the principal amount prepaid to the
date of payment. Any prepayment shall be applied by
the Bank in accordance with Section 2.2 of the Loan
Agreement.
(ii) Change of Law. If any law, regulation, directive or
treaty or any change therein or in the interpretation
or application thereof shall make it unlawful for the
Bank to maintain the loan evidenced by this Note or
to claim or receive any amount otherwise payable
under this Note or the Loan Agreement, the Bank shall
so notify the Borrower. In the case of any such
notice, the Borrower shall prepay the outstanding
principal amount of this Note in full together with
all accrued interest (A) on the last Business Day of
the Interest Period which includes the date of such
notice, if the Bank may lawfully receive such
prepayment on such day, or (B) on such earlier date
on which the Bank may lawfully receive such payment,
if payment on such earlier date is reasonably
required as a result of such impending illegality.
4. Increased Costs:
If, after the date of this Note, the adoption of any applicable
Governmental Rule, any change in any applicable Governmental Rule, any
change in the interpretation or administration of any applicable
Governmental Rule by any
3
<PAGE> 46
Governmental Person charged with the interpretation or
administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law)
of any such Governmental Person
a. shall subject the Bank to any tax, duty or other charge with
respect to all or any portion of the Loan, or its obligation
to make all or any portion of the Loan or shall change the
basis of taxation of payments to the Bank of any amounts due
under this Note (except for changes in the rate of tax on the
overall net income of the Bank or any of its offices imposed
by the tax laws of any jurisdiction in the world); or
b. shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit,
capital adequacy requirement, capital equivalency, ratio of
assets to liabilities or any other capital substitute or
similar requirement against assets of, deposits with or for
the account of, credit extended by, letters of credit issued
and maintained by, or collateral subject to a lien in favor of
the Bank, or shall impose on the Bank any other condition
affecting all or any portion of the Loan;
and the result of any of the foregoing is to increase the cost to or to impose
a cost on the Bank of making or maintaining all or any portion of the Loan, or
to reduce the amount of any sum received or receivable by the Bank under this
Note, or (in the case of a capital adequacy or similar requirement) to reduce
the rate of return on the Bank's capital as a consequence of maintaining all or
any portion of the Loan to a level below that which could have been achieved
but for the imposition of such requirement (taking into consideration the
Bank's capital adequacy policies), then, within 30 days after demand by the
Bank, the Borrower shall pay the Bank for its own account such additional
amount or amounts as will compensate the Bank for such increased cost or
reduction actually incurred. The Bank will promptly notify the Borrower of any
event of which it has knowledge, occurring after the date of this Note, which
will entitle the Bank to compensation pursuant to this Paragraph 4. A
certificate of the Bank claiming compensation for itself under this Paragraph 4
and setting forth in reasonable detail the additional amount or amounts to be
paid to the Bank shall be conclusive evidence of the amount of such
compensation absent manifest error. In determining such amount, the Bank may
use any reasonable averaging and attribution methods.
4
<PAGE> 47
5. Net Payments:
All payments to the Bank under this Note shall be made without
defense, setoff or counterclaim and in such amounts as may be
necessary in order that all such payments (after deduction or
withholding for or on account of any present or future taxes, levies,
imposts, duties, or other charges of whatsoever nature imposed by any
government, any political subdivision or any taxing authority, other
than any tax owed and measured by the overall net income of the Bank
or any of its offices pursuant to the tax laws of any jurisdiction in
the world (collectively, the "Taxes")), shall not be less than the
amounts otherwise specified to be paid under this Note. A certificate
as to any additional amounts payable to the Bank under this Paragraph
5 submitted to the Borrower by the Bank shall show in reasonable
detail the amounts payable and the calculations used to determine in
good faith such amounts and shall be conclusive absent manifest error.
Any amounts payable by the Borrower under this Paragraph 5 with
respect to past payments shall be due within three Business Days
following receipt by the Borrower of such certificate from the Bank;
any such amounts payable with respect to future payments shall be due
concurrently with such future payments. With respect to each
deduction or withholding for or on account of any Taxes, the Borrower
shall promptly furnish to the Bank such certificates, receipts and
other documents as may be required (in the reasonable judgment of the
Bank) to establish any tax credit to which the Bank may be entitled.
6. Compensation for Reinvestment Costs:
If the Borrower makes any payment of or on account of the outstanding
principal amount of this Note at any time other than the last day of
an Interest Period, whether after an Event of Default or otherwise
then the Borrower shall compensate the Bank for the costs (the
"Reinvestment Costs") of reinvesting, for the period extending until
the last day of the then current Interest Period, the funds received
by it upon such payment at a rate or rates which may be less than the
LIBOR-Based Rate applicable to the principal portion of such amount
paid (the "Accelerated Principal"). The Borrower and the Bank
acknowledge that determining the actual amount of the Reinvestment
Costs may be difficult or impossible in any specific instance.
Accordingly, the Borrower and the Bank agree that the Reinvestment
Costs shall be:
the excess, if any, of (i) the product of (A) the
Accelerated Principal, times (B) the applicable
LIBOR-Based Rate divided by 360, times (C) the
remaining number of days from the date of the
5
<PAGE> 48
payment to the last day of the relevant Interest
Period,
over(ii) that amount of interest which the Bank
determines that the holder of a Treasury Obligation
selected by the Bank in the amount (or as close to
such amount as feasible) of the Accelerated Principal
and having a maturity date on (or as soon after as
feasible) the last day of the relevant Interest
Period, would earn if that Treasury Obligation were
purchased in the secondary market on the date the
Accelerated Principal is paid to the Bank and were
held to maturity.
The Borrower agrees that determination of Reinvestment Costs
shall be based on amounts which a holder of a Treasury
Obligation could receive under these circumstances, whether or
not the Bank actually invests the Accelerated Principal in any
Treasury Obligation.
7. Conclusive Determination:
The Bank's determination (i) as to the occurrence or continuation of
any of the events referred to in subparagraph (c) of paragraph 2, (ii)
of LIBOR and the applicable interest rate and the amount of interest
accrued under this Note, and (iii) of Reinvestment Costs pursuant to
paragraph 6, shall be conclusive, final and binding on the Borrower in
the absence of manifest error.
8. Definitions:
a. Accelerated Principal shall be as defined in paragraph
6.
b. Business Day shall mean a "Business Day" as defined in the
Loan Agreement.
c. Closing Date shall mean the "Closing Date" as defined in the
Loan Agreement.
d. Date of Determination shall mean, with respect to each
Interest Period, two Business Days prior to the commencement
of that Interest Period.
e. Default Rate shall have the meaning assigned thereto in
Paragraph 2(d).
f. Event of Default shall mean an "Event of Default" as defined
in the Loan Agreement.
6
<PAGE> 49
g. Governmental Person shall mean "Governmental Person" as
defined in the Loan Agreement.
h. Governmental Rule shall mean "Governmental Rule" as defined in
the Loan Agreement.
i. Interest Period shall mean each consecutive three-month period
ending on the fifth day of October, January, April and July,
as the case may be, following the Closing Date, except that
the first Interest Period shall begin on the Closing Date and
end on October 5, 1994. The last Interest Period shall end on
July 5, 1998. Each Interest Period shall commence immediately
at the end of the preceding Interest Period, except that the
first Interest Period shall commence on the Closing Date. If
any Interest Period would otherwise come to an end on a day
which is not a Business Day, the termination thereof shall be
postponed to the next day which is a Business Day unless it
would thereby terminate in the next calendar month. In such
case, such Interest Period shall terminate on the immediately
preceding Business Day.
j. Liabilities shall include all amounts from time to time
payable by the Borrower under this Note or the Loan Agreement
and any and all other obligations or liabilities of the
Borrower arising under this Note or the Loan Agreement.
k. LIBOR shall mean, with respect to any Interest Period, the
rate or rates established by the New York Branches of the Bank
on the Date of Determination for that Interest Period by
applying the London Eurodollar Deposit Rates quoted on the
display designated as page "RMEY" to subscribers of the
Reuters Monitor Money Rates Service. The rates so quoted
reflect the selling rates selected by such Service as rates
offered at 11:00 A.M. London Standard Time for bank to bank
United States Dollar deposits in such amounts and for such
periods of time (Interest Periods) as may apply. In the event
the RMEY page shall be replaced by another page on the Reuters
Money Market Rates Service for quoting London Eurodollar
Deposit Rates, then rates quoted on said replacement page
shall be applied. If the Bank determines that London
Eurodollar Deposit Rates are no longer being quoted
(temporarily or permanently) on the Reuters Monitor Money
Rates Service or that such Service is no longer functioning
(temporarily or permanently) in substantially the same manner
as on the date hereof, then the Borrower and the Bank shall
negotiate in good faith towards the aim of
7
<PAGE> 50
agreeing upon a substitute, publicly available reference for
the determination of LIBOR.
l. LIBOR-Based Rate shall have the meaning assigned thereto in
Paragraph 2(b).
m. Loan shall mean "Loan #1" as defined in the Loan Agreement.
n. Loan Agreement shall mean the Loan Agreement, dated as of June
30, 1994, between the Borrower and the Bank, as amended and in
force from time to time.
o. London Interbank Market shall mean the London interbank market
for United States Dollars and/or United States Dollar interest
rates.
p. Person shall mean "Person" as defined in the Loan Agreement.
q. Prime-Based Rate shall mean the Bank's New York Branches'
stated prime rate as reflected from time to time in its books
and records. The Prime-Based Rate shall change automatically
when and as the Prime Rate shall change. The Bank may make
loans to others at rates above or below its Prime Rate.
r. Reinvestment Costs shall have the meaning assigned thereto in
Paragraph 6.
s. Taxes shall have the meaning assigned thereto in Paragraph 5.
t. Transfer shall mean any negotiation, assignment, granting of a
security interest in, delegation or other transfer of, a
complete or partial interest or obligation; such term shall
also mean to make a Transfer.
u. Treasury Obligation shall mean a note, bill or bond issued by
the United States Treasury Department as a full faith and
credit general obligation of the United States.
9. Waiver:
Notice, presentment, protest, notice of dishonor and demand for
payment are hereby waived as to all of the Liabilities.
8
<PAGE> 51
10. Costs and Expenses:
The Borrower shall pay all costs and expenses of every kind incurred
by the Bank in connection with any proceedings to collect any
Liabilities, including reasonable attorneys fees and disbursements, as
provided in the Loan Agreement.
11. Maturity on Business Day:
If any payment of principal of or interest on this Note or any other
amount under this Note falls due on a day which is not a Business Day,
it shall be payable on the next succeeding day on which the Office is
open (unless such day would be a day in the next calendar month, and
in such case payment shall be due on the immediately preceding
Business Day), and the resulting additional or decreased time (if any)
shall be included in or deducted from the computation of interest.
12. Parties; No Transfers by the Borrower:
a. Without the Bank's written consent, the Borrower shall have no
right to Transfer any of its obligations hereunder and any
such purported Transfer shall be void. Subject to the
foregoing, this Note is binding upon the Borrower and upon the
Borrower's successors and assigns.
b. If this Note is not a negotiable instrument, then the Borrower
hereby waives all defenses (except such defenses as may be
asserted against a holder in due course of a negotiable
instrument) which the Borrower may have or acquire against any
Transferee who takes this Note, or any complete or partial
interest in it, for value, in good faith and without notice
that it is overdue or has been dishonored or of any defense
against or claim to it on the part of any Person.
13. Reference to Loan Agreement, Acceleration, Remedies:
This Note is Note #1 referred to in the Loan Agreement, and is
entitled to the security and benefits therein provided and is subject
to the terms and conditions thereof. This Note is subject to
mandatory prepayment in whole or in part as specified in Section 2.2
of the Loan Agreement and upon the occurrence of an Event of Default,
the principal of and accrued interest hereon may automatically become,
or may be declared to be, forthwith due and payable, as provided in
the Loan Agreement and the Bank shall be entitled to each and every
one of the remedies set forth therein.
9
<PAGE> 52
14. No Oral Changes; No Waiver; Other Rights:
This Note may not be changed orally. Neither a waiver by the Bank of
any of its options, powers or rights in one or more instances, nor any
delay on the part of the Bank in exercising any of its options, powers
or rights, nor any partial or single exercise thereof, shall
constitute a waiver thereof in any other instance. The options,
powers and rights of the Bank specified herein are in addition to
those otherwise created in the Loan Agreement and other Loan
Documents.
15. Partial Unenforceability:
Any provision of this Note which is prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or
nonauthorization, without invalidating the remaining provisions of
this Note in that or any other jurisdiction and without affecting the
validity, enforceability or legality of such provision in any other
jurisdiction.
16. Governing Law, Jurisdiction, Litigation and Waiver of Jury
Trial:
This Note shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly within such State. Any
action or proceeding in connection with this Note may be brought in a
court of record of the State of New York, County of New York or any
federal court located therein, the parties hereby consenting to the
jurisdiction thereof, and service of process may be made upon any
party by mailing a copy thereof to such party, by registered mail, at
its address to be used for the giving of notices under the Loan
Agreement. IN ANY ACTION OR ANY JUDICIAL PROCEEDING RELATING TO THIS
NOTE THE BORROWER AND BANK MUTUALLY WAIVE TRIAL BY JURY.
TRANS-RESOURCES, INC.
By:
---------------------------
Title:
10
<PAGE> 53
EXHIBIT B
PROMISSORY NOTE
U.S. $100,000,000.00
June 30, 1994
New York, New York
1. Obligation and Repayment:
FOR VALUE RECEIVED, TRANS-RESOURCES, INC., a Delaware corporation (the
"Borrower"), promises to pay to the order of BANK HAPOALIM B.M. (the
"Bank") at the Bank's office at 1177 Avenue of the Americas, New York,
New York 10038 or at such other place in the United States as the Bank
may specify by notice (the "Office"), the principal amount of ONE
HUNDRED MILLION DOLLARS ($100,000,000.00), in lawful money of the
United States, together with interest, as specified below.
a. Subject to conversion of all or any portion of the principal
of this Note to a "Converted Term Loan," as defined in the
Loan Agreement and the provisions herein with respect to a
Converted Term Loan, the unpaid principal hereof shall be
repayable in full in one lump sum payment on January 5, 1996.
b. Any portion of the principal of this Note deemed under Section
2.1 of the Loan Agreement to be a Converted Term Loan shall be
repayable in twenty consecutive installments, the first such
installment to be payable commencing on the last day of the
Interest Period during which any portion of this Loan shall be
deemed converted into a Converted Term Loan pursuant to
Section 2.1 of the Loan Agreement, and the remaining
installments to be payable on the last day of each succeeding
Interest Period. The principal installments in respect of
each Converted Term Loan shall be in the amount of the
outstanding principal amount of such Converted Term Loan,
divided by twenty.
2. Interest:
a. Generally. Interest shall be payable on the last day of each
Interest Period. Interest shall also be payable at any time
that any part of the principal or any installment of this Note
is due or is paid, or any time that this Note is paid in full.
Interest shall be calculated on a daily basis on the
outstanding principal amount of this Note, at the LIBOR-Based
Rate for the unpaid principal hereof not constituting
<PAGE> 54
Converted Term Loans, and at the Converted Loan LIBOR-Based
Rate for the unpaid principal hereof constituting Converted
Term Loans, divided by 360 on the actual days elapsed from the
date hereof, in the case of unpaid principal not constituting
Converted Term Loans, or from the date of conversion for each
portion of the unpaid principal hereof converted to a
Converted Term Loan, or at the applicable Default Rate for
such applicable principal amount, divided by 360 on the actual
days elapsed from the date the entire principal balance of
this Note shall have become due and payable, or from the
stated date of maturity, as appropriate, until paid. Any
payment by other than immediately available funds shall be
subject to collection. Interest shall continue to accrue
until the funds by which payment of principal is made are
available to the Bank for its use. Interest shall never
exceed the maximum lawful rate of interest applicable to this
Note.
b. Interest Rates. Subject to subparagraphs (c) and (d) below,
(i) interest on the outstanding principal amount of this Note
not then constituting Converted Term Loans for each Interest
Period shall be payable at a rate per year (the "LIBOR-Based
Rate") equal to 1% per annum above the LIBOR for that Interest
Period, and (ii) interest on the outstanding principal amount
of this Note constituting Converted Term Loans for each
Interest Period shall be payable at a rate per year (the
"Converted Loan LIBOR-Based Rate") equal to 2.25% per annum
above the LIBOR for that Interest Period. Anything herein to
the contrary notwithstanding, any unpaid principal portion
hereof which becomes a Converted Term Loan prior to the last
day of the then applicable Interest Period, shall bear
interest from the date of such conversion at the Converted
Loan LIBOR-Based Rate.
c. Absence of LIBOR Determination; Unenforceability.
Notwithstanding subparagraph (b) of this paragraph 2, if the
Bank determines, on any Date of Determination, that (A) by
reason of circumstances affecting the London Interbank Market
generally, adequate and fair means do not exist for
ascertaining an applicable LIBOR or it is impractical for the
Bank to continue to fund the outstanding principal amount of
this Note during the applicable Interest Period, or (B) London
Eurodollar Deposit Rates are no longer being quoted
(temporarily or permanently) on the Reuters Monitor Money
Rates Service or such Service is no longer functioning
(temporarily or permanently) in substantially the same manner
as on the date hereof,
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and, after negotiating in good faith, the Bank has failed to
agree with the Borrower with respect to a substitute, publicly
available reference for the determination of LIBOR, or (C)
quotes for funds in United States Dollars in sufficient
amounts comparable to the then outstanding principal amount of
this Note and for the duration of the applicable Interest
Period would not be available to the Bank in the London
Interbank Market, or (D) quotes for funds in United States
Dollars in the London Interbank Market will not accurately
reflect the cost to the Bank of funding the outstanding
principal amount of this Note during the applicable Interest
Period, or (E) the making or funding of loans, or charging of
interest at rates, based on LIBOR shall be unlawful or
unenforceable for any reason, then as long as such
circumstance(s) shall continue, interest on the outstanding
principal amount of this Note shall be payable at a variable
rate per year which shall be equal to the Prime- Based Rate
and such interest shall be payable on the last day of each
Interest Period until the principal amount of this Note is
paid in full.
d. Default Rate. Regardless of the applicability of any other
interest rate hereunder, whether pursuant to subparagraph (c)
of this paragraph 2 or otherwise, interest on the outstanding
principal amounts of this Note as evidenced by Schedule A and
Schedule B shall be payable at a variable rate per year (the
"Default Rate") which shall at all times be equal to two
percent (2%) per year above the Prime-Based Rate, at any date
after the entire outstanding principal balance evidenced by
Schedule A or Schedule B, as the case may be, shall have
become due and payable (whether by reason of stated maturity,
acceleration or otherwise; provided, however, in the case of
acceleration, such Default Rate also shall apply retroactively
from the earliest date an Event of Default, by reason of
nonpayment or otherwise, first occurred).
3. Schedules A and B:
The entire unpaid principal hereof on the date hereof shall be noted
on the attached Schedule A. Thereafter, the date and amount of each
Converted Term Loan shall be noted on Schedule A, as a reduction of
the unpaid principal hereof indicated thereon, and a corresponding
notation shall be made on Schedule B, indicating the date such unpaid
principal balance was deemed a Converted Term Loan and the principal
amount thereof.
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The Borrower hereby unconditionally and irrevocably authorizes the
Bank to make such notations on the attached Schedules A and B (the
"Schedules"). All such notations shall be deemed correct, conclusive
and binding in the absence of manifest error; provided, however, that
the failure of the Bank to make any appropriate notation on either
Schedule A or Schedule B shall not prevent or hinder the Bank from
collecting, or affect the Bank's right to payment of the principal of
and interest on this Note or in any way render the conversion of any
unpaid principal hereof to a Converted Term Loan invalid.
4. Prepayment:
a. Voluntary and Mandatory Prepayments.
(i) Generally. The Borrower shall be entitled to prepay
the outstanding principal amount of this Note in
whole or in part on any Business Day without the
prior consent of the Bank and shall be required to
prepay the outstanding principal of this Note in
whole or in part as set forth in Section 2.2 of the
Loan Agreement. Any such prepayment, whether
voluntary or mandatory, shall be together with all
interest due on the principal amount prepaid to the
date of payment. Any prepayment shall be applied by
the Bank in accordance with Section 2.2 of the Loan
Agreement.
(ii) Change of Law. If any law, regulation, directive or
treaty or any change therein or in the interpretation
or application thereof shall make it unlawful for the
Bank to maintain the loan evidenced by this Note or
to claim or receive any amount otherwise payable
under this Note or the Loan Agreement, the Bank shall
so notify the Borrower. In the case of any such
notice, the Borrower shall prepay the outstanding
principal amount of this Note in full together with
all accrued interest (A) on the last Business Day of
the Interest Period which includes the date of such
notice, if the Bank may lawfully receive such
prepayment on such day, or (B) on such earlier date
on which the Bank may lawfully receive such payment,
if payment on such earlier date is reasonably
required as a result of such impending illegality.
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5. Increased Costs:
If, after the date of this Note, the adoption of any applicable
Governmental Rule, any change in any applicable Governmental Rule, any
change in the interpretation or administration of any applicable
Governmental Rule by any Governmental Person charged with the
interpretation or administration thereof, or compliance by the Bank
with any request or directive (whether or not having the force of law)
of any such Governmental Person
(a) shall subject the Bank to any tax, duty or other charge with
respect to all or any portion of the Loan, or its obligation
to make all or any portion of the Loan or shall change the
basis of taxation of payments to the Bank of any amounts due
under this Note (except for changes in the rate of tax on the
overall net income of the Bank or any of its offices imposed
by the tax laws of any jurisdiction in the world); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit,
capital adequacy requirement, capital equivalency, ratio of
assets to liabilities or any other capital substitute or
similar requirement against assets of, deposits with or for
the account of, credit extended by, letters of credit issued
and maintained by, or collateral subject to a lien in favor of
the Bank, or shall impose on the Bank any other condition
affecting all or any portion of the Loan;
and the result of any of the foregoing is to increase the cost to or
to impose a cost on the Bank of making or maintaining all or any
portion of the Loan, or to reduce the amount of any sum received or
receivable by the Bank under this Note, or (in the case of a capital
adequacy or similar requirement) to reduce the rate of return on the
Bank's capital as a consequence of maintaining all or any portion of
the Loan to a level below that which could have been achieved but for
the imposition of such requirement (taking into consideration the
Bank's capital adequacy policies), then, within 30 days after demand
by the Bank, the Borrower shall pay the Bank for its own account such
additional amount or amounts as will compensate the Bank for such
increased cost or reduction actually incurred. The Bank will promptly
notify the Borrower of any event of which it has knowledge, occurring
after the date of this Note, which will entitle the Bank to
compensation pursuant to this Paragraph 5. A certificate of the Bank
claiming compensation for itself under this Paragraph 5 and setting
forth in reasonable detail the additional amount or amounts
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<PAGE> 58
to be paid to the Bank shall be conclusive evidence of the amount of
such compensation absent manifest error. In determining such amount,
the Bank may use any reasonable averaging and attribution methods.
6. Net Payments:
All payments to the Bank under this Note shall be made without
defense, setoff or counterclaim and in such amounts as may be
necessary in order that all such payments (after deduction or
withholding for or on account of any present or future taxes, levies,
imposts, duties, or other charges of whatsoever nature imposed by any
government, any political subdivision or any taxing authority, other
than any tax owed and measured by the overall net income of the Bank
or any of its offices pursuant to the tax laws of any jurisdiction in
the world (collectively, the "Taxes")), shall not be less than the
amounts otherwise specified to be paid under this Note. A certificate
as to any additional amounts payable to the Bank under this Paragraph
6 submitted to the Borrower by the Bank shall show in reasonable
detail the amounts payable and the calculations used to determine in
good faith such amounts and shall be conclusive absent manifest error.
Any amounts payable by the Borrower under this Paragraph 6 with
respect to past payments shall be due within three Business Days
following receipt by the Borrower of such certificate from the Bank;
any such amounts payable with respect to future payments shall be due
concurrently with such future payments. With respect to each
deduction or withholding for or on account of any Taxes, the Borrower
shall promptly furnish to the Bank such certificates, receipts and
other documents as may be required (in the reasonable judgment of the
Bank) to establish any tax credit to which the Bank may be entitled.
7. Compensation for Reinvestment Costs:
If the Borrower makes any payment of or on account of the outstanding
principal amount of this Note at any time other than the last day of
an Interest Period, whether after an Event of Default or otherwise
then the Borrower shall compensate the Bank for the costs (the
"Reinvestment Costs") of reinvesting, for the period extending until
the last day of the then current Interest Period, the funds received
by it upon such payment at a rate or rates which may be less than the
LIBOR-Based Rate applicable to the principal portion of such amount
paid (the "Accelerated Principal"). The Borrower and the Bank
acknowledge that determining the actual amount of the Reinvestment
Costs may be difficult or impossible in any specific instance.
Accordingly, the Borrower and the Bank agree that the Reinvestment
Costs shall be:
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<PAGE> 59
the excess, if any, of (i) the product of (A) the
Accelerated Principal, times (B) the LIBOR-Based Rate
or the Converted Loan LIBOR-Based Rate, as
applicable, divided by 360, times (C) the remaining
number of days from the date of the payment to the
last day of the relevant Interest Period,
over(ii) that amount of interest which the Bank
determines that the holder of a Treasury Obligation
selected by the Bank in the amount (or as close to
such amount as feasible) of the Accelerated Principal
and having a maturity date on (or as soon after as
feasible) the last day of the relevant Interest
Period, would earn if that Treasury Obligation were
purchased in the secondary market on the date the
Accelerated Principal is paid to the Bank and were
held to maturity.
The Borrower agrees that determination of Reinvestment Costs
shall be based on amounts which a holder of a Treasury
Obligation could receive under these circumstances, whether or
not the Bank actually invests the Accelerated Principal in any
Treasury Obligation.
8. Conclusive Determination:
The Bank's determination (i) as to the occurrence or
continuation of any of the events referred to in subparagraph
(c) of paragraph 2, (ii) of LIBOR and the applicable interest
rate and the amount of interest accrued under this Note, and
(iii) of Reinvestment Costs pursuant to paragraph 7, shall be
conclusive, final and binding on the Borrower in the absence
of manifest error.
9. Definitions:
a. Accelerated Principal shall have the meaning assigned thereto
in Paragraph 7.
b. Business Day shall mean "Business Day" as defined in the Loan
Agreement.
c. Closing Date shall mean the "Closing Date" as defined in the
Loan Agreement.
d. Converted Loan LIBOR-Based Rate shall have the meaning
assigned thereto in Paragraph 2(b).
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<PAGE> 60
e. Date of Determination shall mean, with respect to each
Interest Period, two Business Days prior to the commencement
of that Interest Period.
f. Default Rate shall have the meaning assigned thereto in of
Paragraph 2(d).
g. Event of Default shall mean an "Event of Default" as defined
in the Loan Agreement.
h. Governmental Person shall mean "Governmental Person" as
defined in the Loan Agreement.
i. Governmental Rule shall mean "Governmental Rule" as defined in
the Loan Agreement.
j. Interest Period shall mean:
(i) with respect to the outstanding principal amount
of this Note not constituting Converted Term Loans, each
consecutive three-month period ending on the fifth day of
October, January, April or July, as the case may be, following
the Closing Date, except that the first Interest Period shall
begin on the Closing Date and end on October 5, 1994. The
last such Interest Period shall end on January 5, 1996. Each
such Interest Period shall commence immediately at the end of
the preceding Interest Period, except that the first Interest
Period shall commence on the Closing Date; or
(ii) with respect to each Converted Term Loan,
initially, the period commencing on such Business Day prior to
January 5, 1996 as the Bank shall have agreed to and ending on
the first to occur of the next following January 5, April 5,
July 5 or October 5, and thereafter each consecutive
three-month period ending on such a date.
If any Interest Period would otherwise come to an end on a day
which is not a Business Day, the termination thereof shall be
postponed to the next day which is a Business Day unless it
would thereby terminate in the next calendar month. In such
case, such Interest Period shall terminate on the immediately
preceding Business Day.
k. Liabilities shall include all amounts from time to time
payable by the Borrower under this Note or the Loan Agreement
and any and all other obligations or liabilities of the
Borrower arising under this Note or the Loan Agreement.
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l. LIBOR shall mean, with respect to any Interest Period, the
rate or rates established by the New York Branches of the Bank
on the Date of Determination for that Interest Period by
applying the London Eurodollar Deposit Rates quoted on the
display designated as page "RMEY" to subscribers of the
Reuters Monitor Money Rates Service. The rates so quoted
reflect the selling rates selected by such Service as rates
offered at 11:00 A.M. London Standard Time for bank to bank
United States Dollar deposits in such amounts and for such
periods of time (Interest Periods) as may apply. In the event
the RMEY page shall be replaced by another page on the Reuters
Money Market Rates Service for quoting London Eurodollar
Deposit Rates, then rates quoted on said replacement page
shall be applied. If the Bank determines that London
Eurodollar Deposit Rates are no longer being quoted
(temporarily or permanently) on the Reuters Monitor Money
Rates Service or that such Service is no longer functioning
(temporarily or permanently) in substantially the same manner
as on the date hereof, then the Borrower and the Bank shall
negotiate in good faith towards the aim of agreeing upon a
substitute, publicly available reference for the determination
of LIBOR.
m. LIBOR-Based Rate shall have the meaning assigned thereto in
Paragraph 2 (b).
n. Loan shall mean "Loan #2" as defined in the Loan Agreement.
o. Loan Agreement shall mean the Loan Agreement, dated as of June
30, 1994, between the Borrower and the Bank, as amended and in
force from time to time.
p. London Interbank Market shall mean the London interbank market
for United States Dollars and/or United States Dollar interest
rates.
q. Person shall mean "Person" as defined in the Loan Agreement.
r. Prime-Based Rate shall mean the Bank's New York Branches'
stated prime rate as reflected from time to time in its books
and records. The Prime-Based Rate shall change automatically
when and as the Prime Rate shall change. The Bank may make
loans to others at rates above or below its Prime Rate.
s. Reinvestment Costs shall have the meaning assigned thereto in
Paragraph 7.
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t. Taxes shall have the meaning assigned thereto in Paragraph 6.
u. Transfer shall mean any negotiation, assignment, granting of a
security interest in, delegation or other transfer of, a
complete or partial interest or obligation; such term shall
also mean to make a Transfer.
v. Treasury Obligation shall mean a note, bill or bond issued by
the United States Treasury Department as a full faith and
credit general obligation of the United States.
10. Waiver:
Notice, presentment, protest, notice of dishonor and demand for
payment are hereby waived as to all of the Liabilities.
11. Costs and Expenses:
The Borrower shall pay all costs and expenses of every kind incurred
by the Bank in connection with any proceedings to collect any
Liabilities, including reasonable attorneys fees, as provided in the
Loan Agreement.
12. Maturity on Business Day:
If any payment of principal of or interest on this Note or any other
amount under this Note falls due on a day which is not a Business Day,
it shall be payable on the next succeeding day on which the Office is
open (unless such day would be a day in the next calendar month, and
in such case payment shall be due on the immediately preceding
Business Day), and the resulting additional or decreased time (if any)
shall be included in or deducted from the computation of interest.
13. Parties; No Transfers by the Borrower:
c. Without the Bank's written consent, the Borrower shall have no
right to Transfer any of its obligations hereunder and any
such purported Transfer shall be void. Subject to the
foregoing, this Note is binding upon the Borrower and upon the
Borrower's successors and assigns.
d. If this Note is not a negotiable instrument, then the Borrower
hereby waives all defenses (except such defenses as may be
asserted against a holder in due course of a negotiable
instrument) which the Borrower may have or acquire against any
Transferee who takes
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<PAGE> 63
this Note, or any complete or partial interest in it, for
value, in good faith and without notice that it is overdue or
has been dishonored or of any defense against or claim to it
on the part of any Person.
14. Reference to Loan Agreement, Acceleration, Remedies:
This Note is Note #2 referred to in the Loan Agreement, and is
entitled to the security and benefits therein provided and is subject
to the terms and conditions thereof. This Note is subject to
mandatory prepayment in whole or in part as specified in Section 2.2
of the Loan Agreement and upon the occurrence of an Event of Default,
the principal of and accrued interest hereon may automatically become,
or may be declared to be, forthwith due and payable, as provided in
the Loan Agreement and the Bank shall be entitled to each and every
one of the remedies set forth therein.
15. No Oral Changes; No Waiver; Other Rights:
This Note may not be changed orally. Neither a waiver by the Bank of
any of its options, powers or rights in one or more instances, nor any
delay on the part of the Bank in exercising any of its options, powers
or rights, nor any partial or single exercise thereof, shall
constitute a waiver thereof in any other instance. The options,
powers and rights of the Bank specified herein are in addition to
those otherwise created in the Loan Agreement and other Loan
Documents.
16. Partial Unenforceability:
Any provision of this Note which is prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or
nonauthorization, without invalidating the remaining provisions of
this Note in that or any other jurisdiction and without affecting the
validity, enforceability or legality of such provision in any other
jurisdiction.
17. Governing Law, Jurisdiction, Litigation and Waiver of Jury
Trial:
This Note shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly within such State. Any
action or proceeding in connection with this Note may be brought in a
court of record of the State of New York, County of New York or any
federal court located therein, the parties hereby consenting to the
jurisdiction thereof, and service of process may be made upon any
party
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<PAGE> 64
by mailing a copy thereof to such party, by registered mail, at its
address to be used for the giving of notices under the Loan Agreement.
IN ANY ACTION OR ANY JUDICIAL PROCEEDING RELATING TO THIS NOTE THE
BORROWER AND BANK MUTUALLY WAIVE TRIAL BY JURY.
TRANS-RESOURCES, INC.
By:
---------------------------
Title:
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SCHEDULE A
OF LOANS AND PAYMENTS TO PROMISSORY NOTE
DATED JUNE 30, 1994
MADE BY TRANS-RESOURCES, INC.
<TABLE>
<CAPTION>
Unpaid Principal Balance of
Amount of Principal Note after Subtraction of all
Initial being deemed a Converted Term Loans to
Amount Converted Term Loan on and including Notations
Date of Loan Corresponding Date Corresponding Date made by
---- -------- ----------------------- ------------------------------- ----------
<S> <C> <C> <C> <C>
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</TABLE>
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SCHEDULE B
OF LOANS AND PAYMENTS TO PROMISSORY NOTE
DATED JUNE 30, 1994
MADE BY TRANS-RESOURCES, INC.
<TABLE>
<CAPTION>
Unpaid Principal Amount being deemed Aggregate Unpaid Principal Amount of All
converted on Corresponding Date to a Converted Term Loans to and including Notations made
Date Converted Term Loan Corresponding Date by
---- ------------------- ------------------ ---
<S> <C> <C> <C>
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</TABLE>
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