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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
{ X } ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
or
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-11634
TRANS-RESOURCES, INC.
(Exact name of registrant as specified in its charter)
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Delaware 36-2729497
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (212) 888-3044
____________________
Securities registered pursuant to Section 12 (b) of the Act: NONE
____________________
Securities registered pursuant to Section 12 (g) of the Act: NONE
____________________
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. {X}
State the aggregate market value of the voting stock held by
non-affiliates of registrant.
None held by non-affiliates
Indicate the number of shares outstanding of each of registrant's
classes of common stock, as of the latest practicable date.
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Class Outstanding at March 23, 1994
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Common Stock, par value $.01 per share 3,000 shares
(Owned by TPR Investment Associates, Inc.)
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Documents incorporated by reference.
None
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TABLE OF CONTENTS
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PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 13
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 15
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . 18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . 18
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . 19
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . 23
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . 23
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . 24
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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PART I
ITEM 1. Business
Trans-Resources, Inc., a privately owned Delaware corporation ("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 (collectively, referred to as
K-Power). 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. During 1993, specialty plant nutrients, organic chemicals,
industrial chemicals and potash contributed approximately 45%, 12%, 26% and
17%, respectively, of the Company's total revenues. The following table sets
forth the primary markets and applications for each of the Company's principal
products:
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Principal Products Primary Markets Applications
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SPECIALTY PLANT NUTRIENTS
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K-Power -- Fresh fruits and vegetables, -- Fertigation and foliar sprays
flowers, cotton and tobacco (fully soluble, readily absorbed,
Polyfeed Horticulture no harmful residues)
Multi-MAP Horticulture
Multi-MKP Horticulture
Magnisal Vegetables, citrus, tropical fruits
and flowers
Multicote -- Vegetables, turf, fruit trees and -- Time release of nutrients (to
potted plants optimize plant feeding and
minimize labor requirements)
ORGANIC CHEMICALS
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Propanil -- Rice -- Broad spectrum weed control
Dichloroaniline -- Organic chemical manufacturers -- Intermediate propanil product
Butoxone -- Peanuts -- Weed control
Custom Manufacturing -- Various industrial companies -- Various organic synthesis
INDUSTRIAL CHEMICALS
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Technical Grade Potassium -- Glass, ceramics, food, explosives, -- Oxidation and ion exchange
Nitrate metal, petrochemical and heat
treatment industries
Phosphoric Acid -- Industrial production, food and -- Metal treatment, industrial
fertilizer industries cleaning and fermentation
Sodium Tripolyphosphate -- Soaps and detergents -- Cleansing ingredient
Monoammonium Phosphate -- Chemical manufacturers -- Fire extinguishing powders
Diammonium Phosphate Chemical manufacturers and fire retardant formulations
Monopotassium Phosphate -- Food processing companies -- Fermentation process
Sodium Acid Pyrophosphate -- Food processing companies -- Baking powders and potato
processing
Chlorine -- Chemical companies -- Water purification, production of paper pulp
and PVC pipe
Nitrogen Tetroxide -- United States Government -- Aerospace fuel additive
POTASH
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Agricultural Grade -- Corn, wheat, rice, soybeans -- Fertilizer
Industrial Grade -- Various industrial companies -- Intermediate production of chemicals and lubricants
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Of the Company's total revenues for the year ended December 31, 1993,
approximately 37% and 36% were derived from sales in the United States and
Europe, respectively, with the remainder derived from sales in many other
countries.
On February 7, 1994, the smaller of the two potassium nitrate
production units of the Company's Israeli subsidiary, Haifa Chemicals Limited
("HCL"), was damaged by a fire, causing a temporary reduction of the Company's
potassium nitrate production capacity. The Company is currently reviewing
various alternatives concerning the most effective and timely replacement of
the damaged production unit and expects to replace the damaged unit within
approximately twelve months. 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 determined, the Company expects that the insurance
proceeds relating to the property damage will be for replacement value, which
substantially exceeds the recorded carrying value of the damaged assets.
Management is not aware of any independent, authoritative source of
information about sizes, growth rates or shares for the Company's markets. The
market size, market growth rate and market share estimates contained herein
have been developed by the Company from internal sources and reflect the
Company's current estimates. However, no assurance can be given regarding the
accuracy of such estimates.
The Company's operations are conducted through its direct and indirect
wholly-owned subsidiaries which include HCL, and HCL's wholly- owned
subsidiary, Haifa Chemicals South, Ltd., an Israeli corporation; Cedar Chemical
Corporation, a Delaware corporation ("Cedar"), and Cedar's wholly-owned
subsidiaries, Vicksburg Chemical Company, a Delaware corporation ("Vicksburg"),
and New Mexico Potash Corporation, a New Mexico corporation ("NMPC"); and Eddy
Potash, Inc., a Delaware corporation ("Eddy"). The Company was incorporated in
Delaware in 1971 under the name Trans-Pacific Resources, Inc.
("Trans-Pacific").
SPECIALTY PLANT NUTRIENTS
The Company is a multinational manufacturer of a range of specialty
plant nutrients, which contributed approximately $146,000,000 to the Company's
revenues for the fiscal year ended December 31, 1993, of which K-Power
contributed a substantial portion.
Products and Markets. K-Power, Polyfeed (a fully soluble plant
nutrient containing nitrogen, phosphate and potassium), Magnisal (magnesium
nitrate), Multi-MAP (monoammonium phosphate) and Multi-MKP (monopotassium
phosphate) are suitable for intensive high value crops such as fresh fruit and
vegetables, flowers, cotton and tobacco, since they are fully soluble, easily
absorbed and leave no harmful residues such as chloride, sodium or sulfate.
Because of their solubility, these products can be used with modern drip
irrigation systems, which are increasingly being employed to conserve water.
The Company produces several grades of agricultural potassium nitrate,
including standard and prilled. The Company is the world's largest producer of
potassium nitrate.
Worldwide demand for potassium nitrate has been growing steadily since
potassium nitrate was introduced in the 1960s. The market for K-Power has
enjoyed steady volume growth because it increases plant yields, improves crop
quality and shortens growing cycles. As a result, potassium nitrate commands a
price premium over other potassic plant nutrients such as potassium sulfate and
sulfate of potash magnesia, used in combination with ammonium nitrate.
After a multi-year research and development effort, the Company
developed a technology for the coating of potassium nitrate and other specialty
plant nutrients which promotes the controlled release of
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nutrients over time. These products increase nutrient uptake by plants while
minimizing fertilizer runoff into the soil, thus satisfying growing
environmental concerns, and reducing labor requirements. The Company is
marketing these controlled release plant nutrients products under the Multicote
brand name.
Marketing and Sales. As part of the Company's market development and
sales efforts, resident agronomists are located in the United States, Italy,
France, the United Kingdom, Greece, Mexico, South Africa, Japan and the Benelux
countries. The steady growth in demand for the Company's specialty plant
nutrients has been supported by agronomic activities in many countries which
have demonstrated the benefits of using K-Power. Horticultural and
agricultural growers generally require substantial testing under their own
specific climatic, soil and growing conditions before they will adopt a new
plant nutrient. The Company has developed application expertise which has
produced a growing number of applications and users.
To market its specialty plant nutrients, the Company has established a
worldwide network of agents and distributors and uses storage facilities in
certain countries to provide prompt and responsive customer service. However,
depending on the conditions prevailing in the particular market, certain large
users are serviced directly and certain products are covered by product
managers who have worldwide responsibility for such products. In order to
further improve service to its customers in Western Europe, the Company has
established subsidiaries in the United Kingdom, Belgium, Spain and Italy. A
French subsidiary engaged in the fertilizer business and having its own sales
and distribution network also markets the Company's specialty plant nutrients.
For United States sales, the Company utilizes its own sales force and also
works in selected areas through brokers.
In general, in the United States, the Company sells K-Power to
blenders who produce mixed fertilizers containing potassium nitrate, which is
then sold to growers. Internationally, the Company's distributors usually sell
directly to growers.
Manufacturing. The Company believes it accounts for approximately 65%
of the world's production of potassium nitrate and its current annual potassium
nitrate production capacity is approximately 410,000 metric tons. This
capacity has been temporarily reduced by the February 1994 fire at HCL, but is
scheduled to be restored within approximately twelve months. To meet the
anticipated continued growing demand of the market, the Company is expanding
its production capacity by constructing a new facility (the "K3 Plant") in
Israel, with capacity to produce by 1995 approximately 100,000 metric tons of
potassium nitrate annually. Capacity of the K3 Plant may be expanded in
subsequent years. See "Facilities and Suppliers" below.
Competition. The Company's only significant competitor in the
production and sale of potassium nitrate is Sociedad Quimica Y Minera De Chile,
S.A., a Chilean company. The principal methods of competition are product
quality, customer service, agronomic expertise and price.
ORGANIC CHEMICALS
The Company's organic chemicals business has grown by building upon
its capabilities in specialized areas of complex organic synthesis. Its sales
have grown from approximately $20,000,000 in 1989 to approximately $38,000,000
in 1993, with sales of propanil representing approximately 70% of 1993 sales.
Products and Markets. The Company's organic chemicals products
include propanil (the leading rice herbicide, which Cedar markets principally
under the Cedar label and the brand name "Wham! EZ"), dichloroanaline ("DCA,"
the principal raw material for the production of propanil), Butoxone (a peanut
herbicide) and Diuron (a broad use herbicide used on food crops, alfalfa and
cotton). The Company is also the exclusive United States distributor for Tough
(a corn and peanut herbicide). The Company estimates that it currently
produces approximately 95% of the propanil sold in the United States. The
Company has also
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developed several new propanil formulations which offer various advantages in
terms of ease of application and improved environmental impact in an effort to
expand the propanil market.
Although the United States is currently the largest propanil market,
representing approximately 35% of the world market, the United States contains
only a small proportion of the world's rice acreage. Accordingly, the Company
believes there is significant potential for propanil growth internationally.
The Company has established an international market development program to
introduce propanil to additional markets around the world. As the largest
propanil producer in the world and a low cost producer, the Company believes it
is positioned to benefit from growth in the international propanil market.
The Company also produces other organic chemicals as a contract
manufacturer for various chemical companies. Through this contract
manufacturing, the Company has developed certain techniques for the synthesis
of complex organic chemicals which has been beneficial to it in both its
contract manufacturing activities as well as its own developmental efforts for
proprietary products.
Marketing and Sales. The Company produces and sells propanil under its
own brand name and supplies propanil to other agrichemical companies under
long-term supply contracts. Sales by the Company of propanil and DCA under a
long-term supply contract with the company that, prior to 1992, was the world's
largest producer of propanil, represented approximately 17% of the Company's
sales of organic chemicals in 1993.
The Company sells propanil and its other organic chemical products
through its own sales force and a network of distributors, regional dealers,
cooperatives and international brokers.
Manufacturing. The Company is a low cost producer of propanil as a
result of its 1991 acquisition, relocation and upgrading of a DCA manufacturing
plant.
The Company intends to continue to expand its organic chemicals
business by developing and/or distributing new products that draw upon its
skills in organic chemical synthesis and/or its sales organization. In
particular, the Company is pursuing new manufacturing opportunities which
capitalize on its capabilities in chloronitrobenzene technology.
Competition. In the United States market, the Company primarily
competes with one other propanil supplier while in international markets the
Company competes with several producers. Propanil competes with several other
rice herbicides, but is currently the most commonly used rice herbicide.
Diuron and Tough compete with other products supplied by several multi-national
companies. In contract manufacturing, the Company competes with various other
producers and the basis of competition is generally the quality and range of
production capabilities, service and price.
INDUSTRIAL CHEMICALS
The Company's industrial chemical products include technical grade
potassium nitrate, technical and food grade sodium tripolyphosphate ("STPP"),
technical and food grade phosphoric acid, technical grade monoammonium
phosphate and diammonium phosphate ("MAP" and "DAP"), technical and food grade
monopotassium phosphate ("MKP"), food grade sodium acid pyrophosphate ("SAPP"),
chlorine, nitrogen tetroxide and food grade salts. Industrial chemicals
contributed approximately $84,000,000 to the Company's revenues for the fiscal
year ended December 31, 1993. The Company intends to begin production of
potassium carbonate by the end of 1994 at a new plant being constructed for
this purpose by Vicksburg.
Products and Markets. Technical grade potassium nitrate is used in
the glass industry for making fine tableware glass, TV tubes and crystal glass;
in the metal industry for heat treatment; in the ceramics industry
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for the glazing process; for making explosives and for the production of heat
transfer salts in the petrochemical industry; and for solar energy systems.
Phosphoric acid is used in metal treatment, industrial cleaning
solutions, fermentation processes and for carbonated drinks in the food
industry. STPP is used primarily in the manufacturing of detergents and
specialty cleaning compounds and in the textile and ceramic clay industry; MAP
and DAP are used for fire extinguishing powders and fire retardant functions;
MKP is used for the fermentation process; and SAPP is an ingredient in baking
powders and is used for potato processing. Chlorine is used in the pulp and
paper industry and as a swimming pool disinfectant. Nitrogen tetroxide is an
aerospace fuel additive. Food grade salts are used in food processing.
Potassium carbonate produced at Vicksburg's new plant will be used primarily in
the glass industry.
Marketing and Sales. The Company sells its industrial chemicals
through its own sales force and brokers in the United States and
internationally through a worldwide network of agents and distributors.
Nitrogen tetroxide is primarily sold under a long-term contract to the United
States Government. The Company utilizes storage facilities in certain
countries.
Production. Many of these industrial products are co-products of the
Company's potassium nitrate manufacturing process. Given its production
flexibility, the Company can vary the relative proportion of the various
phosphate chemicals (STPP, MAP, MKP, DAP and SAPP) to optimize its product mix
in light of then prevailing market conditions.
Competition. Certain of the Company's industrial chemicals products,
such as STPP and phosphoric acid, compete in large industrial chemical markets
in which the Company has a small position. Others, such as technical grade
potassium nitrate, MAP, MKP and nitrogen tetroxide have relatively significant
competitive positions in their respective niche markets. The nature of
competition for the various industrial chemicals sold by the Company varies by
product. However, in general, the principal methods of competition are product
quality, customer service and price.
POTASH
The Company is the largest United States producer of potash, producing
approximately 900,000 short tons in 1993, primarily for agricultural use as
fertilizer. During 1993, the Company's share of total potash production in the
United States was approximately 47% and its share of total North American
potash production was approximately 6%. Potash provides potassium, an
essential nutrient for a wide range of crops, including wheat, soybeans and
corn. The Company, through Eddy and NMPC, mines, refines and distributes
potash from two mines and related refineries located in New Mexico. Potash
sales in 1993, excluding intercompany sales to Vicksburg, amounted to
approximately $57,000,000.
Products and Markets. During 1993, approximately 78% of the Company's
potash production was sold as fertilizer and the balance was sold for
industrial uses or used by Vicksburg as a raw material in the production of
potassium nitrate. The Company does not view these operations as a source of
growth.
Marketing and Sales. In the United States, the Company's sales force
sells potash to blenders for fertilizer material and to industrial customers.
Export sales are handled by a sales subsidiary of Potash Corporation of
Saskatchewan. During 1993, the Company sold approximately 77% of its potash
production domestically and 23% internationally.
Although average selling prices for potash in the United States have
declined over the last year, they continue to be above the 1987 price levels,
at least in part as a result of the United States Government's preliminary
findings in a Canadian potash antidumping investigation and the subsequent
Canadian potash
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antidumping agreement. If such agreement is terminated or violated by the
Canadian producers, then depending on the actions taken by the United States
Government, the production and pricing decisions of Canadian producers, and
other market factors, it is possible that the current price levels for potash
could decline substantially, which would adversely affect the Company's results
of operations. See Item 3 - "Legal Proceedings" below.
Production. The Company's potash is mined from approximately 89,000
acres which are under long-term lease, principally from the United States
Government and the State of New Mexico. Such leases cover estimated ore
reserves, as of December 31 1993, of approximately 70,000,000 short tons of
recoverable ore, at thicknesses ranging from four to eight feet. At average
recovery rates these ore reserves are estimated to be sufficient to yield
approximately 15,000,000 short tons of potash concentrate with an average grade
of 60% to 62% "K2O" (a common standard of measurement established by the
industry by defining a product's potassium content in terms of equivalent
percentages of potassium oxide). As of December 31, 1993 and based on current
rates of production (aggregating approximately 940,000 short tons annually),
these ore reserves are estimated to be sufficient to support the mining
operations of NMPC for approximately 31 years and of Eddy, depending on market
conditions, for approximately two to three years. By the time Eddy suspends
operations, which the Company currently expects will be during 1996, depending
on market conditions, the Company may expand production at NMPC from its
present level of approximately 420,000 short tons per year.
Competition. Potash is available from several sources, both domestic
and foreign, including very large Canadian sources of supply. As a result, the
market is highly competitive. Since potash is a commodity product, the most
significant competitive factor affecting sales is price.
FACILITIES AND SUPPLIERS
Vicksburg owns the property, plant and equipment located at its
Vicksburg, Mississippi site and Cedar owns the property, plant and equipment
located at its West Helena, Arkansas site. The Vicksburg plant consists of two
adjacent manufacturing plants situated on 600 contiguous acres. Vicksburg is
constructing a third manufacturing plant on its property, to be completed
during 1994, which will be used for the production of potassium carbonate. The
West Helena plant is located on a 60 acre site. The plants are encumbered by
first mortgages and security interests securing long-term indebtedness.
Cedar's corporate offices are located in leased premises in Memphis, Tennessee.
The major raw materials required by Vicksburg for production of
potassium nitrate are potash supplied by NMPC and nitric acid which is produced
at the Vicksburg plant. Ammonia, the principal raw material required for
production of nitric acid, is supplied from two plants owned by a third party
in close proximity to the Vicksburg facility. The major raw material for the
production of propanil is DCA. The principal raw material for the production
of DCA is provided to the Company under a supply contract. Such raw material
is available from multiple sources.
NMPC owns the property, plant and equipment located at its 320 acre
site near Hobbs, New Mexico. The property, plant and equipment is encumbered
by a first mortgage and security interest securing long-term bank indebtedness.
Eddy owns the property, plant and equipment located at its 680 acre
site in Eddy County, New Mexico.
HCL owns its machinery and equipment and leases its land and buildings
from Oil Refineries Ltd. ("ORL"), a corporation which is majority-owned by the
Israeli Government. The leases expire at various dates, principally in 22
years. Substantially all of the assets of HCL are subject to security
interests in favor
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of the State of Israel or banks. HCL also has a contract with ORL for steam
and processed water which expires on December 31, 1996 and a lease from ORL of
a pipeline which transports ammonia from the port in Haifa to HCL's plant.
HCL is expanding its production capacity by constructing the K3 Plant,
with the capacity to produce annually approximately 100,000 metric tons of
potassium nitrate and 15,000 metric tons of phosphoric acid. The K3 Plant is
being built in the southern part of Israel, on land leased on a long-term basis
from the Government of Israel, and is anticipated to cost approximately
$88,000,000. HCL expects to receive from the Government of Israel an
investment grant of approximately $32,000,000 (which is non-refundable unless
the Company does not comply with the terms of the certificate of approval). In
addition, it is expected that the Government of Israel will contribute
approximately $5,000,000 for infrastructure, so that the net investment of HCL
in the K3 Plant is anticipated to be approximately $51,000,000. Construction
commenced in 1993 and production is planned to start in late 1994. Capacity of
the K3 Plant may be expanded in subsequent years. Provided it completes the K3
Plant and complies with the conditions specified in the applicable certificate
of approval, HCL will receive, with respect to taxable income derived from the
K3 Plant, certain benefits accorded under Israel's Investments Law.
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 is currently
reviewing various alternatives concerning the most effective and timely
replacement of the damaged production unit and expects to replace the damaged
unit within approximately twelve months. 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 determined, the Company expects that the
insurance proceeds relating to the property damage will be for replacement
value, which substantially exceeds the recorded carrying value of the damaged
assets.
HCL obtains its major raw materials, potash and phosphate rock, in
Israel. HCL purchases potash solely from Dead Sea Works, Ltd. ("DSW") in
accordance with a supply contract expiring December 31, 1999. The contract
provides for prices to be established quarterly, based on the weighted average
of the FOB Israeli port prices paid to DSW by its overseas customers during the
preceding quarter plus certain adjustments thereto. HCL purchases phosphate
rock solely from Negev Phosphates, Ltd. ("Negev Phosphates") pursuant to a
supply agreement expiring on June 30, 1994. Based on a letter of intent
between Negev Phosphates and HCL, a long-term contract is currently being
negotiated. DSW and Negev Phosphates are companies that are majority-owned by
the Israeli Government and the sole suppliers in Israel of potash and phosphate
rock, respectively. While HCL views its current relationships with both of its
principal suppliers to be good, the loss of supply from either of these sources
would have an adverse effect on the Company.
Ammonia, which is used to produce nitric acid (which in turn is used
to produce potassium nitrate), is manufactured in Israel as well as imported.
The ammonia used by HCL is currently imported from a producer under supply
agreements expiring on December 31, 1994. HCL owns ammonia terminal facilities
located on leased property in the port of Haifa which have the capacity to
store an amount of ammonia sufficient to meet HCL's requirements.
Management believes that, except for the HCL unit damaged by the fire
in February, 1994, its facilities are in good operating condition and adequate
for its current needs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Capital Expenditures" and Note P of Notes
to Consolidated Financial Statements.
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RESEARCH AND DEVELOPMENT
The Company has developed and patented certain manufacturing processes
and has submitted other applications for patents for additional processes. As
of December 31, 1993, the Company employed 81 research and development
scientists, engineers and technicians, who are involved in the development and
evaluation of process technologies, efficiencies and quality control. For the
years ended December 31, 1991, 1992, and 1993, the Company spent approximately
$2,860,000, $2,945,000 and $3,206,000, respectively, on these efforts, which
have been charged to current operations.
PERSONNEL AND LABOR RELATIONS
As of December 31, 1993 the Company employed approximately 1,500
people. Approximately 260 employees have advanced technical and academic
qualifications.
None of Cedar's, Vicksburg's or NMPC's employees are represented by
any collective bargaining unit. Eddy's hourly work force is represented by
three labor unions. Eddy's collective bargaining agreements covering the
hourly work force expire in July 1995. Eddy has enjoyed good relations with
its labor unions and has not had a significant work stoppage for many years.
Technicians and engineers of HCL are members of the Union of
Technicians and Engineers, which operates throughout Israel, and substantial
terms of their employment (e.g. salaries and promotions) are governed by a
general collective agreement which HCL does not negotiate directly with such
employees. The other employees of HCL are members of the "Histadrut", the
dominant labor union in Israel, and their terms of employment are governed by a
Specific Collective Agreement ("SCA") negotiated by HCL with the Histadrut and
the representatives of the employees. The contractual terms of the most recent
labor agreements with both employee groups expired on December 31, 1992, with
the result that they remain statutorily in effect until terminated by either
party thereto at any time upon two months prior written notice.
HCL is currently negotiating new labor agreements with the respective
employee groups with the objective being to arrive at agreements for the three
year period ending December 31, 1995. HCL's last major labor dispute took
place in July 1991 and related to negotiations of the SCA for 1990 and 1991.
As a result of this dispute, HCL's employees went on strike for approximately
four weeks during the third quarter of 1991. Prior to that, the last major
labor dispute took place in 1983, which resulted in a strike of approximately
two weeks.
ENVIRONMENTAL MATTERS
Cedar and Vicksburg
Vicksburg's plant located in Vicksburg, Mississippi and Cedar's West
Helena, Arkansas plant discharge process waste water and storm water pursuant
to permits issued in accordance with the Federal Clean Water Act and related
state statutes. Air emissions at each plant are regulated by permits issued
pursuant to the Federal Clean Air Act and related state statutes. While the
plants have generated solid waste regulated by the Federal Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984 ("RCRA") and related state statutes, the Company
believes that such waste is currently handled and disposed of in a manner which
does not require the Company to have permits under RCRA or any related state
statute.
The Environmental Protection Agency's (the "EPA") Regional Office in
Atlanta notified Cedar in 1989 that unspecified corrective action will be
required to protect against the release of contaminants allegedly present at
the Vicksburg plant as a result of previous pesticide manufacturing operations.
As a result of the notice, Cedar reached agreement with the EPA and the
Department of Justice on the terms of
8
<PAGE> 11
a Consent Decree which was filed in the United States District Court at
Jackson, Mississippi in January 1992. Pursuant to the Consent Decree, Cedar
submitted a report of current conditions. Upon agency approval of this report
and of the facility investigation work plan to be thereafter submitted for the
Vicksburg plant, Vicksburg will undertake a site investigation and corrective
measures study, followed by implementation of appropriate corrective action.
Compliance with the Consent Decree is expected to occur over a five to six year
period.
Cedar's West Helena plant utilizes a surface impoundment for
biological treatment of non-hazardous waste streams which was the subject of an
enforcement proceeding initiated by the Arkansas Department of Pollution
Control and Ecology (the "ADPCE") in 1986. The proceeding resulted in a
Consent Administrative Order which required Cedar to carry out various studies,
ultimately leading to the implementation of a groundwater monitoring system.
Based in part on the results of groundwater monitoring and in part on the
discovery of a drum burial area on the West Helena plant site, the ADPCE
requested Cedar to initiate an expanded plant-wide investigation pursuant to a
Consent Administrative Order. The Order was entered in the third quarter of
1991. Implementation is expected to occur over a five year period.
Cedar removed the buried drums from the West Helena site in accordance
with a work plan incorporated in the Consent Administrative Order and, shortly
thereafter, filed a suit against a former operator of the plant site for
contribution for the costs incurred. In July 1992, Cedar obtained partial
summary judgment in the suit against the former operator in an amount equal to
the cost Cedar incurred in removing the buried drums. The judgment, in the
amount of $1,725,000 plus interest, has been appealed by the former operator.
The Company believes that the future costs required to complete the
site investigation and corrective measures studies at Vicksburg and the
plant-wide investigation at West Helena will be between $500,000 and $1,000,000
and will be expended over two to three years. Until these investigations are
completed, it is not possible to definitively determine the costs for any
corrective actions which will be required. Any such corrective action costs
will be expended over a period of years. There can be no assurance that such
costs will not be material.
In November 1992, Cedar entered into an agreement with the ADPCE to
resolve alleged violations of Cedar's National Pollutant Discharge Elimination
System permit (issued to its West Helena Plant in accordance with the Federal
Clean Water Act and related state statutes) by agreeing to enter into an
additional Consent Administrative Order which will require implementation of
additional corrective measures (which could cost up to $500,000 over a period
of two to three years) intended to assure future compliance with the
requirements of the permit and which required the payment of a penalty of
$80,000.
In 1987, Cedar entered into a cost sharing agreement with 55 other
companies to fund costs associated with the clean-up of an abandoned waste
disposal site located near Bayou Sorrel, Louisiana. The sharing agreement was
the basis for a consent decree to which Cedar and the other companies are
parties, settling claims brought by the EPA pursuant to the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended. The
sharing agreement allocates approximately 4% of the clean-up costs to Cedar.
After credits and payments through December 31, 1993, Cedar's remaining share
is not expected to exceed an aggregate of $480,000 over approximately the next
25 years.
Appropriate provisions have been made in the consolidated financial
statements with respect to the above matters.
9
<PAGE> 12
Eddy and NMPC
The Company's potash operations are subject to various Federal, state
and local environmental laws. The Company does not believe significant
expenditures will be required for the potash operations in the near future or
that its ongoing environmental operating costs will be material.
HCL
As a result of the chemicals and processes used by HCL in the course
of production, nitrous oxide ("NOX") gases, potassium nitrate and STPP dusts
are emitted into the air. In 1986, the Israeli Ministry of Interior issued an
order (the "Order") under the Law for the Prevention of Hazards of 1961
directing HCL to avoid unreasonable air pollution and to take certain remedial
actions, including the installation of measuring devices. In response to the
Order, HCL installed analyzers for the continuous measuring of the NOX content
of the tail gases in its two nitric acid plants and opacity meters for the
measurement of dust content in the air emitted from potassium nitrate dryers.
An additional absorption tower for the recovery of NOX from the tail gases of
the larger nitric acid plant was installed in 1989 as well as two ventury
scrubber units for the reduction of the dust content in the air emitted from
the dryers of both potassium nitrate plants. As a result of these actions, HCL
complied with the Order. As part of a 1990 nitric acid capacity increase, an
NOX abatement unit was installed in the smaller nitric acid plant.
As a result of the production of phosphoric acid, HCL generates acid
sludge and liquid acid effluent. HCL had previously disposed of its acid sludge
in designated approved sites. In accordance with a permit issued by the
Israeli Agency for Environmental Preservation of the Ministry of Interior
pursuant to the Law for the Prevention of Sea Pollution (Disposing of Wastes)
of 1983 and 1984, HCL is now disposing of the acid sludge in a designated site
in the Mediterranean Sea, situated 20 nautical miles from the Israeli coast.
The permit allows for the disposal of a quantity which is sufficient to satisfy
HCL's needs. The permit is valid until December 31, 1994.
HCL currently disposes of its liquid acid effluents in a local river.
Local authorities have advised HCL that it must find an alternative site for
such disposal. The present solution proposed by HCL is to dispose of the
liquid acid waste four kilometers into Haifa Bay utilizing a marine pipeline.
This proposal, accepted in principle by both the local authorities for
environmental protection and the Haifa port authorities, was submitted for
approval to the Ministry of Environmental Protection in Jerusalem. The
Ministry gave HCL permission to proceed with the design of the marine pipeline,
subject to HCL fulfilling certain requirements. Studies of sea conditions in
the area for the proposed pipeline and of the effect of the acid waste on the
sea environment were performed by the Israel Oceanographic & Lakes Research
Institute. Based on these studies, an environmental impact statement of the
proposed system is currently being prepared. The Company estimates that HCL
will be required to invest approximately $8,000,000 over the next three years
if this proposed solution is adopted and annual operating costs, after
completion of the project, will be approximately $800,000.
ITEM 2. Properties.
Reference is made to "Facilities and Suppliers" in Item 1 above,
"Business," for information concerning the Company's properties. See also
Notes D and P of Notes to Consolidated Financial Statements for additional
information.
10
<PAGE> 13
ITEM 3. Legal Proceedings.
1. On or about December 20, 1991, Peter N. Zachary together with
fifteen other persons, claiming to be shareholders of Sylvan Learning Centers,
Inc., The Enstar Group, Inc. ("Enstar"), Kinder-Care, Inc. and Kinder-Care
Learning Centers, Inc., filed a complaint in the Circuit Court for Montgomery
County, Alabama against Richard J. Grassgreen ("Grassgreen") and Perry Mendel
("Mendel") (each a former indirect stockholder and director of the Company),
another former indirect stockholder and director of the Company, TPR Investment
Associates, Inc. ("Associates," which is a former parent corporation of the
Company), Trans-Pacific (the former name of the Company) and various other
named persons and entities and certain unnamed entities. The complaint alleges
that in January 1986, Grassgreen and Mendel became part owners of Associates
along with the other former indirect stockholder and director of the Company
and certain employees of Drexel Burnham Lambert Incorporated. The complaint
also alleges that in January 1986, Grassgreen caused Enstar, through its
subsidiary, Care Investors, Inc., to purchase a one-third interest in
Associates for $3,000,000 and to loan Associates $10,000,000 to permit it to
acquire Trans-Pacific, which would substantially increase the profits
Grassgreen and Mendel could make on their investments in Trans-Pacific. The
complaint does not explain how these allegations are actionable against
Associates or Trans-Pacific. The Company filed a motion to dismiss the
complaint. On or about May 27, 1993, the Court entered an order dismissing
substantially the entire complaint. Plaintiffs thereafter filed a second
amended complaint, against which the Company also filed a motion to dismiss.
On or about August 10, 1993 the Court entered an order dismissing four of the
five Counts of the amended complaint. The Company has interposed an answer to
the remaining Count in the complaint.
2. On or about December 3, 1993 an action was commenced in the
United States Bankruptcy Court, Middle District of Florida, Jacksonville
Division by Grassgreen (as debtor in his personal bankruptcy proceeding)
against the Company, its current parent corporation, TPR Investment Associates,
Inc. ("TPR"; which is a different corporation than Associates) and Arie Genger
(see Item 10 - "Directors and Executive Officers of the Registrant" and Item 12
- - "Security Ownership of Certain Beneficial Owners and Management"). The
complaint alleges that Grassgreen's November 1991 sale to TPR of his 250 shares
of TPR common stock (1,000 shares were then outstanding) in exchange for a non-
negotiable note constitutes a fraudulent conveyance voidable under state and
bankruptcy law, fraud, a breach by TPR of a 1988 Shareholder Agreement among
TPR and its then shareholders, and that TPR retains property owing to
Grassgreen's bankruptcy estate. The complaint seeks recision of the sale,
damages and costs, and that Mr. Genger be enjoined from issuing any new or
treasury stock of TPR or changing the ownership of TPR or the Company. On or
about February 14, 1994 the defendants filed an answer to the complaint,
denying all of the allegations of the complaint, interposing additional
defenses and asserting a counterclaim against Grassgreen pursuant to his
indemnification obligations under the agreement governing his November 1991
sale of his TPR shares. On or about December 30, 1993 Enstar moved to
intervene in the suit, contending that it, rather than Grassgreen, should
prosecute it. On or about February 16, 1994, in connection with the then
proposed settlement with Grassgreen, Enstar moved to continue indefinitely
(i.e., defer) its intervention motion until it or one of the other parties
requests otherwise.
During March 1994 the parties entered into an agreement (the
"Settlement"), which is subject to Bankruptcy Court approval and confirmation
of Mr. Grassgreen's plan of reorganization, providing for dismissal with
prejudice of the action and releases to the defendants. Pursuant to the
Settlement, TPR will make certain payments in exchange for surrender to TPR of
Grassgreen's non-negotiable note and the Company's outstanding $9,000,000, 9
1/2% junior subordinated debenture due 2005. In addition, the Settlement
provides for the release of the current holder's liability under a $4,000,000
note due 2005 payable to the Company and secured by the $9,000,000 debenture.
TPR will thereafter be the obligor on the $4,000,000 note.
11
<PAGE> 14
3. On or about April 1, 1993 an action was commenced in the
United State District Court for the District of Minnesota, Minneapolis
Division, by Blomkest Fertilizer, Inc., Meadowland Farmers Corp., and Cobden
Grain & Feed against the major Canadian and United States potash producers,
including Eddy and NMPC. The action is purportedly a class action on behalf of
all purchasers of potash from any of the defendants or their respective
affiliates, at any time during the period April 1987 to the present, and
alleges 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
member of the class in violation of the United States anti-trust laws. The
complaint seeks unspecified damages together with injunctive relief against the
defendants. A total of fourteen related actions (in ten of which Eddy and NMPC
were named defendants) were subsequently filed in the United State District
Courts for the District of Minnesota, the Northern District of Illinois and the
Western District of Virginia, all containing allegations similar to those made
by the plaintiffs in the Blomkest action. The actions pending in Federal court
in Minnesota were consolidated and an amended and consolidated complaint was
served; several of the plaintiffs named in the original complaints are no
longer parties to the amended and consolidated complaint. On or about May 27,
1993 a purported class action 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. The complaint in the Coleman
action alleges a price fixing conspiracy in the potash industry between April
1987 and the present in violation of specified California statutes. On July 6,
1993 the defendants removed the Coleman case 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 the pending Federal actions
have been consolidated for pretrial purposes in the United States District
Court for Minnesota.
The defendants filed a joint motion to disqualify plaintiffs' counsel
and dismiss their complaints ("Motion to Disqualify"). Additionally, certain
of the defendants, including Eddy and NMPC, filed a Joint Motion, pursuant to
stipulated Federal statutes, to dismiss ("Motion to Dismiss"). On December 8,
1993 the Court granted the Motion to Disqualify with respect to certain of the
plaintiffs' counsel, including all of the plaintiffs' lead counsel, and ordered
that the plaintiffs, using non-disqualified counsel who submit an affidavit
attesting to facts establishing that they should not be disqualified, could
file amended complaints within 30 days (subsequently extended to January 28,
1994), failing which the complaints would be dismissed without prejudice. The
Court denied the Motion to Dismiss as moot. The Court also ruled that the
Motion to Disqualify and the Motion to Dismiss and its rulings with respect
thereto did not apply to the case transferred from the California Court.
The plaintiffs filed a motion for reconsideration of the Court's
December 8, 1993 decision on the Motion to Disqualify or, in the alternative,
for certification ("Motion for Certification") allowing plaintiffs to appeal
the Court's interlocutory decision to the Eighth Circuit Court of Appeals. On
January 4, 1994 the Court ruled that two of the twelve disqualified law firms
should not have been disqualified and granted plaintiffs' Motion for
Certification. The Court also ruled that upon plaintiffs filing an application
for appeal, all proceedings would be stayed pending further order of the Court
or the Eighth Circuit. On February 4, 1994 the Eight Circuit Court of Appeals
denied the plaintiffs' petitions for permission to appeal the District Court's
interlocutory order. Accordingly, on February 14, 1994, the District Court
vacated the stay and ordered that plaintiffs (using non-disqualified counsel)
could file amended complaints on or before March 1, 1994. Certain of the
plaintiffs filed amended complaints on or about March 1, 1994 and other
plaintiffs obtained an extension from the District Court to file amended
complaints until April 21, 1994. On March 14, 1994, the Court scheduled the
trial to begin on or about January 1, 1996. On or about February 18, 1994
certain of the plaintiffs filed with the Eighth Circuit a petition for
rehearing and suggestion for rehearing en banc of the Eighth Circuit's denial
of plaintiffs' petition for permission to appeal the District Court's
interlocutory decision. This petition has not yet been decided.
Management has no knowledge of any conspiracy of the type alleged in
these complaints.
12
<PAGE> 15
There are several other legal proceedings pending against the Company
and certain of its subsidiaries arising in the ordinary course of its business
which management does not consider material.
Management of the Company believes, based upon its assessment of the
actions and claims outstanding against the Company and certain of its
subsidiaries, and after discussion with counsel, that the eventual disposition
of the matters described or referred to above should not have a material
adverse effect on the financial position or future operations of the Company.
On or about November 26, 1993 Eddy and NMPC (and other major United
States 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 describe above. Eddy and NMPC
are cooperating with DOJ in connection with providing documents sought by the
subpoena.
For information relating to certain environmental proceedings
affecting the Company, see "Environmental Matters" in Item 1 above, "Business."
ITEM 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1993.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
All of the Company's equity securities are owned by TPR. See Item 12
- - "Security Ownership of Certain Beneficial Owners and Management." In
addition, see Note H of Notes to Consolidated Financial Statements for
information regarding certain restrictions on the Company's payment of
dividends. During 1991, 1992 and 1993 the Company paid or declared dividends
on its Common Stock in the amounts of $2,850,000, $13,136,000 and $7,508,000,
respectively.
13
<PAGE> 16
ITEM 6. Selected Financial Data.
The following table presents selected consolidated financial data of
the Company for the five year period ended December 31, 1993. This data has
been derived from the consolidated financial statements of the Company and
should be read in conjunction with the notes thereto.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues . . . . . . . . . . . . . . . . . . $ 269,311 $ 292,235 $ 309,068 $ 345,356 $326,315
Operating costs and expenses:
Cost of goods sold . . . . . . . . . . . . 197,495 219,878 238,489 266,770 255,563
General and administrative . . . . . . . . 24,809 29,488 33,262 36,270 38,375
--------- --------- --------- --------- --------
Operating income . . . . . . . . . . . . . . 47,007 42,869 37,317 42,316 32,377
Interest expense . . . . . . . . . . . . . . (29,393) (32,153) (31,210) (27,542) (27,405)
Interest and other income
(expense) - net (1) . . . . . . . . . . . . 4,095 (4,647) 14,159 8,476 6,014
--------- --------- --------- --------- --------
Income before income taxes,
extraordinary item and change
in accounting principle . . . . . . . . . . 21,709 6,069 20,266 23,250 10,986
Income tax provision . . . . . . . . . . . . 12,283 11,037 2,582 11,231 7,920
--------- --------- --------- --------- --------
Income (loss) before extraordinary item
and change in accounting principle . . . . 9,426 (4,968) 17,684 12,019 3,066
Extraordinary item - net . . . . . . . . . . -- 263 1,186 -- (8,830)
Cumulative effect on prior years of
change in accounting for income taxes . . . -- -- -- 1,130 --
--------- --------- --------- --------- --------
Net income (loss) . . . . . . . . . . . . . . $ 9,426 $ (4,705) $ 18,870 $ 13,149 $ (5,764)
========= ========= ========= ========= ========
Dividends:
Preferred stock . . . . . . . . . . . . . . . $ 855 $ 855 $ 214 $ -- $ --
Common stock . . . . . . . . . . . . . . . . 2,000 2,175 2,850 13,136 7,508
</TABLE>
_______________________
(1) Includes (a) security losses of $6,381,000 and $15,490,000 (which
$15,490,000 relates principally to the Company's investment in Enstar)
in the years ended December 31, 1989 and 1990, respectively, (b) a
gain of $10,000,000 in the year ended December 31, 1991, representing
the excess of insurance proceeds over the carrying value of certain
HCL property destroyed in a fire, and (c) security gains of $2,865,000
and $2,261,000 in the years ended December 31, 1992 and 1993,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note L of Notes to
Consolidated Financial Statements.
14
<PAGE> 17
<TABLE>
<CAPTION>
December 31,
------------
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Financial Position:
Cash and cash equivalents . . . . . . . . . . $61,347 $ 54,999 $ 39,276 $ 54,745 $ 25,742
Working capital . . . . . . . . . . . . . . . 102,670 111,951 120,150 99,297 103,694
Total assets . . . . . . . . . . . . . . . . 318,343 373,083 381,841 341,055 365,865
Short-term debt, including current
maturities of long-term debt . . . . . . . 25,394 29,383 50,105 42,666 47,282
Long-term debt, excluding current
maturities and subordinated debt . . . . . 79,259 125,745 84,132 71,318 61,328
Senior subordinated debt - net . . . . . . . 120,747 120,309 110,716 103,689 140,133
Junior subordinated debt - net . . . . . . . 7,078 7,213 14,735 15,089 15,495
Redeemable preferred stock - net . . . . . . 7,078 7,213 -- -- --
Common stockholder's equity - net . . . . . . 23,236 15,824 28,772 28,882 15,794
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
The following table sets forth as a percentage of revenues and the
percentage change of those items as compared to the prior period, certain items
appearing in the Consolidated Financial Statements.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES YEAR-TO-YEAR CHANGES
---------------------- --------------------
YEAR ENDED DECEMBER 31, 1992 1993
----------------------- VS. VS.
1991 1992 1993 1991 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 11.7% (5.5)%
----- ----- -----
Cost and expenses:
Cost of goods sold . . . . . . . . . . . . . . . 77.2 77.2 78.3 11.9 (4.2)
General and administrative . . . . . . . . . . . 10.7 10.5 11.8 9.0 5.8
----- ----- -----
Operating income . . . . . . . . . . . . . . . . . 12.1 12.3 9.9 13.4 (23.5)
Interest expense . . . . . . . . . . . . . . . . (10.1) (8.0) (8.4) (11.8) (.5)
Interest and other income - net . . . . . . . . 4.6 2.4 1.9 (40.1) (29.1)
----- ----- -----
Income before income taxes, extraordinary
item and change in accounting principle . . . . 6.6 6.7 3.4 14.7 (52.8)
Income tax provision . . . . . . . . . . . . . . . .9 3.2 2.5 335.0 (29.4)
----- ----- -----
Income before extraordinary item and
change in accounting principle . . . . . . . . . 5.7 3.5 .9 (32.0) (74.5)
Extraordinary item - net . . . . . . . . . . . . . .4 -- (2.7) (100.0) (100.0)
Cumulative effect on prior years of
change in accounting for income taxes . . . . . -- .3 -- 100.0 (100.0)
----- ----- -----
Net income (loss) . . . . . . . . . . . . . . . . . 6.1% 3.8% (1.8)% (30.3)% (143.8)%
===== ===== =====
</TABLE>
1993 Compared with 1992
Revenues decreased by 5.5% to $326,315,000 in 1993 from $345,356,000
in 1992, a decrease of $19,041,000, resulting from decreased sales of potash
and chlorine ($9,600,000), specialty plant nutrients and industrial chemicals
($2,600,000) and organic chemicals (primarily contract manufacturing
activities) ($6,800,000).
15
<PAGE> 18
Cost of goods sold as a percentage of revenues increased to 78.3% in
1993 compared with 77.2% in 1992 primarily due to higher costs associated with
contract manufacturing activities in the Company's organic chemicals business
and lower potash prices. During the 1993 period margins on specialty plant
nutrients, industrial chemicals and the organic chemicals' pesticide business
increased, but were offset by reduced margins in contract manufacturing
activities and in the potash business. Gross profit was $70,752,000 in 1993
compared with $78,586,000 in 1992, a decrease of $7,834,000, principally the
result of a decrease in potash gross profit. General and administrative
expense increased to $38,375,000 in 1993 from $36,270,000 in 1992 (11.8% of
revenues in 1993 compared with 10.5% in 1992), with the increase of $2,105,000
principally due to increased selling and marketing expenses for specialty plant
nutrients and organic chemicals.
As a result of the matters described above, the Company's operating
income decreased by $9,939,000 to $32,377,000 in 1993 as compared with
$42,316,000 in 1992.
Interest expense decreased by $137,000 ($27,405,000 in 1993 compared
with $27,542,000 in 1992). While the Company's outstanding debt at December
31, 1993 exceeded the outstanding debt at December 31, 1992 primarily as a
result of the Company's issuance of its 11 7/8% Senior Subordinated Notes due
2002 (see Note H of Notes to Consolidated Financial Statements), interest
expense declined as a result of scheduled debt repayments and lower interest
rates in the 1993 period. Interest and other income - net decreased in 1993 by
$2,462,000, principally as the result of reduced interest and dividend income
and security gains in 1993 and other non-recurring income earned in 1992.
As a result of the above factors, income before income taxes,
extraordinary item and change in accounting principle decreased by $12,264,000
in 1993. The provision for income taxes increased to 72.1% of pre-tax income
in 1993 from 48.3% of pre-tax income in 1992. 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. See Note K of Notes to Consolidated Financial Statements for
information regarding effective tax rates.
In the 1993 period the Company acquired $65,497,000 principal amount
of its 13 1/2% Senior Subordinated Debentures due 1997 (the "13 1/2%
Debentures") and $21,500,000 principal amount of its Senior Subordinated Reset
Notes due 1996 (the "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 Statement of Operations. No debt was
acquired in the 1992 period. See the Note H of Notes to Consolidated Financial
Statements.
1992 Compared with 1991
Revenues increased by 11.7% to $345,356,000 in 1992 from $309,068,000
in 1991, an increase of $36,288,000, mainly the result of increased sales of
specialty plant nutrients, organic chemicals and potash.
Cost of goods sold as a percentage of revenues was 77.2% in both 1991
and 1992. During 1992 margins on specialty plant nutrients and industrial
chemicals improved slightly, partially offset by higher volumes of propanil
sold at lower margins pursuant to a supply agreement commencing in 1992. See
"Business - Organic Chemicals - Marketing and Sales." Gross profit was
$78,586,000 in 1992 compared with $70,579,000 in 1991, an increase of
$8,007,000, with increases occurring in each of the Company's product lines.
General and administrative expense increased to $36,270,000 in 1992 from
$33,262,000 in 1991 (10.5% of revenues in 1992 compared with 10.7% in 1991)
principally due to increased labor costs, selling and marketing expenses.
As a result of the matters described above, the Company's operating
income increased by $4,999,000 to $42,316,000 in 1992 as compared with
$37,317,000 in 1991.
16
<PAGE> 19
Interest expense decreased from $31,210,000 in 1991 to $27,542,000 in
1992, mainly resulting from scheduled debt repayments, lower interest rates and
senior subordinated debt repurchased by the Company in 1991, partially offset
by exchange rate differences on certain HCL long-term loans denominated in
European currencies. Interest and other income - net decreased by $5,683,000
in 1992 principally as the result of the prior year including a gain of
$10,000,000 relating to the excess of insurance proceeds over the carrying
value of certain HCL property damaged in a fire, partially offset by increased
security gains in 1992 (see Notes D and L of Notes to Consolidated Financial
Statements).
As a result of the above factors, income before income taxes,
extraordinary item and change in accounting principle increased by $2,984,000
in 1992. The provision for income taxes increased to 48.3% of pre-tax income
in 1992 from 12.7% of pre-tax income in 1991 since during 1991 HCL received an
income tax refund relating to prior years of $7,100,000. These effective tax
rates 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. See
Note K of Notes to Consolidated Financial Statements for information regarding
effective tax rates.
In 1991 the Company repurchased $10,153,000 principal amount of 13
1/2% Debentures and Reset Notes. Such repurchases resulted in a gain to the
Company, net of income taxes, of $1,186,000, with this gain being classified as
an extraordinary item. There were no repurchases of public indebtedness in
1992. Effective January 1, 1992, the Company changed its method of accounting
for income taxes to conform with Statement of Financial Accounting Standards
No. 109 "Accounting For Income Taxes". In connection with such change in
accounting, net income in 1992 was impacted by a net charge of $1,170,000. See
Note A of Notes to Consolidated Financial Statements.
CAPITAL RESOURCES AND LIQUIDITY
The Company's consolidated working capital at December 31, 1993 and
1992 was $103,694,000 and $99,297,000, respectively. See "Other Matters" and
Notes H and P of Notes to Consolidated Financial Statements.
CAPITAL EXPENDITURES
During 1993 (excluding the K3 Plant) the Company invested
approximately $13,000,000 in capital expenditures. The Company currently
anticipates that capital expenditures for the year ending December 31, 1994
(excluding the K3 Plant and the reconstruction of the production unit damaged
by a fire in February 1994) will aggregate approximately $35,000,000, which
will be used for increasing production capacity and product diversification.
During 1993 the Company commenced construction of the K3 Plant, which is
estimated to cost approximately $88,000,000, with $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 anticipates
completing the construction of the K3 Plant in late 1994. See "Business -
Facilities and Suppliers" and Notes D and P of Notes to Consolidated Financial
Statements. 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.
EXCHANGE RATE INSURANCE
In 1981, HCL joined a program of exchange rate insurance of the
Israeli Government designed to protect participating Israeli exporters from
losses resulting from the widening of the gap between the inflation rate in
Israel and the rate of devaluation of the New Israeli Shekel ("NIS") against a
weighted basket of currencies of Israel's major trading partners. The net
benefits received by HCL for the years ended December 31, 1991, 1992 and 1993
were $4,599,000, $4,056,000 and $1,616,000, respectively, which benefits
17
<PAGE> 20
have been included in revenues. As part of various economic measures adopted
in Israel subsequent to December 31, 1988, the Israeli Government has gradually
reduced the insurance proceeds granted under its program of exchange rate
insurance, with the program having been fully eliminated on August 31, 1993.
See Note A of Notes to Consolidated Financial Statements.
INFLATION
Inasmuch as only approximately $36,000,000 of HCL's annual operating
costs are denominated in NIS, HCL is exposed to inflation in Israel to a
limited extent. The combination of price increases coupled with devaluation of
the NIS have in the past generally enabled HCL to avoid a material adverse
impact from inflation in Israel. However, HCL's earnings could increase or
decrease to the extent that the rate of future NIS devaluation differs from the
rate of Israeli inflation. In December 1991, the Central Bank of Israel
announced a program whereby the lag between the inflation rate in Israel and
devaluation of the NIS, compared to the weighted average exchange rate of a
"basket of currencies" (the currencies most commonly traded with Israel,
including the U.S. Dollar), will not exceed the average inflation rate (about 3
to 4%) of the countries represented in the "basket of currencies". For the
years ended December 31, 1992 and 1993, the devaluation rate of the NIS as
compared to the U.S. Dollar exceeded (or was less than) the inflation rate in
Israel by 11.7% and (3.2)%, respectively.
OTHER MATTERS
On January 27, 1994, HCL filed a registration statement with the
Israeli Securities Authority (the "ISA") pursuant to which HCL would publicly
offer in Israel, in an underwritten offering, units consisting of (i) shares of
HCL common stock (the "HCL Shares") and (ii) options exercisable for HCL
Shares. The terms of the proposed offering have not been finalized, and there
can be no assurance that the ISA will declare the offering effective or that
the offering will be consummated (considering, among other things, prevailing
stock market conditions in Israel). If the proposed offering is consummated,
the Company has determined that it would maintain beneficial ownership of not
less than 90% of the HCL Shares upon issuance of the units and not less than
80% on a fully diluted basis. The Company anticipates that the net proceeds to
be realized for the HCL Shares in the proposed offering, if consummated, would
be substantially in excess of the Company's corresponding carrying value for
the equity interest represented by such shares.
The net proceeds of the proposed offering may be used for any purpose
authorized by the Board of Directors of HCL, including, without limitation,
internal growth or the acquisition of new businesses. HCL does not currently
have any agreements, commitments or understandings for acquiring any particular
businesses and does not anticipate using any of the net proceeds to finance the
construction of the K3 Plant.
ITEM 8. Financial Statements and Supplementary Data.
See Index to Consolidated Financial Statements and Schedules on page
F-1.
ITEM 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
18
<PAGE> 21
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Arie Genger . . . . . . . . . 48 Chairman of the Board and Chief Executive Officer
Thomas G. Hardy . . . . . . . 48 President and Chief Operating Officer; Director
Martin A. Coleman . . . . . . 63 Director
Sash A. Spencer . . . . . . . 62 Director
Lester W. Youner . . . . . . 48 Vice President, Treasurer and Chief Financial Officer
Martin A. Eichen . . . . . . 49 Vice President
Bernard J. Blaney . . . . . . 69 Vice President
Kenneth H. Traub . . . . . . 32 Vice President
FINANCIAL ADVISORY COMMITTEE
- ----------------------------
Lawrence M. Small
Thomas G. Hardy
Sash A. Spencer
</TABLE>
The By-laws of the Company provide for at least one director.
Directors hold office until the next annual meeting of stockholders or until
their successors are elected and qualified. There are no arrangements or
understandings between any director or executive officer of the Company and any
other person pursuant to which such person was elected as a director or
executive officer. The executive officers serve at the discretion of the Board
of Directors.
There are no family relationships among any directors or executive
officers of the Company.
The following are descriptions of the directors and executive officers
of the Company and the members of the Financial Advisory Committee. The
Financial Advisory Committee advises the Board of Directors regarding financial
matters and, when the Committee deems appropriate, make recommendations to the
Board of Directors.
Arie Genger has been a director and Chairman of the Board of Directors
and Chief Executive Officer of the Company since 1986, the sole member of the
Executive Committee since June 1988, and was President of the Company from 1986
to December 1993.
Thomas G. Hardy has been President and Chief Operating Officer of the
Company since December 1993, was Executive Vice President of the Company from
June 1987 to December 1993 and has been a director and member of the Financial
Advisory Committee since October 1992. He has been a director of Laser
Industries Limited (a manufacturer and distributor of surgical lasers and other
medical technology in which the Company has an ownership interest) since
January 1990.
19
<PAGE> 22
Martin A. Coleman has been a director since March 1993. Since January
1991 he has been a private investor and of counsel to the law firm of Rubin
Baum Levin Constant & Friedman, general counsel to the Company. Prior to that,
he was a member of such law firm for more than five years.
Sash A. Spencer has been a director since October 1992 and a member of
the Financial Advisory Committee since March 1993. He has been a private
investor and Chairman of Holding Capital Management Corp., a private investment
firm, for more than five years. He has been a director of Empire Gas Corp., a
corporation engaged in the propane gas business, since 1983.
Lester W. Youner has been Vice President, Treasurer and Chief
Financial Officer of the Company since October 1987. From June 1979 until
October 1987 he was a Partner of Deloitte & Touche, a public accounting firm.
Martin A. Eichen has been a Vice President of the Company since June
1988. From June 1978 to June 1988 he was a Manager at Deloitte & Touche.
Bernard J. Blaney has been a Vice President of the Company since
January 1987.
Kenneth H. Traub has been a Vice President of the Company since
December 1993. Prior thereto, from July 1989, he was Assistant to the Chairman
of the Board of the Company.
Lawrence M. Small, 52, has been Chairman of the Financial Advisory
Committee of the Board of Directors since October 1992. Mr. Small is President
and Chief Operating Officer of Fannie Mae (Federal National Mortgage
Association) headquartered in Washington, DC, which he joined in September
1991. Prior to that, he was Vice Chairman and Chairman of the Executive
Committee of the Boards of Directors of Citicorp and Citibank, N.A., where he
was employed for 27 years. He serves as a director of Fannie Mae and of the
Chubb Corporation (an insurance company).
20
<PAGE> 23
ITEM 11. Executive Compensation
The following table sets forth the aggregate compensation paid or
accrued by the Company for the past three fiscal years to its Chief Executive
Officer and to other executive officers whose annual compensation exceeded
$100,000 for the fiscal year ended December 31, 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation (1) All Other
----------------------- Compen-
Name and Principal Position Year Salary (2) Bonus sation(2)(3)
- --------------------------- ---- ---------- ----- ------------
<S> <C> <C> <C> <C>
Arie Genger . . . . . . . . . . . . . . . . . . 1993 $750,000 $ 92,000 $519,000
Chairman of the Board 1992 750,000 143,000 437,000
and Chief Executive Officer 1991 759,000 -- 14,000
Thomas G. Hardy . . . . . . . . . . . . . . . . 1993 350,000 50,000 8,000
President and Chief Operating Officer 1992 350,000 100,000 11,000
and Director 1991 278,000 125,000 10,000
Lester W. Youner . . . . . . . . . . . . . . . 1993 226,000 70,000 8,000
Vice President, Treasurer and 1992 206,000 70,000 11,000
Chief Financial Officer 1991 199,000 60,000 10,000
Martin A. Eichen . . . . . . . . . . . . . . . 1993 149,000 15,000 7,000
Vice President 1992 149,000 15,000 9,000
1991 142,000 13,000 8,000
Kenneth H. Traub . . . . . . . . . . . . . . . 1993 105,000 25,000 4,000
Vice President 1992 95,000 30,000 6,000
1991 80,000 20,000 5,000
</TABLE>
____________________
(1) During the period covered by the table, the Company did not make any
restricted stock awards, did not have in effect any stock option or
stock appreciation rights plans, and did not make any payments under
any long-term incentive plan. See "Compensation Agreement" for Mr.
Hardy's bonus arrangement.
(2) Does not include in the case of Messrs. Genger, Hardy and Youner
$500,000, $275,000 and $20,000, respectively, of 1994 salary which was
prepaid in 1993.
(3) For 1993, consists of: (i) in the case of Mr. Genger, $250,000 for an
annual premium on ordinary life insurance, $258,000 for related income
tax gross-up, $6,000 for the Company's matching contribution to a
profit sharing thrift plan, and $5,000 for the premium on term life
insurance; (ii) in the case of Messrs. Hardy, Youner, Eichen and Traub
$6,000, $6,000, $5,000 and $4,000, respectively, for the Company's
matching contribution to a profit sharing thrift plan; and (iii)
$2,000 each for Messrs. Hardy, Youner and Eichen for the premium on
term life insurance.
For 1992, consists of: (i) in the case of Mr. Genger, $241,000 for an
annual premium on ordinary life insurance, $183,000 for related income
tax gross-up, $9,000 for the Company's matching contribution to a
profit sharing thrift plan, and $4,000 for the premium on term life
insurance; (ii) in the case of Messrs. Hardy, Youner, Eichen and Traub
$9,000, $9,000, $7,000 and $6,000, respectively, for the Company's
matching contribution to a profit sharing thrift plan; and (iii)
$2,000 each for Messrs. Hardy, Youner and Eichen for the premium on
term life insurance.
21
<PAGE> 24
COMPENSATION AGREEMENT
Pursuant to an Agreement entered into in March 1994 (the "New
Agreement"), the Company and Thomas G. Hardy modified and superseded a bonus
arrangement entered into on January 15, 1988, as amended (the "Old Agreement"),
under which no payments had been made. The Old Agreement provided for a
payment upon termination of Mr. Hardy's employment in an amount equal to 2% of
the Company's average annual after-tax consolidated net income (as defined)
available to the common stockholders for the three years ending on December
31st of the year immediately prior to the termination of Mr. Hardy's
employment, multiplied by either the multiple of the market price to such net
income of the Company's common stock if it is publicly traded or, if the
Company's common stock continues to be privately held at the time of such
termination, by a multiple of eleven. Pursuant to the New Agreement, the
Company is required to irrevocably deposit in trust for the benefit of Mr.
Hardy an aggregate of $2,800,000, of which $1,400,000 was deposited upon
execution of the New Agreement, with the remaining $1,400,000 to be deposited
in 1996 (or under certain circumstances, including a change in control of the
Company, earlier). The deposited funds are held by the trustees under a Trust
Agreement (the "Trust Agreement"), which provides that the assets held
thereunder are subject to the claims of the Company's general creditors in the
event of insolvency of the Company. The Trust Agreement provides that the
assets are payable in a lump sum to Mr. Hardy or his beneficiaries upon the
earlier of December 1, 2001 or the termination of his employment with Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors does not have a Compensation Committee.
Executive officer compensation matters were determined by the Board of
Directors, whose four members currently include Mr. Genger, Chairman of the
Board and Chief Executive Officer of the Company, and Mr. Hardy, President and
Chief Operating Officer of the Company.
COMPENSATION OF DIRECTORS
Officers of the Company who serve as directors do not receive any
compensation for serving as directors. Martin A. Coleman and Sash A. Spencer
each receive $15,000 annually for serving as directors.
22
<PAGE> 25
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth certain information as of March 23,
1994, as to the beneficial ownership of the Common Stock of the Company, which
is the only outstanding class of voting security of the Company:
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OWNED CLASS
---------------- ----- -----
<S> <C> <C>
Common Stock, $.01 par value (1):
TPR (2)
9 West 57th Street
New York, NY 10019 . . . . . . . . . . . . 3,000 100%
All executive officers and directors as a group
(eight persons)(2) . . . . . . . . . . . . 3,000 100%
</TABLE>
___________________
(1) All of the shares of the Common Stock of the Company are pledged to
secure an outstanding TPR note of $7,000,000 issued to a former
indirect stockholder and director of the Company.
(2) Mr. Genger and members of his family own all of the capital stock of
TPR.
ITEM 13. Certain Relationships and Related Transactions.
The Company is, for Federal income tax purposes, a member of a
consolidated tax group of which TPR is the common parent. The Company, TPR,
Eddy, Cedar and certain other subsidiaries are parties to a tax sharing
agreement, dated as of December 30, 1991, under which, among other things, the
Company and such other parties have each agreed to pay TPR amounts equal to the
amounts of Federal income taxes that each such party would be required to pay
if it filed a Federal income tax return on a separate return basis (or in the
case of Cedar, a consolidated Federal income tax return for itself and its
eligible subsidiaries), computed without regard to net operating loss
carrybacks and carryforwards. However, TPR may, at its discretion, allow tax
benefits for such losses. See Note A of Notes to Consolidated Financial
Statements.
See Item 3 - "Legal Proceedings" for a description of the proposed
settlement of an action brought by Grassgreen as debtor in his personal
bankruptcy proceeding, which will result in, among other things, TPR acquiring
the Company's outstanding $9,000,000, 9 1/2% junior subordinated debenture due
2005 and becoming the obligor on an outstanding 8 3/4%, $4,000,000 note due
2005 (which is secured by the $9,000,000 debenture) payable to the Company.
23
<PAGE> 26
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
(a) (1)-(2) See Index to Consolidated Financial Statements and
Schedules on Page F-1.
(3) See Index to Exhibits on Page E-1.
Management contracts or compensatory plans and
arrangements required to be filed as exhibits are as
follows:
(i) Agreement between the Company and Thomas G. Hardy,
dated March 22, 1994, concerning incentive bonus
compensation, including, as Exhibit A thereto, the
related Trust Agreement.
(ii) Split Dollar Insurance Agreement, entered into as
of August 26, 1988, between the Company and Arie
Genger.
(b) No reports on Form 8-K were filed during the last quarter of the
year ended December 31, 1993.
24
<PAGE> 27
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15 (D) 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)
By LESTER W. YOUNER
Lester W. Youner
Vice President, Treasurer
and Chief Financial Officer
Dated: March 23, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED:
PRINCIPAL EXECUTIVE OFFICER:
ARIE GENGER
Chairman of the Board and Chief Executive Officer
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
LESTER W. YOUNER
Vice President, Treasurer and Chief Financial Officer
By LESTER W. YOUNER
Lester W. Youner
For Himself and As Attorney-In-Fact
Directors:
Arie Genger
Thomas G. Hardy Dated: March 23, 1994
Martin A. Coleman
Sash A. Spencer
ORIGINAL POWERS OF ATTORNEY AUTHORIZING LESTER W. YOUNER TO SIGN THIS
REPORT AND ANY AMENDMENTS HERETO ON BEHALF OF THE PRINCIPAL EXECUTIVE OFFICER
AND THE DIRECTORS ARE BEING FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WITH THIS REPORT.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT:
No annual report or proxy materials have been sent to the Company's
security holders. This Annual Report on Form 10-K will be furnished to the
holders of the Company's 11 7/8% Notes and Reset Notes.
25
<PAGE> 28
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS Page
- -------------------- ----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . F-2
Report of Independent Accountants . . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets, December 31, 1992 and 1993 . . . . . . . F-4
Consolidated Statements of Operations,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . F-5
Consolidated Statements of Common Stockholder's Equity,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . F-6
Consolidated Statements of Cash Flows,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-8
SCHEDULES
- ---------
Schedule III - Condensed Financial Information of Registrant,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-1
Schedule V - Property, Plant and Equipment,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-4
Schedule VI - Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-5
Schedule X - Supplementary Income Statement Information,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-6
</TABLE>
Certain schedules, other than as listed above, are omitted because of the
absence of the conditions under which they are required or because the
information required therein is set forth in the financial statements or the
notes thereto.
F-1
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of Trans-Resources, Inc.
New York, New York
We have audited the accompanying consolidated financial statements and
financial statement schedules of Trans-Resources, Inc. (a wholly-owned
subsidiary of TPR Investment Associates, Inc.) and Subsidiaries listed in the
foregoing Index. These financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits. We did not audit the consolidated financial
statements of Cedar Chemical Corporation, a wholly-owned subsidiary, which
statements reflect total assets constituting 26 percent and 27 percent of
consolidated total assets as of December 31, 1993 and 1992, respectively, and
total revenues constituting 35 percent, 35 percent and 32 percent of
consolidated total revenues for the years ended December 31, 1993, 1992 and
1991, respectively. Such financial statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates
to the amounts included for Cedar Chemical Corporation, is based solely on the
report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Trans-Resources, Inc. and Subsidiaries as of December 31,
1993 and 1992, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles. Also, in our opinion, based on
our audits and the report of other auditors, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Note A to the Consolidated Financial Statements, the Company
changed its method of accounting for income taxes during the year ended
December 31, 1992.
Deloitte & Touche
New York, New York
March 16, 1994
F-2
<PAGE> 30
Report of Independent Accountants
To the Board of Directors and Shareholder
of Cedar Chemical Corporation:
In our opinion, the consolidated balance sheets and the related consolidated
statements of income and retained earnings and of cash flows (not presented
separately herein) present fairly, in all material respects, the financial
position of Cedar Chemical Corporation (a wholly-owned subsidiary of
Trans-Resources, Inc.) and its subsidiaries ("Cedar") at December 31, 1992 and
1993, and the results of their operations and their cash flows for the years
ended December 31, 1991, 1992 and 1993, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Cedar's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse
Memphis, Tennessee
February 11, 1994
F-3
<PAGE> 31
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1992 1993
---- ----
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,745 $ 25,742
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,373 55,681
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,057 60,929
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,061 56,090
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,298 17,485
---------- ----------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . 196,534 215,927
PROPERTY, PLANT AND EQUIPMENT - net . . . . . . . . . . . . . . . . . . . . . 121,754 131,001
INVESTMENTS IN SECURITIES - net . . . . . . . . . . . . . . . . . . . . . . . 10,827 2,356
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,940 16,581
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 341,055 $ 365,865
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . $ 29,911 $ 24,801
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,755 22,481
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,082 34,924
Accrued expenses and other current liabilities . . . . . . . . . . . . . . 29,489 30,027
---------- ----------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . 97,237 112,233
---------- ----------
LONG-TERM DEBT - net:
Senior indebtedness, notes payable and other obligations . . . . . . . . . 71,318 61,328
Senior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 103,689 140,133
Junior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 15,089 15,495
---------- ----------
Long-Term Debt - net . . . . . . . . . . . . . . . . . . . . . . . . 190,096 216,956
---------- ----------
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,840 20,882
---------- ----------
COMMON STOCKHOLDER'S EQUITY:
Common stock, $.01 par value, 3,000 shares authorized,
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 500 500
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,620 15,348
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . (238) (54)
---------- ----------
Total Common Stockholder's Equity . . . . . . . . . . . . . . . . . 28,882 15,794
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 341,055 $ 365,865
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 32
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1991, 1992 and 1993
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 309,068 $ 345,356 $ 326,315
OPERATING COSTS AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . 238,489 266,770 255,563
General and administrative . . . . . . . . . . . . . . . . . 33,262 36,270 38,375
--------- --------- ---------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . 37,317 42,316 32,377
Interest expense . . . . . . . . . . . . . . . . . . . . . . (31,210) (27,542) (27,405)
Interest and other income - net . . . . . . . . . . . . . . . 14,159 8,476 6,014
--------- --------- ---------
INCOME BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND CHANGE IN
ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . . . . . . . 20,266 23,250 10,986
INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . . . 2,582 11,231 7,920
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM
AND CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . 17,684 12,019 3,066
EXTRAORDINARY ITEM - Gain (loss) on repurchase
of debt, net of income tax of $296,000 in 1991 . . . . . . . . 1,186 -- (8,830)
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGE IN ACCOUNTING FOR INCOME TAXES . . . . . . . . . . . . -- 1,130 --
--------- --------- ---------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764)
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 33
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1991, 1992 and 1993
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
------ ---------- -------- ----------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1991 . . . . . . . . . . $ -- $ 500 $ 15,601 $ (277) $ 15,824
Net income . . . . . . . . . . . . . . . . 18,870 18,870
Payable to Parent under tax allocation
agreement . . . . . . . . . . . . . . . . (2,800) (2,800)
Dividends:
Preferred stock . . . . . . . . . . . . . (214) (214)
Common stock . . . . . . . . . . . . . . (2,850) (2,850)
Exchange rate changes during year . . . . . (58) (58)
-------- ------- -------- -------- ---------
BALANCE, DECEMBER 31, 1991 . . . . . . . . . -- 500 28,607 (335) 28,772
Net income . . . . . . . . . . . . . . . . 13,149 13,149
Dividends - common stock . . . . . . . . . (13,136) (13,136)
Exchange rate changes during year . . . . . 97 97
-------- ------- -------- -------- ---------
BALANCE, DECEMBER 31, 1992 . . . . . . . . . -- 500 28,620 (238) 28,882
Net loss . . . . . . . . . . . . . . . . . (5,764) (5,764)
Dividends - common stock . . . . . . . . . (7,508) (7,508)
Exchange rate changes during year . . . . . 184 184
-------- ------- -------- -------- ---------
BALANCE, DECEMBER 31, 1993 . . . . . . . . . $ -- $ 500 $ 15,348 $ (54) $ 15,794
======== ======= ======== ======== =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 34
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1991, 1992 and 1993
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764)
Items not requiring cash:
Depreciation and amortization . . . . . . . . . . . 19,757 20,979 24,490
Increase in other liabilities . . . . . . . . . . . 1,730 265 725
Deferred taxes and other - net . . . . . . . . . . . 7,906 (1,694) (2,494)
-------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . 48,263 32,699 16,957
Working capital management:
Accounts receivable and other current assets . . . . . (32,741) 45,416 (9,222)
Inventories . . . . . . . . . . . . . . . . . . . . . . (9,483) (3,538) (9,872)
Prepaid expenses . . . . . . . . . . . . . . . . . . . (2,012) 155 (2,187)
Accounts payable . . . . . . . . . . . . . . . . . . . 9,460 (14,175) 9,842
Accrued expenses and other current liabilities . . . . 4,532 (1,297) 1,323
-------- --------- ---------
Cash provided by operations and
working capital management . . . . . . . . . . . . . 18,019 59,260 6,841
-------- --------- ---------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment . . . . . . . . (18,821) (26,143) (29,056)
Sales of marketable securities and
short-term investments . . . . . . . . . . . . . . . . 2,622 15,391 15,825
Purchases of marketable securities and
short-term investments . . . . . . . . . . . . . . . . (2,108) (12,819) (34,118)
Other - net . . . . . . . . . . . . . . . . . . . . . . . (2,127) 2,405 (6,087)
-------- --------- ---------
Cash used in investment activities . . . . . . . . . . (20,434) (21,166) (53,436)
-------- --------- ---------
FINANCING ACTIVITIES:
Increase in long-term debt . . . . . . . . . . . . . . . . 9,188 10,850 124,660
Repurchases, payments and current maturities of
long-term debt . . . . . . . . . . . . . . . . . . . . (23,444) (18,314) (109,286)
Increase (decrease) in short-term debt . . . . . . . . . . 4,012 (2,025) 9,726
Dividends to stockholders . . . . . . . . . . . . . . . . (3,064) (13,136) (7,508)
-------- --------- ---------
Cash provided by (used in) financing activities . . . . (13,308) (22,625) 17,592
-------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . (15,723) 15,469 (29,003)
CASH AND CASH EQUIVALENTS:
Beginning of year . . . . . . . . . . . . . . . . . . . . 54,999 39,276 54,745
-------- --------- ---------
End of year . . . . . . . . . . . . . . . . . . . . . . . $ 39,276 $ 54,745 $ 25,742
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 35
TRANS-RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of Trans-Resources, Inc. ("TRI"
or the "Company"), include the Company and its 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 ("Vicksburg"); Eddy Potash, Inc. ("Eddy"); and Haifa Chemicals
Ltd. ("HCL") and HCL's wholly-owned subsidiary, Haifa Chemicals South, Ltd.
("HCSL"). The Company is a wholly-owned subsidiary of TPR Investment
Associates, Inc. ("TPR").
Substantially all of the companies' revenues, operating profits and
identifiable assets are related to the chemical industry. The Company is a
multinational manufacturer of specialty plant nutrients, organic chemicals,
industrial chemicals and potash and distributes its products internationally.
The Company is the world's largest producer of potassium nitrate, and the
world's largest producer of propanil, the leading rice herbicide, and is the
largest United States producer of potash.
Operating Data
The Company's revenues by region for the years ended December 31,
1991, 1992 and 1993 are set forth below:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Western Hemisphere:
United States . . . . . . . . . . . . . . . . . $ 114 $ 133 $ 121
Other . . . . . . . . . . . . . . . . . . . . . 31 30 30
Europe . . . . . . . . . . . . . . . . . . . . . . 112 124 119
Asia and Australia . . . . . . . . . . . . . . . . 25 29 30
Israel . . . . . . . . . . . . . . . . . . . . . . 16 18 17
Africa and other . . . . . . . . . . . . . . . . . 11 11 9
----- ------ -----
Total . . . . . . . . . . . . . . . . . . . . . $ 309 $ 345 $ 326
===== ====== =====
</TABLE>
As of December 31, 1992 and 1993, the Company's assets were located in
the United States (44% and 49%, respectively) and abroad (principally Israel)
(56% and 51%, respectively). The Company has no single customer accounting for
more than 10% of its revenues.
Contracts and Revenue Recognition
Under the terms of a long-term U.S. Government contract for the
manufacture of an industrial chemical, revenues are recognized ratably for the
duration of the contract and billings are rendered as product is shipped.
Current deferred revenue of $2,772,000 at December 31, 1992 and 1993 and
non-current deferred revenue of $5,416,000 and $2,645,000 at December 31, 1992
and 1993, respectively, represent billings in excess of revenues recognized
under the contract. Such current and non-current amounts are classified within
"accrued expenses and other current liabilities" and "other liabilities",
respectively, in the accompanying Consolidated Balance Sheets.
F-8
<PAGE> 36
Functional Currency and Transaction Gains and Losses
Approximately 90% of HCL's sales are made outside of Israel in various
currencies, of which approximately 35% are in U.S. dollars, with the remainder
principally in Western European currencies. The Company has a policy of
hedging contracted foreign sales denominated in Western European currencies
against fluctuations in the U.S. dollar rates of exchange. Accordingly, the
Company has entered into forward exchange contracts. At December 31, 1992 and
1993, there were outstanding contracts to purchase $166 million and $167
million, respectively, in various European currencies, principally Deutsche
Marks. In addition, at December 31, 1993 there were outstanding contracts to
sell $56 million in various Western European currencies, principally Deutsche
Marks. Unrealized gains and losses arising from forward exchange contracts
which qualify as hedges pursuant to Statement of Financial Accounting Standards
No. 52 have been deferred and are accounted for in the subsequent year as part
of sales. Gains of approximately $3,900,000 and $2,400,000 were deferred at
December 31, 1992 and 1993, respectively, for forward exchange contracts which
qualify as hedges.
During the years ended December 31, 1991, 1992 and 1993, the Company
recorded a gain of approximately $3,100,000, a loss of approximately $7,000,000
and a gain of approximately $6,100,000, respectively, relating to foreign
currency transactions.
Raw materials purchased in Israel are mainly quoted at prices linked
to the U.S. dollar. The U.S. dollar is the functional currency and accordingly
the financial statements of HCL are prepared, and the books and records of HCL
(except for a subsidiary described below) are maintained, in U.S. dollars.
The assets, liabilities and operations of one of HCL's foreign
subsidiaries are measured using the currency of the primary economic
environment in which the subsidiary operates. Assets and liabilities are
translated at the exchange rate as of the balance sheet date. Revenues,
expenses, gains and losses are translated at the weighted average exchange rate
for the period. Translation adjustments, resulting from the process of
translating such subsidiary's financial statements from its currency into U.S.
dollars, are recorded directly as a separate component of stockholder's equity.
Exchange Rate Insurance
In 1981, HCL joined a program of exchange rate insurance of the
Israeli Government designed to protect participating Israeli exporters from
losses resulting from the widening of the gap between the inflation rate in
Israel and the rate of devaluation of the New Israeli Shekel against a weighted
basket of currencies of Israel's major trading partners. The net benefits
received by HCL for the years ended December 31, 1991, 1992 and 1993 were
$4,599,000, $4,056,000 and $1,616,000, respectively, which benefits have been
included in revenues. As part of various economic measures adopted in Israel
subsequent to December 31, 1988, the Israeli Government has gradually reduced
the insurance proceeds granted under its program of exchange rate insurance,
with the program having been fully eliminated on August 31, 1993.
Inventories
Inventories are carried at the lower of cost or market. Cost is
determined on the first-in, first-out method.
F-9
<PAGE> 37
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Depreciation is
recorded under the straight-line method at generally the following annual
rates:
<TABLE>
<S> <C>
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-8 %
Machinery, plant and equipment . . . . . . . . . . . . . . . . 10-25 %
Office furniture and equipment . . . . . . . . . . . . . . . . 6-20 %
</TABLE>
Expenditures for maintenance and repairs are charged to expense as
incurred. Investment grants from the Israeli Government are initially recorded
as a reduction of the capitalized asset and are recognized in income over the
estimated useful life of the respective asset. HCL recorded investment grants
for the years ended December 31, 1991, 1992 and 1993 amounting to $4,029,000,
$846,000 and $10,952,000, respectively.
Effective January 1, 1992 and 1993, Eddy revised the estimate of
depreciable lives of its property, plant and equipment to more closely
approximate the economic lives of those assets. The effect of these changes in
estimate was to decrease depreciation expense in 1992 and 1993 by approximately
$960,000 and $630,000, respectively.
Non-Current Investments In Marketable Securities
The Company carries its investments in marketable equity securities at
the lower of cost or market. To the extent that the quoted market value is
less than cost, an unrealized loss on marketable equity securities would be
recorded and classified as a reduction of common stockholder's equity. At
December 31, 1992 and 1993 the aggregate quoted market value of the marketable
equity securities owned by the Company exceeded the aggregate cost.
The Company's other investments (principally short-term investments)
are carried at cost. Should declines in the carrying value of any of these
securities (as well as the marketable equity securities described above) be
considered to be other than temporary, such declines are recognized by an
appropriate charge in the Consolidated Statements of Operations.
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" ("SFAS 115"). The adoption of this Statement,
which is not required until 1994, will require 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 No. 115 is not expected to have a
material effect on the Company's consolidated financial position or results of
operations.
Income Taxes
The Company is included in the consolidated Federal income tax return
of TPR. Under the tax allocation agreement entered into with TPR in 1991, the
annual current Federal income tax liability for the Company and each of its
domestic subsidiaries reporting profits is determined as if such entity had
filed a separate Federal income tax return; no tax benefits are given for
companies reporting losses. However, TPR may, at its discretion, allow tax
benefits for such losses.
For purposes of the consolidated financial statements, taxes on income
have been computed as if the Company and its domestic subsidiaries filed its
own consolidated Federal income tax return without regard to the tax allocation
agreement. Payments to TPR, if any, representing the excess of amounts
determined under the tax allocation agreement over amounts determined for the
purposes of consolidated financial statements have been charged to retained
earnings.
F-10
<PAGE> 38
Effective January 1, 1992, the Company changed its method of
accounting for income taxes to conform with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which requires a
change from the deferred method to the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred income taxes
are recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities. Under SFAS 109, the effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date. The Company has reported the cumulative effect on prior years of the
change in the method of accounting for income taxes as of the beginning 1992 in
the Consolidated Statement of Operations.
The effect of adopting SFAS 109 in 1992 was to decrease net income by
approximately $1,170,000, representing an increased income tax provision of
$2,300,000 and an increase in income for the cumulative effect of the change in
accounting principle of $1,130,000.
Research and Development Costs
Research and development costs are charged to expense as incurred and
amounted to $2,860,000, $2,945,000 and $3,206,000 for the years ended December
31, 1991, 1992 and 1993, respectively.
Statements of Cash Flows
Investments with original maturities of three months or less are
classified as cash equivalents by the Company.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
manner of presentation in the current year.
B. OTHER CURRENT ASSETS
Other current assets consist of the following at December 31, 1992 and
1993:
<TABLE>
<CAPTION>
1992 1993
---- ----
(IN THOUSANDS)
<S> <C> <C>
Short-term investments, government securities, etc.
(at cost, approximates market value) . . . . . . . . . . . . . . $ 7,504 $34,529
Miscellaneous receivables (value added tax, grants,
insurance, etc.), deferred income taxes and other . . . . . . . . 20,557 21,561
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,061 $56,090
======= =======
</TABLE>
C. INVENTORIES
Inventories consist of the following at December 31, 1992 and 1993:
<TABLE>
<CAPTION>
1992 1993
---- ----
(IN THOUSANDS)
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,923 $10,602
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,134 50,327
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $51,057 $60,929
======= =======
</TABLE>
F-11
<PAGE> 39
D. PROPERTY, PLANT AND EQUIPMENT - NET
Property, plant and equipment at December 31, 1992 and 1993 consists
of the following:
<TABLE>
<CAPTION>
1992 1993
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,116 $ 2,116
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,760 19,994
Machinery, plant and equipment . . . . . . . . . . . . . . . . . . . 177,891 187,566
Office furniture, equipment and water rights . . . . . . . . . . . . 9,144 9,892
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . 6,932 24,197
--------- ---------
Total, at cost . . . . . . . . . . . . . . . . . . . . . . . . . 214,843 243,765
Less accumulated depreciation and amortization . . . . . . . . . . . 93,089 112,764
--------- ---------
Property, plant and equipment - net . . . . . . . . . . . . . . . $ 121,754 $ 131,001
========= =========
</TABLE>
The Company, through HCSL, is in the process of expanding its
production capacity by constructing a new facility in Israel to produce
annually approximately 100,000 metric tons of potassium nitrate and 15,000
metric tons of phosphoric acid. The new plant is anticipated to cost
approximately $88,000,000 and construction commenced in the second quarter of
1993. The Company expects to receive from the Government of Israel an
aggregate investment grant of approximately $32,000,000 and contributions for
infrastructure of approximately $5,000,000, so that the Company's net
investment in the new plant is anticipated to be approximately $51,000,000.
The Company incurred capital expenditures for the new plant during 1993 (net of
investment grants) of approximately $16,000,000. Plant production is planned
to start in late 1994. The capacity of the new plant may be expanded in
subsequent years.
The Company capitalized interest costs aggregating $144,000, $200,000
and $352,000 during the years ended December 31, 1991, 1992 and 1993,
respectively, with respect to the financing of several construction projects.
Certain property, plant and equipment has been pledged as collateral for
long-term debt - see Note H.
In September 1991, a unit within one of two production lines located
in the Company's Israeli manufacturing facility was damaged by a fire. Such
damage resulted in a temporary reduction of the Company's phosphoric acid
production capacity. Costs of replacement of the damaged assets have been
reimbursed by insurers. Insurance proceeds exceeded the recorded carrying
value of the damaged assets by approximately $10 million. Accordingly, a gain
has been recorded in that amount - see Note L. The effect of business
interruption was likewise covered by insurers and the related compensation
received has been reflected in the accompanying Consolidated Statements of
Operations.
See Note P to Consolidated Financial Statements.
F-12
<PAGE> 40
E. INVESTMENTS IN SECURITIES
Investments in securities consist of the following at December 31,
1992 and 1993:
<TABLE>
<CAPTION>
1992 1993
---- ----
Carrying Market Carrying Market
Value Value Value Value
-------- ------ -------- ------
(in thousands)
<S> <C> <C> <C> <C>
Marketable equity securities . . . . . . . . . . . . . . . . $ 4,383 $ 8,424 $ 2,274 $ 8,529
Corporate bonds, notes and other securities
(carrying value net of allowance for unrealized
loss of $2,351,000 in 1992 and $2,000,000 in 1993) . . . . 6,444 6,921 82 77
--------- -------- --------- --------
Investments in securities - net . . . . . . . . . . . $ 10,827 $ 15,345 $ 2,356 $ 8,606
========= ======== ========= ========
</TABLE>
During the years ended December 31, 1991, 1992 and 1993 the Company
recorded net gains (losses) relating to investments in securities in the
caption "interest and other income - net" in the Consolidated Statements of
Operations (see Note L) in the amounts of $(30,000), $2,865,000 and $2,261,000,
respectively.
In March 1992, the Company purchased from a former indirect
stockholder and director of the Company a 30% limited partnership interest in
American Recreation Group, a New York limited partnership ("ARG"). The
purchase price for the 30% limited partnership interest was $7,500,000. In
March 1992, in open market purchases, the Company acquired approximately
$11,000,000 principal amount of Riviera, Inc. ("Riviera") Floating Rate First
Mortgage Notes (the "Riviera Notes"). The Riviera Notes were purchased at a
cost of approximately $5,100,000. The above-mentioned former indirect
stockholder and director of the Company was the sole owner of the capital stock
of Riviera. In September 1992, the Company sold its investments in both ARG
and the Riviera Notes for an aggregate of $14,500,000 (of which $10,000,000 was
received in October, 1992, and the balance was received during January, 1993)
and recognized a gain of approximately $1,900,000. Shortly after the receipt
of the respective sale proceeds, the Company dividended these amounts to TPR.
F. SHORT-TERM DEBT
The weighted average interest rates and weighted average amounts of
short-term debt outstanding during the years ended December 31, 1991, 1992 and
1993 were 10.6% and $7,921,000; 7.7% and $10,235,000; and 6.7% and $14,066,000,
respectively. The highest amount owed during such years were $14,786,000,
$15,163,000 and $22,481,000, respectively.
The average amount outstanding was determined by the average of
month-end balances. The weighted average interest rate was determined by
dividing interest expense on short-term debt by the average amount outstanding
during the year.
Cedar has a revolving loan commitment from two banks aggregating
$25,000,000 for 1993 (approximately $3,000,000 unused at December 31, 1993) and
$28,000,000 and $33,000,000 for 1994 and 1995, respectively. HCSL has a
$10,000,000 revolving loan commitment from two banks through December 31, 1997,
which permits borrowings commencing January 1, 1995.
F-13
<PAGE> 41
G. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the
following at December 31, 1992 and 1993:
<TABLE>
<CAPTION>
1992 1993
---- ----
(in thousands)
<S> <C> <C>
Compensation and payroll taxes . . . . . . . . . . . . . . . . . $ 9,210 $ 8,827
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,598 8,795
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 4,915 1,004
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,766 11,401
----------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,489 $ 30,027
=========== =========
</TABLE>
H. LONG-TERM DEBT - NET
Long-term debt consists of the following at December 31, 1992 and 1993:
<TABLE>
<CAPTION>
Payable
Description Interest Rate * Through 1992 1993
----------- --------------- ------- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
TRI:
Bank loan (1) . . . . . . . . . . . . . . . . . . . . . LIBOR 1995 $ 12,700 $ 12,700
Bank loans . . . . . . . . . . . . . . . . . . . . . . LIBOR + 2.25% 1997 17,300 13,840
13.5% Senior subordinated debentures, net of
unamortized debt discount of $1,375,000 in 1992
(effective interest rate of 14.2%) (2) . . . . . . . 13.5% 1993 64,123 --
Senior subordinated reset notes, net of
unamortized debt discount of $1,209,000
and $522,000 (effective interest rate of 15.4%) . . . 14.5% 1996 47,04 126,228
11.875% Senior subordinated notes, net of
unamortized debt discount of $1,095,000 in 1993
(effective interest rate of 12.1%)(4) . . . . . . . . 11.875% 2002 -- 113,905
9.5% Junior subordinated debentures, net of
unamortized debt discount of $2,911,000 and
$2,505,000 (effective interest rate of 14.1%)(5). . . 9.5% 2005 15,089 15,495
Subsidiaries:
Bank loans and Industrial Revenue Bond
financing (6) . . . . . . . . . . . . . . . . . . . . Various 2005 62,389 59,589
Other . . . . . . . . . . . . . . . . . . . . . . . . . Various 1993 1,365 --
-------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . 220,007 241,757
Less current portion . . . . . . . . . . . . . . . 29,911 24,801
-------- ----------
Long-term debt - net . . . . . . . . . . . . . . . $190,096 $ 216,956
======== ==========
</TABLE>
____________________
* As prevailing on respective balance sheet dates. Such rates (other
than the subordinated debt) generally "float" according to changes in the Prime
or LIBOR rates. At December 31, 1993 such rates were approximately 6.0% and
3.5%, respectively.
1. On February 26, 1988, the Company entered into a loan agreement with a
bank, pursuant to which the Company borrowed $12,000,000. Subsequently, such
agreement was amended and the Company borrowed an additional $700,000.
One-half of the outstanding principal amount of the loans is due on February
28, 1994 and the balance is due on February 28, 1995.
F-14
<PAGE> 42
2. The senior subordinated debentures (the "Debentures") were redeemable
at the option of the Company at any time after May 1, 1992 at stipulated
redemption prices. As described below, on March 30, 1993, the Company
privately placed $115,000,000 principal amount of 11 7/8% Senior Subordinated
Notes due 2002, Series A (the "11 7/8% Notes"). The Company used a portion of
the net proceeds from the issuance of the 11 7/8% Notes to acquire all of the
Company's $60,997,000 then outstanding principal amount of the Debentures.
3. The Senior Subordinated Reset Notes (the "Reset Notes") bear interest
at 14.5% and mature on September 30, 1996. The Reset Notes are not subject to
any mandatory sinking fund requirement.
4. On March 30, 1993, the Company privately placed $115,000,000 principal
amount of the 11 7/8% Notes at 99% of principal amount (the "Offering"). The
net proceeds to the Company from the Offering were approximately $109,700,000.
Approximately $24,200,000 of such proceeds were used to acquire $21,500,000
principal amount of the Company's Reset Notes. In addition, approximately
$63,900,000 of the proceeds were used in May, 1993 to acquire all of the
Company's $60,997,000 then outstanding principal amount of the Debentures
through utilization of the applicable sinking fund and optional redemption
provisions of the Debentures. As a result of the redemptions and purchases
described above, as well as the Company's acquisition of $4,500,000 principal
amount of the Debentures in January 1993, the Company has recorded an
extraordinary loss of $8,830,000 during 1993, including the write-off of
applicable deferred debt issuance costs. Such loss has no current tax benefit.
On May 6, 1993, to satisfy its obligations with respect to the registration of
the 11 7/8% Notes, the Company commenced an offer (the "Exchange Offer") to
exchange up to $115,000,000 principal amount of its registered 11 7/8% Senior
Subordinated Notes due 2002, Series B (the "New 11 7/8% Notes") for a like
principal amount of the 11 7/8% Notes. The terms of the 11 7/8% Notes and the
New 11 7/8% Notes were identical in all material respects. Pursuant to the
Exchange Offer, which expired on June 9, 1993, all outstanding 11 7/8% Notes
were tendered and exchanged for New 11 7/8% Notes.
The New 11 7/8% Notes mature on July 1, 2002 and are redeemable at the option
of the Company at any time after July 1, 1998 at stipulated redemption prices.
There are no mandatory sinking fund requirements.
5. On November 28, 1986, the Company issued the junior subordinated
debentures (the "9.5% Debentures") in the aggregate principal amount of
$9,000,000, with interest payable from October 1, 1987 and quarterly
thereafter. Such 9.5% Debentures were initially recorded at $6,700,000, the
estimated value on the date of issue, and mature in 1998. During 1991, as
described in Note M, the Company's redeemable preferred stock was converted
into $9,000,000 principal amount of the Company's 9.5% Debentures.
Subsequently, during 1991, the then holder of this $9,000,000 principal amount
of 9.5% Debentures agreed to extend the maturity date of such principal amount
by seven years to the year 2005. The carrying value of the 9.5% Debentures
issued upon conversion of the redeemable preferred stock was equivalent to the
previous carrying value of the preferred stock.
6. Industrial Revenue Bond financing permits an $11,250,000 term loan
commitment in connection with the construction of a new plant in Vicksburg. As
of December 31, 1993, $495,000 was outstanding relating to such facility. In
addition, as of December 31, 1993 certain subsidiaries of the Company have
unused bank credit lines of approximately $37,000,000. Such credit lines
permit borrowings through December 31, 1995. Any amounts borrowed must be
repaid over a ten year period ending in the year 2005.
The Reset Notes are pari passu with the New 11 7/8% Notes and
are subordinated in right of payment to all Senior Indebtedness (as defined) of
the Company and senior to the 9.5% Debentures.
Certain of the Company's and its subsidiaries' loan agreements
and Indentures require the Company and/or the respective subsidiary to, among
other things, maintain various financial ratios including minimum net worth,
ratios of debt to net worth, interest and fixed charge coverage tests and
current ratios. In addition, there are certain limitations on the Company's
ability make certain Restricted Payments and Restricted
F-15
<PAGE> 43
Investments (each as defined), etc. The Company is also required to offer to
purchase a portion of the New 11 7/8% Notes and the Reset Notes if it fails to
maintain minimum amounts of Junior Subordinated Capital (as defined). In the
event of a Change in Control (as defined), the Company is required to offer to
purchase all the New 11 7/8% Notes and Reset Notes as well as to repay certain
bank loans. Certain of the respective instruments also limit the payment of
dividends, capital expenditures and the incurring of additional debt and liens.
As of December 31, 1993, the Company and its subsidiaries are
in compliance with the covenants of each of the respective loan agreements and
Indentures.
The aggregate maturities of long-term debt are set forth below.
<TABLE>
<CAPTION>
Years Ending
December 31, (in thousands)
------------ --------------
<S> <C>
1994 . . . . . . . . . . . . . . . . . . $ 24,801
1995 . . . . . . . . . . . . . . . . . . 23,355
1996 . . . . . . . . . . . . . . . . . . 36,296
1997 . . . . . . . . . . . . . . . . . . 9,546
1998 . . . . . . . . . . . . . . . . . . 15,086
Thereafter . . . . . . . . . . . . . . . 136,795
Unamortized debt discount . . . . . . . (4,122)
--------
Total . . . . . . . . . . . . . $241,757
=========
</TABLE>
Substantially all of the assets of HCL are subject to security
interests in favor of the State of Israel and/or banks. In addition,
substantially all of Cedar's, Vicksburg's and NMPC's assets are subject to
security interests in favor of banks pursuant to loan agreements. The capital
stock of HCL, Cedar, Vicksburg and NMPC has also been pledged to the banks
pursuant to these agreements. The Company's common stock is pledged to secure
the repayment obligations of TPR under a note issued by it to a former indirect
shareholder of the Company.
During 1991, the Company acquired $10,153,000 principal amount
of Debentures and Reset Notes, at a cost of $8,127,000, resulting in a net gain
(pre-tax) to the Company, after the elimination of certain deferred costs, of
$1,482,000. Such gain is reported as an extraordinary item in the accompanying
Consolidated Statement of Operations.
Interest paid on the long-term debt obligations, net of
capitalized interest, totaled $30,136,000, $26,386,000 and $21,852,000 for the
years ended December 31, 1991, 1992 and 1993, respectively.
I. OTHER LIABILITIES
Under Israeli law and labor agreements, HCL is required to
make severance and pension payments to dismissed employees and to employees
leaving employment in certain other circumstances. These liabilities are
covered by regular deposits to various severance pay funds and by payment of
premiums to an insurance company for officers and non-factory personnel under
approved plans. "Other liabilities" in the Consolidated Balance Sheets as of
December 31, 1992 and 1993 include accruals of $2,097,000 and $2,116,000,
respectively, for the estimated unfunded liability of complete severance of all
HCL employees. Cost incurred was approximately $2,531,000, $1,673,000 and
$1,857,000 for the years ended December 31, 1991, 1992 and 1993, respectively.
No information is available regarding actuarial present value
of HCL's pension plans and the plans' net assets available for benefits, as
these plans are multi-employer, external and independent of HCL.
F-16
<PAGE> 44
Cedar has a defined benefit pension plan which covers all of
the full-time employees of Cedar and Vicksburg. Funding of the plan is made
through payment to various funds managed by a third party and is in accordance
with the funding requirements of the Employee Retirement Income Security Act of
1974 ("ERISA").
Cedar's net pension cost for the years ended December 31,
1991, 1992 and 1993 included the following benefit and cost components:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 481 $ 540 $ 552
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 523 658
Amortization of unrecognized prior service cost . . . . . . . . . . 72 72 120
Actual return on plan assets . . . . . . . . . . . . . . . . . . . (403) (526) (592)
Amortization of unrecognized net transition obligation . . . . . . 59 59 59
-------- ---------- ---------
Net pension cost . . . . . . . . . . . . . . . . . . . . . . . . $ 654 $ 668 $ 797
======== ========== =========
</TABLE>
The funded status and the amounts recognized in the Company's
December 31, 1992 and 1993 Consolidated Balance Sheets for Cedar's benefit plan
is as follows:
<TABLE>
<CAPTION>
1992 1993
---- ----
(in thousands)
<S> <C> <C>
Plan assets at market value . . . . . . . . . . . . . . . $ 6,332 $ 8,066
Actuarial present value of projected benefit obligation . 7,362 10,222
------- -------
Funding status . . . . . . . . . . . . . . . . . . . . . (1,030) (2,156)
Unrecognized net transition obligation . . . . . . . . . 527 468
Unrecognized prior service cost . . . . . . . . . . . . . 724 1,265
Unrecognized net (gain) loss . . . . . . . . . . . . . . (552) 762
------- -------
Prepaid (accrued) pension cost . . . . . . . . . . . . . $ (331) $ 339
======= =======
</TABLE>
At December 31, 1992 and 1993 the actuarial present value of
Cedar's vested benefit obligation was $6,036,000 and $7,115,000 and the
accumulated benefit obligation was $6,329,000 and $7,533,000, respectively.
Actuarial assumptions used at December 31, 1992 and 1993 were
as follows:
<TABLE>
<CAPTION>
1992 1993
---- ----
<S> <C> <C>
Discount rate . . . . . . . . . . . . . . . . . . . . . . 8.25% 7.50%
Rate of increase in compensation levels . . . . . . . . . 5.0% 5.0%
Expected long-term rate of return on assets . . . . . . . 9.0% 9.0%
</TABLE>
The unrecognized net transition obligation is being amortized
on a straight-line basis over fifteen years beginning January 1, 1987.
Cedar and its subsidiaries and Eddy have profit sharing thrift
plans designed to conform to Internal Revenue Code Section 401(k) and to the
requirements of ERISA. The plans, which cover all full-time employees (and one
of which includes Company headquarters employees), allow participants to
contribute as much as 15% of their annual compensation, up to a maximum
permitted by law, through salary reductions. The companies' contributions to
the plans are based on a percentage of the participant's contributions, and the
companies may make additional contributions to the plans at the discretion of
their respective Boards of Directors. The contribution expense relating to the
profit sharing thrift plans totaled $631,000, $653,000 and $595,000 for the
years ended December 31, 1991, 1992 and 1993, respectively.
F-17
<PAGE> 45
J. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company and its subsidiaries are obligated under
non-cancelable operating leases covering principally land and office
facilities. At December 31, 1993, minimum annual rental commitments under
these leases are:
<TABLE>
<CAPTION>
Years Ending
December 31, (in thousands)
------------ --------------
<S> <C>
1994 . . . . . . . . . . . . . . . . . . $ 1,451
1995 . . . . . . . . . . . . . . . . . . 1,307
1996 . . . . . . . . . . . . . . . . . . 1,152
1997 . . . . . . . . . . . . . . . . . . 1,143
1998 . . . . . . . . . . . . . . . . . . 1,143
Thereafter . . . . . . . . . . . . . . . 7,394
-------
Total . . . . . . . . . . . $13,590
=======
</TABLE>
Rent expense for 1991, 1992 and 1993 was $3,154,000,
$3,637,000 and $3,835,000, respectively, covering land, office facilities and
equipment.
Purchase Commitment
HCL has an agreement for the purchase of potash which
expires in 1999. The terms of the agreement require HCL to purchase a minimum
quantity at the weighted average of the FOB Israeli port prices received by the
seller for the immediately preceding quarter plus certain adjustments thereto.
Based upon current prices and at current capacity, the annual commitment is
approximately $15,000,000. There are currently no purchase commitments in
excess of market prices.
K. INCOME TAXES
The Company's income tax provision for the years ended
December 31, 1991, 1992 and 1993 consist of the following:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Currently payable (refundable):
Federal . . . . . . . . . . . . . . . . . . . . . . . . $ (530) $ -- $ --
Foreign . . . . . . . . . . . . . . . . . . . . . . . . (5,451) 11,276 7,939
State . . . . . . . . . . . . . . . . . . . . . . . . . 678 1,232 301
-------- --------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . (5,303) 12,508 8,240
-------- --------- --------
Deferred (benefit):
Federal . . . . . . . . . . . . . . . . . . . . . . . . 71 -- --
Foreign . . . . . . . . . . . . . . . . . . . . . . . . 7,840 (785) (472)
State . . . . . . . . . . . . . . . . . . . . . . . . . (26) (492) 152
-------- ---------- --------
7,885 (1,277 ) (320)
-------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 2,582 $ 11,231 $ 7,920
======== ========= ========
</TABLE>
F-18
<PAGE> 46
Deferred income taxes (benefits) included in the Company's
income tax provision consisted of the following:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Depreciation and property and equipment basis
differences . . . . . . . . . . . . . . . . . . . . $ 8,181 $ 1,435 $ (1,110)
Contract revenue recognition method . . . . . . . . . . (367) (1,843) 1,185
Net operating and capital loss carryforwards . . . . . . -- (1,239) (6,945)
Valuation allowance . . . . . . . . . . . . . . . . . . -- 1,204 9,275
Other - net . . . . . . . . . . . . . . . . . . . . . . 71 (834) (2,725)
-------- ---------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 7,885 $ (1,277) $ (320)
======== ========= =========
</TABLE>
The provision for income taxes for the years ended December
31, 1991, 1992 and 1993 amounted to $2,582,000, $11,231,000 and $7,920,000,
respectively, representing effective income tax rates of 12.7%, 48.3% and
72.1%, respectively. These amounts differ from the amounts of $6,890,000,
$7,905,000 and $3,845,000, respectively, computed by applying the statutory
Federal income tax rates to income before income taxes. The reasons for such
variances from statutory rates were as follows:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Statutory Federal rates . . . . . . . . . . . . . . . . 34.0% 34.0% 35.0%
Increase (decrease) in income tax rate resulting from:
Israeli operations - net impact of Israeli statutory
rate, effects of "inflation allowances",
withholding taxes etc. . . . . . . . . . . . . . 13.1 3.3 (10.1)
Refund of prior year Israeli taxes . . . . . . . . (35.0) -- --
Net losses for which
there is no current tax benefit . . . . . . . . 4.7 15.5 47.4
Additional depletion expense . . . . . . . . . . . (6.2) (6.6) (2.9)
State and local income taxes - net . . . . . . . . 2.1 2.1 2.7
---- ---- ----
Effective income tax rates . . . . . . . . . . . . . . . 12.7% 48.3% 72.1%
==== ==== ====
</TABLE>
F-19
<PAGE> 47
At December 31, 1992 and 1993, deferred taxes (liabilities)
consisted of the following:
<TABLE>
<CAPTION>
1992 1993
---- ----
(in thousands)
<S> <C> <C>
Depreciation and property and equipment basis differences . . . . . . $ (16,173) $ (15,063)
Contract revenue recognition method . . . . . . . . . . . . . . . . . 3,292 2,107
Nondeductible reserves . . . . . . . . . . . . . . . . . . . . . . . . 2,971 3,683
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . 10,860 18,973
Capital loss and capital loss carryforwards . . . . . . . . . . . . . 6,742 5,574
Foreign tax credit carryovers . . . . . . . . . . . . . . . . . . . . 792 3,000
AMT credit carryovers . . . . . . . . . . . . . . . . . . . . . . . . 1,693 1,693
Investment tax credit carryovers . . . . . . . . . . . . . . . . . . . 200 200
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,355 1,160
------------ ------------
Deferred taxes - net, exclusive of valuation allowance . . . . . . . . 11,732 21,327
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . (23,228) (32,503)
------------ ------------
Deferred taxes - net . . . . . . . . . . . . . . . . . . . . . . . . . $ (11,496) $ (11,176)
============= ============
</TABLE>
At December 31, 1992, deferred tax assets of $2,382,000 are
classified as "other current assets" and deferred tax liabilities of
$13,878,000 are classified as "other liabilities". At December 31, 1993,
deferred tax assets of $2,100,000 are classified as "other current assets" and
deferred tax liabilities of $13,276,000 are classified as "other liabilities".
At December 31, 1993, the Company had various tax loss and
credit carryovers which expire as follows:
<TABLE>
<CAPTION>
Federal Net State Net Foreign Investment
Operating Operating Capital Tax Tax
Expiration Loss Loss Loss Credit Credit
- ---------- ----------- --------- ------- ------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
1994 . . . . . . $ 800
1995 . . . . . . $ 1,000
1997 . . . . . . 13,000
1998 . . . . . . 2,200
2001 . . . . . . $ 200
2002 - 2005 . . . $ 19,000
2006 - 2008 . . . $41,000 33,000
------- ---------- ---------- --------- ---------
Total . . . . $41,000 $ 52,000 $ 14,000 $ 3,000 $ 200
======= ========== ========== ========= =========
</TABLE>
Income tax has not been provided on unrepatriated earnings of
HCL as it is the intention of the Company to reinvest such foreign earnings for
indefinite periods in HCL's operations. The cumulative amount of such
unrepatriated earnings at December 31, 1993 approximates $38 million.
Income taxes paid totalled approximately $3,300,000,
$7,800,000 and $11,600,000, respectively, during the years ended December 31,
1991, 1992 and 1993. The amount paid for 1991 excludes an Israeli tax refund
received by HCL relating to prior years amounting to $7,100,000.
F-20
<PAGE> 48
L. INTEREST AND OTHER INCOME - NET
Interest and other income - net for the years ended December
31, 1991, 1992 and 1993 consists of the following:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Interest and dividend income . . . . . . . . . . . . . . $ 6,959 $ 3,735 $ 3,258
Security gains (losses) - net . . . . . . . . . . . . . (30 ) 2,865 2,261
Gain on involuntary conversion (see Note D) . . . . . . 10,000 -- --
Other . . . . . . . . . . . . . . . . . . . . . . . . . (2,770 ) 1,876 495
--------- --------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 14,159 $ 8,476 $ 6,014
========= ========= ========
</TABLE>
M. REDEEMABLE PREFERRED STOCK
Redeemable preferred stock was issued to a then related party,
Care Investors, Inc., on November 28, 1986. The dividend on the preferred
stock was cumulative at the rate of $9.50 per share per annum and the preferred
stock was convertible into 9.5% junior subordinated debentures due 1998, at the
option of the Company or the holder. The preferred shares were initially
recorded at $6,700,000, the estimated value on the date of issue. During
January 1991 the preferred stock was converted into $9,000,000 principal amount
of the Company's 9.5% junior subordinated debentures (see Note H).
N. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of
financial instruments is made in accordance with the requirements of Statement
of Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments." The estimated fair value amounts have been determined
by the Company, using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
December 31, 1992 December 31, 1993
----------------- -----------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Assets:
Short-term investments (included within
"other current assets") . . . . . . . . . $ 7,504 $ 8,655 $ 34,529 $ 34,895
Investments in securities - net . . . . . . . 10,827 15,345 2,356 8,606
Liabilities:
Long-term debt . . . . . . . . . . . . . . . 220,007 227,000 241,757 246,330
Off-balance sheet financial instruments:
Foreign currency contracts . . . . . . . . . -- 3,900 -- 2,400
</TABLE>
Cash and Cash Equivalents, Accounts Receivable, Short-Term
Debt, and Accounts Payable - The carrying amounts of these items are a
reasonable estimate of their fair value.
F-21
<PAGE> 49
Investments in Securities - The fair value of these securities
(including short-term investments classified within "other current assets" in
the accompanying Consolidated Balance Sheets) are estimated based on quoted
market prices or recent sales for those or similar investments.
Long-Term Debt - Interest rates that are currently available
to the Company for issuance of debt with similar terms and remaining maturities
are used on a discounted cash flow basis to estimate fair value for debt issues
for which no market quotes are available.
Foreign Currency Contracts - The fair value of foreign
currency contracts (used for hedging purposes) is estimated by obtaining quotes
from brokers. The contractual amount of these contracts totals approximately
$67,000,000 and $35,000,000 as of December 31, 1992 and 1993, respectively.
The fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1992 and 1993.
Although management is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and
current estimates of fair value may differ significantly from the amounts
presented herein.
O. CONTINGENT LIABILITIES
For a description of certain legal proceedings pending against
the Company, see Item 3 - "Legal Proceedings", which is an integral part of
these financial statements. The Company is vigorously defending against the
allegations described therein.
Management of the Company believes, based upon its assessment
of the actions and claims outstanding against the Company and certain of its
subsidiaries, and after discussion with counsel, that the eventual disposition
of the matters referred to above should not have a material adverse effect on
the financial position or future operations of the Company.
Also see "Environmental Matters" in Item 1 - "Business".
P. SUBSEQUENT EVENTS
On January 27, 1994, HCL filed a registration statement with
the Israeli Securities Authority (the "ISA") pursuant to which HCL would
publicly offer in Israel, in an underwritten offering, units consisting of (i)
shares of HCL common stock (the "HCL Shares") and (ii) options exercisable for
HCL Shares. The terms of the proposed offering have not been finalized, and
there can be no assurance that the ISA will declare the offering effective or
that the offering will be consummated (considering, among other things,
prevailing stock market conditions in Israel). If the proposed offering is
consummated, the Company has determined that it would maintain beneficial
ownership of not less than 90% of the HCL Shares upon issuance of the units and
not less than 80% on a fully diluted basis. The Company anticipates that the
net proceeds to be realized for the HCL Shares in the proposed offering, if
consummated, would be substantially in excess of the Company's corresponding
carrying value for the equity interest represented by such shares.
The net proceeds of the proposed offering may be used for any
purpose authorized by the Board of Directors of HCL, including, without
limitation, internal growth or the acquisition of new businesses. HCL does not
currently have any agreements, commitments or understandings for acquiring any
particular businesses and does not anticipate using any of the net proceeds to
finance the construction of the K3 Plant.
On February 7, 1994, the smaller of the two potassium nitrate
production units located in the Company's Haifa, Israel manufacturing facility
was damaged by a fire, causing a temporary reduction of the Company's potassium
nitrate production capacity. The Company is currently reviewing various
alternatives concerning the most effective and timely replacement of the
damaged production unit and expects to replace the damaged unit within
approximately twelve months. The Company believes that the impact of the loss
F-22
<PAGE> 50
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 determined, the Company expects that the insurance
proceeds relating to the property damage will be for replacement value, which
substantially exceeds the recorded carrying value of the damaged assets.
F-23
<PAGE> 51
CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE III
TRANS-RESOURCES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------
1992 1993
---- ----
(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 5,918 $ 9,800
Receivables and other current assets . . . . . . . . . . . . . . . . . . . 13,285 35,474
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 891
----------- ----------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . 19,939 46,165
INVESTMENTS IN SECURITIES - net . . . . . . . . . . . . . . . . . . . . . . . 5,081 --
INVESTMENTS IN SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . 144,151 131,861
DUE FROM SUBSIDIARIES - net . . . . . . . . . . . . . . . . . . . . . . . . . 15,453 19,402
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,484 11,282
----------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 192,108 $ 208,710
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . $ 10,935 $ 9,810
Accrued expenses and other current liabilities . . . . . . . . . . . . . . 4,774 7,805
----------- ----------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . 15,709 17,615
----------- ----------
LONG-TERM DEBT - net:
Senior indebtedness, notes payable and other obligations . . . . . . . . . 26,540 16,730
Senior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 103,689 140,133
Junior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 15,089 15,495
----------- ----------
Long-Term Debt - net (Note) . . . . . . . . . . . . . . . . . . . . 145,318 172,358
----------- ----------
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,199 2,943
----------- ----------
COMMON STOCKHOLDER'S EQUITY:
Common stock, $.01 par value, 3,000 shares authorized,
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . -- --
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 500 500
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,620 15,348
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . (238) (54)
----------- ----------
Total Common Stockholder's Equity . . . . . . . . . . . . . . . . . 28,882 15,794
----------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 192,108 $ 208,710
=========== ==========
</TABLE>
____________________
Note - The aggregate maturities of long-term debt during the next five years
is approximately as follows: 1994 - $9,810,000; 1995 - $9,810,000;
1996 - $30,210,000; 1997 - $3,460,000 and 1998 - $9,000,000. Also,
see Note H of Notes to Consolidated Financial Statements.
S-1
<PAGE> 52
CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE III
(continued)
TRANS-RESOURCES, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1991, 1992 and 1993
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
REVENUE - Equity in earnings of subsidiaries
(including $167,000 credit representing the
cumulative effect on prior years of the change
in accounting for income taxes in 1992) . . . . . . . . . . $ 38,940 $ 30,345 $ 22,458
COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . (2,993) (4,527) (4,111)
INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . (21,849) (20,682) (22,121)
INTEREST AND OTHER INCOME - net . . . . . . . . . . . . . . . . 2,068 4,970 5,797
--------- --------- ---------
INCOME BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND CHANGE IN
ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . . . . . . . 16,166 10,106 2,023
INCOME TAX BENEFIT . . . . . . . . . . . . . . . . . . . . . . 1,518 2,080 1,043
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM
AND CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . 17,684 12,186 3,066
EXTRAORDINARY ITEM - Gain (loss) on repurchase
of debt, net of income tax of $296,000 in 1991 . . . . . . . 1,186 -- (8,830)
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGE IN ACCOUNTING FOR INCOME TAXES . . . . . . . . . . . -- 963 --
--------- --------- ---------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764)
========= ========= =========
</TABLE>
S-2
<PAGE> 53
CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE III
(concluded)
TRANS-RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1991, 1992 and 1993
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764)
Non-cash items:
Unremitted earnings of subsidiaries . . . . . . . . . (12,797) (25,213) 12,474
Depreciation and amortization . . . . . . . . . . . . 1,691 1,307 3,985
Increase in other liabilities . . . . . . . . . . . . 775 594 744
Deferred taxes and other - net . . . . . . . . . . . 43 1,125 (1,048)
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 8,582 (9,038) 10,391
Working capital management:
Receivables and other current assets . . . . . . . . . . (19,077) 23,171 4,926
Prepaid expenses . . . . . . . . . . . . . . . . . . . . (86) (642) (155)
Accrued expenses and other current liabilities . . . . . 5,909 (7,764) 3,816
--------- --------- ---------
Cash provided by (used in) operations and
working capital management . . . . . . . . . . . . . . . (4,672) 5,727 18,978
--------- --------- ---------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment . . . . . . . . . (945) (28) (75)
Sales of marketable securities and
short-term investments . . . . . . . . . . . . . . . . . 2,622 12,578 12,435
Purchases of marketable securities and
short-term investments . . . . . . . . . . . . . . . . . (2,108) (12,819) (34,118)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . (10,278) (645) (4,539)
--------- --------- ---------
Cash used in investment activities . . . . . . . . . . . . . (10,709) (914) (26,297)
--------- --------- ---------
FINANCING ACTIVITIES:
Increase in long-term debt . . . . . . . . . . . . . . . . . -- -- 109,166
Payments and current maturities of long-term debt . . . . . (3,803) (475) (90,457)
Distribution to stockholders . . . . . . . . . . . . . . . . (3,064) (13,136) (7,508)
--------- --------- ---------
Cash provided by (used in) financing activities . . . . . . (6,867) (13,611) 11,201
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . (22,248) (8,798) 3,882
CASH AND CASH EQUIVALENTS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . 36,964 14,716 5,918
--------- --------- ---------
End of year . . . . . . . . . . . . . . . . . . . . . . . . $ 14,716 $ 5,918 $ 9,800
========= ========= =========
- ------------------
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,992 $ 19,497 $ 16,557
========= ========= =========
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . $ 2,614 $ 506 $ 2,100
========= ========= =========
</TABLE>
S-3
<PAGE> 54
TRANS-RESOURCES, INC. SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
(in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
BALANCE AT BALANCE AT
BEGINNING ADDITIONS OTHER CHANGES END OF
CLASSIFICATIONS OF PERIOD AT COST RETIREMENTS ADD (DEDUCT) PERIOD
--------------- ---------- --------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1991:
- -----------------------------
Land . . . . . . . . . . . . . . . $ 1,891 $ 225 $ 2,116
Buildings . . . . . . . . . . . . 15,222 3,908 $ (1,346) 17,784
Machinery, plant and equipment . . 131,047 39,784 (18,076) 152,755
Office furniture, equipment
and water rights . . . . . . . . 7,113 2,246 (105) 9,254
Construction-in-progress . . . . . 34,400 (27,342) 7,058
--------- --------- --------- -------- ---------
Total . . . . . . . . . . . . . $ 189,673 $ 18,821 $ (19,527) $ -- $ 188,967
========= ========= ========= ======== =========
Year Ended December 31, 1992:
- -----------------------------
Land . . . . . . . . . . . . . . . $ 2,116 $ 2,116
Buildings . . . . . . . . . . . . 17,784 $ 1,015 $ (39) 18,760
Machinery, plant and equipment . . 152,755 24,693 $ (231) 674 177,891
Office furniture, equipment
and water rights . . . . . . . . 9,254 561 (236) (435) 9,144
Construction-in-progress . . . . . 7,058 (126) 6,932
--------- --------- --------- -------- ---------
Total . . . . . . . . . . . . . $ 188,967 $ 26,143 $ (467) $ 200 $ 214,843
========= ========= ========= ======== =========
Year Ended December 31, 1993:
- -----------------------------
Land . . . . . . . . . . . . . . . $ 2,116 $ 2,116
Buildings . . . . . . . . . . . . 18,760 $ 1,234 19,994
Machinery, plant and equipment . . 177,891 9,685 $ (10) 187,566
Office furniture, equipment
and water rights . . . . . . . . 9,144 872 (124) 9,892
Construction-in-progress . . . . . 6,932 17,265 24,197
--------- --------- --------- --------
Total . . . . . . . . . . . . . $ 214,843 $ 29,056 $ (134) $ -- $ 243,765
========= ========= ========= ======== =========
</TABLE>
S-4
<PAGE> 55
TRANS-RESOURCES, INC. SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
(in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER CHANGES END OF
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS ADD (DEDUCT) PERIOD
----------- ---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1991:
- -----------------------------
Buildings . . . . . . . . . . . . $ 6,003 $ 1,615 $ (1,275) $ 6,343
Machinery, plant and equipment . . 55,419 15,851 (13,432) 57,838
Office furniture, equipment
and water rights . . . . . . . . 2,582 1,035 (82) 3,535
Excess of net assets acquired
over related costs . . . . . . . 8,528 (1,344) 7,184
--------- --------- --------- -------- ---------
Total . . . . . . . . . . . . . $ 72,532 $ 17,157 $ (14,789) $ -- $ 74,900
========= ========= ========= ======== =========
Year Ended December 31, 1992:
- -----------------------------
Buildings . . . . . . . . . . . . $ 6,343 $ 1,325 $ 7,668
Machinery, plant and equipment . . 57,838 17,498 $ (84) 75,252
Office furniture, equipment
and water rights . . . . . . . . 3,535 1,044 (172) $ (78) 4,329
Excess of net assets acquired
over related costs . . . . . . . 7,184 (1,344) 5,840
--------- ------ --------- -------- ---------
Total . . . . . . . . . . . . . $ 74,900 $ 18,523 $ (256) $ (78) $ 93,089
========= ========= ========= ======== =========
Year Ended December 31, 1993:
- -----------------------------
Buildings . . . . . . . . . . . . $ 7,668 $ 1,646 $ 9,314
Machinery, plant and equipment . . 75,252 18,405 $ (10) 93,647
Office furniture, equipment
and water rights . . . . . . . . 4,329 1,074 (96) 5,307
Excess of net assets acquired
over related costs . . . . . . . 5,840 (1,344) 4,496
--------- --------- --------- -------- ---------
Total . . . . . . . . . . . . . $ 93,089 $ 19,781 $ (106) $ -- $ 112,764
========= ========= ========= ======== =========
</TABLE>
S-5
<PAGE> 56
TRANS-RESOURCES, INC. SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
(in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B
-------- --------
ITEM CHARGED TO COSTS AND EXPENSES
---- -----------------------------
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs . . . . . . . . . . . . . . . . . . . . $ 27,648 $ 28,381 $ 25,582
========= ========= =========
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,361 $ 5,732 $ 4,360
========= ========= =========
</TABLE>
S-6
<PAGE> 57
TRANS-RESOURCES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description Page No.
- ------- ----------- --------
<S> <C> <C>
3.1 Certificate of Incorporation of the Company, as amended, filed as Exhibit
3.1 to the Company's Annual Report on Form 10-K for the year ended December
31, 1987 (the "1987 Form 10-K"), which is incorporated herein by reference.
*
3.2 By-laws of the Company, filed as Exhibit 3.2 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1991 (the "1991 Form 10-K"),
which is incorporated herein by reference. *
4.1 Indenture, dated as of March 1, 1989, between the Company and First Alabama
Bank, as Trustee, relating to the Senior Subordinated Reset Notes due 1996,
filed as Exhibit 4.3 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1988 (the "1988 Form 10-K"), which is incorporated
herein by reference. *
4.2 Indenture, dated as of March 30, 1993 between the Company and First Alabama
Bank, as Trustee, relating to the 11 7/8% Senior Subordinated Notes due
2002, filed as Exhibit 4.1 to the Registration Statement of the Company on
Form S-1, filed on April 16, 1993, as amended, Registration No. 33-61158
(the "1993 Form S-1"), which is incorporated herein by reference.
*
10.1 Potash Sales Agreement between Haifa Chemicals Ltd. and Dead Sea Works
Limited, dated January 1, 1980 (termination date extended to December 31,
1999), concerning the supply of potash, filed as Exhibit 10.2 to the
Registration Statement of the Company on Form S-1, filed on January 30,
1987, as amended, Registration No. 33-11634 (the "1987 Form S-1"), which is
incorporated herein by reference. *
10.2 Manufacturing Processes Agreement between Haifa Chemicals Ltd. and Oil
Refineries Ltd., dated December 28, 1981, concerning the supply of steam and
water, filed as Exhibit 10.6 to the 1987 Form S-1, which is incorporated
herein by reference. *
10.3 Agreement of Use of Ammonia Pipeline between Haifa Chemicals Ltd. and Oil
Refineries Ltd., dated August 7, 1977, as amended, concerning the use of an
ammonia pipeline, filed as Exhibit 10.8 to the 1987 Form S-1, which is
incorporated herein by reference. *
10.4 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated December
20, 1968, concerning real property, filed as Exhibit 10.9 to the 1987 Form
S-1, which is incorporated herein by reference. *
10.5 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated March
31, 1974, concerning real property, filed as Exhibit 10.10 to the 1987 Form
S-1, which is incorporated herein by reference. *
</TABLE>
E-1
<PAGE> 58
<TABLE>
<CAPTION>
Exhibit Description Page No.
- ------- ----------- --------
<S> <C> <C>
10.6 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated April
5, 1978, concerning real property, filed as Exhibit 10.11 to the 1987 Form
S-1, which is incorporated herein by reference. *
10.7 Lease between Haifa Chemical Ltd. and Oil Refineries Ltd., dated June 25,
1978, concerning real property, filed as Exhibit 10.12 to the 1987 Form S-1,
which is incorporated herein by reference. *
10.8 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated September
25, 1986, concerning real property, filed as Exhibit 10.13 to the 1987 Form
S-1, which is incorporated herein by reference. *
10.9 Agreement between Haifa Chemicals Ltd. and The Port Authorities, dated
January 31, 1980 (termination date extended to June 1996), concerning real
property, filed as Exhibit 10.15 to the 1987 Form S-1, which is incorporated
herein by reference. *
10.10 Agreement between the Company and Thomas G. Hardy, dated March 22, 1994,
concerning incentive bonus compensation, including, as Exhibit A thereto,
the related Trust Agreement. E-4
10.11 Loan Agreement, dated as of February 26, 1988, and Amendment No. 1 to Loan
Agreement, dated June 13, 1988, between the Company and Bank Hapoalim B.M.
(certain exhibits omitted) (the "1988 Bank Hapoalim Agreement"), filed as
Exhibit 28.1 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1988, which is incorporated herein by reference.
*
10.12 Amendment No. 2, dated March 17, 1989, to the 1988 Bank Hapoalim Agreement,
and Pledge Agreement, dated March 20, 1989, between the Company, Bank
Hapoalim B.M. and Trust Company of Bank Hapoalim Ltd., filed as Exhibit
10.26 to the 1988 Form 10-K, which is incorporated herein by reference.
*
10.13 Letter agreement, dated April 13, 1989, amending the 1988 Bank Hapoalim
Agreement, between the Company and Bank Hapoalim B.M., filed as Exhibit
10.25 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1989 (the "1989 Form 10-K") which is incorporated herein by
reference. *
10.14 Sixth Amendment to Loan Agreement, dated as of April 25, 1991, amending the
1988 Bank Hapoalim Agreement, between the Company and Bank Hapoalim B.M.,
filed as Exhibit 10.14 to the 1991 Form 10-K, which is incorporated herein
by reference. *
</TABLE>
E-2
<PAGE> 59
<TABLE>
<CAPTION>
Exhibit Description Page No.
- ------- ----------- --------
<S> <C> <C>
10.15 Amended and Restated Credit Agreement, dated as of June 2, 1993 (The
"Cedar/NMPC/Vicksburg Credit Agreement"), among Cedar Chemical Corporation,
New Mexico Potash Corporation, the Banks parties thereto and The First
National Bank of Boston, as Agent (exhibits and schedules omitted). E-5
10.16 Restated Amendment No. 1, dated as of November 10, 1993, to the
Cedar/NMPC/Vicksburg Credit Agreement (exhibits and schedules omitted). E-6
10.17 Loan Agreement, dated as of December 24, 1990, between the Company and Bank
Hapoalim (certain exhibits omitted) (the "1990 Bank Hapoalim Agreement"),
filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1990, which is incorporated herein by reference.
*
10.18 Amendment No. 2, dated as of September 25, 1992, to the 1990 Bank Hapoalim
Agreement, filed as Exhibit 10.23 to the Registration Statement of the
Company on Form S-1, filed on October 20, 1992, as amended, Registration No.
33-53486 (the "1992 Form S-1"), which is incorporated herein by reference.
*
10.19 Tax Sharing Agreement, dated as of December 30, 1991, among TPR Investment
Associates, Inc., the Company, Eddy Potash, Inc., Nine West Corporation, TR
Media Corporation and Cedar Chemical Corporation, filed as Exhibit 10.23 to
the 1991 Form 10-K, which is incorporated herein by reference.
*
10.20 Purchase Agreement, dated September 30, 1992, between the Company and Mardi
Gras Food Court, Inc., filed as Exhibit 10.26 to the 1992 Form S-1, which is
incorporated herein by reference. *
10.21 Split Dollar Insurance Agreement, entered into as of August 26, 1988,
between the Company and Arie Genger, filed as Exhibit 10.27 to the 1992 Form
S-1, which is incorporated herein by reference. *
10.22 Bond Purchase Agreement, dated November 10, 1993, among Mississippi Business
Finance Corporation, Vicksburg Chemical Company and the banks named as
Purchasers therein. E-7
21 Subsidiaries of the Company. E-8
24 Power of Attorney authorizing Lester W. Youner to sign this report and any
amendments hereto on behalf of the principal executive officer and the
directors. E-9
</TABLE>
____________________
* Incorporated by reference
E-3
<PAGE> 1
EXHIBIT 10.10
TRANS-RESOURCES, INC.
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
March 22, 1994
Mr. Thomas G. Hardy
935 Park Avenue
New York, New York 10028
Re: Incentive Bonus - Thomas G. Hardy ("Hardy")
Dear Mr. Hardy:
This will serve to set forth our understanding with regard to the
matters contained herein.
1. Pursuant to Hardy's letter agreement with Trans-Resources, Inc.
(the "Company"), dated January 15, 1988, as amended by a letter dated April 16,
1991 (the "1988 Agreement"), Hardy is entitled, by reason of having remained in
the continuous employ of the Company through May 31, 1993, to receive an
incentive bonus (the "1988 Bonus") determined as, and payable in the manner,
set forth in the 1988 Agreement following the termination of his employment
with Company. Hardy and the Company have agreed to modify the 1988 Agreement
as set forth herein.
2. Notwithstanding the provisions of the 1988 Agreement, in lieu of
the 1988 Bonus, Hardy, or those persons ("Designated Beneficiaries") designated
by Hardy in a revocable writing delivered to the Company as entitled to the
benefits hereof
E-4
<PAGE> 2
Mr. Thomas G. Hardy
March 22, 1994
Page 2
in the event of his death, shall be entitled to receive an amount equal to the
entire balance in the trust (the "Rabbi Trust") established pursuant to this
Letter Agreement at the time the assets in the Rabbi Trust are required to be
distributed to Hardy or his Designated Beneficiaries. The Rabbi Trust shall be
in the form of Exhibit A hereto. The Company shall deposit the aggregate sum
of $2.8 million (the "Initial Principal") with the trustees of the Rabbi Trust
to be held by such trustees and paid as set forth therein. The Company shall
deposit the Initial Principal with the trustees of the Rabbi Trust in two equal
installments of $1.4 million each, without interest, the first of which is
being paid contemporaneously with the execution of this Letter Agreement and
the second of which shall be paid on March 22, 1996 (the "Second Payment
Date"), provided, however, that if the entire assets of the Trust are paid to
the Employee prior to the Second Payment Date without the occurrence of an
Acceleration Event, the second installment shall be paid to Employee on the
Second Payment Date. The amounts held under the Rabbi Trust shall at all times
be subject to the claims of the Company's creditors as provided in the Rabbi
Trust. Upon payment by the Company of the first installment of the Initial
Principal to the Rabbi Trust, the 1988 Agreement shall be superseded in its
entirety by this Letter Agreement and
<PAGE> 3
Mr. Thomas G. Hardy
March 22, 1994
Page 3
the Rabbi Trust and the 1988 Agreement shall be of no further force or effect.
3. If prior to the Second Payment Date, an Acceleration Event (as
defined in Paragraph 5 below) shall occur, the Company shall as promptly as
practicable pay to the trustees of the Rabbi Trust the remaining installment of
the Initial Principal to be held and disposed of in accordance with the Rabbi
Trust.
4. Immediately after the earlier of December 1, 2001 or the
termination of Hardy's employment with the Company (but in each case before the
Rabbi Trust shall have terminated), the Company shall pay to the trustees of
the Rabbi Trust as an additional contribution thereto the aggregate amount
(without interest) of all Tax Reimbursement Amounts (as defined in the Rabbi
Trust) paid by the trustees to the Company during the existence of the Rabbi
Trust.
5. The following terms used in this Agreement shall have the meanings
set forth below.
"ACCELERATION EVENT" means (a) Hardy's leaving the Company's
employ due to Disability; (b) Hardy's death; (c) Hardy's
<PAGE> 4
Mr. Thomas G. Hardy
March 22, 1994
Page 4
discharge by the Company for any reason other than "For Cause;" or (d) a Change
in Control occurs with respect to the Company.
"CHANGE IN CONTROL" means any event or series of events by which
Arie Genger and/or his spouse, children, children-in- law and grandchildren
fail to maintain aggregate beneficial ownership, directly or indirectly, of
more than 50% of the Company's stock on a fully diluted basis.
"DISABILITY" means a permanent physical or mental disability which
substantially prevents Hardy from performing his duties to the Company and such
disability continues for at least six consecutive calendar months.
"FOR CAUSE" means a discharge predicated upon any of the following
events: (a) an act of dishonesty which involves loss or destruction of
property of the Company or any of its subsidiaries or which results in
incarceration following conviction; or (b) the continuing violation of any
specific written direction of the Company's Chairman of the Board or Chief
Executive Officer.
<PAGE> 5
Mr. Thomas G. Hardy
March 22, 1994
Page 5
6. Nothing contained herein is intended to create an employment
contract.
7. Any notice, request, instruction, approval, consent or other
communication to be given hereunder by a party hereto shall be deemed validly
given, made or served if in writing and delivered personally (as of such
delivery) or sent by certified mail (as of three days after deposit in a United
States post office), postage prepaid, or by telex, facsimile or telegraph,
charges prepaid to the addresses set forth at the outset hereof or to such
other individual or address as a party hereto may designate for itself by
notice given as herein provided.
8. This Letter Agreement, together with Exhibit A hereto, sets forth
the entire agreement and understanding of the parties hereto in respect of the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings relating to the subject matter hereof.
9. Each party agrees to execute and deliver all such other
instruments as any other party hereto may reasonably request in order to
effectuate the intent of this Letter Agreement and the transactions provided
for herein.
<PAGE> 6
Mr. Thomas G. Hardy
March 22, 1994
Page 6
10. The provisions of this Letter Agreement may be amended,
supplemented or otherwise modified or waived only by a written agreement signed
by the parties hereto.
11. This Letter Agreement shall be deemed a contract made under the
laws of the State of New York and for all purposes shall be construed and
interpreted in accordance with the laws and decisions of such State without
reference to conflicts of laws principles.
12. Any provision of this Letter Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and, any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. This Letter Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, legal representatives
and successors, but neither this Letter
<PAGE> 7
Mr. Thomas G. Hardy
March 22, 1994
Page 7
Agreement nor any rights arising hereunder may be assigned or pledged by either
of the parties hereto.
Very truly yours,
TRANS-RESOURCES, INC.
By:
------------------------
Arie Genger,
Chairman of the Board
AGREED AND ACCEPTED THIS
___ DAY OF MARCH, 1994:
- -------------------------
Thomas G. Hardy
<PAGE> 8
EXHIBIT A
TRUST AGREEMENT
This Agreement made this 22nd day of March, 1994, by and between
TRANS-RESOURCES, INC., a Delaware corporation ("Company"), and Edward Klimerman
and Charles E. Shaw (the "Trustees").
W I T N E S S E T H:
WHEREAS, Company has entered into an agreement, dated as of the 22nd
day March, 1994 (the "Agreement"), with Thomas G. Hardy ("Employee") which
requires Company to establish a trust (the "Trust") to receive, hold and invest
certain payments of deferred compensation, a copy of which is annexed hereto;
WHEREAS, Company wishes to establish the Trust and to contribute to
the Trust assets to be held therein subject to the claims of Company's
creditors in the event of Company's Insolvency (as herein defined) until paid
to Employee or his designated beneficiaries;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Agreement as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
<PAGE> 9
WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Agreement.
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST.
(a) Company hereby deposits with the Trustees in trust the sum of
$1,400,000, which shall become the principal of the Trust to be held,
administered and disposed of by the Trustees as provided in this Trust
Agreement. The Trustees are authorized to accept additional contributions from
Company.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which Company is
the grantor, within the meaning of subpart E, Part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust and any earnings thereon shall be held
by the Trustees or under the Trustees' direction separate and apart from other
funds of Company and shall be used exclusively for the uses and purposes of
Employee and general creditors as herein set forth. Employee and his
beneficiaries shall have no preferred claim on, or any beneficial ownership
interest in, any assets of the Trust. Any rights created under the
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<PAGE> 10
Agreement and this Trust Agreement shall be mere unsecured contractual rights
of Employee and his beneficiaries against Company. Any assets held by the
Trust will be subject to the claims of Company's general creditors under
federal and state law in the event of Insolvency, as defined in Section 3(a)
hereof.
SECTION 2. PAYMENTS TO EMPLOYEE AND HIS BENEFICIARIES.
(a) Within 30 days after December 1, 2001, or, if earlier, the
termination of Employee's employment with Company for any reason whatsoever,
the entire assets of the Trust shall be paid to Employee, his estate or
designated beneficiaries, in a lump sum, in cash or in kind, provided, however,
that to the extent Trust assets consist of investments which cannot be assigned
or can be liquidated only periodically or upon notice, the Trustees shall
continue to hold such assets, subject to this Trust Agreement, until they can
be liquidated. In addition, the Trust shall make payments out of the Trust
assets to Employee in the event of an Unforeseeable Emergency as defined in
subsection (d) below, provided, however, that the amount of such payment shall
be limited to the amount necessary to meet such Unforeseeable Emergency. The
Trustees shall make provision for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with respect to the
payment of benefits pursuant to this Section and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by Company.
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<PAGE> 11
(b) The entitlement of Employee, his estate or his designated
beneficiaries to benefits under this Section shall be determined by Company.
Company shall notify the Trustees of any event that would require payment to be
made to Employee, his estate or designated beneficiaries. In the event that
Employee requests payment or partial payment of the Trust assets due to an
Unforeseeable Emergency, a claim therefor shall be made to Company, and Company
shall instruct the Trustees of the amount of Trust assets to be paid to
Employee. If Employee disputes Company's determination of the amount of Trust
assets to be so paid, the dispute shall be referred to arbitration before three
arbitrators, one chosen by Employee, one chosen by Company, and the third
chosen by the other two. Such arbitration shall be conducted under the rules
of the American Arbitration Association. The Trustees shall pay the Trust
assets in accordance with Company's instructions or, if applicable, the
arbitrators' decision. The costs of such arbitration shall be paid as
determined by the arbitrators, and the decision of the arbitrators shall be
final and unappealable.
(c) Company may make payment of benefits directly to Employee or his
designated beneficiaries as they become due under the terms of this Section.
Company shall notify the Trustees of its decision to make payment of benefits
directly prior to the time amounts are payable to Employee, his estate or his
designated beneficiaries, and upon such payment the Trustees shall pay to
Company amounts they otherwise would have paid to Employee.
-4-
<PAGE> 12
(d) The term "Unforeseeable Emergency" means severe financial
hardship to Employee resulting from a sudden and unexpected illness or accident
of Employee or a dependent (as defined in Section 152(a) of the Internal
Revenue Code) of Employee, loss of Employee's property due to casualty or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of Employee. Notwithstanding Section 2(a) payments
in respect of an Unforeseeable Emergency shall not be made to the extent that
such hardship is or may be relieved (1) through reimbursement or compensation
by insurance or otherwise, or (2) by liquidation of Employee's assets, to the
extent that liquidation of such assets would not in itself cause severe
financial hardship.
(e) Employee may at any time by written notice to Company or the
Trustees designate or change a prior designation of beneficiaries for payments
to be made hereunder after Employee's death. In the absence of any such
designation, such benefits shall be paid to Employee's estate.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT.
(a) The Trustees shall cease payment of benefits to Employee, his
estate and his designated beneficiaries if Company is Insolvent. Company shall
be considered "Insolvent" for purposes of this Trust Agreement if (i) Company
is unable to pay its debts as
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<PAGE> 13
they become due, or (ii) Company is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below:
(1) The Board of Directors and the Chief Executive Officer of
Company shall have the duty to inform the Trustees in writing of Company's
Insolvency. If a person claiming to be a creditor of Company alleges in
writing to the Trustees that Company has become Insolvent, the Trustees shall
determine whether Company is Insolvent and, pending such determination, the
Trustees shall discontinue payment of benefits to Employee or his
beneficiaries.
(2) Unless the Trustees have actual knowledge of Company's
Insolvency or have received notice from Company or a person claiming to be a
creditor alleging that Company is Insolvent, the Trustees shall have no duty to
inquire whether Company is Insolvent. The Trustees may in all events rely on
such evidence concerning Company's solvency as may be furnished to the Trustees
and that provides Trustees with a reasonable basis for making a determination
concerning Company's solvency.
(3) If at any time the Trustees have determined that the Company
is Insolvent, the Trustees shall discontinue payments to Employee, his estate
or his designated beneficiaries
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<PAGE> 14
and shall hold the assets of the Trust for the benefit of Company's general
creditors. Nothing in this Trust Agreement shall in any way diminish any
rights of Employee, his estate or his designated beneficiaries to pursue their
rights as general creditors of Company with respect to benefits due under this
Trust Agreement or otherwise.
(4) The Trustees shall resume the payment of benefits to
Employee, his estate or his designated beneficiaries in accordance with Section
2 of this Trust Agreement only after the Trustees have determined that the
Company is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustees
discontinue the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resume such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Employee, his estate or his designated beneficiaries under the terms of the
Agreement for the period of such discontinuance, less the aggregate amount of
any payments made to Employee, his estate or his designated benefici-aries by
Company in lieu of the payments provided for hereunder during any such period
of discontinuance.
SECTION 4. INVESTMENT AUTHORITY
In no event may the Trustees invest in securities (including stock or
rights to acquire stock) or obligations issued by Company other than a de
minimis amount held in common investment
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<PAGE> 15
vehicles in which the Trustees invest. All rights associated with assets of
the Trust shall be exercised by the Trustees, or the person designated by the
Trustees, and shall in no event be exercisable by or rest with Employee. The
Trustees shall invest the assets of the Trust in one or more of the following:
(a) securities issued by the United States government; (b) mutual funds
sponsored or managed by Fidelity Investments or Vanguard Management Company,
and (c) Conservation Securities, L.P., a Delaware limited partnership. The
Trustees shall consult with Employee regarding the investment of the Trust's
assets and shall endeavor to take into account the preferences expressed by the
Employee for allocation of the Trust's assets among the foregoing permitted
investments, provided, however, that the Trustees shall determine such
allocation in their sole discretion.
SECTION 5. DISPOSITION OF INCOME
During the term of this Trust, all of the income received by the
Trust, net of expenses, shall be accumulated and reinvested, provided, however
that the Trustees shall pay to Company, at the time and in the manner herein
provided, amounts ("Tax Reimbursement Amounts") in respect of federal, state
and local income taxes ("Taxes") incurred by Company attributable to the
taxable income of the Trust. Promptly after Company shall file its tax returns
for each taxable year in or with which ends a taxable year of the Trust,
Company shall compute the excess, if any, of the aggregate Taxes paid by
Company for such taxable year over the Taxes Company would have paid if the
taxable income of the Trust were not
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<PAGE> 16
includible in Company's taxable income for such taxable year and other taxable
years. For taxable years of Company in which the amount of a net operating or
capital loss carryover ("Loss Carryover") is affected by the inclusion in
Company's taxable income of the Trust's taxable income in a different year, the
excess referred to in the previous sentence shall be computed with due regard
to such reduction in the Loss Carryover. Promptly, but in any event within
fifteen days after the receipt of a written notice from Company containing such
computation, the Trustees shall pay the Tax Reimbursement Amount to Company in
immediately available funds. In the event the tax liability of the Company for
any taxable year shall be adjusted, due to an audit or otherwise, Company shall
promptly recompute all Tax Adjustment Amounts affected by such adjustment, and
deliver to the Trustees written notice containing such computation, and any
increase or decrease in Tax Adjustment Amounts previously paid shall be paid by
the Trustees to Company, or repaid by Company to the Trustees, as the case may
be, within 15 days after delivery of such notice. Notwithstanding the
foregoing, no payment of the Tax Adjustment Amount shall be required in respect
of the last taxable year of the Trust.
SECTION 6. ACCOUNTING BY THE TRUSTEES.
The Trustees shall keep records of investments, receipts,
disbursements and other transactions, including such specific records as shall
be agreed upon in writing between Company and the Trustees. Within 60 days
following the close of each calendar year
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<PAGE> 17
and within 30 days after the removal or resignation of both Trustees, the
Trustees shall deliver to Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by them,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be.
SECTION 7. RESPONSIBILITY OF THE TRUSTEES.
(a) The Trustees shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, the
Trustees shall incur no liability to any person for any action taken pursuant
to a direction, request or approval given by Company which is contemplated by,
and in conformity with, the terms of the Agreement or this Trust and is given
in writing by Company. In the event of a dispute between Company and a party,
including the Trustees, the Trustees may apply to a court of competent
jurisdiction to resolve the dispute.
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<PAGE> 18
(b) If the Trustees undertake or defend any litigation arising in
connection with this Trust, the Trustees shall be indemnified out of the
Trust's assets against their costs, expenses and liabilities (including,
without limitation, attorneys' fees and expenses) relating thereto. If the
Trust's assets are insufficient to fully indemnify the Trustees, Company shall
so indemnify the Trustees.
(c) The Trustees may consult with legal counsel and other
professional advisors (who may also be counsel and advisors for Company
generally and may include one of the Trustees or a firm of which he is a
member) with respect to any of their duties or obligations hereunder. The
costs of all such legal and professional fees shall be paid by the Trust.
(d) The Trustees shall have, without exclusion, all powers conferred
on the Trustees by applicable law, unless expressly provided otherwise herein.
(e) Notwithstanding any powers granted to the Trustees pursuant to
this Trust Agreement or to applicable law, the Trustees shall not have any
power that could give the Trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
(f) The Trustees shall be indemnified against any and all claims,
losses, damages, expenses (including reasonable
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<PAGE> 19
attorneys' fees and disbursements) and liabilities arising from any action or
failure to act in connection with the Trust, except when the same is judicially
determined to be due to the bad faith or willful misconduct of the Trustees.
In the absence of such a judicial determination, no Trustee hereunder shall be
liable to the Trust or to any party or parties interested in the Trust or be
surcharged for any transaction occurring during the administration of the Trust
or for any loss or depreciation which may arise or occur by reason or on
account of any act or failure to act including any mistake of judgment, fact or
law in the management of the Trust. Such indemnity shall be paid out of the
Trust assets, and the rights of the Employee and his designated beneficiaries
and Company to receive any payment from the Trust shall be subordinated to the
right of the Trustees hereunder to receive such indemnification payment. If
such assets are insufficient to fully indemnify the Trustees, Company shall so
indemnify the Trustees. No Trustee shall be accountable, liable or responsible
for any act, default, negligence, or omission of any other Trustee.
(g) Company does hereby expressly acknowledge that it is aware of the
fact that EDWARD KLIMERMAN is a member of the law firm of Rubin Baum Levin
Constant & Friedman ("RBLC&F"), which acts as counsel for Company, and Company
hereby expressly acknowledges and agrees that neither the services of EDWARD
KLIMERMAN as Trustee hereunder, nor any provision of this Trust Agreement,
either express or implied, shall restrict or inhibit EDWARD KLIMERMAN or RBLC&F
in any way from representing Company in any action, dispute,
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<PAGE> 20
controversy, arbitration, suit or negotiation arising under this Trust
Agreement, or under any other agreement or in any other manner or context
whatsoever, whether or not directly or indirectly involving Company or the
Employee, or the administration and/or disposition of the Trust created hereby.
SECTION 8. COMPENSATION AND EXPENSES OF TRUSTEE.
The Trustees agree to act as such hereunder without compensation;
provided, however, the Trustees shall be entitled to reimbursement out of the
Trust assets for all reasonable out-of-pocket expenses incurred by the Trustees
in performing their duties under this agreement, including, without limitation,
legal and accounting fees and disbursements.
SECTION 9. RESIGNATION AND REMOVAL OF THE TRUSTEES.
(a) Each Trustee may resign at any time by written notice to Company,
which shall be effective 30 days after receipt of such notice unless Company
and such Trustee otherwise agree.
(b) Each Trustee may be removed by Company on 10 days notice or upon
shorter notice accepted by such Trustee.
(c) Upon resignation or removal of a Trustee, the remaining Trustee
shall be the sole Trustee hereunder until a successor trustee shall be
appointed in accordance with Section 10 hereof. In the event of the
resignation of both Trustees, and appointment of a successor Trustee or
Trustees, all assets shall subsequently be transferred to the successor Trustee
or Trustees.
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<PAGE> 21
The transfer shall be completed within 30 days after receipt of notice of
resignation, removal or transfer, unless Company otherwise agrees.
(d) If both Trustees resign or are removed, a successor or successors
shall be appointed, in accordance with Section 10 hereof, by the effective date
of resignation or removal under paragraphs (a) or (b) of this section. If no
such appointment has been made, either of the Trustees may apply to a court of
competent jurisdiction for appointment of a successor. All expenses of the
Trustees in connection with the proceeding shall be allowed as administrative
expenses of the Trust.
SECTION 10. APPOINTMENT OF SUCCESSOR OR SUCCESSORS.
(a) If either or both Trustees resign or are removed in accordance
with Section 9(a) or 9(b) hereof, Company shall appoint a third party other
than Employee or a member of his family as a successor or replacement Trustee
for each such Trustee. The appointment shall be effective when accepted in
writing by the new Trustee, who shall have all of the rights and powers of the
former Trustee, including ownership rights in the Trust assets. The former
Trustees shall execute any instrument necessary or reasonably requested by
Company or the successor Trustee to evidence the transfer.
(b) A successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 6 and 7 hereof. A successor
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<PAGE> 22
Trustee shall not be responsible for and the Company shall indemnify and defend
the successor Trustee from any claim or liability resulting from any action or
inaction of any prior Trustee or from any other past event, or any condition
existing at the time it becomes successor Trustee.
SECTION 11. AMENDMENT OR TERMINATION
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustees and Company.
(b) The Trust shall not terminate until the date on which the
Employee or his beneficiaries are no longer entitled to benefits pursuant to
the terms of the Agreement and this Trust Agreement. Upon termination of the
Trust any assets remaining in the Trust shall be returned to Company.
(c) Upon written approval of Employee or designated beneficiaries
entitled to payment of benefits pursuant to the terms of the Agreement, Company
may terminate this Trust prior to the time all benefit payments under the
Agreement and the Trust Agreement have been made. All assets in the Trust at
termination shall be returned to Company.
SECTION 12. MISCELLANEOUS.
(a) Any provisions of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
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<PAGE> 23
(b) Benefits payable to Employee and his beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) All notices required to be given under this Trust Agreement shall
be in writing. The Trustees may rely on any notice by Company which is signed
by any person they believe is authorized to act on behalf of Company. The
Trustees shall not be required to act if, pursuant to the terms of this Trust
Agreement, notice is required to be given and such notice has not been received
by the Trustees.
[The remainder of this page has been
intentionally left blank.]
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<PAGE> 24
(d) This Trust Agreement shall be governed by and construed in
accordance with the laws of New York.
SECTION 13. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be March __, 1994.
COMPANY:
TRANS-RESOURCES, INC.
By:
------------------------------
TRUSTEES:
----------------------------------
Edward Klimerman
-----------------------------------
Charles E. Shaw
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<PAGE> 25
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of March, 1994, before me personally came
________________________ to me known, and known to me to be the individual
described in, and who executed the foregoing instrument on behalf of
Trans-Resources, Inc., and he acknowledged to me that he executed the same.
------------------------------
Notary Public
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<PAGE> 26
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of March, 1994, before me personally came Edward
Klimerman, to me known, and known to me to be the individual described in
foregoing instrument, and he acknowledged to me that he executed the same.
--------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of March, 1994, before me personally came Charles E.
Shaw, to me known, and known to me to be the individual described in foregoing
instrument, and he acknowledged to me that he executed the same.
------------------------------
Notary Public
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<PAGE> 1
EXHIBIT 10.15
[EXECUTION COPY]
U.S. $43,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of June 2, 1993
Among
CEDAR CHEMICAL CORPORATION,
NEW MEXICO POTASH CORPORATION
and
VICKSBURG CHEMICAL COMPANY
Each as a Borrower
THE FIRST NATIONAL BANK OF BOSTON
NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION
and
THE OTHER BANKS NAMED HEREIN FROM TIME TO TIME
as Lenders
and
THE FIRST NATIONAL BANK OF BOSTON
as Agent
E-5
<PAGE> 2
T A B L E O F C O N T E N T S
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<TABLE>
<S> <C> <C>
SECTION 1.01. Certain Defined Terms . . . . . . . . . . 1
SECTION 1.02 Computation of Time Periods . . . . . . . 21
SECTION 1.03 Accounting Terms . . . . . . . . . . . . 22
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances . . . . . . . . . . . . . . 23
SECTION 2.02. Making the Revolving Credit Advances . . 23
SECTION 2.03. Fees . . . . . . . . . . . . . . . . . . 26
SECTION 2.04. Reduction of the Commitments . . . . . . 26
SECTION 2.05. Repayment . . . . . . . . . . . . . . . . 26
SECTION 2.06. Interest . . . . . . . . . . . . . . . . 27
SECTION 2.07. Prepayments and Cash Collateral . . . . . 28
SECTION 2.08. Increased Costs . . . . . . . . . . . . . 29
SECTION 2.09. Payments and Computations . . . . . . . . 29
SECTION 2.10. Sharing of Payments, Etc . . . . . . . . 30
SECTION 2.11. Use of Proceeds . . . . . . . . . . . . . 31
SECTION 2.12. Letters of Credit . . . . . . . . . . . . 31
SECTION 2.13. Sale and Purchase of Participations . . . 34
ARTICLE III
GUARANTEE
SECTION 3.01. Unconditional Guarantee . . . . . . . . . 39
SECTION 3.02. Guarantee Absolute . . . . . . . . . . . 40
SECTION 3.03. Waivers . . . . . . . . . . . . . . . . . 41
SECTION 3.04. Waiver of Subrogation and Contribution
of Cedar . . . . . . . . . . . . . . . . 41
SECTION 3.05. Right of Contribution of Potash and VCC . 42
SECTION 3.06. Survival . . . . . . . . . . . . . . . . 42
ARTICLE IV
CONDITIONS OF EFFECTIVENESS
SECTION 4.01. Conditions Precedent to Effectiveness . . 43
SECTION 4.02. Conditions Precedent to Each Borrowing . 46
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the
Borrowers . . . . . . . . . . . . . . . 47
</TABLE>
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<PAGE> 3
ARTICLE VI
COVENANTS OF THE BORROWERS
<TABLE>
<S> <C> <C>
SECTION 6.01. Affirmative Covenants . . . . . . . . . 53
SECTION 6.02. Negative Covenants . . . . . . . . . . 60
SECTION 6.03. Collection of Receivables . . . . . . . 64
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default . . . . . . . . . . . 66
ARTICLE VIII
THE AGENT
SECTION 8.01. Appointment of Agent . . . . . . . . . 70
SECTION 8.02. Delegation of Duties . . . . . . . . . 70
SECTION 8.03. Exculpatory Provisions . . . . . . . . 70
SECTION 8.04. Reliance by Agent . . . . . . . . . . . 71
SECTION 8.05. Notice of Default . . . . . . . . . . . 71
SECTION 8.06. Non-Reliance on Agent and Other Lenders. 72
SECTION 8.07. Indemnification . . . . . . . . . . . . 72
SECTION 8.08. Agent in Its Individual Capacity . . . 73
SECTION 8.09. Successor Agent . . . . . . . . . . . . 73
SECTION 8.10. Notices from Agent to Lenders . . . . . 73
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. . . . . . . . . . . . 74
SECTION 9.02. Notices, Etc. . . . . . . . . . . . . . 74
SECTION 9.03. No Waiver; Remedies . . . . . . . . . . 75
SECTION 9.04. Costs, Expenses and Taxes . . . . . . . 76
SECTION 9.05. Right of Set-off . . . . . . . . . . . 76
SECTION 9.06. Binding Effect . . . . . . . . . . . . 77
SECTION 9.07. Assignments and Participations . . . . 77
SECTION 9.08. Governing Law; Consent to Jurisdiction . 80
SECTION 9.09. Execution in Counterparts . . . . . . . 80
SECTION 9.10. Indemnification . . . . . . . . . . . . 80
SECTION 9.11. Effect of Amendment and Restatement of
Existing Credit Agreement . . . . . . 81
SECTION 9.12. Waiver of Jury Trial . . . . . . . . . 81
</TABLE>
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<PAGE> 4
Schedule I - Commitments and Lending Offices
Schedule 1.1 - Existing Debt
Schedule 1.1 - Existing Encumbrances
Schedule 1.1 - Mortgages
Schedule 5.01(h) - Disclosed Litigation
Schedule 5.01(s) - Real Property
Schedule 5.01(t) - Leases of Real Property
Schedule 5.01(u) - Material Contracts
Schedule 5.01(v) - Loans, Advances and Other Investments
Schedule 5.01(w) - Patents, Trademarks, Trade Names, Etc.
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<PAGE> 5
Exhibit A-1 - Form of Amended and Restated Revolving Credit
Note
Exhibit A-2 - Form of Amended and Restated Term Loan Note
Exhibit B - Form of Borrowing Base Certificate
Exhibit C - Form of Notice of Borrowing
Exhibit D - Form of Assignment and Acceptance
Exhibit E-1 - Form of Amended and Restated Cedar Security
Agreement
Exhibit E-2 - Form of Amended and Restated Potash Security
Agreement
Exhibit E-3 - Form of Amended and Restated VCC Security
Agreement
Exhibit F-1 - Form of Mortgage Modification (Mississippi)
Exhibit F-2 - Form of Mortgage Modification (New Mexico)
Exhibit F-3 - Form of Mortgage Modification (Arkansas)
Exhibit G - Form of Opinion of Counsel for the Borrowers
(Apperson, Crump)
Exhibit H-1 - Form of Opinion of Mississippi Local Counsel
to the Lenders
Exhibit H-2 - Form of Opinion of New Mexico Local Counsel
to the Lenders
Exhibit H-3 - Form of Opinion of Arkansas Local Counsel to
the Lenders
Exhibit H-4 - Form of Opinion of Rubin Baum Levin Constant
& Friedman Counsel to Nine West [and TRI]
Exhibit I - Form of Notice of Creation of Permitted
Encumbrance
Exhibit J - Form of Amended and Restated Pledge Agreement
Exhibit K - Form of Settlement Report
Exhibit L - Form of Compliance Certificate
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<PAGE> 6
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of June 2, 1993
CEDAR CHEMICAL CORPORATION, a Delaware corporation ("Cedar"), NEW
MEXICO POTASH CORPORATION, a New Mexico corporation ("Potash"), VICKSBURG
CHEMICAL COMPANY, a Delaware corporation ("VCC" and together with Cedar and
Potash, the "Borrowers", and each individually a "Borrower"), THE FIRST
NATIONAL BANK OF BOSTON ("Bank of Boston") and NATIONSBANK OF GEORGIA, NATIONAL
ASSOCIATION (together with any other financial institutions which may be
parties hereto from time to time, the "Lenders"), and BANK OF BOSTON, as agent
(in such capacity, together with any successor appointed pursuant to Article
VIII, the "Agent") for the Lenders hereunder, agree as follows:
Preliminary Statements
The Borrowers, the Lenders (by assignment), and the Agent (as
successor to Citibank, N.A. in such capacity), are parties to the Existing
Credit Agreement (as hereinafter defined).
The Borrowers have requested, among other things, that the Revolving
Credit Commitments, under and as defined in the Existing Credit Agreement, be
increased and that the Revolving Credit Termination Date, under and as defined
in the Existing Credit Agreement, be extended, and the Lenders have agreed to
such requests, upon and subject to all of the terms, conditions and provisions
of this Agreement.
In order to reflect such modifications, as well as certain other
modifications to the Existing Credit Agreement agreed on by the Borrowers, the
Lenders and the Agent, in a single document, the Borrowers, the Lenders and the
Agent have agreed to amend and restate the Existing Credit Agreement in its
entirety as hereinafter set forth but nothing herein is intended as, or shall
be deemd to be a repayment of the indebtedness outstanding under the Existing
Credit Agreement or a novation.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
<PAGE> 7
"Adjusted Net Worth" has the meaning specified in SECTION 6.01(m).
"Advance" means a Revolving Credit Advance or a Term Loan Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling," "controlled
by" and "under common control with") of a Person means the possession, direct
or indirect, of the power to vote 5% or more of the securities having ordinary
voting power for the election of directors of such Person or to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agency Account" means an account of a Borrower maintained by it
with a Clearing Bank pursuant to an Agency Account Agreement.
"Agency Account Agreement" means an agreement among a Borrower, the
Agent and a Clearing Bank, in form and substance satisfactory to the Agent,
concerning the collection of payments which represent the proceeds of
Receivables or of any other Collateral.
"Agent" has the meaning specified in the recital of parties to this
Agreement.
"Agent's Office" means the office of the Agent specified in or
determined in accordance with the provisions of SECTION 9.02.
"Aggregate Borrowing Base" means, at any time, the lesser of:
(a) the aggregate Revolving Credit Commitments at such time, and
(b) the sum of
(i) the sum of the amounts determined pursuant to clause (a) of the
definition "Borrowing Base" for all Borrowers at such time, PLUS
(ii) the lesser of (x) $12,500,000 and (y) the sum of the amounts
determined pursuant to clause (b) of the definition "Borrowing Base" for
all Borrowers at such time, MINUS
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<PAGE> 8
(iii) the Letter of Credit Reserve.
"Applicable Margin" means 3/4 of 1% per annum for Revolving Credit
Advances and 1-1/4% per annum for Term Loan Advances.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the Agent,
in substantially the form of EXHIBIT D hereto.
"Authorized Officer" means the Executive Vice President or the
Treasurer of Cedar or such other Person as may be designated by them in writing
to the Agent.
"Base Rate" means at any time the greater of (i) the rate of
interest announced from time to time by Bank of Boston at its head office at
100 Federal Street, Boston, Massachusetts 02110 as its "base rate" at such
time and (ii) the Federal Funds Rate at such time (rounded upwards, if
necessary, to the next higher 1/8 of 1%), plus 1/2 of 1% per annum.
"Borrower's Account" means, for Cedar, the account of Cedar
maintained with Bank of Boston at its office at 100 Federal Street, Boston,
Massachusetts 02110, Account No. 80-013-898; for Potash, the account of Potash
maintained at such location, Account No. 80-013-900; and, for VCC, the account
of VCC maintained at such location, Account No. 80-014-006.
"Borrowing" means a borrowing consisting of Revolving Credit
Advances made on the same day by the Lenders.
"Borrowing Base" of any Borrower means, at any time, the sum of:
(a) 85% (or such lesser percentage as the Agent in its reasonable
discretion shall determine) of Eligible Receivables of such Borrower at
such time, PLUS
(b) 50% (or such lesser percentage as the Agent in its reasonable
discretion shall determine) of the value of Eligible Inventory of such
Borrower at such time, MINUS
(c) the aggregate face amount of all Letters of Credit issued for
the account of such Borrower and outstanding at such time.
"Borrowing Base Certificate" means a certificate in the form
attached hereto as EXHIBIT B.
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<PAGE> 9
"Business Day" means a day of the year on which banks are not
required or authorized to close in Boston, Massachusetts or Atlanta, Georgia.
"Capital Expenditure Debt" means, at any time, the aggregate amount
of all Debt (including Capital Lease Obligations), other than Debt outstanding
under the Loan Documents, of any Borrower at such time, which Debt was assumed
or incurred to finance Capital Expenditures, and Debt, other than Debt
outstanding under the Loan Documents, the proceeds of which are used to repay
Capital Expenditure Debt.
"Capital Expenditure Lien" means any purchase money or other Lien
confined exclusively to property acquired by a Borrower with the proceeds of
Capital Expenditure Debt, securing only the repayment of such Capital
Expenditure Debt.
"Capital Expenditures" means, for any period, the aggregate of (a)
all expenditures during such period for equipment, fixed assets, real property
or improvements, or for replacements or substitutions therefor or additions
thereto, that have a useful life of more than one year PLUS (b) the entire
principal amount of any Debt (including Capital Lease Obligations) assumed or
incurred in connection with any such expenditures (which principal amounts are
not already included as expenditures under clause (a) above).
"Capital Lease Obligations" has the meaning specified in clause (v)
of the definition of "Debt."
"Cedar Security Agreement" means the Amended and Restated Security
Agreement dated on or about the Effective Date between Cedar and the Agent in
substantially the form of EXHIBIT E-1, as the same may be amended, modified,
supplemented or restated from time to time.
"Cedar Subordinated Debt" means the subordinated loan made to Cedar
by TRI on September 15, 1988 pursuant to the Subordinated Debt Agreement.
"Clearing Bank" means Bank of Boston and any other banking
institution with which an Agency Account has been established pursuant to an
Agency Account Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all "Collateral" referred to in the Collateral
Documents and all other property that is subject to any Lien in favor of the
Agent or the Lenders.
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<PAGE> 10
"Collateral Documents" means each Security Agreement, the Pledge
Agreement and each Mortgage.
"Commitment" has the same meaning as "Revolving Credit Commitment"
and is used interchangeably with the term "Revolving Credit Commitment."
"Compliance Certificate" has the meaning specified in SECTION
6.01(p)(iii).
"Consolidated" refers to the consolidation of financial accounts in
accordance with GAAP.
"Consolidated Subsidiaries" means, as to Cedar, each of Potash and
VCC and any other Subsidiaries of Cedar whose accounts are at the time in
question, in accordance with GAAP and pursuant to the written consent of the
Majority Lenders, which consent may be withheld in their absolute discretion
conditioned upon, among other things, the execution and delivery of guaranties,
security agreements, mortgages and other documents required by the Majority
Lenders in their absolute discretion, Consolidated with those of Cedar.
"Controlled Disbursement Account" means each of the Borrower's
Accounts and each account maintained by and in the name of a Borrower with a
United States commercial bank (each, a "Disbursing Bank") for the purposes of
disbursing the proceeds of Revolving Credit Advances and any amounts deposited
thereto pursuant to SECTION 6.03(b).
"Current Assets" of any Person means all assets of such Person that
would, in accordance with GAAP, be classified as current assets of a company
conducting a business the same as or similar to that of such Person, after
deducting adequate reserves in accordance with GAAP for a company conducting a
business the same as or similar to that of such Person.
"Current Liabilities" of any Person means (a) all Debt of such
Person that by its terms is payable on demand or matures within one year from
the date of its creation (excluding any Debt constituting any portion of any
Revolving Credit Advances), (b) all amounts required to be paid or prepaid with
respect to any Funded Debt of such Person (including the Debt in respect of the
Term Loan Advances) within one year after such date and (c) all other items
(including taxes accrued as estimated, but excluding the current portion of
deferred revenue) that in accordance with GAAP for a company conducting a
business the same as or similar to that of such Person would be classified as
current liabilities of such Person.
"Debt" of any Person means all (i) indebtedness of such Person,
including for borrowed money, (ii) obligations of such
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<PAGE> 11
Person for the deferred purchase price of property or services (other than
trade payables of such Person incurred in the ordinary course of its business),
(iii) obligations of such Person evidenced by any note, loan, bond, debenture
or other similar instrument, (iv) obligations of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (v) obligations of such Person as
lessee under leases (whether in respect of land, machinery, equipment or
otherwise, but excluding rentals under any operating leases) that have been or
should be, in accordance with GAAP, recorded as capital leases ("Capital Lease
Obligations"), (vi) all obligations, contingent or otherwise, of such Person
under acceptance, letter of credit or similar facilities, (vii) obligations of
such Person to purchase, redeem, retire, defease or otherwise acquire for value
any capital stock of such Person or any warrants, rights or options to acquire
such capital stock, valued, in the case of redeemable preferred stock, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends, (viii) all obligations for production or royalty payments
from property operated by or on behalf of such Person and other similar
arrangements with respect to natural resources, (ix) obligations under direct
or indirect guarantees (other than the Guarantee) in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others referred to in clauses (i) through (viii) above, and (x)
liabilities in respect of unfunded vested benefits under plans covered by Title
IV of ERISA. Debt of any Borrower includes but is not limited to any Debt owed
to any other Borrower or to TRI.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
"Determination Date" means, with respect to each of Potash and VCC,
the earlier of (a) the date of commencement of a case under Title 11 of the
United States Code in which such party is a debtor and (b) the date enforcement
of the Guarantee is sought with respect to such party.
"Disclosed Litigation" has the meaning specified in SECTION 4.01(b).
"EBIT" of any Person for any period means, net income of such Person
for such period, plus the amount of interest expense and income tax expense
deducted in computing such net income.
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<PAGE> 12
"EBITDA" of any Person for any period means, EBIT of such Person for
such period, plus depreciation, depletion and amortization expense deducted in
computing such EBIT.
"EBIT Coverage" has the meaning specified in SECTION 6.01(k).
"Effective Date" means the later of the date of this Agreement and
the date on which all of the conditions set forth in ARTICLE IV are first
satisfied.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any State thereof, and having total assets in
excess of $3,000,000,000 and a combined capital and surplus of at least
$150,000,000; (b) a savings and loan association or savings bank organized
under the laws of the United States, or any State thereof, and having total
assets in excess of $3,000,000,000 and a combined capital and surplus of at
least $150,000,000; (c) a commercial bank organized under the laws of any other
country that is a member of the OECD, or a political subdivision of any such
country, and having total assets in excess of $3,000,000,000 and a combined
capital and surplus of at least $150,000,000, PROVIDED that such bank is acting
through a branch or agency located in the country in which it is organized or
another country that is also a member of the OECD; (d) the central bank of any
country that is a member of the OECD; (e) a finance company, insurance company
or other financial institution or fund engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its business,
organized under the laws of the United States or any State thereof and having
assets in excess of $500,000,000; (f) any other financial institution or fund
which the Agent and Cedar agree may become an Eligible Assignee; and (g) any
Affiliate of an assignor of an interest hereunder.
"Eligible Inventory" means, as to each Borrower, Inventory of such
Borrower which the Agent in its reasonable discretion determines to meet all of
the following requirements:
(a) such Inventory is owned by such Borrower, is stored at a
location listed on Schedule III to such Borrower's Security Agreement, is
subject to the Security Interest, which is perfected as to such
Inventory, and is subject to no other Lien whatsoever other than a
Permitted Lien,
(b) such Inventory consists of raw materials or finished goods and
not work-in-process,
(c) such Inventory meets all standards imposed by any Governmental
Authority having regulatory authority over such goods, their use or sale,
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<PAGE> 13
(d) such Inventory is currently either usable or salable at prices
approximating at least cost in the ordinary course of such Borrower's
business,
(e) such Inventory is not obsolete or returned or repossessed goods,
(f) such Inventory is in the possession and control of such
Borrower and not any third party,
(g) if such Inventory is located on property leased by such
Borrower (other than a public warehouse), the lessor of such property
shall have entered into a consent and agreement providing the Agent with
the right to receive notice of default, the right to repossess such
Inventory at any time and such other rights as may be acceptable to the
Agent, and
(h) such Inventory is not determined by the Agent, on behalf of the
Lenders, to be ineligible based on customary credit and collateral
criteria utilized by asset based lenders.
"Eligible Receivable" means, to each Borrower, a Receivable of such
Borrower which the Agent in its reasonable discretion determines to meet all of
the following requirements:
(a) such Receivable is owned by such Borrower and represents a
complete bona fide transaction in the ordinary course of such Borrower's
business which requires no further act under any circumstances on the
part of such Borrower to make such Receivable payable by the account
debtor thereon,
(b) such Receivable does not remain unpaid more than 30 days past
the original due date nor, unless such Receivable is fully backed by an
irrevocable letter of credit issued or confirmed by a U.S. commercial
bank having combined capital and surplus of not less than $150,000,000,
is the original due date of such Receivable more than 180 days past the
date of the original invoice giving rise to such Receivable,
(c) the goods the sale of which gave rise to such Receivable were
shipped or delivered to the account debtor on an absolute sale basis and
not on a bill and hold sale basis, a consignment sale basis, a guaranteed
sale basis, a sale or return basis, or on the basis of any other similar
understanding and no material part of such goods has been returned or
rejected, PROVIDED that this clause (c) shall not apply to Receivables of
VCC arising under the N-204 Contract nor to Receivables arising out of
the sale of goods covered by one or more "inventory protection" programs
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<PAGE> 14
maintained by such Borrower, of which such Borrower has notified the
Agent (in a Borrowing Base Certificate or otherwise in writing), and in
connection with which the Agent shall have established such reserves
against the Borrowing Base of such Borrower as the Agent deems
appropriate,
(d) such Receivable is not evidenced by chattel paper or an
instrument of any kind unless such chattel paper or instrument has been
collaterally assigned to the Agent, for the benefit of itself as Agent
and the Lenders, pursuant to an assignment in form and substance
satisfactory to the Agent and is in the possession of the Agent,
(e) the account debtor with respect to such Receivable is not
insolvent or the subject of any bankruptcy or insolvency proceedings of
any kind or of any other proceeding or action, threatened or pending,
which might, in the Agent's reasonable judgment, have a materially
adverse effect on such account debtor,
(f) such Receivable is not owing by an account debtor having 25% or
more in face value of its then-existing accounts owing to such Borrower
past due more than 60 days from the due date of the original invoice,
(g) such Receivable is not owing by an account debtor whose
then-existing accounts owing to such Borrower exceed in face amount 20%
of such Borrower's total Eligible Receivables, PROVIDED that for the
purpose of this clause (g), only the Receivables of such account debtor
in excess of 20% of such Borrower's total Eligible Receivables shall be
deemed to be ineligible and, PROVIDED FURTHER, that this clause (g) shall
not apply to Receivables arising under a Material Contract that has been
assigned to the Agent as security,
(h) if such Receivable arises from the performance of services,
such services have been fully rendered and do not relate to any warranty
claim or obligation,
(i) such Receivable is not owing by an account debtor that is
located outside of the United States of America, unless such Receivable
is fully backed by an irrevocable letter of credit issued or confirmed by
a U.S. commercial bank having combined capital and surplus of not less
thatn $150,000,000, PROVIDED that this clause (i) shall not apply to
Receivables of such Borrower in an aggregate amount equal to $750,000 or
less,
(j) such Receivable is a valid, legally enforceable obligation of
the account debtor with respect thereto,
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<PAGE> 15
(k) such Receivable is subject to the Security Interest, which is
perfected as to such Receivable, and is subject to no other Lien
whatsoever other than a Permitted Lien,
(l) such Receivable is evidenced by an invoice or other
documentation in form acceptable to the Agent,
(m) the Receivable (including any Receivable arising under the
N-204 Contract) is not subject to the Assignment of Claims Act of 1940,
as amended from time to time, or any Applicable Law now or hereafter
existing similar in effect thereto, or to any other prohibition (under
Applicable Law, by contract or otherwise) against its assignment or
requiring notice of or consent to such assignment, unless all such
required notices have been given, all such required consents have been
received and all other procedures have been complied with such that such
Receivable shall have been duly and validly assigned to the Agent, for
the benefit of the Lenders,
(n) the goods giving rise to such Receivable were not, at the time
of the sale thereof, subject to any Lien, except the Security Interest
and Permitted Liens,
(o) such Borrower is not in breach of any express or implied
representation or warranty with respect to the goods the sale of which
gave rise to such Receivable nor in breach of any representation or
warranty, covenant or other agreement contained in the Loan Documents
with respect to such Receivable,
(p) such Receivable does not arise out of any transaction with any
Subsidiary, Affiliate, creditor, tenant, lessor or supplier of such
Borrower and is not subject to any present or contingent (and no facts
exist which are the basis for any future) offset, deduction or
counterclaim, dispute or other defense on the part of such account
debtor, EXCEPT (i) if such Person has waived any right of set-off or
defense in a manner acceptable to the Agent or (ii) to the extent that
the value (as determined in the reasonable discretion of the Agent) of
any such Receivable exceeds the potential amount (as determined in the
reasonable discretion of the Agent) of any unwaived set-off or defense
against such Receivable,
(q) such Receivable does not arise out of finance or similar
charges by such Borrower or other fees for the time value of money,
(r) the account debtor with respect to such Receivable is not
located in New Jersey or any other state denying
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<PAGE> 16
creditors access to its courts in the absence of qualification to
transact business in such state or the filing of a Notice of Business
Activities Report or other similar filing, unless such Borrower has
either qualified as a foreign corporation authorized to transact business
in such state or has filed a Notice of Business Activities Report or
similar filing with the applicable state agency for the then current
year, and
(s) neither the account debtor with respect to such Receivable, nor
such Receivable, is determined by the Agent, on behalf of the Lenders, to
be ineligible based on customary credit and collateral criteria utilized
by asset based lenders.
"Environmental Law" means any present or future law, statute, code,
ordinance, rule, regulation, permit, consent, approval, license, judgment,
order, writ, decree, injunction, award or other authorization or requirement,
extraordinary as well as ordinary (including but not limited to any requirement
to register underground storage tanks), of any Governmental Authority relating
to treatment, storage, handling, transportation, disposal, manufacturing, sale,
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, publicly owned treatment works, septic systems or
land, or otherwise relating to pollution or to the protection of health or the
environment.
"Equipment" means all Equipment described in Section 1 of each
Security Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means, as to each Borrower, any Person that for
purposes of Title IV of ERISA is a member of such Borrower's controlled group,
or under common control with such Borrower, within the meaning of Section 414
of the Code and the regulations promulgated and rulings issued thereunder.
"ERISA Event" means, as to each Borrower, (a) a reportable event,
within the meaning of Section 4043 of ERISA, unless the 30-day notice
requirement with respect thereto has been waived by the PBGC; (b) the provision
by the administrator of any Plan of a notice of intent to terminate such Plan,
pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect
to a plan amendment referred to in Section 4041(e) of ERISA); (c) the cessation
of operations at a facility in the circumstances described in Section 4068(f)
of ERISA; (d) the withdrawal by such Borrower or an ERISA Affiliate of such
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<PAGE> 17
Borrower from a Multiple Employer Plan during a plan year for which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (e) the
failure by the Borrower or any ERISA Affiliate to make a payment to a plan
required under Section 302(f)(1) of ERISA; (f) the adoption of an amendment to
a Plan requiring the provision of security to such Plan, pursuant to Section
307 of ERISA; or (g) the institution by the PBGC of proceedings to terminate a
Plan, pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition that might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, a Plan.
"Events of Default" has the meaning specified in SECTION 7.01.
"Existing Credit Agreement" means the Credit Agreement dated as of
November 30, 1989, as amended by Amendment No. 1 dated as of August 15, 1990,
by Amendment No. 2 dated as of August 15, 1991, and by Amendment No. 3 dated as
of December 31, 1992, between the Borrowers, the Lenders as the "Lenders" (by
assignment) thereunder, and Bank of Boston, as the agent for such "Lenders".
"Existing Debt" means Debt of a Borrower outstanding as of the date
of this Agreement to the extent set forth in SCHEDULE 1.1 - EXISTING DEBT
hereto.
"Existing Encumbrances" means all Liens affecting property of any
kind of the Borrowers existing on the date hereof as set forth in SCHEDULE 1.1
- - EXISTING ENCUMBRANCES hereto.
"Extension of Credit" means, as to each of Potash and VCC, (i) all
Advances made to each other Borrower under any Loan Document, (ii) all Letters
of Credit issued for the account of each other Borrower under any Loan
Document, (iii) all bankers' acceptances created for the account of each other
Borrower under any Loan Document and (iv) all other extensions of credit to or
for the benefit of each other Borrower under any Loan Document.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve system arranged by federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average of the quotations for such day for
such transactions received by Bank of Boston from three federal funds brokers
of recognized standing selected by it.
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<PAGE> 18
"Fixed Charge Coverage" has the meaning specified in SECTION 6.01(1).
"Funded Debt" of any Person means Debt of such Person that (i)
matures more than one year from the date of its creation or (ii) matures within
one year from such date but is renewable or extendible, at the option of the
debtor, to a date more than one year from such date or arises under a revolving
credit or similar agreement that obligates the lender or lenders to extend
credit during a period of more than one year from such date, including, without
limitation, all amounts of Funded Debt required to be paid or prepaid within
one year from the date of its creation and, when applied to a Borrower, all
Debt in respect of the Advances to it.
"GAAP" has the meaning specified in SECTION 1.03.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity, now existing or
hereafter created, having jurisdiction over a Borrower or any of its property
or any part thereof, exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guarantee" has the meaning specified in SECTION 3.01.
"Guaranteed Obligations" has the meaning specified in SECTION 3.01.
"Hazardous Materials" means all materials subject to any
Environmental Law, including, without limitation, materials listed and defined
as hazardous or toxic pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Section Section
9601, et seq.), the Hazardous Materials Transportation Act, as amended (49
U.S.C. Section Section 1801, et seq.), the Resource Conservation and Recovery
Act of 1976, as amended (42 U.S.C. Section Section 6901, et seq.), and the
regulations adopted and publications promulgated pursuant thereto, including
flammable, explosive or radioactive materials, hazardous or toxic wastes or
substances, petroleum or petroleum distillates or asbestos or material
containing asbestos.
"Insufficiency" means, with respect to any Plan, the amount, if any,
of its unfunded benefit liabilities within the meaning of Section 4001(a)(18)
of ERISA.
"Issuing Bank" means Bank of Boston as the issuer of Letters of
Credit.
"Inventory" means all Inventory described in Section 1 of each
Security Agreement.
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<PAGE> 19
"Leasehold" has the meaning specified in SECTION 5.01(t).
"Lenders" means the Persons listed on the signature pages hereof
under the caption "Lenders" and each Eligible Assignee that shall become a
party hereto pursuant to SECTION 9.07.
"Lending Office" means, with respect to any Lender, the office of
such Lender specified as its "Lending Office" opposite its name on SCHEDULE I
hereto or in the Assignment and Acceptance pursuant to which it became a
Lender, or such other office of such Lender as such Lender may from time to
time specify to the Borrowers and the Agent.
"Letter of Credit" and "Letters of Credit" mean, respectively, any
one or more than one of the letters of credit issued for the account of a
Borrower pursuant to SECTION 2.12, whether issued by or through the actions of
the Issuing Bank, as the same may be transferred, renewed, modified, amended or
restated from time to time in the manner provided therein.
"Letter of Credit Advance" has the meaning specified in SECTION
2.12(d).
"Letter of Credit Reserve" means, at any time, an amount equal to
100% of the aggregate face amount of all Letters of Credit outstanding at such
time.
"Liabilities" of any Person means the total amount of all items that
would be classified as liabilities on a balance sheet prepared of such Person
in accordance with GAAP.
"Lien" means any lien (including, without limitation, any lien
imposed pursuant to Section 107(f) of the Superfund Amendments and
Reauthorization Act of 1986 or any similar Environmental Law), security
interest or other charge or encumbrance of any kind, or any other type of
preferential arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way or other
encumbrance on title to real property.
"Loan Documents" means this Agreement, the Notes, the Letters of
Credit, the Collateral Documents, and the Assignment (as defined in the Cedar
Security Agreement or the VCC Security Agreement) of the N-204 Contract.
"Majority Lenders" means at any time Lenders owed at least 75% of
the then aggregate unpaid principal amount of the Advances owing to Lenders or,
if no such principal amount is then outstanding, Lenders having at least 75% of
the Commitments.
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"Material Contract" means, as to any Person, each contract to which
such Person is a party involving aggregate consideration payable to or by such
Person of $4,500,000 or more or otherwise material to the business, condition
(financial or otherwise), operations, performance, properties or prospects of
such Person.
"Maturity Date" means November 30, 1995.
"Maximum Guaranteed Amount" means, as to each of Potash and VCC as
of the Determination Date for such party, the greatest of (i) an amount equal
to the sum of each Extension of Credit (or portion thereof) the proceeds of
which are used to make a Valuable Transfer to such party PLUS interest on such
amount at the highest rate then applicable under this Agreement, (ii) 95% of
the Net Worth, As Adjusted, of such party on the Effective Date before giving
effect to any Extensions of Credit made on such date and (iii) 95% of the Net
Worth, as Adjusted, of such party at the Determination Date for such party.
For purposes hereof, the proceeds of an Extension of Credit (or portion
thereof) are considered to be used to make a "Valuable Transfer" to either of
Potash or VCC if such proceeds are used to (i) make a loan, advance or capital
contribution to such party, (ii) acquire from such party debt securities or
other obligations of such party, (iii) acquire property, any interest in which
is transferred to either of Potash or VCC (but only to the extent of the
economic benefit to such party of the interest so transferred), (iv) purchase
equity securities of such party or (v) otherwise confer, directly or
indirectly, an economic benefit on such party (but only to the extent of such
benefit).
"Modified Debt" means, at any time, the aggregate amount (but
without duplication) of the Consolidated Funded Debt of Cedar and its
Consolidated Subsidiaries (including current maturities thereof) at such time,
the aggregate outstanding principal amount of all Advances at such time, the
outstanding principal amount of the Cedar Subordinated Debt at such time, and
the aggregate amount of all other obligations of any Borrower to TRI, but
excluding any deferred dividend obligation owing to TRI at such time.
"Mortgage" means each Mortgage, Leasehold Mortgage, Deed of Trust,
Leasehold Deed of Trust, Assignment of Rents and Financing Statement described
on SCHEDULE 1.1 - MORTGAGES, as further amended or modified from time to time
in accordance with the terms thereof.
"Mortgage Modification" means, as to each Mortgage, a modification
or amendment substantially in the form of EXHIBIT F-1, F-2 or F-3, as
appropriate.
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"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which a Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of
the preceding five plan years made or accrued an obligation to make
contributions, such plan being maintained pursuant to one or more collective
bargaining agreements.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of a
Borrower or an ERISA Affiliate and at least one Person other than a Borrower
and its ERISA Affiliates or (b) was so maintained and in respect of which a
Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069
of ERISA in the event such plan has been or were to be terminated.
"N-204 Contract" means that certain contract dated November 30,
1990, between Cedar and the United States of America through the Department of
the Air Force for a term of five years beginning November 30, 1990, as assigned
by Cedar to VCC pursuant to a Novation Agreement dated as of January 1, 1993
(Contract No. F41608-90-D-2268).
"Net Cash Proceeds" means, with respect to any sale, lease, transfer
or other disposition of any asset by any Person, the aggregate amount of cash
received or receivable by such Person in connection with such transaction after
deducting therefrom only (i) reasonable and customary brokerage commissions,
legal fees, finder's fees and other similar fees and commissions, (ii) amounts
paid in respect of Debt permitted under SECTION 6.02(b), to the extent such
Debt is secured by a Lien on such asset, which Lien is senior in priority to
the Liens arising under the Loan Documents, and (iii) the amount of taxes
payable in connection with or as a result of such transaction, but in each case
to the extent, and only to the extent, that the amounts so deducted are, at the
time of receipt of such cash or thereafter, paid to a Person that is not an
Affiliate of such Person and are properly attributable to such transaction or
to the asset that is the subject thereof.
"Net Interest Expense" has the meaning specified in SECTION 6.01(k).
"Net Outstandings" of any Lender means, at any time, the sum of (a)
all amounts paid by such Lender (other than pursuant to SECTION 8.07) to the
Agent in respect of Borrowing consisting of Revolving Credit Advances or
otherwise under this Agreement, MINUS (b) all amounts paid by the Agent to such
Lender which are received by the Agent and which, pursuant to this Agreement,
are paid over to such Lender for application in
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reduction of the outstanding principal balance of the Revolving Credit
Advances.
"Net Worth, As Adjusted" of each of Potash and VCC means, as of any
date, the excess of (i) the amount of the "present fair saleable value" of the
assets of such party as of such date OVER (ii) the amount of all "liabilities
of such party, contingent or otherwise", as of such date, as such quoted terms
are defined or construed in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors.
"Nine West" means Nine West Corporation, a Delaware corporation, its
successors and assigns.
"Note" means a Revolving Credit Note or a Term Loan Note.
"Notice of Borrowing" has the meaning specified in SECTION 2.02(a).
"Non-Ratable Loan" means Revolving Credit Advances made by Bank of
Boston in accordance with the provisions of SECTION 2.14(b).
"Obligation" means, with respect to any Person, any obligation of
such Person of any kind, including, without limitation, any obligation to make
any payment for any reason, whether or not such obligation is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, disputed,
undisputed, legal, equitable, secured or unsecured, and whether or not such
obligation is discharged, stayed or otherwise affected by any proceeding of the
type referred to in SECTION 7.01(e). Without limiting the generality of the
foregoing, the Obligations of each Borrower under the Loan Documents include
(a) all principal, interest, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and any other amounts payable by such Borrower under
any Loan Document and (b) any amount in respect of any of the foregoing that
the Agent or any Lender, in its sole discretion, may elect to pay or advance on
behalf of such Borrower.
"OECD" means the Organization for Economic Cooperation and
Development.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor agency or entity performing substantially the same functions.
"Permitted Encumbrances" has the meaning specified in the Mortgages.
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"Permitted Investments" means deposits in non-interest-bearing
accounts maintained with commercial banks or savings banks organized under the
laws of the United States or any state thereof (as listed on Schedule VI to
each Borrower's Security Agreement) which in the aggregate for all Borrowers do
not exceed $500,000 and investments, having a maturity not greater than 90 days
after the date of acquisition thereof, in (a) obligations issued or
unconditionally guaranteed by the United States or any agency thereof, (b)
certificates of deposit of a Lender or any commercial bank organized under the
laws of the United States or any State thereof and having combined capital and
surplus of at least $1 billion, (c) commercial paper with a rating of at least
"Prime-l" by Moody's Investors Service, Inc. or "A-l" by Standard & Poor's
Corporation or (d) such other investments as the Agent may approve.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) Liens for taxes, assessments and governmental charges or
levies not yet due and payable (other than Liens in favor of the PBGC); (b)
Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's
and repairmen's Liens and other similar Liens arising in the ordinary course of
business securing obligations that are not overdue for a period of more than 30
days; (c) pledges or deposits to secure obligations under workers' compensation
laws or similar legislation or to secure public or statutory obligations; (d)
purchase money Liens upon or in any property acquired by a Borrower in the
ordinary course of its business to secure the purchase price of such property
or to secure indebtedness incurred solely for the purpose of financing the
acquisition of such property; (e) Liens existing on property described in (d)
above at the time of its acquisition; (f) Liens in favor of issuers of surety
and performance bonds arising thereunder in respect of the subject matter
thereof; and (g) operating leases.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Pledge Agreement" means the Amended and Restated Pledge Agreement
dated on or about the Effective Date between Nine West and the Agent in
substantially the form of EXHIBIT J, as the same may be amended, modified,
supplemented or restated from time to time.
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"Pledged Collateral" has the meaning specified in the Pledge
Agreement.
"Potash Security Agreement" means the Amended and Restated Security
Agreement dated on or about the Effective Date between Potash and the Agent in
substantially the form of EXHIBIT E-2, as the same may be amended, modified,
supplemented or restated from time to time.
"Receivables" means all Receivables described in Section 1 of each
Security Agreement.
"Register" has the meaning specified in SECTION 9.07(c).
"Revolving Credit Advance" means each "Revolving Credit Advance" as
defined in and outstanding under the Existing Credit Agreement on the Effective
Date and each Advance made by a Lender pursuant to SECTION 2.01(a) (and
includes Letter of Credit Advances).
"Revolving Credit Commitment" means, as to each Lender, the amount
set forth opposite such Lender's name on SCHEDULE I under the caption
"Revolving Credit Commitment" or, if such Lender has entered into one or more
Assignments and Acceptances, set forth for such Lender in the Register
maintained by the Agent pursuant to SECTION 9.07(c) as such Lender's "Revolving
Credit Commitment," in each case as the same may be reduced pursuant to SECTION
2.04.
"Revolving Credit Note" means a promissory note (including
amendments, restatements and other modifications thereto) of a Borrower payable
to the order of any Lender, in substantially the form of EXHIBIT A-1 hereto,
evidencing the aggregate indebtedness of such Borrower to such Lender resulting
from the Revolving Credit Advances owing to such Lender and any promissory note
issued in exchange, replacement or substitution therefor.
"Revolving Credit Termination Date" means (a) December 31, 1995 or
(b) the earlier date of termination in whole of the Revolving Credit
Commitments pursuant to SECTION 2.04 or 7.01.
"Secured Obligations" has the meaning specified in the relevant
Security Agreement.
"Security Agreement" means each of the Cedar Security Agreement, the
Potash Security Agreement and the VCC Security Agreement, and "Security
Agreements" means more than one of said Agreements.
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"Security Interest" means the Liens of the Agent, for its benefit
and the benefit of the Lenders, on and in the Collateral or the Real Property
or the Leaseholds effected hereby or by any of the Collateral Documents or
pursuant to the terms hereof or thereof.
"Settlement Date" means each Business Day after the Effective Date
selected by the Agent in its sole discretion subject to and in accordance with
the provisions of SECTION 2.14(a) as of which a Settlement Report is delivered
by the Agent and on which settlement is to be made among the Lenders in
accordance with the provisions of SECTION 2.14.
"Settlement Report" means each report, substantially in the form
attached hereto as EXHIBIT K, prepared by the Agent and delivered to each
Lender and setting forth, among other things, as of the Settlement Date
indicated thereon and as of the next preceding Settlement Date, the aggregate
principal balance of all Revolving Credit Advances outstanding, each Lender's
ratable share thereof, each Lender's Net Outstandings and all Non-Ratable Loans
made, and all payments of principal, interest and fees received by the Agent
from the Borrower during the period beginning on such next preceding Settlement
Date and ending on such Settlement Date.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of a
Borrower or an ERISA Affiliate and no Person other than such Borrower and its
ERISA Affiliates or (b) was so maintained and in respect of which a Borrower or
an ERISA Affiliate could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair
salable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its debts as
they become absolute and matured, (c) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature and (d) such Person is not
engaged in business or a transaction, and is not about to engage in business or
a transaction, for which such Person's property would constitute an
unreasonably small capital.
"Subordinated Debt" means Debt of Cedar outstanding from time to
time under the Subordinated Debt Agreement and other Debt for borrowed money of
any Borrower the repayment of which has been subordinated to the prior payment
in full of the
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Obligations of the Borrowers to the Lenders on terms and conditions
satisfactory to the Majority Lenders.
"Subordinated Debt Agreement" means that certain Agreement to Make a
Subordinated Loan, dated July 15, 1988, between Cedar and TRI, as amended,
modified and supplemented from time to time in accordance with the terms hereof
and thereof.
"Subsidiary" means, as to any Person, any corporation of which more
than 50% of the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries and when
used without indication of ownership means a Subsidiary of Cedar.
"Term Loan Advance" means each "Term Loan Advance" as defined in and
outstanding under the Existing Credit Agreement on the Effective Date.
"Term Loan Note" means a promissory note of Cedar payable to the
order of any Lender, in substantially the form of EXHIBIT A-2 hereto,
evidencing the aggregate indebtedness of Cedar to such Lender resulting from
the Term Loan Advances owing to such Lender and any promissory note issued in
exchange, substitution or replacement therefor.
"TRI" means Trans-Resources, Inc., a Delaware corporation, its
successors and assigns.
"VCC Security Agreement" means the Amended and Restated Security
Agreement dated on or about the Effective Date between VCC and the Agent in
substantially the form of EXHIBIT E-3, as the same may be amended, modified,
supplemented or restated from time to time.
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of
ERISA.
"Withdrawal Liability" has the meaning given such term under Part 1
of Subtitle E of Title IV of ERISA.
SECTION 1.02 Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and each of the words "to" and
"until" means "to but excluding".
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SECTION 1.03 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in SECTION 5.01(f) ("GAAP").
SECTION 1.04 Captions. Headings and captions are included in this
Agreement for convenience of reference only and shall not affect the content or
construction of any provision hereof.
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. (a) The Revolving Credit Advances.
Each Lender severally agrees, on the terms and conditions hereinafter set
forth, to make advances ("Revolving Credit Advances") to a Borrower on any
Business Day during the period from the Effective Date until the Revolving
Credit Termination Date in an aggregate amount not to exceed at any time
outstanding such Lender's Revolving Credit Commitment, less such Lender's
ratable share of the Letter of Credit Reserve; PROVIDED, HOWEVER, that (i) in
no event shall the aggregate amount of all outstanding Revolving Credit
Advances to any Borrower exceed such Borrower's Borrowing Base; and (ii) in no
event shall the aggregate amount of all outstanding Revolving Credit Advances
to all Borrowers exceed the Aggregate Borrowing Base. Within the limits of
each Lender's Revolving Credit Commitment, a Borrower may borrow, repay
pursuant to SECTION 2.07(a) and reborrow under this SECTION 2.01(a).
(b) Reduction of Outstandings. Notwithstanding the provisions of
SECTIONS 2.01(a) and 2.07: (i) in 1993 and in each calendar year thereafter
Cedar shall choose a day (the "Initial Clean-up Day") occurring on or after
July 1 and before October 1 of such year and shall notify the Agent thereof at
least two Business Days in advance, (ii) on or before each such Initial
Clean-up Day the Borrowers shall repay outstanding Revolving Credit Advances in
accordance with SECTION 2.07(a) and provide cash collateral as contemplated by
SECTION 2.07(c) for outstanding Letters of Credit, such that the aggregate
principal amount of all outstanding Revolving Credit Advances, PLUS the
aggregate face amount of outstanding Letters of Credit, LESS the amount of such
cash collateral, does not exceed (A) in 1993, $2,000,000 and (B) in 1994 and
each year thereafter, $4,000,000, and (iii) the Borrowers shall not borrow
under SECTION 2.01(a) or SECTION 2.12 during the 31 consecutive days including
and following each such Initial Clean-up Day to the extent that any such
Borrowing would result in Revolving Credit Advances and Letters of Credit being
outstanding in excess of the applicable limit set forth in clause (A) or (B)
above.
SECTION 2.02. Making the Revolving Credit Advances. Revolving
Credit Advances shall be made as follows:
(a) Requests for Borrowing. A request for a Borrowing shall be
made, or shall be deemed to be made, in the following manner:
(i) A Borrower may give the Agent written notice, which shall be
irrevocable and shall be substantially in the form of EXHIBIT C hereto,
of its intention to make a
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Borrowing specifying the amount of the proposed Borrowing and the
proposed Borrowing date not later than 11:00 a.m. (Boston time), on the
date (which shall be a Business Day) of a proposed Borrowing (each such
notice, a "Notice of Borrowing"). A Borrower may give any such notice by
telephone, telecopier or telex by an Authorized Officer, in which case
such Borrower shall confirm the same by mailing a written Notice of
Borrowing to the Agent within 48 hours thereafter.
(ii) Whenever a check is presented for payment against a Controlled
Disbursement Account in an amount greater than the then available balance
in such account, the Disbursing Bank shall, and is hereby irrevocably
authorized by each Borrower to, give the Agent notice thereof, which
notice shall be deemed to be a request for a Borrowing by such Borrower
on the date of such notice in an amount equal to the excess of such check
over such available balance.
(iii) Whenever a drawing occurs under a Letter of Credit, the Issuing
Bank shall, and is hereby irrevocably authorized by each Borrower to,
give the Agent notice thereof, which notice shall be deemed to be a
request for a Borrowing by such Borrower on the date of such notice (or
on the next succeeding Business Day if such notice is given after 11:00
a.m. (Boston time) on such date) in an amount equal to the amount of such
drawing.
(iv) Unless the Borrowers, or any of them, shall have otherwise
notified the Agent, the becoming due of any amount required to be paid
under this Agreement as interest shall be deemed to be a request for a
Borrowing by the Borrower or Borrowers the primary obligors thereon on
the due date in the amount required to pay such interest.
(v) The becoming due of any other Obligation of the Borrowers, or
any them, under this Agreement or any other Loan Document shall be deemed
to be a request for a Borrowing of Revolving Credit Advances on the due
date in the amount then so due, and such request shall be irrevocable.
(vi) If and to the extent that the Borrower or Borrowers the
primary obligors in respect of any Obligation referred to in CLAUSE (ii),
(iii), (iv) OR (v) of this SECTION 2.02(a) may not, within the applicable
limitations set forth in SECTION 2.01(a) or by reason of the conditions
set forth in SECTION 4.02, borrow the amount deemed requested pursuant to
such clause, each other Borrower, in its capacity as a guarantor
hereunder, hereby irrevocably authorizes the Agent to deem such request
for a Borrowing also to have been made by it and to apply the proceeds of
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any Revolving Credit Advances made to such other Borrower to the payment
of the relevant Obligation of such first Borrower. The Agent shall
notify the Borrowers promptly of any Revolving Credit Advances made to
them pursuant to this SECTION 2.02(A)(VI), PROVIDED that the Agent's
failure so to notify any Borrower shall not affect such Borrower's
Obligations hereunder in respect of such Advances.
(b) Disbursement. Subject to the provisions of SECTION 2.14,
promptly following receipt of a Notice of Borrowing, the Agent shall notify
each Lender by telephone, telecopier or telex of the date and amount of the
Borrowing. Not later than 2:00 p.m. (Boston time) on the date specified for
any Borrowing, each Lender shall make available its ratable portion of the
Borrowing in immediately available funds to the Agent at the Agent's Office.
Upon fulfillment of the applicable conditions set forth in ARTICLE IV, each
Borrower hereby irrevocably authorizes the Agent on behalf of the Lenders to
disburse the proceeds of the Revolving Credit Advances made upon each Borrowing
requested, or deemed to be requested, pursuant to this SECTION 2.02 as follows:
(i) the proceeds of each Borrowing requested under SECTIONS
2.02(a)(i) and (ii) shall be disbursed by the Agent in lawful money of
the United States of America in immediately available funds, by wire
transfer to the applicable Controlled Disbursement Account or, in the
absence of a Controlled Disbursement Account, by credit or by wire
transfer to such other account as may be agreed upon by such Borrower and
the Agent from time to time, and
(ii) the proceeds of each Borrowing requested under SECTION
2.02(a)(iii), (iv), (v) or (vi) shall be disbursed by the Agent on behalf
of the Lenders by way of direct payment of the relevant Obligation of the
Borrowers (or any Borrower).
(c) Assumption by Agent. Subject to the provisions of SECTION 2.14
unless the Agent shall have received notice from a Lender prior to the date of
any Borrowing that such Lender will not make available to the Agent such
Lender's ratable portion of such Borrowing, the Agent may assume that such
Lender has made such portion available to the Agent on the date of such
Borrowing in accordance with subsection (a) of this SECTION 2.02 and the Agent
may, in reliance upon such assumption, make available to the appropriate
Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such ratable portion available to the Agent, such
Lender and such Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to such Borrower until the date
such amount is repaid to the Agent, at
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(i) in the case of a Borrower, the interest rate applicable at the time and
(ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall
repay to the Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Advance as part of such Borrowing for purposes of this
Agreement. The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation
hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Fees. (a) Commitment Fee. The Borrowers jointly and
severally agree to pay to the Agent for the account of the Lenders a commitment
fee on the average daily unused portion of each Lender's Revolving Credit
Commitment, LESS such Lender's ratable share of the aggregate face amount of
outstanding Letters of Credit, from the Effective Date (or, if applicable, from
the effective date specified in the Assignment and Acceptance pursuant to which
it became a Lender) until the Revolving Credit Termination Date at the rate of
3/8 of 1% per annum, payable quarterly in arrears on the first Business Day of
each March, June, September and December commencing on September 1, 1993, and
on the Revolving Credit Termination Date; PROVIDED, HOWEVER, that during the
period from the Effective Date through December 31, 1994, such fee at the rate
of 3/8 of 1% per annum shall apply only to the amount of such unused Commitment
in excess of each Lender's ratable share of $5,000,000, and the Borrowers shall
pay such fee at the rate of 1/8 of 1% per annum on such unused Commitment of
each Lender up to such Lender's ratable share of $5,000,000.
(b) Agent's Fees. Cedar agrees to pay to the Agent for its own
account such fees as may from time to time be agreed between the Borrower and
the Agent.
(c) Closing Fee. Cedar agrees to pay to the Agent for the ratable
account of the Lenders a closing fee in the amount of $50,000 on the Effective
Date.
SECTION 2.04. Reduction of the Commitments. The Borrowers shall
have the right, upon at least ten Business Days' notice to the Agent, to
terminate in whole or reduce ratably with respect to the Lenders in part the
unused portions of the Revolving Credit Commitments, PROVIDED that each partial
reduction of the Revolving Credit Commitments shall be in the aggregate amount
of $500,000 or an integral multiple of $100,000 in excess thereof.
SECTION 2.05. Repayment. (a) Revolving Credit Advances. Each
Borrower shall repay to the Agent for the account
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of the Lenders the outstanding principal amount of the Revolving Credit
Advances as follows:
(i) whether or not any Default or Event of Default has occurred,
the outstanding principal amount of all Revolving Credit Advances is due
and payable, and shall be repaid by the Borrowers, on the Revolving
Credit Termination Date;
(ii) if at any time (A) the aggregate outstanding principal amount
of all Revolving Credit Advances to any Borrower exceeds such Borrower's
Borrowing Base or (B) the aggregate outstanding principal amount of all
Revolving Credit Advances to all Borrowers exceeds the Aggregate
Borrowing Base, in each case as in effect at such time, the applicable
Borrower or Borrowers shall pay to the Agent, upon demand by the Agent,
for the ratable account of the Lenders for application to the repayment
of Revolving Credit Advances made by them, an amount equal to such
excess; and
(iii) each Borrower hereby irrevocably instructs the Agent to pay to
the Lenders ratably (subject to the provisions of SECTION 2.14) for
application to the repayment of the Revolving Credit Advances outstanding
to it on any day, or if no such Advances are outstanding to it on such
day, then the Revolving Credit Advances outstanding to any other Borrower
on such day, an amount equal to the amount received by the Agent for the
account of the Lenders on such day pursuant to SECTION 6.03.
(b) Term Loan Advances. Cedar shall repay to the Agent for the
account of the Lenders the outstanding principal amount of the Term Loan
Advances in ten consecutive quarterly installments, the first seven of which
shall be in the amount of $1,928,500 each, with the remaining three payments in
the amount of $1,500,000 each, payable on the first Business Day of each March,
June, September and December of each year, commencing on September 1, 1993 and
ending on the Maturity Date; PROVIDED, HOWEVER, that the last such installment
shall be in the amount necessary to repay in full the unpaid principal amount
of all Term Loan Advances and shall be made on the Maturity Date.
SECTION 2.06. Interest. (a) Interest on Unpaid Principal Amount.
The Borrowers, or Cedar, as the case may be, shall pay interest on the unpaid
principal amount of each Advance from the date of such Advance until such
principal amount shall be due or paid in full prior to the due date therefor,
at a rate per annum equal at all times to the sum of (i) the Base Rate in
effect from time to time PLUS (ii) the Applicable Margin in effect from time
to time, payable monthly in arrears on the first day of each month in the case
of Revolving Credit Advances, and quarterly in arrears on the first day of each
March, June, September and December during the term hereof in the case of the
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Term Loan Advances, commencing on the first such date after the Effective Date,
and on the Maturity Date and the Revolving Credit Termination Date.
(b) Default Interest. If any Borrower shall fail to pay any amount
of principal of any Advance on the due date thereof or upon the occurrence and
during the continuance of an Event of Default, each Borrower shall pay interest
on the unpaid principal amount of each Advance owing to each Lender, payable on
demand, at a rate per annum equal at all times to three percent (3%) per annum
above the rate per annum required to be paid on such Advance pursuant to CLAUSE
(a) above.
SECTION 2.07. Prepayments and Cash Collateral. (a) Optional. Each
Borrower may, upon at least ten Business Days' notice to the Agent stating the
proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrowers shall, prepay the outstanding principal amount of
(i) the Term Loan Advances in whole or ratably in part, or (ii) the entire
outstanding amount of all Revolving Credit Advances and the Term Loan Advances
in whole, in each case together with accrued interest to the date of such
prepayment on the principal amount prepaid; PROVIDED, HOWEVER, that each
partial prepayment of Term Loan Advances shall be in an aggregate principal
amount not less than $100,000 or an integral multiple of $100,000 in excess
thereof, and shall be applied to the installments thereof in inverse order of
maturity.
(b) Mandatory. Each Borrower shall, on the date of receipt of the
Net Cash Proceeds from the sale, lease, transfer or other disposition of any
assets of such Borrower (other than sales of assets in the ordinary course of
business), prepay an aggregate principal amount of the Advances owing by such
Borrower (or to the extent of the excess of such Net Cash Proceeds over such
aggregate amount of Advances, to Advances owing by any other Borrower) equal to
such Net Cash Proceeds. Each such prepayment shall be applied first to the
Term Loan Advances and to the installments thereof in inverse order of maturity
and second to the Revolving Credit Advances. All prepayments under this
SECTION 2.07(b) shall be made together with accrued interest to the date of
such prepayment on the principal amount prepaid.
(c) Cash Collateral. If, as of any Initial Clean-up Day, the
aggregate principal amount of Revolving Credit Advances PLUS aggregate face
amount of outstanding Letters of Credit exceeds the maximum amount of Revolving
Credit Advances PLUS Letters of Credit permitted to be outstanding as of such
day, the Borrowers shall deposit to an account maintained with the Agent, for
the ratable benefit of the Lenders, an amount in cash equal to such excess.
Each such deposit made by the Borrowers or any of them shall be held by the
Agent as cash collateral for the Obligations of the Borrowers under this
Agreement and the other
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Loan Documents for the period specified in SECTION 2.01(b) as the period during
which no Borrowings and Letters of Credit may be outstanding in excess of such
maximum amount and, PROVIDED, no Default has occurred and is continuing as of
the first Business Day after the last day of such period, be returned, less any
amounts thereof applied to reimburse the Issuing Bank for any drawings on any
Letter of Credit made during such period or to satisfy any other Obligations of
the Borrowers hereunder or under any other Loan Document becoming due during
such period, to the party or parties that made such deposit. At the Borrowers'
request, but subject to the Agent's reasonable approval, the Agent shall invest
any cash collateral or proceeds thereof consisting of cash in Permitted
Investments described in clauses (a) through (d) of the definition thereof.
Any commissions, expenses or penalities incurred by the Agent in connection
with any redemption, sale or other realization on any such Permitted
Investments or in connection with making any investments of cash collateral or
proceeds thereof consisting of cash or in connection with any re-transfer of
cash collateral, shall be for the account of the Borrowers, shall be paid by
the Borrowers on demand and shall constitute Obligations of the Borrowers. Any
such amount that is not paid on demand may be charged against such cash
collateral account.
SECTION 2.08. Increased Costs, Etc. If any Lender determines that
compliance with any law or regulation or any guideline or request from any
central bank or other governmental authority (whether or not having the force
of law) affects or would affect the amount of capital required or expected to
be maintained by such Lender or any corporation controlling such Lender and
that the amount of such capital is increased by or based upon the existence of
such Lender's commitment to lend hereunder and other commitments of this type
(or similar contingent obligations), then, upon demand by such Lender (with a
copy of such demand to the Agent), the Borrowers shall pay to the Agent for the
account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender in the light of such
circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's
commitment to lend hereunder. A certificate as to such amounts submitted to the
Borrowers by such Lender shall be conclusive and binding for all purposes,
absent manifest error.
SECTION 2.09. Payments and Computations. (a) Each Borrower shall
make each payment hereunder and under the Notes not later than 11:00 A.M.
(Boston time) on the day when due in U.S. dollars to the Agent at the Agent's
Office in same day funds. The Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest or
commitment fees ratably (other than amounts payable pursuant to SECTION 2.08
and subject to the provisions of SECTION
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2.14) to the Lenders for the account of their Lending Offices, and like funds
relating to the payment of any other amount payable to any Lender to such
Lender for the account of its Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to SECTION 9.07(d), from and after the effective date of
such Assignment and Acceptance, the Agent shall make all payments hereunder and
under the Notes in respect of the interest assigned thereby to the Lender
assignee thereunder, and the parties to such Assignment and Acceptance shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) If the Agent receives funds for application to the Advances in
circumstances in which the Loan Documents do not specify the Advances to which,
or the manner in which, such funds are to be applied, the Agent may elect to
distribute such Advances to each Lender ratably in accordance with such
Lender's proportionate share of all outstanding Advances, in repayment or
prepayment of such of the outstanding Advances of such Lender, and for
application to such principal installments, as the Agent shall direct.
(c) Each Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder or under any
Note held by such Lender, to charge from time to time against any or all of
such Borrower's accounts with such Lender any amount so due.
(d) All computations of interest and fees shall be made by the
Agent on the basis of a year of 360 days, as the case may be, in each case for
the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest, fees or commissions are
payable. Each determination by the Agent of an interest rate or fee hereunder
shall be conclusive and binding for all purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or commitment fee,
as the case may be.
SECTION 2.10. Sharing of Payments, Etc. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Advances owing to it (other than
pursuant to SECTION 2.08 and subject to the provisions of SECTION 2.14) in
excess of its ratable share of payments on account of the Advances obtained by
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all the Lenders, such Lender shall forthwith purchase from the other Lenders
such participations in the Advances owing to them as shall be necessary to
cause such purchasing Lender to share the excess payment ratably with each of
them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each
Lender shall be rescinded and such Lender shall repay to the purchasing Lender
the purchase price to the extent of such recovery together with an amount equal
to such Lender's ratable share (according to the proportion of (i) the amount
of such Lender's required repayment to (ii) the total amount so recovered from
the purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. Each Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this SECTION 2.10 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of such Borrower in the amount of such participation.
SECTION 2.11. Use of Proceeds. The proceeds of the Revolving
Credit Advances made to the Borrowers shall be available (and each Borrower
agrees that it shall use such proceeds) solely for working capital and general
corporate purposes.
SECTION 2.12. Letters of Credit. (a) Upon the terms and provisions
and subject to the conditions contained in this Agreement, in lieu of a cash
advance under the Revolving Credit Commitments, the Issuing Bank in its
discretion may issue or cause the issuance of Letters of Credit from time to
time upon the request of any Borrower up to a cumulative maximum face amount
(whether or not advanced) not to exceed $7,500,000; PROVIDED that the Issuing
Bank's agreement to consider the issuance of Letters of Credit shall terminate
on the Revolving Credit Termination Date; and, PROVIDED FURTHER, that the
Issuing Bank shall not consider the issuance of any Letter of Credit if (i) the
face amount of the Letter of Credit to be issued, when added to the aggregate
principal balance of outstanding Revolving Credit Advances, would exceed the
Aggregate Borrowing Base (or if, when added to the aggregate principal balance
of Revolving Credit Advances outstanding to such Borrower, would exceed such
Borrower's Borrowing Base) or (ii) such issuance would result in the Borrowers'
non-compliance with the provisions of SECTION 2.01(b).
(b) A Borrower may request that a Letter of Credit be issued
pursuant to SECTION 2.12(a) by: (i) giving the Issuing Bank at least five
Business Days' notice of the requested issuance, which notice shall specify (A)
the requested date of issuance, face amount and expiration date of the desired
Letter
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of Credit, (B) the Governmental Authority or other person for whose benefit it
is to be issued, and (C) the purpose for which the Letter of Credit is being
requested; and (ii) completing and delivering to the Issuing Bank an
application for such Letter of Credit on its standard form and otherwise
acceptable to the Issuing Bank. Each requested Letter of Credit shall be in a
face amount of not less than $10,000 and shall terminate no later than December
15, 1995. The issuance of each Letter of Credit is subject to the compliance
by the applicable Borrower with the conditions precedent to obtaining an
Advance under this Agreement and subject always to the sole and absolute
discretion of the Issuing Bank. Each Letter of Credit will be issued on a
standard form of the Issuing Bank then in effect. The requested Letter of
Credit may be delivered by the Issuing Bank to the designated beneficiary, to
such Borrower or to such person as such Borrower may reasonably request.
(c) Each of the Letters of Credit may be drawn upon by presentment
to the Issuing Bank, at its office at 100 Federal Street, Boston, Massachusetts
02110 (or such other office as may be specified therein), of the original
Letter of Credit, duly endorsed by the beneficiary (which presentment may be
waived by the Issuing Bank with respect to Letters of Credit permitting
multiple drawings), together with a draft payable to the beneficiary or its
order and the beneficiary's certificate that it is entitled to the amount of
the draft or such other documents as may be specified in such Letter of Credit,
each in the form annexed to the relevant Letter of Credit. The Issuing Bank
may accept any draft, certificate or other document reasonably conforming in
form and substance to the requirements described in and forms annexed to the
Letter of Credit, and may afford the beneficiary notice of and an opportunity
to correct non-conforming items capable of cure, each in the sole and absolute
discretion of the Issuing Bank and without any notice to or assent from the
applicable Borrower. The Letters of Credit may not be transferred or assigned
without (i) submission to the Issuing Bank of a notice of transfer in the form
annexed to the Letter of Credit, and (ii) the payment of the Issuing Bank's
normal transfer fee.
(d) Each amount paid by the Issuing Bank or its designee pursuant
to a Letter of Credit (a "Letter of Credit Advance") shall, in accordance with
the provisions of SECTION 2.02, be deemed to be a Borrowing of additional
Revolving Credit Advances by the applicable Borrower pursuant to this
Agreement.
(e) (i) The applicable Borrower shall pay to the Agent for the
ratable benefit of the Lenders, on the date of issuance of each standby
Letter of Credit and at 90-day intervals thereafter, in advance, a Letter
of Credit fee at the rate of 1.5% per annum of the undrawn face amount
thereof, for the 90-day period commencing on such date (or
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any shorter period commencing on such date and ending on the expiration
date of such Letter of Credit), computed on the basis of a year of 360
days, such amount to be determined as of the Business Day immediately
preceding such payment date.
(ii) The applicable Borrower shall pay to the Issuing Bank, for its
own account, such fees and charges, payable in advance on the date of
issuance or extension (as the case may be) of each Letter of Credit, in
amounts equal to those customarily charged by the Issuing Bank.
(f) In addition to the payments of principal, interest and fees as
stated above, if there shall be any increase in the direct or indirect costs to
the Issuing Bank of issuing, causing the issuance of or maintaining a Letter of
Credit, or any reduction in any amount received or to be received with respect
to a Letter of Credit by the Issuing Bank hereunder, due to:
(i) the introduction of or any change in any applicable law or the
interpretation or administration thereof, including, without limitation,
the imposition, modification or application of (A) any reserve, capital
inadequacy, special deposit, assessment or similar requirement respecting
Letters of Credit issued by, assets held by, or deposits in or for the
account of the Issuing Bank or other issuer of a Letter of Credit, (B)
any requirement to withhold or deduct from any amount payable to the
Issuing Bank hereunder, or payable directly or indirectly to the issuer
of a Letter of Credit, any taxes, levies, imposts, duties, fees,
deductions, withholdings or charges of a similar nature, or any interest
thereon or any penalties with respect thereto, imposed, levied,
collected, assessed, withheld or deducted by any governmental authority,
including subdivisions and taxing authorities thereof, or (C) any other
restriction or condition affecting a Letter of Credit or this Agreement;
or
(ii) the compliance by the Issuing Bank or other issuer of a Letter
of Credit with any regulation, guideline or request from any central bank
or other authority (whether or not having the force of law);
then the applicable Borrower shall from time to time, upon demand by the
Issuing Bank, pay to the Issuing Bank for its own account, additional amounts
sufficient to indemnify the Issuing Bank against and reimburse it for such
increased costs and reduced receipts. A certificate as to the amount of such
increased costs and reduced receipts submitted to the applicable Borrower by
the Issuing Bank shall be conclusive as to the existence and amount thereof,
absent manifest error. If the Issuing Bank has not received payment for such
amounts by the time it receives from the applicable Borrower the next
succeeding payment or prepayment
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of a portion of the Revolving Credit Advances, whether intended by such
Borrower to be interest, principal or otherwise, the Agent may, and is hereby
authorized by all Borrowers to remit to the Issuing Bank from such payment or
prepayment an amount equal to such costs and receipts, notwithstanding anything
to the contrary contained in this Agreement.
(g) The Obligations on the Borrowers hereunder and under the other
Loan Documents shall not otherwise be deemed to have been fully paid or
satisfied until all of the outstanding Letters of Credit have been presented,
have expired by their terms without presentment or have been surrendered to the
Issuing Bank for return to and cancellation by the issuers thereof.
SECTION 2.13. Sale and Purchase of Participations. (a) Each Lender
hereby irrevocably and unconditionally purchases, and the Issuing Bank hereby
sells and transfers to each Lender, an undivided percentage interest equal to
such Lender's ratable share (based upon its Revolving Credit Commitment) in
each Letter of Credit and each drawing thereunder (and all unsatisfied
reimbursement obligations created in connection therewith) and the Obligations
of the applicable Borrower (and each other Borrower) in respect of each such
Letter of Credit.
(b) Whenever a drawing is made under a Letter of Credit, the
Issuing Bank will promptly notify, by telephone, telefax or telex, each Lender
as of the date of such drawing, and the amount of such drawing. Upon receipt
of such notice, each Lender shall cause to be transmitted to the account
designated by the Issuing Bank an amount in immediately available funds
equivalent to its ratable share of such drawing in such manner to ensure that
such funds are received by the Issuing Bank and available to the Issuing Bank
by 3:00 p.m. (Boston time), on the date demand therefor was made by the Issuing
Bank (if demand was made by 11:00 a.m. (Boston time)) or by 10:00 a.m., (Boston
time), on the Business Day following the date demand therefor was made (if
demand was made after 11:00 a.m. (Boston time)), all without regard to whether
the Borrowers (or such Borrower) have at such time satisfied the conditions to
Advances set forth in ARTICLE IV.
SECTION 2.14. Settlement Among Lenders as to Revolving Credit
Advances. It is agreed that each Lender's Net Outstandings are intended by the
Lenders to be equal at all times to such Lender's ratable share of the
aggregate principal amount of all Revolving Credit Advances outstanding.
Notwithstanding such agreement, the several and not joint obligation of each
Lender to make Revolving Credit Advances in accordance with the terms of this
Agreement ratably in accordance with such Lender's Revolving Credit Commitment
and each Lender's right to receive its ratable share of principal payments on
Revolving Credit Advances in accordance with its Revolving Credit Commitment,
the
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Lenders agree that, in order to facilitate the administration of this Agreement
and the Loan Documents, settlement among them may take place on a periodic
basis in accordance with the provisions of this SECTION 2.14. To the extent
and in the manner hereinafter provided in this SECTION 2.14, settlement among
the Lenders as to Revolving Credit Advances may occur periodically on
Settlement Dates determined from time to time by the Agent, which may occur
before or after the occurrence or during the continuance of a Default and
whether or not all of the conditions set forth in SECTION 4.02 have been met.
On each Settlement Date, payments shall be made by or to Bank of Boston and the
other Lenders in the manner provided in this SECTION 2.14 in accordance with
the Settlement Report delivered by the Agent pursuant to the provisions of this
SECTION 2.14 in respect of such Settlement Date so that as of each Settlement
Date, and after giving effect to the transactions to take place on such
Settlement Date, each Lender's Net Outstandings shall equal such Lender's
ratable share of the Revolving Credit Advances outstanding to all Borrowers.
(a) Selection of Settlement Dates. If the Agent elects, in its
discretion, but subject to the consent of Bank of Boston, to settle accounts
among the Lenders with respect to principal amounts of Revolving Credit
Advances less frequently than each Business Day, then the Agent shall designate
periodic Settlement Dates which may occur on any Business Day after the
Effective Date; PROVIDED, HOWEVER, that the Agent shall designate as a
Settlement Date any Business Day on which interest on any Advances is payable
hereunder; and PROVIDED FURTHER, that a Settlement Date shall occur at least
once during each seven-day period. The Agent shall designate a Settlement Date
by delivering to each Lender a Settlement Report not later than 12:00 noon
(Boston time) on the proposed Settlement Date, which Settlement Report will be
in the form of EXHIBIT K hereto and shall be with respect to the period
beginning on the next preceding Settlement Date and ending on such designated
Settlement Date.
(b) Non-Ratable Loans and Payments. Between Settlement Dates, the
Agent shall request and Bank of Boston may (but shall not be obligated to)
advance to any Borrower out of Bank of Boston's own funds, the entire principal
amount of any Borrowing requested or deemed requested pursuant to SECTION
2.02(a) (any such Borrowing being referred to as a "Non-Ratable Loan"). The
making of each Non-Ratable Loan by Bank of Boston shall be deemed to be a
purchase by Bank of Boston of a 100% participation in each other Lender's
ratable share of the amount of such Non-Ratable Loan. All payments of
principal, interest and any other amount with respect to such Non-Ratable Loan
shall be payable to and received by the Agent for the account of Bank of
Boston. Upon demand by Bank of Boston, with notice thereof to the Agent, each
other Lender shall pay to Bank of Boston, as the
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repurchase of such participation, an amount equal to 100% of such Lender's
ratable share, based on its Revolving Credit Commitment, of the principal
amount of such Non-Ratable Loan. Any payments received by the Agent between
Settlement Dates which in accordance with the terms of this Agreement are to be
applied to the reduction of the outstanding principal balance of Revolving
Credit Advances, shall be paid over to and retained by Bank of Boston for such
application, and such payment to and retention by Bank of Boston shall be
deemed, to the extent of each other Lender's ratable share, based on such
Lender's Revolving Credit Commitment, of such payment, to be a purchase by each
such other Lender of a participation in the Revolving Credit Advances
(including the repurchase of participations in Non-Ratable Loans) held by Bank
of Boston. Upon demand by another Lender, with notice thereof to the Agent,
Bank of Boston shall pay to the Agent, for the account of such other Lender, as
a repurchase of such participation, an amount equal to such other Lender's
ratable share of any such amounts (after application thereof to the repurchase
of any participations of Bank of Boston in such other Lender's ratable share of
any Non-Ratable Loans) paid only to Bank of Boston by the Agent.
(c) Net Decrease in Outstandings. If on any Settlement Date the
increase, if any, in the dollar amount of any Lender's Net Outstandings which
is required to comply with the first sentence of this SECTION 2.14 is less than
such Lender's ratable share of amounts received by the Agent but paid only to
Bank of Boston since the next preceding Settlement Date, such Lender and the
Agent, in their respective records, shall apply such Lender's ratable share of
such amounts to the increase in such Lender's Net Outstandings, and Bank of
Boston shall pay to the Agent, for the account of such Lender, the excess
allocable to such Lender.
(d) Net Increase in Outstandings. If on any Settlement Date the
increase, if any, in the dollar amount of any Lender's Net Outstandings which
is required to comply with the first sentence of this SECTION 2.14 exceeds such
Lender's ratable share of amounts received by the Agent but paid only to Bank
of Boston since the next preceding Settlement Date, such Lender and the Agent,
in their respective records, shall apply such Lender's ratable share of such
amounts to the increase in such Lender's Net Outstandings, and such Lender
shall pay to the Agent, for the account of Bank of Boston, any excess.
(e) No Change in Outstandings. If a Settlement Report indicates
that no Revolving Credit Advances have been made during the period since the
next preceding Settlement Date, then such Lender's ratable share of any amounts
received by the Agent but paid only to Bank of Boston shall be paid by Bank of
Boston to the Agent, for the account of such Lender. If a Settlement Report
indicates that the increase in the dollar amount of a
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Lender's Net Outstandings which is required to comply with the first sentence
of this SECTION 2.14 is exactly equal to such Lender's ratable share of amounts
received by the Agent but paid only to Bank of Boston since the next preceding
Settlement Date, such Lender and the Agent, in their respective records, shall
apply such Lender's ratable share of such amounts to the increase in such
Lender's Net Outstandings.
(f) Return of Payments. If any amounts received by Bank of Boston
in respect of the Obligations of the Borrowers are later required to be
returned or repaid by Bank of Boston to any Borrower or any other obligor or
their respective representatives or successors in interest, whether by court
order, settlement or otherwise, in excess of Bank of Boston's ratable share of
all such amounts required to be returned by all Lenders, each other Lender
shall, upon demand by Bank of Boston with notice to the Agent, pay to the Agent
for the account of Bank of Boston, an amount equal to the excess of such
Lender's ratable share of all such amounts required to be returned by all
Lenders over the amount, if any, returned directly by such Lender.
(g) Payments to Agent, Lenders.
(i) Payments under this SECTION 2.14 by any Lender to the Agent
shall be made not later than 1:00 p.m. (Boston time) on the Business Day
such payment is due, PROVIDED that if such payment is due on demand by
another Lender, such demand is made on the paying Lender not later than
10:00 a.m. (Boston time) on such Business Day. Payment by the Agent to
any Lender under this SECTION 2.14 shall be made by wire transfer
promptly following the Agent's receipt of funds for the account of such
Lender and in the type of funds received by the Agent, PROVIDED that if
the Agent receives such funds at or prior to 1:00 p.m. (Boston time), the
Agent shall pay such funds to such Lender by 2:00 p.m. (Boston time) on
such Business Day. If a demand for payment is made after the applicable
time set forth above, the payment due shall be made by 2:00 p.m. (Boston
time) on the first Business Day following the date of such demand.
(ii) If a Lender shall, at any time, fail to make any payment to the
Agent required hereunder, the Agent may, but shall not be required to,
retain payments that would otherwise be made to such Lender hereunder and
apply such payments to such Lender's defaulted obligations hereunder, at
such time, and in such order, as the Agent may elect in its sole
discretion.
(iii) With respect to the payment of any funds under this SECTION
2.14(g), whether from the Agent to a Lender or from a Lender to the
Agent, the party failing to make full payment when due pursuant to the
terms hereof shall, upon
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demand by the other party, pay such amount together with interest on such
amount at the Federal Funds Effective Rate.
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ARTICLE III
GUARANTEE
SECTION 3.01. Unconditional Guarantee. (a) Each of Cedar, Potash
and VCC hereby jointly and severally unconditionally and irrevocably guarantees
(the undertakings of Cedar, Potash and VCC contained in this ARTICLE III being
the "Guarantee") the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of each other Borrower now or
hereafter existing under this Agreement, the Notes or any other Loan Document,
whether for principal, interest, fees, expenses or otherwise (such obligations,
as to each Borrower in respect of the other Borrowers, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including counsel fees
and expenses) incurred by the Agent or the Lenders in enforcing any rights
under this Guarantee. Without limiting the generality of the foregoing, the
liability of the Guarantee shall extend to all amounts which constitute part of
a Borrower's Guaranteed Obligations and would be owed by any other Borrower to
the Agent or the Lenders under any Loan Document but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such other Borrower. In
addition, each of Cedar, Potash and VCC hereby unconditionally and irrevocably
agrees that upon default in the payment when due (whether at stated maturity,
by acceleration or otherwise) of any principal of, or interest on, any Advance
to any other Borrower or such other amounts payable by such other Borrower to
any Lender or the Agent, it will forthwith pay the same, without further notice
or demand; PROVIDED, HOWEVER, that, anything herein or in any other Loan
Document to the contrary notwithstanding, the maximum liability of each of
Potash and VCC under this Guarantee shall in no event exceed such party's
Maximum Guaranteed Amount as determined at the Determination Date for such
party; and, FURTHER PROVIDED, THAT the Maximum Guaranteed Amount for each of
Potash and VCC under this Guarantee shall in no event exceed the respective
amounts which could be incurred under this Guarantee without rendering this
Guarantee, as it relates to such party, void or voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer (determined after
giving effect to the rights of contribution provided in SECTION 3.05).
(b) Each Borrower agrees that the Guaranteed Obligations of such
Borrower may at any time and from time to time exceed the Maximum Guaranteed
Amount, if any, of such Borrower (or of all of the Borrowers) without impairing
this Guarantee as to such Borrower or affecting the rights and remedies of the
Agent and the Lenders hereunder.
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(c) No payment or payments made by any of the Borrowers or any
other Person or received or collected by the Agent or any Lender from any of
the Borrowers or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Guaranteed Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of Potash or VCC
under this Guarantee which shall, notwithstanding any such payment or payments
other than payments made by such party in respect of the Guaranteed Obligations
or payments received or collected from such party in respect of the Guaranteed
Obligations, remain liable for the Guaranteed Obligations up to its respective
Maximum Guaranteed Amount until the Guaranteed Obligations are paid in full and
the Commitments are terminated.
SECTION 3.02. Guarantee Absolute. Each of Cedar, Potash and VCC
guarantees that the Guaranteed Obligations will be paid strictly in accordance
with the terms of the Loan Documents, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of any Lender or the Agent with respect thereto. This
Guarantee is a continuing guaranty of payment and not of collection; all
liabilities to which it applies or may apply under the terms hereof shall be
conclusively presumed to have been created in reliance hereon. The liabilities
under this Guarantee shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any Loan Documents or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any part of the Guaranteed Obligations, or any other
amendment or waiver thereof or any consent to departure therefrom, including
but not limited to any increase in the Guaranteed Obligations resulting from
the extension of additional credit to any Borrower or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to departure
from any other guaranty, for all or any of the Guaranteed Obligations;
(d) any manner of application of collateral, or proceeds thereof,
to all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Guaranteed Obligations or
any other assets of any Borrower;
(e) any change, restructuring or termination of the corporate
structure or existence of any Borrower; or
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(f) any other circumstance which might otherwise constitute a
defense available to, or a discharge of any Borrower or a guarantor.
This Guarantee shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any of the Lenders or the Agent upon
the insolvency, bankruptcy or reorganization of any Borrower or otherwise, all
as though such payment had not been made.
SECTION 3.03. Waivers. Each of Cedar, Potash and VCC hereby
expressly waives promptness, diligence, notice of acceptance and any other
notice with respect to any of the Guaranteed Obligations and this Guarantee and
any requirement that the Agent or any Lender protect, secure, perfect or insure
any Lien or any property subject thereto or exhaust any right or take any
action against any Borrower or any other Person or any collateral, including
any rights any Borrower may otherwise have under O.C.G.A. Section 10-7-24.
SECTION 3.04. Waiver of Subrogation and Contribution of Cedar.
Cedar hereby irrevocably waives any claims or other rights that it may now have
or hereafter acquire against any other Borrower that arise from the existence,
payment, performance or enforcement of Cedar's obligations under this Guarantee
or any other Loan Document, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification and
any right to participate in any claim or remedy of the Lenders against any
other Borrower or any collateral that the Lenders now have or hereafter
acquire, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from any other Borrower, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim, remedy or right. If any amount shall be paid to Cedar
in violation of the preceding sentence at any time prior to the later of the
payment in full of the Guaranteed Obligations and the Termination Date, such
amount shall be deemed to have been paid to Cedar for the benefit of, and held
in trust for the benefit of the Lenders and shall forthwith be paid to Agent,
for the account of the Lenders, to be credited and applied to the Guaranteed
Obligations, whether matured or unmatured, in accordance with the terms of this
Agreement, or to be held as collateral for any Guaranteed Obligations or other
amounts payable under this Guarantee thereafter arising. Cedar acknowledges
that it will receive direct and indirect benefits from the financing
arrangements contemplated by this Agreement and that the waiver set forth in
this SECTION 3.04 is knowingly made in contemplation of such benefits.
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SECTION 3.05. Right of Contribution of Potash and VCC. Each of
Potash and VCC hereby agrees that to the extent that the other shall have paid
more than its proportionate share of any amount paid made under this Guarantee,
it shall be entitled to seek and receive contribution from and against Potash
or VCC, as the case may be, which has paid less than its proportionate share of
such payment. The provisions of this SECTION 3.05 shall not limit the
obligations and liabilities of any Borrower to the Agent and the Lenders, and
each Borrower shall remain liable to the Agent and the Lenders for the full
amount guaranteed by such Borrower hereunder; PROVIDED, HOWEVER, that, anything
here or in any other Loan Document to the contrary notwithstanding, the maximum
liability of each of Potash and VCC hereunder shall in no event exceed such
party's Maximum Guaranteed Amount as determined at the Determination Date for
such party; and, FURTHER PROVIDED, HOWEVER, that the amounts payable under this
SECTION 3.05 shall in no event exceed the respective amounts which could be
incurred under this Guarantee without rendering this Guarantee, as it relates
to such party, void or voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer (determined after giving effect to the rights
of contribution provided in this SECTION 3.05).
SECTION 3.06. Survival. This Guarantee is a continuing guaranty
and shall (a) remain in full force and effect until indefeasible payment in
full (after the Revolving Credit Termination Date) of the Guaranteed
Obligations and all other amounts payable under this Guarantee, (b) be binding
upon each of Cedar, Potash and VCC, their successors and assigns, and (c) inure
to the benefit of and be enforceable by each Lender and the Agent and their
respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), each Lender may assign or otherwise
transfer all or any portion of its rights and obligations under the Loan
Documents (including but not limited to all or any portion of its Commitment,
the Advances owing to it and any Note held by it) to any Eligible Assignee, and
such Eligible Assignee shall thereupon become vested with all the benefits in
respect thereof granted to such Lender herein or otherwise, subject, however,
to the provisions of SECTION 9.07 and of ARTICLE VIII (concerning the Agent).
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ARTICLE IV
CONDITIONS OF EFFECTIVENESS
SECTION 4.01. Conditions Precedent to Effectiveness. The
effectiveness of this Agreement is subject to the following conditions
precedent:
(a) The Lenders shall be satisfied that all Existing Debt
identified on SCHEDULE 1.1 - EXISTING DEBT as Debt that is to be prepaid,
redeemed or defeased on or prior to the Effective Date (if any Debt is so
identified) has been prepaid, redeemed or defeased in full or otherwise
satisfied and extinguished or that appropriate arrangements have been made to
immediately prepay or otherwise satisfy and extinguish such Existing Debt from
the proceeds hereof as contemplated hereby.
(b) There shall exist no action, suit, investigation, litigation or
proceeding affecting any Borrower pending or threatened before any court,
governmental agency or arbitrator that, if adversely determined, would have a
material adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of any Borrower (other than
the matters described on SCHEDULE 5.01(h) (the "Disclosed Litigation")) or that
purports to affect the legality, validity or enforceability of this Agreement,
any Note, any other Loan Document or the consummation of the transactions
contemplated hereby.
(c) The Agent shall have received on or before the Effective Date
following, each dated such day (unless otherwise specified), in form and
substance satisfactory to the Agent (unless otherwise specified) and (except
for the Notes) in sufficient copies for each Lender:
(i) The Notes to the order of the Lenders.
(ii) Certified copies of the resolutions of the Board of Directors
of each Borrower approving this Agreement, the Notes and each other Loan
Document to which it is or is to be a party, and of all documents
evidencing other necessary corporate action and governmental approvals,
if any, with respect to this Agreement, and the Notes and each other Loan
Document.
(iii) A certificate of the Secretary or an Assistant Secretary of
each Borrower certifying the names and true signatures of the officers of
such Borrower authorized to sign this Agreement, the Notes and each other
Loan Document to which it is or is to be a party and the other documents
to be delivered hereunder and thereunder.
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(iv) A Security Agreement made by each Borrower in substantially the
form of the appropriate EXHIBIT E duly executed by the appropriate
Borrower, together with
(A) signed copies of proper financing statements, in
appropriate form to be filed on or promptly after the Effective Date
under the Uniform Commercial Code of all jurisdictions that the
Agent may deem necessary or desirable in order to perfect and
protect the Security Interest;
(B) completed requests for information, dated on or before the
Effective Date, listing all effective financing statements filed in
the jurisdictions referred to in clause (A) above that name any
Borrower as debtor, together with copies of such other financing
statements;
(C) a proper financing statement, assigning to the Agent the
rights of the secured party named therein, as to each financing
statement reflected in a request delivered pursuant to clause (B)
above that names "Citibank, N.A., as Agent" as the secured party,
duly signed by Citibank, N.A. as such agent;
(D) evidence of the insurance required by the terms of the
Security Agreements;
(E) certificates representing the Pledged Shares (as defined in
the Cedar Security Agreement) accompanied by undated stock powers
executed in blank; and
(F) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the Security
Interest has been taken.
(v) A Mortgage Modification with respect to each Mortgage in
substantially the form of the appropriate EXHIBIT F duly executed by the
applicable Borrower, together with
(A) evidence that each Mortgage Modification has been duly
recorded on or before the Effective Date (or acknowledgement by the
representative of the title insurance issuer of receipt of such
Mortgage Modifications in form for recording) in all filing or
recording offices that the Agent may deem necessary or desirable in
order to preserve the valid and enforceable first and subsisting
Lien on the property described therein in favor of the Lenders;
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(B) American Land Title Association Lender's Extended Coverage
title insurance policies, or endorsements thereto or unconditional
commitments for the issuance of the same, in each case in form and
in amounts acceptable to the Agent, issued and reinsured by title
insurers acceptable to the Agent, insuring the Mortgages (other than
the Mortgage made by Potash) as modified by the Mortgage
Modifications to be valid and enforceable first Liens on the
property described therein, free and clear of all defects
(including, but not limited to, mechanics' and materialmen's liens)
and encumbrances, excepting only Permitted Encumbrances, and
providing for such other affirmative insurance (including
endorsements for future advances under the Loan Documents and for
mechanics' and materialmen's liens) and coinsurance and reinsurance
with direct access as the Agent may deem necessary or desirable;
(C) such consents and agreements of lessors and other third
parties, and such estoppel letters and other confirmations, as the
Agent may deem necessary or desirable;
(D) evidence of the insurance required (including, without
limitation, for any business or property) by the terms of the
Mortgages as modified by the Mortgage Modifications;
(E) certified copies of all authorizations and approvals of,
evidence of action by, notices to, and filings with, all
Governmental Authorities regarding the due execution, delivery or
performance by each Borrower of the Mortgages as modified by the
Mortgage Modification; and
(F) evidence that all other action that the Agent may deem
necessary or desirable in order to preserve valid first and
subsisting Liens on the property described in the Mortgages has been
taken.
(vi) A favorable opinion of Apperson, Crump, Duzane & Maxwell,
counsel for the Borrowers, in substantially the form of EXHIBIT G hereto
and as to such other matters as any Lender through the Agent may
reasonably request.
(vii) Favorable opinions of Hilburn, Calhoon, Harper, Pruniski &
Calhoun, Ltd.; McCormick, Forbes, Caraway & Tabor; and Gerald & Brand,
local counsel to the Lenders in Arkansas, New Mexico, and Mississippi,
respectively, in substantially the forms of EXHIBITS H-1, H-2 and H-3,
respectively, and as to such other matters as any Lender through the
Agent may reasonably request.
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(viii) A favorable opinion of Rubin Baum Levin Constant & Friedman,
counsel for Nine West, in substantially the form of EXHIBIT H-4 and as to
such other matters as any Lender through the Agent may reasonably
request.
(ix) Such financial, business and other information regarding each
Borrower as the Lenders shall have requested.
(x) Agency Account Agreements (as defined in the Security
Agreements) with respect to each account required to be subject thereto
by any Security Agreement, duly executed by each party thereto and duly
agreed to and acknowledged by the Clearing Bank holding such account.
(xi) The Pledge Agreement, duly executed by Nine West.
SECTION 4.02. Conditions Precedent to Each Borrowing. The
obligation of each Lender to make an Advance on the occasion of each Borrowing
(including the initial Borrowing) shall be subject to the further conditions
precedent that on the date of such Borrowing (a) the following statements shall
be true (and each of the giving of the applicable Notice of Borrowing and the
acceptance by any Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty by such Borrower that on the date of such Borrowing
such statements are true):
(i) The representations and warranties contained in each Loan
Document are correct on and as of the date of such Borrowing, before and
after giving effect to such Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date, except for
those representations and warranties made as of a specified date;
(ii) No event has occurred and is continuing, or would result from
such Borrowing or from the application of the proceeds therefrom, that
constitutes a Default; and
(iii) The Aggregate Borrowing Base exceeds the aggregate principal
amount of all Revolving Credit Advances that will be outstanding to all
Borrowers after giving effect to such Borrowing and each Borrower's
Borrowing Base exceeds the aggregate principal amount of all Revolving
Credit Advances that will be outstanding to such Borrower after giving
effect to such Borrowing;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Borrowers.
Each Borrower represents and warrants as follows:
(a) Organization; Qualification; Powers. Each Borrower (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which it
owns or leases property or in which the conduct of its business requires it to
so qualify or be licensed (except where failure to qualify would not have a
material adverse effect on any Borrower or its businesses) and (iii) has all
requisite corporate power and authority to own or lease and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted.
(b) Ownership; Subsidiaries. Cedar owns 100% of the outstanding
capital stock of Potash and VCC; Cedar has no Subsidiaries other than Potash
and VCC; Potash has no Subsidiaries; VCC has no Subsidiaries.
(c) Compliance with Laws, etc. The execution, delivery and
performance by each Borrower of this Agreement, the Notes and each other Loan
Document to which it is or is to be a party, and the consummation of the
transactions contemplated hereby and thereby, are within such Borrower's
corporate powers, have been duly authorized by all necessary corporate action,
and do not (i) contravene such Borrower's charter or by-laws, (ii) violate any
law (including, without limitation, the Securities Exchange Act of 1934), rule,
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award, (iii) conflict with or result in the breach of,
or constitute a default under, any contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or affecting
either Borrower or any of their properties or (iv) result in or require the
creation or imposition of any Lien upon or with respect to any of the
properties of any Borrower, except as contemplated hereby. No Borrower is in
violation of any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument, the
violation or breach of which would materially adversely affect the business,
condition (financial or otherwise), operations, performance, properties or
prospects of such Borrower.
(d) Governmental Approvals; Execution and Delivery. No
authorization or approval or other action by, and no notice to
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or filing with, any Governmental Authority or regulatory body or any other
third party is required for the due execution, delivery and performance by any
Borrower of this Agreement, the Notes or any other Loan Document to which it is
or is to be a party, or for the consummation of the transactions contemplated
hereby or thereby. This Agreement has been, and each of the Notes and each
other Loan Document when delivered hereunder will have been, duly executed and
delivered by each Borrower party thereto.
(e) Enforceable Agreements. This Agreement is, and each of the
Notes and each other Loan Document when delivered hereunder will be, the legal,
valid and binding obligation of each Borrower party thereto, enforceable
against such Borrower in accordance with its terms.
(f) Financial Statements. The Consolidated balance sheets of Cedar
and its Consolidated Subsidiaries as at December 31, 1992, and the related
Consolidated statements of income and retained earnings of Cedar and its
Consolidated Subsidiaries for the fiscal year then ended, certified by Price
Waterhouse, independent public accountants, and the Consolidated balance sheets
of Cedar as at March 31, 1993, and the related Consolidated statements of
income and retained earnings of Cedar for the three months then ended, duly
certified by the chief financial officer of Cedar, copies of which have been
furnished to each Lender, fairly present, subject, in the case of said balance
sheets as at March 31, 1993, and said statements of income and retained
earnings for the three months then ended, to year-end audit adjustments, the
Consolidated financial condition of Cedar and its Consolidated Subsidiaries as
at such dates and the Consolidated results of the operations of Cedar and its
Consolidated Subsidiaries for the periods ended on such dates, all in
accordance with GAAP, and since December 31, 1992, there has been no material
adverse change in the business, condition (financial or otherwise), operations,
performance, properties or prospects of any Borrower.
(g) Information. No information, exhibit or report furnished by a
Borrower to the Agent or any Lender in connection with the negotiation of the
Loan Documents or pursuant to the terms of the Loan Documents contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein not misleading.
(h) Litigation. Except as set forth on SCHEDULE 5.01(h), there is
no pending or threatened action, suit, investigation, litigation or proceeding
affecting any Borrower before any court, governmental agency or arbitrator,
which, if adversely determined, would materially adversely affect the business,
condition (financial or otherwise), operations, performance, properties or
prospects of any Borrower or that purports to affect the legality, validity or
enforceability of
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this Agreement, any Note or any other Loan Document or the consummation of the
transactions contemplated hereby or thereby.
(i) Certain Uses of Proceeds. No proceeds of any Advance will be
used to carry or acquire any equity security of a class that is registered
pursuant to Section 12 of the Securities Exchange Act of 1934 or to carry or
acquire any item of the Permitted Portfolio.
(j) Margin Stock. No Borrower is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of any Advance will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
(k) ERISA. (i) No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan.
(ii) Schedule B (Actuarial Information) to the [1992] annual report
(Form 5500 Series) for each Plan, copies of which have been filed with
the Internal Revenue Service and furnished to the Lenders, is complete
and accurate and fairly presents the funding status of such Plan, and
since the date of such Schedule B there has been no material adverse
change in such funding status.
(iii) No Borrower or any ERISA Affiliate of any Borrower has incurred
or is reasonably expected to incur any Withdrawal Liability to any
Multiemployer Plan.
(iv) No Borrower or any ERISA Affiliate of any Borrower has been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or has been terminated, within the meaning of
Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be
in reorganization or to be terminated, within the meaning of Title IV of
ERISA.
(v) The aggregate annualized cost (including, without limitation,
the cost of insurance premiums) with respect to Welfare Plans for which
any Borrower is liable does not exceed $2,000,000.
(l) No Casualty. Neither the business nor the properties of any
Borrower are affected by any fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or
of the public enemy or other casualty (whether or not covered by insurance)
that materially adversely affects the business, condition (financial
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or otherwise), operations, performance, properties or prospects of any
Borrower.
(m) Environmental Matters. Except as set forth in SCHEDULE 5.01(h)
the operations and properties of each Borrower comply in all material respects
with all Environmental Laws and neither utilize nor contain nor are affected by
any Hazardous Materials except as required in connection with the normal
operation and maintenance of such operations and properties and in compliance
with all Environmental Laws, and no Borrower has any material liability,
contingent or otherwise, under any Environmental Law. Further, except as set
forth in SCHEDULE 5.01(h), (i) the Real Property and the Leaseholds and the
operations conducted thereon do not violate any applicable Environmental Law or
any restrictive covenant or deed restriction (recorded or otherwise), the
violation of which is likely to have a material adverse affect on the condition
(financial or otherwise), operations, business, assets or prospects of any
Borrower; (ii) without limitation of clause (i) above, but subject to the
materiality standard set forth therein, the Real Property and the Leaseholds
and the operations conducted thereon by each Borrower or any of its
Subsidiaries or any current or prior owner, lessor or operator of such real
property, leasehold or operation, are not in violation of any Environmental
Law, or subject to any existing, pending or threatened investigation, inquiry
or proceeding by any governmental authority or to any remedial obligations
under any Environmental Law; (iii) all notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection with the
use of the Real Property or the Leaseholds, including, without limitation, past
or present treatment, storage, disposal or release of any Hazardous Materials
or solid waste into the environment, have been obtained or filed; (iv) all
Hazardous Materials or solid waste generated at the Real Property or the
Leaseholds have in the past been, and shall continue to be, transported,
treated and disposed of only by carriers maintaining valid permits under all
applicable Environmental Laws and only at treatment, storage and disposal
facilities maintaining valid permits under applicable Environmental Laws, which
carriers and facilities have been and are, to the best of each Borrower's
knowledge, operating in compliance with such permits; (v) each Borrower has
taken all reasonable steps necessary to determine, and has determined, that no
Hazardous Materials or solid wastes have been disposed of or otherwise released
on or to the Real Property or the Leaseholds except in compliance with
Environmental Laws the failure to comply with which could have a material
adverse effect on any Borrower, its businesses or on the interests of the
Lenders under the Loan Documents; (vi) each Borrower and its Subsidiaries have
no material contingent liability in connection with any release of any
Hazardous Materials or solid waste into the environment; and (vii) the use
which each Borrower or any of its Subsidiaries makes or intends
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to make of the Real Property and the Leaseholds will not result in the unlawful
or unauthorized disposal or other release of any Hazardous Materials or solid
waste on or to the Real Property or the Leaseholds which could have a material
adverse effect on any Borrower, its businesses or on the interests of the
Lenders under the Loan Documents.
(n) Burdensome Agreements. No Borrower is a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction that would
materially adversely affect the business, condition (financial or otherwise),
operations, performance, properties or prospects of any Borrower, or the
ability of any Borrower to carry out its obligations under this Agreement, the
Notes or any other Loan Document.
(o) Tax Returns. Each Borrower has filed all tax returns (Federal,
state and local) required to be filed and paid all taxes shown thereon to be
due, including interest and penalties, or provided adequate reserves for
payment thereof.
(p) Investment Company. No Borrower is an "investment company," or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act
of 1940, as amended. Neither the making of any Advances nor the application of
the proceeds or repayment thereof by any Borrower, nor the consummation of the
other transactions contemplated hereby, will violate any provision of such Act
or any rule, regulation or order of the Securities and Exchange Commission
thereunder.
(q) Solvency. Each Borrower is, individually and together with its
Subsidiaries, Solvent.
(r) Existing Debt. Set forth on SCHEDULE 1.1 - EXISTING DEBT is a
complete and accurate list of all Debt of each Borrower outstanding on the date
hereof, showing as of the date hereof the principal amount outstanding
thereunder and the maturity date (or amortization schedule) with respect
thereto.
(s) Real Property. Set forth on SCHEDULE 5.01(s) hereto is a
complete and accurate list of all real property owned by any Borrower (the
"Real Property"), showing as of the date hereof the street address, county or
other relevant jurisdiction, state, record owner and book value thereof. The
Borrower indicated on SCHEDULE 5.01(s) has good, marketable and insurable fee
simple title to such real property, free and clear of all Liens, other than
Liens created or permitted by the Loan Documents.
(t) Leaseholds. Set forth on SCHEDULE 5.01(t) hereto is a complete
and accurate list of all leases of real property
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under which a Borrower is the lessee (the "Leaseholds"), showing as of the date
hereof the street address, county or other relevant jurisdiction, state,
lessor, lessee, expiration date and annual rental cost thereof. There is no
default of any Borrower under any such lease, except as disclosed in SCHEDULE
5.01(t). Each such lease is the legal, valid and binding obligation of the
lessor thereof, enforceable in accordance with its terms.
(u) Material Contracts. Set forth on SCHEDULE 5.01(u) hereto is a
complete and accurate list of all Material Contracts of each Borrower, showing
as of the date hereof the parties, subject matter and term thereof. Each such
Material Contract has been duly authorized, executed and delivered by all
parties thereto, has not been amended or otherwise modified, is in full force
and effect and is binding upon and enforceable against all parties thereto in
accordance with its terms, and there exists no default under any Material
Contract by any party thereto.
(v) Investments. Set forth on SCHEDULE 5.01(v) hereto is a
complete and accurate list of all loans, advances and other investments held by
any Borrower, showing as of the date hereof the amount, obligor or issuer and
maturity, if any, thereof.
(w) Intellectual Property. Set forth on SCHEDULE 5.01(w) hereto is
a complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights, and all applications therefor and licenses thereof, of
each Borrower, showing as of the date hereof the jurisdiction in which
registered, the registration number, the date of registration and the
expiration date.
(x) Environmental Monitoring. Each Borrower has established and
maintains a system to assure and monitor continued compliance with all
applicable Environmental Law, the non-compliance with which may materially
adversely affect the value of any Real Property or any Leasehold or the value
of the Collateral (taken as a whole), which systems include annual reviews of
such compliance by employees or agents of the relevant Borrower who are
familiar with the requirements of applicable Environmental Laws.
(y) Subordinations of Cedar Subordinated Debt. The obligations of
Cedar to pay any amount of the Cedar Subordinated Debt shall be subordinate and
junior in right of payment, to the extent and in the manner provided in the
Subordinated Debt Agreement, to all Obligations of Cedar under the Loan
Documents, whether for principal, interest, fees, amounts payable under the
Guarantee or otherwise.
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ARTICLE VI
COVENANTS OF THE BORROWERS
SECTION 6.01. Affirmative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, each Borrower
agrees that it will (and Cedar agrees that it will cause each of Potash and VCC
to), unless the Lenders shall otherwise consent in writing as provided in
SECTION 9.01:
(a) Compliance with Laws, Etc. Comply with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
compliance with ERISA and all applicable Environmental Laws if the failure to
so comply could have a material adverse effect on any Borrower, its businesses
or on the interests of the Lenders under the Loan Documents.
(b) Payment of Taxes, Etc. Pay and discharge before the same shall
become delinquent (i) all taxes, assessments and governmental charges or levies
imposed upon such Borrower or upon such Borrower's property and (ii) all lawful
claims that, if unpaid, might by law become a Lien upon such Borrower's
property; PROVIDED, HOWEVER, that no Borrower shall be required to pay or
discharge any such tax, assessment, charge or claim that is being contested in
good faith and by proper proceedings and as to which appropriate reserves are
being maintained.
(c) Maintenance of Insurance. Maintain insurance with responsible
and reputable insurance companies or associations in such amounts and covering
such risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which such Borrower
operates.
(d) Preservation of Corporate Existence, Etc. Preserve and
maintain its corporate existence, rights (charter and statutory) and
franchises; PROVIDED, HOWEVER, that no Borrower shall be required to preserve
any right or franchise if the Board of Directors of such Borrower shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of such Borrower and that the loss thereof is not
disadvantageous in any material respect to such Borrower or the Lenders.
(e) Visitation Rights. At any reasonable time and from time to
time, permit the Agent or any of the Lenders, or any agents or representatives
thereof, to examine and make copies of and abstracts from the records
(including copies of any leases, the costs of which copying shall be borne by
the Borrowers) and books of account of, and visit the properties of, any
Borrower, and to discuss the affairs, finances and accounts of such
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Borrower with any of their officers or directors and with their independent
certified public accountants.
(f) Keeping of Books. Keep proper books of record and account, in
which full and correct entries shall be made of all financial transactions and
the assets and business of such Borrower in accordance with GAAP.
(g) Maintenance of Properties, Etc. Maintain and preserve in good
working order and condition, ordinary wear and tear excepted, all of its
properties that are used or useful in the conduct of its business with respect
to which failure to so maintain and preserve would have a material adverse
effect on the business, condition (financial or otherwise), operations,
performance or prospects of such Borrower or on the value or utility to such
Borrower of any property.
(h) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform all obligations in respect of all leases of real property,
keep such leases in full force and effect and not allow such leases to lapse or
be terminated or any rights to renew such leases to be forfeited or cancelled
including, without limitation, leases that contain certain performance
standards (such as an obligation of diligent development and continuous
operations as a condition to the right to renew the same), EXCEPT where
compliance with any of the above is no longer desirable in the conduct of such
Borrower's business and failure to so comply is not disadvantageous in any
material respect to any Borrower or to the Lenders; and notify the Agent of any
default by any party with respect to such leases and cooperate with the Agent
in all respects to cure any such default.
(i) Performance of Material Contracts. Perform and observe all the
terms and provisions of each Material Contract to be performed or observed by
it, maintain each such Material Contract in full force and effect, enforce each
such Material Contract in accordance with its terms, take all such action to
such end as may be from time to time requested by the Agent and, upon request
of the Agent, make to each other party to each such Material Contract such
demands and requests for information and reports or for action as such Borrower
is entitled to make under such Material Contract.
(j) Transactions with Affiliates. Conduct all transactions
otherwise permitted under the Loan Documents with any of such Borrower's
Affiliates (other than the other Borrowers) on terms that are fair and
reasonable and no less favorable to such Borrower than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate; PROVIDED,
HOWEVER, that all Debt of any Borrower owing to any
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Affiliate of such Borrower (other than another Borrower) shall be on terms
acceptable to the Majority Lenders.
(k) Maintenance of EBIT Coverage. Maintain, as of the end of each
fiscal quarter of the Borrowers for the period beginning on the first day of
the fiscal year which includes such quarter and ending on the last day of such
quarter, EBIT Coverage of Cedar and its Consolidated Subsidiaries greater than
3.50 to 1. "EBIT Coverage" means, for any period, the ratio of EBIT of Cedar
and its Consolidated Subsidiaries on a Consolidated basis for such period
divided by Net Interest Expense for such period. "Net Interest Expense" means,
for any period, (i) the sum of interest payable on, PLUS amortization of debt
discount in respect of, Debt of Cedar and its Consolidated Subsidiaries on a
Consolidated basis during such period, MINUS (ii) interest income of Cedar and
its Consolidated Subsidiaries on a Consolidated Basis for such period.
(l) Maintenance of Fixed Charge Coverage. Maintain, as of the end
of each fiscal quarter of the Borrowers for the period beginning on the first
day of the fiscal year which includes such quarter and ending on the last day
of such quarter, Fixed Charge Coverage of Cedar and its Consolidated
Subsidiaries greater than 1.0 to 1. "Fixed Charge Coverage" means, for any
period, the ratio of EBITDA of Cedar and its Consolidated Subsidiaries on a
Consolidated basis, to the sum of (i) Net Interest Expense for such period,
(ii) principal payments actually made on Funded Debt (other than Subordinated
Debt and any Revolving Credit Advances) during such period, (iii) Capital
Expenditures (except to the extent made from the proceeds of Capital
Expenditure Debt) for such period, and (iv) cash dividends paid during such
period, in each case of Cedar and its Consolidated Subsidiaries on a
Consolidated basis.
(m) Maintenance of Ratio of Modified Debt to Adjusted Net Worth.
Maintain at all times the ratio of Consolidated Modified Debt of Cedar and its
Consolidated Subsidiaries to Adjusted Net Worth at less than 1.75 to 1.
"Adjusted Net Worth" means the sum of (i) the total amount of common and
preferred stockholders' equity which would appear on a Consolidated balance
sheet of Cedar and its Consolidated Subsidiaries, prepared in accordance with
GAAP on a Consolidated basis, PLUS (ii) the aggregate outstanding principal
amount of Subordinated Debt.
(n) Maintenance of Current Ratio. Maintain at all times the ratio
of Consolidated Current Assets to Consolidated Current Liabilities, in each
case of Cedar and its Consolidated Subsidiaries, at greater than 1.20 to 1.
(o) Adjusted Net Worth. Maintain Adjusted Net Worth greater than
$25,000,000 at all times.
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(p) Reporting Requirements. Furnish to the Lenders:
(i) as soon as possible and in any event within five days after the
occurrence of each Default continuing on the date of such statement, a
statement of the chief financial officer of Cedar setting forth details
of such Default and the action that Cedar proposes to take with respect
thereto;
(ii) (A) as soon as available and in no event later than Wednesday
of each week as of the close of business on the preceding Friday, a
Borrowing Base Certificate in form and substance reasonably acceptable to
the Agent, setting forth information regarding each Borrower's Borrowing
Base and the Aggregate Borrowing Base, including a report of collections
during such week and a detailed aging of all Receivables of all
Borrowers, duly certified by the chief financial officer, the treasurer
or the comptroller of Cedar, (B) as soon as available and in any event
within 10 days after the end of each month, a detailed aging of all
accounts payable of all Borrowers and a report setting forth each
Receivable excluded from any Borrower's Borrowing Base, the name of the
account debtor thereon and the status thereof, each certified by the
chief financial officer, treasurer or controller of Cedar, and (C) as
soon as available and in no event later than every second Wednesday, a
certificate of the chief financial officer, treasurer or controller of
Cedar as to the value (at the lower of cost (on a first-in-first-out
basis) or fair market value) of Inventory of each Borrower, by location,
as of the preceding Friday;
(iii) as soon as available and in any event within 30 days after the
end of each of the first 11 months (other than any such month which is
the last month of a fiscal quarter in which case within 45 days after the
end of the such month), of each fiscal year of the Borrowers, (A) an
unaudited Consolidated balance sheet of Cedar and its Consolidated
Subsidiaries as of the last day of such month and the related unaudited
Consolidated statements of income, cash flow and shareholder's equity of
Cedar and its Consolidated Subsidiaries for such month and for the fiscal
year of the Borrowers through the end of such month, certified by the
chief financial officer of Cedar as presenting fairly in accordance with
GAAP (subject to normal audit adjustments and the absence of notes) the
financial condition and results of operations of the Borrowers on a
Consolidated basis as of such date and for the periods ended on such date
and (B) if such month is the last month in any fiscal quarter of the
Borrowers, (x) consolidating balance sheets of Cedar and its Consolidated
Subsidiaries as of the last day of such fiscal quarter and the related
consolidating statements of income, cash flow and
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shareholder's equity for the fiscal year of the Borrowers through the end
of such fiscal quarter, (y) a comparison of operating performance for
such fiscal quarter and for such fiscal year through the end of such
fiscal quarter against comparable figures for the preceding fiscal year
and against the operating budget for such fiscal year, and (z) a
Compliance Certificate. "Compliance Certificate" means a certificate in
substantially the form of EXHIBIT L, delivered by the chief financial
officer of Cedar, containing a certification to the effect that the
accompanying financial statements present fairly in accordance with GAAP
(subject to normal audit adjustments and the absence of notes) the
Consolidated financial position and results of operations of Cedar and
its Consolidated Subsidiaries as of the dates and for the current periods
ended on such dates of the accompanying financial statements, and a
certification to the effect that the Borrowers were in compliance with
the covenants set forth in SECTIONS 6.01(k), (l), (m), (n) and (o) as of
the end of or for the relevant fiscal period, or if such was not the
case, setting out in reasonable detail the nature of such non-compliance
and what steps are proposed and are being taken to cure such
non-compliance, accompanied by the computation in reasonable detail of
the ratios included in such financial covenants;
(iv) as soon as available and in any event within 90 days after the
end of each fiscal year of Cedar, (A) a copy of the annual report for
such year for Cedar and its Subsidiaries, containing the audited,
Consolidated balance sheet of Cedar and its Consolidated subsidiaries as
of the last day of such fiscal year and the related Consolidated
statements of income, cashflow and shareholders equity for such fiscal
year, certified in a manner acceptable to the Majority Lenders by Price
Waterhouse & Co. or any other independent public accountants selected by
Cedar and acceptable to the Majority Lenders, and (B) unaudited
consolidating balance sheets and income statements of each of Cedar,
Potash and VCC for such year, certified in a Compliance Certificate as
for Cedar and its Consolidated Subsidiaries, described above;
(v) as soon as available and in any event no later than the 31st
day after the beginning of each fiscal year, an annual operating budget
for such fiscal year for each Borrower including, on a Consolidated
basis, monthly projected balance sheets, income statements, cash flow
statements and projected Borrowing Base and usage of Revolving Credit
Advances for and during such fiscal year prepared by management of such
Borrower and Cedar, in form and substance satisfactory to the Lenders;
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(vi) promptly and in any event within 10 days after any Borrower or
any ERISA Affiliate of any Borrower knows or has reason to know that any
ERISA Event has occurred, a statement of the chief financial officer of
such Borrower or such ERISA Affiliate describing such ERISA Event and the
action, if any, that such Borrower or such ERISA Affiliate proposes to
take with respect thereto;
(vii) promptly and in any event within five Business Days after
receipt thereof by any Borrower or any ERISA Affiliate of any Borrower,
copies of each notice from the PBGC stating its intention to terminate
any Plan or to have a trustee appointed to administer any Plan;
(viii) promptly and in any event within 30 days after the filing
thereof with the Internal Revenue Service, copies of each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) with
respect to each Plan;
(ix) promptly and in any event within five Business Days after
receipt thereof by any Borrower or any ERISA Affiliate of any Borrower
from the sponsor of a Multiemployer Plan, a copy of each notice received
by such Borrower or ERISA Affiliate concerning (A) the imposition of
Withdrawal Liability by any Multiemployer Plan, (B) the reorganization or
termination, within the meaning of Title IV of ERISA, of any
Multiemployer Plan or (C) the amount of liability incurred, or that may
be incurred, by such Borrower or ERISA Affiliate in connection with any
event described in clause (A) or (B);
(x) promptly after the commencement thereof, notice of all material
actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting any Borrower of the type described in
SECTION 5.01(h);
(xi) promptly after the furnishing thereof, copies of any statement
or report furnished to any holder of the securities of any Borrower
pursuant to the terms of any indenture, loan or credit or similar
agreement and not otherwise required to be furnished to the Lenders
pursuant to any other clause of this SECTION 6.01(p);
(xii) promptly upon receipt thereof, copies of all significant
notices, requests and other documents received by any Borrower under or
pursuant to any Material Contract and, from time to time upon request by
the Agent, such information and reports regarding the Material Contracts
as the Agent may reasonably request;
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(xiii) promptly after the creation of any Permitted Encumbrance, a
notice substantially in the form of EXHIBIT J hereto;
(xiv) within thirty days after the end of each calendar month, a
sales variance report analysis with respect to such month; and
(xv) such other information respecting the business, condition
(financial or otherwise), operations, performance, properties or
prospects of any Borrower as any Lender may from time to time reasonably
request.
(q) Environmental Monitoring. Continue to maintain a system to
assure and monitor continued compliance with all applicable Environmental Law,
the non-compliance with which may materially adversely affect the value of any
Real Property or any Leasehold or the value of the Collateral (taken as a
whole), which system shall include annual reviews of such compliance by
employees or agents of the relevant Borrower who are familiar with the
requirements of applicable Environmental Laws.
(r) Environmental Requirements. (i) In addition to, and not in
derogation of, the requirements of SECTIONS 6.01(a) AND 6.01(p) and of the
Collateral Documents, comply with all Environmental Laws and all other
applicable laws relating to occupational health and safety (except for
instances of noncompliance that, singly or in the aggregate, could not have a
materially adverse effect on and Borrower) and promptly notify the Agent of its
receipt of any notice of a violation of any such Environmental Laws or other
applicable law and indemnify and hold the Agent and the Lenders harmless from
all loss, cost, damage, liability, claim and expense incurred by or imposed
upon the Agent or any Lender on account of any Borrower's failure to perform
its obligations under this SECTION 6.01(r).
(ii) Whenever a Borrower gives notice to the Agent pursuant to this
SECTION 6.01(r) with respect to a matter that reasonably could be expected to
result in liability to any Borrower in excess of $250,000 in the aggregate
(other than in respect of any matter identified on SCHEDULE 5.01(h)), such
Borrower shall, at the Agent's request and such Borrower's expense (i) cause an
independent environmental engineer acceptable to the Agent to conduct an
assessment, including tests where necessary, of the site where the
noncompliance or alleged noncompliance with Environmental Laws has occurred and
prepare and deliver to the Agent a report setting forth the results of such
assessments or tests, a proposed plan to bring such Borrower into compliance
with such Environmental Laws, if necessary, and an estimate of the costs
thereof, and (ii) provide to the Agent a supplemental report of such engineer
whenever the scope of the noncompliance,
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or the response thereto or the estimated costs thereof, shall materially
adversely change.
(s) As to the Leaseholds. Upon the request of the Agent, promptly
deliver to the Agent a true and complete copy of each lease of any Leasehold
and of each amendment or modification thereof, supplement thereto and waiver or
consent with respect thereto, and, at the request of the Agent, allow the
inspection and copying of such leases, amendments, modifications, supplements,
waivers and consents by representatives of the Agent.
(t) As to Real Property. Use its best efforts to cause all Real
Property and Leaseholds of a Borrower, together with any goods located or to be
located thereon which may constitute "fixtures" within the meaning of Article 9
of the UCC, to be subjected to duly recorded, valid, first-priority mortgage
liens and security interests in favor of the Agent for the benefit of the
Lenders, in each case as security for the payment of the Obligations of such
Borrower to the Lenders and to the Agent under this Agreement, the Notes and
the other Loan Documents, and in each case whether for principal, interest,
fees, commission or otherwise. Such "best efforts" required hereunder shall,
without limitation, include the payment of fees and premiums for the obtaining
of title insurance (other than in respect of the Real Property and Leasehold
covered by the Mortgage made by Potash) for the benefit of the Agent and the
Lenders.
(u) Location of Inventory. Locate all Inventory at Principal
Locations (as defined in the Security Agreements), EXCEPT for Inventory with an
aggregate fair market value for all Borrowers not to exceed $2,000,000 at any
one time.
SECTION 6.02. Negative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, each Borrower
agrees that it will not (and Cedar agrees that it will not permit Potash or VCC
to), without the written consent of the Lenders as provided in SECTION 9.01:
(a) Liens, Etc. Create, incur, assume or suffer to exist, any
Lien on or with respect to any of its properties of any character (including,
without limitation, accounts) whether now owned or hereafter acquired, or sign
or file, under the Uniform Commercial Code of any jurisdiction, a financing
statement that names Cedar, Potash or VCC, as the case may be, as debtor, or
sign any security agreement authorizing any secured party thereunder to file
such financing statement, or assign any accounts, EXCLUDING, HOWEVER, from the
operation of the foregoing restrictions the following:
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(i) Liens created by or pursuant to the Loan Documents;
(ii) Permitted Liens, Existing Encumbrances, Liens arising in
connection with Capital Lease Obligations and Permitted Encumbrances;
PROVIDED that the aggregate principal amount of the outstanding
obligations secured by all Permitted Liens, Existing Encumbrances, Liens
arising in connection with Capital Lease Obligations and Permitted
Encumbrances from time to time shall not at any time exceed $2,000,000
for all Borrowers;
(iii) Capital Expenditure Liens, but only to the extent that such
Liens secure only Capital Expenditure Debt permitted pursuant to SECTION
6.02(b)(vi); and
(iv) the replacement, extension or renewal of any Lien permitted by
clauses (i) and (ii) above upon or in the same property theretofore
subject thereto or the replacement, extension or renewal (without
increase of principal amount) of the obligations secured thereby.
(b) Debt. Create, incur, assume or suffer to exist any Debt other
than (without duplication):
(i) Debt under the Loan Documents,
(ii) the Cedar Subordinated Debt,
(iii) Debt of a Borrower secured by Liens permitted by SECTION
6.02(a)(ii) not to exceed in the aggregate, on a Consolidated basis,
$2,000,000 at any one time outstanding as and to the extent permitted to
be secured by SECTION 6.02(a)(ii),
(iv) the Existing Debt other than any such Debt that is to be repaid
on the Effective Date,
(v) endorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business,
(vi) Capital Expenditure Debt incurred by a Borrower after the
Effective Date and after the Lenders shall have declined to make
additional financing available to such Borrower to acquire the property
acquired by such Borrower with the proceeds of such Capital Expenditure
Debt, to the extent that the aggregate outstanding principal amount of
all such Capital Expenditure Debt of the Borrowers on a Consolidated
Basis shall not exceed in any year listed below, the amount indicated
opposite such year:
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<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1993 $3,000,000
1994 $6,000,000
1995 $9,000,000
</TABLE>
(vii) Subordinated Debt owed to any Affiliate of a Borrower, which
Debt is on terms approved by the Majority Lenders,
(viii) Debt owing by the Borrowers or any of them to TRI during any
period selected pursuant to SECTION 2.01(b), PROVIDED that the terms of
such debt do not require repayment thereof (x) prior to the end of such
period or (y) if any Default shall have occurred and be continuing on the
last day of such period (or if such last day is not a Business Day, then
on the next succeeding Business Day), and
(ix) Debt owing by any Borrower to another Borrower, PROVIDED that
all such Debt shall be reflected as such in the books and records of each
Borrower that is, as to any other Borrower, a borrower or lender.
(c) Lease Obligations. Create, incur, assume or suffer to exist
any obligation as lessee (other than leases of Leaseholds consisting of potash
mining property located in New Mexico under which Potash is the lessee) (i) for
the rental or hire of real or personal property in connection with any sale and
leaseback transaction, or (ii) for the rental or hire of other real or personal
property of any kind under leases or agreements to lease having an original
term of one year or more that would cause the direct or contingent liabilities
of all Borrowers in respect of all such obligations to exceed $5,000,000
payable in any period of 12 consecutive months.
(d) Mergers, Etc. Merge with or into or consolidate with or into,
or convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any Person.
(e) Sales, Etc, of Assets. Sell, lease, transfer or otherwise
dispose of any substantial part of its respective assets or property, including
(without limitation) any manufacturing plant or substantially all assets or
property constituting the business of a division, branch or other unit of
operation, except (i) sales of inventory in the ordinary course of its business
and (ii) sales of assets or property no longer used or useful in its business,
and having a book value or fair market value (whichever is greater) in an
aggregate amount not to
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exceed $300,000 in any year for all Borrowers, and not to exceed $750,000 in
cumulative total.
(f) Investments in Other Persons. Make any loan or advance to any
Person exceeding at any one time outstanding an aggregate for all Borrowers
together of $250,000 for all such loans and advances, or purchase or otherwise
acquire any capital stock, warrants, rights, options, obligations or other
securities of, or make any capital contribution to, or otherwise invest in, any
Person; PROVIDED, HOWEVER, that nothing in this subsection shall prevent any
Borrower from making loans or advances to any other Borrower in accordance with
SECTION 6.02(b)(ix) or from acquiring and holding Permitted Investments in an
aggregate principal amount of not more than $3,000,000 at any time outstanding
or prevent Cedar from owning or holding the capital stock of Potash and VCC.
(g) Dividends, Etc. Declare or pay any dividends, purchase,
redeem, retire, defease or otherwise acquire for value any of its capital stock
or any warrants, rights or options to acquire such capital stock, now or
hereafter outstanding, return any capital to its stockholders as such, or make
any distribution of assets, capital stock, warrants, rights, options,
obligations or securities to its stockholders as such, except that each of
Potash and VCC may declare and pay dividends or make other distributions to
Cedar and Cedar may (i) declare and deliver dividends and distributions payable
only in common stock of Cedar, (ii) purchase, redeem, retire, defease or
otherwise acquire shares of its capital stock with the proceeds received from
the issue of new shares of its capital stock with equal or inferior voting
powers, designations, preferences and rights, and (iii) provided no Default
shall have occurred and be continuing on the date of any such declaration or
payment or would result from such payment, at any time after the Effective Date
declare or pay cash dividends to its stockholders and purchase, redeem or
otherwise acquire shares of its capital stock or warrants, rights or options to
acquire any such shares for cash, to the extent that after giving effect
thereto, the sum (without duplication) of all such declarations and payments
made on or after the Effective Date does not exceed in total an amount equal to
the sum of $1,000,000, plus 50% of the Consolidated net income of Cedar and its
Consolidated Subsidiaries for the period beginning January 1, 1993 and ending
on the date of declaration or payment.
(h) Change in Fiscal Year. Change its fiscal year.
(i) Change in Nature of Business. Make any material change in the
nature of its business as carried on at the date hereof.
(j) Charter Amendments. Amend its certificate of incorporation or
bylaws.
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(k) Accounting Changes. Make or permit any change in accounting
policies or reporting practices, except as required or permitted by GAAP.
(l) Prepayments, Etc. of Debt. Prepay, redeem, purchase, defease
or otherwise satisfy prior to the scheduled maturity thereof in any manner, or
make any payment in violation of any subordination terms of, any Existing Debt
(other than the Advances), or amend, modify or change in any manner any term or
condition of any such Debt, EXCEPT that if on July 31 of 1993, 1994 or 1995 and
on the date such amount (or any portion thereof) is paid, no Default has
occurred and is continuing or would exist after giving effect to such payment,
Cedar may repay outstanding principal of the Cedar Subordinated Debt in an
amount not greater than $666,667 in respect of each such year, on a cumulative
basis, and, at any time after receipt by the Lenders of audited financial
statements for the fiscal year of Cedar ending December 31, 1994, as
contemplated by the provisions of SECTION 6.01(p)(iv), demonstrating that no
Default has occurred and is continuing or would result from such payment, Cedar
may repay outstanding principal of Cedar Subordinated Debt in an additional
amount not greater than $3,500,000, PROVIDED that on the date or dates of
payment of such amount (or any portion thereof) no Default shall have occurred
and be continuing or would result from such payment.
(m) Amendment, Etc. of Material Contracts. Cancel or terminate any
Material Contract or consent to or accept any cancellation or termination
thereof, amend or otherwise modify any Material Contract or give any consent,
waiver or approval thereunder, waive any default under or breach of any
Material Contract, agree in any manner to any other amendment, modification or
change of any term or condition of any Material Contract or take any other
action in connection with any Material Contract that would impair the value of
the interests or rights of any Borrower thereunder or that would impair the
interests or rights of the Agent or any Lender.
(n) Proceeds. Use any of the proceeds of any Advance to carry or
acquire any equity security of a class that is registered pursuant to Section
12 of the Securities Exchange Act of 1934 or to carry or acquire any item of
the Permitted Portfolio.
(o) Amendment of Subordinated Debt Agreement. Permit the
Subordinated Debt Agreement to be amended, modified or supplemented (other than
in accordance with the provisions of SECTION 6.02(l)).
SECTION 6.03. Collection of Receivables. Until this Agreement has
been terminated and all Borrowers' Obligations have
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been irrevocably paid in full, unless the Lenders shall otherwise consent as
provided in SECTION 9.01(a):
(a) Collection of Receivables. Each Borrower will cause all
moneys, checks, notes, drafts and other payments relating to or constituting
proceeds of Receivables of such Borrower, or of any other Collateral, to be
forwarded to an Agency Account in accordance with the procedures set out in the
corresponding Agency Account Agreement, and in particular each Borrower will:
(i) advise each account debtor to address all remittances with
respect to amounts payable on account of any Receivables to a specified
Agency Account, and
(ii) stamp all invoices relating to any such amounts with a
legend satisfactory to the Agent indicating that payment is to be made
to such Borrower via a specified Agency Account.
(b) Each Agency Account Agreement shall provide that all deposits
in each Agency Account be transmitted daily by wire transfer or depository
transfer check or automated clearing house (ACH) transfer in accordance with
procedures set forth in such Agency Account Agreement to the Agent at the
Agent's Office:
(i) for credit on account of the Obligations of such Borrower,
whether direct or under the Guarantee, as provided in SECTION
2.05(a)(iii) such credits to be entered as of the Business Day after
receipt and to be conditional upon final payment in cash or solvent
credits of the items giving rise to them, and
(ii) with respect to the balance, so long as no Default has
occurred and is continuing, for transfer by wire transfer or depository
transfer check or ACH transfer to a Controlled Disbursement Account or,
in the absence of a Controlled Disbursement Account, to such other
account as such Borrower and the Agent shall agree from time to time.
(c) Any moneys, checks, notes, drafts or other payments referred to
in SUBSECTION (a) of this SECTION 6.03 which are received by or on behalf of a
Borrower will be held in trust for the Agent and will be delivered to a
Clearing Bank, as promptly as possible, in the exact form received, together
with any necessary endorsements for deposit in the Agency Account maintained
with such Clearing Bank and processing in accordance with the terms of the
corresponding Agency Account Agreement.
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ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Advance
when due (whether at stated maturity or by mandatory prepayment, acceleration
or otherwise), or fail to pay any interest on any Advance within two Business
Days after such interest shall be due, or fail to make any other payment (other
than payments of principal) under any Loan Document within two Business Days
after such payment shall be due; or
(b) Any representation or warranty made by any Borrower (or any of
its officers) under or in connection with any Loan Document shall prove to have
been incorrect in any material respect when made; or
(c) Any Borrower shall fail to perform or observe any term,
covenant or agreement contained in SECTION 6.01(k), (l), (m), (n), (o),
6.01(p)(i), 6.02 or 6.03 for a period of five Business Days or shall fail to
perform any other term, covenant or agreement contained in any Loan Document on
its part to be performed or observed if such failure shall remain unremedied
for 10 Business Days after written notice thereof shall have been given to such
Borrower by the Agent or any Lender; or
(d) Any Borrower shall fail to pay any principal of, premium or
interest on or any other amount payable in respect of any Debt (but excluding
Debt outstanding hereunder and unsecured Debt of a Borrower incurred in the
ordinary course of such Borrower's business for the deferred purchase price of
property or services, in an aggregate amount for all Borrowers not to exceed
$1,000,000 at any time) of such Borrower, when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Debt; or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt or any such Debt shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Debt shall be required to be made, in each case prior
to the stated maturity thereof; or
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(e) Any Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against any Borrower seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial part
of its property, and, in the case of such a proceeding instituted by a Person
other than a Borrower, such proceeding shall not have been dismissed within 60
days of its filing; or any Borrower shall take any corporate action to
authorize any of the actions set forth above in this SUBSECTION (e); or
(f) Any judgment or order for the payment of money in excess of
$250,000 shall be rendered against any Borrower and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of 30 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(g) Any non-monetary judgment or order shall be rendered against
any Borrower that would materially adversely affect (i) the business, condition
(financial or otherwise), operations, performance, properties or prospects of
any Borrower, (ii) the ability of any Borrower to perform its obligations under
any Loan Document to which it is a party or (iii) the rights and remedies of
the Agent or the Lenders under any Loan Document and, there shall be any period
of 30 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; or
(h) Any provision of any Loan Document after delivery thereof
pursuant to SECTION 4.01 shall for any reason cease to be valid and binding on
or enforceable against any Borrower party to it, or any Borrower shall so state
in writing; or
(i) Any Collateral Document after delivery thereof pursuant to
SECTION 4.01 shall for any reason (other than pursuant to the terms thereof)
cease to create a valid and perfected Lien on the Collateral purported to be
covered thereby, which Lien shall be junior in priority only to Liens expressly
permitted under SECTION 6.02(a); or
(j) Arie Genger shall at any time for any reason other than his
death cease to own and control the majority of the outstanding voting stock of
TRI; or
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(k) TRI shall at any time for any reason cease to be the beneficial
owner, directly or indirectly, of all of the capital stock of any Borrower or
Cedar shall at any time for any reason cease to be the beneficial owner,
directly or indirectly, of all of the capital stock of Potash or VCC; or
(l) Any ERISA Event shall have occurred with respect to a Plan and,
30 days after notice thereof shall have been given to the Borrower by the
Agent, (i) such ERISA Event shall still exist and (ii) the sum (determined as
of the date of occurrence of such ERISA Event) of the Insufficiency of such
Plan and the Insufficiency of any and all other Plans with respect to which an
ERISA Event shall have occurred and then exist (or, in the case of a Plan with
respect to which an ERISA Event described in clause (c) through (f) of the
definition of ERISA Event shall have occurred and then exist, the liability
related thereto) is equal to or greater than $3,000,000; or
(m) Any Borrower or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Borrower or ERISA Affiliate has
incurred Withdrawal Liability to such Multiemployer Plan in an amount that,
when aggregated with all other amounts required to be paid to Multiemployer
Plans by the Borrowers and their ERISA Affiliates in connection with Withdrawal
Liabilities (determined as of the date of such notification), exceeds
$1,000,000 or requires payments exceeding $500,000 per annum; or
(n) Any Borrower or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of ERISA,
if, as a result of such reorganization or termination, the aggregate annual
contributions of the Borrowers and their ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the plan
year of each such Multiemployer Plan immediately preceding the plan year in
which such reorganization or termination occurs by an amount exceeding
$500,000; or
(o) Any Borrower or any ERISA Affiliate shall have committed a
failure described in Section 302(f)(1) of ERISA and the amount determined under
Section 302(f)(3) of ERISA is equal to or greater than $500,000; or
(p) There shall occur in the reasonable judgment of the Majority
Lenders any material adverse change in the business, condition (financial or
otherwise), operations, performance, properties or prospects of any Borrower;
or
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(q) There shall have occurred and be continuing any Event of
Default, as defined in the Mortgages; or
(r) The Pledge Agreement, after delivery thereof pursuant to
SECTION 4.01, shall for any reason (other than pursuant to the terms thereof)
cease to create a valid and perfected first priority lien on the Pledged
Collateral;
then, and in any such event, the Agent (i) shall at the request, or may with
the consent, of the Majority Lenders, by notice to the Borrowers, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, (ii) shall at the request, or may with the consent,
of the Majority Lenders, by notice to the Borrowers, declare the Notes, all
interest thereon and all other amounts payable under this Agreement, the
Letters of Credit, and the other Loan Documents to be forthwith due and
payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest
or further notice of any kind, all of which are hereby expressly waived by each
Borrower and (iii) shall at the request, or may with the consent, of the
Majority Lenders, demand the immediate deposit of cash collateral by the
Borrowers in a non-interest-bearing demand deposit account with the Agent or
such other institution as the Agent may designate in an amount equal to the
aggregate undrawn face amount of the Letters of Credit then outstanding in
order to further secure repayment of all advances under the Letters of Credit,
which deposits shall remain collateral until all of the Letters of Credit have
expired or been surrendered for payment or cancellation; PROVIDED, HOWEVER,
that in the event of an actual or deemed entry of an order for relief with
respect to any Borrower under the Federal Bankruptcy Code, (x) the obligation
of each Lender to make Advances shall automatically be terminated, (y) the
Notes, all such interest and all such amounts shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by each Borrower and (z) the
Borrowers shall be required to make the deposit of cash collateral securing the
Letters of Credit.
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ARTICLE VIII
THE AGENT
SECTION 8.01. Appointment of Agent. Each of the Lenders hereby
irrevocably designates and appoints The First National Bank of Boston as the
Agent of such Lender under this Agreement and the other Loan Documents, and
each such Lender irrevocably authorizes Agent, as the Agent for such Lender to
take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of this Agreement and such other
Loan Documents, including, without limitation, to make determinations as to the
eligibility of Inventory and Receivables and to adjust the advance ratios
contained in the definition of "Borrowing Base" (so long as such advance
ratios, as adjusted, do not exceed those set forth in the definition of
"Borrowing Base"), together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement or such other Loan Documents, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the other Loan Documents or otherwise exist against the Agent.
SECTION 8.02. Delegation of Duties. The Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
SECTION 8.03. Exculpatory Provisions. Neither the Agent nor any
of its trustees, officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable to any Lender (or any Lender's participants) for
any action lawfully taken or omitted to be taken by it or such Person under or
in connection with this Agreement or the other Loan Documents (except for its
or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any Lender (or any Lender's participants) for any
recitals, statements, representations or warranties made by any Borrower or any
officer thereof contained in this Agreement or the other Loan Documents or in
any certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection with, this Agreement or
the other Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the other Loan
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Documents or for any failure of any Borrower to perform its obligations
hereunder or thereunder. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement, or to inspect
the properties, books or records of any Borrower.
SECTION 8.04. Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to a
Borrower), independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless such Note shall have been transferred in accordance with
SECTION 9.07. The Agent shall be fully justified in failing or refusing to
take any action under this Agreement and the other Loan Documents unless it
shall first receive such advice or concurrence of the Majority Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the Notes in accordance with a request of the Majority
Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Notes.
SECTION 8.05. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or a Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall promptly give notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Majority Lenders;
PROVIDED that unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) continue making Revolving Credit
Advances to the Borrowers on behalf of the Lenders in reliance on the
provisions of SECTION 2.02(c) and take such other action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders.
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SECTION 8.06. Non-Reliance on Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of any Borrower, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of each Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of each Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder or by the other Loan Documents, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of any Borrower which may come into the possession of the
Agent or any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates.
SECTION 8.07. Indemnification. The Lenders agree to indemnify the
Agent in its capacity as such (to the extent not reimbursed by a Borrower and
without limiting the obligation of the Borrowers to do so), ratably according
to their respective Revolving Credit Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
Notes) be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or
any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Agent under or in connection with any of the foregoing; PROVIDED that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's gross negligence or
willful misconduct or resulting solely from transactions or occurrences that
occur at a time after such Lender has assigned
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all of its interests, rights and obligations under this Agreement pursuant to
SECTION 9.07 or, in the case of a Lender to which an assignment is made
hereunder pursuant to SECTION 9.07, at a time before such assignment. The
agreements in this subsection shall survive the payment of the Notes, the
Obligations of all Borrowers and all other amounts payable hereunder and the
termination of this Agreement.
SECTION 8.08. Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrowers as if the Agent were not the Agent
hereunder. With respect to its Revolving Credit Commitment, the Advances made
or renewed by it and any Note issued to it and any Letter of Credit issued by
it, the Agent shall have and may exercise the same rights and powers under this
Agreement and the other Loan Documents and is subject to the same obligations
and liabilities as and to the extent set forth herein and in the other Loan
Documents for any other Lender. The terms "Lenders" or "Majority Lenders" or
any other term shall, unless the context clearly otherwise indicates, include
the Agent in its individual capacity as a Lender or one of the Majority
Lenders.
SECTION 8.09. Successor Agent. The Agent may resign at any time
by giving written notice thereof to the Lenders and each Borrower and may be
removed at any time with or without cause by the Majority Lenders. Upon any
such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed
by the Majority Lenders, and shall have accepted such appointment, within 30
days after the retiring Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $50,000,000. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations under
the Loan Documents. After any retiring Agent's resignation or removal hereunder
as Agent, the provisions of this ARTICLE VIII shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 8.10. Notices from Agent to Lenders. The Agent shall
promptly, upon receipt thereof, forward to each Lender copies of any written
notices, reports or other information supplied to it by a Borrower (but which
no Borrower is required to supply directly to the Lenders).
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, the Notes, or the other Loan Documents nor consent
to any departure by any Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Majority Lenders, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; PROVIDED, HOWEVER, that no
amendment, waiver or consent shall, unless in writing and signed by all of the
Lenders, do any of the following: (i) waive any of the conditions specified in
SECTION 4.01 OR 4.02, (ii) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes or the number of Lenders that
shall be required for the Lenders or any of them to take any action hereunder,
(iii) release any Collateral or Pledged Collateral, (iv) amend this SECTION
9.01, (v) increase the Commitments of the Lenders or subject the Lenders to any
additional obligations, (vi) reduce the principal of, or interest on, the Notes
or any fees or other amounts payable hereunder or (vii) postpone any date fixed
for any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder; PROVIDED, FURTHER, that no amendment, waiver or
consent shall, unless in writing and signed by the Agent in addition to the
Lenders required above to take such action, affect the rights or duties of the
Agent under this Agreement or any Note.
SECTION 9.02. Notices, Etc.
(a) Notices. All notices and other communications provided for
hereunder shall, except as expressly provided otherwise, be in writing
(including telegraphic, telecopy, telex or cable communication) and mailed,
telegraphed, telecopied, telexed, cabled or delivered, if to any Borrower, at
Cedar Chemical Corporation
2414 Clark Tower
5100 Poplar Avenue
Memphis, Tennessee 38137
Attention: John C. Bumpers
and
Trans-Resources, Inc.
Nine West 57th Street
New York, New York 10009
Attention: Lester W. Youner
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with a copy to:
Apperson, Crump, Duzane & Maxwell
One Commerce Square Suite 2110
Memphis, Tennessee 38103
Attention: Allen T. Malone, Esq.
and
Rubin Baum Levin Constant & Friedman
30 Rockefeller Center
New York, New York 10112
Attention: Edward Klimerman, Esq.
and if to any Lender, at its Lending Office specified opposite its name on
SCHEDULE I hereto or at its Lending Office specified in the Assignment and
Acceptance pursuant to which it became a Lender; and if to the Agent, at its
address at 400 Perimeter Center Terrace, Suite 745, Atlanta, Georgia 30346,
Attention: John K. Hood; or, as to the Borrowers or the Agent, at such other
address as shall be designated by such party in a written notice to the other
parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the Agent. All
such notices and communications shall, when mailed, telegraphed, telecopied,
telexed or cabled, be effective when deposited in the mails, delivered to the
telegraph company, transmitted by telecopier, confirmed by telex answerback or
delivered to the cable company, respectively, except that notices and
communications to the Agent pursuant to ARTICLE II, IV or VIII shall not be
effective until received by the Agent. A telephonic notice to the Agent, as
understood by the Agent, will be deemed to be the controlling and proper notice
in the event of a discrepancy with or failure to receive a confirming written
notice.
(b) Agent's Office. The Agent hereby designates its office located
at 100 Federal Street, Boston, Massachusetts 02110, or any subsequent office
which shall have been specified for such purpose by written notice to the
Borrowers and the Lenders, as the office to which payments due are to be made
and at which Advances will be disbursed.
SECTION 9.03. No Waiver; Remedies. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note or other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any other right. The
remedies herein and in the other Loan Documents provided are cumulative and not
exclusive of any remedies provided by law.
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SECTION 9.04. Costs, Expenses and Taxes. The Borrowers agree to
pay on demand all costs and expenses in connection with the preparation,
execution, delivery, administration, modification and amendment of the Loan
Documents (including, without limitation, (i) the reasonable fees and expenses
of counsel for the Agent with respect thereto and with respect to advising the
Agent and any Lender as to their respective rights and responsibilities, or
perfection, protection or preservation of rights or interests, under the Loan
Documents (including, without limitation, the costs of any environmental
appraisal obtained in connection therewith or enforcement thereof, including,
without limitation, in connection with any foreclosure under any Security
Document) and the reasonable fees and expenses of counsel for each Lender in
connection with the review and negotiation of this Agreement and the other Loan
Documents on and prior to the Effective Date and the occurrence of the
Effective Date and (ii) all costs and expenses (including, without limitation,
reasonable fees and expenses of counsel for the Agent and each Lender) in
connection with the enforcement of the Loan Documents (whether through
negotiations before or after the occurrence of any Default, legal proceedings
(including, without limitation, any bankruptcy, insolvency or other similar
proceeding affecting creditors' rights generally) or otherwise), all
out-of-pocket expenses and a per diem charge of $500 per examiner in connection
with field examinations required or permitted under the Loan Documents and any
and all stamp and other taxes payable or determined to be payable in connection
with the execution and delivery of the Loan Documents and agree to save the
Agent and each Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such
taxes).
SECTION 9.05. Right of Set-off. Upon (a) the occurrence and
during the continuance of any Event of Default and (b) the making of the
request or the granting of the consent specified by SECTION 7.01 to authorize
the Agent to declare the Notes due and payable pursuant to the provisions of
SECTION 7.01, each Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of any Borrower against any and all of the Obligations of
the Borrowers, or any of them now or hereafter existing under this Agreement,
the Notes or the other Loan Documents held by such Lender, irrespective of
whether such Lender shall have made any demand under this Agreement, such Note
or other Loan Document and although such obligations may be unmatured. Each
Lender agrees promptly to notify the Borrowers, or any of them, after any such
set-off and application made by such Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each
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Lender under this SECTION 9.05 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that such Lender may
have.
SECTION 9.06. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of Cedar, Potash, VCC, the Agent and each Lender
and their respective successors and assigns, except that no Borrower shall have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lenders.
SECTION 9.07. Assignments and Participations. (a) Each Lender
may, with the prior written consent of the Borrowers and the Majority Lenders
(other than such Lender), assign to one or more banks or other entities all or
a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the Advances owing to
it and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) each such
assignment shall be of a uniform, and not a varying, percentage of all of the
assigning Lender's rights and obligations under this Agreement, (ii) except in
the case of an assignment to a Person that immediately prior to such assignment
was a Lender, the amount of the Commitment of the assigning Lender being
assigned pursuant to each such assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no event be
less than $5,000,000 and shall be an integral multiple of $100,000, (iii) each
such assignment shall be to an Eligible Assignee and (iv) the parties to each
such assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any Note
or Notes subject to such assignment and a processing and recordation fee of
$2,000. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the delivery thereof
to the Agent or, if so specified in such Assignment and Acceptance, the date of
acceptance thereof by the Agent, (x) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (y) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease
to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee
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thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement
or any other instrument or document furnished pursuant hereto or any collateral
(including without limitation the Collateral); (ii) such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to the
financial condition of any Borrower or the performance or observance by any
Borrower of any of its obligations under this Agreement or any other instrument
or document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in SECTION 5.01 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee confirms that it is
an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations that
by the terms of this Agreement are required to be performed by it as a Lender.
(c) The Agent shall maintain at the Agent's Office a copy of each
Assignment and Acceptance delivered to and accepted by it and a register for
the recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Advances owing to, each Lender from time to
time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrowers, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by any Borrower or Lender at any reasonable time and
from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with the Notes subject to such assignment, the Agent shall, if such
Assignment and Acceptance has been completed and is in substantially the form
of
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EXHIBIT D hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to Cedar. Within five Business Days after Cedar's receipt of such
notice, the Borrowers, at their own expense, shall execute and deliver to the
Agent in exchange for each surrendered Note a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it pursuant
to such Assignment and Acceptance and, if the assigning Lender has retained a
Commitment hereunder, a new Note to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Notes shall
be in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Notes, shall be dated the effective date of such Assignment
and Acceptance, and shall otherwise be in substantially the form of EXHIBIT A-1
or A-2 hereto, as the case may be.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitments, the Advances owing to it and the Note or Notes held by it);
PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Commitment to each Borrower hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) such Lender
shall remain the holder of any such Note for all purposes of this Agreement,
(iv) the Borrowers, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights
and obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of any Loan Document, or any consent to any departure by any Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such participation,
postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation, or release all or substantially all of
the Collateral.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this SECTION
9.07, disclose to the assignee or participant or proposed assignee or
participant any information relating to the relevant Borrower furnished to such
Lender by or on behalf of such Borrower; PROVIDED, HOWEVER, that, prior to any
such disclosure, the assignee or participant or proposed assignee or
participant shall agree to preserve the confidentiality of any
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confidential information relating to such Borrower received by it from such
Lender.
SECTION 9.08. Governing Law; Consent to Jurisdiction. THIS
AGREEMENT AND THE NOTES, AND ALL CLAIMS AND DISPUTES ARISING OUT OF OR RELATING
HERETO OR THERETO OR TO THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
GEORGIA, EXCEPT WHERE OTHERWISE SPECIFIED IN ANY LOAN DOCUMENT. EACH PARTY
HERETO HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF GEORGIA AND OF ANY FEDERAL COURT SITTING IN THE NORTHERN DISTRICT OF
GEORGIA AND ANY APPELLATE COURT FROM ANY THEREOF. Nothing in this Section
shall affect the right of any Lender or the Agent to bring any action or
proceeding against the Borrowers or their respective property in the courts of
any other jurisdictions or to enforce in any other jurisdiction any judgment
obtained in a court sitting in Georgia.
SECTION 9.09. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.10. Indemnification. The Borrowers hereby jointly and
severally indemnify and hold the Agent and each Lender harmless from and
against any and all claims damages, losses, liabilities, costs or expenses
which the Agent or such Lender may incur or which may be claimed against the
Agent or such Lender by any person or entity:
(a) by reason of any inaccuracy or alleged inaccuracy in any
material respect, or any untrue statement or alleged untrue statement of any
material fact, contained in the written information provided by or on behalf of
any Borrower to any Lender in connection with this Agreement or any other Loan
Documents or the transactions contemplated hereby or thereby, or by reason of
the omission or alleged omission to state therein a material fact necessary to
make such statements, in the light of the circumstances under which they were
made, not misleading;
(b) by reason of or in connection with the execution, delivery or
performance of this Agreement or any other Loan Document, or any transaction
contemplated hereby or by any thereof; PROVIDED, HOWEVER, that the Borrowers
shall not be required to indemnify the Agent or such Lender pursuant to this
SECTION 9.10(b) for any claims, damages, losses, liabilities, costs or expenses
to the extent caused by the Agent's or such Lender's wilful misconduct or gross
negligence; or
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(c) by reason of or in connection with the application of any
Environmental Law to the operations or properties of any Borrower; PROVIDED,
that such claims, damages, losses, liabilities, costs or expenses arise out of
or relate to any of the Loan Documents or the transactions contemplated
thereby.
Nothing in this SECTION 9.10 is intended to limit the Borrowers'
obligations contained in ARTICLE II. Without prejudice to the survival of any
other obligation of any Borrower hereunder, the indemnities and obligations of
all Borrowers contained in this SECTION 9.10 shall survive the payment in full
of amounts payable pursuant to ARTICLE II.
SECTION 9.11. Effect of Amendment and Restatement of Existing
Credit Agreement. From and after the Effective Date, the Existing Credit
Agreement is hereby amended and restated in its entirety. The Borrowers, the
Lenders and the Agent acknowledge and agree that (i) this Agreement and the
other Loan Documents executed and delivered in connection herewith do not
constitute a novation, payment and reborrowing, or termination of the
"Obligations" (as defined in the Existing Credit Agreement) under the Existing
Credit Agreement as in effect prior to the Effective Date, (ii) such
"Obligations" are in all respects continuing (as amended and restated hereby)
with only the terms thereof being modified as provided in this Agreement, (iii)
the Liens, assignments and security interests of the Agent, for its benefit and
the benefit of the Lenders, created and granted under the Security Agreements,
the Mortgages and the other Collateral Documents, securing the payment and
performance of such "Obligations," are in all respects continuing and in full
force and effect (as modified in connection with this Agreement) and secure the
payment and performance of the Obligations (as defined in this Agreement), and
(iv) from and after the Effective Date, all references in any Loan Document to
"the Credit Agreement" and other words or phrases referring to the Existing
Credit Agreement, shall mean and be references to this Agreement.
SECTION 9.12. Waiver of Jury Trial. EACH OF CEDAR, POTASH, VCC,
THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF
THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
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<PAGE> 87
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
CEDAR CHEMICAL CORPORATION
By: /s/ John C. Bumpers
-----------------------------------
Name: John C. Bumpers
Title: Executive Vice President
NEW MEXICO POTASH CORPORATION
By: /s/ John C. Bumpers
-----------------------------------
Name: John C. Bumpers
Title: Vice President
VICKSBURG CHEMICAL COMPANY
By: /s/ John C. Bumpers
-----------------------------------
Name: John C. Bumpers
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
as Agent
By: /s/ William C. Purinton
-----------------------------------
William C. Purinton
Vice President
Lenders
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ William C. Purinton
-----------------------------------
William C. Purinton
Vice President
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<PAGE> 88
NATIONSBANK OF GEORGIA, N.A.
By: /s/ Joe Hardesty
-----------------------------------
Name: Joe Hardesty
Title: Senior Vice President
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<PAGE> 1
EXHIBIT 10.16
[Execution Copy]
RESTATED AMENDMENT NO. 1
to
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS RESTATED AMENDMENT NO. 1 dated as of November 10, 1993 is
made among CEDAR CHEMICAL CORPORATION, NEW MEXICO POTASH CORPORATION, VICKSBURG
CHEMICAL COMPANY, THE FIRST NATIONAL BANK OF BOSTON and NATIONSBANK OF GEORGIA,
N.A.
Preliminary Statements
Cedar Chemical Corporation, a Delaware corporation ("Cedar"),
New Mexico Potash Corporation ("Potash"), Vicksburg Chemical Company ("VCC"),
The First National Bank of Boston ("Bank of Boston"), NationsBank of Georgia,
N.A. (a "Lender") and Bank of Boston as agent for itself and the other Lenders,
are parties to an Amended and Restated Credit Agreement dated as of June 2,
1993 (said Agreement, the "Credit Agreement," terms defined therein or by
reference therein being used herein as therein defined), pursuant to which the
Lenders have extended and may continue to extend loans and other financial
accommodations to the Borrowers.
VCC intends to construct a new potassium carbonate plant on
VCC's property in Vicksburg, adjacent to VCC's existing plant. The Borrowers
have determined that it is advantageous to VCC as the direct borrower and to
Cedar and Potash as guarantors, that the financing for such plant be provided
by the loan to VCC by the Mississippi Business Finance Corporation (the
"Authority") of the proceeds of the issuance by the Authority of certain
taxable industrial development revenue bonds. VCC and the other Borrowers have
requested, and the Lenders and the Agent have agreed, upon and subject to all
of the terms, conditions and provisions of this Restated Amendment and of the
Bond Documents (as defined in Section 1(b) below), to purchase said bonds in an
aggregate principal amount equal to up to 75% (or $11,250,000, if less) of the
cost of said plant. This Restated Amendment corrects, supersedes and replaces,
in its entirety, the document titled "Amendment No. 1 to Amended and Restated
Credit Agreement" heretofore executed by the parties hereto but which did not
become effective in accordance with its terms.
NOW, THEREFORE, in consideration of the premises, the Loans
outstanding under the Credit Agreement, the Credit Agreement, and the mutual
promises contained therein and herein, the parties hereto hereby agree as
follows:
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<PAGE> 2
Section 1. Amendments to Credit Agreement. Subject to
the provisions of Section 2, the Credit Agreement is amended by
(a) amending Section 1.01 Certain Defined Terms by
(i) amending the definition "Business Day" by inserting
immediately prior to the period at the end thereof, the phrase "or, in
connection with any Bond Advance or payment by the Authority or the
Trustee, in Vicksburg, Mississippi";
(ii) amending the definition "Collateral Documents" by
inserting immediately prior to the period at the end thereof, the
phrase ", and the Indenture, the PCP Trust Deed and the PCP Security
Agreement";
(iii) amending the definition "Loan Documents" by inserting
after the phrase "the Collateral Documents," the phrase "at any time
when all Lenders are also Bondholders (as defined in the PCP
Indenture), the Bond Documents,";
(iv) amending the definition "Revolving Credit Commitment"
in its entirety to read as follows:
"Revolving Credit Commitment" means, as to each
Lender, such Lender's Commitment Percentage of (i) $25,000,000
during calendar year 1993, (ii) $28,000,000 during calendar
year 1994 and (iii) $33,000,000 during calendar year 1995, as
the same may be reduced pursuant to SECTION 2.04.
(v) amending the definition "Revolving Credit Note" by
inserting after the reference "Exhibit A-1" appearing therein, the
phrase "or Exhibit A-1b";
(b) further amending Section 1.01 Certain Defined Terms
by adding thereto in correct alphabetical order the following additional
definitions:
"Authority" means the Mississippi Business Finance Corporation.
"Authorized Officer" means the Chairman, President or
Executive Vice President of any Borrower, or any other officer of a
Borrower authorized by the Board of Directors of such Borrower to make
requests for Advances or Bond Advances.
"Bond Advance" means each payment by a Lender to the Authority
to acquire Bonds or which results in an increase in the Authority's
obligations under outstanding Bonds.
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<PAGE> 3
"Bond Documents" means the Bond Purchase Agreement, the Bonds,
the Indenture, the PCP Deed of Trust, the PCP Security Agreement, the
PCP Loan Agreement, the PCP Notes and the other certificates,
instruments, agreements and documents delivered by or on behalf of any
Borrower in connection therewith.
"Bond Financing" means the purchase of the Bonds on the
Issuance Date and Bond Advances made after the Issuance Date, in each
case by the Lenders, in accordance with the terms of the Bond Purchase
Agreement, the Bond Documents and this Agreement.
"Bond Financing Amount" means a principal amount equal to the
least of (i) $11,250,000, (ii) the aggregate principal amount of all
Bond Advances made by the Lenders on or before June 1, 1995, and (iii)
an amount equal to 75% of PCP Construction Cost, as determined on June
1, 1995.
"Bond Financing Commitment" means, as to each Lender, an
amount equal to such Lender's Commitment Percentage of $11,250,000.
"Bond Purchase Agreement" means the Bond Purchase Agreement,
dated as of November 10, 1993, between the Authority, as issuer, VCC,
and the Lenders, as purchasers, as the same may be amended, modified,
supplemented or restated from time to time.
"Bonds" means $11,250,000 Mississippi Business Finance
Corporation Taxable Industrial Development Revenue Bonds, Series 1993
(Vicksburg Chemical Company) bearing interest and payable as to
principal and interest in accordance with the terms set forth on
SCHEDULE 1.1 - CERTAIN BOND TERMS hereto.
"Commitment Percentage" means, as to each Lender, the
percentage set forth opposite such Lender's name on SCHEDULE I under
the caption "Commitment Percentage" or, if such Lender has entered
into one or more Assignments and Acceptances, set forth for such
Lender in the Register maintained by the Agent pursuant to SECTION
9.07(c) as such Lender's "Commitment Percentage."
"Issuance Date" means the first date on which all of the
conditions specified in SECTIONS 4.02 AND 4.03 are satisfied and on
which the Bonds are issued.
"PCP" means the potassium carbonate plant conforming to the
specifications attached hereto as SCHEDULE 1.1 -- PCP SPECIFICATIONS,
to be owned by VCC and constructed by VCC on
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<PAGE> 4
land subject to the Mortgage affecting VCC's real property in
Mississippi.
"PCP Construction Cost" means the total cost to VCC (less any
portion of such cost allocated to land) of designing and building, or
causing to be designed and built, the PCP.
"PCP Deed of Trust" means the Deed of Trust dated as of
December 1, 1993 made by VCC in favor of the Authority as security for
VCC's obligations under the PCP Loan Agreement and the PCP Notes, as
the same may be amended, modified, supplemented or restated from time
to time and any substitute or replacement deed of trust securing said
obligations, in each case in accordance with the provisions of this
Agreement.
"PCP Indenture" means the Trust Indenture dated as of December
1, 1993, between the Authority and First National Bank of Vicksburg,
trustee, as the same may be amended, modified, supplemented or
restated from time to time in accordance with the provisions of this
Agreement.
"PCP Loan Agreement" means the Loan Agreement dated as of
December 1, 1993 between the Authority, as lender, and VCC, as
borrower, with respect to the loan by the Authority to VCC of the
proceeds of issuance of the Bonds, as the same may be amended,
modified, supplemented or restated from time to time in accordance
with the provisions of this Agreement.
"PCP Note" means each promissory note of VCC substantially in
the form thereof attached to the PCP Loan Agreement, properly
completed, payable to the order of the Authority evidencing advances
made under the PCP Loan Agreement.
"PCP Security Agreement" means the Security Agreement dated as
of December 1, 1993 made by VCC in favor of the Authority with respect
to certain collateral for the Bonds, as the same may be amended,
modified, supplemented or restated from time to time in accordance
with the provisions of this Agreement.
"Trustee" means First National Bank of Vicksburg, as trustee
under the PCP Indenture, and any successor Trustee appointed in
accordance with the terms of the PCP Indenture.
(c) amending Section 2.01(b) Reduction of Outstandings in
its entirety to read as follows:
(b) Reduction of Outstandings. Notwithstanding the
provisions of SECTIONS 2.01(a) and 2.07: (i) in 1994 and in
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<PAGE> 5
each calendar year thereafter Cedar shall choose a day (the "Initial
Clean-up Day") occurring on or after July 1 and before October 1 of
such year and shall notify the Agent thereof at least two Business
Days in advance, (ii) on or before each such Initial Clean-up Day the
Borrowers shall repay outstanding Revolving Credit Advances in
accordance with SECTION 2.07(a) and provide cash collateral as
contemplated by SECTION 2.07(c) for outstanding Letters of Credit,
such that the aggregate principal amount of all outstanding Revolving
Credit Advances, PLUS the aggregate face amount of outstanding Letters
of Credit, LESS the amount of such cash collateral, does not exceed
$7,000,000, and (iii) the Borrowers shall not borrow under SECTION
2.01(a) or SECTION 2.12 during the 31 consecutive days including and
following each such Initial Clean-up Day to the extent that any such
Borrowing would result in Revolving Credit Advances and Letters of
Credit being outstanding in excess of $7,000,000.
(d) amending Section 2.02(a) Requests for Borrowing (i)
by inserting in subsection (iv) thereof immediately after the phrase "under
this Agreement" the phrase "or under the PCP Loan Agreement or the PCP Notes"
and (ii) by inserting in subsection (v) thereof immediately after the phrase
"under this Agreement" the phrase ", the PCP Loan Agreement, the PCP Notes";
(e) adding thereto a new Article IIA to read as follows:
ARTICLE IIA
THE BOND ADVANCES
SECTION 2A.01. The Bond Advances. Each Lender severally
agrees, on the terms and conditions hereinafter set forth, to make
Bond Advances on the Issuance Date and, if requested to do so in
accordance with the terms of the Bond Purchase Agreement, on the first
Business Day of each month thereafter through and including June 1,
1995; PROVIDED, that the aggregate principal amount of all Bond
Advances made by each Lender shall not exceed such Lender's Bond
Financing Commitment.
SECTION 2A.02. Requests for Bond Advances. Each request for
a Bond Advance shall be made not later than three Business Days before
the date of such advance, and otherwise in accordance with the
provisions of the Bond Purchase Agreement and the PCP Loan Agreement.
Without regard to any other provision of this Agreement, the Agent
shall only make proceeds of Bond Advances available to the Authority
(or to the Trustee or to VCC) to the extent the
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<PAGE> 6
Agent has received such funds, of the same type, from the Lenders.
SECTION 2A.03. Repayment of and Interest on the Bond
Advances. The principal of the Bond Advances and interest thereon
shall be paid to the Lenders in accordance with the terms of the Bond
Documents.
SECTION 2A.04. Payments Made Under Notes. VCC expressly
acknowledges, for the benefit of the Agent and the Lenders, the
validity and enforceability against it of the Bond Documents to which
it is or as of the Issuance Date will be a party.
(f) amending Section 3.01 Unconditional Guarantee by
adding as a new sentence at the end of subsection (a) thereof, the following:
Without limiting the effect or generality of the foregoing, each of
Cedar, Potash and VCC expressly acknowledges and agrees that VCC's
Obligations under the PCP Loan Agreement, the PCP Notes and under any
other Bond Documents, to the extent such Obligations are part of the
security for the Bonds included in the "Trust Estate" (as defined in
the PCP Indenture), constitute Obligations of VCC to the Lenders and
the Agent under the Loan Documents and constitute Guaranteed
Obligations.
(g) amending Section 3.06 Survival by inserting after the
phrase "the Advances owing to it and any", the phrase "Bond or";
(h) redesignating Section 4.02 Conditions Precedent to
Each Borrowing thereof as Section 4.03 and adding thereto a new Section 4.02 to
read as follows:
SECTION 4.02. Conditions Precedent to Bond Advances. The
obligation of each Lender to make its initial Bond Advance is subject
to the conditions precedent that:
(a) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Borrower pending or threatened
before any court, Governmental Authority or arbitrator that, if
adversely determined, would have a material adverse effect on the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Borrower (other than Disclosed
Litigation) or that purports to affect the legality, validity or
enforceability of this Agreement, any Note, any other Loan Document,
any Bond Document or the consummation of the transactions contemplated
hereby or thereby.
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<PAGE> 7
(b) All conditions to the issuance of the Bonds, other
than tender of the Bond Advances to be made by the Lenders on the
Issuance Date, and to the Lenders' obligations under the Bond Purchase
Agreement to purchase Bonds, shall have been satisfied or waived in
accordance with the terms of the PCP Indenture or the Bond Purchase
Agreement, as applicable, and the Agent shall have received, dated
such day, a certificate of an Authorized Officer of Cedar and VCC to
such effect, having attached thereto, copies of all Bond Documents, as
executed by the parties thereto, together with copies of all
certificates, legal opinions, resolutions, financing statements and
other documents delivered in connection therewith, certified by such
officer of Cedar and VCC as true and complete copies thereof, together
with reliance letters as to such certificates or opinions, not
otherwise addressed to the Agent and the Lenders, as any of them may
reasonably request.
(c) The Agent shall have received, in form and substance
satisfactory to it, each of the following:
(i) signed copies of proper financing statements,
in appropriate form to be filed on or promptly after the
Issuance Date under the Uniform Commercial Code of all
jurisdictions that the Agent may deem necessary or desirable
in order to continue and protect the perfection of the
Security Interest;
(ii) Revolving Credit Notes in substantially the
form of Exhibit A-1b, properly completed, duly executed and
delivered by the Borrowers;
(iii) evidence of the insurance required by the
terms of the Security Agreements;
(iv) a Mortgage modification with respect to each
Mortgage, effective to include as indebtedness secured by such
Mortgage, the Obligations of the applicable Borrower to the
Agent and the Lenders in connection with the Bonds, duly
executed by the applicable Borrower, together with
(A) evidence that each such Mortgage
modification has been duly recorded on or before the
Issuance Date (or acknowledgement by the
representative of the title insurance issuer of
receipt of such Mortgage modifications in form for
recording) in all filing or recording offices that
the Agent may deem necessary or desirable in order to
preserve the valid and enforceable first and
subsisting Lien on the property described therein in
favor of the Lenders;
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<PAGE> 8
(B) American Land Title Association
Lender's Extended Coverage title insurance policies,
or endorsements thereto or unconditional commitments
for the issuance of the same, in each case in form
and in amounts acceptable to the Agent, issued and
reinsured by title insurers acceptable to the Agent,
insuring the Mortgages (other than the Mortgage made
by Potash) as modified by such Mortgage modifications
to be valid and enforceable first Liens on the
property described therein, free and clear of all
defects (including, but not limited to, mechanics'
and materialmen's liens) and encumbrances, excepting
only Permitted Encumbrances, and providing for such
other affirmative insurance (including endorsements
for future advances under the Loan Documents
(including Bond Advances) and for mechanics' and
materialmen's liens) and coinsurance and reinsurance
with direct access as the Agent may deem necessary or
desirable;
(C) such consents and agreements of
lessors and other third parties, and such estoppel
letters and other confirmations, as the Agent may
deem necessary or desirable;
(D) evidence of the insurance required
(including, without limitation, for any business or
property) by the terms of the Mortgages as modified
by such Mortgage modifications; and
(E) evidence that all other action that
the Agent may deem necessary or desirable in order to
preserve valid first and subsisting Liens in favor of
the Agent, for the benefit of the Lenders, on the
property described in the Mortgages has been taken;
(v) A favorable opinion of Apperson, Crump,
Duzane & Maxwell, counsel for the Borrowers, in substantially
the form of EXHIBIT M hereto and as to such other matters as
any Lender through the Agent may reasonably request; and
(vi) Favorable opinions of Hilburn, Calhoon,
Harper, Pruniski & Calhoun, Ltd.; McCormick, Forbes, Caraway &
Tabor; and Gerald & Brand, local counsel to the Lenders in
Arkansas, New Mexico, and Mississippi, respectively, in
substantially the forms of EXHIBITS N-1, N-2 AND N-3,
respectively, and as to such other matters as any Lender
through the Agent may reasonably request;
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<PAGE> 9
(d) Cedar or another Borrower shall have paid to the
Agent for the ratable account of the Lenders a facility fee in the
amount of $112,500, which fee shall be fully earned when due and
payable and not subject to refund or rebate; and
(e) The Agent shall have received in form and substance
satisfactory to it, such other certificates, instruments, agreements
and documents relating to the transactions contemplated to occur in
connection herewith and with the issuance of the Bonds as the Agent or
any Lender may reasonably request.
(i) amending the redesignated Section 4.03 in its
entirety to read as follows:
SECTION 4.03. Conditions Precedent to Each
Borrowing and Bond Advance. (a) The obligation of each Lender to make
an Advance on the occasion of each Borrowing (including the initial
Borrowing) shall be subject to the further conditions precedent that
on the date of such Borrowing (i) the following statements shall be
true (and each of the giving of the applicable Notice of Borrowing and
the acceptance by any Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty by such Borrower that on the
date of such Borrowing such statements are true):
(A) The representations and warranties contained
in each Loan Document are correct on and as of the date of
such Borrowing, before and after giving effect to such
Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date, except for those
representations and warranties made as of a specified date;
(B) No event has occurred and is continuing, or
would result from such Borrowing or from the application of
the proceeds therefrom, that constitutes a Default; and
(C) The Aggregate Borrowing Base exceeds the
aggregate principal amount of all Revolving Credit Advances
that will be outstanding to all Borrowers after giving effect
to such Borrowing and each Borrower's Borrowing Base exceeds
the aggregate principal amount of all Revolving Credit
Advances that will be outstanding to such Borrower after
giving effect to such Borrowing;
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<PAGE> 10
and (ii) the Agent shall have received such other approvals, opinions
or documents as any Lender through the Agent may reasonably request.
(b) The obligation of each Lender to make a Bond Advance
(including the initial Bond Advance) upon request therefor by VCC and
the Authority made in accordance with the terms of the Bond Purchase
Agreement, the PCP Loan Agreement and the PCP Indenture, shall be
subject to the further conditions precedent that on the date of such
Bond Advance (i) the following statements shall be true (and each of
the giving of the applicable request for such Bond Advance and the
acceptance (directly or indirectly) by any Borrower of the proceeds of
such Bond Advance shall constitute a representation and warranty by
the Borrowers that on the date of such Bond Advance such statements
are true):
(A) The representations and warranties contained
in each Loan Document and the representations and warranties
of the Borrowers contained in each Bond Document are correct
on and as of the date of such Bond Advance, before and after
giving effect to such Bond Advance and to the application of
the proceeds therefrom, as though made on and as of such date,
except for those representations and warranties made as of a
specified date; and
(B) No event has occurred and is continuing, or
would result from such Bond Advance or from the application of
the proceeds therefrom, that constitutes a Default;
(ii) the Agent shall have received at least three Business
Days prior to the date on which such Bond Advance is requested to be
made, in sufficient copies for each Lender, a certificate of an
Authorized Officer of VCC or Cedar setting forth (A) the date of the
requested Bond Advance (which purchase date shall be the first
Business Day of a month on or prior to the first Business Day of June
1995), (B) the amount of the requested Bond Advance (which shall be at
least $100,000), and (C) such Borrower's certification that the amount
of the requested Bond Advance does not exceed 75% of the PCP
Construction Cost incurred by VCC through the date of such
certificate, LESS the aggregate amount of all Bond Advance theretofore
made, and accompanied by a computation in reasonable detail supporting
such certification and by copies of invoices or other evidences of
payment acceptable to the Agent in its reasonable judgment, and
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<PAGE> 11
(iii) the Agent shall have received such other approvals,
opinions or documents as any Lender through the Agent may reasonably
request.
(j) amending Section 5.01 Representations and Warranties
of the Borrowers by adding thereto a new subsection (z) to read as follows:
(z) Bond Documents. The representations and warranties
of VCC set forth in the Bond Documents to which it is a party are (or
will be) true and correct on and as of the Issuance Date and each of
the Bond Documents to which any Borrower is a party is (or, upon
execution and delivery by such Borrower, will be) the legal, valid,
binding and enforceable obligation of such Borrower.
(k) amending Section 6.01 Covenants of the Borrowers by
(i) adding in the first grammatical paragraph thereof immediately after the
phrase "any Advance" the phrase "or any amount outstanding under any PCP Note
or any Bond" and (ii) amending the parenthetical phrase appearing in clause
(iii) of subsection (l) Maintenance of Fixed Charge Coverage in its entirety to
read as follows:
(other than those made from the proceeds of Capital
Expenditure Debt or included in PCP Construction Cost);
(l) amending Section 6.02 Negative Covenants by (i)
adding in the first grammatical paragraph thereof immediately after the phrase
"any Advance" the phrase "or any amount outstanding under any PCP Note or any
Bond", (ii) adding to clause (i) of subsection (a) Liens, Etc. thereof,
immediately prior to the semi-colon at the end thereof, the phrase "or, to the
extent they affect only property of VCC, the Bond Documents", (iii) amending
subsection (l) Prepayments, Etc. of Debt in its entirety to read as follows:
(l) Prepayments, Etc. of Debt. Prepay, redeem,
purchase, defease or otherwise satisfy prior to the scheduled maturity
thereof in any manner, or make any payment in violation of any
subordination terms of, any Existing Debt (other than the Advances or
the Debt outstanding under the PCP Notes), or amend, modify or change
in any manner any term or condition of any such Debt, EXCEPT that (A)
if on July 31 of 1993, 1994 or 1995 and on the date such amount (or
any portion thereof) is paid, no Default has occurred and is
continuing or would exist after giving effect to such payment, Cedar
may repay outstanding principal of the Cedar Subordinated Debt in an
amount not greater than $666,667 in respect of each such year, on a
cumulative basis, and (B) not earlier than 12 months after the date
which an Authorized Officer of Cedar and VCC shall
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<PAGE> 12
have certified to the Agent and the Lenders as the date on which the
PCP became operational, Cedar may repay outstanding principal of Cedar
Subordinated Debt in an additional amount not greater than $3,500,000,
PROVIDED that both on and as of the date of the audited financial
statements of the Borrowers then most recently delivered pursuant to
SECTION 6.01(p)(iv) and on the date or dates of payment of such amount
(or any portion thereof) no Default shall have occurred and be
continuing or would result from such payment.
and (iv) adding thereto a new subsection (p) to read as follows:
(p) Amendment of Bond Documents. Permit the Bond
Documents to which it is a party, or any of them, to be amended,
modified or supplemented, other than strictly in accordance with the
terms thereof.
(m) amending Section 7.01 Events of Default by amending
the first parenthetical phrase of subsection (d) thereof in its entirety to
read as follows:
(including any Debt of VCC under the PCP Loan Agreement and the PCP
Notes, but excluding Debt referred to in SECTION 7.01(a) and unsecured
Debt of a Borrower incurred in the ordinary course of such Borrower's
business for the deferred purchase price of property of services up to
an amount, for all Borrowers, of $1,000,000 at any time)
(n) amending Section 9.01 Amendments, Etc. by (i)
inserting after the phrase "the other Loan Documents" the first time it appears
therein, a parenthetical phrase to read "(including, without being limited to,
the Bond Documents)", (ii) deleting the reference in clause (i) thereof to
"Section 4.01 or 4.02" and substituting therefor a reference to "Article IV",
(iii) inserting in clause (v) thereof after the phrase "the Commitments"
appearing therein, the phrase "or the Bond Financing Commitments", (iv)
inserting in each of clauses (vi) and (vii) thereof immediately after the
phrase "the Notes" appearing in each the phrase ", the PCP Notes or the Bonds"
and (v) adding at the end thereof a new sentence to read as follows:
The Lenders hereby authorize and direct the Agent to vote 100% of the
Bonds held by Lenders in connection with any request for consent or
approval or waiver of the Lenders, as bondholders, under the Bond
Documents entirely in accordance with the direction of the Majority
Lenders or all Lenders, as the case may be.
(o) adding thereto a new Section 9.13 to read in its
entirety as follows:
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<PAGE> 13
SECTION 9.13. Conflict with Bond Documents. As between the
Borrowers, the Lenders and the Agent, in the event that any provisions
of the Bond Documents (other than Sections 4.12 and 4.13 of the PCP
Loan Agreement and the corollary provisions of the other Bond
Documents) conflict with or are inconsistent with the provisions of
the Loan Documents, the provisions of the Loan Documents shall govern.
(p) amending Schedule I to the Credit Agreement in its
entirety to be the form of Schedule I attached hereto as ANNEX 1; and
(q) further amending the Credit Agreement by adding
thereto as a new SCHEDULE 1.1 -- PCP SPECIFICATIONS the document attached
hereto as ANNEX 2, as new SCHEDULE 1.1 -- CERTAIN BOND TERMS the document
attached hereto as ANNEX 3, as new EXHIBITS A-1b, M, N-1, N-2 and N-3,
respectively, the documents attached hereto as ANNEXES 4, 5, 6, 7 and 8, and by
deleting Schedule 5.01(t) to the Credit Agreement and substituting therefor the
Schedule bearing the same designation attached hereto as ANNEX 9.
Section 2. Conditions to Effectiveness of this
Amendment. This Amendment will become effective on the date (the "Amendment
Effective Date") on which all of the following conditions are first satisfied
(terms defined in the Credit Agreement, as amended by this Amendment, being
used in this Section 2 as so defined):
(a) Documents. The Agent shall have received each of the
following documents, each in form and substance satisfactory to the Lenders and
the Agent:
(i) Certified copies of the resolutions of the Board of
Directors of each Borrower approving this Amendment and each other
Loan Document to which it is or is to be a party, and of all documents
evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Amendment and each other such
Loan Document.
(ii) A certificate of the Secretary or an Assistant
Secretary of each Borrower certifying the names and true signatures of
the officers of such Borrower authorized to sign this Amendment and
each other Loan Document to which it is or is to be a party and the
other documents to be delivered hereunder and thereunder.
(iii) Such additional Financing Statements naming a
Borrower as debtor and the Agent as secured party duly executed and
delivered by such Borrower as the Agent shall require.
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<PAGE> 14
(iv) A certificate of an authorized officer of each
Borrower stating that, based on an examination sufficient to permit
him or her to express an informed opinion, both before and after
giving effect to this Amendment,
(A) each representation and warranty of such
Borrower contained in the Agreement, as amended by this
Amendment, the other Loan Documents and any Bond Documents
that have been executed and delivered on or prior to the
Amendment Effective Date by such Borrower, is true and correct
on and as of the Amendment Effective Date, as though made on
and as of such date, and
(B) no Default or Event of Default has occurred
and is continuing.
(v) Nine West, as the pledgor under the Pledge Agreement,
and TRI, as the holder of the Subordinated Debt, shall each have
executed and delivered an acknowledgement and consent in substantially
the form attached hereto.
(vi) Such other documents and instruments as the Agent or
any Lender may reasonably request.
(b) Representation; No Material Adverse Change. The
statements set forth in Section 2(a)(iv) above shall be true and since the date
of the most recent financial statements timely delivered by the Borrowers in
accordance with the provisions of Section 6.01(p) of the Credit Agreement, no
material adverse change in the business, condition (financial or other),
performance, properties or prospects of any Borrower shall have occurred.
Section 3. Representations and Warranties of Borrowers.
Each of the Borrower represents and warrants to the Agent and each Lender as
follows (terms defined in the Agreement, as amended by this Amendment, being
used in this Section 3 as so defined):
(a) each of the representations and warranties of the
Borrower, or any of them, set forth in the Credit Agreement or in any other
Loan Document (including, in each case, as amended in connection with the
consummation of the transactions contemplated by this Amendment), is true and
correct on and as of the date of this Amendment as though made on and as of
such date;
(b) each Borrower has the power and has taken the
necessary action to authorize it to execute, deliver and perform this Amendment
and the Agreement, as amended by this Amendment, in accordance with its terms;
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<PAGE> 15
(c) this Amendment has been, and each other document
contemplated to be delivered by a Borrower hereunder when delivered pursuant to
this Amendment (or to the Credit Agreement as amended by this Amendment) will
have been, executed and delivered by duly authorized officers of such Borrower
and constitutes or will when executed and delivered constitute the legal, valid
and binding obligation of the Borrower or Borrowers party thereto, enforceable
against such Borrower(s) in accordance with its respective terms;
(d) no Default or Event of Default has occurred and is
continuing; and
(e) no litigation, governmental investigation or other
similar action involving any Borrower has been commenced or threatened in
writing, to restrain or prohibit the transactions contemplated by the Credit
Agreement, the other Loan Documents or the Bond Documents in each case as in
effect on the date hereof or as the same are to be amended in connection with
the consummation of the transactions contemplated by this Amendment.
Section 4. Effect of Effectiveness. From and after the
Amendment Effective Date, each reference in the Credit Agreement or in any
other Loan Document to "this Agreement," "the Credit Agreement," "hereunder,"
"hereof," or words of like import referring to the Credit Agreement shall mean
and be a reference to the Credit Agreement as amended by this Amendment. Each
Borrower hereby expressly confirms its Security Agreement and the continuing
effectiveness thereof and of the Liens created thereby as security for such
Borrower's Obligations and Guaranteed Obligations as they may exist after the
effectiveness of this Amendment, the issuance of the Bonds and application of
the proceeds of each Bond Advance.
Section 5. General Provisions.
(a) Titles and Captions. Titles and captions of Sections
and subsections in this Amendment are for convenience only, and neither limit
nor amplify the provisions of this Amendment.
(b) Governing Law. This Amendment shall be construed in
accordance with and governed by the laws of the State of Georgia.
(c) Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and shall be binding upon all parties, their successors and assigns, and all of
which taken together shall constitute one and the same agreement.
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
CEDAR CHEMICAL CORPORATION
By: /s/ John C. Bumpers
-----------------------------------
Name: John C. Bumpers
Title: Executive Vice President
NEW MEXICO POTASH CORPORATION
By: /s/ John C. Bumpers
-----------------------------------
Name: John C. Bumpers
Title: Vice President
VICKSBURG CHEMICAL COMPANY
By: /s/ John C. Bumpers
-----------------------------------
Name: John C. Bumpers
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
as Agent
By: /s/ William C. Purinton
-----------------------------------
William C. Purinton
Vice President
Lenders
-------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ William C. Purinton
------------------------------------
William C. Purinton
Vice President
NATIONSBANK OF GEORGIA, N.A.
By: /s/ Lynn Webster
----------------------------------
Name: Lynn Webster
Title: Vice President
<PAGE> 1
EXHIBIT 10.22
NOT TO EXCEED $11,250,000
MISSISSIPPI BUSINESS FINANCE CORPORATION
TAXABLE INDUSTRIAL DEVELOPMENT REVENUE BONDS,
SERIES 1993
(VICKSBURG CHEMICAL COMPANY)
NOVEMBER 10, 1993
BOND PURCHASE AGREEMENT
Mississippi Business Finance Corporation
Jackson, Mississippi
Vicksburg Chemical Company
Vicksburg, Mississippi
The First National Bank of Boston and NationsBank of Georgia, N.A.
(collectively, the "Purchasers") offer to enter into this Bond Purchase
Agreement (this "Agreement") with the Mississippi Business Finance Corporation,
a public corporation organized and existing under the laws of the State of
Mississippi (the "State") (the "Issuer") and Vicksburg Chemical Company, a
corporation organized and validly existing under the laws of the State of
Delaware, and qualified to do business and in good standing under the laws of
the State (the "Company"), which, upon your acceptance will be binding upon the
Issuer, the Company and the Purchasers.
1. BACKGROUND
(a) The Issuer will issue and sell its Taxable Industrial
Development Revenue Bonds, Series 1993 (Vicksburg Chemical Company) in the
maximum aggregate principal amount of $11,250,000 (the "Bonds") to provide for
the permanent financing of the Project (as defined in the Loan Agreement, as
hereinafter defined) to be located in the State and to be owned by the Company.
The Issuer and the Company will enter into a Loan Agreement (the "Loan
Agreement") dated as of December 1, 1993, providing, among other things, for
payments at times and in amounts sufficient to pay when due the principal of
and interest on the Bonds.
(b) The Bonds will be issued pursuant to the provisions
of Title 57, Chapter 10, Article 7 of the Mississippi Code of 1972, as amended
and supplemented (the "Act"), resolutions of the Issuer dated October 14, 1993
and November 10, 1993 (collectively the
E-7
<PAGE> 2
"Resolution") and a Trust Indenture (the "Indenture") dated as of December 1,
1993, between the Issuer and First National Bank of Vicksburg, Vicksburg,
Mississippi, as Trustee (the "Trustee"). The Bonds are limited obligations of
the Issuer, payable solely from payments to be made by the Company pursuant to
the Loan Agreement and a promissory note delivered to the Issuer (the "Note").
Payment of the Bonds is secured by (i) the lien of the Indenture on the trust
estate created thereunder which consists generally of money deposited in the
funds and accounts established under the Indenture and income from the
investment of such money as required by the Indenture, the Loan Agreement and
the Note and (ii) a lien and security interest on the Project as provided for
in the Loan Agreement by the Deed of Trust from the Company to the Issuer (the
"Deed of Trust") (as defined in the Indenture), and the Security Agreement from
the Company to the Issuer (as defined in the Indenture) (the "Security
Agreement"). The Loan Agreement, Note, Deed of Trust and Security Agreement
are referred to herein collectively as the "Loan Documents." This Agreement,
the Bonds and the Indenture are referred to herein collectively as the "Bond
Documents."
(c) The Bonds will contain the terms and provisions as
described in the Indenture and will bear interest at the rates described in the
Indenture.
(d) The terms and provisions of the Bonds have been
approved by the Company which enters into this Agreement in order to induce the
Purchasers to purchase the Bonds at the price set forth herein.
(e) No preliminary official statement, final official
statement or other disclosure document will be distributed in connection with
the issuance and sale of the Bonds.
(f) It is intended that interest on the Bonds will be
includable in the gross income of the holder thereof for federal income tax
purposes.
(g) The Purchasers are purchasing the Bonds for their own
account and will, on the Initial Closing Date (as hereinafter defined), execute
a document satisfactory to the Issuer agreeing not to sell or otherwise
transfer or dispose of the Bonds without (i) complying with applicable
disclosure and registration requirements of federal and state securities laws
and (ii) if such transfer or disposition is to an entity other than a United
States bank, thrift institution, insurance company, or other U.S. company
having the principal business of providing commercial financing, receiving the
prior written consent of the Issuer, which consent shall not be withheld
unreasonably.
2. JOINT REPRESENTATION OF THE ISSUER AND THE COMPANY
The Issuer and the Company represent that the Project will constitute
a "project" within the meaning of the Act.
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<PAGE> 3
3. REPRESENTATIONS OF THE ISSUER
The Issuer makes the following representations, all of which will
survive the purchase and offering of the Bonds.
(a) The Issuer is a public corporation organized and
existing under the laws of the State.
(b) The Issuer has complied with all provisions of the
State Constitution and laws governing the issuance and sale of the Bonds and
has full power and authority to authorize and thereafter consummate all
transactions contemplated by the Bond Documents, the Loan Documents, and all
other agreements relating thereto.
(c) The Issuer has duly adopted the Resolution, has duly
authorized all necessary actions to be taken by the Issuer and has obtained all
approvals necessary and appropriate for: (i) the issuance and sale of the
Bonds upon the terms set forth herein and in the Indenture, (ii) the execution,
delivery, receipt and due performance of the Bond Documents, the Loan
Documents, and any and all other agreements and documents as may be required to
be executed, delivered and received by the Issuer in order to carry out, give
effect to and consummate the transaction contemplated hereby and by the
issuance and sale of the Bonds and (iii) the carrying out, giving effect to,
and consummation of the transactions contemplated hereby, by the Indenture and
by the issuance and sale of the Bonds. The Bonds and executed counterparts of
other Bond Documents and the Loan Documents will be delivered to the Purchasers
by the Issuer on the Initial Closing Date (as hereinafter defined).
(d) To the best of the Issuer's knowledge, there is no
action, suit, proceeding, inquiry, investigation at law or in equity or before
or by any court, public board or body pending or threatened against or
affecting the Issuer (or any basis therefor), wherein an unfavorable decision,
ruling or finding would adversely affect the transactions contemplated hereby
or by the issuance and sale of the Bonds or the validity of the Bond Documents,
the Loan Documents, or any agreement or instrument to which the Issuer is or is
expected to be a party and which is used or contemplated for use in the
consummation of the transaction contemplated hereby or by the issuance and sale
of the Bonds.
(e) The execution and delivery by the Issuer of the Bond
Documents, the Loan Documents, and other agreements contemplated hereby or by
the issuance and sale of the Bonds and compliance with the provisions thereof
will not conflict with or constitute, on the part of the Issuer, a breach of or
a default under any existing law, court or administrative regulation, decree or
order or any agreement, indenture, mortgage, lease or other instrument to which
the Issuer is subject or by which the Issuer is bound.
(f) Any certificate signed by any of the Issuer's
authorized officers and delivered to the Purchasers shall be deemed a
representation and warranty by the Issuer to the Purchasers as to the
statements made therein.
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<PAGE> 4
4. REPRESENTATIONS OF THE COMPANY
The Company makes the following representations, all of which will
survive the purchase and offering of the Bonds.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified as a foreign corporation and is in good standing to do business
in the State.
(b) The Company has full corporate power and authority to
authorize and thereafter consummate on its behalf all transactions contemplated
by the Bond Documents, the Loan Documents, and any and all other agreements
relating thereto.
(c) The Company has duly authorized all necessary actions
to be taken by the Company for (i) the execution, delivery, receipt and due
performance of this Agreement, the Loan Documents, and all other agreements and
documents as may be required to be executed, delivered and received by the
Company in order to carry out, give effect to and consummate the transaction
contemplated hereby and by the issuance and sale of the Bonds, (ii) the
carrying out, giving effect to and consummation of the transactions
contemplated by the Indenture, the issuance and the sale of the Bonds, this
Agreement, and the Loan Documents, and (iii) the Loan Documents, this
Agreement, and any related documents executed by the Company to constitute
valid and binding obligations of the Company enforceable in accordance with
their respective terms, except to the extent that the enforceability thereof
may be limited (A) by bankruptcy, reorganization, or similar laws limiting the
enforceability of creditors' rights generally or (B) by the validity of any
discretionary equitable remedies.
(d) The Company's execution and delivery of this
Agreement, the Loan Documents, and the other documents contemplated hereby and
by the issuance and sale of the Bonds and compliance with the provisions
thereof will not conflict with or constitute on the Company's part a breach of
or a default under any existing law, court or administrative regulation, decree
or order or any agreement, indenture, mortgage, lease or other instrument to
which the Company is subject or by which the Company is bound.
(e) The Company has obtained or will obtain as and when
required by applicable law all approvals, licenses, permits, or other
governmental authorizations required in connection with the execution and
delivery of and performance by the Company of its obligations under this
Agreement, the Loan Documents and in relation to the acquisition, construction,
installation, operation and financing of Project.
(f) Any certificate signed by any of the Company's
authorized officers and delivered to the Purchasers shall be deemed a
representation and warranty by the Company to the Purchasers as to the
statements made therein.
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<PAGE> 5
(g) To the best of the Company's knowledge, there is no
action, suit, proceeding, inquiry, investigation at law or in equity or before
or by any court, public board or body pending or threatened against or
affecting the Company (or any basis therefor), other than Disclosed Litigation
(as defined in the Loan Agreement) wherein an unfavorable decision, ruling or
finding would have a material, adverse effect on the transactions
contemplated hereby or by the issuance and sale of the Bonds or the validity of
the Bonds, the Indenture, the Loan Documents, or any agreement or instrument to
which the Company is or is expected to be a party and which is used or
contemplated for use in the consummation of the transaction contemplated
hereby.
5. COVENANTS OF THE COMPANY
The Company covenants and agrees to the following covenants, all of
which will survive the purchase and offering of the Bonds and any
investigations made by or on behalf of the Purchasers.
(a) The Company agrees to indemnify and hold harmless the
Issuer, its counsel, Bond Counsel, the Purchasers, the Trustee, any officer,
agent or employee of the Issuer and each person, if any, who controls any of
the foregoing within the meaning of Section 15 of the Securities Act of 1933,
as amended, or Section 20 of the Securities Exchange Act of 1934, as amended
(collectively referred to herein as the "Indemnified Parties"), against any and
all losses, claims, damages, liabilities or expenses whatsoever arising out of
or resulting from or in any way related to the issuance and sale of the Bonds,
any breach by the Company of any of, or the inaccuracy of any of, its
representations, warranties and covenants set forth in this Agreement, and the
acquisition, installation, equipping and the use of the Project; provided,
however, that the Company shall not indemnify and hold harmless any Indemnified
Party from damages that result from negligence or intentional misconduct on the
part of the Indemnified Party seeking such indemnity.
If any action is brought against an Indemnified Party based
upon the information described in the preceding paragraph and in respect of
which indemnity may be sought against the Company, the Indemnified Party shall
promptly notify the Company in writing and the Company shall promptly assume
the defense thereof, including the employment of counsel reasonably acceptable
to the Indemnified Party, the payment of all expenses, and the right to
negotiate and consent to settlement. An Indemnified Party has the right, at
its own expense, to employ separate counsel in any such action and to
participate in the defense thereof. The Company shall not be liable for any
settlement of any such action effected without its consent, but if settled with
the consent of the Company, or if there be a final judgment for the plaintiff
in any such action with or without its consent, the Company agrees to indemnify
and hold harmless the Indemnified Party from and against any loss or liability
by reason of such settlement or judgment.
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<PAGE> 6
(b) The Company will not take or omit to take, as may be
applicable, any action which would, in any way, cause the proceeds of the Bonds
to be applied in a manner contrary to the requirements of the Bond Documents
and the Loan Documents.
(c) Whether or not the sale of the Bonds by the Issuer to
the Purchasers is consummated, the Company agrees that the Purchasers shall
have no obligation to pay any costs or expenses incident to the performance of
the obligations of the Issuer or the Purchasers under this Agreement. All
costs and expenses to affect the preparation, issuance, sale and delivery of
the Bond Documents, the Loan Documents, and all related documents, and the fees
and expenses of the Issuer and of Bond Counsel shall be paid by the Company.
6. PURCHASE, SALE AND DELIVERY OF THE BONDS
(a) On the basis of the representations, warranties and
covenants contained herein, and in the other agreements referred to herein and
subject to the terms and conditions herein set forth, on the Initial Closing
Date the Purchasers agree to purchase from the Issuer and the Issuer agrees to
sell to the Purchasers all or any portion of the Bonds for a purchase price of
one hundred percent (100%) of the principal amount of the Bonds issued and
sold, as provided for hereunder and in the Indenture. Pursuant to the terms
hereof, sixty percent (60%) of the aggregate principal amount of the Bonds
shall be purchased by The First National Bank of Boston and the remaining forty
percent (40%) of the aggregate principal amount of the Bonds shall be purchased
by NationsBank of Georgia, N.A.
(b) The Issuer will deliver the Bonds to or for the
account of the Purchasers against payment of the purchase price. The payment
of the purchase price may be made in the form of periodic advances of the
principal amount of the Bonds, up to the maximum principal amount. Such
advances, including the initial advance made upon the delivery of the Bonds,
shall be made by the Purchasers: (i) upon the written request of the Company,
(ii) subject to the satisfaction (in the Purchasers' opinion) of the conditions
set forth in the Bond Documents for making such advances, and (iii) in the
manner and according to the Issuer's written instructions. The Bonds will be
dated as of the Initial Closing Date, will be delivered in fully registered
form, will be registered to the Purchasers, and will be issued in the amounts
and in the form specified in the Indenture. The Bonds may be in printed,
engraved, typewritten or photocopied form and each such form shall constitute
"definitive form".
(c) The Bonds shall bear interest at the rates, mature on
the date and have such other terms as described in the Indenture.
(d) The Purchasers shall solely determine the principal
amount of the Bonds to be advanced from time to time to the Trustee or the
Company.
- 6 -
<PAGE> 7
7. TRANSACTION DOCUMENTS
On or prior to December 1, 1993 or such other date mutually agreeable
to the Issuer, the Company and the Purchasers (the "Initial Closing Date"), the
Purchasers shall be provided with a copy of each of the Bond Documents, the
Loan Documents, and all related documents duly executed by all parties thereto
as certified to the satisfaction of the Purchasers. The Issuer and the Company
shall immediately upon their execution provide the Purchasers with any
amendments of the Bond Documents, Loan Documents, and related documents.
8. CONDITIONS TO THE PURCHASERS' OBLIGATIONS TO PURCHASE BONDS
AND TO MAKE SUBSEQUENT ADVANCES OF PRINCIPAL
a. Conditions to Purchase of the Bonds on the Initial
Closing Date
The obligation of the Purchasers to purchase and pay for the Bonds on
the Initial Closing Date shall be subject to the following conditions
precedent:
(1) There shall exist no action, suit,
investigation, litigation or proceeding affecting the Company or any Related
Entity (as defined in the Loan Agreement) pending or threatened before any
court, governmental authority or arbitrator that, if adversely determined,
would have a material adverse effect on the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Company or
any Related Entity (other than Disclosed Litigation) or that purports to affect
the legality, validity or enforceability of the Credit Agreement and related
documents (as defined in the Loan Agreement), Loan Documents, the Bond
Documents or the consummation of the transactions contemplated hereby or
thereby.
(2) All conditions to the issuance of the Bonds,
other than the payment for the Bonds to be made by the Purchasers on the
Initial Closing Date, and to the Purchasers' obligations under this Agreement
to purchase the Bonds, shall have been satisfied or waived in accordance with
the terms of the Indenture or this Agreement, as applicable, and the Agent
shall have received, dated such day, a certificate of an Authorized Company
Representative (as defined in the Loan Agreement) to such effect, having
attached thereto, copies of all Bond Documents and Loan Documents as executed
by the parties thereto, together with copies of all certificates, legal
opinions, resolutions, financing statements and other documents delivered in
connection therewith, certified by the Company as true and complete copies
thereof, together with reliance letters as to such certificates or opinions,
not otherwise addressed to the Agent and the Purchasers, as any of them may
reasonably request.
(3) The Agent (as defined in the Loan Agreement)
shall have received, in form and substance satisfactory to it, signed copies of
proper financing statements, in appropriate form to be filed on or promptly
after the Initial Closing Date under the Uniform commercial Code of all
jurisdictions that the Agent may deem necessary or desirable in order to
continue and protect the perfection of the Security Agreement.
- 7 -
<PAGE> 8
(4) The Agent shall have received in form and
substance satisfactory to it, evidence of the insurance required by the terms
of the Security Agreement.
(5) The Agent shall have received, in form and
substance satisfactory to it, a Mortgage (as defined in the Loan Agreement)
modification with respect to each Mortgage, effective to include as
indebtedness secured by such Mortgage, the obligations of the Company or
Related Entity, as applicable, to the Purchasers in connection with the Bonds,
duly executed by the Company or Related Entity, as applicable, together with
(i) evidence that each such Mortgage
modification has been duly recorded on or before the
Initial Closing Date (or acknowledgement by the
representative of the title insurance issuer of
receipt of such Mortgage modifications in form for
recording) in all filing or recording offices that
the Agent may deem necessary or desirable in order to
preserve the valid and enforceable first and
subsisting lien on the property described therein in
favor of the Purchasers;
(ii) American Land Title Land Association
Lender's Extended Coverage title insurance policies,
or endorsements thereto or unconditional commitments
for the issuance of the same, in each case in form
and in amounts acceptable to the Agent, issued and
reinsured by title insurers acceptable to the Agent,
insuring the Mortgages (other than the Mortgage by
Potash) as modified by such Mortgage modifications to
be valid and enforceable first liens on the property
described therein, free and clear of all defects
(including, but not limited to, mechanics' and
materialmen's liens) and encumbrances, excepting only
Permitted Encumbrances, and providing for such other
affirmative insurance (including endorsements for
future advances under the Loan Documents (including
Bond purchases) and for mechanics' and materialmen's
liens) and coinsurance and reinsurance with direct
access as the Agent may deem necessary or desirable;
(iii) such consents and agreements of
lessors and other third parties, and such estoppel
letters and other confirmations, as the Agent may
deem necessary or desirable;
(iv) evidence of the insurance required
(including, without limitation, for any business or
property) by the terms of the Mortgages as modified
by such Mortgage modifications; and
(v) evidence that all other action that the
Agent may deem necessary or desirable in order to
preserve valid first and subsisting liens on the
property described in the Mortgages has been taken.
- 8 -
<PAGE> 9
(6) The Purchasers shall have received an opinion
of counsel to the Company, dated the Initial Closing Date and addressed to the
Purchasers in form and substance acceptable to the Purchasers.
(7) The Agent shall have received the favorable
opinions of counsel to the Purchasers, dated the Initial Closing Date and
addressed to the Agent in form and substance acceptable to the Agent.
(8) The Purchasers shall have received, in form
and substance satisfactory to them and to the Agent, reports of independent
reputable appraisers of the "in use" or "going concern" and liquidation values
of the fixed assets of the Company and each Related Entity;
(9) The Company or another Related Entity shall
have paid to the Agent for the ratable account of the Purchasers a facility fee
in the amount of $112,500, which fee shall be fully earned when due and payable
and not subject to refund or rebate.
(10) Such other certificates, instruments,
agreements and documents relating to the transactions contemplated to occur in
connection with the issuance of the Bonds as the Agent or any Purchaser may
reasonably request.
b. Conditions to Subsequent Advances
The obligation of each Purchaser to make a principal advance on the
occasion of each principal advance (including the initial advance on the
Initial Closing Date) shall be subject to the conditions precedent that on the
date of such principal advance:
(1) the following statements shall be true (and
each of the giving of the applicable notice of advance and the acceptance by
the Company of the proceeds of such advance shall constitute a representation
and warranty by the Company that on the date of such advance such statements
are true):
(a) The representations and warranties
contained in each Loan Document and the Credit Agreement are correct
on and as of the date of such advance, before and after giving effect
to such advance and to the application of the proceeds therefrom, as
though made on and as of such date, except for those representations
and warranties made as of a specified date; and
(b) No event has occurred and is
continuing, or would result from such advance or from the application
of the proceeds therefrom, that constitutes a default under the Loan
Documents or the Credit Agreement.
(2) The Agent shall have received such other
approvals, opinions or documents as any Purchaser through the Agent may
reasonably request.
- 9 -
<PAGE> 10
(3) The Agent shall have received at least three
Business Days prior to the date on which such principal advance is requested to
be made, in sufficient copies for each Purchaser, a certificate of an
Authorized Officer of the Company setting forth (i) the date of the requested
principal advance (which advance date shall be the first Business Day of a
month on or prior to the first Business Day of June 1995), (ii) the amount of
the requested principal advance (which shall be at least $100,000), and (iii)
such Authorized Officer's certification that the amount of the requested
principal advance does not exceed 75% of the Project construction cost incurred
by the Company through the date of such certificate, LESS the aggregate amount
of all principal advances theretofore made, and accompanied by a computation in
reasonable detail supporting such certification and by copies of invoices or
other evidences of payment acceptable to the Agent in its reasonable judgment.
9. OTHER CONDITIONS TO BOND SALE AND PRINCIPAL
ADVANCES
The obligation of the Purchasers to purchase the Bonds and the
obligation of the Issuer to sell the Bonds to the Purchasers are further
subject to the following conditions:
a. The representations and warranties of the
Company herein and the representations and warranties made in each Loan
Document and each of the Bond Documents by the respective parties thereto shall
be true, correct and complete on the date hereof, on the Initial Closing Date
and on the date of each subsequent advance of principal, and each such party to
the Loan Documents and Bond Documents, including the Company, shall deliver a
certificate to such effect on the Initial Closing Date and the Company shall
deliver such a certificate on the date of each principal advance. The Issuer
and the Company shall have performed all of their obligations hereunder and the
statements made on behalf of the Issuer and the Company hereunder shall be true
and correct on the date hereof, on the Initial Closing Date and on the date of
each principal advance, and the Issuer and the Company shall deliver
certificates to such effect on the Initial Closing Date and the Company shall
deliver such a certificate on the date of each principal advance.
b. Except as may have been agreed to by the
Purchasers, as of the Initial Closing Date and the date of each principal
advance, each of the Bond Documents, the Loan Documents, the Resolution and all
other official action of the Issuer relating thereto shall be in full force and
effect and shall not have been amended, modified or supplemented without the
written approval of the Purchasers.
c. The Issuer shall have received the approving
opinion of Bond Counsel in form and substance acceptable to the Purchasers, and
the Purchasers shall have received a letter from Bond Counsel dated the Initial
Closing Date and addressed to the Purchasers, to the effect that the Purchasers
may rely upon such firm's opinion as if it were addressed to the Purchasers.
- 10 -
<PAGE> 11
d. The Purchasers, the Trustee, the Company and
Bond Counsel shall have received an opinion of Issuer's counsel in form and
substance agreeable to the aforesaid parties.
e. Each of the Bond Documents shall have been
executed and delivered by each of the respective parties thereto, all such
documents shall be in the forms attached to the resolution adopted by the
Issuer on the date hereof with only such changes as the Purchasers may approve,
and each of the Bond Documents shall be in full force and effect.
f. None of the events referred to in Section 10
of this Agreement shall have occurred and be continuing.
g. The Purchasers and Issuer shall have received
a certificate, dated the Initial Closing Date and signed by an authorized
officer of the Trustee, to the effect that (i) he or she is an authorized
officer of the Trustee, (ii) the Indenture has been duly executed and delivered
by the Trustee, (iii) the Trustee has all necessary corporate and trust powers
required to carry out the trust created by the Indenture, (iv) to the best of
his or her knowledge, the acceptance by the Trustee of the duties and
obligations of the Trustee under the Indenture and compliance with the
provisions thereof will not conflict with or constitute a breach of or default
under any law, administrative regulations, consent decree or any agreement or
other instrument to which the Trustee is subject or by which the Trustee is
bound, and (v) the Trustee has duly authenticated the Bonds, and the person
signing the certificate of authentication on each bond has been duly authorized
to do so.
h. Evidence, satisfactory in form and substance
to the Purchasers and Bond Counsel, of a satisfactory and favorable conclusion
to a bond validation proceeding under the laws of the State with respect to the
Bonds shall have been received.
i. Such other certificates, opinions and other
documents as the Purchasers or Bond Counsel may reasonably request to evidence
performance of or compliance with the provisions of this Agreement and the
transactions contemplated hereby and by the issuance and sale of the Bonds, all
such certificates and other documents to be satisfactory in form and substance
to the Purchasers, shall have been received.
If any conditions to the obligations of the Purchasers or the Issuer
contained in this Agreement are not satisfied and the satisfaction of such
conditions shall not be waived by the Purchasers, then, at the option of the
Purchasers (i) the Initial Closing Date shall be postponed for such period as
may be necessary for such conditions to be satisfied or (ii) without limiting
the generality of Section 14 of this Agreement, the obligations of the
Purchasers and the Issuer under this Agreement shall terminate, neither the
Purchasers nor the Issuer shall have any further obligations or liabilities
hereunder, and the Company shall have no further obligations or liabilities
hereunder other than its obligations under Section 5 hereof.
All of the legal opinions, certificates, proceedings, instruments and
other documents mentioned above or elsewhere in this Agreement shall be deemed
to be in compliance with the provisions hereof if, but only if, they are in
form and substance satisfactory to the Purchasers and the Issuer.
- 11 -
<PAGE> 12
10. TERMINATION
The Purchasers may terminate their obligations hereunder by written
notice to the Issuer if, at any time subsequent to the date hereof and on or
prior to the Initial Closing Date:
(a) There shall have occurred any material change in the
business or affairs of the Issuer or the Company or any material change in the
Project which, in the sole judgment of the Purchasers, materially adversely
affects the financial condition, business, properties or prospects of the
Company.
(b) Any condition to the Purchasers' obligations
hereunder is not satisfied because of any refusal, inability or failure on the
part of the Company or the Issuer to comply with any of the terms or to fulfill
any of the conditions provided for or contemplated by this Agreement, or if for
any reason the Company, the Trustee or the Issuer shall be unable to perform
all of their obligations or satisfy conditions, respectively, provided for or
contemplated in this Agreement.
11. EXPENSES
Except as otherwise provided herein, the Company shall cause to be
paid out of its own funds or the proceeds of the Bonds, the costs of issuing
the Bonds, including, but not limited to, the fees and expenses described in
Section 5 of this Agreement; whether or not the sale of the Bonds by the Issuer
to the Purchasers is consummated.
12. CONDITION OF THE ISSUER'S OBLIGATIONS
The Issuer's obligations hereunder are subject to the Purchasers'
performance of their obligations hereunder.
13. NOTICES
Any notice or other communication to be given to the Issuer under this
Agreement may be given by delivering the same in writing as follows:
<TABLE>
<S> <C>
If to the Issuer - Mississippi Business Finance
Corporation
1306 Walter Sillers Building
Post Office Box 849
Jackson, Mississippi 39205
Attention: William T. Barry
with a copy to:
Holcomb, Dunbar, Connell, Chaffin & Willard
Suite 900, 120 North Congress (39201)
P. O. Box 2990
Jackson, Mississippi 39207-2990
Attention: W. Larry Harris
</TABLE>
- 12 -
<PAGE> 13
<TABLE>
<S> <C>
If to the Company - Vicksburg Chemical Company
5100 Poplar, Suite 2414
Memphis, Tennessee 38137
Attention: John C. Bumpers
If to the Trustee - First National Bank of Vicksburg
Post Office Box 39
Vicksburg, Mississippi 39181
Attention: Joe Schmidt
If to the Purchasers - The First National Bank of Boston
Suite 745
400 Perimeter Center Terrace
Atlanta, Georgia 30346
Attention: John K. Hood
and
NationsBank of Georgia, N.A.
600 Peachtree Street
Atlanta, Georgia 30308
Attention: Lynn Webster
</TABLE>
14. SUCCESSORS
This Agreement is made solely for the benefit of the Issuer, the
Purchasers and the Company (including their successors or assigns) and no other
person shall acquire or have any right hereunder or by virtue hereof (other
than pursuant to Section 5 hereof).
15. SURVIVAL OF CERTAIN REPRESENTATIONS AND WARRANTIES
All agreements, covenants, representations and warranties and
all other statements of the Issuer and the Company set forth in or made
pursuant to this Agreement shall remain in full force and effect and shall
survive the Initial Closing Date and the delivery of the Bonds, from time to
time.
- 13 -
<PAGE> 14
16. GOVERNING LAW
This Agreement shall be governed by the laws of the State.
17. MISCELLANEOUS
This Agreement constitutes the only agreement among the parties hereto
relating to the subject matter hereof and it supersedes and cancels any and all
previous contracts, agreements or understandings with respect thereto. This
Agreement may not be amended or modified except in writing executed by all
parties hereto. Capitalized terms not otherwise defined herein shall have the
meaning assigned to them in the Indenture and the Loan Agreement.
18. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument.
<TABLE>
<S> <C>
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON
By:
----------------------------------------------------------
Title:
-------------------------------------------------------
NATIONSBANK OF GEORGIA, N.A.
By:
----------------------------------------------------------
Title:
-------------------------------------------------------
Accepted on MISSISSIPPI BUSINESS FINANCE
November 10, 1993 CORPORATION
By:
----------------------------------------------------------
Executive Director
</TABLE>
- 14 -
<PAGE> 15
<TABLE>
<S> <C>
Accepted on VICKSBURG CHEMICAL COMPANY
November 10, 1993
By:
----------------------------------------------------------
Title:
-------------------------------------------------------
</TABLE>
- 15 -
<PAGE> 1
EXHIBIT 21
The following table sets forth certain information, as of
March 23, 1994, with respect to the subsidiaries of the Company, other than
certain subsidiaries which, if considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary.
<TABLE>
<CAPTION>
Percentage of
voting securities State or other
owned by its jurisdiction in
immediate parent which incorporated
----------------- ------------------
<S> <C> <C>
Subsidiaries of the Company:
Haifa Chemicals Ltd. 100% (1) Israel
Haifa Chemicals South, Ltd. 100% Israel
Hi-Chem (UK) Ltd. 100% United Kingdom
Hi-Chem S.A. 100% Belgium
Fertilizantes Quimicos, S.A. 100% Spain
Hi-Agri S.R.L. 100% (2) Italy
Duclos International S.A. 80% France
Eddy Potash, Inc. 100% Delaware
Nine West Corporation 100% Delaware
Cedar Chemical Corporation 100% Delaware
New Mexico Potash Corporation 100% New Mexico
Vicksburg Chemical Company 100% Delaware
</TABLE>
_____________________________
(1) Including approximately 7% owned by Trans-Resources (Israel) Ltd.
(2) Including approximately 5% owned by Haifa Chemicals South, Ltd.
E-8
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned officers and directors of
Trans-Resources, Inc., a Delaware corporation (the "Company"), does hereby
constitute and appoint Arie Genger and Lester W. Youner, and each of them, as
the undersigned's true and lawful attorney-in-fact, with full power to each of
them to act without the other, to execute in the name and on behalf of the
undersigned, individually and in the capacity stated below, the Annual Report
on Form 10-K of the Company for the fiscal year ended December 31, 1993 and any
and all amendments thereto, which amendments may make such changes in such Form
10-K as either such attorney-in-fact may deem appropriate.
Each of the undersigned does further hereby ratify and confirm
all that either said attorney-in-fact may do or cause to be done pursuant to
the power granted hereby.
Dated: March 23, 1994
<TABLE>
<S> <C>
s/ Arie Genger
----------------------------------------
Arie Genger
Director,
Chairman of the Board
and Chief Executive Officer
(principal executive officer)
s/ Lester W. Youner
----------------------------------------
Lester W. Youner
Vice President,
Treasurer and
Chief Financial Officer
(principal financial and
accounting officer)
s/ Thomas G. Hardy
----------------------------------------
Thomas G. Hardy
Director
s/ Martin A. Coleman
----------------------------------------
Martin A. Coleman
Director
s/ Sash A. Spencer
----------------------------------------
Sash A. Spencer
Director
</TABLE>
E-9
