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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
<TABLE>
<S> <C>
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
FOR THE TRANSACTION PERIOD FROM TO
</TABLE>
COMMISSION FILE NUMBER: 1-9988
--------------------------
REXENE CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2104131
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5005 LBJ FREEWAY
DALLAS, TEXAS 75244
(Address of principal executive offices) (Zip Code)
(214) 450-9000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ---------------------------------------- ---------------------------
<S> <C>
Common Stock, $0.01 par value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
11 3/4% Senior Notes due 2004 New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS
NONE
Indicate by check mark whether the 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 the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
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. [ ]
The aggregate market value of the 18,559,990 shares of common stock held by
non-affiliates of the Registrant was $180,959,903 as of March 9, 1995.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _X_ No ____
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING AT
TITLE OF EACH CLASS MARCH 9, 1995
- ----------------------------------- --------------------
<S> <C>
Common Stock, $0.01 par value 18,717,797
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the Registrant's
definitive proxy statement to be filed for its annual meeting of stockholders
scheduled to be held on April 25, 1995.
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<PAGE>
REXENE CORPORATION
1994 ANNUAL REPORT ON FORM 10-K
PART I
ITEM 1. BUSINESS
INTRODUCTION
The Company is the result of a combination of three businesses operated by
predecessor entities. In 1958, a subsidiary of The El Paso Company ("El Paso")
constructed a styrene plant in Odessa, Texas. In 1960, El Paso and a predecessor
of Dart Industries Inc. ("Dart") formed a joint venture to produce ethylene,
propylene, polyethylene and polypropylene in Odessa, Texas. El Paso subsequently
acquired the plastic film business of Dart in 1979 and full ownership of these
businesses by 1983. In 1983, El Paso sold its petrochemical, polyolefin and
plastic film business to a management-led group of investors, who consolidated
the businesses under a Delaware corporation named Rexene Corporation ("Old
Rexene"). In 1988, Old Rexene was sold to an investor group organized by an
investment banking firm.
In October 1991, Old Rexene filed a petition for reorganization under the
federal bankruptcy laws. On September 18, 1992, Old Rexene emerged from
bankruptcy in accordance with a plan of reorganization (the "1992
Reorganization") providing for the merger of Old Rexene into its wholly-owned
operating subsidiary, Rexene Products Company, a Delaware corporation
("Products"), which subsequently changed its name to Rexene Corporation. Unless
otherwise indicated, Old Rexene, Products and New Rexene and their consolidated
subsidiaries are sometimes collectively or separately referred to as "Rexene" or
the "Company". See "Item 3 -- Legal Proceedings".
In the fourth quarter of 1994, the Company completed a recapitalization plan
(the "Recapitalization") designed to increase stockholders' equity, reduce
indebtedness and interest expense and improve the Company's strategic, operating
and financial flexibility. The Recapitalization resulted in (i) the issuance of
8 million shares of common stock at $11.00 per share, (ii) the issuance of
11 3/4% Senior Notes due 2004 (the "Senior Notes") in an aggregate principal
amount of $175 million, (iii) the establishment of a new credit facility (the
"Credit Agreement"), providing a $100 million term loan (the "Term Loan") and an
$80 million revolving line of credit (the "Revolving Credit Facility"), (iv) the
redemption and defeasance of the Company's Increasing Rate Senior Notes Due 1999
(the "Old Senior Notes"), (v) the redemption of the Company's Increasing Rate
Subordinated Notes Due 2002 (the "Old Subordinated Notes" and, together with the
Old Senior Notes, the "Old Notes"), and (vi) the repayment in full of the
outstanding indebtedness under the then existing credit agreement (the "Old
Credit Agreement"). No borrowings have been made under the Revolving Credit
Facility. In connection with the redemption of the Old Notes, the Company
recorded an extraordinary loss of $25.8 million (net of income tax benefits) in
the fourth quarter of 1994.
The corporate headquarters of the Company, a Delaware corporation, are
located at 5005 LBJ Freeway, Dallas, Texas 75244, and its telephone number is
214-450-9000.
PRINCIPAL PRODUCTS
The Company manufactures and markets a wide variety of products through its
two operating divisions, Rexene Products Company division ("Rexene Products")
and Consolidated Thermoplastics Company division ("CT Film"). The products range
from value added specialty products, such as customized plastic films, to
commodity petrochemicals, such as styrene. These products are used in a wide
variety of industrial and consumer-related applications. The Company's principal
products are plastic film, polyethylene, polypropylene and REXTAC-Registered
Trademark- amorphous polyalphaolefin ("APAO") resins and styrene. In addition,
the Company manufactures, primarily for its own consumption, ethylene and
propylene, the two basic chemical building blocks of the Company's principal
products. The
1
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Company manufactures plastic film at five plants located in the United States
and England and polymers and petrochemicals at an integrated facility in Odessa,
Texas (the "Odessa Facility") which is located near supplies of most of its raw
materials.
Plastic film, polyethylene, polypropylene, APAO and styrene are used by the
Company's customers to manufacture many diverse finished goods. These principal
end market products are set forth below:
[SEE APPENDIX FOR DESCRIPTION]
2
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The following chart presents the net sales, excluding intercompany sales,
contributed by the Company's products during the periods indicated (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED ENDED
------------------------ DECEMBER 31, SEPTEMBER 30,
1994 1993 1992(1) 1992(1)
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Plastic film.................................... $ 172,618 $ 147,468 $ 34,140 $ 104,264
Polyethylene.................................... 145,362 120,060 32,250 90,799
Polypropylene................................... 77,544 64,459 13,213 51,989
APAO............................................ 18,571 15,084 2,649 10,997
Styrene......................................... 89,818 61,372 13,705 49,392
Other........................................... 34,044 20,910 2,897 8,665
----------- ----------- ------------ -------------
Total....................................... $ 537,957 $ 429,353 $ 98,854 $ 316,106
----------- ----------- ------------ -------------
----------- ----------- ------------ -------------
<FN>
- ------------------------
(1) Notwithstanding the accounting changes instituted pursuant to the 1992
Reorganization, the net sales presented for the three months ended December
31, 1992 and the nine months ended September 30, 1992 are comparable on an
aggregate basis to those amounts presented for the years ended December 31,
1994 and 1993.
</TABLE>
No customer accounted for more than 10% of the Company's consolidated net
sales for the years ended December 31, 1994 and 1993, the three months ended
December 31, 1992 or the nine months ended September 30, 1992.
PLASTIC FILM
THE PRODUCT
The Company, through CT Film, is a major participant in the specialty market
for polyethylene films. Product applications for these films include disposable
diapers, feminine hygiene products, tapes, packaging, lamination and unsupported
overwraps and greenhouse and agricultural applications. CT Film's products are
manufactured principally with its own proprietary processes.
CT Film develops specialty formulations of films to meet customer
specifications for various highly specific and value added applications.
Examples include a recycle film containing a minimum of 25% recycled materials,
low gel film developed for photo-resistant applications, MAXILENE-Registered
Trademark-lamination film and thin gauge barrier film for feminine hygiene
products and medical applications. CT Film produces films for co-extruded
forming webs, linear tear films, and elastomeric films for surgical products.
MARKETING
Domestically, CT Film ships film from its plants in Chippewa Falls,
Wisconsin; Clearfield, Utah; Dalton, Georgia; and Harrington, Delaware. The
Company's customers include a number of Fortune 500 companies. Products are sold
primarily through the Company's plastic film sales staff.
COMPETITION
The United States polyethylene film industry is highly fragmented, with over
450 producers ranging from a few large national producers, such as CT Film, to
many small, regional producers. CT Film's principal competitors include Tredegar
Industries, Exxon Chemical Americas, Clopay Corporation, Blessings Company,
Deerfield Plastics Company, Inc., DuPont of Canada, and James River Corporation.
The plastic film business is based on custom formulations to meet customer
needs. Competition is based on the quality and properties of the film as well as
price. CT Film seeks to develop innovative products to meet customer needs and
seeks to compete by segmenting market niches and being responsive to customers'
specific requirements.
3
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EUROPEAN OPERATIONS
In 1994, Rexene Corporation Limited, an English subsidiary, completed
construction of a manufacturing facility in Scunthorpe, England at a cost of
approximately $14.1 million and began production in September 1994. The plant
has been built to supply Kimberly-Clark Limited and other customers in Europe.
POLYETHYLENE
THE PRODUCT
Polyethylene represents by volume the most widely produced thermoplastic
resin in the world. The majority of polyethylene produced in the United States
is low density polyethylene ("LDPE") resin. In 1994, approximately 57% of LDPE
capacity in the United States was used to make high pressure low density
polyethylene ("HPLDPE") resin and the balance to make linear low density
polyethylene ("LLDPE") resin. The Company currently only participates in the
HPLDPE market.
The Company produces a variety of grades of HPLDPE, some of which are
combined with other polymers to meet specific customer requirements, such as
circuit board protective films. Examples of the Company's differentiated resins
are ethylene-vinyl acetate resins used in film applications that require high
clarity, toughness and sealability, and specialty low-gel resins used in
computer circuit board production. The Company focuses on producing high
performance, specially tailored resins designed to meet the customer's specific
requirements.
MARKETING
The Company participates in every principal market for HPLDPE resin, selling
its HPLDPE resins under the REXENE-Registered Trademark- name. Prime grade
products are sold domestically and in Canada directly to customers primarily
through the Company's sales and technical service staffs. Most wide
specification products are sold to dealers for resale. Export sales, other than
to Canada, are made through international trading companies or agents.
COMPETITION
There are currently 14 domestic producers of LDPE resins, some of which
produce both HPLDPE and LLDPE. These producers have an estimated aggregate,
rated annual production capacity of approximately 14.6 billion pounds. The
largest manufacturer of LDPE is Quantum Chemical Corporation. The other five
largest domestic producers of LDPE are Dow Chemical U.S.A., Union Carbide
Corporation, Chevron Chemical Company, Exxon Chemical Company and Mobil Chemical
Company. In 1994, Rexene accounted for approximately 3% of the United States
capacity for LDPE and approximately 5% of the United States capacity for HPLDPE.
Competition for sales is generally based on price for less specialized products
and on price, product performance and customer service for more specialized
products. The Company seeks to compete with larger polyethylene producers by
providing a high level of customer service and developing resins which are
responsive to customers' specific requirements.
POLYPROPYLENE
THE PRODUCT
The Company currently produces a variety of grades of polypropylene resins,
including several types of general purpose polypropylene for industrial use and
a variety of more differentiated types of polypropylene which have properties or
characteristics specifically tailored for special uses. The Company emphasizes
the manufacturing of polypropylene resins for specialty segments of the
polypropylene market such as medical, electrical and food packaging
applications. The Company is one of only two domestic producers of a super clean
grade of polypropylene utilized for medical applications, and is a key supplier
of this grade for electrical capacitor film uses. The Company's line of impact
copolymer polypropylene products is used primarily for automotive components and
rigid packaging. Other products include radiation resistant resins for medical
applications requiring radiation sterilization, capacitor resins for premium
electrical grade film, and premium copolymer blow-
4
<PAGE>
molding resins for medical and food applications. The Company has been active in
making technology improvements in process and catalyst technology and works
closely with customers in developing new products to meet their specific needs.
MARKETING
The Company sells its polypropylene products under the REXENE-Registered
Trademark- name. Domestic and Canadian sales of products are sold primarily
through the Company's sales and technical service staffs. Most
wide-specification products are sold to brokers for resale. Export sales, other
than to Canada, are made directly and through trading companies.
COMPETITION
In 1994, there were 17 domestic producers of polypropylene, with an
estimated aggregate, rated annual production capacity of approximately 10.4
billion pounds. In 1994, the four largest domestic producers of polypropylene
were Himont Incorporated, Amoco Chemicals Corporation, Fina, Inc. and Exxon
Chemical Company. Competition for sales is dependent upon a variety of factors,
including product price, technical support and customer service, and the degree
of specialization of various grades of polypropylene. General purpose
polypropylene ordinarily competes principally on the basis of price, while more
differentiated polypropylene competes principally on the basis of product
quality, performance specifications and price. In 1994, Rexene accounted for
approximately 2% of United States production capacity for polypropylene. The
Company seeks to compete effectively with larger competitors by focusing on
specialty products responsive to customers' specific requirements.
APAO
THE PRODUCT
The Company is one of only two United States on-purpose producers of APAO.
APAO is a special purpose, high quality polymer developed principally to replace
atactic polypropylene ("APP"), a by-product of polypropylene manufacturing. APAO
is used primarily in the production of modified bitumen roofing materials;
lamination; wire and cable; and adhesives and sealants, including hot melt
adhesives for nonwovens; packaging, pressure sensitive and assembly
applications.
MARKETING
The Company sells APAO under the REXTAC-Registered Trademark- name. APAO is
sold domestically through the Company's sales and technical service staffs. The
Company supplements its sales of APAO with purchases from Ube Rexene
Corporation, a joint venture company located in Japan in which the Company holds
a 50% equity interest.
COMPETITION
The Company and Eastman Chemical Company are currently the only domestic
on-purpose producers of APAO. In addition, a few producers of polypropylene also
produce APP, which competes with APAO for some less performance driven uses.
Based on management estimates, in 1994 Rexene accounted for approximately 30% of
the United States capacity for APAO and APP. The Company seeks to compete by
providing a high level of customer service and developing products which are
responsive to customers' specific requirements.
STYRENE
THE PRODUCT
Styrene is a petrochemical commodity with a variety of applications. Styrene
is made from ethylene and benzene and is used principally in the manufacture of
intermediate products such as polystyrene, latex, acrylonitrile butadiene
styrene resins, synthetic rubbers and unsaturated polyester resins. Through
these products, styrene can be found in consumer products, including disposable
cups and trays, luggage, housewares, toys and building products such as roof
insulation, pipes and fittings.
5
<PAGE>
MARKETING
The Company sells the vast majority of its styrene directly to a small
number of domestic customers under year to year contracts, and handles export
sales through international trading companies.
COMPETITION
In 1994, there were 10 domestic producers of styrene with an estimated
aggregate, rated annual production capacity of approximately 10.8 million
pounds. In 1994, the six largest domestic producers of styrene were Arco
Chemical Company, Huntsman Chemicals Corporation, Amoco Chemicals Corporation,
Sterling Chemicals, Inc., Dow Chemical U.S.A. and Chevron Chemical Company.
Rexene accounted for approximately 3% of domestic production capacity for
styrene. Competition for sales of styrene is generally based on price.
EXPORT SALES
The following chart summarizes revenues from export sales, and the
percentages of net sales represented by export sales, for the periods indicated
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, ENDED ENDED
-------------------- DECEMBER 31, SEPTEMBER 30,
1994 1993 1992(1) 1992(1)
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Export sales....................................... $ 41,000 $ 30,495 $ 9,295 $ 33,806
Percentage of net sales............................ 7.6% 7.1% 9.4% 10.7%
<FN>
- ------------------------
(1) Notwithstanding the accounting changes instituted pursuant to the 1992
Reorganization, the export sales and percentage of net sales presented for
the three months ended December 31, 1992 and the nine months ended
September 30, 1992 are comparable on an aggregate basis to those amounts
presented for the years ended December 31, 1994 and 1993.
</TABLE>
The majority of the Company's export sales were to foreign companies through
agents and domestic offices of foreign companies, which are responsible for the
actual export of the product to a variety of locations.
NEW PRODUCT DEVELOPMENT
The Company continually seeks to enhance and expand its portfolio of
specialty polymers through sustained in-house research and development and
licensing arrangements. For example, in 1993 the Company developed a new
flexible polyolefin polymer, REXflex-Registered Trademark- FPO ("FPO"), made
from propylene. The Company believes that FPO has the potential for use in a
wide variety of applications, including in automotive components, containers for
personal care products and medical devices. In 1995, the Company plans to begin
construction of a 50 million pound annual rated capacity plant at the Odessa
Facility to produce FPO with commercial production scheduled in 1996. Commercial
production of FPO is subject to the successful development of such technology,
the completion of a commercial plant and necessary governmental approvals.
RAW MATERIALS FOR PRINCIPAL PRODUCTS
Principal raw materials purchased by the Company consist of ethane and
propane extracted from natural gas liquids, propylene and benzene (all four of
which are referred to as "feedstocks") for the polymer and styrene businesses
and polyethylene resins for the film business. The prices of feedstocks
fluctuate widely based upon the prices of natural gas and oil. During 1994,
feedstocks accounted for approximately 29% of the Company's total cost of sales.
As a result, the Company's ability to pass on increases in raw material costs to
customers has a significant impact on operating results.
The Odessa Facility obtains a combination of pure and mixed streams of
natural gas liquids ("NGL") from NGL pipelines and NGL extraction plants located
in west Texas and uses such streams to obtain ethane and propane feedstocks for
the Company's olefins plant. In 1994, the Company consumed approximately 558
million pounds of ethane and 485 million pounds of propane, and in
6
<PAGE>
1993, the Odessa Facility consumed ethane and propane of approximately 526
million and 422 million pounds, respectively. In 1994, the Company produced all
of its ethylene and 52% of its propylene requirements for the Odessa Facility.
The Company's feedstock supplies are currently adequate for its requirements.
The Company has storage capacity for an approximately fifteen-day supply of
feedstocks.
The Odessa Facility uses benzene and ethylene to produce styrene. In 1994,
approximately 60% of the Company's benzene purchases were under contracts from
Gulf Coast producers and approximately 18% was purchased from Midwest producers
at prevailing contract prices, with the balance of its needs being filled with
purchases on the spot market. The Odessa Facility has historically served as its
own source of ethylene.
The principal feedstocks for the Company's captive ethylene and propylene
production of the Odessa Facility are ethane and propane. Ethane and propane
prices are established in Mont Belvieu, Texas (Gulf Coast) according to
prevailing market conditions, but the Company is able to purchase NGL containing
ethane and propane in west Texas at prices discounted from the prevailing
reported average Mont Belvieu, Texas prices. These discounts reflect a
significant portion of the cost for the producers to transport NGL containing
ethane and propane to Mont Belvieu, Texas and to fractionate them into pure
ethane and propane. In 1994, the Company acquired all of the Odessa Facility's
requirements for ethane and propane under such arrangements.
CT Film raw materials consist principally of polyethylene resins and
additives. CT Film obtains its raw materials from a variety of sources
(including the Odessa Facility) and has been able to order these materials in
advance as its needs dictate. CT Film has adequate storage capabilities for its
raw materials.
EMPLOYEES
On March 1, 1995, the Company employed approximately 1,300 persons,
approximately 120 of which are unionized at the CT Film facility in Chippewa
Falls, Wisconsin. The Company and the union are parties to a collective
bargaining agreement through February 28, 1997.
TRADEMARKS AND PATENTS
The Company is the owner of many United States and foreign patents and uses
trade secrets, including substantial know-how, which relate to its polyethylene,
polypropylene, APAO and plastic film products. The Company has spent over $6
million for research and development during each of the last three fiscal years
and anticipates spending a similar amount in 1995. Although patents and trade
secrets are important to the Company, permitting it to retain ownership and use
of its technological advances, the Company does not believe that the loss of any
patent would have a material adverse effect on its financial condition. The
Company also uses the technology of others under license agreements in certain
of its manufacturing operations.
REXENE-Registered Trademark- and REXTAC-Registered Trademark- are important
trademarks for the Company's resins and are widely known among purchasers of
these products. The Company is the owner of other trademarks used on or in
connection with its products.
The Company has been sued by Phillips Petroleum Company for alleged
infringement of its crystalline and block co-polymer polypropylene patents. See
"Item 3 -- Legal Proceedings".
ENVIRONMENTAL AND RELATED REGULATION
GENERAL
The Company, and the industry in which it competes, is subject to extensive
environmental laws and regulations and is also subject to other federal, state
and local laws and regulations regarding health and safety matters. The Company
believes that its business, operations and facilities generally have been and
are being operated in compliance in all material respects with applicable
environmental and health and safety laws and regulations, many of which provide
for substantial fines, criminal
7
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sanctions, and in certain extreme circumstances, temporary or permanent plant
closures for violations. Nevertheless, from time to time the Company has
received notices of alleged violations of certain environmental laws, and has
endeavored promptly to remedy such alleged violations. The ongoing operations of
chemical manufacturing plants entail risks in these areas and there can be no
assurance that material costs or liabilities will not be incurred in the future.
Further, existing groundwater and/or soil contamination at the Odessa Facility
may require remediation that could involve significant expenditures.
In addition, future developments, such as increasingly strict requirements
of environmental and health and safety laws and regulations and enforcement
policies thereunder could bring into question the handling, manufacture, use,
emission or disposal of substances or pollutants at the Company's facilities.
Changes to or reinterpretations of existing laws could materially and adversely
affect the Company's business and results of operations.
The Company's operating expenditures for environmental remediation,
compliance and waste disposal were approximately $6.6 million and $6.4 million
in 1994 and 1993, respectively. In 1994 and 1993, the Company also expended
approximately $2.0 million and $5.1 million, respectively, relating to
environmental capital expenditures. The environmental related capital
expenditures in 1994 were lower than historical levels due to timing of
expenditures pertaining to several projects. For the foreseeable future, the
Company expects to incur approximately $4.0 to $5.0 million per year in capital
spending to address the requirements of environmental laws. Annual amounts could
vary depending on a variety of factors, such as the control measures or remedial
technologies ultimately required and the time allowed to meet such requirements.
The Company believes that, in light of its historical expenditures and
expected future results of operations, it will have adequate resources to
conduct its operations in compliance with currently applicable environmental and
health and safety laws and regulations. However, in order to comply with
changing licensing and regulatory standards, the Company may be required to make
additional significant site or operational modifications that are not currently
contemplated. Further, the Company has incurred and may in the future incur
liability to clean up waste or contamination at its current or former
facilities, or which it may have disposed of at facilities operated by third
parties. The Company has approximately $22.7 million accrued in the December 31,
1994 balance sheet as an estimate of its total potential environmental liability
with respect to remediating known site contamination. The Company continually
reviews its estimates of potential environmental liabilities. However, no
assurance can be given that all potential liabilities arising out of the
Company's present or past operations have been identified or that the amounts
that might be required to remediate such conditions will not be significant to
the Company.
The Company does not currently carry environmental impairment liability
insurance to protect it against such contingencies because the Company has found
such coverage available only at great cost and with broad exclusions. As part of
its financial assurance requirements under the Resource Conservation and
Recovery Act ("RCRA") and equivalent Texas law, the Company has deposited $10.7
million in trust to cover closure and post-closure costs and liability for
bodily injury and certain types of property damage arising from sudden and
non-sudden accidental occurrences at certain of the Odessa Facility s hazardous
waste management units. Based on the Company s improved economic condition,
management believes it will be able to meet the regulatory requirements to have
the Texas Natural Resource Commission (the "TNRCC") release in 1995
approximately $8.0 million of the funds in the trust.
WASTEWATER
The Company currently disposes of wastewater from the Odessa Facility
through injection wells operated under permits from the TNRCC. The TNRCC has
stated that it does not intend to renew the permits after they expire in
December 1997. Further, the TNRCC may order the Company to cease using one or
more of the wells if certain periodic testing results indicate that continued
injection
8
<PAGE>
cannot be conducted safely. The Company is working with the City of Odessa and a
quasi-governmental authority to acquire, modify and operate a publicly-owned
treatment works ("POTW") to dispose of industrial wastewater. The parties have
completed their technical review of the project and are currently negotiating
the contractual arrangements. If the Company is unable to reach a satisfactory
arrangement to use the POTW, it has a permit from the TNRCC to drill and operate
a deeper well to provide for wastewater disposal. Company consultants have
estimated the cost of installing a new deep well injection system at
approximately $6 million. If the Company is forced to cease using one or more
injection wells before an alternative system is developed, there could be a
material adverse effect on the Company's financial condition and results of
operations.
SOLID WASTES
In March 1994, TNRCC granted the Company a permit to operate three hazardous
waste management units at the Odessa Facility as treatment/storage/disposal
facilities under RCRA. This permit is accompanied by a compliance plan requiring
the Company to take corrective action with regard to existing contamination at
the Odessa Facility. Pursuant to this compliance plan, the Company must complete
an investigation into the extent of on-site contamination, conduct a risk
assessment to determine the level of risk it presents to human health and the
environment, develop a corrective measures study on the ways to remediate the
contamination, and implement a remediation plan approved by TNRCC. During the
investigations of contamination at the Odessa Facility, the Company discovered,
and reported to TNRCC, the presence of low levels of contaminants in an
intermittently-flowing stream adjacent to the Odessa Facility. The Company is
continuing its investigations as to the source, extent and effect of
contaminants in this stream.
Based upon the results of its investigations of on-site contamination, the
Company does not believe that implementation of a corrective action plan will
have a material adverse effect on its financial condition. However, no assurance
can be given that all conditions any corrective action plan may be required to
address have been identified, or that the amounts that might be required to
implement that plan will not be significant to the Company.
AIR EMISSIONS
In 1990, Congress amended the federal Clean Air Act (the "Clean Air Act
Amendments"), to require control of certain emissions not previously regulated,
some of which are emitted by the Company's facilities. This legislation will
require the Company (and others in the industry with such emissions) to
implement additional pollution control measures. Some of the regulations
detailing these additional control measures have not yet been promulgated. The
Company expects that modifications required by the currently published
regulations can be accomplished within the projected capital budget, but it can
give no assurance that the costs it may incur to comply with regulations that
have not yet been issued will not be significant.
The Company operates its styrene plant under an air permit that was first
issued in 1979. The permit has been amended several times, and it currently
covers both the styrene plant and the styrene loading facilities. During the
current renewal process, two parties requested a public hearing on the permit.
One of the requesting parties is the law firm representing the plaintiffs in the
Odessa Residents Tort Litigation. See "Item 3 -- Legal Proceedings". The public
hearing process will probably take from six to thirteen months to complete.
During the pendency of the public hearing process, the Company will continue to
operate under its existing permit. While there can be no assurance, the Company
expects the TNRCC to renew its styrene air permit, although the renewal permit
may contain additional modeling or monitoring requirements.
In addition, the same law firm requested a public hearing on the renewal of
the air permit on a finished product cleaning unit in the Company's polyethylene
plant. While there can be no assurance, the Company expects the TNRCC to renew
the unit's air permit, although additional emission control measures may be
required.
9
<PAGE>
ADDITIONAL ENVIRONMENTAL ISSUES
The Federal Comprehensive Environmental Response Compensation and Liability
Act, as amended ("CERCLA"), and similar laws in many states, impose liability
for the clean-up of certain waste sites and for related natural resource
damages, without regard to fault or the legality of the waste disposal. Liable
persons generally include the site owner or operator, former site owners, and
persons that disposed or arranged for the disposal of hazardous substances found
at those sites. The Company has sent wastes from its operations to various
third-party waste disposal sites. From time to time the Company receives notices
from representatives of governmental agencies and private parties contending
that the Company is potentially liable for a portion of the remediation at such
third-party and formerly-owned sites. Although there can be no assurance, the
Company does not believe that its liabilities for remediation of such sites,
either individually or in the aggregate, will have a material adverse effect on
the Company.
The Odessa Facility is located near the South Dixie Water Treatment Plant
owned by the City of Odessa ("Odessa"). Odessa is implementing a plan to expand
a second water treatment plant and abandon the South Dixie Water Treatment
Plant. Odessa has alleged that the Company has contributed to groundwater
contamination at the South Dixie Water Treatment Plant. If Odessa's allegations
are correct, then the Company could be liable for some or all of the remediation
at the site. Although there can be no assurance, the Company does not believe
that any such costs will have a material adverse effect on the Company.
EXECUTIVE OFFICERS
The table set forth below provides certain information with respect to those
persons who are currently serving as executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Andrew J. Smith 53 Director, Chief Executive Officer
Lavon N. Anderson 59 Director, President and Chief Operating Officer
Kevin W. McAleer 44 Executive Vice President and Chief Financial Officer
Jack E. Knott 40 Executive Vice President and President -- Rexene Products
James M. Ruberto 48 Executive Vice President and President -- CT Film
Jonathan R. Wheeler 43 Senior Vice President -- Administration
Bernard J. McNamee 59 Vice President, Secretary and General Counsel
Geff Perera 41 Vice President and Controller
</TABLE>
Mr. Smith has been Chief Executive Officer and a director of the Company
since March 1992. From December 1991 to March 1992, he was a private consultant.
From June 1991 to December 1991, he was President and Chief Operating Officer of
Itex Enterprises, Inc., an environmental remediation company. Mr. Smith also
served as a consultant to the Company from January 1991 to June 1991.
Immediately prior thereto, he had been a director of the Company since May 1988
and the President and Chief Executive Officer of the Company since June 1988.
Dr. Anderson has been President and Chief Operating Officer of the Company
since January 1991 and a director since February 1990. From May 1988 to January
1991 Dr. Anderson was Executive Vice President -- Manufacturing and Technical of
the Company.
Mr. McAleer has been Executive Vice President and Chief Financial Officer of
the Company since July 1990. From 1985 to 1990, Mr. McAleer was Chief Financial
Officer of Varo, Inc., a manufacturer of specialty electronics equipment.
10
<PAGE>
Mr. Knott has been Executive Vice President of the Company and President of
Rexene Products since March 1, 1995. Prior thereto, Mr. Knott had been Executive
Vice President -- Sales and Market Development of the Company since March 1992.
Prior thereto, Mr. Knott was an Executive Vice President of the Company since
January 1991 and President of CT Film since February 1989.
Mr. Ruberto has been Executive Vice President of the Company and President
of CT Film since March 1992. Prior thereto, Mr. Ruberto had been Executive Vice
President -- Sales and Market Development of the Company since January 1991.
From April 1989 to January 1991, Mr. Ruberto was Executive Vice President --
Marketing and Business Planning of the Company.
Mr. Wheeler has been Senior Vice President -- Administration of the Company
since December 1990. Prior thereto, Mr. Wheeler had been Vice President -- Human
Resources and Administration of the Company since September 1988.
Mr. McNamee has been Vice President, Secretary and General Counsel of the
Company since May 1993. From September 1989 to November 1992, Mr. McNamee was
Vice President and General Counsel of Ferro Corporation, a multinational
manufacturer of specialty materials.
Mr. Perera has been Vice President of the Company since January 1991 and
Controller since February 1989.
ITEM 2. PROPERTIES
The Company operates six manufacturing facilities, five of which are in the
United States and one in England.
CT Film has four domestic manufacturing facilities located in Delaware,
Georgia, Utah and Wisconsin, with a total rated annual production capacity of
approximately 225 million pounds. In 1994 these plants, which produce blown and
cast plastic film, operated at a weighted average utilization rate of
approximately 81%. The fifth CT Film manufacturing facility, located in England,
commenced commercial production in September 1994 with a total rated annual
production capacity of 20 million pounds. These five CT Film plants, which
commenced operations between 1948 and 1994, are, in general, in good operating
condition.
The polyethylene plant in Odessa, Texas has been in operation since 1961 and
has a total rated annual production capacity of approximately 405 million
pounds.
The polypropylene plant in Odessa, Texas has been in operation since 1961
and has a total rated annual production capacity of approximately 180 million
pounds. APAO is produced in a former polypropylene plant that was converted in
1986 and in 1994 had a total rated annual production capacity, before expansions
in 1994, of approximately 35 million pounds. By the end of 1994, the APAO plant
had been expanded, and the current estimated annual production capacity is
approximately 60 million pounds.
The styrene plant in Odessa, Texas has been in operation since 1958 and has
a total rated annual production capacity of approximately 320 million pounds.
The olefin plant at the Odessa Facility has been in operation since 1961 and
has a total rated annual production capacity for ethylene of approximately 540
million pounds and for propylene of approximately 210 million pounds.
In 1994 each of these plants at the Odessa Facility operated at rates in
excess of 90% of their 1994 total rated annual production capacity. Although
several of these plants first began production more than thirty years ago, the
Company believes these plants are in good operating condition.
The Company owns all of its manufacturing facilities, except for the CT Film
plant in Utah, which is held under a long-term lease. All the United States
plants are subject to encumbrances which secure borrowings under the Credit
Agreement. See Note 9 to the Consolidated Financial Statements in Item 8 for
further discussion.
11
<PAGE>
The Company also owns an off-site warehouse in Odessa, Texas, leases
off-site warehouses near its manufacturing facilities in Delaware and Wisconsin,
and leases its executive offices in Dallas, Texas.
ITEM 3. LEGAL PROCEEDINGS
BANKRUPTCY
On October 18, 1991, and pursuant to an agreement in principle detailing the
terms for Old Rexene's recapitalization, Old Rexene and its wholly-owned
subsidiaries, Products and Poly-Pac, Inc., filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"), case numbers 91-1058, 91-1057 and 91-1059, respectively. Pursuant to an
Order Providing for Joint Administration entered by the Bankruptcy Court on
October 21, 1991, the Old Rexene and Poly-Pac, Inc. cases were consolidated with
the Products case for administrative purposes only. On July 7, 1992, the
Bankruptcy Court entered an order confirming the Amended Plan, which, among
other things, provided for the merger of Old Rexene with and into Products to
form the Company (the "1992 Merger"). Thereafter, all conditions to the
effectiveness of the 1992 Merger and the Amended Plan were either satisfied or
waived. The 1992 Merger and the Amended Plan were then consummated on September
11, 1992 and September 18, 1992 (the "Effective Date"), respectively.
Substantially all distributions contemplated by the Amended Plan have been made.
Certain matters, none of them material, remain pending before the Bankruptcy
Court.
STOCKHOLDER CLASS ACTION LITIGATION
In January 1990, a purported class action was filed in the United States
District Court, Northern District of Texas, by an alleged stockholder of the
Company on behalf of purchasers of the Company's common stock between October
23, 1989 and December 27, 1989. The defendants in this action included the
Company, one of its current directors and certain of its former directors. The
class was certified with an intervenor as the class representative. The
intervenor's complaint asserted claims under Rule 10b-5 under the Securities
Exchange Act of 1934, and state common law grounds. The plaintiff alleged that
public statements made by certain directors of the Company created a misleading
impression of the Company's financial condition thereby artificially inflating
the price of the common stock of the Company. The plaintiffs sought compensatory
damages, prejudgment interest, a recovery of costs and attorneys' fees, and such
other relief as may be deemed just and proper. The parties have reached an
agreement to settle the case without any admission of liability, and it has been
preliminarily approved by the District Court. A final hearing on the settlement
is scheduled for May 16, 1995.
IZZARELLI STOCK BONUS PLAN CLASS ACTION LITIGATION
In February 1991, a class action lawsuit was filed in the United States
District Court for the Western District of Texas-Midland Division against the
Company, the El Paso Products Company Stock Bonus Plan (the "Stock Bonus Plan")
and Texas Commerce Bank -- Odessa (the former trustee for the Stock Bonus Plan)
by two former participants in the Stock Bonus Plan on behalf of the 1986
participants in the Stock Bonus Plan (the "Izzarelli Class"). The complaint
alleged that the Company amended the Stock Bonus Plan in 1987 and 1988 to
deprive the Izzarelli Class of benefits to which they would have been entitled
had the Stock Bonus Plan not been amended. The Izzarelli Class asserted claims
under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
for alleged breach of fiduciary duties to the participants and for alleged
violation of ERISA's provision prohibiting amendments to the Stock Bonus Plan
after benefits had accrued to participants. After a trial, the trial court in
July 1992 entered a judgment against the Company in the amount of $6.6 million
(as subsequently amended) plus court costs. In November 1992, the trial court
awarded the Izzarelli Class $595,000 for attorneys' fees and out-of-pocket
expenses.
The Company appealed the judgment to the United States Court of Appeals for
the Fifth Circuit. The Izzarelli Class also filed an appeal with respect to the
amount of damages awarded and the judgment in favor of Texas Commerce Bank --
Odessa. On June 22, 1994, the appeals court reversed the trial court and held
that Rexene did not violate ERISA or any fiduciary duty in amending the Stock
12
<PAGE>
Bonus Plan. It also affirmed the trial court's judgment that the trustee was not
liable to the plaintiffs. On August 11, 1994, the appeals court refused the
plaintiffs' request that it reconsider its decision. The Izzarelli Class did not
appeal further.
In the Company's bankruptcy proceeding, the Izzarelli Class filed proofs of
claim for $27.7 million. On January 31, 1995, the Bankruptcy Court entered a
stipulation and order which disallowed the proof of claims and resolved all
pending motions in favor of the Company. The Company has reversed an accrual of
$7.4 million made previously to reflect the judgment.
PHILLIPS BLOCK COPOLYMER LITIGATION
In March 1984, Phillips Petroleum Company ("Phillips") filed a lawsuit
against the Company in the United States District Court for the Northern
District of Illinois, Eastern Division, seeking injunctive relief, an
unspecified amount of compensatory damages and treble damages. The complaint
alleges that the Company's copolymer process for polypropylene infringes
Phillips' two "block" copolymer patents. This action has been transferred to the
United States District Court for the Southern District of Texas, Houston
Division. Discovery in this case has been completed. The Company has filed a
motion for summary judgment. Phillips has filed a motion for partial summary
judgment. Pursuant to an agreement among the parties, the court appointed a
special master who conducted a hearing on these motions and thereafter
recommended to the court that the Company's motion be granted and Phillips'
motion be denied. Thereafter, Phillips filed motions to disqualify the special
master, to reject the recommendation of the special master and to enter partial
summary judgment for Phillips. The court has entered an order denying Phillips'
motion to disqualify the special master. The summary judgment motions are still
pending. In the Company's bankruptcy proceeding, Phillips filed a proof of claim
seeking in excess of $108 million based upon the allegations in this litigation.
The Company objected to the claim and elected to leave the legal, equitable and
contractual rights of Phillips unaltered, thereby allowing this litigation to
proceed as of the Effective Date without regard to the bankruptcy proceeding.
PHILLIPS CRYSTALLINE LICENSE LITIGATION
In May 1990, Phillips filed a lawsuit against the Company in the United
States District Court for the District of Delaware seeking injunctive relief, an
unspecified amount of compensatory damages, treble damages and attorneys' fees,
costs and expenses. The complaint alleges that the Company is infringing
Phillips' Patent No. 4,376,851 (the "'851 Patent") for crystalline
polypropylene. Pursuant to a License Agreement dated as of May 15, 1983, as
amended, (the "License Agreement"), Phillips granted the Company a non-exclusive
license to make, use and sell crystalline polypropylene covered by the '851
Patent. The complaint alleges that effective April 21, 1990, Phillips terminated
the License Agreement because it believed that, by the terms of the License
Agreement all conditions precedent to such termination had occurred. The
complaint further alleges that, without an effective License Agreement, the
Company's continuing use of the '851 Patent constitutes an infringing use. An
amended complaint filed in May 1990 further alleges that the Company made a
material misrepresentation that induced Phillips to enter into the License
Agreement and that Phillips entered into the License Agreement as a consequence
of a mutual mistake of the parties. The amended complaint therefore alleges that
the License Agreement is void AB INITIO. The Company filed a motion to dismiss
Phillips' amended complaint for failure to state a claim. On December 30, 1993,
the court entered an order dismissing Phillips' claim that the License Agreement
was void AB INITIO, and ordered that the 1990 license termination issue be
resolved at trial. A trial was conducted before the United States District Court
in October 1994. At trial, Phillips sought damages and interest totalling
approximately $15.5 million for the period from April 1990 through the time of
trial. Phillips also seeks an injunction to prevent future infringement.
Post-trial briefing is now complete and the parties are awaiting a decision. In
the Company's bankruptcy proceeding, Phillips filed a proof of claim seeking in
excess of $147 million based upon the allegations in this litigation. The
Company objected to the bankruptcy claim and elected to leave the legal,
equitable and contractual rights of Phillips unaltered, thereby allowing this
litigation to proceed as of the Effective Date without regard to the bankruptcy
proceeding.
13
<PAGE>
ODESSA RESIDENTS' TORT LITIGATION
On April 15, 1994, the national and state chapters of the NAACP and
approximately 770 residents of a neighborhood approximately one mile northwest
of the Shell Oil Company ("Shell"), Rexene and Dynagen, Inc. ("Dynagen") plants
in Odessa, Texas petitioned the State District Court in Odessa, Texas to
intervene in a previously existing lawsuit against Dynagen to (a) add as
additional defendants Rexene, Shell and General Tire Corporation (the parent
company of Dynagen) and (b) have the litigation certified as a class action. The
plaintiffs' petition seeks an unspecified amount of money damages for past,
present and future injuries to plaintiffs' health, wrongful death, loss of
consortium and reduction in property values; the conduct and payment of property
clean up, remediation and relocation costs; payment of expenses for medical
testing and monitoring; funding of pollution and health studies; attorney's
fees; punitive damages and injunctive relief. Plaintiffs' petition specified
alleged pollution from air emissions from the three plants as a basis for their
claims. The trial court has allowed intervention and severed the action from the
original lawsuit against Dynagen. Plaintiffs have withdrawn their motion to have
the litigation certified as a class claim. In November 1994, the plaintiffs
filed an amended petition which substituted the Odessa branch of the NAACP as
plaintiff in place of the national and state chapters of the NAACP. The amended
complaint also added approximately 100 additional plaintiffs. Defendants are
challenging the NAACP's standing to participate in the lawsuit. Pretrial
discovery is ongoing. Plaintiffs' attorneys have also requested public hearings
in connection with the renewal of the Company's air permits for its styrene
plant and a finished product cleaning unit in the polyethylene plant. See "Item
1 -- Environmental and Related Regulation."
Although there can be no assurance of the final resolution of any of these
matters, the Company believes that, based upon its current knowledge of the
facts of each case, it has meritorious defenses to the various claims made and
intends to defend each suit vigorously. Although there can be no assurance of
the final resolution of any of these litigation matters, the Company does not
believe that the outcome of any of these lawsuits will have a material adverse
effect on the Company's financial position or results of operations.
With respect to certain pending or threatened proceedings involving the
discharge of materials into or protection of the environment, see "Item 1 --
Environmental and Related Regulation". The Company is also a party to various
lawsuits arising in the ordinary course of business and does not believe that
the outcome of any of these lawsuits will have a material adverse effect on the
Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders during
the fourth quarter of 1994.
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Registrant's common stock is traded on the New York Stock Exchange under
the symbol "RXN". As of March 9, 1995, there were 649 record holders of common
stock. The following table sets forth the high and low sales prices of the
common stock as reported by the New York Stock Exchange for the last two fiscal
years.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1994:
Fourth Quarter............................................................... 18 9 1/8
Third Quarter................................................................ 17 1/8 8 3/8
Second Quarter............................................................... 11 3 5/8
First Quarter................................................................ 4 3/4 2 7/8
1993:
Fourth Quarter............................................................... 3 3/8 2 1/2
Third Quarter................................................................ 3 5/8 2 3/4
Second Quarter............................................................... 4 1/4 3
First Quarter................................................................ 4 1/8 3
</TABLE>
The Company has not paid cash dividends on its common stock during the last
two fiscal years. The Credit Agreement precludes the Company from paying cash
dividends on the common stock. In addition, the indenture governing the Senior
Notes limits the Company's ability to pay dividends on the common stock. See
"Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources".
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company for
the periods indicated. Information should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto included on the
pages immediately following the Index to Consolidated Financial Statements
appearing on page F-1. See "Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 18 to the Consolidated
Financial Statements for a discussion about comparability.
<TABLE>
<CAPTION>
POST-EMERGENCE
----------------------------------- PRE-EMERGENCE
--------------------------------------
YEARS ENDED THREE MONTHS NINE MONTHS YEARS ENDED
DECEMBER 31, ENDED ENDED DECEMBER 31,
-------------------- DECEMBER 31, SEPTEMBER 30, -----------------------
1994 1993 1992 1992 1991 1990
--------- --------- ------------- ------------- ------------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Net sales....................... $ 537,957 $ 429,353 $ 98,854 $ 316,106 $ 449,728 $ 502,186
Operating income................ 75,085 14,504 1,418 9,392 12,028 81,100
Interest expense -- cash........ 30,444 24,446 6,215 -- 55,029(1) 76,375
Interest expense -- non-cash.... 19,441 25,388 6,445 -- 3,345(1) (4,643)
Income (loss) before
extraordinary gain (loss)...... 21,504 (25,243) (6,528) (31,476) (42,747) 2,705
Extraordinary gain (loss), net
of income taxes................ (25,831) -- -- 123,672 -- 17,169
--------- --------- ------------- ------------- ------------ ---------
Net income (loss)............... $ (4,327) $ (25,243) $ (6,528) $ 92,196 $ (42,747) $ 19,874
--------- --------- ------------- ------------- ------------ ---------
--------- --------- ------------- ------------- ------------ ---------
Income (loss) per share (2):
Income (loss) before
extraordinary loss........... $ 1.84 $ (2.40) $ (.62)
Extraordinary loss............ (2.21) -- --
--------- --------- -------------
Net loss per share............ $ (.37) $ (2.40) $ (.62)
--------- --------- -------------
--------- --------- -------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- ------------- ------------- ------------
CONSOLIDATED BALANCE SHEETS DATA:
<S> <C> <C> <C> <C> <C> <C>
Working capital................. $ 140,039 $ 109,381 $ 104,824 $ 109,777 $ 133,051
Total assets.................... 506,954 434,307 423,591 440,665 461,152
Long-term debt and other
noncurrent liabilities......... (366,766) (397,091) (367,327) (57,410) (454,096)
Liabilities subject to
compromise..................... -- -- -- (428,297) (3) --
Stockholders' equity
(deficit)...................... 74,876 (5,137) 20,106 (94,813) (55,936)
<FN>
- ------------------------
(1) Interest from October 16, 1991 through December 31, 1991 was calculated
using the terms of an agreement in principle between the Company and the
holders of increasing rate notes prior to the approval of the Amended Plan.
If the interest expense from October 16, 1991 to December 31, 1991 had been
calculated based on the terms of the increasing rate notes, the interest
expense for the year ended December 31, 1991 would have aggregated $73.8
million.
(2) Per share data for the pre-emergence periods is not presented because such
information is not comparable to the similar information for the
post-emergence periods.
(3) Represents increasing rate notes and interest thereon.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The polyethylene, polypropylene and styrene markets in which the Company
competes are cyclical markets that are sensitive to relative changes in supply
and demand, which are in turn affected by general economic conditions. The
Company's plastic film and APAO businesses are generally less sensitive to the
economic cycles. Historically, the cyclical segments have experienced
alternating periods of tight supply and rising prices and profit margins,
followed by periods of large capacity additions resulting in oversupply and
declining prices and profit margins. Following a significant improvement in
domestic economic growth since the second half of 1993, these cyclical markets
experienced increased levels of demand which have resulted in near full capacity
utilization and higher domestic and export prices. This increase in demand has
enabled the Company and the petrochemical industry in general to increase
selling prices significantly at a time when feedstock costs have been relatively
stable.
Principal raw materials purchased by the Company consist of ethane and
propane extracted from NGL, propylene and benzene (all four of which are
referred to as "feedstocks") for the polymer and styrene businesses and
polyethylene resins for the film business. The prices of feedstocks fluctuate
widely based on the prices of natural gas and oil. During 1994, feedstocks
accounted for approximately 29% of the Company's total cost of sales. As a
result, the Company's ability to pass on increases in raw material costs to
customers has a significant impact on operating results.
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Growth in the United States economy resulted in the strengthening of the
petrochemical and polymer markets during the year ended December 31, 1994. As a
result, sales volumes and average sales prices for the Company's major product
lines increased during 1994. Total net sales increased $108.6 million (or 25%)
from 1993 to 1994. Styrene sales increased $28.4 million (or 46%) from 1993 to
1994 principally due to a volume increase of approximately 49 million pounds and
an increase in average sales prices of 6 cents per pound. Polyethylene sales
increased $25.3 million (or 21%) from 1993 to 1994 due to a volume increase of
approximately 37 million pounds and an increase in average sales prices of 3
cents per pound. Plastic film sales increased $25.2 million (or 17%) principally
due to a volume increase of approximately 28 million pounds. Polypropylene sales
increased $13.1 million (or 20%) from 1993 to 1994 due to a volume increase of
approximately 16 million pounds and an increase
16
<PAGE>
in average sales prices of 4 cents per pound. APAO sales increased $3.5 million
(or 23%) principally due to a volume increase of approximately 7 million pounds.
Excess feedstock sales also contributed to the increase in sales.
The Company's gross profit percentage increased from 13% in 1993 to 22% in
1994 principally due to the increase in average sales prices discussed above and
lower unit manufacturing costs due to higher production volumes.
Marketing, general and administrative expenses increased $5.1 million (or
16%) from 1993 to 1994 principally due to higher employee benefits that are
related to the Company's improved operating performance. In addition, sales and
marketing costs increased due to the increase in sales volumes discussed above.
Research and development costs increased $0.5 million (or 7%) principally due to
an increase in new product development.
Due primarily to the factors discussed above, operating income increased
$60.6 million (or 418%) from 1993 to 1994.
Cash interest expense increased and non-cash interest expense decreased $6.0
million principally due to the decision not to exercise the pay-in-kind feature
on the Old Subordinated Notes for the interest payment made on November 15,
1994. See "Liquidity and Capital Resources" for a description of the
Recapitalization completed in the fourth quarter of 1994.
Interest income increased $0.9 million principally due to an increase in
cash and cash equivalents and the increase in general interest rates of
investments. Other, net increased $7.8 million from 1993 to 1994 principally due
to the reversal of a $7.4 million accrual for a lawsuit in which the Company
ultimately prevailed on appeal. See "Item 3 -- Legal Proceedings".
The income tax expense of $13.6 million in 1994 reflects current income
taxes payable of $16.1 million, partially offset by deferred income tax benefits
of $2.5 million, excluding the tax effect of the extraordinary loss discussed
below. The income tax benefit of $8.9 million in 1993 reflects current income
tax benefits of $4.8 million from the carryback of 1993 pretax losses in prior
years and deferred income tax benefits of $4.1 million.
In 1994, the Company had income before extraordinary loss of $21.5 million
compared with a loss of $25.2 million in 1993. In 1994, the Company recorded an
extraordinary loss of $25.8 million, net of income taxes of $15.8 million, as a
result of the redemption of the Old Notes. The income tax benefit from the
extraordinary loss reflects a current income tax benefit of $16.2 million,
partially offset by deferred income tax expense of $0.4 million. See "Liquidity
and Capital Resources".
Due primarily to the factors discussed above, the Company's net loss
decreased $20.9 million (or 83%) from 1993 to 1994.
1993 COMPARED TO 1992 (PRO FORMA)
In connection with the 1992 Reorganization, the Company adopted as of
September 30, 1992, the American Institute of Certified Public Accountants'
Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" (the "Reorganization SOP"). The
Company's basis of accounting for financial reporting purposes changed as a
result of adopting the Reorganization SOP. Accordingly, the results of
operations (other than net sales) after September 30, 1992 are not comparable to
results of operations prior to such date, and the results of operations for the
nine months ended September 30, 1992 and the three months ended December 31,
1992 have not been aggregated. Therefore, the following analysis compares the
results for the year ended December 31, 1993 to the pro forma results for the
year ended December 31, 1992. The pro forma information gives effect to the 1992
Reorganization as though it had occurred on September 30, 1991. The adjustments
relate primarily to (i) the recording of interest expense in accordance with the
terms of the Old Notes, (ii) the recording of depreciation of property, plant
and equipment in accordance with their restated values, (iii) the recording of
amortization of reorganization value in excess of amounts allocable to
identifiable assets, (iv) the elimination of goodwill amortization,
reorganization items and the extraordinary gain, and (v) the income tax effects
for adjustments (i) through (iv) above.
17
<PAGE>
Results of operations for the year ended December 31, 1993 and the year
ended December 31, 1992 (pro forma) are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1993 1992
----------- -----------
(PRO FORMA)
<S> <C> <C>
Net sales........................................................... $ 429,353 $ 414,960
Operating expenses:
Cost of sales..................................................... 375,609 360,257
Marketing, general and administrative............................. 32,641 30,629
Research and development.......................................... 6,599 6,374
----------- -----------
414,849 397,260
----------- -----------
Operating income.................................................... 14,504 17,700
----------- -----------
Interest expense.................................................... (49,834) (49,572)
Interest income..................................................... 1,392 1,377
Other, net.......................................................... (245) (6,818)
----------- -----------
Loss before income taxes............................................ (34,183) (37,313)
----------- -----------
Income tax benefit.................................................. 8,940 8,116
----------- -----------
Net loss............................................................ $ (25,243) $ (29,197)
----------- -----------
----------- -----------
</TABLE>
Net sales increased $14.4 million (or 3%) for 1993 as compared to 1992
principally due to an increase in plastic film sales. Plastic film sales
increased $11.8 million (or 9%) primarily due to a volume increase of 11.2
million pounds principally due to higher sales to the disposable diaper market
and the blown co-extrusion film market. APAO and excess propane and ethylene
sales also contributed to the increase in sales. APAO sales increased $3.3
million (or 20%) from 1992 to 1993 principally due to an increase in sales of
product purchased from the Ube Rexene Corporation joint venture located in
Japan. Excess ethylene and propane sales increased $5 million due to changes in
the feedstock mix at the olefin plant. These increases were partially offset by
a $3 million (or 2%) decrease in polyethylene sales and a $3.1 million (or 5%)
decrease in styrene sales. Polyethylene and styrene sales declined in 1993 as
compared to 1992 primarily as a result of continuous pricing pressure due to an
overcapacity in the industry.
The Company's gross profit percentage remained constant at 13% in 1993 as
compared to 1992. Gross profit for 1993 decreased $1.0 million (or 2%) as
compared to 1992 principally due to a decrease in polyethylene gross profits of
$4.4 million as a result of lower margins, partially offset by lower
environmental remediation charges in 1993. Gross profit for 1992 reflected a
charge to increase the Company's environmental remediation accrual. Polyethylene
margins for 1993 were lower than 1992 margins principally as a result of higher
ethylene transfer prices and lower selling prices for polyethylene.
Marketing, general and administrative expenses increased $2.0 million (or
7%) from 1992 to 1993 principally due to an increase in marketing and related
expenditures incurred to address growth opportunities for plastic film and APAO.
In addition, the increase in 1993 is due to unusually low expenses in 1992 as a
result of changes in estimates of incentive and benefit plan expenses and lower
legal fees for general litigation resulting from the automatic stay provision of
the Bankruptcy Code.
Due primarily to the factors described above, operating income decreased
$3.2 million (or 18%) from 1992 to 1993.
Other, net decreased $6.6 million (or 96%) from $6.8 million in 1992 to $0.2
million in 1993 principally due to a $7.4 million accrual in 1992 relating to
the adverse judgment (including estimated attorneys' fees) on the Izzarelli
class action lawsuit, partially offset by $1.5 million of business interruption
insurance proceeds received in 1992 for an electrical outage at the Odessa
Facility in May 1991. See "Item 3 -- Legal Proceedings".
18
<PAGE>
The 1993 results include an income tax benefit of $8.9 million as compared
to a benefit of $8.1 million for 1992. As a result of adoption of Statement of
Financial Accounting Standards 109, "Accounting for Income Taxes" on September
30, 1992, the income tax benefit for 1993 is not comparable to the income tax
benefit for 1992.
Due primarily to the factors described above, the net loss decreased $4.0
million (or 14%) from $29.2 million in 1992 to $25.2 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 1994, net cash provided by operating
activities increased $41.4 million as compared to 1993. This increase was
principally due to higher operating income and receipt of $5.5 million of
federal income tax refunds, partially offset by the effect of increased
operating working capital resulting primarily from higher sales.
In the fourth quarter of 1994, the Company completed the Recapitalization,
which was designed to increase stockholders' equity, reduce indebtedness and
interest expense and improve the strategic, operating and financial flexibility
of the Company. The Recapitalization resulted in (i) the issuance of 8 million
shares of common stock at $11.00 per share, (ii) the issuance of the Senior
Notes in an aggregate principal amount of $175 million, (iii) the establishment
of the Credit Agreement, providing the Company with a $100 million Term Loan and
an $80 million Revolving Credit Facility for working capital and for letters of
credit, (iv) the redemption and defeasance of the Company's Old Senior Notes,
(v) the redemption of the Company's Old Subordinated Notes, and (vi) the
repayment in full of the outstanding indebtedness under the Company's Old Credit
Agreement. No borrowings have been made under the Revolving Credit Facility. In
connection with the redemption of the Old Notes, the Company recorded an
extraordinary loss of $25.8 million (net of income tax benefits) in the fourth
quarter of 1994. The debt issuance costs relating to the placement of the Senior
Notes and the establishment of the Credit Agreement aggregating $9.7 million
were capitalized as intangible assets and are being amortized over the life of
the related debt.
The Company is required to repay a portion of its borrowings under the Term
Loan each year so as to retire such indebtedness in its entirety by December 31,
1999. On January 31, 1995, the Company prepaid $20 million of the Term Loan,
which will be credited against required principal repayments under the Term Loan
as such required payments become due. Four required payments of $2.5 million
each are due in 1995; four additional payments of $3.75 million each are due at
the end of each quarter in 1996; and quarterly payments of $6.25 million are due
at the end of each succeeding quarter until the Term Loan is paid in full. In
addition, the Company has certain additional annual mandatory repayments
beginning in April 1996 equal to 50% of the excess cash flow (as defined in the
Credit Agreement) of the Company in the preceding year but subject to a maximum
of $15.0 million in 1996; $25.0 million, less any prior mandatory excess cash
flow repayments, in 1997; and $35.0 million, less any prior mandatory excess
cash flow repayments, in 1998. The Company's Senior Notes will mature on
December 1, 2004. The Company believes that, based on current levels of
operations and anticipated growth, its cash flow from operations, together with
other available sources of liquidity, including borrowings under the Revolving
Credit Facility, will be adequate for the foreseeable future to make scheduled
payments of principal and interest under the Credit Agreement and interest
payments on the Senior Notes, to permit anticipated capital expenditures and to
fund working capital requirements. However, the ability of the Company to
satisfy these obligations depends on a number of significant assumptions
regarding the demand for the Company's products, raw material costs and other
factors.
The indenture governing the Senior Notes contains certain covenants that,
among other things, limit the ability of the Company to incur additional
indebtedness and to repurchase subordinated indebtedness, incur or suffer to
exist certain liens, pay dividends, make certain investments, sell significant
fixed assets and engage in mergers and consolidations.
19
<PAGE>
The Credit Agreement contains covenants which restrict or preclude, among
other things, the incurrence of additional indebtedness by the Company, the
payment of dividends, the creation of liens on the Company's assets, the making
of certain investments by the Company, certain mergers, sales of certain fixed
assets and the prepayment of the Senior Notes. The Credit Agreement also
contains certain financial covenants relating to the financial condition of the
Company, including covenants relating to the ratio of its earnings to its
interest expense, the ratio of its earnings to its fixed charges and a leverage
ratio. Availability of borrowings under the Revolving Credit Facility is based
upon a formula related to inventory and accounts receivable.
During 1994 and 1993, the Company expended approximately $30.9 and $17.0
million, respectively, for capital expenditures. For 1995, the Company has
budgeted approximately $51 million for proposed capital expenditures, including
$20 million towards the construction of the FPO plant at the Odessa Facility.
A number of potential environmental liabilities exist which relate to
contaminated property. In addition, a number of potential environmental costs
relate to pending or proposed environmental regulations. No assurance can be
given that all of the potential liabilities arising out of the Company's present
or past operations have been identified or that the amounts that might be
required to remediate such sites or comply with pending or proposed
environmental regulations can be accurately estimated. The Company has
approximately $22.7 million accrued in the December 31, 1994 balance sheet as an
estimate of its total potential environmental liability with respect to
remediating known site contamination. If, however, additional liabilities with
respect to environmental contamination are identified, there is no assurance
that additional amounts that might be required to remediate such potential sites
would not have a material adverse effect on the financial condition of the
Company. In addition, future regulatory developments could restrict or possibly
prohibit existing methods of environmental compliance, such as the disposal of
waste water in deep injection wells. At this time, the Company is unable to
determine the potential consequences such possible future regulatory
developments would have on its financial condition. Management continually
reviews on an on-going basis its estimates of potential environmental
liabilities. The Company does not currently carry environmental impairment
liability insurance to protect it against such contingencies because the Company
has found such coverage is available only at great cost and with broad
exclusions. As part of its financial assurance requirements under RCRA and
equivalent Texas law, the Company has deposited $10.7 million in trust to cover
closure and post-closure costs and liability for bodily injury and certain types
of property damage arising from sudden and non-sudden accidental occurrences at
certain of the Odessa Facility's hazardous waste management units. Based on the
Company's improved economic condition, management believes it will be able to
meet the regulatory requirements to have the TNRCC release, in 1995,
approximately $8.0 million of the funds in the trust.
The Company's operating expenditures for environmental remediation,
compliance and waste disposal were approximately $6.6 million and $6.4 million
in 1994 and 1993, respectively. In 1995, the Company anticipates spending
approximately $11.1 million for environmental remediation, compliance and waste
disposal. Of that amount, expenditures relating to remediation are projected to
be approximately $5 million in 1995 and decrease to approximately $3 million
thereafter. Compliance and waste disposal costs are expected to increase
slightly over the next several years as a result of increasingly stringent
regulations that affect waste handling alternatives. In 1994 and 1993, the
Company also expended approximately $2.0 million and $5.1 million, respectively,
relating to environmental capital expenditures. The environmental related
capital expenditures were lower than historical levels due to timing of
expenditures pertaining to several projects. For the foreseeable future, the
Company expects to incur approximately $4.0 to $5.0 million per year in capital
spending to address the requirements of environmental laws. Annual amounts could
vary depending on a variety of factors, such as the control measures or remedial
technologies ultimately required and the time allowed to meet such requirements.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
The Company's Consolidated Financial Statements required by this item are
included on the pages immediately following the Index to Consolidated Financial
Statements appearing on page F-1 and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be contained in the definitive
proxy statement (the "Proxy Statement") of the Company to be filed in connection
with its forthcoming annual meeting of stockholders scheduled for April 25,
1995, except for the information regarding executive officers of the Company
contained in Part I of this Annual Report on Form 10-K. The information required
by this item to be contained in the Proxy Statement is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in the Proxy
Statement. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be contained in the Proxy
Statement. Such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be contained in the Proxy
Statement. Such information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements:
See Index to Consolidated Financial Statements on page F-1.
2. Financial Statement Schedules:
See Index to Consolidated Financial Statements on page F-1.
3. Exhibits:
<TABLE>
<S> <C> <C>
2.1 -- First Amended Plan of Reorganization of Rexene Products Company, et al.,
dated April 29, 1992 (filed as Exhibit 2.1 to Rexene Corporation's Form 8-K
Current Report dated July 7, 1992 and incorporated herein by reference).
2.2 -- Order Confirming First Amended Plan of Reorganization, dated April 29, 1992
(filed as Exhibit 2.2 to Rexene Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 and incorporated herein by
reference).
2.3 -- Plan and Agreement of Merger, between Rexene Corporation and Rexene Products
Company, dated as of September 11, 1992 (filed as Exhibit 2.3 to Rexene
Corporation's Annual Report on Form 10-K for the fiscal year ended December
31, 1992 and incorporated herein by reference).
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C>
3.1.1 -- Restated Certificate of Incorporation of Rexene Products Company (a/k/a
Rexene Corporation), dated September 11, 1992 (filed as Exhibit 3.1 to Rexene
Corporation's Annual Report on Form 10-K for the fiscal year ended December
31, 1992 and incorporated herein by reference).
3.1.2 -- Amendment to Certificate of Incorporation, dated June 9, 1993 (filed as
Exhibit 3.1.2 to Rexene Corporation's Annual Report on Form 10-K for the year
ended December 31, 1993 and incorporated herein by reference).
3.2 -- Amendments to By-Laws, adopted May 24, 1994, together with a restatement of
Rexene Corporation's By-Laws incorporating all amendments through May 24,
1994 (filed as Exhibit 3.2.3 to Rexene Corporation's Form 10-Q Quarterly
Report for the three months ended June 30, 1994 and incorporated herein by
reference).
4.1 -- Indenture, dated as of November 29, 1994, between Rexene Corporation, as
Issuer, and Bank One, Texas, N.A., as Trustee, for $175,000,000 11 3/4%
Senior Notes due 2004.
4.2.1 -- Stockholder Rights Agreement, between Rexene Corporation and American Stock
Transfer & Trust Company, as Rights Agent, dated as of January 26, 1993
(filed as Exhibit 4.20 to Rexene Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 and incorporated herein by
reference).
4.2.2 -- Amendment No. 1 to Stockholder Rights Agreement (filed as Exhibit 1 to Rexene
Corporation's Form 8-A/A filed on October 21, 1994 and incorporated herein by
reference).
10.1.1 -- Rexene Corporation 1988 Stock Incentive Plan (filed as Exhibit 10.5 to Rexene
Corporation's Registration Statement on Form S-1 (SEC No. 33-22723) and
incorporated herein by reference).
10.1.2 -- Amendment to Rexene Corporation 1988 Stock Incentive Plan (filed as Exhibit
10.2.1 to Rexene Corporation's Annual Report on Form 10-K for the year ended
December 31, 1991 and incorporated herein by reference).
10.2 -- Rexene Corporation 1993 Non-Qualified Stock Option Plan (filed as Exhibit
10.2 to Rexene Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference).
10.3 -- Non-Qualified Stock Option Plan for Outside Directors of Rexene Corporation
(filed as Exhibit 10.3 to Rexene Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 and incorporated herein by
reference).
10.4 -- Rexene Corporation 1994 Long-Term Incentive Plan (filed as Exhibit 10.2 to
Amendment No. 1 to Rexene Corporation's Registration Statement on Form S-3
(SEC File No. 33-55507) as filed on October 21, 1994 and incorporated herein
by reference).
10.5 -- Rexene Corporation Supplemental Executive Retirement Plan (filed as Exhibit
10.3 to Amendment No. 1 to Rexene Corporation's Registration Statement on
Form S-3 (SEC File No. 33-55507) as filed on October 21, 1994 and
incorporated herein by reference).
10.6.1 -- Rexene Corporation 1993 Annual Incentive Bonus Plan (filed as Exhibit 10.4 to
Rexene Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein by reference).
10.6.2 -- Rexene Corporation 1994 Annual Incentive Bonus Plan (filed as Exhibit 10.4.2
to Rexene Corporation's Annual Report Form 10-K for the fiscal year ended
December 31, 1993 and incorporated herein by reference).
10.6.3 -- Rexene Corporation 1995 Annual Incentive Bonus Plan.
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C>
10.7 -- Rexene Corporation Executive Management Committee Severance Policy (filed as
Exhibit 10.5 to Rexene Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 and incorporated herein by reference).
10.8 -- Executive Security Plan of Rexene Products Company (filed as Exhibit 10.8 to
Rexene Corporation's Registration Statement on Form S-1 (SEC No. 33-22723)
and incorporated herein by reference).
10.9 -- Letter Agreement, dated as of March 16, 1992, between Rexene Corporation and
Arthur L. Goeschel (filed as Exhibit 10.13 to Rexene Corporation's Annual
Report on Form 10-K for the year ended December 31, 1991 and incorporated
herein by reference).
10.10.1 -- Letter Agreement, dated January 7, 1993, between Rexene Corporation and
Andrew J. Smith (filed as Exhibit 10.8.1 to Rexene Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference).
10.10.2 -- Indemnity Agreement, dated as of May 25, 1990, by and among Rexene
Corporation, Rexene Products Company and Andrew J. Smith (filed as Exhibit
10.8.2 to Rexene Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference).
10.11.1 -- Non-Qualified Stock Option Agreement, dated as of June 15, 1988, between
Rexene Corporation and Lavon N. Anderson (filed as Exhibit 10.29.2 to Rexene
Corporation's Registration Statement on Form S-1 (SEC No. 33-22723) and
incorporated herein by reference).
10.11.2 -- Indemnity Agreement, dated as of May 25, 1990, by and among Rexene
Corporation, Rexene Products Company and Lavon N. Anderson (filed as Exhibit
10.9.3 to Rexene Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference).
10.11.3 -- Letter Agreement, dated January 7, 1993, between Rexene Corporation and Lavon
N. Anderson (filed as Exhibit 10.9.4 to Rexene Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein
by reference).
10.12.1 -- Employment Agreement, dated as of July 23, 1990, between Rexene Products
Company and Kevin W. McAleer (filed as Exhibit 10.13 to Rexene Corporation's
Annual Report on Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference).
10.12.2 -- Non-Qualified Stock Option Agreement, dated as of July 23, 1990, between
Rexene Corporation and Kevin W. McAleer (filed as Exhibit 10.13.1 to Rexene
Corporation's Annual Report on Form 10-K for the year ended December 31, 1990
and incorporated herein by reference).
10.12.3 -- Letter Agreement, dated July 23, 1993, between Rexene Corporation and Kevin
W. McAleer (filed as Exhibit 10.10.4 to Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended June 30, 1993 and incorporated
herein by reference).
10.13.1 -- Employment Agreement, dated as of May 29, 1990, between Rexene Products
Company and Jack E. Knott (filed as Exhibit 10.15 to Rexene Corporation's
Annual Report on Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference).
10.13.2 -- Letter Agreement, dated June 11, 1993, between Rexene Corporation and Jack E.
Knott (filed as Exhibit 10.11.4 to Rexene Corporation's Form 10-Q Quarterly
Report for the three months ended June 30, 1993 and incorporated herein by
reference).
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C>
10.14 -- Letter Agreement, dated January 7, 1993, between Rexene Corporation and James
M. Ruberto (filed as Exhibit 10.12.2 to Rexene Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein
by reference).
10.15 -- Letter Agreement, dated January 7, 1993, between Rexene Corporation and
Jonathan R. Wheeler (filed as Exhibit 10.13.2 to Rexene Corporation's Annual
Report on Form 10- K for the fiscal year ended December 31, 1992 and
incorporated herein by reference).
10.16 -- Credit Agreement, dated as of November 29, 1994, among Rexene Corporation, as
Borrower, The Bank of Nova Scotia, as Agent, and the Lenders Signatory
thereto.
10.17 -- Indemnity Agreement, dated as of May 25, 1990, by and among Rexene
Corporation, Rexene Products Company and William B. Hewitt (filed as Exhibit
10.22 to Rexene Corporation's Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated herein by reference).
10.18 -- Letter Agreement, dated June 11, 1993, between Rexene Corporation and Bernard
J. McNamee (filed as Exhibit 10.23.2 to Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended June 30, 1993 and incorporated
herein by reference).
21.1 -- Subsidiaries of Rexene Corporation.
23.1 -- Consent of Price Waterhouse LLP.
</TABLE>
24
<PAGE>
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, as of March 9, 1995.
REXENE CORPORATION
Registrant
By: /s/ ANDREW J. SMITH
--------------------------------------
Andrew J. Smith
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below as of March 9, 1995 by the following persons on
behalf of the registrant and in the capacities indicated.
<TABLE>
<S> <C>
/s/ ARTHUR L. GOESCHEL /s/ ANDREW J. SMITH
- ------------------------------------------- -------------------------------------------
Arthur L. Goeschel Andrew J. Smith
CHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER
AND DIRECTOR
/s/ LAVON N. ANDERSON /s/ WILLIAM B. HEWITT
- ------------------------------------------- -------------------------------------------
Lavon N. Anderson William B. Hewitt
PRESIDENT AND CHIEF OPERATING DIRECTOR
OFFICER AND DIRECTOR
/s/ ILAN KAUFTHAL /s/ FRED RULLO
- ------------------------------------------- -------------------------------------------
Ilan Kaufthal Fred Rullo
DIRECTOR DIRECTOR
/s/ PHILLIP SIEGEL /s/ HEINN TOMFOHRDE
- ------------------------------------------- -------------------------------------------
Phillip Siegel Heinn Tomfohrde
DIRECTOR DIRECTOR
/s/ KEVIN W. McALEER /s/ GEFF PERERA
- ------------------------------------------- -------------------------------------------
Kevin W. McAleer Geff Perera
EXECUTIVE VICE PRESIDENT VICE PRESIDENT AND CONTROLLER
AND CHIEF FINANCIAL OFFICER
</TABLE>
25
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
ITEMS 8 AND 14(A)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants:
Post-emergence Consolidated Financial Statements...................................................... F-2
Pre-emergence Consolidated Financial Statements....................................................... F-3
Consolidated Financial Statements:
Consolidated Statements of Operations for the years ended December 31, 1994 and 1993, the three months
ended December 31, 1992 and the nine months ended September 30, 1992................................. F-4
Consolidated Balance Sheets as of December 31, 1994 and 1993.......................................... F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31,
1994 and 1993, the three months ended December 31, 1992 and the nine months ended September 30,
1992................................................................................................. F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1994 and 1993, the three months
ended December 31, 1992 and the nine months ended September 30, 1992................................. F-7-8
Notes to Consolidated Financial Statements............................................................ F-9-27
</TABLE>
All Financial Statement Schedules have been omitted since the required
information is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the Consolidated
Financial Statements or the Notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS -- POST-EMERGENCE
CONSOLIDATED FINANCIAL STATEMENTS
To the Board of Directors and Stockholders of
Rexene Corporation
In our opinion, the accompanying consolidated financial statements listed on
the Index on page F-1 present fairly, in all material respects, the financial
position of Rexene Corporation and its subsidiaries (the Company) at December
31, 1994 and 1993, and the results of their operations and their cash flows for
the years ended December 31, 1994 and 1993 and the three months ended December
31, 1992 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits 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.
As discussed in notes 17 and 18 to the consolidated financial statements, on
September 18, 1992 the Company's Plan of Reorganization was consummated.
Effective September 30, 1992, the Company accounted for the Chapter 11
reorganization using "fresh-start" reporting as set forth in the American
Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code."
Accordingly, the financial statements subsequent to the emergence from Chapter
11 have been prepared using a different basis of accounting and are therefore
not comparable to the pre-emergence consolidated financial statements.
PRICE WATERHOUSE LLP
Dallas, Texas
February 7, 1995
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS -- PRE-EMERGENCE
CONSOLIDATED FINANCIAL STATEMENTS
To the Board of Directors and Stockholders of
Rexene Corporation
In our opinion, the accompanying consolidated financial statements listed on
the Index on page F-1 present fairly, in all material respects, the results of
Rexene Corporation and its subsidiaries' (the Company) operations and their cash
flows for the nine months ended September 30, 1992, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
As discussed in notes 17 and 18 to the consolidated financial statements, on
October 18, 1991 the Company filed a voluntary petition for reorganization under
Chapter 11 of the United States Bankruptcy Code. The Company's Plan of
Reorganization was consummated on September 18, 1992 and, effective September
30, 1992, the Company accounted for the reorganization using "fresh-start"
reporting as set forth in the American Institute of Certified Public
Accountants' Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code."
PRICE WATERHOUSE LLP
Dallas, Texas
April 12, 1993
F-3
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
POST-EMERGENCE PRE-EMERGENCE
-------------------------------------- -------------
THREE MONTHS NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED ENDED
------------------------ DECEMBER 31, SEPTEMBER 30,
1994 1993 1992 1992
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales................................................ $ 537,957 $ 429,353 $ 98,854 $ 316,106
----------- ----------- ------------ -------------
Operating expenses:
Cost of sales.......................................... 418,048 375,609 86,732 278,081
Marketing, general and administrative.................. 37,764 32,641 9,045 23,918
Research and development............................... 7,060 6,599 1,659 4,715
----------- ----------- ------------ -------------
462,872 414,849 97,436 306,714
----------- ----------- ------------ -------------
Operating income......................................... 75,085 14,504 1,418 9,392
----------- ----------- ------------ -------------
Interest expense:
Cash................................................... (30,444) (24,446) (6,215) --
Non-cash............................................... (19,441) (25,388) (6,445) --
Interest income.......................................... 2,337 1,392 637 740
Other, net............................................... 7,524 (245) 169 (458)
----------- ----------- ------------ -------------
Income (loss) before reorganization items, income taxes
and extraordinary gain (loss)........................... 35,061 (34,183) (10,436) 9,674
Reorganization items..................................... -- -- -- (38,514)
----------- ----------- ------------ -------------
Income (loss) before income taxes and extraordinary gain
(loss).................................................. 35,061 (34,183) (10,436) (28,840)
Income tax (expense) benefit............................. (13,557) 8,940 3,908 (2,636)
----------- ----------- ------------ -------------
Income (loss) before extraordinary gain (loss)........... 21,504 (25,243) (6,528) (31,476)
Extraordinary gain (loss), net of income taxes........... (25,831) -- -- 123,672
----------- ----------- ------------ -------------
Net income (loss)........................................ $ (4,327) $ (25,243) $ (6,528) $ 92,196
----------- ----------- ------------ -------------
----------- ----------- ------------ -------------
Weighted average shares outstanding...................... 11,663 10,501 10,501
----------- ----------- ------------
----------- ----------- ------------
Income (loss) per share:
Income (loss) before extraordinary loss................ $ 1.84 $ (2.40) $ (.62 )
Extraordinary loss..................................... (2.21) -- --
----------- ----------- ------------
Net loss............................................... $ (.37) $ (2.40) $ (.62 )
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................................... $ 45,822 $ 30,535
Deposit held in trust................................................................... 8,000 --
Accounts receivable, net................................................................ 77,433 57,820
Inventories............................................................................. 62,726 52,621
Income taxes receivable................................................................. 1,647 4,965
Deferred income taxes................................................................... 8,625 4,271
Prepaid expenses and other.............................................................. 1,098 1,522
----------- -----------
Total current assets................................................................ 205,351 151,734
----------- -----------
Property, plant and equipment, net...................................................... 258,119 244,346
Intangible assets, net.................................................................. 16,062 7,858
Other noncurrent assets................................................................. 27,422 30,369
----------- -----------
$ 506,954 $ 434,307
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable........................................................................ $ 38,019 $ 27,386
Current portion of long-term debt....................................................... 10,000 --
Accrued liabilities..................................................................... 9,488 8,116
Accrued interest........................................................................ 1,894 3,097
Employee benefits payable............................................................... 5,911 3,754
----------- -----------
Total current liabilities........................................................... 65,312 42,353
----------- -----------
Long-term debt.......................................................................... 265,000 281,764
Other noncurrent liabilities............................................................ 49,999 65,840
Deferred income taxes................................................................... 51,767 49,487
Commitments and contingencies........................................................... -- --
Stockholders' equity (deficit):
Common stock, par value $.01 per share; 100 million shares authorized; 18.6 and 10.5
million shares issued and outstanding, respectively.................................. 186 105
Paid-in capital....................................................................... 110,355 26,529
Accumulated deficit................................................................... (36,098) (31,771)
Foreign currency translation adjustment............................................... 433 --
----------- -----------
Total stockholders' equity (deficit)................................................ 74,876 (5,137)
----------- -----------
$ 506,954 $ 434,307
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK CURRENCY
--------------- PAID-IN ACCUMULATED TRANSLATION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT TOTAL
------- ------ --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991.................................. 31,419 $ 314 $ 151,411 $(246,538) -$- $ (94,813)
Net loss -- pre-emergence................................... -- -- -- (5,602) -- (5,602)
------- ------ --------- ----------- ----- ---------
Balance, September 30, 1992 -- pre-emergence................ 31,419 314 151,411 (252,140) -- (100,415)
Adjustments for reorganization:
Extraordinary gain on debt exchange....................... -- -- -- 123,672 -- 123,672
Fresh start reporting adjustments......................... (31,419) (314) (151,411) 128,468 -- (23,257)
Issuance of common stock.................................. 10,501 105 26,529 -- -- 26,634
------- ------ --------- ----------- ----- ---------
Balance, September 30, 1992 -- post-emergence............... 10,501 $ 105 $ 26,529 $ -- -$- $ 26,634
------- ------ --------- ----------- ----- ---------
------- ------ --------- ----------- ----- ---------
Balance, September 30, 1992................................. 10,501 $ 105 $ 26,529 $ -- -$- $ 26,634
Net loss.................................................... -- -- -- (6,528) -- (6,528)
------- ------ --------- ----------- ----- ---------
Balance, December 31, 1992.................................. 10,501 105 26,529 (6,528) -- 20,106
Net loss.................................................... -- -- -- (25,243) -- (25,243)
------- ------ --------- ----------- ----- ---------
Balance, December 31, 1993.................................. 10,501 105 26,529 (31,771) -- (5,137)
Issuance of common stock.................................... 8,124 81 83,826 -- -- 83,907
Foreign currency translation adjustment..................... -- -- -- -- 433 433
Net loss.................................................... -- -- -- (4,327) -- (4,327)
------- ------ --------- ----------- ----- ---------
Balance, December 31, 1994.................................. 18,625 $ 186 $ 110,355 $ (36,098) $433 $ 74,876
------- ------ --------- ----------- ----- ---------
------- ------ --------- ----------- ----- ---------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRE-
POST-EMERGENCE EMERGENCE
-------------------------------- -------------
THREE NINE
YEARS ENDED MONTHS MONTHS
DECEMBER 31, ENDED ENDED
------------------ DECEMBER 31, SEPTEMBER 30,
1994 1993 1992 1992
-------- -------- ------------ -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................ $ (4,327) $(25,243) $(6,528) $ 92,196
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization............................................ 18,959 17,446 4,315 20,062
Reorganization items..................................................... -- -- -- 38,514
Reversal of accrued interest............................................. -- -- -- (6,831)
Extraordinary (gain) loss, net of income taxes........................... 25,831 -- -- (123,672)
(Reversal) accrual of lawsuit judgment................................... (7,400) -- -- 7,400
Non-cash interest expense................................................ 19,441 25,388 6,445 --
Deferred income taxes.................................................... (2,476) (4,160) (3,690) 525
Change in:
Accounts receivable.................................................... (19,588) (6,049) 5,756 (9,343)
Inventories............................................................ (10,111) 1,071 (3,030) 182
Prepaid expenses and other............................................. 413 (276) (940) 727
Income taxes........................................................... 19,550 (4,894) (408) 17,441
Accounts payable....................................................... 10,621 6,999 2,517 1,139
Accrued interest....................................................... (1,203) (48) (2,914) --
Employee benefits payable and accrued liabilities...................... 3,528 (756) 612 (1,552)
Prepetition liabilities paid........................................... -- -- (1,093) (30,571)
Increase in other noncurrent liabilities............................... 3,189 1,006 985 5,118
Other.................................................................. (3,698) 857 782 (456)
-------- -------- ------------ -------------
Total adjustments.................................................... 57,056 36,584 9,337 (81,317)
-------- -------- ------------ -------------
(CONTINUED ON PAGE F-8)
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRE-
POST-EMERGENCE EMERGENCE
--------------------------------- -------------
THREE NINE
YEARS ENDED MONTHS MONTHS
DECEMBER 31, ENDED ENDED
------------------- DECEMBER 31, SEPTEMBER 30,
1994 1993 1992 1992
--------- -------- ------------ -------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities before reorganization items
paid...................................................................... $ 52,729 $ 11,341 $ 2,809 $ 10,879
Reorganization items paid................................................ -- -- (2,053) (10,180)
--------- -------- ------------ -------------
Net cash provided by operating activities.................................. 52,729 11,341 756 699
--------- -------- ------------ -------------
Cash flows from investing activities:
Capital expenditures..................................................... (30,876) (17,008) (3,961) (11,136)
Investment in joint venture.............................................. -- -- (325) --
--------- -------- ------------ -------------
Net cash used for investing activities..................................... (30,876) (17,008) (4,286) (11,136)
--------- -------- ------------ -------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net.............................. 83,907 -- -- --
Proceeds from issuance of debt........................................... 275,000 -- -- --
Repayment of long-term debt.............................................. (352,629) -- -- --
Bank borrowings.......................................................... 7,000 2,000 -- --
Repayment of bank borrowings............................................. (9,000) -- -- --
Debt issuance costs and other............................................ (10,899) -- -- --
--------- -------- ------------ -------------
Net cash provided by (used for) financing activities....................... (6,621) 2,000 -- --
--------- -------- ------------ -------------
Effect of exchange rate changes on cash.................................... 55 -- -- --
--------- -------- ------------ -------------
Net increase (decrease) in cash and cash equivalents....................... 15,287 (3,667) (3,530) (10,437)
--------- -------- ------------ -------------
Cash and cash equivalents at beginning of period........................... 30,535 34,202 37,732 48,169
--------- -------- ------------ -------------
Cash and cash equivalents at end of period................................. $ 45,822 $ 30,535 $34,202 $ 37,732
--------- -------- ------------ -------------
--------- -------- ------------ -------------
Supplemental cash flow information:
Cash paid for interest................................................... $ 30,915 $ 24,039 $ 9,002 $ 14,737
Cash paid for income taxes............................................... $ 2,451 $ 114 $-- $ 1,703
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Rexene Corporation (the "Company")
include its wholly-owned subsidiaries.
CASH AND CASH EQUIVALENTS
Cash equivalents represent short-term investments with original maturities
of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is provided
utilizing the straight-line method over the estimated useful lives of the
assets, ranging from 3 to 20 years. Improvements are capitalized, while repair
and maintenance costs are charged to operations as incurred. Certain interest
costs are capitalized as part of major construction projects. Upon disposal of
assets, the cost and related accumulated depreciation are removed from the
accounts and the resulting gain or loss is included in income.
INTANGIBLE ASSETS
Debt issuance costs are amortized on a straight-line basis, ranging from
five to ten years. Reorganization value in excess of amounts allocable to
identifiable assets is amortized on a straight-line basis over fifteen years.
Other intangible assets are stated at cost and consist primarily of licensing
agreements and patents, which are amortized on a straight-line basis over five
years.
DEFERRED PREOPERATING COSTS
The incremental costs of establishing a plant in England have been deferred.
The plant commenced production in September 1994. These deferred preoperating
costs are being amortized on a straight-line basis over three years.
INCOME TAXES
Concurrent with fresh start reporting (see note 18), on September 30, 1992
the Company adopted Statement of Financial Accounting Standard ("SFAS") 109,
"Accounting for Income Taxes", which requires an asset and liability approach to
financial accounting and reporting of income taxes. Prior to September 30, 1992,
the Company accounted for income taxes under the deferred method, as prescribed
under Accounting Principles Board ("APB") Opinion No. 11, "Accounting for Income
Taxes".
FOREIGN CURRENCY TRANSLATION
Operations of the foreign subsidiary use the local currency of the country
of operation as the functional currency. The financial statements of the foreign
subsidiary are translated at current and average exchange rates, with any
resulting translation adjustments included in the foreign currency translation
adjustment account in stockholders equity.
INCOME (LOSS) PER SHARE
Income (loss) per share is based on the weighted average number of shares of
common stock and, if dilutive, common stock equivalents outstanding. The per
share amount for the pre-emergence period is not presented since such
information is not comparable with the post-emergence periods.
RECLASSIFICATIONS
Certain amounts in the consolidated financial statements for periods prior
to 1994 have been reclassified to conform with the 1994 presentation.
F-9
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. RECAPITALIZATION
In the fourth quarter of 1994, the Company completed a recapitalization plan
(the "Recapitalization") consisting of (i) the issuance of 8 million shares of
common stock at $11.00 per share, (ii) the issuance of 11 3/4% Senior Notes due
2004 (the "Senior Notes") in an aggregate principal amount of $175 million,
(iii) the establishment of a new credit facility (the "Credit Agreement"),
providing the Company with a $100 million term loan (the "Term Loan") and an $80
million revolving line of credit (the "Revolving Credit Facility"), (iv) the
redemption and defeasance of the Company's Increasing Rate Senior Notes Due 1999
(the "Old Senior Notes"), (v) the redemption of the Company's Increasing Rate
Subordinated Notes Due 2002 (the "Old Subordinated Notes" and, together with the
Old Senior Notes, the "Old Notes"), and (vi) the repayment in full of the
outstanding indebtedness under the Company's existing credit agreement (the "Old
Credit Agreement"). No amount has been borrowed under the Revolving Credit
Facility. In connection with the redemption of the Old Notes, the Company
recorded an extraordinary loss of $25.8 million (net of income tax benefits of
$15.8 million).
3. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Trade.................................................................. $ 74,026 $ 57,697
Other.................................................................. 7,376 3,930
--------- ---------
81,402 61,627
Less allowances........................................................ (3,969) (3,807)
--------- ---------
$ 77,433 $ 57,820
--------- ---------
--------- ---------
</TABLE>
No bad debt expense was recorded during the year ended December 31, 1994.
Bad debt expense for the year ended December 31, 1993, the three months ended
December 31, 1992 and the nine months ended September 30, 1992 is $223,000,
$300,000 and $327,000, respectively. During the year ended December 31, 1994,
there was a net recovery of previously written-off accounts of $162,000.
Uncollectible accounts written off for the year ended December 31, 1993 and the
three months ended December 31, 1992 were $925,000 and $218,000, respectively.
No amounts were written off during the nine months ended September 30, 1992.
4. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Raw materials.......................................................... $ 21,363 $ 11,313
Work in progress....................................................... 8,014 6,694
Finished goods......................................................... 33,349 34,614
--------- ---------
$ 62,726 $ 52,621
--------- ---------
--------- ---------
</TABLE>
F-10
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Land................................................................ $ 5,819 $ 5,738
Buildings........................................................... 20,720 17,758
Plant and equipment................................................. 252,817 230,026
Construction in progress............................................ 15,895 10,530
----------- -----------
295,251 264,052
Less accumulated depreciation....................................... (37,132) (19,706)
----------- -----------
$ 258,119 $ 244,346
----------- -----------
----------- -----------
</TABLE>
Depreciation expense for the years ended December 31, 1994 and 1993, the
three months ended December 31, 1992 and the nine months ended September 30,
1992 is $17,426,000, $16,059,000, $3,664,000 and $17,689,000, respectively.
During the years ended December 31, 1994 and 1993 and the three months ended
December 31, 1992, $1,412,000, $1,259,000 and $312,000, respectively, of
interest was capitalized in connection with construction projects. No interest
was capitalized during the nine months ended September 30, 1992.
6. INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization are (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Debt issuance costs.................................................... $ 9,735 $ --
Less accumulated amortization.......................................... (116) --
--------- ---------
9,619 --
--------- ---------
Reorganization value in excess of amounts allocable to identifiable
assets................................................................ 4,298 4,298
Less accumulated amortization.......................................... (904) (638)
--------- ---------
3,394 3,660
--------- ---------
Other intangible assets................................................ 5,544 5,598
Less accumulated amortization.......................................... (2,495) (1,400)
--------- ---------
3,049 4,198
--------- ---------
$ 16,062 $ 7,858
--------- ---------
--------- ---------
</TABLE>
F-11
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. OTHER NONCURRENT ASSETS
Other noncurrent assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Spare parts inventories................................................ $ 18,380 $ 16,654
Unrecognized prior service cost........................................ 3,152 --
Deferred preoperating costs, net of accumulated amortization of $149 in
1994.................................................................. 1,656 1,322
Other.................................................................. 1,583 1,870
Deposits held in trusts................................................ 10,651 10,523
--------- ---------
35,422 30,369
Less: current portion of deposits held in trust........................ (8,000) --
--------- ---------
$ 27,422 $ 30,369
--------- ---------
--------- ---------
</TABLE>
The deposits held in trusts for the benefit of the Texas Natural Resource
Conservation Commission were established and funded to comply with the financial
assurance requirements of the Resource Conservation and Recovery Act.
8. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Accrued taxes, other than income......................................... $ 2,836 $ 2,555
Other accrued expenses................................................... 6,652 5,561
--------- ---------
$ 9,488 $ 8,116
--------- ---------
--------- ---------
</TABLE>
9. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Senior Notes due November 2004...................................... $ 175,000 $ --
Old Senior Notes due 1999........................................... -- 253,000
Old Subordinated Notes due 2002..................................... -- 95,342
Less: unamortized discount.......................................... -- (68,578)
----------- -----------
175,000 279,764
----------- -----------
Bank borrowings..................................................... 100,000 2,000
Less: current portion............................................... (10,000) --
----------- -----------
90,000 2,000
----------- -----------
$ 265,000 $ 281,764
----------- -----------
----------- -----------
</TABLE>
SENIOR NOTES
The fair market value of the Senior Notes approximates its book value. The
Senior Notes rank PARI PASSU in right of payment to any subordinated
indebtedness of the Company. The Company has no such outstanding subordinated
indebtedness at December 31, 1994. However, the Senior Notes are effectively
subordinated to the secured indebtedness of the Company consisting principally
of borrowings under the Credit Agreement.
F-12
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. LONG-TERM DEBT (CONTINUED)
Interest is payable on the Senior Notes semiannually on June 1 and December
1 at an annual interest rate of 11 3/4%. In 1994 and 1993, the annual interest
rate on the Old Senior Notes and Old Subordinated Notes was 9% and 10%,
respectively.
The Senior Notes are not redeemable, in whole or in part, prior to December
1, 1999, except that, at any time prior to December 1, 1997, the Company may
redeem up to an aggregate of $58.3 million principal amount of Senior Notes, at
a price equal to 110% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the redemption date with the net cash proceeds of any
future offerings of common stock of the Company; provided, however, that at
least $100 million aggregate principal amount of Senior Notes is outstanding
immediately following each such redemption; and provided further that each such
redemption occurs within 60 days of the date of the closing of the applicable
offering. On or after December 1, 1999, the Senior Notes are redeemable, at the
Company's option, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest, if any, to the date of redemption.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------- -----------
<S> <C>
1999......................................................... 105.875%
2000......................................................... 103.917%
2001......................................................... 101.958%
2002 and thereafter.......................................... 100.000%
</TABLE>
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Senior Notes.
The indenture governing the Senior Notes contains certain covenants that,
among other things, limit the ability of the Company to incur additional
indebtedness and to repurchase subordinated indebtedness, incur or suffer to
exist certain liens, pay dividends, make certain investments, sell significant
fixed assets and engage in mergers and consolidations.
The Old Notes were recorded at their fair market value at the Effective Date
(see note 17). The resulting discount from the face amount was accreted to
interest expense over the original term of the Old Notes. For each interest
period ending on or prior to November 15, 1994, the Company could pay up to 90%
of the interest due on the Old Subordinated Notes by delivering additional Old
Subordinated Notes in lieu of cash ("Pay-in-Kind"), if certain financial tests
were met. In 1994 and 1993, the Board of Directors exercised the Pay-in-Kind
feature and issued $4.3 million and $8.1 million, respectively, of Old
Subordinated Notes. This decrease was principally due to the decision not to
exercise the Pay-in-Kind feature for the interest payment made on November 15,
1994. In connection with the Recapitalization, the Old Notes were redeemed (see
note 2).
CREDIT AGREEMENT
The Company is required to repay a portion of its borrowings under the Term
Loan each year, so as to retire such indebtedness in its entirety by December
31, 1999. On January 31, 1995, the Company prepaid $20 million of the Term Loan
which will be credited against required principal repayments under the Term Loan
as such required payments become due. Four required payments of $2.5 million
each are due in 1995; four additional payments of $3.75 million each are due at
the end of each quarter in 1996; and quarterly payments of $6.25 million are due
at the end of each succeeding quarter until the Term Loan is paid in full. In
addition, the Company has certain additional annual mandatory repayments
beginning in April 1996 equal to 50% of the excess cash flow (as defined in the
Credit Agreement) of the Company in the preceding year but subject to a maximum
of $15.0 million in 1996; $25.0 million, less any prior mandatory excess cash
flow repayments, in 1997; and $35.0 million,
F-13
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. LONG-TERM DEBT (CONTINUED)
less any prior mandatory excess cash flow repayments, in 1998. Borrowings under
the Credit Agreement bear interest at a floating rate based on the prime rate
or, at the Company's option, on the reserve-adjusted London Interbank offered
rate and is secured by the pledge of substantially all of the assets of the
Company, including inventory and accounts receivable and the proceeds thereof.
Availability of borrowings under the Revolving Credit Facility is based upon a
formula related to inventory and accounts receivable. At December 31, 1994, the
Company borrowed $100 million under the Term Loan and no amount under the
Revolving Credit Facility. At December 31, 1994, approximately $3.6 million of
stand-by letters of credit were outstanding under the Credit Agreement.
The Credit Agreement contains covenants which restrict or preclude, among
other things, the incurrence of additional indebtedness by the Company, the
payment of dividends, the creation of liens on the Company's assets, the making
of certain investments by the Company, certain mergers, sales of certain fixed
assets and the prepayment of the Senior Notes. The Credit Agreement also
contains certain financial covenants relating to the financial condition of the
Company, including covenants relating to the ratio of its earnings to its
interest expense, the ratio of its earnings to its fixed charges and a leverage
ratio.
10. OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Accrued environmental remediation costs................................ $ 22,742 $ 23,357
Accumulated postretirement benefit obligation (note 15)................ 15,259 14,729
Noncurrent interest payable............................................ -- 11,630
Lawsuit accrual (note 20).............................................. -- 7,400
Pension liabilities.................................................... 6,355 1,113
Other.................................................................. 5,643 7,611
--------- ---------
$ 49,999 $ 65,840
--------- ---------
--------- ---------
</TABLE>
Noncurrent interest payable represented interest accrued in accordance with
Emerging Issues Task Force ("EITF") Issue No. 86-15, "Increasing Rate Debt".
Under EITF Issue No. 86-15, aggregate interest expense was charged in equal
amounts over the estimated term of the Old Notes (see note 13). This interest
payable was eliminated in connection with the Recapitalization.
11. COMMITMENTS
The future payments of rentals on buildings, computers, office equipment and
transportation equipment under the terms of noncancellable operating lease
agreements are as follows (in thousands):
<TABLE>
<S> <C>
For the years ending December 31,
1995............................................ $ 7,417
1996............................................ 5,619
1997............................................ 3,415
1998............................................ 2,295
1999............................................ 1,700
2000 and thereafter............................. 5,106
---------
Total minimum lease payments...................... $ 25,552
---------
---------
</TABLE>
F-14
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS (CONTINUED)
Rental expense under operating leases for the years ended December 31, 1994
and 1993, the three months ended December 31, 1992 and the nine months ended
September 30, 1992, approximated $7,616,000, $7,630,000, $2,024,000 and
$6,451,000, respectively.
12. INCOME TAXES
At September 30, 1992, the Company adopted SFAS 109, "Accounting for Income
Taxes", concurrent with its adoption of fresh start reporting (see note 18). For
the nine months ended September 30, 1992, the Company accounted for income taxes
under principles provided in APB Opinion No. 11. Therefore, the income tax
(expense) benefit for the years ended December 31, 1994 and 1993 and the three
months ended December 31, 1992 is not comparable with the income tax expense for
the nine months ended September 30, 1992.
Income tax (expense) benefit on the Company's income (loss) before
extraordinary loss consists of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, ENDED ENDED
--------------------- DECEMBER 31, SEPTEMBER 30,
1994 1993 1992 1992
---------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Current:
Federal................................ $ (13,884) $ 5,390 $ 41 $ (2,794)
State.................................. (2,150) (610) 177 683
Deferred................................. 2,477 4,160 3,690 (525)
---------- --------- ------------- -------------
$ (13,557) $ 8,940 $ 3,908 $ (2,636)
---------- --------- ------------- -------------
---------- --------- ------------- -------------
</TABLE>
In addition, for the year ended December 31, 1994, the Company recorded a
current income tax benefit of $16.2 million and a deferred income tax expense of
$0.4 million as a result of the extraordinary loss from the Recapitalization.
The effective income tax rate differs from the amount computed by applying
the statutory federal income tax rate to the Company's income before income
taxes and extraordinary loss. The statutory federal income tax rate was 35% for
the years ended December 31, 1994 and 1993 and 34% for the three months ended
December 31, 1992 and the nine months ended September 30, 1992. The reasons for
these differences are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, ENDED ENDED
--------------------- DECEMBER 31, SEPTEMBER 30,
1994 1993 1992 1992
---------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Tax computed at statutory federal tax rate.................. $ (12,271) $ 11,964 $ 3,549 $ 9,806
State income taxes.......................................... (554) (397) 116 461
Non-deductible amortization and expenses.................... (245) (493) -- --
Non-cash interest........................................... (1,771) (1,883) -- --
Effect of change in statutory federal income tax rate....... -- (1,333) -- --
Reorganization items........................................ -- -- 325 (8,133)
Differences in financial and tax bases of assets
and liabilities............................................ -- -- -- (3,893)
Non-qualified stock option plan for outside
directors.................................................. 333 -- -- --
Other, net.................................................. 951 1,082 (82) (877)
---------- --------- ------------- -------------
Income tax (expense) benefit................................ $ (13,557) $ 8,940 $ 3,908 $ (2,636)
---------- --------- ------------- -------------
---------- --------- ------------- -------------
</TABLE>
F-15
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
Deferred income tax balances, net consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993
---------- ----------
<S> <C> <C>
Property, plant and equipment........................................ $ 70,193 $ 69,533
Intangible assets.................................................... 1,111 --
Old Notes............................................................ -- 9,168
---------- ----------
Gross deferred tax liabilities................................... 71,304 78,701
---------- ----------
Accounts receivable.................................................. (1,718) (1,639)
Inventories.......................................................... (766) (666)
Tax losses and credits carried forward............................... (4,238) --
Intangible assets.................................................... -- (1,140)
Other noncurrent assets.............................................. (2,816) (4,474)
Other noncurrent liabilities......................................... (16,721) (23,600)
Other................................................................ (1,903) (1,966)
---------- ----------
Gross deferred tax assets........................................ (28,162) (33,485)
---------- ----------
$ 43,142 $ 45,216
---------- ----------
---------- ----------
</TABLE>
The Company has unused net operating loss carryforwards of $3.7 million at
December 31, 1994, of which $1.2 million is subject to expiration in the year
2003 and $2.5 million will expire in the year 2009, and an alternative minimum
tax credit carryforward of approximately $2.0 million, which has no expiration.
In 1994, the Company received $5.5 million in income tax refunds related to the
carryback of the 1993 and 1992 net operating losses to the year ended December
31, 1990. During the bankruptcy proceeding in 1992, all federal income tax
matters through the 1991 tax year were resolved.
Under APB Opinion No. 11, the deferred income tax provision results from
timing differences in the recognition of revenues and expenses for tax and
financial reporting purposes. The nature of the timing differences under APB
Opinion No. 11 and the tax effects for the nine months ended September 30, 1992
are as follows (in thousands):
<TABLE>
<S> <C>
Depreciation and amortization...................................... $ (3,010)
Accrual for lawsuit................................................ 2,504
Other, net......................................................... (19)
---------
$ (525)
---------
---------
</TABLE>
13. INTEREST EXPENSE
For the year ended December 31, 1994, cash interest expense consists of
interest on the Old Senior Notes and 10% of the interest on the Old Subordinated
Notes, through May 15, 1994, the last period in which the Company exercised the
Pay-in-Kind feature. Thereafter, 100% of the interest on the Old Subordinated
Notes is included in cash interest expense. For the year ended December 31, 1993
and the three months ended December 31, 1992, cash interest expense consists of
interest on the Old Senior Notes and 10% of the interest on the Old Subordinated
Notes. The remaining 90% of the interest on the Old Subordinated Notes is
included as non-cash interest expense in accordance with the Pay-in-Kind
feature. In addition, non-cash interest expense includes (i) accretion on the
Old Notes, (ii) an adjustment for EITF Issue No. 86-15, and (iii) an adjustment
for interest capitalized in connection with construction projects. (See notes 5,
9 and 10).
F-16
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. OTHER INFORMATION
Other, net for the year ended December 31, 1994 includes the reversal of a
$7.4 million lawsuit accrual for which the Company ultimately prevailed on
appeal (see note 20). This accrual was originally recorded for the nine months
ended September 30, 1992.
Export sales of the Company were $41,000,000, $30,495,000, $9,295,000 and
$33,806,000 for the years ended December 31, 1994 and 1993, the three months
ended December 31, 1992 and the nine months ended September 30, 1992,
respectively. The majority of export sales were to foreign companies through
agents and domestic offices of foreign companies, which are responsible for the
actual export of the product to a variety of locations. Accordingly, amounts of
export sales to specific geographic locations are not available.
Maintenance and repair expenses were $27,335,000, $27,017,000, $6,221,000
and $18,244,000 for the years ended December 31, 1994 and 1993, the three months
ended December 31, 1992 and the nine months ended September 30, 1992,
respectively.
Other, net for the nine months ended September 30, 1992 includes a reversal
of postpetition interest of $6.8 million accrued as of December 31, 1991 and
$1.5 million of business interruption insurance proceeds received in 1992 for an
electrical outage at the Odessa, Texas facility in May 1991.
15. EMPLOYEE BENEFITS
SAVINGS PLAN
The Company sponsors an employee savings plan (the "Savings Plan") that
provides participating employees with additional income upon retirement.
Employees may contribute between 1% and 10% of their base salary up to a maximum
of $9,240 annually to the Savings Plan. The Company matches a minimum of 25% of
the employee's aggregate contributions up to 6% of the employee's base salary.
Employee contributions are fully vested. Employer contributions are fully vested
upon retirement or after five years of service. For 1994, 1993 and 1992, the
Company matched 25% of the employee contributions up to the 6% limit. The
Company contributed approximately $395,000, $351,000, $96,000 and $275,000 to
the Savings Plan during the years ended December 31, 1994 and 1993, the three
months ended December 31, 1992 and the nine months ended September 30, 1992,
respectively.
PENSION PLANS
The Company has two noncontributory defined benefit plans (the "Pension
Plans") covering substantially all full time employees. Benefits provided under
the Pension Plans are primarily based on years of service and the employee's
final average earnings. The Company's funding policy is to contribute annually
an amount based upon actuarial and economic assumptions designed to achieve
adequate funding of projected benefit obligations.
Net pension expense consists of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, ENDED ENDED
-------------------- DECEMBER 31, SEPTEMBER 30,
1994 1993 1992 1992
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Service cost................................................. $ 1,570 $ 1,279 $ 369 $ 1,108
Interest accrued on pension obligations...................... 1,218 976 239 717
Actual return on plan assets................................. 462 (1,278) (137) (446)
Net amortization and deferral................................ (1,687) 162 -- (540)
--------- --------- ------ -------------
Net pension expense.......................................... $ 1,563 $ 1,139 $ 471 $ 839
--------- --------- ------ -------------
--------- --------- ------ -------------
</TABLE>
F-17
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. EMPLOYEE BENEFITS (CONTINUED)
The following table sets forth the funded status of the Pension Plans (in
thousands):
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.............................................................. $ 12,505 $ 11,924
Non-vested benefits.......................................................... 2,097 1,898
---------- ----------
Accumulated benefit obligation............................................... $ 14,602 $ 13,822
---------- ----------
---------- ----------
Projected benefit obligation................................................... $ 17,456 $ 16,518
Plan assets at fair value...................................................... (14,387) (14,238)
---------- ----------
Excess of projected benefit obligations over plan assets....................... 3,069 2,280
Unrecognized net loss.......................................................... (638) (1,392)
Unrecognized prior service cost................................................ (851) 125
Additional liability........................................................... 138 100
---------- ----------
Pension liability included in other noncurrent liabilities..................... $ 1,718 $ 1,113
---------- ----------
---------- ----------
</TABLE>
At December 31, 1994 and 1993, in determining the present value of benefit
obligations, a discount rate of 8.0% and 7.0% was used, respectively. The
assumption for the increase in future compensation levels was 4.5% at December
31, 1994 and 1993. At December 31, 1994 and 1993, the expected long-term rate of
return on assets used in determining future service costs was 9.0%.
EXECUTIVE RETIREMENT PLANS
In October 1994, the Company adopted a Supplemental Executive Retirement
Plan (the "SERP") to provide supplemental retirement and survivor benefits for
certain key employees who complete a specified period of service and otherwise
become eligible under the SERP. The Company will fund the SERP at the discretion
of the Board of Directors. In 1994, no amount was funded for the SERP.
In addition, the Company provides retirement and death benefits to certain
employees through an Executive Security Plan (the "Security Plan"). No new
employees have been added to this plan, and it is not expected that any
additional employees will participate in the Security Plan.
Net pension expense for the year ended December 31, 1994 consists of the
following (in thousands):
<TABLE>
<CAPTION>
SECURITY
SERP PLAN
---- --------
<S> <C> <C>
Service cost................................................ $132 $ 90
Interest accrued on pension obligations..................... 55 230
Net amortization and deferral............................... 73 204
---- --------
Net pension expense......................................... $260 $524
---- --------
---- --------
</TABLE>
F-18
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. EMPLOYEE BENEFITS (CONTINUED)
The following table sets forth the funded status of the SERP and the
Security Plan at December 31, 1994 (in thousands):
<TABLE>
<CAPTION>
SECURITY
SERP PLAN
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits................................................................. $ -- $ --
Non-vested benefits............................................................. 1,872 2,765
--------- ---------
Accumulated benefit obligation.................................................. $ 1,872 $ 2,765
--------- ---------
--------- ---------
Projected benefit obligation...................................................... $ 2,931 $ 2,765
Plan assets at fair value......................................................... -- --
--------- ---------
Excess of projected benefit obligations over plan assets.......................... 2,931 2,765
Unrecognized prior service cost................................................... (3,136) (1,401)
Additional liability.............................................................. 1,613 1,420
Unrecognized net gain (loss)...................................................... 464 (19)
--------- ---------
Pension liability included in other noncurrent liabilities........................ $ 1,872 $ 2,765
--------- ---------
--------- ---------
</TABLE>
A discount rate of 8% was used in determining the present values of benefit
obligations at December 31, 1994. The assumption for the increase in future
compensation levels was 6%.
POSTEMPLOYMENT BENEFITS
Concurrent with fresh start reporting (see note 18), on September 30, 1992
the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits", which generally requires an employer to recognize the obligation to
provide postemployment benefits. The obligation for postemployment benefits at
December 31, 1994 and 1993 approximated $1.1 million and $1.2 million,
respectively, and is included in other noncurrent liabilities.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors life and health welfare benefits plans for its current
and future retirees. Concurrent with fresh start reporting (see note 18), on
September 30, 1992 the Company adopted SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which requires an accrual method
of accounting for certain postretirement benefits. Adoption of SFAS 106 did not
have a material effect on the September 30, 1992 financial statements since the
Company had recorded an estimated liability for these benefits as part of
purchase accounting entries recorded in 1988. Prior to September 30, 1992, the
cost of net postretirement benefits other than pensions were recognized using
the pay-as-you-go basis.
Net postretirement benefit cost consists of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED
------------- DECEMBER 31,
1994 1993 1992
----- ------ ------------
<S> <C> <C> <C>
Service cost................................................ $ 394 $ 760 $175
Interest cost............................................... 682 1,070 234
Net amortization and deferral............................... (284) -- --
----- ------ -----
$ 792 $1,830 $409
----- ------ -----
----- ------ -----
</TABLE>
F-19
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. EMPLOYEE BENEFITS (CONTINUED)
The actuarial value of postretirement benefit obligations consists of (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Active participants eligible for retirement............................ $ 3,003 $ 3,016
Active participants not yet eligible for retirement.................... 3,889 3,736
Retired participants................................................... 2,858 3,154
Unrecognized prior service cost........................................ 837 914
Unrecognized net gain.................................................. 4,672 3,909
--------- ---------
Accumulated postretirement benefit obligation.......................... $ 15,259 $ 14,729
--------- ---------
--------- ---------
</TABLE>
In 1994 and 1993, in determining the value of postretirement benefit
obligations, a discount rate of 8.0% and 7.0%, respectively, was used, and in
1994 the health care trend rate used to measure the expected increase in cost of
benefits was assumed to be 13% in 1995, and descending to 5.5% in 2006 and
thereafter. A one percentage-point increase in the assumed health care cost
trend rate for each year would increase the accumulated postretirement benefit
obligation as of December 31, 1994 by approximately $417,000 and would increase
the net postretirement benefit cost for the year ended December 31, 1994 by
approximately $71,000.
STOCK OPTION PLANS
In 1988, the Company adopted a stock incentive plan (the "Stock Incentive
Plan") providing for the granting of 87,500 stock options for, stock
appreciation rights in, and the sale of restricted shares of, common stock for
certain employees. In 1993, the Company adopted a non-qualified stock option
plan (the "Employee Plan") providing for the granting of 700,000 stock options
for common stock to key employees of the Company. In 1994, the Company adopted a
long-term incentive plan (the "Incentive Plan") providing for the granting of
882,000 stock options for common stock to key employees of the Company. The
Incentive Plan is intended to replace the Stock Incentive Plan and the Employee
Plan. The adoption of the Incentive Plan is subject to stockholder approval.
Changes in stock options during the years indicated are summarized as
follows:
<TABLE>
<CAPTION>
OPTIONS PRICE RANGE
OUTSTANDING PER SHARE
----------- ---------------
<S> <C> <C>
Balance at December 31, 1991................................ 35,250 $ 10.00-$304.00
Cancelled................................................... (3,250) 65.20- 304.00
-----------
Balance at December 31, 1992................................ 32,000 10.00- 304.00
Granted..................................................... 207,000 3.43
Cancelled................................................... (18,700) 93.60- 304.00
-----------
Balance at December 31, 1993................................ 220,300 3.43- 304.00
Granted..................................................... 498,000 3.71- 14.63
Exercised................................................... (4,496) 3.43
Cancelled................................................... (8,175) 304.00
-----------
Balance at December 31, 1994................................ 705,629 $ 3.43-$ 95.20
-----------
-----------
</TABLE>
The data above has been adjusted to reflect a 40-for-1 reverse stock split
effected in connection with the bankruptcy reorganization (see note 17). Of the
options outstanding at December 31, 1994, 68,825 are exercisable.
F-20
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. EMPLOYEE BENEFITS (CONTINUED)
NON-QUALIFIED STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
In 1993, the Company adopted a non-qualified stock option plan for outside
directors (the "Directors Plan") providing for the granting of 225,000 stock
options for common stock. The Directors Plan provided for the automatic grant as
of January 1, 1993 and January 1, 1994 to each non-employee director of options
to purchase 12,500 shares of common stock, other than the Chairman of the Board
for whom an award on each grant date of options to purchase 16,667 shares of
common stock was provided. The exercise price of the options to purchase 104,167
shares of common stock granted in each year under the Directors Plan as of
January 1, 1994 and 1993 was $0.43 and $0.63 per share, respectively. In 1994,
14,583 options were exercised, and 18,750 were cancelled. At December 31, 1994,
129,167 options are exercisable.
STOCK OPTION FOR FORMER OFFICER
In 1992, the Company granted a stock option to purchase 105,031 shares of
common stock at an aggregate exercise price of $901,120. In 1994, this stock
option was exercised.
STOCK BONUS PLAN
In 1985, the Company established an employee stock bonus plan (the "Stock
Bonus Plan") for the benefit of its employees. Contributions were made at the
discretion of the Company. Effective January 1, 1992, all participants (as
defined) became 100% vested, and participation in the Stock Bonus Plan was
frozen. The Company does not intend to make further contributions to the Stock
Bonus Plan (see note 20).
16. COMMON STOCK PURCHASE RIGHTS
In 1993, the Company declared a dividend distribution of one Common Stock
Purchase Right (a "Right") for each outstanding share of common stock. The
Rights are exercisable only if a person or group acquires 15% or more of common
stock or announces a tender offer, the consummation of which would result in
ownership by a person or group of 15% or more of the common stock. Each Right
entitles stockholders to purchase such number of shares of common stock at an
exercise price of $60.00 (as amended) as determined under formulas set out in
the agreement providing for the Rights. The existence of the Rights may, under
certain circumstances, render more difficult or discourage attempts to acquire
the Company.
The Company can terminate the Rights at no cost any time prior to the
acquisition of a 15% position. The termination period can be extended by the
Board of Directors. The rights expire February 8, 2003.
17. CHAPTER 11 REORGANIZATION
The Company was reorganized in September 1992, pursuant to a First Amended
Plan of Reorganization (the "Amended Plan") under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code").
As a result of the bankruptcy reorganization and the confirmation of the
Amended Plan by the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court"), the Company, among other things, (i) reduced the
principal amount of its long-term debt by replacing $403 million of increasing
rate notes, with $337 million of debt that was scheduled to mature in 1999 and
2002, and issued 92.5% of its common stock to the holders of such debt. The
Amended Plan was consummated on September 18, 1992 (the "Effective Date"). The
Company recorded an extraordinary gain of $123.7 million as a result of this
exchange.
F-21
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. CHAPTER 11 REORGANIZATION (CONTINUED)
Cash and cash equivalents at December 31, 1994 and 1993 include restricted
cash held in a reserve account under the Amended Plan for payment of disputed
claims and administrative expenses. At December 31, 1994 and 1993, restricted
cash was $0.7 million and $2.2 million, respectively.
18. FRESH START REPORTING
In connection with the Chapter 11 reorganization (see note 17), the Company
adopted as of September 30, 1992, the American Institute of Certified Public
Accountants' Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" (the "Reorganization SOP"). The
Company's basis of accounting for financial reporting purposes changed as a
result of adopting the Reorganization SOP. Accordingly, the results of
operations after September 30, 1992 are not comparable to results of operations
prior to such date, and the results of operations for the nine months ended
September 30, 1992 and the three months ended December 31, 1992 have not been
aggregated.
The Company recorded the following reorganization expenses and adjustments
to assets and liabilities to reflect fresh start reporting in its statement of
operations for the nine months ended September 30, 1992 (in thousands):
<TABLE>
<S> <C>
Professional fees................................................ $ (12,600)
Interest expense -- cash......................................... (6,059)
Interest expense -- non-cash..................................... (1,941)
Revaluation of assets and liabilities to fair values:
Property, plant and equipment.................................. 50,535
Goodwill....................................................... (16,604)
Reorganization value in excess of amounts allocable to
identifiable assets........................................... 4,298
Other noncurrent assets........................................ (11,904)
Deferred income taxes.......................................... (50,346)
Pension liability.............................................. 7,067
Other.......................................................... (960)
---------
$ (38,514)
---------
---------
</TABLE>
19. RELATED PARTY TRANSACTIONS
Pursuant to a letter agreement between the Company and its Chairman of the
Board, Arthur L. Goeschel, the Company agreed to pay Mr. Goeschel, in addition
to his normal director fees, a sum of $2,750 per day plus expenses for each day
over five days per quarter that he spends on Company matters. Under this letter
agreement, the Company paid Mr. Goeschel $49,500, $107,250, $60,500 and $137,500
in additional fees for the years ended December 31, 1994 and 1993, the three
months ended December 31, 1992 and the nine months ended September 30, 1992,
respectively.
Mr. Kevin Clowe, a former director of the Company, is a corporate officer of
The American International Group, Inc. ("AIG") which provides various types of
insurance for the Company. During 1994 and 1993, the Company paid approximately
$3.1 million and $2.8 million, respectively, in premiums and fees to
subsidiaries of AIG in the ordinary course of business. In addition, a
subsidiary of AIG is the beneficiary of stand-by letters of credit of $1.9
million to ensure payment of premiums.
A son of Mr. Andrew J. Smith, the Chief Executive Officer and a director of
the Company, became a Vice President in 1990 and a stockholder in 1993 of Orion
Pacific, Inc. ("Orion"). In August 1993, the son of Mr. Smith resigned as an
officer and employee of Orion. Pursuant to contractual arrangements originated
in 1988, (i) the Company sells to Orion certain (a) discarded by-products which
Orion
F-22
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. RELATED PARTY TRANSACTIONS (CONTINUED)
extracts from Company landfills and (b) scrap products, and (ii) Orion packages
and processes a portion of the REXTAC-Registered Trademark- amorphous
polyalphaolefins ("APAO") manufactured by the Company at its plant in Odessa,
Texas. During the year ended December 31, 1993, the three months ended December
31, 1992 and the nine months ended September 30, 1992, the Company sold
approximately $283,000, $241,000 and $671,000, respectively, of such by-product
and scrap products to Orion in the ordinary course of business. For the same
periods, the Company purchased approximately $1,551,000, $302,000 and
$1,033,000, respectively, of APAO processing and packaging services and
miscellaneous materials from Orion. At December 31, 1993, the net payable to
Orion was approximately $55,000. In 1990, Orion sold its APAO processing and
packaging technology to the Company for $750,000. The Company has also agreed to
pay Orion an additional $250,000 per plant for each APAO plant utilizing the
technology which the Company builds outside the United States (excluding a
certain joint venture plant in Japan). The Company currently licenses this
technology to Orion so that Orion can continue providing these services to the
Company.
Mr. Ilan Kaufthal, a director of the Company, is a managing director of
Wertheim Schroder & Co. Incorporated ("Wertheim"). In connection with the
Recapitalization, the Company paid Wertheim underwriter fees of approximately
$2.9 million. The Company paid Wertheim financial advisory fees of $860,000 for
the nine months ended September 30, 1992 in connection with the Company's
bankruptcy proceeding. In December 1992, the Company retained Wertheim as its
financial advisor with respect to the Common Stock Purchase Rights (see note 16)
for approximately $78,000.
In March 1992, Mr. William Gilliam resigned as Chairman of the Board and
Chief Executive Officer of the Company. In connection with Mr. Gilliam's
resignation, the Company, Mr. Gilliam, and Gilliam and Company, Inc., a
corporation of which Mr. Gilliam was the sole shareholder ("GCI"), with the
approval of the Bankruptcy Court, entered into an agreement which, among other
things, (i) terminated a management agreement between the Company and GCI which
had been suspended during the bankruptcy proceeding, (ii) granted to Mr. Gilliam
a stock option (see note 15), and (iii) paid $500,000 to Mr. Gilliam.
In April 1988, the Company was sold (the "1988 Merger") by its then current
stockholders (the "Selling Stockholders"). Pursuant to the merger agreement for
the 1988 Merger (the "1988 Merger Agreement") and a related escrow agreement,
$30 million of the purchase price was deposited into an escrow account (the
"Escrow Account") on behalf of the Selling Stockholders to indemnify the Company
against certain contingencies. In December 1992, the Company entered into a
memorandum agreement (the "Escrow Settlement Agreement") for the disposition of
the principal balance of the Escrow Account and accrued interest thereon (less
certain prior distributions). Pursuant to the Escrow Settlement Agreement, the
Escrow Account, among other things, (i) distributed approximately $32.1 million
to the Selling Stockholders, (ii) paid approximately $1 million to reimburse the
Company for its net expenses (plus interest thereon) in defending certain
lawsuits, (iii) retained $2.25 million as a reserve to pay certain potential
expenses of the Escrow Account and (iv) retained $2 million which will be
available to the Company to pay up to 50% of any portion of a final judgment or
settlement in the Izzarelli litigation (see note 20) which is not paid by
insurance. As a result of the Escrow Settlement Agreement, Mr. Smith, Dr. Lavon
N. Anderson, the president and chief operating officer and a director of the
Company, and Mr. Jack E. Knott, executive vice president of the Company and
President of Rexene Products, a division of the Company, received approximately
$660,000, $85,000 and $71,000 from the Escrow Account, respectively in 1992. Any
amounts being reserved by the Escrow Account which are not utilized for their
intended purpose will be available for future distribution to the Selling
Stockholders. In all negotiations concerning the Escrow Account, the Selling
Stockholders were represented by a committee appointed under the 1988 Merger
Agreement
F-23
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
19. RELATED PARTY TRANSACTIONS (CONTINUED)
and by counsel to such committee. Mr. Smith, Dr. Anderson and Mr. Knott were not
members of such committee and did not participate in any of the negotiations
between the Company and the committee.
20. CONTINGENCIES
The Company is subject to extensive environmental laws and regulations
concerning, for example, emissions to the air, discharges to surface and
subsurface waters and the generation, handling, storage, transportation,
treatment and disposal of waste and other materials. The Company believes that,
in light of its historical expenditures, it will have adequate resources to
conduct its operations in compliance with currently applicable environmental and
health and safety laws and regulations. However, in order to comply with
changing licensing and regulatory standards, the Company may be required to make
additional significant site or operational modifications. Further, the Company
has incurred and may in the future incur liability to clean up waste or
contamination at its current or former facilities, or which it may have disposed
of at facilities operated by third parties. On the basis of reasonable
investigation and analysis, management believes that the approximately $22.7
million accrued in the December 31, 1994 balance sheet is adequate for the total
potential environmental liability of the Company with respect to contaminated
sites. However, no assurance can be given that all potential liabilities arising
out of the Company's present or past operations have been identified or that the
amounts that might be required to remediate such sites will not be significant
to the Company. The Company continually reviews its estimates of potential
environmental liabilities.
STOCKHOLDER CLASS ACTION LITIGATION
In January 1990, a purported class action was filed in the United States
District Court, Northern District of Texas, by an alleged stockholder of the
Company on behalf of purchasers of the Company's common stock between October
23, 1989 and December 27, 1989. The defendants in this action included the
Company, one of its current directors and certain of its former directors. The
class was certified with an intervenor as the class representative. The
intervenor's complaint asserted claims under Rule 10b-5 under the Securities
Exchange Act of 1934, and state common law grounds. The plaintiff alleged that
public statements made by certain directors of the Company created a misleading
impression of the Company's financial condition thereby artificially inflating
the price of the Company's common stock. The plaintiffs sought compensatory
damages, prejudgment interest, a recovery of costs and attorneys' fees, and such
other relief as may be deemed just and proper. The parties have reached an
agreement to settle the case without any admission of liability, and it has been
preliminarily approved by the District Court. A final hearing on the settlement
is scheduled for May 16, 1995.
IZZARELLI STOCK BONUS PLAN CLASS ACTION LITIGATION
In February 1991, a class action lawsuit was filed in the United States
District Court for the Western District of Texas -- Midland Division against the
Company, the Stock Bonus Plan and Texas Commerce Bank -- Odessa (the former
trustee for the Stock Bonus Plan) by two former participants in the Stock Bonus
Plan on behalf of the 1986 participants in the Stock Bonus Plan (the "Izzarelli
Class"). The complaint alleged that the Company amended the Stock Bonus Plan in
1987 and 1988 to deprive the Izzarelli Class of benefits to which they would
have been entitled had the Stock Bonus Plan not been amended. The Izzarelli
Class asserted claims under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") for alleged breach of fiduciary duties to the participants
and for alleged violation of ERISA's provision prohibiting amendments to the
Stock Bonus Plan after benefits had accrued to participants. After a trial, the
trial court in July 1992 entered a judgment against the Company in the amount of
$6.6 million (as subsequently amended) plus court costs. In November 1992, the
trial court awarded the Izzarelli Class $595,000 for attorneys' fees and out-of-
pocket expenses.
F-24
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONTINGENCIES (CONTINUED)
The Company appealed the judgment to the United States Court of Appeals for
the Fifth Circuit. The Izzarelli Class also filed an appeal with respect to the
amount of damages awarded and the judgment in favor of Texas Commerce Bank --
Odessa. On June 22, 1994, the appeals court reversed the trial court and held
that the Company did not violate ERISA or any fiduciary duty in amending the
Stock Bonus Plan. It also affirmed the trial court's judgment that the trustee
was not liable to the plaintiffs. On August 11, 1994, the appeals court refused
the plaintiffs' request that it reconsider its decision. The Izzarelli Class did
not appeal further.
In the Company's bankruptcy proceeding, the Izzarelli Class filed proofs of
claim for $27.7 million. On January 31, 1995, the Bankruptcy Court entered a
stipulation and order which disallowed the proofs of claims and resolved all
pending motions in favor of the Company. The Company has reversed an accrual of
$7.4 million made previously to reflect the judgment.
PHILLIPS BLOCK COPOLYMER LITIGATION
In March 1984, Phillips Petroleum Company ("Phillips") filed a lawsuit
against the Company in the United States District Court for the Northern
District of Illinois, Eastern Division, seeking injunctive relief, an
unspecified amount of compensatory damages and treble damages. The complaint
alleges that the Company's copolymer process for polypropylene infringes
Phillips' two "block" copolymer patents. This action has been transferred to the
United States District Court for the Southern District of Texas, Houston
Division. Discovery proceedings in this case have been completed. The Company
has filed a motion for summary judgment. Phillips has filed a motion for partial
summary judgment. Pursuant to an agreement among the parties, the court
appointed a special master who conducted a hearing on these motions and
thereafter recommended to the court that the Company's motion be granted and
Phillips' motion be denied. Thereafter, Phillips filed motions to disqualify the
special master, to reject the recommendation of the special master and to enter
partial summary judgment for Phillips. The court has entered an order denying
Phillips' motion to disqualify the special master. The summary judgment motions
are still pending. In the Company's bankruptcy proceeding, Phillips filed a
proof of claim seeking in excess of $108 million based upon the allegations in
this litigation. The Company objected to the claim and elected to leave the
legal, equitable and contractual rights of Phillips unaltered, thereby allowing
this litigation to proceed as of the Effective Date without regard to the
bankruptcy proceeding.
PHILLIPS CRYSTALLINE LICENSE LITIGATION
In May 1990, Phillips filed a lawsuit against the Company in the United
States District Court for the District of Delaware seeking injunctive relief, an
unspecified amount of compensatory damages, treble damages and attorneys' fees,
costs and expenses. The complaint alleges that the Company is infringing
Phillips' Patent No. 4,376,851 (the "851 Patent") for crystalline polypropylene.
Pursuant to a License Agreement dated as of May 15, 1983, as amended (the
"License Agreement"), Phillips granted the Company a non-exclusive license to
make, use and sell crystalline polypropylene covered by the '851 Patent. The
complaint alleges that effective April 21, 1990, Phillips terminated the License
Agreement because it believed that, by the terms of the License Agreement, all
conditions precedent to such termination had occurred. The complaint further
alleges that, without an effective License Agreement, the Company's continuing
use of the '851 Patent constitutes an infringing use. An amended complaint filed
in May 1990 further alleges that the Company made a material misrepresentation
that induced Phillips to enter into the License Agreement and that Phillips
entered into the License Agreement as a consequence of a mutual mistake of the
parties. The amended complaint therefore alleges that the License Agreement is
void AB INITIO. The Company filed a motion to dismiss Phillips' amended
complaint for failure to state a claim. On December 30, 1993, the Court entered
an order dismissing Phillips' claim that the License Agreement was void AB
INITIO, and ordered that the 1990 license termination issue be resolved at
trial. A trial was conducted before the United States
F-25
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. CONTINGENCIES (CONTINUED)
District Court in October 1994. At trial, Phillips sought damages and interest
totaling approximately $15.5 million for the period from April 1990 through the
time of trial. Phillips also seeks an injunction to prevent future infringement.
Post-trial briefing is now complete and the parties are awaiting a decision. In
the Company's bankruptcy proceeding, Phillips filed a proof of claim seeking in
excess of $147 million based upon the allegations in this litigation. The
Company objected to the bankruptcy claim and elected to leave the legal,
equitable and contractual rights of Phillips unaltered, thereby allowing this
litigation to proceed as of the Effective Date without regard to the bankruptcy
proceeding.
ODESSA RESIDENTS TORT LITIGATION
On April 15, 1994, the national and state chapters of the NAACP and
approximately 770 residents of a neighborhood approximately one mile northwest
of the Shell Oil Company ("Shell"), the Company and Dynagen, Inc. ("Dynagen")
plants in Odessa, Texas petitioned the State District Court in Odessa, Texas to
intervene in a previously existing lawsuit against Dynagen to (a) add as
additional defendants the Company, Shell and General Tire Corporation (the
parent company of Dynagen) and (b) have the litigation certified as a class
action. The plaintiffs' petition seeks an unspecified amount of money damages
for past, present and future injuries to plaintiffs' health, wrongful death,
loss of consortium and reduction in property values; the conduct and payment of
property clean up, remediation and relocation costs; payment of expenses for
medical testing and monitoring; funding of pollution and health studies;
attorney's fees; punitive damages and injunctive relief. Plaintiffs' petition
specified alleged pollution from air emissions from the three plants as a basis
for their claims. The trial court has allowed intervention and severed the
action from the original lawsuit against Dynagen. Plaintiffs have withdrawn
their motion to have the litigation certified as a class claim. In November
1994, the plaintiffs filed an amended petition which substituted the Odessa
branch of the NAACP as plaintiff in place of the national and state chapters of
the NAACP. The amended complaint also added approximately 100 additional
plaintiffs.
Defendants are challenging the NAACP's standing to participate in the
lawsuit. Pretrial discovery is ongoing. Plaintiffs' attorneys have also
requested public hearings in connection with the renewal of the Company's air
permits for its styrene plant and a finished product cleaning unit in the
polyethylene plant.
Although there can be no assurance of the final resolution of any of these
matters, the Company believes that, based upon its current knowledge of the
facts of each case, it has meritorious defenses to the various claims made and
intends to defend each suit vigorously. Although there can be no assurance of
the final resolution of any of these litigation matters, the Company does not
believe that the outcome of any of these lawsuits will have a material adverse
effect on the Company's financial position or results of operations.
The Company is also a party to various lawsuits arising in the ordinary
course of business and does not believe that the outcome of any of these
lawsuits will have a material adverse effect on the Company's financial position
or results of operations.
F-26
<PAGE>
REXENE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial information for the years ended December 31,
1994 and 1993 is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
--------------------------------------------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1994 1994 1994 1994 1993 1993 1993 1993
------------ ------------- --------- ----------- ------------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $ 151,804 $ 142,937 $ 124,140 $ 119,076 $ 102,893 $ 111,188 $ 105,998 $ 109,274
Gross profit............. 42,717 33,529 23,991 19,672 12,184 14,537 13,613 13,410
Income (loss) before
extraordinary loss...... 15,351 6,814 1,064 (1,725) (5,608) (7,826) (3,656) (8,153)
Extraordinary loss....... (25,831) -- -- -- -- -- -- --
Net income (loss)........ (10,480) 6,814 1,064 (1,725) (5,608) (7,826) (3,656) (8,153)
Income (loss) per share:
Income (loss) before
extraordinary loss.... 1.10 .62 .10 (.16) (.53) (.75) (.35) (.78)
Extraordinary loss..... (1.85) -- -- -- -- -- -- --
Net income (loss)...... (.75) .62 .10 (.16) (.53) (.75) (.35) (.78)
</TABLE>
F-27
<PAGE>
APPENDIX
Page 2
Flow chart showing Principal Raw Materials, Principal Products and Principal
End Market Products.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
No. Description of Exhibit Exhibit
- ------- ---------------------- -------
<S> <C> <C> <C>
2.1 -- First Amended Plan of Reorganization of Rexene Products Company, et al.,
dated April 29, 1992 (filed as Exhibit 2.1 to Rexene Corporation's Form 8-K
Current Report dated July 7, 1992 and incorporated herein by reference).
2.2 -- Order Confirming First Amended Plan of Reorganization, dated April 29, 1992
(filed as Exhibit 2.2 to Rexene Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 and incorporated herein by
reference).
2.3 -- Plan and Agreement of Merger, between Rexene Corporation and Rexene Products
Company, dated as of September 11, 1992 (filed as Exhibit 2.3 to Rexene
Corporation's Annual Report on Form 10-K for the fiscal year ended December
31, 1992 and incorporated herein by reference).
3.1.1 -- Restated Certificate of Incorporation of Rexene Products Company (a/k/a
Rexene Corporation), dated September 11, 1992 (filed as Exhibit 3.1 to Rexene
Corporation's Annual Report on Form 10-K for the fiscal year ended December
31, 1992 and incorporated herein by reference).
3.1.2 -- Amendment to Certificate of Incorporation, dated June 9, 1993 (filed as
Exhibit 3.1.2 to Rexene Corporation's Annual Report on Form 10-K for the year
ended December 31, 1993 and incorporated herein by reference).
3.2 -- Amendments to By-Laws, adopted May 24, 1994, together with a restatement of
Rexene Corporation's By-Laws incorporating all amendments through May 24,
1994 (filed as Exhibit 3.2.3 to Rexene Corporation's Form 10-Q Quarterly
Report for the three months ended June 30, 1994 and incorporated herein by
reference).
4.1 -- Indenture, dated as of November 29, 1994, between Rexene Corporation, as
Issuer, and Bank One, Texas, N.A., as Trustee, for $175,000,000 11 3/4%
Senior Notes due 2004.
4.2.1 -- Stockholder Rights Agreement, between Rexene Corporation and American Stock
Transfer & Trust Company, as Rights Agent, dated as of January 26, 1993
(filed as Exhibit 4.20 to Rexene Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 and incorporated herein by
reference).
4.2.2 -- Amendment No. 1 to Stockholder Rights Agreement (filed as Exhibit 1 to Rexene
Corporation's Form 8-A/A filed on October 21, 1994 and incorporated herein by
reference).
10.1.1 -- Rexene Corporation 1988 Stock Incentive Plan (filed as Exhibit 10.5 to Rexene
Corporation's Registration Statement on Form S-1 (SEC No. 33-22723) and
incorporated herein by reference).
10.1.2 -- Amendment to Rexene Corporation 1988 Stock Incentive Plan (filed as Exhibit
10.2.1 to Rexene Corporation's Annual Report on Form 10-K for the year ended
December 31, 1991 and incorporated herein by reference).
10.2 -- Rexene Corporation 1993 Non-Qualified Stock Option Plan (filed as Exhibit
10.2 to Rexene Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference).
10.3 -- Non-Qualified Stock Option Plan for Outside Directors of Rexene Corporation
(filed as Exhibit 10.3 to Rexene Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 and incorporated herein by
reference).
10.4 -- Rexene Corporation 1994 Long-Term Incentive Plan (filed as Exhibit 10.2 to
Amendment No. 1 to Rexene Corporation's Registration Statement on Form S-3
(SEC File No. 33-55507) as filed on October 21, 1994 and incorporated herein
by reference).
10.5 -- Rexene Corporation Supplemental Executive Retirement Plan (filed as Exhibit
10.3 to Amendment No. 1 to Rexene Corporation's Registration Statement on
Form S-3 (SEC File No. 33-55507) as filed on October 21, 1994 and
incorporated herein by reference).
10.6.1 -- Rexene Corporation 1993 Annual Incentive Bonus Plan (filed as Exhibit 10.4 to
Rexene Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein by reference).
10.6.2 -- Rexene Corporation 1994 Annual Incentive Bonus Plan (filed as Exhibit 10.4.2
to Rexene Corporation's Annual Report Form 10-K for the fiscal year ended
December 31, 1993 and incorporated herein by reference).
10.6.3 -- Rexene Corporation 1995 Annual Incentive Bonus Plan.
10.7 -- Rexene Corporation Executive Management Committee Severance Policy (filed as
Exhibit 10.5 to Rexene Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 and incorporated herein by reference).
10.8 -- Executive Security Plan of Rexene Products Company (filed as Exhibit 10.8 to
Rexene Corporation's Registration Statement on Form S-1 (SEC No. 33-22723)
and incorporated herein by reference).
10.9 -- Letter Agreement, dated as of March 16, 1992, between Rexene Corporation and
Arthur L. Goeschel (filed as Exhibit 10.13 to Rexene Corporation's Annual
Report on Form 10-K for the year ended December 31, 1991 and incorporated
herein by reference).
10.10.1 -- Letter Agreement, dated January 7, 1993, between Rexene Corporation and
Andrew J. Smith (filed as Exhibit 10.8.1 to Rexene Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference).
10.10.2 -- Indemnity Agreement, dated as of May 25, 1990, by and among Rexene
Corporation, Rexene Products Company and Andrew J. Smith (filed as Exhibit
10.8.2 to Rexene Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference).
10.11.1 -- Non-Qualified Stock Option Agreement, dated as of June 15, 1988, between
Rexene Corporation and Lavon N. Anderson (filed as Exhibit 10.29.2 to Rexene
Corporation's Registration Statement on Form S-1 (SEC No. 33-22723) and
incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Numbered
No. Description of Exhibit Exhibit
- ------- ---------------------- -------
<S> <C> <C> <C>
10.11.2 -- Indemnity Agreement, dated as of May 25, 1990, by and among Rexene
Corporation, Rexene Products Company and Lavon N. Anderson (filed as Exhibit
10.9.3 to Rexene Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 and incorporated herein by reference).
10.11.3 -- Letter Agreement, dated January 7, 1993, between Rexene Corporation and Lavon
N. Anderson (filed as Exhibit 10.9.4 to Rexene Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein
by reference).
10.12.1 -- Employment Agreement, dated as of July 23, 1990, between Rexene Products
Company and Kevin W. McAleer (filed as Exhibit 10.13 to Rexene Corporation's
Annual Report on Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference).
10.12.2 -- Non-Qualified Stock Option Agreement, dated as of July 23, 1990, between
Rexene Corporation and Kevin W. McAleer (filed as Exhibit 10.13.1 to Rexene
Corporation's Annual Report on Form 10-K for the year ended December 31, 1990
and incorporated herein by reference).
10.12.3 -- Letter Agreement, dated July 23, 1993, between Rexene Corporation and Kevin
W. McAleer (filed as Exhibit 10.10.4 to Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended June 30, 1993 and incorporated
herein by reference).
10.13.1 -- Employment Agreement, dated as of May 29, 1990, between Rexene Products
Company and Jack E. Knott (filed as Exhibit 10.15 to Rexene Corporation's
Annual Report on Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference).
10.13.2 -- Letter Agreement, dated June 11, 1993, between Rexene Corporation and Jack E.
Knott (filed as Exhibit 10.11.4 to Rexene Corporation's Form 10-Q Quarterly
Report for the three months ended June 30, 1993 and incorporated herein by
reference).
10.14 -- Letter Agreement, dated January 7, 1993, between Rexene Corporation and James
M. Ruberto (filed as Exhibit 10.12.2 to Rexene Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein
by reference).
10.15 -- Letter Agreement, dated January 7, 1993, between Rexene Corporation and
Jonathan R. Wheeler (filed as Exhibit 10.13.2 to Rexene Corporation's Annual
Report on Form 10- K for the fiscal year ended December 31, 1992 and
incorporated herein by reference).
10.16 -- Credit Agreement, dated as of November 29, 1994, among Rexene Corporation, as
Borrower, The Bank of Nova Scotia, as Agent, and the Lenders Signatory
thereto.
10.17 -- Indemnity Agreement, dated as of May 25, 1990, by and among Rexene
Corporation, Rexene Products Company and William B. Hewitt (filed as Exhibit
10.22 to Rexene Corporation's Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated herein by reference).
10.18 -- Letter Agreement, dated June 11, 1993, between Rexene Corporation and Bernard
J. McNamee (filed as Exhibit 10.23.2 to Rexene Corporation's Form 10-Q
Quarterly Report for the three months ended June 30, 1993 and incorporated
herein by reference).
21.1 -- Subsidiaries of Rexene Corporation.
23.1 -- Consent of Price Waterhouse LLP.
</TABLE>
<PAGE>
EXECUTION COPY
REXENE CORPORATION
$175,000,000
11-3/4% Senior Notes due 2004
------------------------------
INDENTURE
Dated as of November 29, 1994
-----------------------------
BANK ONE, TEXAS, N.A.
-----------------------------
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
TRUST INDENTURE ACT Section INDENTURE SECTION
310(a)(1). . . . . . . . . . . . . . . . . . . . 7.10
(a)(2). . . . . . . . . . . . . . . . . . . . 7.10
(a)(3). . . . . . . . . . . . . . . . . . . . N.A.
(a)(4). . . . . . . . . . . . . . . . . . . . N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . 3.09;7.08;7.10
(c) . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . 10.03
(c) . . . . . . . . . . . . . . . . . . . . . 10.03
313(a) . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1). . . . . . . . . . . . . . . . . . . . N.A.
(b)(2). . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . 7.06;10.02
(d) . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . 4.03;4.04;10.02
(b) . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1). . . . . . . . . . . . . . . . . . . . 10.04
(c)(2). . . . . . . . . . . . . . . . . . . . 10.04
(c)(3). . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . 10.02;10.03;10.04;10.05
(e) . . . . . . . . . . . . . . . . . . . . . 10.05
(f) . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . 7.01(2)
(b) . . . . . . . . . . . . . . . . . . . . . 7.05;10.02
(c) . . . . . . . . . . . . . . . . . . . . . 7.01(1)
(d) . . . . . . . . . . . . . . . . . . . . . 7.01(3)
(e) . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence). . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . 6.04
(a)(2). . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . 6.07
<PAGE>
317(a)(1). . . . . . . . . . . . . . . . . . . . 6.08
(a)(2). . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . 10.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . 25
Section 1.03. Incorporation by Reference of Trust Indenture Act . . . . 25
Section 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . 26
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . 27
Section 2.02. Execution and Authentication. . . . . . . . . . . . . . . 27
Section 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . . 28
Section 2.04. Paying Agent to Hold Money in Trust . . . . . . . . . . . 28
Section 2.05. Noteholder Lists. . . . . . . . . . . . . . . . . . . . . 29
Section 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . 29
Section 2.07. Replacement Notes . . . . . . . . . . . . . . . . . . . . 30
Section 2.08. Outstanding Notes . . . . . . . . . . . . . . . . . . . . 30
Section 2.09. Treasury Notes. . . . . . . . . . . . . . . . . . . . . . 31
Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . 31
Section 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . . . 31
Section 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . . . 32
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . . . . 32
Section 3.02. Selection of Notes to Be Redeemed . . . . . . . . . . . . 33
Section 3.03. Notice of Redemption. . . . . . . . . . . . . . . . . . . 33
Section 3.04. Effect of Notice of Redemption. . . . . . . . . . . . . . 34
Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . 34
Section 3.06. Notes Redeemed in Part. . . . . . . . . . . . . . . . . . 35
Section 3.07. Optional Redemption . . . . . . . . . . . . . . . . . . . 35
Section 3.08. Mandatory Redemption. . . . . . . . . . . . . . . . . . . 36
Section 3.09. Asset Sale Offers . . . . . . . . . . . . . . . . . . . . 36
i
<PAGE>
PAGE
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes. . . . . . . . . . . . . . . . . . . . . 38
Section 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . 39
Section 4.03. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.04. Compliance Certificate. . . . . . . . . . . . . . . . . . 40
Section 4.05. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.06. Stay, Extension and Usury Laws. . . . . . . . . . . . . . 41
Section 4.07. Limitation on Restricted Payments . . . . . . . . . . . . 42
Section 4.08. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. . . . . . 45
Section 4.09. Limitation on Additional Indebtedness and Issuance
of Preferred Stock. . . . . . . . . . . . . . . . . . . . 46
Section 4.10. Sale of Assets. . . . . . . . . . . . . . . . . . . . . . 47
Section 4.11. Limitation on Transactions With Affiliates. . . . . . . . 50
Section 4.12. Limitation on Liens . . . . . . . . . . . . . . . . . . . 51
Section 4.13. Corporate Existence . . . . . . . . . . . . . . . . . . . 51
Section 4.14. Change of Control.. . . . . . . . . . . . . . . . . . . . 51
Section 4.15. Limitation on Issuances and Sales of Capital
Stock of Wholly Owned Restricted Subsidiaries.. . . . . . 53
Section 4.16. Subsidiary Guarantees . . . . . . . . . . . . . . . . . . 54
Section 4.17. Limitation on Applicability of Covenants. . . . . . . . . 54
ARTICLE 5
SUCCESSORS
Section 5.01. Limitations on Merger, Consolidation or Sale of
Substantially All Assets. . . . . . . . . . . . . . . . . 54
Section 5.02. Successor Corporation Substituted . . . . . . . . . . . . 56
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . 56
Section 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . . 58
Section 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . . 59
Section 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . 59
Section 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . 60
Section 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . 60
Section 6.07. Rights of Holders to Receive Payment. . . . . . . . . . . 61
Section 6.08. Collection Suit by Trustee. . . . . . . . . . . . . . . . 61
ii
<PAGE>
PAGE
Section 6.09. Trustee May File Proofs of Claim. . . . . . . . . . . . . 61
Section 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . . . 62
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . 62
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . 63
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . 64
Section 7.03. Individual Rights of Trustee. . . . . . . . . . . . . . . 64
Section 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . 65
Section 7.05. Notice of Defaults. . . . . . . . . . . . . . . . . . . . 65
Section 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . 65
Section 7.07. Compensation and Indemnity. . . . . . . . . . . . . . . . 66
Section 7.08. Replacement of Trustee. . . . . . . . . . . . . . . . . . 66
Section 7.09. Successor Trustee by Merger, etc. . . . . . . . . . . . . 68
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . 68
Section 7.11. Preferential Collection of Claims Against the Company . . 68
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance. . . . . . . . . . . . . . . . . . . . . . . . 68
Section 8.02. Legal Defeasance and Discharge. . . . . . . . . . . . . . 68
Section 8.03. Covenant Defeasance . . . . . . . . . . . . . . . . . . . 69
Section 8.04. Conditions to Legal or Covenant Defeasance. . . . . . . . 70
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.. . . . . . . . . . 72
Section 8.06. Repayment to the Company. . . . . . . . . . . . . . . . . 73
Section 8.07. Reinstatement . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders. . . . . . . . . . . . . . . . 74
Section 9.02. With Consent of Holders . . . . . . . . . . . . . . . . . 74
Section 9.03. Compliance with Trust Indenture Act . . . . . . . . . . . 76
Section 9.04. Revocation and Effect of Consents . . . . . . . . . . . . 76
Section 9.05. Notation on or Exchange of Notes. . . . . . . . . . . . . 76
Section 9.06. Trustee to Sign Amendments, etc . . . . . . . . . . . . . 76
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PAGE
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls . . . . . . . . . . . . . . 77
Section 10.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.03. Communication by Holders with Other Holders. . . . . . . 78
Section 10.04. Certificate and Opinion as to Conditions Precedent . . . 78
Section 10.05. Statements Required in Certificate or Opinion. . . . . . 79
Section 10.06. Rules by Trustee and Agents. . . . . . . . . . . . . . . 79
Section 10.07. Legal Holidays . . . . . . . . . . . . . . . . . . . . . 79
Section 10.08. No Recourse Against Others . . . . . . . . . . . . . . . 80
Section 10.09. Duplicate Originals. . . . . . . . . . . . . . . . . . . 80
Section 10.10. Governing Law. . . . . . . . . . . . . . . . . . . . . . 80
Section 10.11. No Adverse Interpretation of Other Agreements. . . . . . 80
Section 10.12. Successors . . . . . . . . . . . . . . . . . . . . . . . 80
Section 10.13. Severability . . . . . . . . . . . . . . . . . . . . . . 81
Section 10.14. Counterpart Originals. . . . . . . . . . . . . . . . . . 81
Section 10.15. Table of Contents, Headings, etc.. . . . . . . . . . . . 81
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
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INDENTURE dated as of November 29, 1994 between Rexene Corporation, a
Delaware corporation (the "COMPANY"), and Bank One, Texas, N.A., a national
banking association duly organized and existing under the laws of the
United States of America, as trustee ("TRUSTEE").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 11-3/4% Senior
Notes due 2004 of the Company (the "NOTES"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED DEBT" means, with respect to the Company or any Restricted
Subsidiary of the Company,
(i) Indebtedness of any other Person existing at the time such other
Person is merged with or into the Company or any such Restricted Subsidiary
or became a Restricted Subsidiary of the Company, including, without
limitation, Indebtedness incurred by such other Person in connection with,
or in contemplation of, such other Person merging with or into or becoming
a Restricted Subsidiary of the Company, and
(ii) Indebtedness secured by a Lien encumbering any asset acquired by such
other Person prior to the date on which the Company or any Restricted
Subsidiary acquires such Person.
"ACQUISITION DEBT" means
(i) Indebtedness incurred substantially simultaneously with, and for the
purpose of financing all or any part of the purchase price or cost of, any
acquisition of a Permitted Business, which acquisition is permitted
pursuant to Section 4.07 hereof and
(ii) Acquired Debt of the Person which is acquired.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies
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of such Person, whether through the ownership of voting securities, by agreement
or otherwise; PROVIDED that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control; and PROVIDED FURTHER, that
no employee or group of employees of the Company (other than executive officers
and directors) shall by reason of their employment be deemed to be an Affiliate.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APAO" means amorphous polyalphaolefins.
"APAO JOINT VENTURE" means a joint venture between the Company and any
other Person, other than URC, providing for the manufacture and sale of APAO
outside of the United States and Canada in geographic regions in which URC does
not do business.
"APAO VENTURE INVESTMENT" means each of the following Investments by
the Company and its Restricted Subsidiaries in the APAO Joint Venture: (i)
Investments of cash in an aggregate amount outstanding at any time (measured by
their fair market value as of the date made) not in excess of the aggregate cash
received after the date of this Indenture by the Company and its Restricted
Subsidiaries from the APAO Joint Venture as fees for the licensing to the APAO
Joint Venture of any intellectual property rights or other proprietary
technology relating to the manufacture of APAO and (ii) the Guarantee by the
Company and any Subsidiary Guarantor of Indebtedness of the APAO Joint Venture
in a principal amount not exceeding $15 million less all Investments made by the
Company and the Subsidiary Guarantors to satisfy their obligations under any
such Guarantee.
"ASSET SALE" means
(i) the sale, lease, transfer or conveyance of any assets of the
Company or any Restricted Subsidiary (including, without limitation, by way
of a sale and leaseback, but specifically excluding a sale and leaseback of
an asset occurring within 150 days after the completion of construction or
acquisition of such asset) other than in the ordinary course of business
(PROVIDED that the sale, lease, transfer or conveyance of all or
substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of
Sections 4.14 and/or 5.01 of this Indenture and not by the provisions of
Section 4.10 of this Indenture),
(ii) the issuance by any Restricted Subsidiary of the Company of
Equity Interests of any of the Company's Restricted Subsidiaries to any
Person other than the Company or a Restricted Subsidiary, and
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(iii) the sale by the Company or its Restricted Subsidiaries of
Equity Interests of any Restricted Subsidiary of the Company, in each case
(a) whether in a single transaction or a series of related
transactions and
(b) that have a fair market value, as determined by the
Board of Directors of the Company, in excess of $1 million.
Notwithstanding the foregoing:
(i) a transfer of assets by the Company to a Restricted Subsidiary
or by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary,
(ii) a transfer of up to 375 acres of undeveloped land located in
Bayport, Texas, and owned by the Company on the date of this Indenture,
(iii) a disposition of any machinery, equipment, furniture,
apparatus, tools, implements, materials, supplies or other similar
property which have become worn out or obsolete,
(iv) a Restricted Payment that is permitted by the provisions of
Section 4.07 of this Indenture or
(v) a sale, transfer or conveyance of any intellectual property
rights of the Company (other than those used in the C T Film Division) to
manufacture a product in any country in which neither the Company nor any
Restricted Subsidiary is manufacturing the same product at the time of such
sale, transfer or conveyance will not be deemed to be an Asset Sale. In no
event shall any sale, lease, transfer or conveyance of
(i) all or substantially all of the capital stock or assets
of any of the styrene, polymer or film businesses of the Company or
(ii) all or substantially all of the capital stock or assets
of any Restricted Subsidiary or group of Restricted Subsidiaries that
singly or together would constitute a Significant Subsidiary or
(iii) assets which account for
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(A) at least 10% of the consolidated assets of the
Company and its Restricted Subsidiaries as of the end of the most recently
ended fiscal quarter of the Company or
(B) at least 10% of the Consolidated Cash Flow of the
Company for the four full fiscal quarters immediately preceding such sale,
lease or conveyance be deemed to be made in the ordinary course of
business.
"BANK CREDIT AGREEMENTS" means one or more credit agreements between
the Company and lenders thereunder providing for term borrowings and/or
revolving borrowings, including all related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, in each
case as amended, modified, renewed, refunded, replaced or refinanced, in whole
or in part, from time to time (and regardless of the number of lenders
thereunder and whether Indebtedness thereunder would constitute Permitted
Refinancing Debt) and including, but not limited to, the New Credit Agreement.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any authorized committee of the Board of Directors.
"BORROWING BASE" means the greater of
(i) $80 million and
(ii) the sum of
(A) 80% of the net book value of all accounts receivable of
the Company that are not more than 60 days past due and
(B) 60% of the net book value of all inventory of the
Company.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE" means, at the time any determination thereof is to be
made, any lease of property, real or personal, in respect of which the present
value of the minimum rental commitment would be capitalized on a balance sheet
of the lessee in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a Capital Lease
that would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
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"CAPITAL STOCK" means
(i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all
shares, interests, participation, rights or other equivalents (however
designated) of corporate stock,
(iii) in the case of a partnership, partnership interests (whether
general or limited) and
(iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions
of assets of, the issuing Person.
"CASH EQUIVALENTS" means
(i) United States dollars, pounds sterling and any other freely
convertible currency,
(ii) securities issued or directly and fully guaranteed or insured
by the United States government or any agency or instrumentality thereof,
having maturities of not more than six months from the date of acquisition,
(iii) certificates of deposit and eurodollar time deposits, with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better,
(iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and
(v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of acquisition.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, (42 U.S.C. Section 9607(1)).
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"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition in
one or a series of related transactions, by merger or consolidation or
otherwise, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to any Person or Group (as such
term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act),
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Company unless such plan is abandoned within 30 days
after the date of adoption of such plan,
(iii) the acquisition by any Person or Group (as defined above) of a
direct or indirect interest in more than 50% of the voting power of the
voting stock of the Company, by way of merger or consolidation or
otherwise, or
(iv) the first day on which a majority of the members of the Board
of Directors of the Company are not Continuing Directors. For purposes of
this definition, any transfer of an Equity Interest of an entity that was
formed for the purpose of acquiring voting stock of the Company will be
deemed to be a transfer of such portion of such voting stock as corresponds
to the portion of the equity of such entity that has been so transferred,
and the acquisition of voting power of the voting stock of the Company by
any Subsidiary of the Company shall be disregarded.
"COGEN ASSETS" means
(i) feasibility studies and other similar developmental items
related to one or more joint ventures to produce steam and power for the
Odessa Facility; PROVIDED, HOWEVER, that the aggregate cost thereof does
not exceed $3.0 million and
(ii) up to ten acres of unused land at the Odessa Facility which is
owned by the Company as of the date of this Indenture.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus
(i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), plus
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(ii) provision for taxes based on income or profits of such Person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was included in computing such Consolidated Net Income
plus
(iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation, amortization of
original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing
such Consolidated Net Income, plus
(iv) depreciation and amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such
depreciation and amortization were deducted in computing such Consolidated
Net Income plus
(v) any other non-cash charges that were deducted in computing
such Consolidated Net Income less all non-cash income that was included in
computing such Consolidated Net Income. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization of, a Subsidiary of the referent person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only
if a corresponding amount would be permitted at the date of determination
to be dividended to the Company by such Subsidiary without prior approval,
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that
(i) the Net Income of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned
Restricted Subsidiary thereof,
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(ii) the Net Income of any Restricted Subsidiary shall be excluded
to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(which has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders,
(iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded and
(iv) the cumulative effect of a change in accounting principles
shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any
date, the sum of
(i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus
(ii) the respective amounts reported on such Person's balance sheet
as of such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock, less
(x) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of such
business) subsequent to the date of this Indenture in the book value of any
asset owned by such Person or a consolidated Subsidiary of such Person,
(y) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in each
case, Permitted Investments), and
(z) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
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"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who
(i) was a member of such Board of Directors on the date of this
Indenture or
(ii) was nominated for election or elected to such Board of
Directors with the affirmative vote of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"CONTRACT OBLIGATIONS" means contractual obligations of the Company
and any Subsidiary Guarantor to repay or credit to a third party amounts
advanced by such third party (or its Affiliates) to the Company or any
Subsidiary Guarantor, which obligations to repay or credit are secured by a Lien
on the assets of the Company and/or any Subsidiary Guarantor. The amount of
Contract Obligations outstanding as of any date shall be equal to the aggregate
amount of remaining payments required to be made by, and credits required to be
given by, the Company and/or the Subsidiary Guarantors under the agreements
related to such Contractual Obligations at such time.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 10.02 or such other address as the Trustee may give
notice to the Company.
"C T FILM DIVISION" means the Company's Consolidated Thermoplastics
division, which produces specialty grades of polyethylene films.
"CURRENCY AGREEMENT" means the obligation of any Person pursuant to
any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such Person against fluctuations in
currency values.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"DESIGNATED UNRESTRICTED SUBSIDIARY" means, as of any date, any
Unrestricted Subsidiary of the Company from which the Company and its Wholly
Owned Restricted Subsidiaries have received, as of the date of determination,
cash distributions in an amount less than the Investments made by the Company
and its Restricted Subsidiaries in such Unrestricted Subsidiary.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder
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thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature.
"DOLLARS" and "$" means lawful money of the United States of America.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security which is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING DEBT" means all Indebtedness outstanding on the date of this
Indenture.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. For purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period, and
(ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded,
and
(iii) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the
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referent Person or any of its Restricted Subsidiaries following the
Calculation Date.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum of
(i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued, to the
extent that such expense was deducted in computing Consolidated Net Income
(excluding all non-cash amortization of financing fees incurred in
connection with the Recapitalization and including, without limitation, the
interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if
any) pursuant to Hedging Obligations) and
(ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and
(iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or any of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or any of its Restricted Subsidiaries
(whether or not such Guarantee or Lien is called upon) and
(iv) the product of
(a) all cash dividend payments (and non-cash dividend
payments in the case of a Person that is a Restricted Subsidiary) on any
series of preferred stock of such Person, times
(b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Company organized
under the laws of a jurisdiction outside of the United States.
"FOREIGN SUBSIDIARY BORROWING BASE" means, with respect to any Foreign
Subsidiary that is a Restricted Subsidiary and not a Subsidiary Guarantor, the
sum of
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(A) 80% of the net book value of all accounts receivable of such
Foreign Subsidiary that are not more than 60 days past due and
(B) 60% of the net book value of all inventory of such Foreign
Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture; PROVIDED,
HOWEVER, that for purposes of all information and other reports required to be
delivered pursuant to the provisions of Section 4.03 of this Indenture, GAAP
shall mean such generally accepted accounting principles as are in effect from
time to time.
"GOVERNMENT SECURITIES" means direct obligations of the United States
of America, or any agency or instrumentality thereof for the payment of which
the full faith and credit of the United States of America is pledged.
"GUARANTEE" means, with respect to any Person, a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness that is owned by any other Person.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under
(i) Currency Agreements,
(ii) Interest Rate Agreements and
(iii) agreements to protect against fluctuations in the price of
feedstocks.
"HOLDER" means a Person in whose name a Note is registered.
"INDEBTEDNESS," means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or indebtedness
representing Hedging Obligations, Capital Lease Obligations or the balance of
the deferred and unpaid portion of the
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purchase price of any property, except any such balance that constitutes an
accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all Indebtedness of others secured by a Lien on any asset of
such Person (whether or not such Indebtedness is assumed by such Person) and, to
the extent not otherwise included, the Guarantee by such Person of any
indebtedness of any other Person other than a Restricted Subsidiary of such
Person.
"INDENTURE" means this Indenture as amended or supplemented from time
to time.
"INTEREST RATE AGREEMENT" means the obligations of any person pursuant
to any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in interest rates.
"INVESTMENTS" means, with respect to the Company and its Restricted
Subsidiaries, any investment by the Company or any of its Restricted
Subsidiaries in other Persons (including Affiliates) in the form of loans
(including Guarantees of Indebtedness), advances (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), capital contributions, purchases or other acquisitions from such
other Persons for consideration of Indebtedness, Equity Interests, cash or other
property, and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; PROVIDED, HOWEVER, that
Investments shall not include purchases and sales of goods and services in the
ordinary course of business on arms' length terms or sales commissions paid to
any agent in connection with such purchases and sales, except that purchases and
sales of goods between the Company or any Restricted Subsidiary on the one hand
and any Unrestricted Subsidiary which is a Foreign Sales Corporation (within the
meaning of 26 U.S.C. Sections 921-927 or any successor to such sections)
on the other hand and payment of commissions by the Company or any Restricted
Subsidiary to any Unrestricted Subsidiary that is a Foreign Sales Corporation in
connection with sales agented by such Foreign Sales Corporation on behalf of the
Company or such Restricted Subsidiary need not be on arms' length terms.
"LETTER OF CREDIT" means the irrevocable letter of credit issued by
The Bank of Nova Scotia on behalf of the Company with a face amount of
approximately $101 million in favor of the trustee for the Old Notes to support
the Company's redemption obligations with respect to the Old Notes, as in effect
on the date of the Indenture.
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"LIEN" means, with respect to any asset owned by the Company or its
Restricted Subsidiaries, any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law (including any conditional
sale or other title retention agreement, any option or other agreement to sell
or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"MAKE-WHOLE PREMIUM" means, as of any date of determination, the
greater of
(i) 1.0% of the then outstanding principal amount of the Notes or
(ii) the excess of
(a) the present value of all required interest and
principal payments due on such Notes from and after such date to the first
date that the Notes may be redeemed at the option of the Company assuming
all such Notes so redeemed and computed using a discount rate equal to the
Treasury Rate on such date plus 100 basis points compounded semi-annually
over
(b) the then outstanding principal amount of the Notes.
"NET INCOME" means with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP, and before any reduction in
respect of preferred stock dividends, excluding, however,
(i) any gain (but not loss), together with any related provision
for taxes on such gain (but not loss), realized in connection with
(a) any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any
of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries and
(ii) any extraordinary gain (but not loss), together with any
related provision for taxes on such extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate proceeds of cash and Cash
Equivalents received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any cash received upon
the sale or other
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disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"NEW CREDIT AGREEMENT" means the Credit Agreement, dated as of
November 29, 1994, between the Company, the Bank of Nova Scotia and the lenders
party thereto.
"NOTEHOLDER" means a Holder of one or more Notes.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OBSOLETE PLANTS" means plant and equipment, together with land on
which such plant and equipment is situated, at the Odessa Facility that, as of
the date of this Indenture, has been shut down (other than plant or equipment
that has been temporarily shut down for repairs or maintenance); PROVIDED,
HOWEVER, that the aggregate net book value of all such Obsolete Plants on the
date of this Indenture shall not exceed $2.0 million.
"ODESSA FACILITY" means the Company's integrated production facility
in Odessa, Texas.
"OFFICERS" means the Chief Executive Officer, the President, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, Controller, Secretary
or any Vice-President of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers,
one of whom must be the principal executive officer, principal financial officer
or principal accounting officer of the Company.
"OLD NOTES" means the Company's Increasing Rate Second Priority Notes
due 2002.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee. Except with respect to any opinion
delivered pursuant to Article 8, the counsel may be an employee of the Company
or the Trustee. The counsel may be counsel to the Company or the Trustee.
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"PERMITTED BUSINESS" means any business that is not unrelated to the
businesses in which the Company is engaged on the date of this Indenture.
"PERMITTED INVESTMENTS" means
(a) Investments in the Company or in a Wholly Owned Restricted
Subsidiary of the Company;
(b) Investments in Cash Equivalents;
(c) Investments by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment
(i) such Person becomes a Wholly Owned Restricted
Subsidiary of the Company or
(ii) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the
Company;
(d) the APAO Venture Investments and the URC Venture Investments;
(e) Investments received as consideration for Asset Sales
permitted under this Indenture;
(f) Investments by the Company and its Restricted Subsidiaries in
RCL not exceeding the amount of such Investment on the date of this
Indenture, calculated as of the date of each such Investment;
(g) the transfer by the Company of the Cogen Assets to one or more
joint ventures; and
(h) other Investments in joint ventures or Unrestricted
Subsidiaries of the Company that are engaged in a Permitted Business in an
aggregate amount outstanding at any time (measured by their fair market
value as of the date made) not exceeding $15 million.
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"PERMITTED LIENS" means:
(i) Liens on assets of the Company and the Subsidiary Guarantors
securing Indebtedness permitted to be incurred pursuant to clauses (i) and
(ii) of the second paragraph of Section 4.09 of this Indenture;
(ii) Liens in favor of the Company or any Subsidiary Guarantor;
(iii) first priority Liens (other than Liens permitted pursuant to
any other clause of this definition) securing Indebtedness of the Company
and any Subsidiary Guarantor that is not subordinated to any other
Indebtedness of the Company or such Subsidiary Guarantor and/or Contract
Obligations of the Company or such Subsidiary Guarantor, PROVIDED that the
sum of the aggregate principal amount of such Indebtedness and the total
amount of such Contract Obligations outstanding from time to time does not
exceed $100 million less the principal amount of Senior Term Debt (and
Permitted Refinancing Debt with respect thereto) outstanding as of such
time;
(iv) Liens existing on the property of any Person at the time such
Person becomes a Restricted Subsidiary of the Company (excluding Liens
which were incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary of the Company) that do not extend to any
other property of the Company or its Restricted Subsidiaries;
(v) Liens on the shares of URC stock now owned or hereafter
acquired by the Company and on patents of the Company licensed to URC, in
each case, to the extent required pursuant to the agreements governing the
URC Venture Investment, as amended from time to time;
(vi) Liens on
(a) the Company's Equity Interest in the APAO Joint Venture
and
(b) intellectual property rights permitted by this
Indenture to be licensed and licensed to the APAO Joint Venture required
pursuant to the agreements governing the APAO Investments;
(vii) Liens to secure Acquisition Debt permitted to be incurred
pursuant to Section 4.09 of this Indenture; PROVIDED, HOWEVER, that
(a) such Liens shall either
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(1) extend only to the assets acquired with the
proceeds of such Acquisition Debt or
(2) otherwise be permitted by clause (iv) or (xvii) of
this definition,
(b) the Acquisition Debt secured thereby shall not exceed
the fair market value of the assets acquired with the proceeds of such
Acquisition Debt and
(c) except with respect to Acquired Debt, such Lien shall
be created simultaneously with the incurrence of such Acquisition Debt;
(viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(ix) landlords', carriers', vendors', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising by operating of law
in the ordinary course of business;
(x) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(xi) deposits to secure the performance of bids, trade contracts,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of like nature incurred in the ordinary course of business;
(xii) easements, rights of way, restrictions, licenses, consignments
and other similar encumbrances on any property of the Company or of any
Restricted Subsidiary, including Liens constituting leases or subleases to
third parties granted by the Company or any Restricted Subsidiary, in each
case to the extent incurred in the ordinary course of business;
(xiii) judgment Liens that do not constitute a Default;
(xiv) Liens on unearned premiums of insurance policies that secure
the financing of such premiums for such policies;
(xv) Liens arising pursuant to authority granted under CERCLA, RCRA
or analogous state statutes, PROVIDED that the aggregate of all obligations
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in respect of which the Company is required to record a reserve in
accordance with GAAP that are secured by such Liens shall not exceed $40
million at any time;
(xvi) Liens existing on the date of this Indenture;
(xvii) Liens on property existing at the time of acquisition thereof
by the Company or any Restricted Subsidiary of the Company; PROVIDED that
such Liens were in existence prior to contemplation of such acquisition;
(xviii) Liens on assets of any Person which is not a Restricted
Subsidiary;
(xix) Liens incurred to secure
(a) Purchase Money Financings or
(b) Capital Lease Obligations
but only, in the case of (a) and (b), if such Liens do not extend to any assets
other than the assets purchased with the proceeds of the corresponding Purchase
Money Financing or which are the subject of such Capital Lease Obligation, and
in each case to the extent the Indebtedness secured thereby is permitted to be
incurred pursuant to Section 4.09 of this Indenture;
(xx) Liens on accounts receivable and inventory of Foreign
Subsidiaries that are Restricted Subsidiaries and not Subsidiary Guarantors
to secure Indebtedness permitted to be incurred pursuant to clause (x) of
second paragraph of Section 4.09 of this Indenture; and
(xxi) Liens securing any extension, renewal or refunding of any
obligations secured by the foregoing Liens that do not increase the
obligations secured thereby and do not extend such Lien to any assets other
than those previously securing such obligations.
(xxii) Liens arising in favor of the Trustee under Section 7.07 of
this Indenture.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund Indebtedness (other than the Notes); PROVIDED that:
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(i) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith),
(ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and
(iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes or any Subsidiary Guarantee, such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Notes and the Subsidiary Guarantee
on terms at least as favorable to the Holders of Notes as those contained
in the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, limited liability company,
partnership, association, joint stock company, trust or trustee thereof, estate
or executor thereof, unincorporated organization or joint venture.
"PURCHASE MONEY FINANCING" means, with respect to any Person,
Indebtedness incurred to finance the purchase of any assets of such Person
(within 90 days of such purchase) to the extent
(i) the amount of Indebtedness thereunder shall not exceed 95% of
the purchase cost of such assets,
(ii) the purchase cost for such assets is or should be included in
"additions to property plant and equipment" in accordance with GAAP and
(iii) the purchase of such assets is not part of an acquisition of any
Person.
"RCL" means Rexene Corporation Limited, an English company.
"RCRA" means the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et. seq.).
"RECAPITALIZATION" shall have the meaning ascribed to such term in the
Registration Statement on Form S-3 relating to the Notes as declared effective
by the
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SEC on November 21, 1994 (and including the information omitted from such
registration statement in reliance on Rule 430A under the Securities Act).
"RESPONSIBLE OFFICER" when used with respect to the Trustee, means any
officer within the Corporate Trust Office (or any successor group of the
Trustee) assigned by the Trustee to administer its corporate trust matters.
"RESTRICTED INVESTMENT" means any Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of the Company means any Subsidiary of the
Company that is designated as a Restricted Subsidiary by the Board of Directors
or otherwise fails to meet the requirements set forth in the definition of
Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR REVOLVING DEBT" means revolving credit borrowings under the
Bank Credit Agreements.
"SENIOR TERM DEBT" means term borrowings under the Bank Credit
Agreements and obligations of the Company of up to $100 million under the Letter
of Credit.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act.
"SUBSIDIARY" means, with respect to any Person,
(i) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more
Subsidiaries of that Person (or a combination thereof) and
(ii) any partnership
(a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or
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(b) the only general partners of which are such Person or
one or more Subsidiaries of such Person (or any combination thereof).
"SUBSIDIARY GUARANTEE" means
(i) the full and unconditional guarantee by a Restricted
Subsidiary (other than a Foreign Subsidiary) of all of the Company's
obligations under this Indenture and the Notes delivered pursuant to
Section 4.16 of this Indenture and
(ii) the full and unconditional guarantee of all of the Company's
obligations under this Indenture and the Notes by any Foreign Subsidiary
that is a Restricted Subsidiary that elects to so guarantee such
obligations, in each case, in the form of EXHIBIT B hereto.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TREASURY RATE" means, on any date of determination, a per annum rate
equal to the semiannual equivalent yield to maturity for United States Treasury
securities maturing on the maturity date of the Notes, as determined by
interpolation between the most recent weekly average yields to maturity for two
series of United States Treasury securities,
(i) one maturing as close as possible to, but earlier than, the
maturity date of the Notes and
(ii) the other maturing as close as possible to, but later than,
the maturity date of the Notes, in each case as most recently published by
the Board of Governors of the Federal Reserve System in its Statistical
Release H.15(519), or any successor publication ("H.15(519)") (or, if a
weekly average yield to maturity for United States Treasury securities
maturing on the maturity date of the Notes is reported in the most recent
H.15(519), as published in H.15(519)).
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"UNRESTRICTED SUBSIDIARY" means
(i) each of the Subsidiaries of the Company in existence on the
date of this Indenture,
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(ii) any Subsidiary of the Company designated as an Unrestricted
Subsidiary pursuant to the provisions of Section 4.07 of this Indenture and
(iii) any Subsidiary formed or acquired by the Company after the
date of this Indenture, but only to the extent that such Subsidiary:
(a) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Company;
(b) is a Person with respect to which neither the Company
nor any of its Restricted Subsidiaries has any direct or indirect
obligation to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results;
(c) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries; and
(d) has at least one director on its board of directors
that is not a director or executive officer of the Company or any of its
Restricted Subsidiaries and has at least one executive officer that is not
a director or executive officer of the Company or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary as an Unrestricted Subsidiary pursuant to the
provisions of Section 4.07 of this Indenture by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the provisions of Section 4.07 of this Indenture. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the provisions of Section 4.09 of this Indenture,
the Company shall be in default of such covenant unless such default shall have
been cured within a period of 30 days thereafter). The Board of Directors of
the Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; PROVIDED that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the
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Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if
(i) such Indebtedness is permitted under the provisions of Section
4.09 of this Indenture,
(ii) no Default or Event of Default would be in existence following
such designation and
(iii) unless such Subsidiary is a Foreign Subsidiary, such
Subsidiary executes a Subsidiary Guarantee.
"URC VENTURE INVESTMENT" means
(i) all Investments by the Company in URC outstanding as of the
date of this Indenture PLUS
(ii) all Investments made by the Company and its Restricted
Subsidiaries in URC after the date of this Indenture; PROVIDED, HOWEVER,
that the aggregate amount of all such Investment made after the date of
this Indenture (measured by their fair market value as of the date made)
shall not exceed the aggregate amount of the cash received after the date
of this Indenture by the Company and its Restricted Subsidiaries as fees
for the licensing of any intellectual property rights or other proprietary
technology to URC plus
(iii) obligations under the Guaranty (as defined in the Joint
Venture Modification Agreement dated as of (and as in effect on) February
25, 1992 between the Company and UBE Industries Inc.); PROVIDED that at no
time shall the Guaranty made by the Company and its Restricted Subsidiaries
(a) be with recourse to the Company or any of its
Subsidiaries or
(b) be secured by any Liens on the property of the Company
or any of its Subsidiaries (other than Liens permitted pursuant to clause
(v) of the definition of Permitted Liens); and PROVIDED FURTHER that the
amount of the obligations guaranteed pursuant to such Guaranty shall be
reduced by the amount of all Investments made to satisfy the Company's
obligations under such Guaranty.
"URC" means Ube Rexene Corporation, a Japanese corporation.
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"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing
(i) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by
(b) the number of years (calculated to the nearest one-
twelfth) that will elapse between such date and the making of such payment,
by
(ii) the then outstanding principal amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or a combination thereof.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . 4.11(a)
"Asset Sale". . . . . . . . . . . . . . . . . . . . . . . . 4.10(a)
"Asset Sale Offer". . . . . . . . . . . . . . . . . . . . . 4.10
"Bankruptcy Law". . . . . . . . . . . . . . . . . . . . . . 6.01
"Change of Control Offer" . . . . . . . . . . . . . . . . . 4.14
"Change of Control Payment" . . . . . . . . . . . . . . . . 4.14
"Change of Control Payment Date". . . . . . . . . . . . . . 4.14
"Commencement Date" . . . . . . . . . . . . . . . . . . . . 3.09
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Event of Default". . . . . . . . . . . . . . . . . . . . . 6.01
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . 11.07
"Offer Amount". . . . . . . . . . . . . . . . . . . . . . . 3.09
"Offer Period". . . . . . . . . . . . . . . . . . . . . . . 3.09
"Paying Agent". . . . . . . . . . . . . . . . . . . . . . . 2.03
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . 3.09
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payments" . . . . . . . . . . . . . . . . . . . 4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
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Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Noteholder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Notes means the Company or any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
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ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT A, which is part of this Indenture. Each
Subsidiary Guaranty shall be substantially in the form of EXHIBIT C hereto,
which is part of this Indenture. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Note shall be
dated the date of its authentication. The Notes shall be issued initially in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture, and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and
may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature of the Trustee shall be conclusive evidence that
the Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to an aggregate principal
amount stated in paragraph 4 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed the amount set forth herein except
as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by
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the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with the Company or an Affiliate of the
Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain in the Borough of Manhattan, The City of
New York, State of New York, and in such other locations as it shall determine,
(i) an office or agency where Notes may be presented for registration
of transfer or for exchange ("REGISTRAR") and
(ii) an office or agency where Notes may be presented for payment
("PAYING AGENT"). The Registrar shall keep a register of the Notes and of
their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term
"Registrar" includes any co-registrar and the term "Paying Agent" includes
any additional paying agent. The Company may change any Paying Agent or
Registrar without notice to any Noteholder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent or fails to give the foregoing notice, the
Trustee shall act as such. The Company or any of its Subsidiaries may act
as Paying Agent or Registrar.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes, and will notify the
Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money delivered to the Trustee. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate
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and hold in a separate trust fund for the benefit of the Noteholders all money
held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings
relating to the Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Noteholders,
including the aggregate principal amount thereof, and the Company shall
otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
When Notes are presented by a Holder to the Registrar with a request
to register, transfer or exchange them for an equal principal amount of Notes of
other authorized denominations, the Registrar shall register the transfer or
make the exchange as requested if its requirements for such transactions are
met; PROVIDED, HOWEVER, any Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar and the Trustee
duly executed by the Holder thereof or by his attorney duly authorized in
writing, with signature guaranteed. To permit registrations of transfer and
exchanges, the Company shall issue and the Trustee shall authenticate Notes at
the Registrar's request, subject to such rules as the Trustee may reasonably
require.
Neither the Company nor the Registrar shall be required
(i) to issue, register the transfer of or exchange Notes during any
period
(a) beginning at the opening of business on a Business Day 15
days before the day of any selection of Notes for redemption under Section
3.02 and ending at the close of business on the day of selection or
(b) beginning at the opening of business on a Business Day 15
days before an interest payment date and ending at the close of business on
such interest payment date, or
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(ii) to register the transfer or exchange of any Note selected for
redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
No service charge shall be made to any Noteholder for any registration
of transfer or exchange (except as otherwise expressly permitted herein), but
the Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Sections 2.10, 3.06 or 9.05 hereof, which shall be paid by the Company).
Prior to due presentment for registration of transfer of any Note, the
Trustee, any Agent and the Company may deem and treat the Person in whose name
any Note is registered as the absolute owner of such Note for the purpose of
receiving payment of principal of and interest on such Note and for all other
purposes whatsoever, whether or not such Note is overdue, and neither the
Trustee, any Agent nor the Company shall be affected by notice to the contrary.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company
and the Trustee receives evidence to their satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses (including the fees and expenses of the Trustee) in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation and those described in this Section as not outstanding.
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If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Subject to Section 2.09 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or an Affiliate of the Company shall be considered as though they are
not outstanding, except that for purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Responsible Officer knows to be so owned shall be so considered.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company and the Trustee consider appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
definitive Notes in exchange for temporary Notes. Until such exchange,
temporary Notes shall be entitled to the same rights, benefits and privileges as
definitive Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation. The Company may
not issue new Notes to replace Notes that it has redeemed or paid or that have
been delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed (subject to
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the record retention requirement of the Exchange Act) and certification of their
destruction delivered to the Company unless by a written order, signed by an
Officer of the Company, the Company shall direct that cancelled Notes be
returned to it.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest
(i) if payment is made during the period of five Business Days
following the date on which such interest was due, to the Persons who were
to receive payment on the date such interest was due or
(ii) if payment is made after such period, to the Persons who are
Noteholders on a subsequent special record date, which date shall be at the
earliest practicable date but in all events at least five Business Days
prior to the payment date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall, with the consent of the
Trustee, fix or cause to be fixed each such special record date and payment
date. At least 15 days before the special record date, the Company (or the
Trustee, in the name of and at the expense of the Company) shall mail to
Noteholders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
ARTICLE 3
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date (unless a
shorter notice shall be satisfactory to the Trustee), an Officers' Certificate
setting forth the Section of this Indenture pursuant to which the redemption
shall occur, the redemption date, the principal amount of Notes to be redeemed
and the redemption price.
If the Company is required to make an offer to repurchase Notes
pursuant to the mandatory repurchase provisions of Section 3.09 hereof, it shall
notify the Trustee in writing of the Section of this Indenture pursuant to which
the repurchase shall occur, the repurchase date, the principal amount of Notes
to be repurchased and
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the repurchase price and shall furnish to the Trustee an Officers' Certificate
to the effect that
(a) the Company has effected an Asset Sale and
(b) the conditions set forth in Section 4.10 have been satisfied.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed among the Holders of the Notes in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not so listed, on a pro rata
basis, by lot or by such other method as the Trustee shall deem fair and
appropriate. In the event of partial redemption by lot, the Trustee shall make
the selection not less than 30 nor more than 60 days prior to the redemption
date from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the portion of the principal amount thereof to be redeemed. Notes
and portions of them selected to be redeemed shall be in principal amounts of
$1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder
are to be redeemed, the entire outstanding amount of Notes held by such Holder,
even if not a multiple of $1,000, shall be redeemed. Except as provided in the
preceding sentence, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
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date, upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(7) the paragraph of the Notes pursuant to which the Notes called for
redemption are being redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Notes called for redemption
become irrevocably due and payable on the redemption date at the price set forth
in the Note.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Notes to be redeemed on that date. The Trustee or
the Paying Agent shall return to the Company any money deposited with the
Trustee or the Paying Agent by the Company in excess of the amounts necessary to
pay the redemption price of, and accrued interest on, all Notes to be redeemed.
Interest on the Notes to be redeemed will cease to accrue on the
applicable redemption date, whether or not such Notes are presented for payment,
if the Company makes the redemption payment. If any Note called for redemption
shall not be so paid upon surrender for redemption because of the failure of the
Company to comply with the preceding paragraph, interest will be paid on the
unpaid principal, from the redemption date until such principal is paid, and to
the extent lawful on any interest not paid on such unpaid principal, in each
case at the rate provided in the Notes and in
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Section 4.01 hereof. Section 8.06 shall apply to any Notes not redeemed within 2
years from the redemption date.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
The Notes are not redeemable at the Company's option prior to December
1, 1999. Thereafter, the Notes will be subject to redemption at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
December 1 of the years indicated below:
YEAR PRINCIPAL AMOUNT
1999. . . . . . . . . . . . . . . . . . . . . . . . 105.875%
2000. . . . . . . . . . . . . . . . . . . . . . . . 103.917
2001. . . . . . . . . . . . . . . . . . . . . . . . 101.958
2002 and thereafter . . . . . . . . . . . . . . . . 100.000%
Notwithstanding the foregoing, prior to December 1, 1997, the Company
may, from time to time, redeem up to $58.3 million in aggregate principal amount
of Notes, upon not less than 30 nor more than 60 days' notice, at a redemption
price of 110% of the principal amount thereof plus accrued and unpaid interest
thereon to the redemption date, with the net proceeds of an offering or
offerings of common stock of the Company; PROVIDED that at least $100 million in
aggregate principal amount of Notes remains outstanding immediately after the
occurrence of each such redemption; and PROVIDED, FURTHER, that each such
redemption shall occur within 60 days of the date of the closing of the related
offering of common stock of the Company.
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Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Subject to the Company's obligation to make an offer to repurchase
Notes under certain circumstances pursuant to Sections 4.10 and 4.14 hereof, the
Company shall have no mandatory redemption or sinking fund obligations with
respect to the Notes.
SECTION 3.09. ASSET SALE OFFERS
In the event that the Company shall commence an Asset Sale Offer
pursuant to Section 4.10 hereof, it shall follow the procedures specified below:
The Asset Sale Offer shall remain open for 20 Business Days after the
commencement (the "COMMENCEMENT DATE") of such Asset Sale Offer, except to the
extent required to be extended by applicable law (as so extended, the "OFFER
PERIOD"). No later than three Business Days after the termination of the Offer
Period (the "PURCHASE DATE"), the Company shall purchase the principal amount
(the "OFFER AMOUNT") of Notes required to be purchased in such Asset Sale Offer
pursuant to Section 4.10 hereof or, if less than the Offer Amount has been
tendered, all Notes tendered in response to the Asset Sale Offer.
If the Purchase Date is on or after an interest payment record date
and on or before the related interest payment date, any interest accrued to such
Purchase Date shall be paid to the Person in whose name a Note is registered at
the close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
On the Commencement Date of any Asset Sale Offer, the Company shall
send or cause to be sent, by first class mail, a notice to each of the Holders,
with a copy to the Trustee. Such notice, which shall govern the terms of the
Asset Sale Offer, shall contain all instructions and materials necessary to
enable the Holders to tender Notes pursuant to the Asset Sale Offer and shall
state:
(1) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(2) the Offer Amount, the purchase price and the Purchase Date;
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(3) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(4) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Company, a depositary, if appointed by the Company, or a
Paying Agent at the address specified in the notice prior to the close of
business at least three Business Days preceding the Purchase Date;
(6) that Holders shall be entitled to withdraw their election if the
Company, the depositary or Paying Agent, as the case may be, receives, not
later than the close of business on the second Business Day preceding the
termination of the Offer Period, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Note the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have the Note purchased;
(7) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Trustee shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(8) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered.
On or before each Purchase Date, the Company shall irrevocably deposit
with the Trustee or Paying Agent, in immediately available funds, the aggregate
purchase price with respect to a principal amount of Notes equal to the Offer
Amount, together with accrued interest thereon, if any, to be held for payment
in accordance with the terms of this Section. On the Purchase Date, the Company
shall, to the extent lawful,
(i) accept for payment, on a pro rata basis to the extent necessary,
an aggregate principal amount equal to the Offer Amount of Notes tendered
pursuant to the Asset Sale Offer, or if less than the Offer Amount has been
tendered, all Notes or portions thereof tendered,
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(ii) deliver or cause the Paying Agent or depositary, as the case may
be, to deliver to the Trustee Notes so accepted and
(iii) deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the
depositary or Paying Agent, as the case may be, shall promptly (but in any
case not later than three Business Days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price with
respect to the Notes tendered by such Holder and accepted by the Company
for purchase, and the Company shall promptly issue a new Note, and the
Trustee shall authenticate and mail or deliver such new Note, to such
Holder, equal in principal amount to any unpurchased portion of such
Holder's Notes surrendered. Any Note not accepted in the Asset Sale Offer
shall be promptly mailed or delivered by the Company to the Holder thereof.
The Company shall publicly announce in a newspaper of national circulation
or in a press release provided to a nationally recognized financial wire
service the results of the Asset Sale Offer on or as soon as practicable
after the Purchase Date.
Other than as specifically provided in this Section 3.09, any
redemption pursuant to this Section 3.09 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent (other than the Company or a Subsidiary), holds at
least one Business Day before that date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. Such Paying Agent shall
return to the Company, no later than five days following the date of payment,
any money (including accrued interest, if any) that exceeds such amount of
principal, premium, if any, and interest paid on the Notes.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any
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Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office of the Trustee or Registrar)
where Notes may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
SECTION 4.03. SEC REPORTS.
Whether or not required by the federal securities laws or the rules
and regulations of the SEC, so long as any Notes are outstanding, the Company
shall furnish to the Holders of Notes
(i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Company were required to file such Forms including, in addition to the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" with respect to the Company and its Subsidiaries required
pursuant to such Forms with respect to the annual information only, a
report thereon by the Company's certified independent accountants and
(ii) all current reports that would be required to be filed with the
SEC on Form 8-K if the Company were required to file such reports. Such
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information and reports shall be mailed to the Trustee at its address set
forth herein and to the Holders of Notes at their addresses appearing in
the register of Notes maintained by the Registrar,
(i) in the case of such information and reports that are
required to be filed with the SEC, within 15 days after such filing with
the SEC and
(ii) in the case of information and reports that are not required
to be so filed, within the same time periods as would have applied if such
information and reports had been required to be so filed.
If at any time during the period presented in such quarterly or annual financial
information, the Company has one or more Unrestricted Subsidiaries that singly
or together would constitute a Significant Subsidiary, all such quarterly and
annual financial information shall also include a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" with respect to the
Company and its Restricted Subsidiaries (if any) for such period. In addition,
whether or not required by the federal securities laws or the rules and
regulations of the SEC, the Company shall file a copy of all such information
and reports with the SEC for public availability (unless the SEC will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether each has kept, observed, performed and fulfilled in all
respects its obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to the best of his knowledge each
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in any respect in default in the performance or
observance of any of the terms, provisions and conditions hereof or thereof (or,
if such Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he may have knowledge and what action
each is taking or proposes to take with respect thereto).
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation reasonably satisfactory to the
Trustee) that in making the
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examination necessary for certification of such financial statements nothing has
come to their attention which would lead them to believe that either the Company
or any of its Subsidiaries has violated any provisions of Sections 4.01, 4.05,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 or 4.17 hereof or of
Article 5 of this Indenture or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any person for any
failure to obtain knowledge of any such violation.
(c) The Company will, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon becoming aware of
(i) any Default or Event of Default or
(ii) any event of default under any other mortgage, indenture or
instrument as that term is used in Section 6.01(v) which permits an
acceleration that could become an Event of Default, an Officers'
Certificate specifying such Default, Event of Default or event of default
and what action the Company is taking or proposes to take with respect
thereto.
SECTION 4.05. TAXES.
The Company shall, and shall cause each of its Subsidiaries to, pay
prior to delinquency all material taxes, assessments, and governmental levies
except as contested in good faith and by appropriate proceedings.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.
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SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS.
Subject to the other provisions of Section 4.07, the Company shall not
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly:
(i) declare or pay any dividend or make any distribution on account
of the Company's Equity Interests (other than dividends or distributions
payable to any Wholly Owned Restricted Subsidiary of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company;
(iii) purchase, redeem or otherwise acquire or retire for value
any Indebtedness that is subordinated to the Notes, except at final
maturity thereof as set forth in the original documentation governing such
Indebtedness; or
(iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (including Restricted
Payments permitted by clauses (v), (w) and (y) of the next succeeding
paragraph), is less than the sum of
(w) 50% of the Consolidated Net Income of the Company
(excluding the amount of all cash payments received by the Company and its
Wholly Owned Restricted Subsidiaries from URC or the APAO Joint Venture
after the date of this Indenture as fees for licensing of intellectual
property rights or other proprietary technology that are applied to an
Investment in either such joint venture pursuant to clause (d) of the
definition of "Permitted Investments") for the period (taken as one
accounting period) from the beginning
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of the first month commencing after the date of this Indenture to the end
of the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus
(x) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale since the date of this Indenture of Equity
Interests of the Company or of debt securities of the Company that have
been converted into such Equity Interests (other than Equity Interests (or
convertible debt securities) sold to a Subsidiary of the Company and other
than Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus
(y) to the extent that any Restricted Investment that was
made after the date of this Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of
(1) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition if any) and
(2) the initial amount of such Restricted Investment.
Notwithstanding anything to the contrary contained herein, the
provisions of this Section 4.07 shall not prohibit
(v) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such payment would
have complied with the provisions of this Indenture;
(w) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company or a Designated Unrestricted Subsidiary) of other
Equity Interests of the Company (other than any Disqualified Stock);
(x) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net proceeds from an incurrence of Permitted
Refinancing Indebtedness;
(y) the repurchase, redemption or other acquisitions or retirement
for value of any Equity Interests of the Company or any Restricted
Subsidiary of the Company held by any member of the Company's (or any of
its Restricted
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Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement; PROVIDED that
(1) the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $1.0 million in any
twelve-month period plus the aggregate cash proceeds received by the
Company during such twelve-month period from any reissuance of Equity
Interests by the Company to members of management of the Company and its
Restricted Subsidiaries and
(2) no Default or Event of Default shall have occurred and be
continuing immediately after such transaction; or
(z) Restricted Payments to the extent made with Equity Interests
(other than Disqualified Stock) of the Company.
In no event will the Company or any Restricted Subsidiary of the
Company make an Investment after the date of this Indenture in any Person in
which it has an Equity Interest on the date of this Indenture but which is not a
Subsidiary of the Company on the date of this Indenture, including any Guarantee
of Indebtedness of such Person, in excess of the aggregate cash received from
such Person after the date of this Indenture by the Company and its Wholly Owned
Restricted Subsidiaries as fees for the licensing of any intellectual property
rights or other proprietary technology.
Not later than the thirtieth day after the end of each calendar
quarter in which any Restricted Payment is made, the Company shall deliver to
the Trustee an Officers' Certificate stating that such Restricted Payment was
permitted and setting forth the basis upon which the calculations required by
this Section 4.07 were computed, which calculations may be based upon the
Company's latest available financial statements at the time such Officers'
Certificate is delivered.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if
(x) the Company would, at the time of such designation and after
giving pro forma effect thereto as if such designation had been made at the
beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of Section 4.09
of this Indenture and
(y) such designation would not cause a Default. For purposes of
making such determination, all outstanding Investments by the Company and
its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be
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Restricted Payments at the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
Section 4.07. All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the greater of
(y) the net book value of such Investments at the time of such
designation or
(z) the fair market value of such Investments at the time of
such designation.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
SECTION 4.08. LIMITATION ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any contractual encumbrance or other restriction on
the ability of any Restricted Subsidiary to
(i) (a) pay dividends or make any other distributions to the Company
or any of its Restricted Subsidiaries
(1) on its Capital Stock or
(2) with respect to any other interest or participation in,
or measured by, its profits or
(b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries,
(ii) make loans or advances to the Company or any of its Restricted
Subsidiaries or
(iii) transfer any of its properties or assets to the Company or
any of its Restricted Subsidiaries, in each case, except for such
encumbrances or restrictions existing under or by reason of
(a) applicable law,
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(b) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, provided that the
Consolidated Cash Flow of such Person is not taken into account in
determining whether such acquisition was permitted by the terms of this
Indenture,
(c) any Bank Credit Agreement, PROVIDED that such encumbrances
and restrictions are no more restrictive than such encumbrances and
restrictions under the New Credit Agreement as in effect on the date of
this Indenture,
(d) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices or
(e) purchase money obligations and Capital Lease Obligations for
property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property
so acquired.
SECTION 4.09. LIMITATION ON ADDITIONAL INDEBTEDNESS AND ISSUANCE
OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to create, incur, issue, assume, Guarantee or otherwise become
liable with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and the Company shall not issue any Disqualified Stock and shall
not permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; PROVIDED, HOWEVER, that the Company and any Subsidiary Guarantor may
incur Indebtedness (including Acquired Debt) or the Company may issue shares of
Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, with respect to any such Indebtedness incurred, or Disqualified
Stock issued, on or prior to December 1, 1997, and at least 2.25 to 1, with
respect to any such Indebtedness incurred, or Disqualified Stock issued, after
December 1, 1997, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period.
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Notwithstanding the foregoing, the limitations of this Section 4.09
shall not apply to:
(i) the incurrence by the Company and any Subsidiary Guarantor of
Senior Term Debt in an aggregate principal amount outstanding at any time
not to exceed $100 million less the aggregate amount of all repayments
after the date of this Indenture, optional or mandatory, of the principal
of such Indebtedness, including, without limitation, pursuant to the
provisions of Section 4.10 of this Indenture;
(ii) the incurrence by the Company and any Subsidiary Guarantor of
Senior Revolving Debt and letters of credit (and any Guarantees thereof by
the Company and any Subsidiary Guarantor) in an aggregate principal amount
at any time outstanding (with letters of credit and Guarantees being deemed
to have a principal amount equal to the maximum potential liability of the
Company and its Restricted Subsidiaries thereunder) not to exceed the
Borrowing Base less the aggregate amount of all permanent repayments of
Senior Revolving Debt made pursuant to clause (ii) of the first sentence of
Section 4.10(b) of this Indenture;
(iii) the incurrence by the Company and any Subsidiary Guarantor
of Acquisition Debt, if the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
Acquisition Debt is incurred, determined on a pro forma basis as if the
Acquisition Debt had been incurred and the related acquisition had been
consummated at the beginning of such four-quarter period, would be greater
than the actual Fixed Charge Coverage Ratio of the Company for such four-
quarter period;
(iv) the incurrence by the Company and any Subsidiary Guarantor of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, decrease or refund
Indebtedness that was permitted by this Indenture to be incurred;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries;
(vi) the incurrence in the ordinary course of business by the Company
and any Subsidiary Guarantor of Hedging Obligations;
(vii) the incurrence by the Company and any Subsidiary Guarantor
of Indebtedness pursuant to letters of credit issued in the ordinary course
of
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business to support payment by the Company and such Subsidiary Guarantors
of insurance premiums;
(viii) the incurrence by the Company of Existing Debt;
(ix) the incurrence of Indebtedness which also constitutes
Investments, to the extent permitted by the provisions of Section 4.07 of
this Indenture;
(x) the incurrence of Indebtedness for general corporate purposes by
any Foreign Subsidiary that is a Restricted Subsidiary and not a Subsidiary
Guarantor in an aggregate principal amount outstanding at any time not
exceeding such Foreign Subsidiary's Foreign Subsidiary Borrowing Base; and
(xi) the incurrence by the Company and any Subsidiary Guarantor of
additional Indebtedness in an aggregate principal amount outstanding at any
one time not exceeding $35 million.
SECTION 4.10. SALE OF ASSETS.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale unless
(i) the Company (or the Restricted Subsidiary, at the case may
be) receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board of Directors
set forth in an Officers' Certificate delivered to the Trustee) of the
assets or Equity Interests issued, sold or otherwise disposed of in such
Asset Sale less the amount of liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet or in the notes
thereto) and obligations assumed in connection with such Asset Sale by the
transferee of any such assets or on behalf of such transferee by a third
party and
(ii) except with respect to Asset Sales involving Obsolete
Plants, at least 80% of the consideration therefor received by the Company
or such Restricted Subsidiary (after deducting expenses associated with
such Asset Sale) is in the form of cash or Cash Equivalents; PROVIDED that
the amount of
(x) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet or in the notes thereto)
of the Company or such Restricted Subsidiary that are assumed in connection
with such Asset Sale by the transferee of any such assets or on behalf of
such transferee by a third party and
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(y) any notes or other obligations received by the Company
or any such Restricted Subsidiary from such transferee that are immediately
converted by the Company or such Restricted Subsidiary into cash or Cash
Equivalents and
(z) with respect to any Asset Sale for consideration not
exceeding $10.0 million, up to $10 million principal amount of notes or
other obligations received by the Company or such Restricted Subsidiary
from such transferee that are repaid in cash or Cash Equivalents to the
Company or such Restricted Subsidiary within 360 days after consummation of
such Asset Sale (to the extent of the cash or Cash Equivalents received),
shall be deemed to be cash for purposes of this provision.
(b) Within 360 days after the consummation of any Asset Sale, the
Company may apply the Net Proceeds from such Asset Sale, at its option,
(i) to reduce Senior Term Debt,
(ii) to repay Senior Revolving Debt or
(iii) to an acquisition of a Permitted Business, the making
of capital expenditures or the acquisition of other fixed assets, in each
case, engaged or used in a Permitted Business. At any time on or prior to
360 days following consummation of any Asset Sale, the Company may
designate all or any portion of the Net Proceeds from such Asset Sale as
"Excess Proceeds." Pending the final application of any such Net Proceeds
in accordance with the first sentence of this paragraph or to an Asset Sale
Offer, the Company may invest such Net Proceeds in any manner that is not
prohibited by this Indenture and may temporarily repay Senior Revolving
Debt. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph or which are designated
"Excess Proceeds" as provided above in this paragraph will constitute
"Excess Proceeds." Within 10 Business Days after the date on which the
aggregate amount of Excess Proceeds exceeds $25.0 million, the Company will
make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase
the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash equal to 100% of the principal
amount thereof plus accrued and unpaid interest thereon to the date of
purchase. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate
purposes. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
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(c) An Asset Sale Offer shall be made pursuant to the provisions of
Section 3.09 hereof. Simultaneously with the notification of such offer of
redemption to the Trustee as required by Sections 3.01, 3.03 and 3.09 hereof,
the Company shall provide the Trustee with an Officers' Certificate setting
forth the information required to be included therein by Section 3.01 hereof
and, in addition, setting forth the calculations used in determining the amount
of Net Proceeds to be applied to the redemption of Notes. If the aggregate
principal amount of Notes tendered pursuant to an Asset Sale Offer exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make any contract, agreement, understanding, loan, advance or guarantee with,
or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and
(ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction involving
aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (i) above and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors and
(b) with respect to any Affiliate Transaction involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Company or such Restricted Subsidiary of such Affiliate
Transaction from a financial point of view issued by an investment banking
firm of national standing; PROVIDED, HOWEVER, that
(x) any contract, agreement, understanding, payment, loan,
advance or guarantee (each a "Compensation Benefit") with, for the benefit
of, or to an executive officer of the Company as compensation for
employment by the Company, whether pursuant to an employment agreement, an
employee benefit plan or other compensation arrangement if either
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(1) such Compensation Benefit is less than $1 million
or
(2) is approved by the Compensation Committee or the
Board of Directors of the Company,
(y) transactions between or among the Company and/or its
Restricted Subsidiaries and
(z) Restricted Payments permitted by Section 4.07 of this
Indenture, in each case, shall not be deemed Affiliate Transactions.
SECTION 4.12. LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom, or assign or convey any right to receive any income or
profits therefrom, except Permitted Liens.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect
(a) its corporate existence, and the corporate, partnership or other
existence of each Subsidiary, in accordance with the respective
organizational documents (as the same may be amended from time to time) of
each Subsidiary and
(b) its (and its Subsidiaries') rights (charter and statutory),
licenses and franchises; PROVIDED, HOWEVER, that the Company shall not be
required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any Subsidiary, if the Board
of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and
its Subsidiaries taken as a whole and that the loss thereof is not adverse
in any material respect to the Holders.
SECTION 4.14. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to purchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer
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described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase (the "Change of Control Payment").
Within ten days following any Change of Control, the Company will mail a notice
to each Holder stating:
(1) that the Change of Control Offer is being made pursuant to
the provisions of this Section 4.14 and that all Notes properly tendered
will be accepted for payment;
(2) the purchase price and the purchase date, which will be no
earlier than 30 days nor later than 40 days from the date such notice is
mailed (the "Change of Control Payment Date");
(3) that any Note not properly tendered will continue to accrue
interest;
(4) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer will cease to accrue interest after the Change of
Control Payment Date;
(5) that Holders electing to have any Notes purchased pursuant
to a Change of Control Offer will be required to surrender the Notes, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Notes completed, or transfer by book-entry, to the Paying Agent at the
address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the
second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have such Notes
purchased; and
(7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered (or transferred by book-entry), which
unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof. The Company will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes in connection
with a Change of Control.
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(b) On the Change of Control Payment Date, the Company will, to the
extent lawful,
(1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer,
(2) deposit with the Paying Agent an amount equal to the Change
of Control Payment in respect of all Notes or portions thereof so tendered
and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes so tendered and the Change of Control Payment for
such Notes, and the Trustee will promptly authenticate and mail (or cause
to be transferred by book entry) to each Holder a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered, if
any; PROVIDED that each such new Note will be in a principal amount of
$1,000 or an integral multiple thereof. The Paying Agent shall promptly
(but in any case not later than three Business Days after the Purchase
Date) mail or deliver to each tendering Holder an amount equal to the
purchase price with respect to the Notes tendered by such Holder and
accepted by the Company for purchase. The Company shall publicly announce
in a newspaper of national circulation or in a press release provided to a
nationally recognized financial wire service the results of the Change of
Control Offer on or as soon as practicable after the Change of Control
Payment Date.
SECTION 4.15. LIMITATION ON ISSUANCES AND SALES OF CAPITAL
STOCK OF WHOLLY OWNED RESTRICTED SUBSIDIARIES.
The Company
(i) shall not, and shall not permit any Wholly Owned Restricted
Subsidiary of the Company to, transfer, convey or sell any Capital Stock of
any Wholly Owned Restricted Subsidiary of the Company to any Person (other
than to the Company or a Wholly Owned Restricted Subsidiary of the
Company), unless
(a) such transfer, conveyance or sale is of all the Capital
Stock of such Wholly Owned Restricted Subsidiary and
(b) the cash Net Proceeds from such transfer, conveyance or sale
are applied in accordance with the provisions of Section 4.10 of this
Indenture and
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(ii) shall not permit any Wholly Owned Restricted Subsidiary of the
Company to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to
any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
SECTION 4.16. SUBSIDIARY GUARANTEES.
The Company shall cause all Subsidiaries of the Company that are
designated or are otherwise deemed to be Restricted Subsidiaries after the date
of this Indenture (other than Foreign Subsidiaries) to execute Subsidiary
Guarantees. The Company may, at its option, cause any Restricted Subsidiary
that is a Foreign Subsidiary to execute a Subsidiary Guarantee.
SECTION 4.17. LIMITATION ON APPLICABILITY OF COVENANTS.
During any period that
(i) the ratings assigned to the Notes by each of Standard & Poor's
Rating Group and Moody's Investors Services (collectively, the "Ratings
Agencies") are higher than BBB-or Baa3, respectively (the "Investment Grade
Ratings") and
(ii) no Default or Event of Default has occurred and is continuing,
the Company and its Restricted Securities will not be subject to Sections
4.07, 4.09 and 4.10 (collectively "Suspended Covenants"). If one or both
Rating Agencies withdraws its rating or downgrades its Investment Grade
Rating, then thereafter the Company and its Restricted Subsidiaries will be
subject to the Suspended Covenants (until the Rating Agencies have again
assigned Investment Grade Ratings to the Senior Notes) and compliance with
the Suspended Covenants with respect to Restricted Payments made after the
time of such withdrawal or downgrade will be calculated in accordance with
Section 4.07 as if such covenant had been in effect at all times after the
date of this Indenture. The Company shall promptly notify the Trustee of
the occurrence of any change in the applicability of any sections of this
Indenture pursuant to this Section 4.17.
ARTICLE 5
SUCCESSORS
SECTION 5.01. LIMITATIONS ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL
ASSETS.
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey
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or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another Person unless:
(i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state
thereof or the District of Columbia,
(ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
under the Notes and this Indenture pursuant to a supplemental Indenture in
a form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists; and
(iv) the Company or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall
have been made
(A) will have Consolidated Net Worth (immediately after the
transaction but prior to any purchase accounting adjustments resulting from
the transaction) equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and
(B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning
of the applicable four-quarter period, be permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of Section 4.09 of this Indenture.
The Company shall deliver to the Trustee prior to the consummation of
the proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture if applicable comply with this Indenture. The Trustee shall be
entitled to conclusively rely upon such Officers' Certificate and Opinion of
Counsel.
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SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation, merger,
sale, lease, conveyance or other disposition, the provisions of this Indenture
referring to the "Company" shall refer instead to the successor corporation and
not to the Company), and may exercise every right and power of the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; PROVIDED, HOWEVER, that the Company shall not be
released or discharged from the obligation to pay the principal of or interest
on the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(i) default for 30 days in the payment when due of interest on any
Note;
(ii) default in payment when due of the principal of or premium, if
any, on any Note;
(iii) failure by the Company for 30 days to comply with any of the
provisions described under Sections 4.07, 4.09, 4.10 or 4.14 of this
Indenture;
(iv) failure by the Company for 60 days after notice to comply with
any of its other agreements in this Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of this Indenture, which default
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(a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness prior to the expiration of a period
of 10 days after expiration of any grace period provided in such
Indebtedness (as amended from time to time) (a "Payment Default") or
(b) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10.0 million or more
(excluding the principal amount of the Notes and excluding any acceleration
of maturity of the Indebtedness represented by the Old Notes to the extent
that such Indebtedness shall be redeemed on or prior to the 30th day after
the date of this Indenture);
(vi) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $5.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days;
(vii) except as permitted by this Indenture or if, at the time
thereof, the obligor under such Subsidiary Guarantee is and is permitted to
be designated as an Unrestricted Subsidiary without causing a Default, any
Subsidiary Guarantee of a Significant Subsidiary shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Subsidiary Guarantor that is a
Significant Subsidiary, or any Person acting on behalf of any such
Subsidiary Guarantor, shall deny or disaffirm, in writing, its obligation
under its Subsidiary Guarantee;
(viii) the Company or any of its Restricted Subsidiaries that are
Significant Subsidiaries pursuant to or within the meaning of any
Bankruptcy Law
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(d) makes a general assignment for the benefit of its creditors,
(e) generally is unable to pay its debts as the same become due;
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(ix) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that
(a) is for relief against the Company or any of its Restricted
Subsidiaries that are Significant Subsidiaries in an involuntary case,
(b) appoints a Custodian of the Company or any of its Restricted
Subsidiaries that are Restricted Subsidiaries or for all or substantially
all of their property,
(c) orders the liquidation of the Company or any of its
Restricted Subsidiaries that are Significant Subsidiaries, and the order or
decree remains unstayed and in effect for 60 days; or
(x) the Letter of Credit is not issued on or prior to November 30,
1994.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (viii) and (ix) of Section 6.01, with respect to the Company or any
Restricted Subsidiary that is a Significant Subsidiary) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least 25%
in principal amount of the then outstanding Notes by written notice to the
Company and the Trustee may declare the unpaid principal of and any accrued
interest on all the Notes to be due and payable immediately. Upon such
declaration the principal and interest shall be due and payable immediately. If
an Event of Default specified in clause (viii) or (ix) of Section 6.01 occurs
with respect to the Company or any Restricted Subsidiary that is a Significant
Subsidiary, such an amount shall IPSO FACTO become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. In the event of a declaration of acceleration of the Notes because an
Event of Default in Section 6.01(v) hereof has occurred and is continuing, such
declaration of acceleration shall be automatically annulled if the holders of
the Indebtedness described in Section 6.01(v) hereof have rescinded the
declaration of acceleration in respect of such Indebtedness within 15 Business
Days thereof and if
(i) the annulment of such acceleration would not conflict with any
judgment or decree of a court of competent jurisdiction,
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(ii) all existing Events of Default, except non-payment of principal
or interest which shall have become due solely because of the acceleration,
have been cured or waived and
(iii) the Company has delivered an Officers' Certificate to the
Trustee to the effect of clauses (i) and (ii) above. In accordance with
the provisions of Section 6.04, the Holders of a majority in principal
amount of the then outstanding Notes by written notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal or interest that has become due solely
because of the acceleration) have been cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of Section 3.07 of this Indenture, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the Notes. If an Event of Default
occurs prior to December 1, 1999 by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding the prohibition on redemption of the Notes prior to such date, then the
Make-whole Premium shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal or interest on
the Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
(1) Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under this
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Indenture (except a continuing Default or Event of Default in the payment of
interest or premium on, or the principal of, any Note held by a non-consenting
Holder). Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
(2) The Trustee may, without the consent of any Holders of the Notes,
waive any Event of Default that relates to untimely or incomplete reports or
information if the legal rights of the Holders would not be materially adversely
affected thereby and may waive any other defaults the effect of which would not
materially adversely affect the rights of the Holders under this Indenture.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, that the Trustee determines may be unduly prejudicial to
the rights of other Noteholders, or that may involve the Trustee in personal
liability.
SECTION 6.06. LIMITATION ON SUITS.
A Noteholder may pursue a remedy with respect to this Indenture or the
Notes only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
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(5) during such 60-day period the Holders of a majority in aggregate
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or adversely affected without the
consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid on the Notes and interest on overdue
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Noteholder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Noteholders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a
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Lien on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties which the Holders of the Notes may be entitled
to receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Noteholder in any
such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07, including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Trustee and the costs and expenses of
collection;
Second: to Noteholders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal, premium and interest, respectively;
Third: without duplication, to Holders of Notes for any other
Obligations owing to the Holders of Notes under the Notes or this Indenture; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Noteholders.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
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ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(1) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(2) Except during the continuance of an Event of Default:
(a) The duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(3) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) This paragraph does not limit the effect of paragraph (2) of
this Section.
(b) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(c) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(1), (2) and (3) of this Section.
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(5) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(6) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(1) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel. The Trustee may consult
with counsel and the written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11. Subject to the provisions of Section 310(b) of the TIA, the
Trustee shall be permitted to engage
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in transactions with the Company and its Subsidiaries other than those
contemplated by this Indenture.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company or upon the Company's direction under
any provision hereof. The Trustee shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee and
it shall not be responsible for any statement or recital herein or any statement
in the Notes or any other document in connection with the sale of the Notes or
pursuant to this Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
Subject to Section 6.04(2), if a Default or Event of Default occurs
and is continuing and if it is known to the Trustee, the Trustee shall mail to
Noteholders a notice of the Default or Event of Default within 90 days after it
obtains knowledge of the existence of such Event of Default. Except in the case
of a Default or Event of Default in payment of principal, premium or interest on
any Note, the Trustee may withhold the notice if and so long as a committee of
its Responsible Officers in good faith determines that withholding the notice is
in the interests of Noteholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each October 15 beginning with the October 15
following the date of this Indenture, the Trustee shall mail to Noteholders a
brief report dated as of such reporting date that complies with TIA Section
313(a) (but if no event described in TIA Section 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA Section 313(b). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).
Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to Noteholders shall be filed
with the SEC and each stock exchange on which the Notes are listed. The Company
shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
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SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents, employees,
officers and directors against any and all losses, liabilities or expenses
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, except as set forth in the
next paragraph. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own negligence or bad
faith.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(viii) or (ix) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
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The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by any Noteholder who has been a
Noteholder for at least six months fails to comply with Section 7.10, such
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Noteholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums owing
to the Trustee hereunder have been paid and subject to the Lien provided for in
Section 7.07. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 hereof shall continue
for the benefit of the retiring Trustee.
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SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee power, shall be subject to supervision or examination by Federal or
state authority and shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and 310(a)(5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, with respect to
the Notes, elect to have either Section 8.02 or 8.03 be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.02, the Company shall be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "LEGAL
DEFEASANCE"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes, which shall thereafter be
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deemed to be "outstanding" only for the purposes of Section 8.05 and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder:
(a) the rights of Holders of outstanding Notes to receive solely from
the trust fund described in Section 8.04, and as more fully set forth in
such Section, payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due,
(b) the Company's obligations with respect to such Notes under
Sections 2.03, 2.05, 2.06, 2.07, 2.10 and 4.02,
(c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and
(D) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 with respect to the Notes.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.03, the Company shall be released from its
obligations under the covenants contained in Sections 4.03, 4.04, 4.07, 4.08,
4.09, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16 and 4.17 and Article Five with respect
to the outstanding Notes on and after the date the conditions set forth below
are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01(iii) or
(iv), but, except as specified above, the remainder of this Indenture and such
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Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 of the option applicable to this Section 8.03, Sections
6.01(iii) through 6.01(vii) shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or Section 8.03 to the outstanding Notes:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 who shall agree to comply with the provisions of this
Article Eight applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes,
(a) cash in U.S. Dollars in an amount, or
(b) non-callable Government Securities which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment, cash in U.S. Dollars in an amount, or
(c) a combination thereof, in such amounts, as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge the principal
of, premium, if any, and interest on the outstanding Notes on the stated
maturity or on the applicable redemption date, as the case may be, and the
Company must specify whether the Notes are being defeased to maturity or to
a particular redemption date of such principal or installment of principal,
premium, if any, or interest; PROVIDED that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such non-
callable Government Securities to said payments with respect to the Notes;
(2) In the case of an election under Section 8.02, either
(i) (A) the Notes will become due and payable at their stated
maturity within one year after the date of such election pursuant to
Section 8.02 or, within one year after the date of such election, the Notes
will be redeemable at the option of the Company and will be redeemed by the
Company pursuant to irrevocable instructions issued to the Trustee at the
time of such
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election for the giving of a notice of redemption by the Trustee for such
redemption and
(B) the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States reasonably satisfactory to the
Trustee to the effect that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to Federal income tax in the
same amount, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred or
(ii) the Company shall have delivered to the Trustee an Opinion
of Counsel in the United States reasonably satisfactory to the Trustee
confirming that
(A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or
(B) since the date hereof, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such opinion shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance has
not occurred;
(3) In the case of an election under Section 8.03, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably satisfactory to the Trustee to the effect that the Holders of
the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to Federal income tax in the same amount, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had
not occurred;
(4) No Default or Event of Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit or, in so far
as Section 6.01(viii) or (ix) is concerned, at any time in the period
ending on the 91st day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until the expiration of
such period);
(5) Such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture or
any
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other material agreement or instrument to which the Company is a party or
by which the Company is bound;
(6) In the case of an election under either Section 8.02 or 8.03, the
Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Company pursuant to its election under
Section 8.02 or 8.03 was not made by the Company with the intent of
preferring the Holders over other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and
(7) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating
that all conditions precedent provided for relating to either the Legal
Defeasance under Section 8.02 or the Covenant Defeasance under Section 8.03
(as the case may be) have been complied with as contemplated by this
Section 8.04.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06, all money and Government Securities
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant
to Section 8.04 in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or Government Securities
deposited pursuant to Section 8.04 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or Government Securities held by it as provided in
Section 8.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under
Section 8.04(1)), are in excess of the amount thereof which would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
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SECTION 8.06. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
Dollars or Government Securities in accordance with Section 8.02 or 8.03, as the
case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's obligations under this Indenture and the Notes shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.02 or
8.03 until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.02 or 8.03, as the case may be;
PROVIDED, HOWEVER, that, if the Company makes any payment of principal of,
premium, if any, or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent and provided further that if such order or judgment is issued in
connection with the insolvency, receivership or other similar occurrence with
respect to the Trustee, upon the reinstatement of such obligations the Company
shall be released from its obligations under Sections 4.03, 4.04, 4.07, 4.08,
4.09, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16 and 4.17.
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ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture,
any supplemental indenture relating to Subsidiary Guarantees or the Notes
without the consent of any Noteholder to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's obligations
to Holders of Notes in the case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of Notes or
that does not materially adversely affect the legal rights under this Indenture
of any such Holder, or to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company, accompanied by a resolution of its
Board of Directors authorizing the execution of any such supplemental indenture,
and upon receipt by the Trustee of the documents described in Section 9.06
hereof, the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental indenture which affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture or
the Notes with the written consent of the Holders of at least a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for the Notes) and any existing
Default (including, without limitation, an acceleration of the Notes) or
compliance with any provision of this Indenture or the Notes may be waived with
the written consent of the Holders of at least a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes).
Upon the request of the Company, accompanied by a resolution of its
Board of Directors authorizing the execution of any such supplemental indenture,
and upon the filing with the Trustee of evidence satisfactory to the Trustee of
the consent of the Noteholders as aforesaid, and upon receipt by the Trustee of
the documents described in Section 9.06 hereof, the Trustee shall join with the
Company in the execution of such supplemental indenture unless such supplemental
indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which
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case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After a supplement, amendment or waiver under this Section becomes
effective, the Company shall mail to the Holders of each Note affected thereby a
notice briefly describing the supplement, amendment or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture,
amendment or waiver. Subject to Sections 6.04(1) and 6.07 hereof, the Holders
of a majority in principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Noteholder
affected, a supplement, amendment or waiver under this Section may not (with
respect to any Notes held by a non-consenting Noteholder):
(1) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to redemption of the Notes other than
pursuant to Sections 3.09, 4.10 and 4.14 hereof;
(3) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(4) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on any Note (except a recision of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default
that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the
Note;
(6) make any change in Section 6.04(1) or 6.07 hereof or in this
sentence of this Section 9.02 or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(7) waive a redemption payment with respect to any Note (other than a
payment required by the provisions of Sections 4.10 or 4.14 hereof); or
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(8) make any change in the foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until a supplement, amendment or waiver becomes effective, a consent
to it by a Noteholder is a continuing consent by the Noteholder and every
subsequent Noteholder or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Noteholder or subsequent Noteholder may revoke the
consent as to its Note if the Trustee receives written notice of revocation
before the date the waiver or amendment becomes effective. An amendment or
waiver becomes effective in accordance with its terms and thereafter binds every
Noteholder.
The Company may fix a record date for determining which Holders must
consent to such amendment or waiver. If the Company fixes a record date, the
record date shall be fixed at
(i) the later of 30 days prior to the first solicitation of such
consent or the date of the most recent list of Holders furnished to the
Trustee prior to such solicitation pursuant to Section 2.05, or
(ii) such other date as the Company shall designate.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about a supplement,
amendment or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the supplement, amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such supplement, amendment or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely affect
the
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rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental indenture, the Trustee shall be entitled to receive,
if requested, an indemnity reasonably satisfactory to it and to receive and,
subject to Section 7.01, shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that it
is not inconsistent herewith, and that it will be valid and binding upon the
Company in accordance with its terms. The Company may not sign an amendment or
supplemental indenture until the Board of Directors approves it.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA SECTION 318(c), the duties imposed by TIA Section
318(c) shall control.
SECTION 10.02. NOTICES.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in Person or mailed by first-class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company:
Rexene Corporation
5005 LBJ Freeway
Occidental Tower, Suite 500
Dallas, Texas 75244
Attention: General Counsel
Telecopier No.: (214) 450-9017
If to the Trustee:
Bank One, Texas, N.A.
8111 Preston Road, Second Floor
Dallas, Texas 75225
Attention: Corporate Trust Dept.
Telecopier No.: (214) 360-3980
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The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Noteholders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Noteholder shall be mailed by
first-class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Noteholders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
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(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been complied with.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 10.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized or
obligated by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
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SECTION 10.08. NO RECOURSE AGAINST OTHERS.
No director, officer, employee, incorporator or stockholder of the
Company or any Subsidiary Guarantor, as such, shall have any liability for any
Obligations of the Company or any Subsidiary Guarantor under the Notes, this
Indenture or any Subsidiary Guarantee or for any claim based on, in respect of
or by reason of such obligations or their creation. Each Noteholder by
accepting a Note waives and releases all such liability. This waiver and
release are part of the consideration for issuance of the Notes.
SECTION 10.09. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
SECTION 10.10. GOVERNING LAW.
The internal law of the State of New York shall govern and be used to
construe this Indenture and the Notes (without regard to conflicts of law
provisions). Each party hereto irrevocably submits itself to the non-exclusive
jurisdiction of the state and federal courts of New York for purposes of this
Indenture and agrees and consents that service of process may be made upon it in
any legal proceeding relating to this Indenture by any means allowed under
federal or New York law. The parties hereto hereby waive and agree not to
assert, by way of motion, as a defense or otherwise, that any such proceeding is
brought in an inconvenient forum or that the venue thereof is improper.
SECTION 10.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 10.12. SUCCESSORS.
All agreements of the Company in this Indenture, and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successor.
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SECTION 10.13. SEVERABILITY.
In case any provision in this Indenture or the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.14. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 10.15. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
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SIGNATURES
Dated as of November 29, 1994
REXENE CORPORATION
By:________________________
Name:
Title:
Attest:_____________________
Dated as of November 29, 1994
BANK ONE, TEXAS, N.A.
By:__________________________
Name:
Title:
Attest:______________________
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EXHIBIT A
(Face of Security)
11-3/4% Senior Notes due 2004
No. $__________
REXENE CORPORATION
promises to pay to _______________________________________
or registered assigns, the principal sum of ___________________
Dollars on December 1, 2004.
Interest Payment Dates: June 1 and December 1, commencing June 1, 1995
Record Dates: May 15 and November 15 (whether or not a Business Day)
REXENE CORPORATION
By:_____________________________
Name:
Title:
TRUSTEE CERTIFICATE OF AUTHENTICATION
Dated: _________________
This is one of the By:_______________________________
Notes referred to in the Name:
within-mentioned Indenture: Title:
Bank One, Texas, N.A.,
as Trustee
By:__________________________
(Authorized Signature)
<PAGE>
(Back of Security)
11-3/4% Senior Notes due 2004
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Rexene Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate and in the manner specified below.
Interest on the Notes will accrue at the rate of 11-3/4% per annum and
will be payable semi-annually in arrears on June 1 and December 1, commencing on
June 1, 1995, or if any such day is not a Business Day, on the next succeeding
Business Day (each an "Interest Payment Date"), to Holders of record on the
immediately preceding May 15 and November 15.
Interest will be computed on the basis of a 360-day year of twelve
30-day months. Interest on the Notes will accrue from the most recent date to
which interest has been paid or duly provided for or, if no interest has been
paid or duly provided for, from the date of original issuance of the Notes. To
the extent lawful, the Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate of 1% per annum in excess of the then applicable interest rate on the
Notes; it shall pay interest on overdue installments of interest (without regard
to applicable grace periods) at the same rate, to the extent lawful,
(i) if payment is made during the period of five Business Days
following the date on which such interest was due, to the Persons who
were to receive payment on the date such interest was due or
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(ii) if payment is made after such period, to the Persons who are
Noteholders on a subsequent special record date, which date shall be
at the earliest practicable date but in all events at least five
Business Days prior to the payment date.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date next preceding the Interest Payment
Date, even if such Notes are cancelled after such record date and on or before
such Interest Payment Date. Principal, premium, if any, and interest on the
Notes will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York, or at the option of the Company,
payment of interest may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
PROVIDED that all payments with respect to Notes the Holders of which have given
wire transfer instructions to the Company and the Trustee will be required to be
made by wire transfer of immediately available funds to the accounts specified
by the Holders thereof. The Company will pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially the Trustee under the
Indenture will act as Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice to any Noteholder. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of November 29, 1994 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code SECTION Section 77aaa-77bbbb) as in
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effect on the date of the Indenture. The Notes are subject to all such terms,
and Holders are referred to the Indenture and such Act for a statement of such
terms. The terms of the Indenture shall govern any inconsistencies between the
Indenture and the Notes. Terms not otherwise defined herein shall have the
meanings assigned in the Indenture. The Notes are general unsecured obligations
of the Company limited to $175,000,000 in aggregate principal amount.
5. OPTIONAL REDEMPTION.
The Notes are not redeemable at the Company's option prior to December
1, 1999. Thereafter, the Notes will be subject to redemption, at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning December 1
of the years indicated below:
YEAR PRINCIPAL AMOUNT
---- ----------------
1999 . . . . . . . . . . . . . . . . . . . . . . . . . 105.875%
2000 . . . . . . . . . . . . . . . . . . . . . . . . . 103.917
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 101.958
2002 and thereafter. . . . . . . . . . . . . . . . . . 100.000%
Notwithstanding the foregoing, prior to December 1, 1997, the Company may,
from time to time, redeem up to $58.3 million in aggregate principal amount of
Notes, upon not less than 30 nor more than 60 days' notice, at a redemption
price of 110% of
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the principal amount thereof plus accrued and unpaid interest thereon to the
redemption date, with the net proceeds of an offering or offerings of common
stock of the Company; provided that at least $100.0 million in aggregate
principal amount of Notes remains outstanding immediately after the occurrence
of each such redemption; and provided, further, that each such redemption shall
occur within 60 days of the date of the closing of the related offering of
common stock of the Company.
6. MANDATORY REDEMPTION.
Subject to the Company's obligation to make an offer to repurchase Notes
under certain circumstances pursuant to Sections 4.10 and 4.14 of the Indenture
(as described in paragraph 7 below), the Company is not required to make
mandatory redemption or sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
offer to purchase all or any part (equal to $1,000 or an integral multiple
thereof) of each Holder's Notes at a purchase price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any, to
the date of purchase. Holders of Notes that are subject to an offer to purchase
will receive an offer to purchase from the Company prior to any related purchase
date, and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
(b) If the Company consummates any Asset Sale, the Company will be
required, under certain circumstances, to apply the Excess Proceeds thereof to
an offer to all Holders of Notes to purchase the maximum principal amount of
Notes that may be purchased out of the Excess Proceeds at an offer price in cash
equal to 100% of the
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principal amount of the Notes plus accrued and unpaid interest, if any, to the
date of purchase, in accordance with the procedures set forth in the Indenture.
Holders of Notes that are subject to an offer to purchase will receive an offer
to purchase from the Company prior to any related purchase date, and may elect
to have such Notes purchased by completing the form entitled "Option of Holder
to Elect Purchase" appearing below.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in face
denominations of $1,000 and integral multiples of $1,000. The Notes may be
transferred and exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption. Also, it need not
(i) register the transfer of or exchange any Notes during any period
(a) beginning at the opening of business on a Business Day 15 days
before the day of any selection of Notes for redemption and ending at the
close of business on the day of selection or
(b) beginning at the opening of business on a Business Day 15 days
before an interest payment date and ending on the close of business on such
interest payment date or
(ii) register the transfer or exchange of any Note selected for redemption
in whole or in part, except the unredeemed portion of any Note being
redeemed in part.
A-6
<PAGE>
9. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for
registration of the transfer of this Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name this Note is registered as
its absolute owner for the purpose of receiving payment of principal of and
interest on this Note and for all other purposes whatsoever, whether or not this
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered holder of a Note shall be
treated as its owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture and the Notes may be amended or supplemented with the written consent
of the Holders of at least a majority in principal amount of the then
outstanding Notes, and any existing Default (except a Default or Event of
Default relating to the payment of principal, premium or interest) or compliance
with any provision of the Indenture or the Notes may be waived with the written
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes. Without the consent of any Holder, the Indenture or the
Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's obligations
to Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not materially adversely affect the legal rights of any such Holder
under the Indenture, or to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
11. DEFAULTS AND REMEDIES. Events of Default include in summary form:
(i) default for 30 days in the payment when due of interest on the Notes;
A-7
<PAGE>
(ii) default in payment when due of the principal of or premium, if any, on
the Notes;
(iii) failure by the Company for 30 days to comply with any of the
provisions described under Sections 4.07, 4.09, 4.10 or 4.14 of the
Indenture;
(iv) failure by the Company for 60 days after notice to comply with any of
its other agreements in the Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries), whether such Indebtedness or guarantee now
exists or is created after the date of the Indenture, which default
(a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of a period of 10
days after expiration of any grace period provided in such Indebtedness (as
amended from time to time) (a "Payment Default") or
(b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10 million or more (excluding
the principal amount of the Notes and excluding any acceleration of
maturity of the Indebtedness represented by the Old Notes to the extent
that such Indebtedness shall be redeemed on or prior to the 30th day after
the date of the Indenture);
A-8
<PAGE>
(vi) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $5 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
(vii) except as permitted by the Indenture or if, at the time thereof,
the obligor under such Subsidiary Guarantee is and is permitted to be
designated as an Unrestricted Subsidiary without causing a Default, any
Subsidiary Guarantee of a Significant Subsidiary shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Subsidiary Guarantor that is a
Significant Subsidiary, or any Person acting on behalf of any such
Subsidiary Guarantor, shall deny or disaffirm, in writing, its obligation
under its Subsidiary Guarantee; or
(viii) certain events of bankruptcy or insolvency with respect to the
Company or any Restricted Subsidiary that is a Significant Subsidiary. If
any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, with respect to the Company or any
Restricted Subsidiary that is a Significant Subsidiary, all outstanding
Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in
the Indenture. The Trustee may require indemnity satisfactory to it before
it enforces the Indenture or the Notes. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or
Event of Default (except a Default or Event of Default relating to the
payment of principal, premium or interest) if it determines that
withholding notice is in their
A-9
<PAGE>
interest. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
12. TRUSTEE DEALINGS WITH THE COMPANY. Subject to the provisions of the
Indenture, the Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Subject to
the provisions of Section 310(b) of the Trust Indenture Act, the Trustee shall
be permitted to engage in transactions with the Company and its Subsidiaries
other than those contemplated by this Indenture.
13. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of the Company or any Subsidiary Guarantor, as such,
shall have any liability for any obligations of the Company or any Subsidiary
Guarantor under the Notes, the Indenture or any Subsidiary Guarantee or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes, by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
14. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
15. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
A-10
<PAGE>
16. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Rexene Corporation
5005 LBJ Freeway
Occidental Tower, Suite 500
Dallas, Texas 75244
Attention: General Counsel
A-11
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: _________________________
Your Signature:_____________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee. *
- ----------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by the
Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, state the amount you elect to
have purchased (if all, write "ALL"): $___________
Date:________________ Your Signature:______________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:________________
Signature Guarantee. *
- ------------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-13
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSIDIARY GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, between __________________ (the "Subsidiary Guarantor"), a
subsidiary of Rexene Corporation (or its successor), a Delaware corporation (the
"Company"), and Bank One, Texas, N.A., a national banking association, as
trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of November 29, 1994, providing
for the issuance of an aggregate principal amount of $175,000,000 of 11-3/4%
Senior Notes due 2004 (the "Notes");
WHEREAS, Section 4.16 of the Indenture provides that under certain
circumstances the Company is required to cause the Subsidiary Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the Subsidiary Guarantor shall unconditionally guarantee all of the Company's
Obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and
conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
B-1
<PAGE>
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Subsidiary Guarantor hereby agrees as
follows:
(a) The Subsidiary Guarantor, jointly and severally with all other
Subsidiary Guarantors, if any, unconditionally guarantees to each Holder of
a Note authenticated and delivered by the Trustee and to the Trustee and
its successors and assigns, regardless of the validity and enforceability
of the Indenture, the Notes and the Obligations of the Company under the
Indenture and the Notes, that:
(i) the principal of, premium and interest on the Notes will be
promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of, premium,
if any, and interest on the Notes, to the extent lawful, and all other
Obligations of the Company to the Holders or the Trustee thereunder will be
promptly paid in full, all in accordance with the terms thereof; and
(ii) in case of any extension of time for payment or renewal of
any Notes or any of such other obligations, that the same will be promptly
paid in full when due in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
B-2
<PAGE>
Notwithstanding the foregoing, in the event that this Subsidiary Guarantee
would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of
the Subsidiary Guarantor under this Supplemental Indenture and its
Subsidiary Guarantee shall be reduced to the maximum amount permissible
under such fraudulent conveyance or similar law.
3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.
(a) To evidence its Subsidiary Guarantee set forth in this
Supplemental Indenture, the Subsidiary Guarantor hereby agrees that a
notation of such Subsidiary Guarantee substantially in the form of
EXHIBIT C to the Indenture shall be endorsed by an officer of such
Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee after the date hereof.
(b) Notwithstanding the foregoing, the Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee set forth herein shall remain in full
force and effect notwithstanding any failure to endorse on each Note a
notation of such Subsidiary Guarantee.
(c) If an officer whose signature is on this Supplemental Indenture
or on the Subsidiary Guarantee no longer holds that office at the time the
Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed,
the Subsidiary Guarantee shall be valid nevertheless.
(d) The delivery of any Note by the Trustee, after the authentication
thereof under the Indenture, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Supplemental Indenture on behalf of
the Subsidiary Guarantor.
B-3
<PAGE>
(e) The Subsidiary Guarantor hereby agrees that its obligations
hereunder shall be unconditional, regardless of the validity, regularity or
enforceability of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
(f) The Subsidiary Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and
covenants that its Subsidiary Guarantee made pursuant to this Supplemental
Indenture will not be discharged except by complete performance of the
obligations contained in the Notes and the Indenture.
(g) If any Holder or the Trustee is required by any court or
otherwise to return to the Company or the Subsidiary Guarantors, or any
Custodian, Trustee, liquidator or other similar official acting in relation
to either the Company or the Subsidiary Guarantors, any amount paid by
either to the Trustee or such Holder, the Subsidiary Guarantee made
pursuant to this Supplemental Indenture, to the extent theretofore
discharged, shall be reinstated in full force and effect.
(h) The Subsidiary Guarantor agrees that it shall not be entitled to
any right of subrogation in relation to the Holders in respect of any
Obligations guaranteed hereby until payment in full of all Obligations
guaranteed hereby. The Subsidiary Guarantor further agrees that, as
between the Subsidiary Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand:
B-4
<PAGE>
(i) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture for the purposes of
the Subsidiary Guarantee made pursuant to this Supplemental Indenture,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby; and
(ii) in the event of any declaration of acceleration of such
Obligations as provided in Article 6, such Obligations (whether or not due
and payable) shall forthwith become due and payable by the Subsidiary
Guarantor for the purpose of the Subsidiary Guarantee made pursuant to this
Supplemental Indenture.
(i) The Subsidiary Guarantor shall have the right to seek
contribution from any other non-paying Subsidiary Guarantor so long as the
exercise of such right does not impair the rights of the Holders under the
Subsidiary Guarantee made pursuant to this Supplemental Indenture.
4. SUBSIDIARY GUARANTOR MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5 of the Indenture, nothing
contained in the Indenture, this Supplemental Indenture or in the Notes
shall prevent any consolidation or merger of the Subsidiary Guarantor with
or into the Company or any other Subsidiary Guarantor or shall prevent any
transfer, sale or conveyance of the property of the Subsidiary Guarantor as
an entirety or substantially as an entirety, to the Company or any other
Subsidiary Guarantor.
(b) Except as set forth in Article 4 of the Indenture, nothing
contained in the Indenture, this Supplemental Indenture or in the Notes
shall prevent any consolidation or merger of the Subsidiary Guarantor with
or into a corporation
B-5
<PAGE>
or corporations other than the Company or any other Subsidiary Guarantor
(in each case, whether or not affiliated with the Subsidiary Guarantor), or
successive consolidations or mergers in which a Subsidiary Guarantor or its
successor or successors shall be a party or parties, or shall prevent any
sale or conveyance of the property of a Subsidiary Guarantor as an entirety
or substantially as an entirety, to a corporation other than the Company or
any other Subsidiary Guarantor (in each case, whether or not affiliated
with the Subsidiary Guarantor) authorized to acquire and operate the same;
PROVIDED, HOWEVER, that the Subsidiary Guarantor hereby covenants and
agrees that, upon any such consolidation, merger, sale or conveyance, the
due and punctual performance and observance of all of the covenants and
conditions of the Indenture and this Supplemental Indenture to be performed
by such Subsidiary Guarantor, shall be expressly assumed (in the event that
the Subsidiary Guarantor is not the surviving corporation in the merger),
by supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee, by the corporation formed by such consolidation,
or into which the Subsidiary Guarantor shall have been merged, or by the
corporation which shall have acquired such property.
(c) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form
to the Trustee, of the Subsidiary Guarantee made pursuant to this
Supplemental Indenture and the due and punctual performance of all of the
covenants and conditions of the Indenture and this Supplemental Indenture
to be performed by the Subsidiary Guarantor, such successor corporation
shall succeed to and be substituted for the Subsidiary Guarantor with the
same effect as if it had been named herein as the Subsidiary Guarantor.
Such successor corporation thereupon may cause to be signed any or all of
the Subsidiary Guarantees to be endorsed upon the Notes issuable under the
Indenture which theretofore shall not have been signed by the
B-6
<PAGE>
Company and delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under the
Indenture and this Supplemental Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms of the
Indenture and this Supplemental Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution hereof.
5. RELEASES FOLLOWING SALE OF ASSETS. Concurrently with any sale of
assets (including, if applicable, all of the Capital Stock of the Subsidiary
Guarantor), all Liens in favor of the Trustee in the assets sold thereby shall
be released; provided that in the event of an Asset Sale, the Net Proceeds from
such sale or other disposition are treated in accordance with the provisions of
Section 4.10 of the Indenture. If the assets sold in such sale or other
disposition include all or substantially all of the assets of the Subsidiary
Guarantor or all of the Capital Stock of the Subsidiary Guarantor, then the
Subsidiary Guarantor (in the event of a sale or other disposition of all of the
Capital Stock of such Subsidiary Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Subsidiary Guarantor) shall be released from and
relieved of its obligations under this Supplemental Indenture and its Subsidiary
Guarantee made pursuant hereto or Section 4 of this Supplemental Indenture, as
the case may be; provided that in the event of an Asset Sale, the Net Proceeds
from such sale or other disposition are treated in accordance with the
provisions of Section 4.10 of the Indenture. Upon delivery by the Company to
the Trustee of an Officers' Certificate to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of the
Indenture and this Supplemental Indenture, including without limitation, Section
4.10 of the Indenture, the Trustee shall execute any documents reasonably
required in order to evidence the release of the Subsidiary Guarantor from its
obligations under this Supplemental Indenture and its Subsidiary Guarantee made
pursuant hereto. If the Subsidiary Guarantor is not released from its
Obligations under its Subsidiary
B-7
<PAGE>
Guarantee, it shall remain liable for the full amount of principal of, premium,
if any, and interest on the Notes and for the other Obligations of such
Subsidiary Guarantor under the Indenture as provided in this Supplemental
Indenture.
6. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture (without regard
to conflicts of law provisions). Each party hereto irrevocably submits itself
to the non-exclusive jurisdiction of the state and federal courts of New York
for purposes of this Supplemental Indenture and agrees and consents that service
of process may be made upon it in any legal proceeding relating to this
Supplemental Indenture by any means allowed under federal or New York law. The
parties hereto hereby waive and agree not to assert, by way of motion, as a
defense or otherwise, that any such proceeding is brought in an inconvenient
forum or that the venue thereof is improper.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
B-8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ____________ ___, ____ [Subsidiary Guarantor]
By: ___________________________
Name:
Title:
Dated: ____________ ___, ____ Bank One, Texas, N.A.
as Trustee
By: ___________________________
Name:
Title:
B-9
<PAGE>
EXHIBIT C
FORM OF NOTATION ON SENIOR NOTE RELATING TO SUBSIDIARY GUARANTEE
Each Subsidiary Guarantor (as defined in the Indenture (the
"Indenture") referred to in the Note upon which this notation is endorsed),
(i) has jointly and severally unconditionally guaranteed
(a) the due and punctual payment of the principal of, premium
with respect to, and interest on the Notes, whether at maturity or an
interest payment date, by acceleration, call for redemption or otherwise,
(b) the due and punctual payment of interest on the overdue
principal and premium of and interest on the Notes, and
(c) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, the same will be promptly paid
in full when due in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise and
(ii) has agreed to pay any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any holder in
enforcing any rights under this Subsidiary Guarantee.
Notwithstanding the foregoing, in the event that the Subsidiary
Guarantee of any Subsidiary Guarantor would constitute or result in a violation
of any applicable fraudulent conveyance or similar law of any relevant
jurisdiction, the liability of such
C-1
<PAGE>
Subsidiary Guarantor under its Subsidiary Guarantee shall be reduced to the
maximum amount permissible under such fraudulent conveyance or similar law.
No director, officer, employee, agent, manager, stockholder or other
Affiliate (other than the other Subsidiary Guarantors) of the Subsidiary
Guarantors, as such, shall have any liability for any obligations of the
Subsidiary Guarantors under the Indenture, any supplemental indenture delivered
pursuant to Section 4.16 of the Indenture by such Subsidiary Guarantors or the
Subsidiary Guarantees, or for any claim based on, in respect of or by reason of
such obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability.
This Subsidiary Guarantee shall be binding upon the Subsidiary
Guarantors and their successors and assigns and shall inure to the benefit of
the successors and assigns of the Trustee and the Holders and, in the event of
any transfer or assignment of rights by any Holder or the Trustee, the rights
and privileges herein conferred upon that party shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
[Subsidiary Guarantor]
By: ___________________________
Name:
Title:
C-2
<PAGE>
REXENE CORPORATION
1995 ANNUAL INCENTIVE BONUS PLAN
I. PURPOSE
The Rexene Annual Incentive Bonus Plan (AIB) is designed to reward key
employees for their contribution to the achievement of both corporate
financial and individual performance objectives.
II. DEFINITIONS
FINANCIAL FORMULA PORTION - that portion of an individual's bonus that is
paid, contingent upon the company achieving certain formula financial
targets. These targets will be established annually and consider the
annual business plan, industry and general economic conditions. This
portion shall represent 70% of an individual's target award opportunity.
NON-FINANCIAL INDIVIDUAL PORTION - that portion of an individual's bonus
that is paid, contingent upon the individual achieving certain documented
performance objectives. This portion shall represent 30% of an
individual's target award opportunity.
TARGET AWARD OPPORTUNITY - expressed as a percent of base salary, the total
bonus award to be paid if both formula financial targets and individual
performance objectives are achieved.
III. TARGET AWARD OPPORTUNITY
The target award opportunity for the financial formula and non-financial
individual portions, expressed as a percent of base salary is as follows:
<TABLE>
<CAPTION>
TARGET TARGET
FINANCIAL TARGET TOTAL
POSITION FORMULA INDIVIDUAL OPPORTUNITY
-------- --------- ---------- -----------
<S> <C> <C> <C>
CEO 70% 30% 100%
EXEC. MGMT.
COMMITTEE 56% 24% 80%
DIV. V. P. 42% 18% 60%
BUS. DIRECTORS 35% 15% 50%
</TABLE>
<PAGE>
1995 Annual Incentive Bonus Plan
Page Two
IV. MAXIMUM FINANCIAL FORMULA BONUS
An individual may receive up to 150% of his target financial formula bonus
if the company achieves financial objectives significantly exceeding
targeted levels. Schedule I attached details financial targets and related
formula bonus payout potentials.
V. MAXIMUM NON-FINANCIAL INDIVIDUAL BONUS
An individual may receive up to 100% of his target non-financial individual
bonus in accordance with the following qualitative evaluations of
achievement. Schedule II attached provides the format for establishing and
evaluating objectives.
VI. GENERAL PROVISIONS
ELIGIBILITY
- Participants are eligible for pro rata bonus consideration under this
plan if they have completed at least six (6) months of service in one
or more bonus eligible positions and do not participate in any other
incentive program.
- Participants who are terminated during the fiscal year for any reason,
except cause, shall be eligible to receive a pro rata formula
financial bonus based on year-end financial results. Participants who
voluntarily resign their employment prior to the end of the fiscal
year shall not be entitled to any bonus payment.
- Payment of bonuses will occur as determined by the Compensation
Committee of the Board of Directors, but in no case later than the
week following the announcement of year-end earnings.
VII. ADMINISTRATION
The Senior Vice President of Human Resources and Administration shall be
responsible for the administration of this program. The Board of Directors
is the sole interpreter and arbitrator of the general and specific
provisions of this plan and has the sole authority to approve awards
recommended by the Chief Executive Officer within the parameters of this
plan or to amend or modify them, if necessary, to provide equitable bonus
oportunity for participants.
<PAGE>
Schedule I
REXENE CORPORATION
FINANCIAL FORMULA BONUS SCHEDULE - 1995
(In Millions of $ Except Per Share and % Data)
(Interpolation Where Necessary)
<TABLE>
<CAPTION>
FINANCIAL FORMULA TARGETS
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
% OF TARGET
EARNINGS NET OPERATING FINANCIAL FORMULA
PER SHARE INCOME INCOME BONUS PAID
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 0.09 1.7 30 0%
$ 1.10 21 60 25%
$ 2.11 40 90 60%
$ 3.13 59 120 100%
$ 3.47 66 130 120%
$ 4.15 79 150 150%
</TABLE>
Note: The stated financial target is earnings per share (EPS), and assumes
stated levels of net and operating income.
EPS targets also assume planned levels of interest expense net of $25.4
million and an income tax rate of approximately 38% and weighted average
shares of 19 million. Adjustments will be made to the EPS target to
reflect unplanned changes in capital structure, tax rates or other
unusual charges or events.
<PAGE>
US $180,000,000
CREDIT AGREEMENT
DATED AS OF NOVEMBER 29, 1994
AMONG
REXENE CORPORATION,
AS BORROWER,
THE BANK OF NOVA SCOTIA,
AS AGENT,
AND
THE LENDERS SIGNATORY HERETO
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 TERMS DEFINED ABOVE . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 CERTAIN DEFINED TERMS . . . . . . . . . . . . . . . . . . . . 1
Section 1.03 ACCOUNTING TERMS AND DETERMINATIONS . . . . . . . . . . . . . 21
ARTICLE II
COMMITMENTS
Section 2.01 LOANS AND LETTERS OF CREDIT . . . . . . . . . . . . . . . . . 22
Section 2.02 BORROWINGS, CONTINUATIONS, CONVERSIONS AND LETTERS OF CREDIT 23
Section 2.03 CHANGES OF REVOLVING CREDIT COMMITMENTS . . . . . . . . . . . 25
Section 2.04 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.05 SEVERAL OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 27
Section 2.06 NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.07 PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.08 ASSUMPTION OF RISKS . . . . . . . . . . . . . . . . . . . . . 29
Section 2.09 OBLIGATION TO REIMBURSE AND TO PREPAY . . . . . . . . . . . . 29
Section 2.10 LENDING OFFICES . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 REPAYMENT OF LOANS . . . . . . . . . . . . . . . . . . . . . 31
Section 3.02 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.02 PRO RATA TREATMENT . . . . . . . . . . . . . . . . . . . . . 33
Section 4.03 COMPUTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.04 NON-RECEIPT OF FUNDS BY THE AGENT . . . . . . . . . . . . . . 34
Section 4.05 SET-OFF, SHARING OF PAYMENTS, ETC. . . . . . . . . . . . . . 34
Section 4.06 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-i-
<PAGE>
ARTICLE V
CAPITAL ADEQUACY
Section 5.01 EURODOLLAR REGULATIONS, ETC. . . . . . . . . . . . . . . . . 38
Section 5.02 LIMITATION ON EURODOLLAR ADVANCES . . . . . . . . . . . . . . 40
Section 5.03 ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.04 BASE RATE LOANS PURSUANT TO SECTIONS 5.01, 5.02 AND 5.03 . . 41
Section 5.05 COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.06 REPLACEMENT LENDERS . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 INITIAL FUNDING . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.02 INITIAL AND SUBSEQUENT LOANS AND LETTERS OF CREDIT . . . . . 46
Section 6.03 CONDITIONS RELATING TO LETTERS OF CREDIT . . . . . . . . . . 46
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01 CORPORATE EXISTENCE . . . . . . . . . . . . . . . . . . . . . 47
Section 7.02 FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . . . . 47
Section 7.03 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.04 NO BREACH . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.05 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.06 APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.07 USE OF LOANS . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.09 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.10 TITLES, ETC . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.11 NO MATERIAL MISSTATEMENTS . . . . . . . . . . . . . . . . . . 50
Section 7.12 INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . . . . 50
Section 7.13 PUBLIC UTILITY HOLDING COMPANY ACT . . . . . . . . . . . . . 50
Section 7.14 SUBSIDIARIES AND PARTNERSHIPS . . . . . . . . . . . . . . . . 51
Section 7.15 LOCATION OF BUSINESS AND OFFICES . . . . . . . . . . . . . . 51
Section 7.16 DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.17 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . 51
Section 7.18 COMPLIANCE WITH THE LAW . . . . . . . . . . . . . . . . . . . 52
Section 7.19 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.20 RESTRICTION ON LIENS . . . . . . . . . . . . . . . . . . . . 53
Section 7.21 MATERIAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII
-ii-
<PAGE>
AFFIRMATIVE COVENANTS
Section 8.01 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 53
Section 8.02 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.03 MAINTENANCE, INSURANCE, ETC. . . . . . . . . . . . . . . . . 56
Section 8.04 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . 57
Section 8.05 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 58
Section 8.06 PERFORMANCE OF OBLIGATIONS . . . . . . . . . . . . . . . . . 58
Section 8.07 ERISA INFORMATION AND COMPLIANCE . . . . . . . . . . . . . . 58
Section 8.08 LOCKBOX . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.09 BORROWING BASE AUDIT . . . . . . . . . . . . . . . . . . . . 59
Section 8.10 STAY, EXTENSION AND USURY LAWS . . . . . . . . . . . . . . . 59
Section 8.11. REAL ESTATE APPRAISALS . . . . . . . . . . . . . . . . . . . 59
Section 8.12. WAREHOUSE LEASES . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01 DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.02 LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.03 INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.04 RESTRICTED PAYMENTS . . . . . . . . . . . . . . . . . . . . . 62
Section 9.05 SALES AND LEASEBACKS . . . . . . . . . . . . . . . . . . . . 62
Section 9.06 NATURE OF BUSINESS . . . . . . . . . . . . . . . . . . . . . 63
Section 9.07 LIMITATION ON LEASES . . . . . . . . . . . . . . . . . . . . 63
Section 9.08 MERGERS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.09 PROCEEDS OF NOTES . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.10 ERISA COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.11 SALE OR DISCOUNT OF RECEIVABLES . . . . . . . . . . . . . . . 65
Section 9.12 LEVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.13 FIXED CHARGE COVERAGE RATIO . . . . . . . . . . . . . . . . . 65
Section 9.14 INTEREST COVERAGE RATIO . . . . . . . . . . . . . . . . . . . 66
Section 9.15 SALE OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . 66
Section 9.16 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . 66
Section 9.17 SUBSIDIARIES AND PARTNERSHIPS . . . . . . . . . . . . . . . . 67
Section 9.18 NEGATIVE PLEDGE AGREEMENTS . . . . . . . . . . . . . . . . . 67
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . 68
Section 10.02 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . 70
-iii-
<PAGE>
ARTICLE XI
THE AGENT
Section 11.01 APPOINTMENT, POWERS AND IMMUNITIES . . . . . . . . . . . . . 71
Section 11.02 RELIANCE BY AGENT . . . . . . . . . . . . . . . . . . . . . 71
Section 11.03 DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 11.04 RIGHTS AS A LENDER . . . . . . . . . . . . . . . . . . . . . 72
Section 11.05 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 72
Section 11.06 NON-RELIANCE ON AGENT AND OTHER LENDERS . . . . . . . . . . 72
Section 11.07 ACTION BY AGENT . . . . . . . . . . . . . . . . . . . . . . 73
Section 11.08 RESIGNATION OF AGENT . . . . . . . . . . . . . . . . . . . . 73
ARTICLE XII
MISCELLANEOUS
Section 12.01 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 12.02 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.03 PAYMENT OF EXPENSES, INDEMNITIES, ETC. . . . . . . . . . . . 74
Section 12.04 AMENDMENTS, ETC. . . . . . . . . . . . . . . . . . . . . . . 77
Section 12.05 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . 77
Section 12.06 ASSIGNMENTS AND PARTICIPATIONS . . . . . . . . . . . . . . . 77
Section 12.07 INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 12.08 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 12.09 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 12.10 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 12.11 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 12.12 NO ORAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 79
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . . . . . . 80
Section 12.14 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 12.15 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . 82
Section 12.16 RELEASES OF LIENS . . . . . . . . . . . . . . . . . . . . . 83
Section 12.17 EFFECTIVENESS . . . . . . . . . . . . . . . . . . . . . . . 83
-iv-
<PAGE>
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Term Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D-1(a) - Form of Legal Opinion of Thompson & Knight
Exhibit D-1(b) - Form of Legal Opinion of Patterson, Belknap, Webb & Tyler
Exhibit D-2 - Form of Legal Opinion of Bayard, Handelman & Murdoch, P.A.
Exhibit D-3 - Form of Legal Opinion of Cohne, Rappaport & Segal
Exhibit D-4 - Form of Legal Opinion of Foley & Lardner
Exhibit D-5 - Form of Legal Opinion of Arnall, Golden & Gregory
Exhibit E - List of Security Instruments
Exhibit F - Form of Assignment Agreement
Exhibit G - List of Commitments
Schedule 6.02 - Subsequent Security Instruments
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.18 - Compliance with the Law
Schedule 7.19 - Insurance
Schedule 7.21 - Material Agreements
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments
-v-
<PAGE>
CREDIT AGREEMENT dated as of November 29, 1994, among: REXENE
CORPORATION, a Delaware corporation (the "BORROWER"); each of the lenders that
is a signatory hereto or which becomes a signatory hereto as provided in
Section 12.06 (individually, together with its successors and assigns, a
"LENDER" and, collectively, the "LENDERS"); and THE BANK OF NOVA SCOTIA (in its
individual capacity, "SCOTIABANK"), as agent for the Lenders (in such capacity,
together with its successors in such capacity, the "AGENT").
R E C I T A L S
A. The Borrower has requested that the Lenders provide certain loans and
extensions of credit on behalf of the Borrower; and
B. The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 TERMS DEFINED ABOVE. As used in this Agreement, the terms
"AGENT," "BORROWER," "LENDER," "LENDERS," and "SCOTIABANK" shall have the
meanings indicated above.
Section 1.02 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings (all terms defined in this Article I or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and VICE VERSA):
"ADDITIONAL COSTS" shall have the meaning assigned such term in
Section 5.01(a).
"ADJUSTED CONSOLIDATED NET INCOME" shall mean with respect to the
Borrower and its Consolidated Subsidiaries, for any period, the aggregate
of the net income (or loss) of the Borrower and its Consolidated
Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP; PROVIDED that there shall be excluded from such net
income (to the extent otherwise included therein) the following: (a) the
net income of any Person in which the Borrower or any Consolidated
Subsidiary has an interest (which interest does not cause the net income of
such other Person to be consolidated with the net income of the Borrower
and its Consolidated Subsidiaries in accordance with GAAP), except to the
extent of the amount of dividends or distributions actually paid in such
period by such other Person to the Borrower or to a Consolidated
Subsidiary, as the case may be; (b) the net income (but not loss) of any
Consolidated Subsidiary to the extent that the declaration or payment of
dividends or similar distributions or transfers or loans by that
Consolidated Subsidiary is not at the time permitted by operation of the
terms of its charter or any agreement, instrument or
<PAGE>
Governmental Requirement applicable to such Consolidated Subsidiary, or is
otherwise restricted or prohibited in each case determined in accordance
with GAAP; (c) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (d) any extraordinary gains or losses, including gains or
losses attributable to Property sales not in the ordinary course of
business; and (e) the cumulative effect of a change in accounting
principles and any gains or losses attributable to writeups or writedowns
of assets.
"ADJUSTED EBITDA" shall mean, for any period, the sum of Adjusted
Consolidated Net Income for such period plus the following expenses or
charges to the extent deducted from Adjusted Consolidated Net Income in
such period: interest, taxes, depreciation and amortization.
"AFFECTED LOANS" shall have the meaning assigned such term in
Section 5.04.
"AFFILIATE" of any Person shall mean (a) any Person directly or
indirectly controlled by, controlling or under common control with such
first Person, (b) any director or officer of such first Person or of any
Person referred to in clause (a) above, and (c) if any Person in clause (a)
above is an individual, any member of the immediate family (including
parents, spouse and children) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "CONTROL" (including, with its
correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH")
shall mean any Person which owns directly or indirectly 10% or more of the
securities having ordinary voting power for the election of directors or
other governing body of a corporation or 10% or more of the partnership or
other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to control such corporation or
other Person.
"AGREEMENT" shall mean this Credit Agreement, as the same may from
time to time be amended or supplemented.
"AGGREGATE COMMITMENTS" at any time shall equal the sum of the
Commitments of the Lenders.
"APAO" shall mean amorphous polyalphaolefins.
"APAO JOINT VENTURE" shall mean a joint venture between the Borrower
and any other Person, other than URC, providing for the manufacture and
sale of APAO outside of the United States and Canada in geographic regions
in which URC does not do business.
"APAO VENTURE INVESTMENT" shall mean each of the following Investments
by the Borrower and its Restricted Subsidiaries in the APAO Joint Venture:
(i) Investments of cash in an aggregate amount outstanding at any time
(measured by their fair market value as of the date made) not in excess of
the aggregate cash received after the date of this
-2-
<PAGE>
Agreement by the Borrower and its Restricted Subsidiaries from the APAO
Joint Venture as fees for the licensing to the APAO Joint Venture of any
intellectual property rights or other proprietary technology relating to
the manufacture of APAO and (ii) the amount of the Guarantee by the
Borrower and any Restricted Subsidiary of Debt of the APAO Joint Venture in
a principal amount not exceeding $15,000,000 less all Investments made by
the Borrower and the Restricted Subsidiaries to satisfy their obligations
under any such Guarantee.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the lending office of such Lender (or an Affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or
such other offices of such Lender (or of an Affiliate of such Lender) as
such Lender may from time to time specify to the Agent and the Borrower as
the office by which its Loans of such Type are to be made and maintained.
"APPLICABLE MARGIN" shall mean, for the first twelve-month period
following the Closing Date, (a) three-fourths of one percent (3/4 of 1%)
per annum with respect to Base Rate Loans and (b) one and three-fourths
percent (1-3/4%) per annum with respect to Eurodollar Advances.
Thereafter, the Applicable Margin for Base Rate Loans and Eurodollar
Advances will be determined quarterly based on the ratio of consolidated
Debt of the Borrower and its Consolidated Subsidiaries to Adjusted EBITDA
on a trailing four-quarter basis, as follows (with changes in Applicable
Margin to occur 60 days after the applicable quarter end, so long as
Borrower has supplied the computation required by subsection 8.01(j) within
the 45 days required under such subsection). (In the event the Borrower
does not timely supply the required computations, the Agent shall have the
right, with the consent of the Majority Lenders, to set the Applicable
Margin based upon the most recent applicable information available to the
Agent):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Debt < 1.5 to 1.0 >1.5 to 1.0 >2.0 to 1.0 >3.0 to 1. >4.0 to 1.0 >5.0 to
to Adjusted - - - - -
EBITDA < 2.0 to 1.0 < 3.0 to 1.0 < 4.0 to 1.0 < 5.0 to 1.0 1.0
Ratio
- --------------------------------------------------------------------------------------------------------------
Eurodollar 1% 1.25% 1.5% 1.75% 2% 2.5%
Advances
- --------------------------------------------------------------------------------------------------------------
Base Rate 0% .25% .5% .75% 1% 1.5%
Loans
- --------------------------------------------------------------------------------------------------------------
</TABLE>
"ASSET SALE" means the sale or conveyance of any non-current tangible
assets of the Borrower or any Restricted Subsidiary (including, without
limitation, by way of sale and leaseback, but specifically excluding a sale
and leaseback of an asset occurring within 150 days after the completion of
construction or acquisition of such asset) other than in the ordinary
course of business.
"ASSIGNMENT" shall have the meaning assigned such term in
Section 12.06(b).
-3-
<PAGE>
"BASE RATE" shall mean, with respect to any Base Rate Loan, for any
day, the higher of (a) the Federal Funds Rate for any such day plus 1/2 of
1% or (b) the rate of interest most recently established by Scotiabank at
its New York office as its base rate for Dollar loans in the U.S. Each
change in any interest rate provided for herein based upon the Base Rate
resulting from a change in the Base Rate shall take effect at the time of
such change in the Base Rate.
"BASE RATE LOANS" shall mean Loans that bear interest at rates based
upon the Base Rate.
"BORROWING BASE" shall mean at any time the sum of (i) 85% of the
value of all Eligible Accounts, (ii) 65% of the value of all Eligible
Inventory composed of raw materials, work in progress and finished goods
which are readily convertible into cash without material discount and, in
the case of finished goods, are held for sale in the ordinary course of
business, and (iii) 50% of the value of all other Eligible Inventory (which
shall only consist of packaging materials) provided, however, Eligible
Inventory shall never be permitted to exceed 50% of the Borrowing Base and,
further provided, however, Eligible Inventory in the aggregate consisting
of finished goods inventory at nonowned locations, on consignment and in
transit (as to which satisfactory lien waivers have not been delivered to
the Agent) shall never exceed a $15,000,000 portion of the Borrowing Base.
"BORROWING BASE REPORT" shall mean the report of the Borrower to be
delivered pursuant to Section 8.01(h), and being in a form mutually
satisfactory to Borrower and Agent.
"BUSINESS DAY" shall mean (i) any day other than a day on which
commercial banks are authorized or required to close in New York, New York
and, (ii) if such term is used in the definition of "Quarterly Date" in
this Section 1.02 or if such day relates to a borrowing or continuation of,
a payment or prepayment of principal of or interest on, or a conversion of
or into, or the Interest Period for, a Eurodollar Advances or a notice by
the Borrower with respect to any such borrowing or continuation, payment,
prepayment, conversion or Interest Period, any day which is also a day on
which dealings in Dollar deposits are carried out in the London interbank
market.
"CAPITAL LEASE OBLIGATION" shall mean, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"CAPITAL STOCK" shall mean (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participation, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited), and (iv) any other
interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the
issuing Person.
-4-
<PAGE>
"CHANGE OF CONTROL" means the occurrence of any of the following (i)
the acquisition by any Person (or group of Persons acting together) of a
direct or indirect interest in more than 50% of the voting power of the
voting stock of the Borrower, by way of merger or consolidation or
otherwise, or (ii) the first day on which a majority of the members of the
board of directors of the Borrower are not Continuing Directors. For
purposes of this definition, any transfer of an Equity Interest of an
entity that was formed for the purpose of acquiring voting stock of the
Borrower will be deemed to be a transfer of such portion of such voting
stock as corresponds to the portion of the equity of such entity that has
been so transferred, and the acquisition of voting power of the voting
stock of the Borrower by any Subsidiary of the Borrower shall be
disregarded.
"CLOSING DATE" shall mean November 29, 1994.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"COMMITMENT" shall mean, for any Lender, its obligation to make Loans
as provided in Section 2.01(a) and Section 2.01(b) and to participate in
the Letters of Credit as provided in Section 2.01(c), up to the sum of
(a) the amount set forth opposite such Lender's name under the caption
"Revolving Credit Loans" on Exhibit G, and (b) the amount set forth
opposite such Lender's name under the caption "Term Loans" on Exhibit G, as
the same may be modified from time to time to reflect any assignments
permitted by Section 12.06(b).
"CONSOLIDATED NET WORTH" shall mean, as at any date, the sum of
the Borrower's and its Consolidated Subsidiaries' consolidated net
worth determined (without duplication) in accordance with GAAP, but
exclusive of increases to Consolidated Net Worth attributable to the
income of Unrestricted Subsidiaries.
"CONSOLIDATED SUBSIDIARIES" shall mean each Restricted Subsidiary of
the Borrower (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated
with the financial statements of the Borrower in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the board of directors of the Borrower who (i) was a member of
such board of directors on the Closing Date or (ii) was nominated for
election or elected to such board of directors with the affirmative vote of
a majority of the Continuing Directors who were members of such board at
the time of such nomination or election.
"CONTRACT OBLIGATIONS" means contractual obligations of the Borrower
and any Restricted Subsidiary to repay or credit to a third party amounts
advanced by such third party (or its Affiliates) to the Borrower or any
Restricted Subsidiary. The amount of Contract Obligations outstanding as
of any date shall be equal to the aggregate amount of remaining payments
required to be made by, and credits required to be given by, the
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Borrower and/or the Restricted Subsidiary under the agreements related
to such Contract Obligations at such time.
"CURRENCY AGREEMENT" shall mean the obligation of any Person pursuant
to any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such Person against
fluctuations in currency values.
"CURRENT FUNDED DEBT" means the Borrower's Debt under:
(i) Borrower's existing Increasing Rate First Priority Notes Due
1999;
(ii) Borrower's existing Increasing Rate Second Priority Notes Due
2002;
(iii) Borrower's existing credit agreement with Transamerica
Business Credit Corporation.
"DEBT" shall mean, for any Person the sum of the following (without
duplication): (a) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
bankers' acceptances, letters of credit, surety or other bonds and similar
instruments; (c) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as Capital Lease
Obligations; (d) all Debt obligations of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person;
(e) all Debt obligations of others guaranteed by such Person; (f) all
obligations or undertakings of such Person to maintain or cause to be
maintained the financial position or financial covenants of other Persons;
(g) all obligations of such Person under Hedging Agreements and (h) all
obligations of such Person for the deferred payment for goods or services
which are treated as debt under GAAP (other than accounts payable arising
in the ordinary course of such Person's business).
"DEFAULT" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"DOLLARS" and "$" shall mean lawful money of the U.S.
"DOMESTIC SUBSIDIARY" means any Subsidiary of the Borrower organized
under the laws of a jurisdiction within the U.S.
"EFFECTIVE DATE" shall have the meaning assigned such term in
Section 12.17.
"ELIGIBLE ACCOUNTS" shall mean at any time an amount equal to the
aggregate net invoice or ledger amount owing on all trade accounts
receivable of the Borrower and any Restricted Subsidiary, for goods sold or
leased or services rendered in the ordinary course of business, in which
the Agent has a perfected, first priority security interest (subject only
to Excepted Liens which do not secure borrowed money), after deducting
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(a) the amount of all such accounts owing by account debtors having their
principal place of business in the U.S. that are unpaid for the earlier of
60 days after the due date of the original invoice or 120 days after the
date of the original invoice, (b) the amount of all such accounts owing by
account debtors which have 50% or more of their accounts owing to the
Borrower unpaid for the earlier of 60 days after the due date of the
original invoice or 120 days after the date of the original invoice, (c) in
a situation in which the accounts owing by a single account debtor exceeds
10% of all such accounts owing to the Borrower, then the amount of all such
accounts owing by such account debtor in excess of such 10% portion, unless
waived, as to a particular account debtor, in writing by the Agent
following consent by the Majority Lenders, (d) the amount on all such
accounts which are owed by account debtors having their principal place of
business outside of Canada, the U.S. or the Commonwealth of Puerto Rico
that are (i) not backed by a letter of credit satisfactory to the Agent or
otherwise not insured in a manner satisfactory to the Agent or (ii) (even
if backed by a letter of credit) unpaid for 60 days or more after the due
date of the original invoice, (e) the amount on all such accounts owing in
connection with non-trade products not sold in the ordinary course of
business, (f) the amount of all trade and other discounts, returns,
allowances, rebates, credits, concessions, unbilled amounts and adjustments
to such accounts, (g) all accounts owing by a Governmental Authority which
arise out of contracts between such Governmental Authority and the Borrower
or any Restricted Subsidiary, (h) all contra accounts, setoffs, defenses or
counterclaims asserted by the Persons obligated on such accounts, (i) the
amount billed for or representing retainage, if any, until all
prerequisites to the immediate payment of retainage have been satisfied,
(j) all such accounts owed by account debtors which are insolvent or
otherwise not satisfactory to the Agent or the Majority Lenders, (k) all
such accounts owing by officers or employees of the Borrower or by
Restricted Subsidiaries or any other Person in which the Borrower may have
an Equity Interest and (l) all such accounts from account payors located in
the States of Indiana, Minnesota or New Jersey unless Borrower has filed an
appropriate notice of business activity report (or similar report) for the
then current year with the appropriate Governmental Authority in such
states in each case.
"ELIGIBLE INVENTORY" shall mean at any time all inventory of 100% of
raw materials, 80% of work in process and 100% of finished goods then owned
by the Borrower or any Restricted Subsidiary (less any reserve for
obsolescence, any reserve for slow-moving inventory or any other similar
contra-account to inventory, all of which shall be reasonably satisfactory
to the Agent and the Majority Lenders) and held for use, sale or
disposition in the ordinary course of business, in which the Agent has a
perfected, first priority security interest (subject only to Excepted
Liens), valued at the lower of cost or market, exclusive of tools,
catalysts, spare parts, supplies (other than packaging materials) and book
inventory reserves in the general ledger and 20% of the aggregate of all
(i) finished goods inventory at nonowned locations, (ii) finished goods
inventory on consignment, and (iii) finished goods inventory in transit;
provided, however, such 20% exclusion shall not be applicable in situations
in which the owner or lessor at the inventory location has waived its
statutory or contract lien on such inventory to the Agent's reasonable
satisfaction.
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"ENVIRONMENTAL LAWS" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all
jurisdictions that may be applicable to the business or Property of the
Borrower or any Restricted Subsidiary, including without limitation, the
Oil Pollution Act of 1990 ("OPA"), the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of
1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term "oil" shall have
the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the
terms "solid waste" and "disposal" (or "disposed") have the meanings
specified in RCRA; provided, however, that (i) in the event either OPA,
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply prospectively only and only
subsequent to the effective date of such amendment and (ii) to the extent
the laws of the state in which any Property of the Borrower or any
Restricted Subsidiary is located establish a meaning for "oil," "hazardous
substance," "release," "solid waste" or "disposal" which is broader than
that specified in either OPA, CERCLA or RCRA, such broader meaning shall
apply, but only in such state.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security
which is convertible into, or exchangeable for, Capital Stock).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and any successor statute.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Restricted Subsidiary
would be deemed to be a "single employer" within the meaning of
section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of
section 414 of the Code.
"ERISA EVENT" shall mean (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder other than one
for which the PBGC has waived in writing the statutory notice requirement,
(ii) the withdrawal of the Borrower, any Subsidiary or any ERISA Affiliate
from a Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, (iii) the filing of a notice of
intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, (iv) the institution of
proceedings to terminate a Plan by the PBGC or (v) any other event or
condition which might constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Plan.
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"EURODOLLAR ADVANCES" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "Fixed
Eurodollar Rate" in this Section 1.02.
"EVENT OF DEFAULT" shall have the meaning assigned such term in
Section 10.01.
"EXCEPTED LIENS" shall mean:
(i) Liens securing payment of any Indebtedness, but exclusive of
Liens securing Hedging Agreements other than Hedging Agreements
with the Agent, a Lender or an Affiliate of a Lender;
(ii) Liens existing on Property as of the Closing Date and (if such
Liens are Liens for borrowed money or judgments or for taxes due
and payable which are delinquent and as to which the Borrower or
a Restricted Subsidiary (as applicable) has received written
notice) listed on Schedule 9.02.
(iii) Liens (other than as already permitted by other clauses of
this definition) on the Property (exclusive of inventory and
accounts) of the Borrower at its Odessa Texas plant after
the aggregate principal amount of the Term Loans is less
than $25,000,000, but only to the extent Debt hereafter
created or Contract Obligations hereafter created and
secured thereby is permitted to be incurred pursuant to
Section 9.01 or elsewhere in this Agreement, such Liens and
Debt do not otherwise cause an Event of Default hereunder,
such liens do not secure the Senior Unsecured Notes, and no
Event of Default exists hereunder at the time of creation of
such Liens;
(iv) Liens in favor of the Borrower or any Restricted Subsidiary,
which are junior, inferior and fully subordinate in right of
payment and as to enforcement of remedies to the Liens in favor
of the Agent as security for the Indebtedness.
(v) Liens existing on the Property of any Person at the time such
Person becomes a Restricted Subsidiary of the Borrower (excluding
Liens which were incurred in connection with, or in contemplation
of, such Person becoming a Restricted Subsidiary of the Borrower)
that do not extend to any other Property of the Borrower or its
Restricted Subsidiaries and as to which Borrower has used
reasonable efforts to reduce in size in situations where the Lien
in question is large in comparison to the obligation secured;
(vi) Liens on the shares of URC stock now owned or hereafter acquired
by the Borrower and on non U.S. patents of the Borrower licensed
to URC, in each case, to the extent and only to the extent
required pursuant to the
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agreements governing the URC Venture Investment, as amended from
time to time;
(vii) Liens on the non U.S. intellectual property rights licensed
to the APAO Joint Venture required pursuant to the
agreements governing the APAO Venture Investments;
(viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made therefor;
(ix) landlords', carriers', vendors', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising by
operation of law in the ordinary course of business;
(x) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(xi) deposits to secure the performance of bids, trade contracts,
statutory obligations, surety and appeal bonds, performance bonds
and other obligations of like nature incurred in the ordinary
course of business;
(xii) easements, rights of way, restrictions, licenses,
consignments and other similar encumbrances on any Property
of the Borrower or of any Restricted Subsidiary, including
Liens constituting leases or subleases to third parties
granted by the Borrower or any Restricted Subsidiary, in
each case to the extent incurred in the ordinary course of
business;
(xiii) judgment Liens which attach to Property after the Closing
Date and which do not constitute a Default;
(xiv) Liens on unearned premiums of insurance policies that secure
the financing of such premiums for such policies;
(xv) Liens arising pursuant to authority granted under CERCLA or RCRA
or pursuant to analogous state statutes, provided that the
aggregate of all obligations secured by such Liens in respect of
which the Borrower is carrying an asset on its books as a
noncurrent asset or is required to record a reserve in accordance
with GAAP which are secured by such Liens shall not exceed
$15,000,000 in the aggregate at any time;
(xvi) Liens on property existing at the time of acquisition
thereof by the Borrower or any Restricted Subsidiary of the
Borrower; provided that such Liens were in existence prior
to contemplation of such acquisition
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and as to which Borrower has used reasonable efforts to reduce in
size in situations where the Lien in question is large in
comparison to the obligation secured;
(xvii) Liens on assets of any Person (other than Borrower) which is
not a Restricted Subsidiary;
(xviii) Liens incurred to secure (A) Purchase Money Financings or
(B) Capital Lease Obligations but only, in the case of (A)
and (B), if such Liens do not extend to any assets other
than the assets purchased with the proceeds of the
corresponding Purchase Money Financing or which are the
subject of such Capital Lease Obligation, and in each case
to the extent the Debt secured thereby is permitted to be
incurred pursuant to Section 9.01;
(xix) Liens securing any extension, renewal or refunding of any
obligations secured by the foregoing Liens that do not
increase the obligations secured thereby and do not extend
such Lien to any assets other than those previously securing
such obligations.
"EXCESS CASH FLOW" shall mean, for the four fiscal quarters
immediately preceding the date of determination, Adjusted EBITDA PLUS non-
cash charges MINUS (a) the scheduled cash payments made for principal and
interest for such four fiscal quarters of the Borrower, (b) the lesser of
capital expenditures actually incurred and $20,000,000, (c) cash taxes paid
and (d) non cash credits on the income statement emanating from Contract
Obligations.
"EXISTING DEBT" shall mean all Debt of the Borrower and its Restricted
Subsidiaries outstanding on the Closing Date.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
a member of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, provided that (i) if the date for
which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day,
and (ii) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Agent on such
day on such transactions as determined by the Agent.
"FINAL MATURITY DATE" shall mean, unless the Term Notes are sooner
prepaid pursuant to Section 2.07 hereof, December 31, 1999.
"FINANCIAL STATEMENTS" shall mean the financial statement or
statements of the Borrower described or referred to in Section 7.02.
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"FIXED EURODOLLAR RATE" shall mean, with respect to any Eurodollar
Advances, the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) quoted by the Agent at approximately 11:00 a.m. London time (or
as soon thereafter as practicable) two Business Days prior to the first day
of the Interest Period for such Loan for the offering by the Agent to
leading lenders in the London interbank market of Dollar deposits having a
term comparable to such Interest Period and in an amount comparable to the
principal amount of the Eurodollar Advances to be made by the Lenders for
such Interest Period.
"FIXED RATE" shall mean, with respect to any Eurodollar Advances, a
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Agent to be equal to the quotient of (i) the Fixed
Eurodollar Rate for such Loan for the Interest Period for such Loan divided
by (ii) 1 minus the Reserve Requirement for such Loan for such Interest
Period.
"FOREIGN SUBSIDIARY" shall mean any Subsidiary of the Borrower
organized under the laws of a jurisdiction outside of the U.S. and not
operating in the U.S.
"GAAP" shall mean generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect on the Closing
Date provided, however, that for purposes of all determinations with
respect to accounting matters and all financial statements, certificates
and other reports as to financial matters required to be made or delivered
pursuant to this Agreement after the Closing Date, GAAP shall mean such
generally accepted accounting principles as are in effect from time to
time.
"GOVERNMENTAL AUTHORITY" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's
Property is located or which exercises valid jurisdiction over any such
Person or such Person's Property, and any court, agency, department,
commission, board, bureau or instrumentality of any of them including
monetary authorities which exercises valid jurisdiction over any such
Person or such Person's Property. Unless otherwise specified, all
references to Governmental Authority herein shall mean a Governmental
Authority having jurisdiction over, where applicable, the Borrower, its
Restricted Subsidiaries or any of their Properties or the Agent or, any
Lender or any Applicable Lending Office.
"GOVERNMENTAL REQUIREMENT" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
directive or requirement (whether or not having the force of law),
including, without limitation, Environmental Laws, energy regulations and
occupational, safety and health standards or controls, of any Governmental
Authority.
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"GUARANTEE" shall mean, with respect to any Person, a guarantee (other
than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner (including,
without limitation, letters of credit and reimbursement agreements in
respect thereof), of all or any part of any Debt that is owed by any other
Person.
"HEDGING AGREEMENTS" shall mean, with respect to any Person, the
obligations of such Person under (i) Currency Agreements, (ii) Interest
Rate Agreements and (iii) agreements to protect against fluctuations in the
price of feedstocks or products.
"HIGHEST LAWFUL RATE" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Notes or on other Indebtedness under laws applicable to such Lender which
are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
"INDEBTEDNESS" shall mean any and all amounts owing or to be owing by
the Borrower or any Restricted Subsidiary to the Agent and/or Lenders in
connection with the Notes or any other Loan Document and any Hedging
Agreements now or hereafter arising between the Borrower or any Restricted
Subsidiary and any Lender or any Affiliate of any Lender, and all renewals,
extensions for any period, amendments, supplements, reissues,
modifications, and/or rearrangements of any of the above.
"INDEMNIFIED PARTIES" shall have the meaning assigned such term in
Section 12.03(b).
"INDEMNITY MATTERS" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands
and causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or
nature whatsoever incurred by such Person whether caused by the sole or
concurrent negligence of such Person seeking indemnification.
"INITIAL FUNDING" shall mean the earlier to occur of funding of the
initial Loans or the issuance of any Letters of Credit, including the
$101,000,000 Letter of Credit on the Closing Date pursuant to Section 6.01
and Section 6.03 hereof.
"INTEREST PERIOD" shall mean, with respect to any Eurodollar Advances,
the period commencing on the date such Eurodollar Advances is made and
ending on the numerically corresponding day in the first, second, third or
sixth calendar month thereafter, as the Borrower may select as provided in
Section 2.02 (or such longer period as may be requested by the Borrower and
agreed to by the Lenders), except that each Interest Period which commences
on the last Business Day of a calendar month (or on any day for which there
is no numerically corresponding day in the appropriate
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subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may commence
before and end after the Final Maturity Date; (ii) no Interest Period for
any Eurodollar Advances may end after the due date of any installment, if
any, provided for in Section 3.01 hereof to the extent that such Eurodollar
Advances would need to be prepaid prior to the end of such Interest Period
in order for such installment to be paid when due; (iii) each Interest
Period which would otherwise end on a day which is not a Business Day shall
end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next
preceding Business Day); and (iv) no Interest Period shall have a duration
of less than one month and, if the Interest Period for any Eurodollar
Advances would otherwise be for a shorter period, such Loans shall not be
available hereunder.
"INTEREST RATE AGREEMENT" shall mean the obligations of any person
pursuant to any interest rate swap agreement, interest rate collar
agreement or other similar agreement or arrangement designed to protect
such Person against fluctuations in interest rates.
"INVESTMENT" shall mean, with respect to the Borrower and its
Restricted Subsidiaries, any investment by the Borrower or any of its
Restricted Subsidiaries in other Persons (including Affiliates) in the
forms of loans, Guarantees of Debt, advances (excluding commission, travel
and similar advances to officers and employees made in the ordinary course
of business), capital contributions, purchases or other acquisitions from
such other Persons for consideration of Debt, Equity Interests, cash or
other property, and all other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP, but
excluding investments to the extent made with the Capital Stock of the
Borrower, with the calculation of each such investment to be as of the date
of such investment.
"INVESTMENT SUSPENSION" shall mean the occurrence of (i) a monetary
Default, (ii) a breach of a covenant contained in Sections 9.12, 9.13 or
9.14 hereof, or (iii) any other Default which could likely have a Material
Adverse Effect in the sole and exclusive judgment of the Agent or the
Majority Lenders.
"ISSUER" shall mean, with respect to the issuance of Letters of
Credit, the Agent or, with respect to a Letter of Credit issued or to be
issued by a Lender which has consented to be an Issuer and for which prior
consent of the Agent was obtained, such consenting Lender.
"LC COMMISSION RATE" shall mean the rate per annum equal to the sum of
(a) one-eighth of one percent (1/8%), plus (b) the Applicable Margin for
Eurodollar Advances in effect at the time of issuance of a Letter of
Credit.
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"LC COMMITMENT" at any time (except as otherwise provided in Section
2.01(c) hereof) shall mean $15,000,000.
"LC EXPOSURE" at any time shall mean the aggregate face amount of all
undrawn and uncancelled Letters of Credit and the aggregate of all amounts
drawn under all Letters of Credit and not yet reimbursed.
"LETTER OF CREDIT AGREEMENTS" shall mean the written agreements with
the Issuer for any Letter of Credit, executed or hereafter executed in
connection with the issuance of the Letters of Credit, such agreements to
be on the Issuer's customary form for letters of credit of comparable
amount and purpose as from time to time in effect or as otherwise agreed to
by the Borrower and the Issuer.
"LETTERS OF CREDIT" shall mean the letters of credit issued pursuant
to Section 2.01(c) and Section 6.03 and all reimbursement obligations
pertaining to any such letters of credit, and "Letter of Credit" shall mean
any one of the Letters of Credit and the reimbursement obligations
pertaining thereto.
"LIEN" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and whether
such obligation or claim is fixed or contingent, and including but not
limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt
or a lease, consignment or bailment for security purposes. The term "LIEN"
shall include reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other title exceptions
and encumbrances affecting Property. For the purposes of this Agreement,
the Borrower or any Subsidiary shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale
agreement, or leases under an agreement constituting a Capital Lease
Obligation.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes the Letters
of Credit, the Letter of Credit Agreements and the Security
Instruments.
"LOANS" shall mean the loans as provided for by Sections 2.01(a) and
(b). "Loans" shall include the Revolving Credit Loans and the Term Loans.
"LOCKBOX AGREEMENT" shall mean that certain Lockbox Agreement of even
date herewith by and between the Borrower, the depository bank for the
lockbox and the Agent, relating to the lockbox maintained by the Borrower
pursuant to Section 8.08.
"MAJORITY LENDERS" shall mean, at any time while no Loans are
outstanding, Lenders having at least fifty-one percent (51%) of the
Aggregate Commitments and, at any time while Loans are outstanding, Lenders
holding at least fifty-one percent (51%) of the outstanding aggregate
principal amount of the Loans (without regard to any sale by a Lender of a
participation in any Loan under Section 12.06(c)); provided, however, with
respect to the approval of and consent to the initial amendment of this
Agreement,
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such term shall mean sixty-six and two-thirds percent (66 2/3%) of such
Aggregate Commitments and, if applicable, of such outstanding aggregate
principal amount.
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect,
as determined by the Majority Lenders, on (i) the assets, liabilities,
financial condition, business, operations or affairs of the Borrower and
its Restricted Subsidiaries taken as a whole different from those reflected
in the Financial Statements or from the facts represented or warranted in
this Agreement or any other Security Instrument, or (ii) the ability of the
Borrower and its Restricted Subsidiaries taken as a whole to carry out
their business or meet their obligations under the Loan Documents on a
timely basis.
"MORTGAGED PROPERTY" shall mean the Property owned by the Borrower and
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.
"MULTIEMPLOYER PLAN" shall mean a Plan defined as such in
Section 3(37) or 4001(a)(3) of ERISA.
"NET PROCEEDS" means the aggregate proceeds of cash and cash
equivalents received by the Borrower or any of its Restricted Subsidiaries
in respect of any Asset Sale or Contract Obligation (including, without
limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale or Contract Obligation),
net of the direct costs relating to such Asset Sale or Contract Obligation
(including, without limitation, legal, accounting and investment banking
fees and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
arrangements) and any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP.
"NOTES" shall mean the Notes provided for by Section 2.06, together
with any and all renewals, extensions for any period, increases,
rearrangements, substitutions or modifications thereof. The "Notes" shall
include the Revolving Credit Notes and the Term Notes.
"$101,000,000 LETTER OF CREDIT" shall mean that certain Irrevocable
Letter of Credit in the amount of $101,000,000 dated on or about the
Closing Date and issued by the Agent for the account of the Borrower and
for the benefit of United States Trust Company of New York, as Trustee
("USTC"). Funds drawn under the $101,000,000 Letter of Credit shall be
used only for the purpose of paying all principal of and interest accrued
and unpaid on the Increasing Rate Second Priority Notes due 2002 issued
pursuant to that certain Indenture dated as of September 18, 1992, between
the Borrower and USTC.
"OTHER TAXES" shall have the meaning assigned such term in
Section 4.06(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
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"PERCENTAGE SHARE" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated on
Exhibit G hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b).
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization
or government or any agency, instrumentality or political subdivision
thereof, or any other form of entity.
"PLAN" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (a) is currently or hereafter sponsored,
maintained or contributed to by the Borrower, any Subsidiary or an ERISA
Affiliate or (b) was at any time during the preceding six calendar years,
sponsored, maintained or contributed to, by the Borrower, any Subsidiary or
an ERISA Affiliate.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any
Loan or any other amount payable by the Borrower under this Agreement or
any Note which is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period commencing
on the due date until such amount is paid in full or the default is cured
or waived equal to 2% per annum above the Base Rate as in effect from time
to time plus the Applicable Margin (if any), but in no event to exceed the
Highest Lawful Rate (provided that, if such amount in default is principal
of a Eurodollar Advances, the "Post-Default Rate" for such principal shall
be, for the period commencing on the due date and ending on the last day of
the Interest Period therefor, 2% per annum above the interest rate for such
Loan as provided in Section 3.02(b), but in no event to exceed the Highest
Lawful Rate).
"PRINCIPAL OFFICE" shall mean the principal office of the Agent in New
York, located at One Liberty Plaza, New York, New York 10006, which shall
serve to collect payments on the Indebtedness and other fees under this
Agreement on behalf of the Lenders including The Bank of Nova Scotia,
Atlanta agency acting on behalf of The Bank of Nova Scotia.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"PURCHASE MONEY FINANCING" shall mean, with respect to any Person,
Debt incurred to finance the purchase of any assets of such Person (within
90 days of such purchase) to the extent (i) the amount of Debt thereunder
shall not exceed 95% of the purchase cost of such assets, (ii) the purchase
cost for such assets is or should be included in "additions to property
plant and equipment" in accordance with GAAP and (iii) the purchase of such
assets is not part of an acquisition of any Person.
"QUARTERLY DATES" shall mean the last day of each March, June,
September and December, in each year, the first of which shall be December
31, 1994; provided, however, that if any such day is not a Business Day,
such Quarterly Date shall be the next preceding Business Day.
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"REGULATION D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor), as the same may be amended
or supplemented from time to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including
Regulation D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of lenders
(including such Lender or its Applicable Lending Office) of or under any
Governmental Requirement applicable to banks (whether or not having the
force of law) by any Governmental Authority charged with the interpretation
or administration thereof.
"REQUIRED PAYMENT" shall have the meaning assigned such term in
Section 4.04.
"RESERVE REQUIREMENT" shall mean, for any Interest Period for any
Eurodollar Advances, the average maximum rate at which reserves (including
any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks
of the Federal Reserve System in New York City with deposits exceeding one
billion Dollars against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by
such member banks by reason of any Regulatory Change against (i) any
category of liabilities which includes deposits by reference to which the
Fixed Eurodollar Rate for Eurodollar Advances is to be determined as
provided in the definition of "Fixed Eurodollar Rate" in this Section 1.02
or (ii) any category of extensions of credit or other assets which include
a Eurodollar Advances.
"RESPONSIBLE OFFICER" shall mean, as to any Person, the Chief
Executive Officer, the President or any Vice President of such Person and,
with respect to financial matters, the term "Responsible Officer" shall
include the Chief Financial Officer or the Controller of such Person.
Unless otherwise specified, all references to a Responsible Officer herein
shall mean a Responsible Officer of the Borrower.
"RESTRICTED SUBSIDIARY" of a Person shall mean any direct or indirect
Domestic Subsidiary of the Borrower that is not an Unrestricted Subsidiary,
which Person shall not become a Restricted Subsidiary hereunder until all
actions by and with respect to such Person described in Section 9.17 shall
have occurred.
"REVOLVING CREDIT COMMITMENT" shall mean, for any Lender, its
obligation to make Loans as provided in Section 2.01(a) and
Section 2.01(b), and to participate in Letters of Credit as provided in
Section 2.01(c) up to the Lender's Percentage Share of the lesser of
(a) $80,000,000, or (b) the then effective Borrowing Base, as the same may
be reduced pursuant to Section 2.03(a).
"REVOLVING CREDIT LOANS" shall mean Loans made pursuant to Section
2.01(a).
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"REVOLVING CREDIT NOTES" shall mean the promissory note or notes
(whether one or more) of the Borrower described in Section 2.06 hereof and
being in the form of Exhibit A-1 hereto.
"REVOLVING CREDIT PERIOD" shall mean the period from the Closing Date
to and ending on the Revolving Credit Termination Date.
"REVOLVING CREDIT TERMINATION DATE" shall mean, unless the Revolving
Credit Commitments are sooner terminated pursuant to Sections 2.03(a) or
10.02 hereof, December 31, 1999.
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"SECURITY INSTRUMENTS" shall mean the Letters of Credit, the Letter of
Credit Agreements, the agreements or instruments described or referred to
in Exhibit E, and any and all other agreements or instruments now or
hereafter executed and delivered by the Borrower or any other Person (other
than participation or similar agreements between any Lender and any other
lender or creditor with respect to any Indebtedness pursuant to this
Agreement) in connection with, or as security for the payment or
performance of the Notes, this Agreement, or reimbursement obligations
under the Letters of Credit, as such agreements may be amended,
supplemented or restated from time to time.
"SENIOR UNSECURED NOTES" shall mean those certain unsecured 11 3/4%
Senior Notes due 2004 in the aggregate principal amount of $175,000,000, to
be issued by the Borrower pursuant to the Indenture dated as of November
29, 1994 and governing such notes, upon terms and conditions satisfactory
to the Agent and the Lenders.
"SIGNIFICANT SUBSIDIARY" shall mean any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act.
"SUBSIDIARY" shall mean any corporation of which at least a majority
of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower and/or one or more of its
Subsidiaries.
"TAXES" shall have the meaning assigned such term in Section 4.06(a).
"TERM LOANS" shall mean the term loans made pursuant to Section
2.01(b). A "Term Loan" shall mean, for any Lender, the amount set forth
opposite such Lender's name on Exhibit G under the caption "Term Loan" as
modified from to time to reflect any assignments permitted by Section
12.06(b).
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"TERM LOAN COMMITMENT" shall mean, for any Lender, its obligation to
make Loans as provided in Section 2.01(b) up to the amount set forth
opposite such Lender's name under the caption "Term Loans" on Exhibit G.
"TERM LOAN TERMINATION DATE" shall mean the first day on which the
Term Loans have been paid in full.
"TERM NOTES" shall mean the promissory note or notes (whether one or
more) of the Borrower described in Section 2.06 hereof and being in the
form of Exhibit A-2 hereto.
"TYPE" shall mean, with respect to any Loan, a Base Rate Loan or a
Eurodollar Advances.
"U.K. SUBSIDIARY" shall mean Rexene Corporation Limited.
"UNRESTRICTED SUBSIDIARY" means (i) each of the Subsidiaries of the
Borrower in existence on the date of this Agreement which meets the tests
set forth in clause (iii) of this definition, (ii) any Foreign Subsidiary
presently existing or formed or acquired by the Borrower after the date of
this Agreement, (iii) any Domestic Subsidiary of the Company which is
designated by the Borrower as an Unrestricted Subsidiary (pursuant to
procedures set forth below in clause (iii)(f)), but only to the extent that
such Domestic Subsidiary complies with the following: (a) is not party to
any agreement, contract, arrangement or understanding with the Borrower or
any Restricted Subsidiary of the Borrower unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to
the Borrower or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Borrower;
(b) is a Person with respect to which neither the Borrower nor any of its
Restricted Subsidiaries has any direct or indirect obligation to maintain
or preserve such Person's financial condition or to cause such Person to
achieve any specified levels of operating results; (c) has not guaranteed
or otherwise directly or indirectly provided credit support for any Debt of
the Borrower or any of its Restricted Subsidiaries; (d) has at least one
director on its board of directors that is not a director or executive
officer of the Borrower or any of its Restricted Subsidiaries and has a
least one executive officer that is not a director or executive officer of
the Borrower or any of its Restricted Subsidiaries; (e) is, at the time it
becomes an Unrestricted Subsidiary, adequately capitalized in light of its
business activities at such time; and (f) (except for the existing
Subsidiaries) is designated as an Unrestricted Subsidiary by the board of
directors of the Borrower, which designation shall be evidenced to the
Agent by filing with the Agent a certified copy of the board resolution
giving effect to such designation and an officers' certificate certifying
that such designation complied with the foregoing conditions. If, at any
time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be
an Unrestricted Subsidiary for purposes of this Agreement and any Debt of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary
of the Borrower as of such date (and, if such Debt is not permitted to be
incurred as of such date under the provisions of this Agreement,
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the Borrower shall be in default of such covenant unless such default shall
have been cured within a period of 30 days thereafter). The board of
directors of the Borrower may at any time designate any Domestic Subsidiary
which is an Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that such designation shall be deemed to be an incurrence of Debt by a
Restricted Subsidiary of the Borrower of any outstanding Debt of such
Unrestricted Subsidiary and such designation shall only be permitted if (i)
such Debt is permitted under the provisions of this Agreement, (ii) no
Default or Event of Default would be in existence following such
designation, and (iii) such Domestic Subsidiary shall execute a written
instrument of guaranty, unconditionally guaranteeing payment of and a Lien
covering the assets of such Domestic Subsidiary securing all Indebtedness
under this Agreement, the Notes and any other Loan Document.
"URC VENTURE INVESTMENT" shall mean (i) all Investments by the
Borrower in URC outstanding as of the date of this Agreement, plus (ii) all
Investments made by the Borrower and its Restricted Subsidiaries in URC
after the date of this Agreement; provided, however that the aggregate
amount of all such Investments made after the date of this Agreement
(measured by their fair market value as of the date made) shall not exceed
the aggregate amount of the cash received after the date of this Agreement
by the Borrower and its Restricted Subsidiaries as fees for the licensing
of any intellectual property rights or other proprietary technology to URC
and (iii) the amount of the Guaranty (as defined in the Joint Venture
Modification Agreement dated as of (and as in effect on) February 25, 1992
between the Borrower and UBE Industries Inc.); provided that at no time
shall the Guaranty made by the Borrower and its Restricted Subsidiaries (A)
be with recourse to the Borrower or any of its Subsidiaries or (B) be
secured by any Liens on the Property of the Borrower or any of its
Subsidiaries (other than Liens permitted pursuant to clause (vi) of the
definition of Excepted Liens); and provided further that the amount of the
obligations guaranteed pursuant to such Guaranty shall be reduced by the
amount of all Investments made to satisfy the Borrower's obligations under
such Guaranty.
"URC" shall mean Ube Rexene Corporation, a Japanese corporation.
"U.S." shall mean the United States of America.
"WHOLLY-OWNED SUBSIDIARY" shall mean, as to the Borrower, any
Subsidiary of which all of the outstanding shares of stock having by the
terms thereof ordinary voting power to elect the board of directors of such
corporation, other than directors' qualifying shares, are owned or
controlled by the Borrower or one or more of the Wholly-Owned Subsidiaries
or by the Borrower and one or more of the Wholly-Owned Subsidiaries.
Section 1.03 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Agent or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
audited
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financial statements of the Borrower referred to in Section 7.02 (except for
changes concurred with by the Borrower's independent public accountants).
ARTICLE II
COMMITMENTS
Section 2.01 LOANS AND LETTERS OF CREDIT.
(a) REVOLVING CREDIT LOANS. Each Lender severally agrees, on the
terms of this Agreement, to make Revolving Credit Loans to the Borrower
during the period from and including (i) the Closing Date or (ii) such
later date that such Lender becomes a party to this Agreement as provided
in Section 12.06(b), to and up to, but excluding, the Revolving Credit
Termination Date in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount of such Lender's Revolving
Credit Commitment as then in effect; PROVIDED, HOWEVER, that the aggregate
principal amount of all such Loans by all Lenders hereunder at any one time
outstanding together with the LC Exposure shall not exceed the lesser of
(i) $80,000,000, or (ii) the then effective Borrowing Base. Subject to the
terms of this Agreement, during the period from the Closing Date to and up
to, but excluding, the Revolving Credit Termination Date, the Borrower may
borrow, repay and reborrow the amount described in this Section 2.01(a).
(b) TERM LOANS. On the date a drawing is made under the $101,000,000
Letter of Credit, the Borrower will request and the Lenders will make
(whether or not requested by the Borrower) Term Loans to the Borrower in
the aggregate amount of $100,000,000 to fund a $100,000,000 portion of the
$101,000,000 Letter of Credit, and, to the extent the draw on the
$101,000,000 Letter of Credit exceeds $100,000,000, (i) Borrower shall make
available to the Agent such excess in immediately available cash to fund
the remaining portion of the $101,000,000 Letter of Credit, (ii) until such
time as the $101,000,000 Letter of Credit is drawn upon and fully funded, a
$1,000,000 portion of the Revolving Credit Commitments shall be reserved
and unavailable to Borrower and (iii) the Lenders shall have the right
(upon their own motion) to make advances under their respective Revolving
Credit Note to fund such excess portion in the event Borrower fails to make
immediately available cash available to fund such excess portion as
aforementioned. The conditions precedent contained in Article VI hereof
shall not apply with respect to advances of the Term Loans (and, if
necessary, up to a $1,000,000 portion of the Revolving Credit Notes) to
fund the drawing of the $101,000,000 Letter of Credit. The Term Loans may
be used only to fund a portion of the $101,000,000 Letter of Credit.
(c) LETTERS OF CREDIT. (i) During the period from and including the
Closing Date to but excluding the Revolving Credit Termination Date, each
Issuer, as issuing bank for the Lenders, agrees to extend credit for the
account of the Borrower or any Restricted Subsidiary and the Borrower at
any time and from time to time by issuing, renewing, extending or reissuing
Letters of Credit; provided however, the LC Exposure
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at any one time outstanding shall not exceed the lesser of (A) the LC
Commitment or (B) the Revolving Credit Commitments, as then in effect,
minus the aggregate principal amount of all Revolving Credit Loans then
outstanding. The Lenders shall participate in such Letters of Credit
according to their respective Percentage Shares.
(ii) The Lenders shall have the obligation, notwithstanding any Event
of Default (but subject to each Lender's respective Revolving Credit
Commitment) to make advances under their respective Revolving Credit Note
to fund their respective Percentage Shares of any Letter of Credit.
(iii) It is hereby expressly agreed and understood that (A) the
$101,000,000 Letter of Credit was issued by the Agent as a special
accommodation to the Borrower and shall not, therefore, be counted in
determining either the LC Commitment or the LC Exposure, but shall be
counted when determining fees for Letters of Credit pursuant to Section
2.04(b), (B) each Lender severally and unconditionally agrees to
participate in the $101,000,000 Letter of Credit (according to such Lenders
Percentage Share) and to make its Percentage Share of the Term Loans to
fund the $101,000,000 Letter of Credit pursuant to Section 2.01(b), (C) the
$101,000,000 Letter of Credit will be used only for the purpose set forth
in the definition for such term in Section 1.02, (D) the $101,000,000
Letter of Credit is and shall be part of the Indebtedness of the Borrower
hereunder and shall be secured by all of the Property covered by the
Security Instruments whether or not specifically described therein, and
(E) the $101,000,000 Letter of Credit shall not be amended without the
consent of the Lenders.
(d) LIMITATION ON TYPES OF LOANS. Subject to the other terms and
provisions of this Agreement, at the option of the Borrower, the Loans may
be Base Rate Loans or Eurodollar Advances; provided that, without the prior
written consent of the Majority Lenders, no more than five (5) Eurodollar
Advances may be outstanding at any time.
(e) BORROWING BASE DETERMINATIONS. It shall be the responsibility of
the Borrower to continually monitor the amount of the Borrowing Base and to
forthwith report the results of such monitoring in writing to the Agent as
a redetermination of the Borrowing Base. In addition, the Agent (on its
own initiative, but with the consent of the Majority Lenders) shall have
the authority to redetermine the Borrowing Base at any time and for any
reason based upon the latest Borrowing Base Report (or upon the best
information then available to the Agent or upon an audit pursuant to
Section 8.09), but always subject to the parameters of this Agreement.
The Borrowing Base shall be redetermined by the Agent with the consent of
the Majority Lenders upon any Asset Sale, as applicable.
Section 2.02 BORROWINGS, CONTINUATIONS, CONVERSIONS AND LETTERS OF CREDIT.
(a) BORROWINGS. The Borrower shall give the Agent (which shall
promptly notify the Lenders) advance notice as hereinafter provided of each
borrowing hereunder, which shall specify the aggregate amount of such
borrowing, the Type and the date (which shall be a Business Day) of the
Loans to be borrowed and (in the case of Eurodollar Advances) the duration
of the Interest Period therefor.
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(b) MINIMUM AMOUNTS. All Base Rate Loan borrowings shall be in
amounts of at least $1,000,000 or the remaining balance of the Aggregate
Commitments, if less, or any whole multiple of $500,000 in excess thereof,
and all Eurodollar Advances shall be in amounts of at least $5,000,000 or
any whole multiple of $1,000,000 in excess thereof.
(c) NOTICES. All borrowings, continuations and conversions shall
require advance written notice (including notice by telecopier as provided
in Section 12.02) to the Agent (which shall promptly notify the Lenders) in
the form of Exhibit B hereto (or telephonic notice promptly confirmed by
such a written notice), which in each case shall be irrevocable, from the
Borrower to be received by the Agent not later than 11:00 a.m. New York,
New York time at least one (1) Business Day prior to the date of each Base
Rate Loan borrowing (except for Base Rate Loan borrowings on the Revolving
Credit Notes which are requested in order to fund Letters of Credit, which
borrowings may be requested not later than 12:00 noon at least one (1)
Business Day prior to such Base Rate Loan borrowings) and three (3)
Business Days prior to the date of each Eurodollar Advances borrowing,
continuation or conversion. Without in any way limiting the Borrower's
obligation to confirm in writing any telephonic notice, the Agent may act
without liability upon the basis of telephonic notice believed by the Agent
in good faith to be from the Borrower prior to receipt of written
confirmation. In each such case, the Borrower hereby waives the right to
dispute the Agent's record of the terms of such telephonic notice except in
the case of gross negligence or willful misconduct by the Agent. Agent
agrees to give Borrower notice as soon as practicable of all drawings on
Letters of Credit, in order to permit Borrower to request a Base Rate Loan
borrowing as set forth in this Section 2.02(c).
(d) CONTINUATION OPTIONS. Subject to the provisions made in this
Section 2.02(d), the Borrower may elect to continue all or any part of any
Eurodollar Advances beyond the expiration of the then current Interest
Period relating thereto by giving advance notice as provided in
Section 2.02(c) to the Agent (which shall promptly notify the Lenders) of
such election, specifying the amount of such Loan to be continued and the
Interest Period therefor. In the absence of such a timely and proper
election, the Borrower shall be deemed to have elected to convert such
Eurodollar Advances to a Base Rate Loan pursuant to Section 2.02(e). All
or any part of any Eurodollar Advances may be continued as provided herein,
provided that (i) any continuation of any such Loan shall be (as to each
Loan as continued for an applicable Interest Period) in amounts of at least
$5,000,000 or any whole multiple of $1,000,000 in excess thereof and
(ii) no Default shall have occurred and be continuing. If a Default shall
have occurred and be continuing, each Eurodollar Advances shall be
converted to a Base Rate Loan on the last day of the Interest Period
applicable thereto.
(e) CONVERSION OPTIONS. The Borrower may elect to convert all or any
part of any Eurodollar Advances on the last day of the then current
Interest Period relating thereto to a Base Rate Loan by giving advance
notice to the Agent (which shall promptly notify the Lenders) of such
election. Subject to the provisions made in this Section 2.02(e), the
Borrower may elect to convert all or any part of any Base Rate Loan
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at any time and from time to time to a Eurodollar Advance by giving advance
notice as provided in Section 2.02(c) to the Agent (which shall promptly
notify the Lenders) of such election. All or any part of any outstanding
Loan may be converted as provided herein, provided that (i) any conversion
of any Base Rate Loan into a Eurodollar Advance shall be (as to each such
Loan into which there is a conversion for an applicable Interest Period) in
amounts of at least $5,000,000 or any whole multiple of $1,000,000 in
excess thereof and (ii) no Default shall have occurred and be continuing.
If a Default shall have occurred and be continuing, no Base Rate Loan may
be converted into a Eurodollar Advances.
(f) ADVANCES. Not later than 11:00 a.m. New York, New York time on
the date specified for each borrowing hereunder, each Lender shall make
available the amount of the Loans to be made by it on such date to the
Agent, to an account which the Agent shall specify, in immediately
available funds, for the account of the Borrower. The amounts so received
by the Agent shall, subject to the terms and conditions of this Agreement,
be made available to the Borrower by transferring the same, in immediately
available funds, to an account of the Borrower, designated by the Borrower
and maintained with the Agent at the Principal Office.
(g) LETTERS OF CREDIT. The Borrower shall give the Agent (which
shall promptly notify the Lenders of such request and their Percentage
Share of such Letter of Credit) advance notice to be received by the Agent
not later than 11:00 a.m. New York, New York time not less than three (3)
Business Days prior thereto of each request for the issuance and at least
ten (10) Business Days prior to the date of the renewal or extension of a
Letter of Credit hereunder which request shall specify (i) the amount of
such Letter of Credit, (ii) the date (which shall be a Business Day) such
Letter of Credit is to be issued, renewed or extended, (iii) the duration
thereof, (iv) the name and address of the beneficiary thereof, (v) the form
of the Letter of Credit, (vi) the name of the Issuer thereof, and (vii)
such other information as the Agent may reasonably request, all of which
shall be reasonably satisfactory to the Agent. Subject to the terms and
conditions of this Agreement, on the date specified for the issuance,
renewal or extension of a Letter of Credit, the Issuer shall issue such
Letter of Credit to the beneficiary thereof.
In conjunction with the issuance of each Letter of Credit, the
Borrower and the Restricted Subsidiary, if the account party, shall execute
a Letter of Credit Agreement. In the event of any conflict between any
provision of a Letter of Credit Agreement and this Agreement, the Borrower,
the Agent and the Lenders hereby agree that the provisions of this
Agreement shall govern.
The Issuer will send to the Borrower and each Lender, immediately upon
issuance of any Letter of Credit, or an amendment thereto, a true and
complete copy of such Letter of Credit, or such amendment thereto.
Section 2.03 CHANGES OF REVOLVING CREDIT COMMITMENTS.
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(a) The Borrower shall have the right to terminate or to reduce the
amount of the Revolving Credit Commitments at any time or from time to time
upon not less than three (3) Business Days' prior notice to the Agent
(which shall promptly notify the Lenders) of each such termination or
reduction, which notice shall specify the effective date thereof and the
amount of any such reduction (which shall not be less than $5,000,000 or
any whole multiple of $1,000,000 in excess thereof) and shall be
irrevocable and effective only upon receipt by the Agent.
(b) The Revolving Credit Commitments once terminated or reduced may
not be reinstated.
Section 2.04 FEES.
(a) The Borrower shall pay to the Agent for the account of each
Lender a commitment fee on the daily average unadvanced portion of the
Revolving Credit Commitments (without regard to the Borrowing Base and
minus the LC Exposure) at a rate per annum equal to one-half of one percent
(1/2 of 1%). Thereafter, for the period up to but excluding the earlier of
the date the Revolving Credit Commitments are terminated or the Revolving
Credit Termination Date, the commitment fee will be determined quarterly
and will be 3/8% per annum if the ratio of consolidated Debt of the
Borrower and its Consolidated Restricted Subsidiaries to Adjusted EBITDA on
a trailing four-quarter basis is less than 3.0 to 1.0 and 1/2% per annum if
such ratio is equal to or greater than 3.0 to 1.0.
Accrued commitment fees shall be payable on each Quarterly Date and on the
date the Revolving Credit Commitments are terminated.
(b) The Borrower agrees to pay to the Agent for the Issuers and the
Lenders a fee for each Letter of Credit (including the $101,000,000 Letter
of Credit) in an amount equal to the LC Commission Rate on the daily
average outstanding amount of the maximum liability existing from time to
time under such Letter of Credit. In each such case, the Issuer shall
receive for its own account a portion of said fee equal to one eighth of
one percent (1/8%) per annum of the maximum liability and the remaining
portion of said fee shall be distributed to the Lenders (including the
Issuer as a Lender) in accordance with their respective Percentage Share.
Each Letter of Credit shall be deemed to be outstanding up to the full face
amount of the Letter of Credit until the Issuer has received (i) the
cancelled Letter of Credit or a written cancellation of the Letter of
Credit from the beneficiary of such Letter of Credit in form and substance
acceptable to the Issuer or (ii) for any reductions in the amount of the
Letter of Credit (other than from a drawing), written notification from the
Borrower (and written acceptance of such reduction from the beneficiary, as
applicable). Such fees are payable in advance at issuance of the Letter of
Credit. Any refunds due Borrower on account of any early cancellations or
reductions shall be paid to Borrower by the Lenders through the Agent
within five (5) Business Days of such cancellation or reduction.
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(c) Upon each transfer of any Letter of Credit to a successor
beneficiary in accordance with its terms, the Borrower shall pay the sum of
$500 to the Issuer for its own account.
Section 2.05 SEVERAL OBLIGATIONS. The obligations of the Lenders to fund
their respective Percentage Share of the Loans or the Letters of Credit
(including without limitation the $101,000,000 Letter of Credit) are several
(and not joint or joint and several), and the failure of any Lender to make any
Loan to be made by it or to provide funds for disbursements under Letters of
Credit on the date specified therefor shall not relieve any other Lender of its
obligation to make its Loan or provide funds on such date (up to but not
exceeding its Commitment).
Section 2.06 NOTES. The Term Loan made by each Lender shall be evidenced
by a single promissory note of the Borrower in substantially the form of
Exhibit A-2 hereto, dated (i) the Closing Date or (ii) the effective date of an
Assignment pursuant to Section 12.06(b), payable to the order of such Lender in
a principal amount equal to the amount set forth on Exhibit G. The Revolving
Credit Loans made by each Lender shall be evidenced by a single promissory note
of the Borrower in substantially the form of Exhibit A-1 hereto, dated (i) the
Closing Date or (ii) the effective date of an Assignment pursuant to Section
12.06(b), payable to the order of such Lender in a principal amount equal to its
Maximum Credit Amount as originally in effect and otherwise duly completed. The
date, amount, Type, interest rate and Interest Period of each Loan made by each
Lender, and all payments made on account of the principal thereof, shall be
recorded by such Lender on its books for its Notes, and, prior to any transfer,
endorsed by such Lender on the schedule attached to such Notes or any
continuation thereof. Such records shall be deemed conclusive absent manifest
error.
Section 2.07 PREPAYMENTS.
(a) The Borrower may prepay the Base Rate Loans upon not less than
one (1) Business Day prior notice to the Agent (which shall promptly notify
the Lenders), which notice shall specify the prepayment date (which shall
be a Business Day) and the amount of the prepayment (which shall be at
least $2,000,000, or the remaining aggregate principal balance outstanding
on the Notes) and shall be irrevocable and effective only upon receipt by
the Agent. Except for mandatory prepayments provided for in this
Agreement, the Borrower may not prepay any Eurodollar Advances prior to the
end of an Interest Period. Any prepayment of a Eurodollar Advances shall
be made together with the payment of compensation pursuant to Section 5.05.
(b) If, after giving effect to any termination or reduction of the
Revolving Credit Commitments pursuant to Section 2.03(a), the outstanding
aggregate principal amount of the Revolving Credit Loans plus the LC
Exposure exceeds the Revolving Credit Commitments (in this subsection (b)
and subsection 2.07(c) such excess is referred to as the "Excess"), the
Borrower shall (i) prepay the Revolving Credit Loans on the date of such
termination or reduction in an aggregate principal amount equal to the
Excess, together with interest on the principal amount paid accrued to the
date of such prepayment and (ii) if any portion of the Excess remains after
prepaying all of the
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Revolving Credit Loans, pay to the Agent on behalf of the Lenders an amount
equal to such remaining portion of the Excess to be held as cash collateral
as provided in Section 2.09(b) hereof.
(c) Upon any redetermination of the amount of the Borrowing Base by
the Agent pursuant to Section 2.01(e), if the redetermined Borrowing Base
is less than the aggregate outstanding principal amount of the Revolving
Credit Loans plus the LC Exposure, then the Borrower shall within ten (10)
Business Days (or two (2) Business Days if an Event of Default has occurred
and is continuing (except for an Event of Default occasioned by the
redetermination, in which case, ten (10) Business Days) of receipt of
written notice thereof prepay the Revolving Credit Loans in an aggregate
principal amount equal to such Excess, together with interest on the
principal amount paid accrued to the date of such prepayment. Furthermore,
if, as a result of monitoring by the Borrower pursuant to Section 2.01(e),
the Borrower determines that the amount of the Borrowing Base is less than
the aggregate outstanding principal amount of the Revolving Credit Loans
plus the LC Exposure, the Borrower shall, within two (2) Business Days
following such determination, prepay the Revolving Credit Loans in an
aggregate principal amount equal to such Excess, together with interest on
the principal amount paid accrued to the date of such prepayment and if any
portion of the Excess remains after prepaying all of the Revolving Credit
Loans, pay to the Agent on behalf of the Lenders an amount equal to such
remaining portion of the Excess to be held as cash collateral as provided
in Section 2.09(b) hereof.
(d) Until all amounts owing under the Term Notes have been paid in
full, the Borrower shall make annual prepayments on the Term Loans, which
prepayments (i) shall be due and payable on April 15th of each fiscal year
commencing April 15, 1996, (ii) shall be in an amount equal to 50% of
Excess Cash Flow, (iii) may not be reborrowed, and (iv) shall be applied to
installments on the Term Notes in the inverse order of maturity; provided,
however, the amount of such prepayments made as to any year shall not
exceed the Cap (as herein defined). As used herein, "Cap" shall mean
$15,000,000 for calendar year 1995, $25,000,000 for calendar year 1996 and
$35,000,000 for calendar year 1997, decreased in each year for the amount
prepaid pursuant to this Section 2.07(d) since the Closing Date, with no
Cap applicable for any calendar year after 1997.
(e) Until the Term Loan Termination Date, all insurance proceeds
received by the Borrower in an amount equal to or greater than $1,000,000
in each year which are not used by the Borrower within twelve (12) months
of the receipt thereof to restore or replace the damaged or destroyed asset
of the Borrower upon which such proceeds were paid, shall be delivered to
the Agent and shall be applied by the Agent to installments of principal on
the Term Notes in the inverse order of their maturity until the Term Notes
are paid in full. After the Term Notes have been paid in full, all such
proceeds received in excess of $20,000,000 in the aggregate shall be
delivered to the Agent for application towards the reduction of outstanding
Indebtedness in such manner as the Majority Lenders shall, in their sole
discretion, determine.
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(f) Until the Term Loan Termination Date, (i) 50% of the Net Proceeds
from Asset Sales in excess of the first $10,000,000 of Net Proceeds from
Asset Sales up to $25,000,000 of Net Proceeds from Asset Sales and (ii)
100% of the Net Proceeds from Asset Sales over the first $25,000,000 of Net
Proceeds from Asset Sales (subject to approval of Assets Sales over
$25,000,000 pursuant to Section 9.15 hereof) shall be delivered to the
Agent and shall be applied by the Agent to installments of the principal on
the Term Notes in the inverse order of maturity until the Term Notes are
paid in full; provided, however, no such prepayments shall be required in
situations where replacement assets are purchased as permitted in Section
9.15.
(g) Until the Term Loan Termination Date, (i) 50% of the Net Proceeds
from Contract Obligations that are not included in Adjusted Consolidated
Net Income in excess of the first $10,000,000 of Net Proceeds from Contract
Obligations that are not included in Adjusted Consolidated Net Income up to
$25,000,000 of Net Proceeds from Contract Obligations that are not included
in Adjusted Consolidated Net Income and (ii) 100% of the Net Proceeds from
Contract Obligations that are not included in Adjusted Consolidated Net
Income over the first $25,000,000 of Net Proceeds from Contract Obligations
that are not included in Adjusted Consolidated Net Income shall be
delivered to the Agent and shall be applied by the Agent to installments of
the principal on the Term Notes in the inverse order of maturity until the
Term Notes are paid in full.
(h) Prepayments permitted or required under this Section 2.07 shall
be without premium or penalty, except as required under Section 5.05 for
prepayment of Eurodollar Advances. Any prepayments on the Revolving Credit
Loans may be reborrowed subject to the then effective Revolving Credit
Commitments and satisfaction of all applicable conditions precedent to
borrowings thereunder.
Section 2.08 ASSUMPTION OF RISKS. The Borrower assumes all risks of the
acts or omissions of any beneficiary of any Letter of Credit or any transferee
thereof with respect to its use of such Letter of Credit. Neither the Issuer
nor its correspondents (except in the case of willful misconduct or bad faith on
the part of the Issuer or the correspondents or any of their employees) shall be
responsible for the validity, sufficiency or genuineness of certificates or
other documents or any endorsements thereon, even if such certificates or other
documents should in fact prove to be invalid, insufficient, fraudulent or
forged; for errors, omissions, interruptions or delays in transmissions or
delivery of any messages by mail, telex, or otherwise, whether or not they be in
code; for errors in translation or for errors in interpretation of technical
terms; the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason. The Issuer and its correspondents may
accept certificates or other documents that appear on their face to be in order,
without responsibility for further investigation of any matter contained therein
regardless of any notice or information to the contrary.
Section 2.09 OBLIGATION TO REIMBURSE AND TO PREPAY.
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(a) If a disbursement by an Issuer is made under any Letter of
Credit, the Borrower shall immediately pay to the Issuer upon notice to the
Borrower of any such disbursement, the amount of each such disbursement
made by the Issuer under the Letter of Credit (if such payment is not
sooner effected as may be required under this Section 2.09, permitted under
Section 2.01(c) or under other provisions of the Letter of Credit),
together with interest on the amount disbursed from and including the date
of disbursement until payment in full of such disbursed amount at a varying
rate per annum equal to (i) the then applicable interest rate for Base Rate
Loans through the second Business Day after notice of such disbursement is
received by the Borrower and (ii) thereafter, the Post-Default Rate for
Base Rate Loans (but in no event to exceed the Highest Lawful Rate) for the
period from and including the Business Day following the date of such
disbursement to and including the date of repayment in full of such
disbursed amount. The obligations of the Borrower under this Agreement
with respect to each Letter of Credit shall be absolute, unconditional and
irrevocable and shall be paid or performed strictly in accordance with the
terms of this Agreement under all circumstances whatsoever, including,
without limitation, but only to the fullest extent permitted by applicable
law, the following circumstances: (i) any lack of validity or
enforceability of this Agreement, any Letter of Credit or any of the
Security Instruments; (ii) any amendment or waiver of (including any
default), or any consent to departure from this Agreement made or given in
accordance with the terms of the Loan Agreement (except to the extent
permitted by any amendment or waiver), any Letter of Credit or any of the
Security Instruments; (iii) the existence of any claim, set-off, defense or
other rights which the Borrower may have at any time against the
beneficiary of any Letter of Credit or any transferee of any Letter of
Credit (or any Persons for whom any such beneficiary or any such transferee
may be acting), the Agent, any Lender or any other Person, whether in
connection with this Agreement, any Letter of Credit, the Security
Instruments, the transactions contemplated hereby or any unrelated
transaction; (iv) any statement, certificate, draft, notice or any other
document presented under any Letter of Credit proves to have been forged,
fraudulent, insufficient or invalid in any respect or any statement therein
proves to have been untrue or inaccurate in any respect whatsoever;
(v) payment by the Issuer under any Letter of Credit against presentation
of a draft or certificate which appears on its face to comply, but does not
comply, with the terms of such Letter of Credit; and (vi) any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing.
Notwithstanding anything in this Agreement to the contrary, the Borrower
will not be liable for payment or performance that results from the gross
negligence or willful misconduct of the Issuer, except (i) where the
Borrower or any Subsidiary actually recovers the proceeds for itself or the
Issuer of any payment made by the Issuer in connection with such gross
negligence or willful misconduct or (ii) in cases where the Issuer makes
payment to the named beneficiary of a Letter of Credit in accordance with
the requirements of the Letter of Credit.
(b) In the event of the occurrence of any Event of Default, a payment
or prepayment pursuant to Sections 2.07(b) and (c) hereof or the maturity
of the Notes, whether by acceleration or otherwise, an amount equal to the
LC Exposure (or the
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Excess in the case of Sections 2.07(b) and (c)) shall be deemed to be
forthwith due and owing by the Borrower to the Agent and the Lenders as of
the date of any such occurrence; and the Borrower's obligation to pay such
amount shall be absolute and unconditional, without regard to whether any
beneficiary of any such Letter of Credit has attempted to draw down all or
a portion of such amount under the terms of a Letter of Credit, and, to the
fullest extent permitted by applicable law, shall not be subject to any
defense or be affected by a right of set-off, counterclaim or recoupment
which the Borrower may now or hereafter have against any such beneficiary,
the Agent, the Lenders or any other Person for any reason whatsoever. Such
payments shall be held by the Agent on behalf of the Lenders as cash
collateral securing the LC Exposure. In the event of any such payment by
the Borrower of amounts contingently owing under outstanding Letters of
Credit and in the event that thereafter drafts or other demands for payment
complying with the terms of such Letters of Credit are not made prior to
the respective expiration dates thereof, the Agent agrees, if no Event of
Default has occurred and is continuing or if no other amounts are
outstanding under this Agreement, the Notes or the Security Instruments, to
remit to the Borrower amounts for which the contingent obligations
evidenced by the Letters of Credit have ceased.
(c) Each Lender severally and unconditionally agrees that,
notwithstanding the occurrence of an Event of Default, it shall promptly
reimburse the Issuer an amount equal to such Lender's Percentage Share of
any disbursement made by the Issuer under any Letter of Credit (including
the $101,000,000 Letter of Credit) that is not reimbursed according to this
Section 2.09 except in cases of gross negligence or willful misconduct of
Issuer in paying such Letter of Credit (including the $101,000,000 Letter
of Credit).
Section 2.10 LENDING OFFICES. The Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 REPAYMENT OF LOANS. The Borrower will pay to the Agent at
its Principal Office, for the account of each Lender, the principal payments
required by this Section 3.01. On the Revolving Credit Termination Date, the
Borrower shall repay the outstanding aggregate principal amount of the Revolving
Credit Notes. On each Quarterly Date commencing on March 31, 1995, the
aggregate principal amount of the Term Notes shall be payable in installments as
set forth below, with final payment of the remaining principal balance on the
Term Notes due on the Final Maturity Date:
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<TABLE>
<CAPTION>
Quarterly
Period Aggregate Principal Amount
------ --------------------------
<S> <C>
1995 $2,500,000
1996 $3,750,000
1997 $6,250,000
1998 $6,250,000
1999 $6,250,000
</TABLE>
Section 3.02 INTEREST. The Borrower will pay to the Agent at its
Principal Office for account of each Lender, interest on the unpaid principal
amount of each Loan made by such Lender for the period commencing on the date
such Loan is made to but excluding the date such Loan shall be paid in full, at
the following rates per annum (subject, however, to Section 12.14):
(a) if such a Loan is a Base Rate Loan, the Base Rate (as in effect
from time to time) plus the Applicable Margin, but in no event to exceed
the Highest Lawful Rate; and
(b) if such a Loan is a Eurodollar Advance, for each Interest Period
relating thereto, the Fixed Rate for such Loan plus the Applicable Margin,
but in no event to exceed the Highest Lawful Rate.
Notwithstanding the foregoing, the Borrower will pay to the Agent at its
Principal Office, for the account of each Lender, interest at the applicable
Post-Default Rate on any principal of any Loan made by such Lender, and (to the
fullest extent permitted by law) on any other amount payable by the Borrower
hereunder or under any Notes held by such Lender to or for account of such
Lender, which shall not be paid in full when due (whether at stated maturity, by
acceleration or otherwise), for the period commencing on the due date thereof
until the same is paid in full.
Accrued interest on Base Rate Loans shall be payable on each Quarterly Date
commencing on December 31, 1994, and accrued interest on each Eurodollar
Advances shall be payable on the last day of the Interest Period therefor and,
if such Interest Period is longer than three months at three-month intervals
following the first day of such Interest Period, except that interest payable at
the Post-Default Rate shall be payable from time to time on demand and interest
on any Eurodollar Advances that is converted into a Base Rate Loan (pursuant to
Section 5.04) shall be payable on the date of conversion (but only to the extent
so converted).
Promptly after the determination of any interest rate provided for herein
or any change therein, the Agent shall notify the Lenders to which such interest
is payable and the Borrower thereof. Each determination by the Agent of an
interest rate or fee hereunder shall, except in cases of manifest error, be
final, conclusive and binding on the parties.
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ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 PAYMENTS. Except to the extent otherwise provided herein,
all payments of principal, interest and other amounts to be made by the Borrower
under this Agreement, the Notes and the Letters of Credit shall be made in
Dollars, in immediately available funds, to the Agent at its Principal Office in
such accounts as the Agent shall specify by notice to the Borrower from time to
time, not later than 11:00 a.m. New York, New York time on the date on which
such payments shall become due (each such payment made after such time on such
due date to be deemed to have been made on the next succeeding Business Day).
Such payments shall be made without (to the fullest extent permitted by
applicable law) defense, set-off or counterclaim. Each payment to be made to
the Agent under this Agreement or any Note for account of a Lender shall be paid
promptly to such Lender in immediately available funds. If the due date of any
payment under this Agreement or any Note would otherwise fall on a day which is
not a Business Day such date shall be extended to the next succeeding Business
Day and interest shall be payable for any principal so extended for the period
of such extension. At the time of each payment to the Agent of any principal of
or interest on any borrowing, the Borrower shall notify the Agent of the Loans
to which such payment shall apply. In the absence of such notice the Agent may
specify the Loans to which such payment shall apply, but to the extent possible
such payment or prepayment will be applied first to the Loans comprised of Base
Rate Loans.
Section 4.02 PRO RATA TREATMENT. Except to the extent otherwise provided
herein each Lender agrees that: (a) each borrowing from the Lenders under
Section 2.01 shall be made from the Lenders pro rata in accordance with their
Percentage Share, each payment of commitment fee or other fees under
Sections 2.04(a) and (b) shall be made for account of the Lenders pro rata in
accordance with their Percentage Share, and each termination or reduction of the
amount of the Revolving Credit Commitments under Section 2.03(a) shall be
applied to the Revolving Credit Commitment of each Lender, pro rata according to
the amounts of its respective Revolving Credit Commitment; (b) each payment of
principal of Loans by the Borrower shall be made for account of the Lenders pro
rata in accordance with the respective unpaid principal amount of the Loans held
by the Lenders; and (c) each payment of interest on Loans by the Borrower shall
be made for account of the Lenders pro rata in accordance with the amounts of
interest due and payable to the respective Lenders; and (d) each reimbursement
by the Borrower of disbursements under Letters of Credit shall be made for
account of the Lenders pro rata in accordance with the amounts of reimbursement
obligations due and payable to each respective Lender.
Section 4.03 COMPUTATIONS. Interest on Eurodollar Advances and fees shall
be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which such interest is payable, unless such calculation would exceed the Highest
Lawful Rate, in which case interest shall be calculated on the per annum basis
of a year of 365 or 366 days, as the case may be. Interest on Base Rate Loans
shall be computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days
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elapsed (including the first day but excluding the last day) occurring in the
period for which such interest is payable.
Section 4.04 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall
have been notified (which notice shall be effective upon receipt) by a Lender or
the Borrower prior to the date on which such notifying party is scheduled to
make payment to the Agent (such payment being herein called the "REQUIRED
PAYMENT") of (a) in the case of a Lender, the proceeds of a Loan or a payment
under a Letter of Credit to be made by it hereunder or (b) in the case of the
Borrower, a payment to the Agent for account of one or more of the Lenders
hereunder, that it does not intend to make the Required Payment to the Agent,
the Agent may assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or the Borrower (as the case may be) has not in fact made the Required Payment
to the Agent or fails to make such Required Payment on the date when due, (i)
the recipient(s) of such payment (to the extent payment is not made pursuant to
clause (ii) below) shall, on demand, repay to the Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until but excluding the date the Agent recovers such amount at a rate per annum
which, for any Lender as recipient, will be equal to the Federal Funds Rate, and
for the Borrower as recipient, will be equal to the Base Rate plus the
Applicable Margin and (ii) the Lender failing to advance proceeds of a Loan or a
payment under a Letter of Credit shall pay to the Agent customary fees plus
interest on such proceeds and payments for each day on which such proceeds
and/or payments are not made equal to the Federal Funds Rate for the first two
(2) such days and at the Base Rate for each such day thereafter until such
advances are made or returned to the Agent.
Section 4.05 SET-OFF, SHARING OF PAYMENTS, ETC.
(a) The Borrower agrees that, in addition to (and without limitation
of) any right of set-off, bankers' lien or counterclaim a Lender may
otherwise have, each Lender shall have the right and be entitled (after
consultation with the Agent), at its option, to offset balances held by it
or by any of its Affiliates for account of the Borrower or any Restricted
Subsidiary at any of its offices, in Dollars or in any other currency,
against any principal of or interest on any of such Lender's Loans, or any
other amount payable to such Lender hereunder, which is not paid when due
(regardless of whether such balances are then due to the Borrower), in
which case it shall promptly notify the Borrower and the Agent thereof,
provided that such Lender's failure to give such notice shall not affect
the validity thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to the Borrower under this Agreement (or
reimbursement as to any Letter of Credit, including the $101,000,000 Letter
of Credit) through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise, and, as a result of such
payment, such Lender shall have received a greater percentage of the
principal or interest (or reimbursement) then due hereunder by the Borrower
to such Lender than the percentage received by any other Lenders, it shall
promptly (i) notify the
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Agent and each other Lender thereof and (ii) purchase from such other
Lenders participations in (or, if and to the extent specified by such
Lender, direct interests in) the Loans (or participations in Letters of
Credit) made by such other Lenders (or in interest due thereon, as the case
may be) in such amounts, and make such other adjustments from time to time
as shall be equitable, to the end that all the Lenders shall share the
benefit of such excess payment (net of any expenses which may be incurred
by such Lender in obtaining or preserving such excess payment) pro rata in
accordance with the unpaid principal and/or interest on the Loans held by
each of the Lenders (or reimbursements of Letters of Credit). To such end,
all the Lenders shall make appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if such payment is rescinded or
must otherwise be restored. The Borrower agrees that any Lender so
purchasing a participation (or direct interest) in the Loans made by other
Lenders (or in interest due thereon or reimbursement for Letters of Credit,
as the case may be) may exercise all rights of set-off, banker's lien,
counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or Letters of Credit in the
amount of such participation. Nothing contained herein shall require any
Lender to exercise any such right or shall affect the right of any Lender
to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Borrower. If under
any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a set-off to which this Section 4.05
applies, such Lender shall, to the extent practicable, exercise its rights
in respect of such secured claim in a manner consistent with the rights of
the Lenders entitled under this Section 4.05 to share the benefits of any
recovery on such secured claim.
Section 4.06 TAXES.
(a) PAYMENTS FREE AND CLEAR. Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 4.01, free and clear of
and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto resulting from a Regulatory Change, EXCLUDING, in the case
of each Lender and the Agent, taxes imposed on its income, and franchise or
similar taxes imposed on it, by (i) any jurisdiction (or political
subdivision thereof) of which the Agent or such Lender, as the case may be,
is a citizen or resident or in which such Lender has an Applicable Lending
Office, (ii) the jurisdiction (or any political subdivision thereof) in
which the Agent or such Lender is organized, or (iii) any jurisdiction (or
political subdivision thereof) in which such Lender or the Agent is doing
business which taxes are imposed solely as a result of doing business in
such jurisdiction (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "TAXES"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the
Lenders or the Agent (i) the sum payable shall be increased by the amount
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 4.06)
such Lender or the Agent (as the case may be) shall receive an amount equal
to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay
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the full amount deducted to the relevant taxing authority or other
Governmental Authority in accordance with applicable law.
(b) OTHER TAXES. In addition, to the fullest extent permitted by
applicable law, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement,
any Assignment or any other Security Instrument (hereinafter referred to as
"OTHER TAXES").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE AGENT FOR THE FULL
AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES
OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE
UNDER THIS SECTION 4.06) PAID BY SUCH LENDER OR THE AGENT (ON THEIR BEHALF
OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH
RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR
LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR
LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS
THE RESULT OF ITS GROSS NEGLIGENCE OR WILFUL MISCONDUCT. ANY PAYMENT
PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS
AFTER THE DATE ANY LENDER OR THE AGENT, AS THE CASE MAY BE, MAKES WRITTEN
DEMAND THEREFOR. IF ANY LENDER OR THE AGENT RECEIVES A REFUND OR CREDIT IN
RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER OR THE AGENT HAS
RECEIVED PAYMENT FROM THE BORROWER HEREUNDER IT SHALL PROMPTLY NOTIFY THE
BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND
IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE
BORROWER (OR PROMPTLY UPON RECEIPT, IF THE BORROWER HAS REQUESTED
APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL
TO SUCH REFUND OR CREDIT TO THE BORROWER WITHOUT INTEREST (BUT WITH ANY
INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT THE BORROWER, UPON THE
REQUEST OF SUCH LENDER OR THE AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT
(PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE AGENT IN
THE EVENT SUCH LENDER OR THE AGENT IS REQUIRED TO REPAY SUCH REFUND OR
CREDIT.
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(d) LENDER REPRESENTATIONS.
(i) Each Lender represents that it is either (i) a corporation
organized under the laws of the United States of America or any state
thereof or (ii) it is entitled to complete exemption from United
States withholding tax imposed on or with respect to any payments,
including fees, to be made to it pursuant to this Agreement (A) under
an applicable provision of a tax convention to which the United States
of America is a party or (B) because it is acting through a branch,
agency or office in the United States of America and any payment to be
received by it hereunder is effectively connected with a trade or
business in the United States of America. Each Lender that is not a
corporation organized under the laws of the United States of America
or any state thereof agrees to provide to the Borrower and the Agent
on the Closing Date, or on the date of its delivery of the Assignment
pursuant to which it becomes a Lender, and at such other times as
required by United States law or as the Borrower or the Agent shall
reasonably request, two accurate and complete original signed copies
of either (A) Internal Revenue Service Form 4224 (or successor form)
certifying that all payments to be made to it hereunder will be
effectively connected to a United States trade or business (the "FORM
4224 CERTIFICATION") or (B) Internal Revenue Service Form 1001 (or
successor form) certifying that it is entitled to the benefit of a
provision of a tax convention to which the United States of America is
a party which completely exempts from United States withholding tax
all payments to be made to it hereunder (the "FORM 1001
CERTIFICATION"). In addition, each Lender agrees that if it
previously filed a Form 4224 Certification, it will deliver to the
Borrower and the Agent a new Form 4224 Certification prior to the
first payment date occurring in each of its subsequent taxable years;
and if it previously filed a Form 1001 Certification, it will deliver
to the Borrower and the Agent a new certification prior to the first
payment date falling in the third year following the previous filing
of such certification. Each Lender also agrees to deliver to the
Borrower and the Agent such other or supplemental forms as may at any
time be required as a result of changes in applicable law or
regulation in order to confirm or maintain in effect its entitlement
to exemption from United States withholding tax on any payments
hereunder, PROVIDED that the circumstances of such Lender at the
relevant time and applicable laws permit it to do so. If a Lender
determines, as a result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is unable to submit any
form or certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any such
form or certificate previously submitted, it shall promptly notify the
Borrower and the Agent of such fact. If a Lender is organized under
the laws of a jurisdiction outside the United States of America,
unless the Borrower and the Agent have received a Form 1001
Certification or Form 4224 Certification satisfactory to them
indicating that all payments to be made to such Lender hereunder are
not subject to United States withholding tax, the Borrower shall
withhold taxes from such payments at the applicable statutory rate.
Each Lender agrees to indemnify and hold harmless the Borrower or
Agent, as applicable, from any United States taxes, penalties,
interest and other
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expenses, costs and losses incurred or payable by (i) the Agent as a
result of such Lender's failure to submit any form or certificate that
it is required to provide pursuant to this Section 4.06 or (ii) the
Borrower or the Agent as a result of their reliance on any such form
or certificate which such Lender has provided to them pursuant to this
Section 4.06.
(ii) For any period with respect to which a Lender has failed to
provide the Borrower with the form required pursuant to this Section
4.06, if any, (other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 4.06 with respect to taxes
imposed by the United States which taxes would not have been imposed
but for such failure to provide such forms; PROVIDED, HOWEVER, that
should a Lender, which is otherwise exempt from or subject to a
reduced rate of withholding tax becomes subject to taxes because of
its failure to deliver a form required hereunder, the Borrower shall
take such steps as such Lender shall reasonably request to assist such
Lender to recover such taxes.
(iii) Any Lender claiming any additional amounts payable
pursuant to this Section 4.06 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or
document requested by the Borrower or the Agent or to change the
jurisdiction of its Applicable Lending Office or to contest any tax
imposed if the making of such a filing or change or contesting such
tax would avoid the need for or reduce the amount of any such
additional amounts that may thereafter accrue and would not, in the
sole determination of such Lender, be otherwise disadvantageous to
such Lender.
(iv) Each Lender hereby represents that it will acquire its Note
for its own account in the ordinary course of its commercial lending
business; however, the disposition of such Lender's property shall at
all times be and remain within its control and, in particular and
without limitation, such Lender may, subject to the provisions of
Section 12.06 and any other applicable provisions of this Agreement,
sell or otherwise transfer its Note, any participation interest or any
interest in its Note, or any of its other rights and obligations under
the Loan Documents.
ARTICLE V
CAPITAL ADEQUACY
Section 5.01 EURODOLLAR REGULATIONS, ETC..
(a) EURODOLLAR REGULATIONS, ETC. The Borrower shall pay directly to
each Lender from time to time such amounts as such Lender may determine to
be necessary to compensate such Lender for any costs which it determines
are attributable to its
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making or maintaining of any Eurodollar Advances or issuing or
participating in Letters of Credit hereunder or its obligation to make any
Eurodollar Advances or issue or participate in any Letters of Credit
hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Eurodollar Advances, Letters of Credit
or such obligation (such increases in costs and reductions in amounts
receivable being herein called "ADDITIONAL COSTS"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to such Lender under this Agreement or any Note in respect of any
of such Eurodollar Advances or Letters of Credit (other than taxes imposed
on the overall net income of such Lender or of its Applicable Lending
Office for any of such Eurodollar Advances by the jurisdiction in which
such Lender has its principal office or Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit, minimum capital,
capital ratio or similar requirements (other than the Reserve Requirement
utilized in the determination of the Fixed Rate for such Loan) relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities of such Lender (including any of such Eurodollar Advances or
any deposits referred to in the definition of "Fixed Eurodollar Rate" in
Section 1.02 hereof), or the Commitment of such Lender or the Eurodollar
interbank market; or (iii) imposes any other condition affecting this
Agreement or any Note (or any of such extensions of credit or liabilities)
or such Lender's Commitment. Each Lender will notify the Agent and the
Borrower of any event occurring after the Closing Date which will entitle
such Lender to compensation pursuant to this Section 5.01(a) as promptly as
practicable after it obtains knowledge thereof and determines to request
such compensation, and will designate a different Applicable Lending Office
for the Loans of such Lender affected by such event if such designation
will avoid the need for, or reduce the amount of, such compensation and
will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, provided that such Lender shall have no obligation to so designate
an Applicable Lending Office located in the United States. If any Lender
requests compensation from the Borrower under this Section 5.01(a), the
Borrower may, by notice to such Lender, suspend the obligation of such
Lender to make additional Loans of the Type with respect to which such
compensation is requested until the Regulatory Change giving rise to such
request ceases to be in effect (in which case the provisions of
Section 5.04 shall be applicable).
(b) REGULATORY CHANGE. Without limiting the effect of the provisions
of Section 5.01(a), in the event that, by reason of any Regulatory Change
or any other circumstances arising after the Closing Date affecting such
Lender, the Eurodollar interbank market or such Lender's position in such
market, any Lender either (i) incurs Additional Costs based on or measured
by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender which includes deposits by
reference to which the interest rate on Eurodollar Advances is determined
as provided in this Agreement or a category of extensions of credit or
other assets of such Lender which includes Eurodollar Advances or
(ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if such Lender so elects by
notice to the Borrower, the obligation of such Lender to make additional
Eurodollar Advances shall be suspended until such Regulatory Change or
other
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circumstances ceases to be in effect (in which case the provisions of
Section 5.04 shall be applicable).
(c) CAPITAL ADEQUACY. Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the Borrower
shall pay directly to any Lender from time to time on request such amounts
as such Lender may reasonably determine to be necessary to compensate such
Lender or its parent or holding company for any costs which it determines
are attributable to the maintenance by such Lender or its parent or holding
company (or any Applicable Lending Office), pursuant to any Governmental
Requirement following any Regulatory Change, of capital in respect of its
Commitment, its Note, its Loans or any interest held by it in any Letter of
Credit, such compensation to include, without limitation, an amount equal
to any reduction of the rate of return on assets or equity of such Lender
or its parent or holding company (or any Applicable Lending Office) to a
level below that which such Lender or its parent or holding company (or any
Applicable Lending Office) could have achieved but for such Governmental
Requirement. Such Lender will notify the Borrower that it is entitled to
compensation pursuant to this Section 5.01(c) as promptly as practicable
after it determines to request such compensation.
(d) COMPENSATION PROCEDURE. Any Lender notifying the Borrower of the
incurrence of additional costs under this Section 5.01 shall in such notice
to the Borrower and the Agent set forth in reasonable detail the basis and
amount of its request for compensation. Determinations and allocations by
each Lender for purposes of this Section 5.01 of the effect of any
Regulatory Change pursuant to Section 5.01(a) or (b), or of the effect of
capital maintained pursuant to Section 5.01(c), on its costs or rate of
return of maintaining Loans or its obligation to make Loans or issue
Letters of Credit, or on amounts receivable by it in respect of Loans or
Letters of Credit, and of the amounts required to compensate such Lender
under this Section 5.01, shall be conclusive and binding for all purposes,
provided that such determinations and allocations are made on a reasonable
basis. Any request for additional compensation under this Section 5.01
shall be paid by the Borrower within thirty (30) Business Days of the
receipt by the Borrower of the notice described in this Section 5.01(d).
Section 5.02 LIMITATION ON EURODOLLAR ADVANCES. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Fixed
Eurodollar Rate for any Interest Period:
(a) the Agent determines (which determination shall be conclusive,
absent manifest error) that quotations of interest rates for the relevant
deposits referred to in the definition of "Fixed Eurodollar Rate" in
Section 1.02 are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for
Eurodollar Advances as provided herein; or
(b) the Agent determines (which determination shall be conclusive,
absent manifest error) that the relevant rates of interest referred to in
the definition of "Fixed Eurodollar Rate" in Section 1.02 upon the basis of
which the rate of interest for
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Eurodollar Advances for such Interest Period is to be determined are not
sufficient to adequately cover the cost to the Lenders of making or
maintaining Eurodollar Advances;
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Eurodollar Advances.
Section 5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Advances hereunder, then such Lender shall promptly notify the Borrower thereof
and such Lender's obligation to make Eurodollar Advances shall be suspended
until such time as such Lender may again make and maintain Eurodollar Advances
(in which case the provisions of Section 5.04 shall be applicable).
Section 5.04 BASE RATE LOANS PURSUANT TO SECTIONS 5.01, 5.02 AND 5.03. If
the obligation of any Lender to make Eurodollar Advances shall be suspended
pursuant to Sections 5.01, 5.02 or 5.03 ("AFFECTED LOANS"), all Affected Loans
which would otherwise be made by such Lender shall be made instead as Base Rate
Loans (and, if an event referred to in Section 5.01(b) or Section 5.03 has
occurred and such Lender so requests by notice to the Borrower, all Affected
Loans of such Lender then outstanding shall be automatically converted into Base
Rate Loans on the date specified by such Lender in such notice) and, to the
extent that Affected Loans are so made as (or converted into) Base Rate Loans,
all payments of principal which would otherwise be applied to such Lender's
Affected Loans shall be applied instead to its Base Rate Loans.
Section 5.05 COMPENSATION. The Borrower shall pay to each Lender within
thirty (30) days of receipt of written request of such Lender (which request
shall set forth, in reasonable detail, the basis for requesting such amounts and
which shall be conclusive and binding for all purposes provided that such
determinations are made on a reasonable basis), such amount or amounts as shall
compensate it for any loss, cost, expense or liability which such Lender
determines are attributable to:
(a) any payment, prepayment or conversion of a Eurodollar Advances
properly made by such Lender or the Borrower for any reason (including,
without limitation, the acceleration of the Loans pursuant to
Section 10.01) on a date other than the last day of the Interest Period for
such Loan; or
(b) any failure by the Borrower for any reason (including but not
limited to, the failure of any of the conditions precedent specified in
Article VI to be satisfied) to borrow, continue or convert Eurodollar
Advances from such Lender on the date for such borrowing, continuation or
conversion specified in the relevant notice given pursuant to
Section 2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of
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such payment, prepayment or conversion or failure to borrow to the last day of
the Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the interest component of the amount such Lender would have
bid in the London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities comparable to
such period (as reasonably determined by such Lender).
Section 5.06 REPLACEMENT LENDERS.
(a) If only one (1) Lender has notified the Borrower and the Agent of
its incurring additional costs under Section 5.01 hereof or has required
the Borrower to make payments for Taxes under Section 4.06 hereof or obtain
appraisals pursuant to Section 8.11, then the Borrower may (subject to
paragraph (b) of this Section 5.06), unless such Lender has notified the
Borrower and the Agent that the circumstances giving rise to such notice no
longer apply, terminate, in whole but not in part, the Commitment of such
Lender (other than the Agent) (the "TERMINATED LENDER") at any time upon
five (5) Business Days' prior written notice to the Terminated Lender and
the Agent (such notice referred to herein as a "NOTICE OF TERMINATION").
The rights of the Borrower provided for in this Section 5.06(a) shall not
apply if two (2) or more Lenders notify the Borrower and the Agent that
each such Lender has incurred such additional costs or required the
Borrower to pay such Taxes.
(b) In order to effect the termination of the Commitment of the
Terminated Lender, the Borrower shall: (i) obtain an agreement with one or
more Lenders to be the Issuer on any replacement Letter of Credit or
increase their Commitment or Commitments and/or (ii) request any one or
more other banking institutions (satisfactory to the Agent and all Issuers)
to become parties to this Agreement in place and instead of such Terminated
Lender and agree to accept a Commitment or Commitments; PROVIDED, HOWEVER,
that such one or more other banking institutions are reasonably acceptable
to the Agent (and to the Issuers of the Letters of Credit) and become
parties by executing an Assignment (the Lenders or other banking
institutions that agree to accept in whole or in part the Commitment of the
Terminated Lender being referred to herein as the "REPLACEMENT LENDERS"),
such that the aggregate increased and/or accepted Commitments of the
Replacement Lenders under clauses (i) and (ii) above equal the Commitment
of the Terminated Lender.
(c) The Notice of Termination shall include the name of the
Terminated Lender, the date the termination will occur (the "TERMINATION
DATE"), and the Replacement Lender or Replacement Lenders (or replacement
Issuer) to which the Terminated Lender will assign its Commitment and, if
there will be more than one Replacement Lender, the portion of the
Terminated Lender's Commitment to be assigned to each Replacement Lender.
(d) On the Termination Date, (i) the Terminated Lender shall by
execution and delivery of an Assignment assign its Commitment to the
Replacement Lender or
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Replacement Lenders (pro rata, if there is more than one Replacement
Lender, in proportion to the portion of the Terminated Lender's Commitment
to be assigned to each Replacement Lender) indicated in the Notice of
Termination and shall assign to the Replacement Lender(s) each of its Loans
(if any) then outstanding and participation interests in Letters of Credit
(if any) then outstanding pro rata as aforesaid), (ii) the Terminated
Lender shall endorse its Note, payable without recourse, representation or
warranty to the order of the Replacement Lender(s) (pro rata as aforesaid),
(iii) the Replacement Lender(s) shall purchase the Note held by the
Terminated Lender (pro rata as aforesaid) at a price equal to the unpaid
principal amount thereof plus interest and facility and other fees accrued
and unpaid to the Termination Date, (iv) the Replacement Lender(s) shall
become the Issuer on any replacement Letters of Credit, as applicable, and
(v) the Replacement Lender or Replacement Lenders will thereupon (pro rata
as aforesaid) succeed to and be substituted in all respects for the
Terminated Lender with like effect as if becoming a Lender pursuant to the
terms of Section 12.06(b), and the Terminated Lender will have the rights
and benefits of an assignor under Section 12.06(b). To the extent not in
conflict, the terms of Section 12.06(b) shall supplement the provisions of
this Section 5.06(d). For each assignment made under this Section 5.06,
the Replacement Lender shall pay to the Agent the processing fee provided
for in Section 12.06(b). The Borrower will be responsible for the payment
of any breakage costs associated with termination and Replacement Lenders,
as set forth in Section 5.05.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 INITIAL FUNDING.
The obligation of the Lenders to make the Initial Funding is subject to the
receipt by the Agent and the Lenders of all fees (if any) payable pursuant to
Section 2.04 or otherwise under this Agreement on or before the Closing Date,
receipt by the Agent and the Lenders of each of the documents referred to below,
and the satisfaction of the following conditions provided in this Section 6.01,
each of which shall be satisfactory to the Agent and the Lenders as to form and
substance:
(a) a certificate of the Secretary or an Assistant Secretary of the
Borrower setting forth (i) resolutions of its board of directors with
respect to the authorization of the Borrower to execute and deliver the
Loan Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of the Borrower (y) who
are authorized to sign the Loan Documents to which Borrower is a party and
(z) who will, until replaced by another officer or officers duly authorized
for that purpose, act as its representative for the purposes of signing
documents and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the articles or certificate
of incorporation and bylaws of the Borrower, certified as being true
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and complete. The Agent and the Lenders may conclusively rely on such
certificate until the Agent receives notice in writing from the Borrower to
the contrary;
(b) certificates of the appropriate state agencies with respect to
the existence, qualification and good standing of the Borrower and
Restricted Subsidiaries;
(c) a compliance certificate which shall be substantially in the form
of Exhibit C, duly and properly executed by a Responsible Officer and dated
as of the date of the Initial Funding;
(d) the Notes, duly completed and executed;
(e) the Security Instruments, including those described on Exhibit E,
duly completed and executed in sufficient number of counterparts for
recording, if necessary, granting to the Agent for the benefit of the
Lenders first priority Liens (subject only to the Excepted Liens; provided,
however, the only permitted Excepted Liens on Eligible Accounts and
Eligible Inventory are those referenced in clauses (i), (ii), (viii) and
(ix) of the definition of Excepted Liens) upon the Property of the Borrower
more particularly described therein including, without limitation,
(i) certain real property and all improvements thereon located
in Ector County, Texas, Chippewa County, Wisconsin, Kent County,
Delaware, Whitfield County, Georgia and Davis County, Utah;
(ii) all existing and future accounts, inventory, equipment, and
general intangibles of the Borrower (but excluding (a) non-U.S.
patents, trademarks and copyrights and (b) other intellectual property
rights to the extent same are used outside of the U.S. but not
excluded otherwise);
(iii) all of Borrower's U.S. patents and other U.S.
intellectual property;
(iv) the deposit accounts of the Borrower;
(v) 100% of the Capital Stock of each Subsidiary other than a
Foreign Subsidiary;
(vi) 65% of the Capital Stock of each Foreign Subsidiary, except
URC; and
(vii) all proceeds of the foregoing.
(f) completion by independent consultants and legal counsel selected
by the Agent of due diligence reviews and audits regarding the overall
economic, technical, environmental, legal and operational status of the
Borrower the results of which shall be satisfactory to the Lenders in all
respects;
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(g) satisfactory review by the Lenders of the proposed capital
structure of the Borrower and the terms and conditions of the Senior
Unsecured Notes;
(h) the Borrower shall have received a minimum of $85,000,000 gross
proceeds from the issuance of its common stock and an aggregate of
$275,000,000 gross proceeds from the issuance of Senior Unsecured Notes and
common stock; provided that the aggregate gross proceeds of $275,000,000
may be reduced by the amount of the balance sheet cash of the Borrower and
its consolidated Subsidiaries above $20,000,000 which is used to retire
Debt;
(i) the following legal opinions:
(i) an opinion of Thompson & Knight, counsel to the Borrower,
substantially in the form of Exhibit D-1(a) hereto;
(ii) an opinion of Patterson, Belknap, Webb & Tyler, special New
York counsel to the Borrower, substantially in the form of Exhibit D-
1(b) hereto;
(iii) an opinion of Bayard, Handelman & Murdoch, P.A.,
special Delaware counsel to the Borrower, substantially in the form of
Exhibit D-2 hereto;
(iv) an opinion of Cohne, Rappaport & Segal, special Utah counsel
to the Borrower, substantially in the form of Exhibit D-3 hereto;
(v) an opinion of Foley & Lardner, special Wisconsin counsel to
the Borrower, substantially in the form of Exhibit D-4 hereto;
(vi) an opinion of Arnall, Golden & Gregory, special Georgia
counsel to the Borrower, substantially in the form of Exhibit D-5
hereto;
(j) a certificate of insurance coverage of the Borrower evidencing
that the Borrower is carrying insurance in accordance with Section 7.19
hereof;
(k) the Agent shall have been furnished with appropriate UCC search
certificates reflecting the filing of all financing statements required to
perfect the security interests granted by the Security Instruments and
reflecting no prior liens or security interests;
(l) the Agent shall have received commitments for title insurance on
real property assets upon which a Lien has been granted in favor of the
Agent to secure the Indebtedness;
(m) after giving effect to (h) above, (i) the market value of the
outstanding shares of the Borrower's common stock will be a minimum of
$155,000,000 and (ii) the
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aggregate indebtedness of the Borrower including the Indebtedness and Debt
permitted by Section 9.01, less its unrestricted cash on hand, shall not
exceed $280,000,000; and
(n) such other documents as the Agent or special counsel to the Agent
may reasonably request.
Section 6.02 INITIAL AND SUBSEQUENT LOANS AND LETTERS OF CREDIT. The
obligation of the Lenders to make Loans to the Borrower upon the occasion of
each borrowing hereunder (including the Initial Funding) and, in addition to the
conditions in Section 6.03, the obligation of the Issuer to issue, renew or
extend any Letters of Credit (including the Initial Funding) is subject to the
further conditions precedent that as of the date of such Loans and after giving
effect thereto (i) no Default shall have occurred and be continuing or result
therefrom; (ii) no Material Adverse Effect shall have occurred; (iii) the
aggregate principal amount of the Revolving Credit Loans plus the LC Exposure
does not exceed the Revolving Credit Commitment, and (iv) the representations
and warranties made by the Borrower in Article VII and in the Security
Instruments shall be true on and as of the date of the making of such Loans with
the same force and effect as if made on and as of such date and following such
new borrowing, except as such representations and warranties are modified in
writing (x) by new disclosures made to the Agent and the Lenders from time to
time in the course of fulfilling Borrower's obligations under this Agreement and
(y) to give effect to transactions expressly permitted hereby. Each request for
a borrowing by the Borrower hereunder shall constitute a certification by the
Borrower to the effect set forth in the preceding sentence (both as of the date
of such notice and, unless the Borrower otherwise notifies the Agent prior to
the date of and immediately following such borrowing as of the date thereof).
Section 6.03 CONDITIONS RELATING TO LETTERS OF CREDIT. In addition to the
satisfaction of all other conditions precedent set forth in this Article VI, the
issuance, renewal, extension or reissuance of the Letters of Credit (including
the $101,000,000 Letter of Credit) referred to in Section 2.01(c) hereof is
subject to the following conditions precedent:
(a) At least three (3) Business Days prior to the date of the
issuance and at least ten (10) Business Days prior to the date of the
renewal, extension or reissuance of each Letter of Credit, the Agent shall
have received a written request for a Letter of Credit.
(b) Each of the Letters of Credit shall (i) be issued by an Issuer,
(ii) contain such terms and provisions as are reasonably required by the
Agent and the Issuer, (iii) be for the account of the Borrower or a
Restricted Subsidiary and the Borrower, (iv) expire not later than twelve
(12) months after the date of issuance, renewal, extension or reissuance,
and in no event later than two (2) Business Days before the Final Maturity
Date, and (v) not be issued to directly or indirectly support the
Borrower's obligations under the Senior Unsecured Note.
(c) The Borrower shall have duly and validly executed and delivered
to the Issuer a Letter of Credit Agreement pertaining to the Letter of
Credit.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders that
(each representation and warranty herein is given as of the Closing Date and
shall be deemed repeated and reaffirmed on the dates of each borrowing as
provided in Section 6.02):
Section 7.01 CORPORATE EXISTENCE. Each of the Borrower and each
Restricted Subsidiary: (a) is a corporation duly organized, legally existing
and in good standing under the laws of the jurisdiction of its incorporation;
(b) has all requisite corporate power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets and
carry on its business as now being conducted; and (c) is qualified to do
business in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify would have
a Material Adverse Effect.
Section 7.02 FINANCIAL CONDITION. The audited consolidated balance sheet
of the Borrower and its consolidated Subsidiaries as at December 31, 1993 and
the related consolidated statement of income, stockholders' equity and cash flow
of the Borrower and its consolidated Subsidiaries for the fiscal year ended on
said date, with the opinion thereon of Price Waterhouse L.L.P. heretofore
furnished to each of the Lenders and the unaudited consolidated balance sheet of
the Borrower and its consolidated Subsidiaries as at September 30, 1994 and
their related consolidated statements of income, stockholders' equity and cash
flow of the Borrower and its consolidated Subsidiaries for the three and nine-
month period ended on such date heretofore furnished to the Agent, fairly
present the consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at said dates and the results of its operations for
the fiscal year and the three and nine-month periods on said dates, all in
accordance with GAAP, as applied on a consistent basis (subject, in the case of
the interim financial statements, to normal year-end adjustments). Neither the
Borrower nor any Subsidiary has on the Closing Date any material Debt, material
contingent liabilities, material liabilities for taxes, unusual material forward
or long-term commitments or unrealized or anticipated material losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the Financial Statements , in the Borrower's registration statement (#33-55507)
or in Schedule 7.02. Since December 31, 1993, there has been no change or event
having a Material Adverse Effect. Since the date of the Financial Statements,
neither the business nor the Properties of the Borrower or any Restricted
Subsidiary have been materially and adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition or taking of Property or cancellation of
contracts, permits or concessions by any Governmental Authority, riot,
activities of armed forces or acts of God or of any public enemy.
Section 7.03 LITIGATION. Except as disclosed to the Lenders in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, to the knowledge of the Borrower
governmental investigation, or to the knowledge of the Borrower other similar
action of any nature pending or, to the knowledge of the Borrower threatened
against the Borrower or any Subsidiary which involves the reasonable possibility
of any
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judgment or liability against the Borrower or any Subsidiary not fully covered
by insurance (except for normal deductibles), and which may reasonably have a
Material Adverse Effect.
Section 7.04 NO BREACH. Except (i) with respect to Current Funded Debt
and Existing Debt which is either being prepaid in full or refinanced in its
entirety with the proceeds of the Loans, or (ii) as otherwise disclosed to the
Agent and the Lenders in writing, neither the execution and delivery of the Loan
Documents nor compliance with the terms and provisions hereof will conflict with
or result in a breach of, or require any consent which has not been obtained as
of the Closing Date under, the respective charter or by-laws of the Borrower or
any Restricted Subsidiary, or any Governmental Requirement or any agreement or
instrument to which the Borrower or any Restricted Subsidiary is a party or by
which it is bound or to which it or its Properties are subject, or constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any Lien upon any of the revenues or assets of the Borrower or any
Restricted Subsidiary pursuant to the terms of any such agreement or instrument
other than the Liens created by the Loan Documents.
Section 7.05 AUTHORITY. The Borrower has all necessary corporate power
and authority to execute, deliver and perform its obligations under the Loan
Documents to which it is a party; and the execution, delivery and performance by
the Borrower and each Restricted Subsidiary of the Loan Documents to which it is
a party, have been duly authorized by all necessary corporate action on its
part; and the Loan Documents constitute the legal, valid and binding obligations
of the Borrower and each Restricted Subsidiary, enforceable in accordance with
their terms.
Section 7.06 APPROVALS. No authorizations, approvals or consents of, and
no filings or registrations with, any Governmental Authority are necessary for
the execution, delivery or performance by the Borrower or any Restricted
Subsidiary of the Loan Documents or for the validity or enforceability thereof,
except for the recording and filing of the Security Instruments as required by
this Agreement.
Section 7.07 USE OF LOANS. The proceeds of the Term Loans and the
Revolving Credit Loans shall be used to fund the $101,000,000 Letter of Credit
and to repay Current Funded Debt in full and related expenses. Proceeds of the
Revolving Credit Loans may also be used for general corporate purposes including
but not limited to the payment of reimbursement obligations under Section 2.09.
The Borrower is not engaged principally, or as one of its important activities,
in the business of extending credit for the purpose, whether immediate,
incidental or ultimate, of buying or carrying margin stock (within the meaning
of Regulation U or X of the Board of Governors of the Federal Reserve System)
and no part of the proceeds of any Loan hereunder will be used to buy or carry
any margin stock. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause the Notes or any of
the Security Instruments, including this Agreement, to violate Regulation U or X
or any other regulation of the Board of Governors of the Federal Reserve System
or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
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Section 7.08 ERISA.
(a) The Borrower, each Domestic Subsidiary and each ERISA Affiliate
have since September 18, 1992, and have to the best knowledge of the
executive officers of the Borrower prior to such date, complied in all
material respects with ERISA and, where applicable, the Code regarding each
Plan.
(b) Each Plan is, has been since September 18, 1992, and has been to
the best knowledge of the executive officers of the Borrower prior to such
date, maintained in substantial compliance with ERISA and, where
applicable, the Code.
(c) No act, omission or transaction has occurred which is reasonably
likely to result in imposition on the Borrower or any Domestic Subsidiary
of (i) either a civil penalty assessed pursuant to section 502(c), (i) or
(l) of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the
Code which would likely have a Material Adverse Effect or (ii) breach of
fiduciary duty liability damages under section 409 of ERISA which would
have a Material Adverse Effect.
(d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974.
Neither Borrower nor any Domestic Subsidiary has any liability to the PBGC
with respect to any Plan (other than for the payment of current premiums
which are not past due) which would have a Material Adverse Effect. No
ERISA Event with respect to any Plan which would have a Material Adverse
Effect has occurred.
(e) Full payment when due has been made of all amounts which the
Borrower, any Domestic Subsidiary or any ERISA Affiliate (while an ERISA
Affiliate) is required under the terms of each Plan or applicable law to
have paid as contributions to such Plan and which, if not paid, would have
a Material Adverse Effect, and no accumulated funding deficiency (as
defined in section 302 of ERISA and section 412 of the Code), whether or
not waived, exists with respect to any Plan.
(f) Except as to which proper notice was given pursuant to Section
9.10(g), the current value of the benefit liabilities under each Plan which
is subject to Title IV of ERISA does not, as of the end of the Borrower's
most recently ended fiscal year, exceed in the aggregate by more than
$5,000,000 the current value of the assets of all such Plans allocable to
such benefit liabilities based upon the assumptions applied by the actuary
for such Plans in the most recent actuarial reports for such Plans.
(g) Except as to which proper notice was given pursuant to Section
9.10(f), none of the Borrower, any Domestic Subsidiary or any ERISA
Affiliate currently sponsors, maintains, or contributes to an employee
welfare benefit plan, as defined in section 3(1) of ERISA, including,
without limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by the Borrower, a
Domestic Subsidiary or any ERISA Affiliate in its sole discretion at any
time without any material liability.
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(h) Except as to which proper notice was given pursuant to Section
9.10(f), none of the Borrower, any Domestic Subsidiary or any ERISA
Affiliate currently sponsors, maintains or contributes to, or has at any
time in the preceding six calendar years sponsored, maintained or
contributed to, any Multiemployer Plan.
(i) None of the Borrower, any Domestic Subsidiary or any ERISA
Affiliate is currently required to provide security under
section 401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the Plan.
Section 7.09 TAXES. Except as set out in Schedule 7.09, each of the
Borrower and its Restricted Subsidiaries has filed all United States Federal
income tax returns and all other tax returns which are required to be filed by
them and have paid (to the extent payment is required by the Closing Date) all
material taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower or any Restricted Subsidiary, except for such
assessments which are being contested in good faith. The charges, accruals and
reserves on the books of the Borrower and its Restricted Subsidiaries in respect
of taxes and other governmental charges are, in the opinion of the Borrower,
adequate. Except as disclosed on Schedule 7.09, no material tax lien has been
filed and, to the knowledge of the Borrower, no claim is being asserted with
respect to any such tax, fee or other charge.
Section 7.10 TITLES, ETC. Except as set out in Schedule 7.10, each of the
Borrower and its Restricted Subsidiaries has good and defensible title to its
material (individually or in the aggregate) Properties, free and clear of all
Liens except Liens permitted by Section 9.02.
Section 7.11 NO MATERIAL MISSTATEMENTS. No written information,
statement, exhibit, certificate, document or report furnished to the Agent by
the Borrower or any Subsidiary in connection with the negotiation of this
Agreement contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statement contained therein not
materially misleading in the light of the circumstances in which made and with
respect to the Borrower and its Subsidiaries taken as a whole (except to the
extent corrected or updated by later information furnished to the Agent prior to
the Closing Date). There is no fact peculiar to the Borrower or any Subsidiary
which has or in the opinion of Borrower would have a Material Adverse Effect and
which has not been set forth in this Agreement or the other written information,
statements, exhibits, certificates, documents, or reports furnished to the Agent
by or on behalf of the Borrower or any Restricted Subsidiary prior to, or on,
the Closing Date in connection with the transactions contemplated hereby.
Section 7.12 INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor
any Subsidiary is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
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Section 7.14 SUBSIDIARIES AND PARTNERSHIPS. Except as set forth on
Schedule 7.14, the Borrower has no Subsidiaries and has no interest in any
partnerships. Schedule 7.14 indicates which Subsidiaries are Restricted
Subsidiaries and which are Unrestricted Subsidiaries.
Section 7.15 LOCATION OF BUSINESS AND OFFICES. The Borrower's principal
place of business and chief executive offices are located at the address stated
on the signature page of this Agreement. The principal place of business and
chief executive office of each Restricted Subsidiary are located at the
addresses stated on Schedule 7.15.
Section 7.16 DEFAULTS. Except (i) with respect to Current Funded Debt and
Existing Debt which is either being prepaid in full or refinanced in its
entirety with the proceeds from the Senior Unsecured Notes, the $101,000,000
Letter of Credit and the issuance of Borrower's common stock, or (ii) as
otherwise disclosed to the Agent and the Lenders in writing, neither the
Borrower nor any Restricted Subsidiary is in default nor has any event or
circumstance occurred which, but for the expiration of any applicable grace
period or the giving of notice, or both, would constitute a default under any
material agreement or instrument to which the Borrower or any Restricted
Subsidiary is a party or by which the Borrower or any Restricted Subsidiary is
bound which default would have a Material Adverse Effect. No Default hereunder
has occurred and is continuing.
Section 7.17 ENVIRONMENTAL MATTERS. Except (i) as provided in
Schedule 7.17 or (ii) as would not have a Material Adverse Effect (or with
respect to (c), (d) and (e) below, where the failure to take such actions would
not have a Material Adverse Effect):
(a) Neither any Property of the Borrower or any Domestic Subsidiary
nor the operations conducted thereon violate any order or requirement of
any court or Governmental Authority or any Environmental Laws;
(b) Without limitation of clause (a) above, no Property of the
Borrower or any Domestic Subsidiary nor the operations currently conducted
thereon or, to the knowledge of the Borrower, by any prior owner or
operator of such Property or operation, are subject to any existing,
pending or, to the knowledge of Borrower, threatened action, suit,
investigation or proceeding by or before any court or Governmental
Authority or to any remedial obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed in connection with the operation or use of
any and all Property of the Borrower and each Domestic Subsidiary,
including without limitation those required for treatment, storage,
disposal or release of a hazardous substance or solid waste into the
environment, have been duly applied for, obtained or filed, and the
Borrower and each Domestic Subsidiary are in compliance in ALL material
respects with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
(d) To the knowledge of the Borrower, all hazardous substances and
solid waste generated at any and all Property of the Borrower or any
Domestic Subsidiary have in the past been transported, treated and disposed
of in accordance with Environmental
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Laws and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment, and all such transport
carriers and treatment and disposal facilities have been and are operating
in compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment,
and are not the subject of any existing, pending or threatened action,
suit, investigation or proceeding by or before any Governmental Authority
in connection with any Environmental Laws;
(e) The Borrower, after reasonably appropriate inquiry, has
determined that no hazardous substances or solid waste has been disposed of
or otherwise released on or to any Property of the Borrower or any Domestic
Subsidiary except in compliance with Environmental Laws and so as not to
pose an imminent and substantial endangerment to public health or welfare
or the environment;
(f) To the extent applicable, all Property of the Borrower and each
Domestic Subsidiary currently satisfies all design, operation, and
equipment requirements imposed by the OPA as of the Closing Date or
scheduled to be imposed by OPA during the term of this Agreement, and the
Borrower does not have any reason to believe that such Properties, to the
extent subject to OPA, will not be able to maintain compliance with the OPA
requirements during the term of this Agreement; and
(g) Neither the Borrower nor any Domestic Subsidiary has any known
contingent liability in connection with any release or threatened release
of any oil, hazardous substance or solid waste into the environment;
provided, however, neither the Borrower nor any Domestic Subsidiary shall be in
breach of any representation concerning compliance with Environmental Laws in
any situation in which the Borrower or Domestic Subsidiary was in compliance
with an Environmental Law and such law was amended or supplemented such that the
Borrower or Domestic Subsidiary is no longer in compliance, so long as the
Borrower or Domestic Subsidiary is making diligent efforts to comply as soon as
practicable, the matter is reported to the Agent and compliance is achieved
within six months after the date of effectiveness of the change or supplement to
such law.
Section 7.18 COMPLIANCE WITH THE LAW. Except as disclosed on Schedule
7.18 or otherwise disclosed to the Agent and the Lenders in writing, neither the
Borrower nor any Restricted Subsidiary is at the Closing Date in violation in
any material respect of any Governmental Requirement or does not have or has not
applied for any license, permit, franchise or other governmental authorization
necessary for the ownership of any of its Properties or the conduct of its
business, which violation or failure would have a Material Adverse Effect.
Section 7.19 INSURANCE. Schedule 7.19 attached hereto contains an
accurate and complete list of all material policies of fire, liability,
workmen's compensation, business interruption and other forms of insurance owned
or held by the Borrower and each Restricted Subsidiary. All such policies are
in full force and effect, all premiums with respect thereto covering all periods
up to and including the date of the closing have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies
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are sufficient for compliance in all material respects with all requirements of
law and of all agreements to which the Borrower or any Restricted Subsidiary is
a party (including, without limitation, the provisions of Section 8.03(b)
hereof); are valid, outstanding and enforceable policies; provide insurance
coverage in at least such amounts and against at least such risks (but including
in any event public liability) as are usually insured against in the same
general area by companies engaged in the same or a similar business for the
assets and operations of the Borrower and each Restricted Subsidiary; will
remain in full force and effect through the respective dates set forth in
Schedule 7.19 without the payment of additional premiums; and will not in any
way be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement; and will otherwise be satisfactory to the Agent
in all respects, including, without limitation, the insurer, amount, form and
substance.
Section 7.20 RESTRICTION ON LIENS. Except (i) with respect to Current
Funded Debt and Existing Debt which is either being prepaid in full or
refinanced in its entirety with the proceeds of the Loans, (ii) with respect to
the Senior Unsecured Notes, or (iii) as otherwise disclosed to the Agent and the
Lenders in writing, neither the Borrower nor any of its Restricted Subsidiaries
is a party to any agreement or arrangement (other than this Agreement and the
Security Instruments), or subject to any order, judgment, writ or decree, which
either restricts or purports to restrict its ability to grant Liens to other
Persons on or in respect of their respective assets or Properties.
Section 7.21 MATERIAL AGREEMENTS. Set forth on Schedule 7.21 hereto is a
complete and correct list of all material agreements, leases, indentures,
purchase agreements, obligations in respect of letters of credit, guarantees,
and joint venture agreements of the Borrower and its Restricted Subsidiaries
with a remaining obligation in excess of $5,000,000 and a remaining term of
twelve (12) months, and such list correctly sets forth the names of the debtor
or lessee and creditor or lessor with respect to the Debt or lease obligations
outstanding or to be outstanding and the property subject to any Lien securing
such Debt or lease obligation. The Borrower has heretofore delivered or made
available to the Agent a complete and correct copy of all such agreements,
indentures, purchase agreements, letters of credit, guarantees, or joint venture
agreements, including any modifications or supplements thereto, as in effect on
the Closing Date.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of all Loans hereunder, all interest
thereon and all other amounts payable by the Borrower hereunder:
Section 8.01 FINANCIAL STATEMENTS. The Borrower shall deliver, or shall
cause to be delivered, to the Agent and to each of the Lenders:
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(a) As soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, the audited consolidated and
unaudited consolidating statements of income, stockholders' equity, and
cash flow of the Borrower and its Consolidated Subsidiaries for such fiscal
year, and the related consolidated and consolidating balance sheets of the
Borrower and its Consolidated Subsidiaries as at the end of such fiscal
year, and setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by the related
opinion of independent public accountants of recognized national standing
acceptable to the Agent which opinion shall state that said financial
statements fairly present the consolidated financial condition and results
of operations of the Borrower and its Consolidated Subsidiaries as at the
end of, and for, such fiscal year and that such financial statements have
been prepared in accordance with GAAP except for such changes in such
principles with which the independent public accountants shall have
concurred and a certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no knowledge, except
as specifically stated, of any Default; provided, however, notwithstanding
the foregoing, all audited statements shall be for the Borrower and its
consolidated Subsidiaries and statements and reports for the Borrower and
its Consolidated Subsidiaries shall be unaudited. Simultaneously with
the delivery of the statements referred to in the first sentence of
this Section 8.01(a), the Borrower shall deliver to the Agent and
to each of the Lenders an income budget for the fiscal year of the
Borrower following the date of such financial statements.
(b) As soon as available and in any event within 45 days after the
end of each of the first three fiscal quarterly periods of each fiscal
year of the Borrower, a consolidated and consolidating statements of
income, stockholders' equity, and cash flow of the Borrower and its
Consolidated Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and the
related consolidated and consolidating balance sheets as at the end of
such period, and setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding fiscal
year, accompanied by the certificate of a Responsible Officer, which
certificate shall state that said financial statements fairly present the
consolidated and consolidating financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries in accordance
with GAAP, as at the end of, and for, such period (subject to normal
year-end audit adjustments).
(c) As soon as available and in any event within 30 days after the
end of each calendar month of each fiscal year of the Borrower,
consolidated and consolidating statements of income, stockholders' equity,
and cash flow of the Borrower and its Consolidated Subsidiaries for such
period and for the period from the beginning of the respective fiscal year
to the end of such period, and the related consolidated and consolidating
balance sheets as at the end of such period, and setting forth in each
case in comparative form the corresponding figures for the corresponding
period in the preceding fiscal year, accompanied by the certificate of a
Responsible Officer, which certificate shall state that said financial
statements fairly present the consolidated and consolidating financial
condition and results of operations of the Borrower and its
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Consolidated Subsidiaries in accordance with GAAP, as at the end of, and
for, such period (subject to normal year-end audit adjustments).
(d) Promptly after the Borrower knows that any Default or any
Material Adverse Effect has occurred, a notice of such Default or Material
Adverse Effect, describing the same in reasonable detail and the action the
Borrower proposes to take with respect thereto.
(e) Promptly upon receipt thereof, a copy of each other report or
letter submitted to the Borrower or any Restricted Subsidiary by
independent accountants in connection with any annual, interim or special
audit made by them of the books of the Borrower and its Restricted
Subsidiaries, and a copy of any response by the Borrower or any Restricted
Subsidiary of the Borrower, or the Board of Directors of the Borrower or
any Restricted Subsidiary of the Borrower, to such letter or report.
(f) Promptly upon its becoming available, each financial statement,
report, notice or proxy statement sent by the Borrower to stockholders
generally and each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal
letters) in respect thereof filed by the Borrower with or received by the
Borrower in connection therewith from any securities exchange or the SEC or
any successor agency.
(g) Promptly after the furnishing thereof, copies of any statement,
report or notice furnished to or any Person pursuant to the terms of any
indenture, loan or credit or other similar agreement, other than this
Agreement and not otherwise required to be furnished to the Lenders
pursuant to any other provision of this Section 8.01.
(h) On the 15th day of each calendar month (as of the end of the
prior calendar month), a Borrowing Base Report, a report in reasonable
detail of the aging of the accounts receivable included in the Borrowing
Base, and (as reasonably requested by any Lender at reasonable intervals)
materials and information to back up the Borrowing Base Report, the
Eligible Accounts and the Eligible Inventory (which backup material and
information shall not be required whenever the aggregate amount outstanding
on the Revolving Credit Notes is below $20,000,000). In addition, Borrower
shall supply the Lenders monthly with an inventory report summarizing on an
aggregate basis the amount and general categories of inventory of Borrower
and its Restricted Subsidiaries which are Domestic Subsidiaries in form and
substance substantially similar to the form previously delivered to the
Agent. Upon the occurrence of an Investment Suspension which is
continuing, Borrower shall supply the Lenders with a Borrowing Base Report
on a weekly basis containing the Borrower's best estimates of Eligible
Accounts and Eligible Inventory within each category in the Borrowing Base.
(i) From time to time such other information regarding the business,
affairs or financial condition of the Borrower or any Restricted Subsidiary
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as any
Lender or the Agent may reasonably request.
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(j) The Borrower will furnish to the Agent, at the time it furnishes
each set of financial statements pursuant to paragraph (a) or (b) above, a
certificate substantially in the form of Exhibit C hereto executed by a
Responsible Officer (i) certifying as to the matters set forth therein and
stating that no Default has occurred and is continuing (or, if any Default
has occurred and is continuing, describing the same in reasonable detail),
and (ii) setting forth in reasonable detail the computations necessary to
determine whether the Borrower is in compliance with Sections 2.07(f) and
(h), 9.01, 9.03, 9.12, 9.13 and 9.14 as of the end of the respective fiscal
quarter or fiscal year and whether or not a change in Applicable Margin
should occur.
Section 8.02 LITIGATION. The Borrower shall promptly give to the Agent
notice of: (a) all legal or arbitral proceedings, and of all proceedings before
any Governmental Authority affecting the Borrower or any Restricted Subsidiary,
except proceedings which, if adversely determined, would not likely have a
Material Adverse Effect, and (b) of any litigation or proceeding affecting the
Borrower or any Restricted Subsidiary in which the amount claimed is in excess
of $5,000,000 and is not covered by insurance. The Borrower will, and will
cause each of its Restricted Subsidiaries to, promptly notify the Agent and each
of the Lenders of any claim, judgment, Lien or other encumbrance affecting any
Property of the Borrower or any Restricted Subsidiary if the value of the
judgment, Lien, or other encumbrance affecting such Property shall exceed
$1,000,000.
Section 8.03 MAINTENANCE, INSURANCE, ETC.
(a) The Borrower shall and shall cause each Restricted Subsidiary to:
preserve and maintain its corporate existence and all of its material
rights, privileges, licenses and franchises; keep books of record and
account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and activities; comply
with all Governmental Requirements if failure to comply with such
requirements will have a Material Adverse Effect; pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or on
its income or profits or on any of its Property prior to the date on which
penalties attach thereto, except for any such tax, assessment, charge or
levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained in
accordance with GAAP; and upon reasonable notice, permit representatives of
the Agent or any Lender, during normal business hours, to examine, copy and
make extracts from its books and records, to inspect its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by such Lender or the Agent (as the case may be).
(b) The Borrower and each Restricted Subsidiary now maintains and
will continue to maintain with financially sound and reputable insurers,
insurance with respect to their respective Properties and business against
such liabilities, casualties, risks and contingencies and in such types and
amounts as is customary in the case of Persons engaged in the same or
similar businesses and similarly situated. Prepayments occasioned by the
receipt of insurance proceeds are addressed in Subsection 2.07(e) hereof.
The Borrower has obtained or will promptly obtain endorsements (i) to the
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policies pertaining to all physical Properties in which the Agent or the
Banks shall have a Lien under the Security Instruments naming the Agent as
a loss payee, (ii) to all third party liability policies naming the Agent
an additional insured, and (iii) containing provisions that all such
policies will not be cancelled or be subject to non-renewal (except for
nonpayment of premium) without 45 days (or 10 days with respect to failure
to pay premiums) prior written notice having been given by the insurance
company to the Agent.
Contemporaneously with the delivery of the financial statements
required by Section 8.01(a) to be delivered for each year, the Borrower
will furnish or cause to be furnished to the Agent and the Lenders
certificates of insurance coverage (with respect to the Borrower's and each
Restricted Subsidiary's Property) from the insurers in form and substance
satisfactory to the Agent and, if requested, will furnish the Agent and the
Lenders copies of the applicable policies.
(c) The Borrower will and will cause each Restricted Subsidiary to
operate its Properties or cause such Properties to be operated in a careful
and efficient manner in accordance with the practices of the industry and
in compliance in all material respects with all applicable contracts and
agreements and in compliance in all material respects with all Governmental
Requirements.
Section 8.04 ENVIRONMENTAL MATTERS.
(a) The Borrower and each Domestic Subsidiary will own and operate
its Property so as not to cause or permit any of its Property to be in
violation of any Environmental Laws and will not do anything or permit
anything to be done which will subject any such Property to any remedial
obligations under any Environmental Laws, assuming disclosure to the
applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations would have a Material Adverse Effect; provided,
however, neither the Borrower or any Domestic Subsidiary shall be in breach
of this covenant for failure to comply with any Environmental Law in any
situation in which the Borrower or Domestic Subsidiary was in compliance
with an Environmental Law and such law was amended or supplemented such
that the Borrower or Domestic Subsidiary is no longer in compliance, so
long as the Borrower or Domestic Subsidiary is making diligent efforts to
comply as soon as practicable, the matter is reported to the Agent and
compliance is achieved within six months after the date of effectiveness of
the change or supplement to such law.
(b) The Borrower will and will cause each Domestic Subsidiary to
establish and implement such procedures as may be reasonably necessary to
continuously determine and assure that any failure of the following does
not have a Material Adverse Effect: (i) all Property of the Borrower and
its Domestic Subsidiaries and the operations conducted thereon are in
compliance with and do not violate the requirements of any Environmental
Laws in any material respect, (ii) no oil, hazardous substances or solid
wastes are disposed of or otherwise released on or to any Property owned by
any such
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party except in substantial compliance with Environmental Laws, and
(iii) no oil, hazardous substance or solid wastes are released on or to any
such Property so as to pose an imminent and substantial endangerment to
human health or welfare or the environment.
(c) The Borrower will promptly notify the Agent in writing of any
threatened action, suit, investigation or proceeding by or before any
Governmental Authority of which the Borrower receives notice or otherwise
has knowledge that involves allegations of harm to human health or the
environment or potential violations of Environmental Laws, except that
notice to the Agent shall not be required for actions, suits,
investigations, or proceedings where the potential fine, penalty or
remedial obligation is likely to cost the Borrower less than $100,000 or
the injunctive relief sought would not have a Material Adverse Effect.
Section 8.05 FURTHER ASSURANCES. The Borrower will and will cause each
Restricted Subsidiary to cure promptly any defects in the creation and issuance
of the Notes and the execution and delivery of the Security Instruments,
including this Agreement. The Borrower at its expense will and will cause each
Restricted Subsidiary to promptly execute and deliver to the Agent upon its
reasonable request all such other documents, agreements and instruments to
comply with or accomplish the covenants and agreements of the Borrower or any
Restricted Subsidiary in the Security Instruments, including this Agreement, or
to further evidence and more fully describe the collateral intended as security
for the Notes, or to correct any omissions in the Security Instruments, or to
state more fully the security obligations set out herein or in any of the
Security Instruments, or to perfect, protect or preserve any Liens created
pursuant to any of the Security Instruments, or to make any recordings, to file
any notices or obtain any consents, all as may be necessary or appropriate in
connection therewith.
Section 8.06 PERFORMANCE OF OBLIGATIONS. The Borrower will pay the Notes
according to the reading, tenor and effect thereof; and the Borrower will and
will cause each Restricted Subsidiary to do and perform every act and discharge
all of the obligations to be performed and discharged by them under the Security
Instruments, including this Agreement, at the time or times and in the manner
specified.
Section 8.07 ERISA INFORMATION AND COMPLIANCE. The Borrower will promptly
furnish and will cause the Domestic Subsidiaries and any ERISA Affiliate to
promptly furnish to the Agent with sufficient copies to the Lenders (i) promptly
after the filing thereof with the United States Secretary of Labor, the Internal
Revenue Service or the PBGC, upon written request by the Lenders, copies of each
annual and other report with respect to each Plan or any trust created
thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA
Event which would have a Material Adverse Effect or of any "prohibited
transaction," as described in section 406 of ERISA or in section 4975 of the
Code which would have a Material Adverse Effect, in connection with any Plan or
any trust created thereunder, a written notice signed by a Responsible Officer
specifying the nature thereof, what action the Borrower, the Domestic Subsidiary
or the ERISA Affiliate is taking or proposes to take with respect thereto, and,
when known, any action taken or proposed by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto, and (iii) immediately upon
receipt
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thereof, copies of any notice of the PBGC's intention to terminate or to have a
trustee appointed to administer any Plan. With respect to each Plan (other than
a Multiemployer Plan), the Borrower will, and will cause each Subsidiary and
ERISA Affiliate to, (i) satisfy in full and in a timely manner, without
incurring any late payment or underpayment charge or penalty and without giving
rise to any lien, all of the contribution and funding requirements of section
412 of the Code (determined without regard to subsections (d), (e), (f) and (k)
thereof) and of section 302 of ERISA (determined without regard to sections 303,
304 and 306 of ERISA) where failure to do so would have a Material Adverse
Affect, and (ii) pay, or cause to be paid, to the PBGC in a timely manner,
without incurring any late payment or underpayment charge or penalty, all
premiums required pursuant to sections 4006 and 4007 of ERISA where failure to
do so would have a Material Adverse Affect.
Section 8.08 LOCKBOX. The Borrower shall establish and maintain one or
more lockboxes for the collection of its accounts receivable, and shall cause
its accounts receivable to be deposited in such lockboxes, with all amounts so
deposited being pledged to secure the Indebtedness (and withheld from Borrower
if an Event of Default occurs), all in accordance with the terms and provisions
of the Lockbox Agreement. The Borrower and the Agent can change the depository
at which the lockboxes are maintained without the consent of the Lenders;
provided, however, Agent and Borrower shall enter new Lockbox Agreements
(substantially similar to the old Lockbox Agreements) with regard to such new
lockbox account(s).
Section 8.09 BORROWING BASE AUDIT. At the request of the Agent and/or the
Majority Lenders, the Borrower shall permit, at the Borrower's expense (not to
exceed $25,000 per audit), a Person acceptable to the Agent and/or the Majority
Lenders to conduct an audit of the then current Borrowing Base; provided,
however, no more than one such audit shall be conducted in a calendar year
unless an Event of Default shall have occurred and be continuing. In addition,
the Majority Lenders may at their own initiative and at the expense of all
Lenders, cause audits of Eligible Accounts and Eligible Inventory to be
conducted by the aforementioned acceptable Person, but no more often than once
per calendar quarter and only then if amounts outstanding on the Revolving
Credit Notes equal or exceed $20,000,000. Unless changed by the Majority
Lenders, Mellon Bank, N.A. or its successors shall be the acceptable Person to
conduct all such audits.
Section 8.10 STAY, EXTENSION AND USURY LAWS. The Borrower covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of this Agreement;
and the Borrower (to the extent it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Agent or any Lender, but will suffer and permit the
execution of every such power as though no such law has been enacted.
Section 8.11. REAL ESTATE APPRAISALS. In the event any Lender is required
by any Governmental Authority to have real estate appraisals and annual updates
(or is criticized in any written report or examination by any Governmental
Authority for not having same), Borrower
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at its expense shall cooperate with the need for the Lender to receive same, and
same shall be available for the benefit of all Lenders.
Section 8.12. WAREHOUSE LEASES. Borrower will use reasonable efforts to
cause the Agent to receive a first priority Lien on the Borrower's interest in
the warehouse leases described on Schedule 6.02 within sixty (60) days after the
Closing Date.
ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Commitments
(including Letters of Credit) are in effect and until payment in full of Loans
hereunder, all interest thereon and all other amounts payable by the Borrower
hereunder, without the prior written consent of the Majority Lenders:
Section 9.01 DEBT. Neither the Borrower nor any Restricted Subsidiary
will incur, create, assume or suffer to exist any Debt, except:
(a) the Notes, reimbursement obligations under Letters of Credit
(including the $101,000,000 Letter of Credit), or other Indebtedness or any
guaranty of or suretyship arrangement for the Notes or other Indebtedness;
(b) Debt of the Borrower existing on the Closing Date which is
reflected in the Financial Statements (except for that portion of Current
Funded Debt which is being repaid or defeased on the Closing Date) or
disclosed on Schedule 9.01, and any renewals or extensions (but not
increases) thereof;
(c) Debt constituting Capital Lease Obligations (as required to be
reported on the financial statements of the Borrower pursuant to GAAP) and
Purchase Money Financing not to exceed $10,000,000 in the aggregate;
(d) Debt of the Borrower and its Restricted Subsidiaries under
Hedging Agreements;
(e) unsecured intercompany Debt between or among Borrower and any of
its Restricted Subsidiaries;
(f) Debt which also constitutes Investments to the extent permitted
under Section 9.03;
(g) Debt not to exceed $5,500,000 incurred in connection with
transactions for the disposal of wastewater and groundwater to a wastewater
treatment plant in the vicinity of Borrower's Odessa Texas plant;
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(h) Debt evidenced by the Senior Unsecured Notes, up to the aggregate
principal amount of $175,000,000 and any refinancing thereof; and
(i) other Debt (which shall be unsecured except for Excepted Liens)
not to exceed $10,000,000 in the aggregate at any one time outstanding.
Section 9.02 LIENS. Neither the Borrower nor any Restricted Subsidiary
will create, incur, assume or permit to exist any Lien on any of its Properties
(now owned or hereafter acquired), except Excepted Liens.
Section 9.03 INVESTMENTS. Neither the Borrower nor any Restricted
Subsidiary will make or permit to remain outstanding any Investments (which
includes acquisitions) in any Person, except that the foregoing restriction
shall not apply to:
(a) Investments, reflected in the Financial Statements or which are
disclosed to the Lenders in Schedule 9.03, including, without limitation,
investments up to the aggregate amount of $20,000,000 existing as of the
Effective Date in Rexene Corporation Limited, an English company, which
investments in Rexene Corporation Limited may be paid down and reinvested,
but which can not take the form of a Guarantee; provided, however, no such
reinvestment shall be permitted after an Investment Suspension has occurred
and is continuing;
(b) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each
case maturing within one year from the date of creation thereof;
(c) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by Standard & Poors Corporation
or Moody's Investors Service, Inc.;
(d) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or
any office located in the United States of any other bank or trust company
which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least
$100,000,000 (as of the date of such Lender's or bank or trust company's
most recent financial reports) and has a short term deposit rating of no
lower than A2 or P2, as such rating is set forth from time to time, by
Standard & Poors Corporation or Moody's Investors Service, Inc.,
respectively;
(e) deposits in money market funds investing exclusively in
investments described in Section 9.03(b), 9.03(c) or 9.03(d);
(f) Investments in the Borrower or a Restricted Subsidiary;
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(g) so long as any potential acquisition of any kind (including the
acquisition of a company through the acquisition of its assets) is approved
by the board of directors of the Person to be acquired, Investments by the
Borrower or a Restricted Subsidiary in a Person if as a result of such
Investment (i) such Person becomes a Restricted Subsidiary, or (ii) such
person is merged, consolidated or amalgamated into, the Borrower or a
Restricted Subsidiary, provided in each case that, immediately thereafter
and giving effect thereto, no event shall occur and be continuing which
constitutes a Default or an Event of Default;
(h) Investments in joint ventures not to exceed at any one time
outstanding an aggregate of $25,000,000, calculated as of the dates of such
investments; provided, however, that the Borrower or a Restricted
Subsidiary must be one of the venture partners;
(i) other Investments in Unrestricted Subsidiaries in an aggregate
amount at any time outstanding not to exceed $15,000,000 calculated as of
the dates of such Investments (which can take the form of a Guarantee);
provided, however, such Investments shall not be permitted after an
Investment Suspension has occurred and is continuing;
(j) Investments to the extent made with Capital Stock of the
Borrower; and
(k) other Investments not to exceed at any one time outstanding
$5,000,000; provided, however, such Investments shall not be permitted
after an Investment Suspension has occurred and is continuing.
Section 9.04 RESTRICTED PAYMENTS. The Borrower or any Restricted
Subsidiary will not declare or pay any dividend, purchase, redeem or otherwise
acquire for value any of its stock now or hereafter outstanding, return any
capital to its stockholders or make any distribution of its assets to its
stockholders or repay, purchase, repurchase, defease or make any prepayments on
the Senior Unsecured Notes; provided, however, so long as no Default has
occurred and is continuing hereunder or would occur as a consequence thereof,
the Borrower and any Restricted Subsidiary may declare and pay (i) dividends
payable in Capital Stock of the Borrower or (ii) dividends or distributions
payable to the Borrower or any Restricted Subsidiary.
Section 9.05 SALES AND LEASEBACKS. Neither the Borrower nor any
Restricted Subsidiary will enter into any arrangement, directly or indirectly,
with any Person whereby the Borrower or any Restricted Subsidiary shall sell or
transfer any of its Property, whether now owned or hereafter acquired, and
whereby the Borrower or any Restricted Subsidiary shall then or thereafter rent
or lease as lessee such Property or any part thereof or other Property which the
Borrower or any Restricted Subsidiary intends to use for substantially the same
purpose or purposes as the Property sold or transferred; except, as long as no
Default is occasioned by either of the following: (i) a sale and leaseback in
the ordinary course of business and (ii) a sale and leaseback of an asset
occurring within 150 days after the acquisition or completion of construction of
such asset, subject in all such cases in clauses (i) and (ii) of this Section
9.05 to the limitations of Section 9.01(c).
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Section 9.06 NATURE OF BUSINESS. Neither the Borrower nor any Restricted
Subsidiary will allow any material change to be made in the character of its
business.
Section 9.07 LIMITATION ON LEASES. Neither the Borrower nor any
Restricted Subsidiary will create, incur, assume or suffer to exist any
obligation for the payment of rent or hire of Property of any kind whatsoever
(real or personal excluding capital leases), under leases or lease agreements
which would cause the aggregate amount of all payments made by the Borrower and
its Restricted Subsidiaries pursuant to such leases or lease agreements to
exceed $10,000,000 in any period of twelve consecutive calendar months during
the life of such leases.
Section 9.08 MERGERS, ETC. The Borrower will not merge or consolidate
with or sell, transfer, convey, assign, lease or otherwise dispose of (whether
in one transaction or in a series of transactions) by merger or consolidation or
otherwise, all or substantially all of its Properties (whether now owned or
hereafter acquired) to any Person or Group (as that term is used in sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended, or
permit any Restricted Subsidiary to do so, except that any Restricted Subsidiary
may merge into or consolidate with or transfer Properties to the Borrower, and
the Borrower or any Restricted Subsidiary may merge or consolidate with any
Person provided in each case that, immediately thereafter and giving effect
thereto, no event shall occur and be continuing which constitutes a Default or
an Event of Default and in the case of any such merger or consolidation to which
the Borrower or any Restricted Subsidiary is a party, the Borrower or such
Restricted Subsidiary, as the case may be, is the surviving corporation.
Section 9.09 PROCEEDS OF NOTES. The Borrower will not permit the proceeds
of the Notes to be used for any purpose other than those permitted by
Section 7.07.
Section 9.10 ERISA COMPLIANCE. The Borrower will not at any time:
(a) Engage in, or permit any Domestic Subsidiary to engage in, any
transaction in connection with which the Borrower, any Domestic Subsidiary
or any ERISA Affiliate is reasonably likely to be subjected to either a
civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA
which would have a Material Adverse Effect or a tax imposed by Chapter 43
of Subtitle D of the Code which would have a Material Adverse Effect;
(b) Terminate, or permit any Domestic Subsidiary or ERISA Affiliate
to terminate, any Plan in a manner, or take any other action with respect
to any Plan, which could result in any liability to the Borrower, any
Domestic Subsidiary or any ERISA Affiliate to the PBGC which would have a
Material Adverse Effect;
(c) Fail to make, or permit any Domestic Subsidiary or ERISA
Affiliate to fail to make, full payment when due of all amounts which,
under the provisions of any Plan, agreement relating thereto or applicable
law, the Borrower, a Domestic Subsidiary or any ERISA Affiliate is required
to pay as contributions thereto if such failure would have a Material
Adverse Effect;
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(d) Permit to exist, or allow any Domestic Subsidiary or ERISA
Affiliate to permit to exist, any accumulated funding deficiency within the
meaning of section 302 of ERISA or section 412 of the Code, whether or not
waived, with respect to any Plan;
(e) Permit, or allow any Domestic Subsidiary or ERISA Affiliate to
permit, the aggregate current value of the benefit liabilities under all
Plans maintained by the Borrower, any Domestic Subsidiary or any ERISA
Affiliate which is subject to Title IV of ERISA to exceed by more than
$5,000,000 the aggregate current value of the assets of such Plan allocable
to such benefit liabilities (based upon the assumptions applied by the
actuary for such Plans in the most recent actuarial reports for such
Plans).
(f) Without thirty days prior written notice to the Lenders,
contribute to or assume an obligation to contribute to, or permit any
Domestic Subsidiary or ERISA Affiliate to contribute to or assume an
obligation to contribute to, any Multiemployer Plan;
(g) Without thirty days prior written notice to the Lenders, acquire,
or permit any Domestic Subsidiary or ERISA Affiliate to acquire, an
interest in any Person that causes such Person to become an ERISA Affiliate
with respect to the Borrower, any Domestic Subsidiary or any ERISA
Affiliate if such Person sponsors, maintains or contributes to, or at any
time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other
Plan that is subject to Title IV of ERISA under which the current value of
the benefit liabilities under such Plan when added to the current value of
the benefit liabilities under all other Plans (that are subject to Title IV
of ERISA) of the Borrower, each Domestic Subsidiary and ERISA Affiliates
(while an ERISA Affiliate) exceeds by more than $5,000,000 the aggregate
current value of the assets of all such Plans allocable to such benefit
liabilities (based upon the assumptions applied by the actuary for such
Plans in the most recent actuarial report for such Plans);
(h) Incur, or permit any Domestic Subsidiary or ERISA Affiliate to
incur, a liability to or on account of a Plan under section 515, 4041,
4062, 4063, 4064, 4201 or 4204 of ERISA which would have a Material Adverse
Effect;
(i) Contribute to or assume an obligation to contribute to, or permit
any Domestic Subsidiary or ERISA Affiliate to contribute to or assume an
obligation to contribute to, any employee welfare benefit plan, as defined
in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that
may not be terminated by such entities in their sole discretion at any time
without any material liability; or
(j) Amend or permit any Domestic Subsidiary or ERISA Affiliate to
amend, a Plan resulting in an increase in current liability that has a
Material Adverse Affect such that the Borrower, any Domestic Subsidiary or
any ERISA Affiliate is required to provide security to such Plan under
section 401(a)(29) of the Code.
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Section 9.11 SALE OR DISCOUNT OF RECEIVABLES. Neither the Borrower nor
any Restricted Subsidiary will discount or sell (with or without recourse) any
of its notes receivable or accounts receivable.
Section 9.12 LEVERAGE RATIO. The Borrower will not permit its Leverage
Ratio to be greater than the ratio for the periods indicated below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
12/31/94 - 12/30/95 .8 to 1.0
12/31/95 - 12/30/96 .7 to 1.0
12/31/96 - 12/30/97 .6 to 1.0
12/31/97 and thereafter .5 to 1.0
</TABLE>
For the purposes of this Section 9.12, "LEVERAGE RATIO" shall mean the ratio of
(i) Debt of the Borrower and its Consolidated Subsidiaries to (ii) Debt of the
Borrower and its Consolidated Subsidiaries plus Consolidated Net Worth.
Section 9.13 FIXED CHARGE COVERAGE RATIO. The Borrower will not permit
the Fixed Charge Coverage Ratio of the Borrower and its Consolidated
Subsidiaries as of the end of any fiscal quarter (calculated quarterly at the
end of each fiscal quarter beginning with the first quarter of fiscal 1995) to
be less than 1.0 to 1.0. For purposes of this Section 9.13, "Fixed Charge
Coverage Ratio" shall mean the ratio of (A) Adjusted EBITDA and other non-cash
charges for the four fiscal quarters immediately preceding the date of
determination, plus the lesser of (i) $40,000,000 and (ii) (a) 50% of the
Revolving Credit Commitments minus (b) the average usage of the Revolving Credit
Commitments during the immediately preceding fiscal quarter (including LC
Exposure) offset by the average cash on hand for such period, to (B) (i) cash
payments made during such period for or under taxes, capital expenditures,
Guarantees of Debt and obligations of any Affiliate (other than Restricted
Subsidiaries) made during such period by the Borrower and Consolidated
Subsidiaries, and scheduled principal reductions, (ii) interest expense incurred
during such period, and (iii) investments, loans, and advances in any Affiliate
(other than Restricted Subsidiaries) made during such period by the Borrower and
Consolidated Subsidiaries; provided, however, for determinations made for the
first four fiscal quarters after December 31, 1994, each such determination
shall be for the period beginning the first day of the calendar quarter
following December 31, 1994 through the date of such determination.
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Section 9.14 INTEREST COVERAGE RATIO. The Borrower will not permit its
Interest Coverage Ratio as of the end of any fiscal quarter of the Borrower
(calculated quarterly at the end of each fiscal quarter beginning with the first
fiscal quarter of 1995) to be less in any fiscal year of the Borrower than the
ratio and for the fiscal years indicated below:
<TABLE>
<CAPTION>
Year(s) Ended Ratio
------------ -----
<S> <C>
1995 3.0 to 1
1996 3.0 to 1
1997 3.1 to 1
1998 and thereafter 3.25 to 1
</TABLE>
For the purposes of this Section 9.14, "INTEREST COVERAGE RATIO" shall mean the
ratio of (i) Adjusted EBITDA for the four fiscal quarters immediately preceding
the date of determination to (ii) interest expense incurred for such four fiscal
quarters of the Borrower and its Consolidated Subsidiaries; provided, however,
for determinations made for the first four fiscal quarters after December 31,
1994, each such determination shall be for the period beginning the first day of
the calendar quarter following December 31, 1994 through the date of such
determination.
Section 9.15 SALE OF PROPERTY. Except in the ordinary course of its
business, the Borrower and its Restricted Subsidiaries will not sell, assign,
convey or otherwise transfer any Property or any undivided interest in any
Property (to Persons other than the Borrower or any Restricted Subsidiary)
except for Asset Sales for which the Borrower has given the Agent at least
thirty (30) days prior written notice of the proposed Asset Sale; provided,
however, in no event shall the aggregate market value of all Asset Sales exceed
$25,000,000, or result in the sale or other transfer of substantially all of the
assets of the Borrower or any Restricted Subsidiary, without the prior written
consent of the Majority Lenders. Notwithstanding anything to the contrary
contained in this Section 9.15, the Borrower or any Restricted Subsidiary may
sell an asset if (i) such asset is replaced by an asset of the same type as the
asset sold within 12 calendar months of such sale, (ii) the market value of each
such asset sold is less than or equal to $10,000,000 (but in no event shall the
aggregate market value of all such assets sold during the term of this Agreement
exceed $50,000,000), and (iii) the Borrower or such Restricted Subsidiary, as
the case may be, shall execute and deliver to the Agent all instruments and
documents necessary to grant to the Agent for the benefit of the Lenders a
first-priority Lien on each asset replacing an asset so sold.
Section 9.16 TRANSACTIONS WITH AFFILIATES. The Borrower shall not, and
shall not permit any of its Restricted Subsidiaries to, sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Borrower or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Borrower or such Restricted Subsidiary with an
unrelated Person and (ii) the Borrower delivers to the Agent (a) with respect to
any Affiliate Transaction involving aggregate consideration in excess of $1.0
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million, a resolution of the appropriate board of directors' set forth in an
officers' certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the board of directors and (b) with
respect to any Affiliate Transaction involving aggregate consideration in excess
of $10.0 million, an opinion as to the fairness to the Borrower or such
Restricted Subsidiary of such Affiliate Transaction from a financial point of
view issued by an investment banking firm of national standing; PROVIDED,
HOWEVER, that (x) any contract, agreement, understanding, payment, loan, advance
or guarantee (each a "Compensation Benefit") with, for the benefit of, or to an
executive officer of the Borrower as compensation for employment by the
Borrower, whether pursuant to an employment agreement, an employee benefit plan
or other compensation arrangement if either (1) such Compensation benefit is
less than $1 million or (2) is approved by the compensation committee or the
board of directors of the Borrower, (y) transactions between or among the
Borrower and/or its Restricted Subsidiaries and/or any Unrestricted Subsidiary
which is a foreign sales corporation within the scope of 26 U.S.C. Section 922
and (z) transactions permitted by Sections 9.03 and 9.04 of this Agreement, in
each case, shall not be deemed Affiliate Transactions.
Section 9.17 SUBSIDIARIES AND PARTNERSHIPS. The Borrower shall not create
any additional Subsidiaries or partnerships or permit any Subsidiary to do so
without prior written notice to the Agent and the Lenders. In every such case
(i) 100% of the Capital Stock of each new Restricted Subsidiary, 65% of the
Capital Stock of each new Foreign Subsidiary, 100% of the Equity Interest of
Borrower or any Restricted Subsidiary in any U.S. partnership or joint venture,
and 65% of the Equity Interest of Borrower or any Restricted Subsidiary in any
non U.S. partnership or joint venture, shall be forthwith pledged to the Agent
for the benefit of the Lenders as security for the payment of the Indebtedness,
(ii) a Lien covering the assets of each new Restricted Subsidiary shall be
granted in favor of the Agent for the benefit of the Lenders, (iii) each new
Restricted Subsidiary shall forthwith execute a written instrument of guaranty,
unconditionally guaranteeing payment of all Indebtedness under this Agreement,
the Notes and any other Security Instrument, and (iv) the Borrower shall deliver
to the Agent and the Lenders a revised Schedule 7.14 with respect to each new
Subsidiary partnership and joint venture, designating such Subsidiary as a
Restricted Subsidiary or Unrestricted Subsidiary. The Borrower shall not permit
any Foreign Subsidiary to have any activities in the United States which would
have a permanent establishment in the United States.
Section 9.18 NEGATIVE PLEDGE AGREEMENTS. Neither the Borrower nor any
Restricted Subsidiary will create, incur, assume or suffer to exist any
contract, agreement or understanding (other than this Agreement, the Security
Instruments and the indenture under the Senior Unsecured Notes) which in any way
prohibits or restricts the granting, conveying, creation or imposition of any
Lien on any of its Property or restricts any Restricted Subsidiary from paying
dividends to the Borrower, or which requires the consent of or notice to other
Persons in connection therewith.
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ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 EVENTS OF DEFAULT. If one or more of the following events
shall occur and be continuing, it shall constitute an "EVENT OF DEFAULT":
(a) the Borrower shall default in the payment or prepayment when due
of any principal of any Loan or reimbursement obligation for a disbursement
made under any Letter of Credit; or the Borrower shall default for two (2)
Business Days in the payment or prepayment when due of any interest on any
Loan or any fees or other amount payable by it hereunder or under any
Security Instrument; or
(b) except for any default on Borrower's Increasing Rate Second
Priority Notes due 2002, the Borrower or any Restricted Subsidiary shall
default in the payment when due of any principal of or interest on any of
its other Debt aggregating $5,000,000 or more, or any event specified in
any note, agreement, indenture or other document evidencing or relating to
any such Debt shall occur if the effect of such event is to cause, or (with
the giving of any notice or the lapse of time or both) to permit the holder
or holders of such Debt (or a trustee or agent on behalf of such holder or
holders) to cause, such Debt to become due prior to its stated maturity; or
(c) any representation, warranty or certification made or deemed made
herein or in any Security Instrument by the Borrower or any Restricted
Subsidiary, or any certificate or financial statement furnished to any
Lender or the Agent pursuant to the provisions hereof or any Security
Instrument, shall prove to have been false or misleading as of the time
made or furnished in any material respect and the failure of such
representation, warranty or certification to be true shall have caused or
reasonably be expected to cause a Material Adverse Effect; or
(d) (i) the Borrower, any Restricted Subsidiary or (as applicable)
any Domestic Subsidiary shall default in the performance of any of its
obligations under Section 8.03 (with respect to Borrower's agreeing within
the term of an insurance policy to a shorter cancellation period), Section
8.08, Article IX (other than Sections 9.02 with respect to inadvertent
Liens] and 9.10) or any other Article of this Agreement other than Article
VIII, or (ii) the Borrower shall default in the performance of any of its
obligations under Section 9.02 (with respect to inadvertent Liens), Section
9.10 or Article VIII (except for Section 8.03 [with respect to Borrower's
agreeing within the term of an insurance policy to a shorter cancellation
period] and Section 8.08) of this Agreement or any Security Instrument
(other than the payment of amounts due which shall be governed by
Section 10.01(a)) and such default shall continue unremedied for a period
of thirty (30) days after the earlier to occur of (i) notice thereof to the
Borrower by the Agent or any Lender (through the Agent), or (ii) the
Borrower otherwise becoming aware of such default; or
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(e) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) the Borrower shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the Federal Bankruptcy Code (as now
or hereafter in effect), (iv) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization,
winding-up, liquidation, dissolution or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
case under the Federal Bankruptcy Code, or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application
or consent of the Borrower, in any court of competent jurisdiction, seeking
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower of all
or any substantial part of its assets, or (iii) similar relief in respect
of the Borrower under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 days; or an order for
relief against the Borrower shall be entered in an involuntary case under
the Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess of
$5,000,000 in the aggregate shall be rendered by a court against the
Borrower or any Restricted Subsidiary not covered by insurance and the same
shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within
thirty (30) days from the date of entry thereof and the Borrower or such
Restricted Subsidiary shall not, within said period of 30 days, or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(i) a final rule, order, decision, or decree shall be issued by a
Governmental Authority pursuant to Environmental Laws that requires the
Borrower or any Domestic Subsidiary to expend more than $5,000,000 in the
aggregate in any one calendar year to remediate environmental contamination
or to spend more than $10,000,000 in the aggregate in any one calendar year
to install pollution or control equipment or that requires the Borrower to
change its operations in a manner that can reasonably be expected to cause
a Material Adverse Effect; or
(j) the Security Instruments after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be in
full force and effect and valid, binding and enforceable in accordance with
their terms, or cease to create a valid
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and perfected Lien of the priority required thereby on any of the
collateral purported to be covered thereby, or the Borrower shall so state
in writing; or
(k) the Borrower discontinues its usual business or a Change of
Control occurs;
(l) any Restricted Subsidiary takes, suffers or permits to exist any
of the events or conditions referred to in paragraphs (e), (f), (g) or (h)
hereof;
(m) The Borrower adopts a plan relating to the liquidation or
dissolution of the Borrower unless such plan is abandoned within 30 days
after the adoption of such plan; and
(n) The sale, lease, transfer, conveyance or other disposition in one
or a series of related transactions, by merger or consolidation or
otherwise, of all or substantially all of the assets of the Borrower and
its Restricted Subsidiaries taken as a whole to any Person or Group (as
such term is used in Sections 13(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended).
Section 10.02 REMEDIES.
(a) In the case of an Event of Default other than one referred to in
clauses (e), (f) or (g) of Section 10.01 or in clause (l) to the extent it
relates to clauses (e), (f) or (g), the Agent may with the consent of the
Majority Lenders and, upon request of the Majority Lenders, shall, by
notice to the Borrower, cancel the Commitments and/or declare the principal
amount then outstanding of, and the accrued interest on, the Loans and all
other amounts payable by the Borrower hereunder and under the Notes
(including without limitation the payment of cash collateral to secure the
LC Exposure as provided in Section 2.09(b) hereof) to be forthwith due and
payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
(b) In the case of the occurrence of an Event of Default referred to
in clauses (e), (f) or (g) of Section 10.01 or in clause (l) to the extent
it relates to clauses (e), (f) or (g), the Commitments shall be
automatically cancelled and the principal amount then outstanding of, and
the accrued interest on, the Loans and all other amounts payable by the
Borrower hereunder and under the Notes (including without limitation the
payment of cash collateral to secure the LC Exposure as provided in
Section 2.09(b) hereof) shall become automatically immediately due and
payable without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other formalities of any kind, all of
which are hereby expressly waived by the Borrower.
(c) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in this Agreement and the Security
Instruments; second to accrued interest on the
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Notes; third to fees; fourth pro rata to principal outstanding on the Notes
and other Indebtedness; fifth to serve as cash collateral to be held by the
Agent to secure the LC Exposure; and any excess shall be paid to the
Borrower or as otherwise required by any Governmental Requirement.
ARTICLE XI
THE AGENT
Section 11.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder with
such powers as are specifically delegated to the Agent by the terms of this
Agreement, together with such other powers as are reasonably incidental thereto.
The Agent (which term as used in this sentence and in Section 11.05 and the
first sentence of Section 11.06 shall include reference to its Affiliates and
its and its Affiliates' officers, directors, employees, attorneys, accountants,
experts and agents): (a) shall have no duties or responsibilities except those
expressly set forth in this Agreement, and shall not by reason of this Agreement
be a trustee or fiduciary for any Lender; (b) makes no representation or
warranty to any Lender and shall not be responsible to the Lenders for any
recitals, statements, representations or warranties contained in this Agreement,
or in any certificate or other document referred to or provided for in, or
received by any of them under, this Agreement, or for the value, validity,
effectiveness, genuineness, execution, effectiveness, legality, enforceability
or sufficiency of this Agreement, any Note or any other document referred to or
provided for herein or for any failure by the Borrower or any other Person
(other than the Agent) to perform any of its obligations hereunder or thereunder
or for the existence, value, perfection or priority of any collateral security
or the financial or other condition of the Borrower, its Subsidiaries or any
other obligor or guarantor; (c) except pursuant to Section 11.07 shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder; and (d) shall not be responsible for any action taken or omitted to
be taken by it hereunder or under any other document or instrument referred to
or provided for herein or in connection herewith including its own ordinary
negligence, except for its own gross negligence or willful misconduct. The
Agent may employ agents, accountants, attorneys and experts and shall not be
responsible for the negligence or misconduct of any such agents, accountants,
attorneys or experts selected by it in good faith or any action taken or omitted
to be taken in good faith by it in accordance with the advice of such agents,
accountants, attorneys or experts. The Agent may deem and treat the payee of
any Note as the holder thereof for all purposes hereof unless and until a
written notice of the assignment or transfer thereof permitted hereunder shall
have been filed with the Agent.
Section 11.02 RELIANCE BY AGENT. The Agent shall be entitled to rely upon
any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent.
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Section 11.03 DEFAULTS. The Agent shall not be deemed to have knowledge
of the occurrence of a Default (other than the non-payment of principal of or
interest on Loans or of fees or failure to reimburse for Letter of Credit
drawings) unless the Agent has received notice from a Lender or the Borrower
specifying such Default and stating that such notice is a "Notice of Default."
In the event that the Agent receives such a notice of the occurrence of a
Default, the Agent shall give prompt notice thereof to the Lenders. In
addition, the Agent shall give each Lender prompt notice of each such Default.
Section 11.04 RIGHTS AS A LENDER. With respect to its Commitment, the
Loans made by it and its participation in the issuance of Letters of Credit,
Scotiabank (and any successor acting as Agent) in its capacity as a Lender
hereunder shall have the same rights, obligations and powers hereunder as any
other Lender and may exercise the same as though it were not acting as the
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. Scotiabank (and any
successor acting as Agent) and its Affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to and generally engage
in any kind of banking, trust or other business with the Borrower (and any of
its Affiliates) as if it were not acting as the Agent, and Scotiabank and its
Affiliates may accept fees and other consideration from the Borrower for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE AGENT
RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE SHARES FOR THE INDEMNITY MATTERS AS
DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR REIMBURSED BY THE
BORROWER UNDER SECTION 12.03, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE
BORROWER UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE IMPOSED
ON, INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING
OUT OF: (A) THIS AGREEMENT, THE SECURITY INSTRUMENTS OR ANY OTHER DOCUMENTS
CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY,
BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL
ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY
DUTIES HEREUNDER; OR (B) THE ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT,
ANY SECURITY INSTRUMENT OR OF ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF
THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT
NEGLIGENCE OF THE AGENT, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE
FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILFUL
MISCONDUCT OF THE AGENT.
Section 11.06 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender
acknowledges and agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrower and its
decision to enter into this Agreement, and that it will,
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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 analysis and decisions in taking or not taking action
under this Agreement. The Agent shall not be required to keep itself informed
as to the performance or observance by the Borrower of this Agreement, the
Notes, the Security Instruments or any other document referred to or provided
for herein or to inspect the properties or books of the Borrower. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrower (or any of its Affiliates) which may come into the possession of the
Agent or any of its Affiliates.
Section 11.07 ACTION BY AGENT. Except for action or other matters
expressly required of the Agent hereunder, the Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall (i) receive
written instructions from the Majority Lenders (or all of the Lenders in cases
expressly requiring consent, vote or approval by the Lenders under this
Agreement) specifying the action to be taken, and (ii) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action.
The instructions of the Majority Lenders (or the Lenders, as the context
requires) and any action taken or failure to act pursuant thereto by the Agent
shall be binding on all of the Lenders. If a Default has occurred and is
continuing, the Agent shall take such action with respect to such Default as
shall be directed by the Majority Lenders in the written instructions (with
indemnities) described in this Section 11.07, provided that, unless and until
the Agent shall have received such directions, the Agent may with the consent of
the Majority Lenders (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default as it shall deem
advisable in the best interests of the Lenders. In no event, however, shall the
Agent be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement and the Security Instruments or
applicable law.
Section 11.08 RESIGNATION OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Lenders and the Borrower. Upon any such
resignation, 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 thirty (30) days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent with the prior consent
of the Borrower, which consent shall not be unreasonably withheld. Upon the
acceptance of such appointment hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article XI and
Section 12.03 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent.
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ARTICLE XII
MISCELLANEOUS
Section 12.01 WAIVER. No failure on the part of the Agent or any Lender
to exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege under the Loan Documents shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege under the Loan Documents preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.
Section 12.02 NOTICES. All notices and other communications provided for
herein and in the other Security Instruments (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other
Security Instruments) shall be given or made by telex, telecopy, telegraph,
cable, courier or U.S. Mail or in writing and telexed, telecopied, telegraphed,
cabled, mailed or delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof or in the other
Security Instruments or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement or in the other Security Instruments, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. local time on a Business Day (otherwise on the next
succeeding Business Day), by telex or telecopier and evidence or confirmation of
receipt is obtained, delivered to the telegraph or cable office or personally
delivered or, in the case of a mailed notice, seven (7) days after the date
deposited in the mails, postage prepaid, in each case given or addressed as
aforesaid.
Section 12.03 PAYMENT OF EXPENSES, INDEMNITIES, ETC. The Borrower agrees:
(a) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Agent in the
administration (both before and after the execution hereof and including
advice of counsel as to the rights and duties of the Agent and the Lenders
with respect thereto) of, and in connection with the negotiation,
syndication, investigation, preparation, execution and delivery of,
recording or filing of, preservation of rights under, enforcement of, and
refinancing, renegotiation or restructuring of, the Loan Documents and any
amendment, waiver or consent relating thereto (including, without
limitation, travel, photocopy, mailing, courier, telephone and other
similar expenses of the Agent, the cost of environmental audits, surveys
[including industry surveys] and appraisals at reasonable intervals, the
reasonable fees and disbursements of counsel for the Agent and, in the case
of enforcement, for any of the Lenders (including allocations for either in
house counsel or outside counsel, but not both, for any Lender choosing
same), and for insurance and other consultants retained by the Agent to
review all policies of insurance of the Borrower or other matters
reasonably required by the Agent or the Lenders); and promptly reimburse
the Agent for all amounts expended, advanced or incurred by the Agent or
the Lenders to satisfy any obligation of the Borrower under this Agreement
or any Security Instrument, including without limitation, all costs and
expenses of foreclosure;
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(b) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED
PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND
PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE
INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY
OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN
ANY WAY RELATED TO (i) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE
PROCEEDS OF ANY OF THE LOANS OR LETTERS OF CREDIT, (ii) THE EXECUTION,
DELIVERY AND PERFORMANCE OF THIS AGREEMENT, THE NOTES AND THE OTHER
SECURITY INSTRUMENTS, (iii) THE OPERATIONS OF THE BUSINESS OF THE BORROWER
AND ITS SUBSIDIARIES, (iv) THE FAILURE OF THE BORROWER OR ANY RESTRICTED
SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY SECURITY INSTRUMENT, INCLUDING
THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (v) ANY INACCURACY OF
ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER SET FORTH
IN THIS AGREEMENT OR THE OTHER SECURITY INSTRUMENTS, (vi) THE ISSUANCE,
EXECUTION AND DELIVERY OR TRANSFER OF OR PAYMENT OR FAILURE TO PAY UNDER
ANY LETTER OF CREDIT, IN ACCORDANCE WITH THE TERMS HEREOF, SUCH LETTER OF
CREDIT, OR THE LETTER OF CREDIT AGREEMENT EXECUTED IN CONNECTION THEREWITH,
OR (vii) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT IN ACCORDANCE
WITH THE TERMS HEREOF, SUCH LETTER OF CREDIT, OR THE LETTER OF CREDIT
AGREEMENT EXECUTED IN CONNECTION THEREWITH, NOTWITHSTANDING THE
NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE MANUALLY
EXECUTED DRAFT(S) AND CERTIFICATION(S), (viii) ANY ASSERTION THAT THE
LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE
SECURITY INSTRUMENTS, OR (ix) ANY OTHER ASPECT OF THIS AGREEMENT, THE NOTES
AND THE SECURITY INSTRUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE
FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN
CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY ACTION,
SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR
CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY
NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS
ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND
THE AGENT OR A LENDER'S SHAREHOLDERS AGAINST THE AGENT OR LENDER OR BY
REASON OF THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT ON THE PART OF THE
INDEMNIFIED PARTY; AND
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(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED
PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY
SUCH PERSON MAY BECOME SUBJECT (i) UNDER ANY ENVIRONMENTAL LAW APPLICABLE
TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING
WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES, (ii) AS A RESULT OF THE BREACH OR NON-COMPLIANCE
BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO
THE BORROWER OR ANY SUBSIDIARY, (iii) DUE TO PAST OWNERSHIP BY THE BORROWER
OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY THEIR
PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (iv) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE
PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY, OR (v) ANY
OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THIS
AGREEMENT, THE NOTES OR ANY OTHER SECURITY INSTRUMENT, PROVIDED, HOWEVER,
NO INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION 12.03(c) IN RESPECT OF
ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE
AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS
SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY
(WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS
MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be unreasonably
withheld; provided, that the indemnitor may not reasonably withhold consent
to any settlement that an Indemnified Party proposes, if the indemnitor
does not have the financial ability to pay all its obligations outstanding
and asserted against the indemnitor at that time, including the maximum
potential claims against the Indemnified Party to be indemnified pursuant
to this Section 12.03.
(e) In the case of any indemnification hereunder, the Agent, as
appropriate, shall give notice to the Borrower of any such claim or demand
being made against the Indemnified Party and the Borrower shall have the
non-exclusive right to join in the defense against any such claim or demand
provided that if the Borrower provides a defense, the Indemnified Party
shall bear its own cost of defense unless there is a conflict between the
Borrower and such Indemnified Party.
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
OR AN OMISSION,
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INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN
THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES
OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE
OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED PARTY IS
FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILFUL MISCONDUCT,
THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT SHALL
ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY
REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF
THE INDEMNIFIED PARTY.
(g) The Borrower's obligations under this Section 12.03 shall survive
any termination of this Agreement and the payment of the Notes and shall
continue thereafter in full force and effect.
(h) The Borrower shall pay any amounts due under this Section 12.03
within thirty (30) days following a final determination of the liability of
the Agent or Lenders and of the receipt by the Borrower of notice of the
amount due.
Section 12.04 AMENDMENTS, ETC. Any provision of this Agreement or any
other Security Instruments may be amended, modified or waived with the
Borrower's and the Majority Lenders' prior written consent; provided that (a) no
amendment, modification or waiver which forgives all or any portion of principal
on loans under this Agreement, extends the Final Maturity Date or the time to
pay interest or fees hereunder, increases the Aggregate Commitments, reduces or
extends the time for payment of principal on any loans hereunder, reduces
extends the date of payment (or amends the formula for determining) any
prepayment required under this Agreement, extends the Revolving Credit
Termination Date, extends a Letter of Credit beyond the final Maturity Date,
modifies the Borrowing Base, releases any guarantor of the Indebtedness or all
or substantially all of the collateral, reduces the interest rate applicable to
the Loans or the fees payable to the Lenders, generally, affects
Sections 2.03(a), this Section 12.04 or Section 12.06(a) or modifies the
definition of "Majority Lenders" shall be effective without consent of all
Lenders; (b) no amendment, modification or waiver which increases the Maximum
Credit Amount of any Lender shall be effective without the consent of such
Lender; and (c) no amendment, modification or waiver which modifies the rights,
duties or obligations of the Agent shall be effective without the consent of the
Agent.
Section 12.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) The Borrower may not assign its rights or obligations hereunder
or under the Notes or any Letters of Credit without the prior consent of
all of the Lenders and the Agent.
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(b) Any Lender may, upon the written consent of the Agent and the
Borrower (which consent will not be unreasonably withheld), assign to one
or more assignees all or a portion of its rights and obligations under this
Agreement pursuant to an Assignment Agreement substantially in the form of
Exhibit F (an "ASSIGNMENT") PROVIDED, HOWEVER, that (i) any such assignment
shall be in the amount of at least $5,000,000 or such lesser amount to
which the Borrower has consented and (ii) the assignee or assignor shall
pay to the Agent a processing and recordation fee of $2,500 for each
assignment. Any such assignment will become effective upon the execution
and delivery to the Agent of the Assignment and the consent of the Agent.
Promptly after receipt of an executed Assignment, the Agent shall send to
the Borrower a copy of such executed Assignment. Upon receipt of such
executed Assignment, the Borrower, will, at its own expense, execute and
deliver new Notes to the assignor and/or assignee, as appropriate, in
accordance with their respective interests as they appear. Upon the
effectiveness of any assignment pursuant to this Section 12.06(b), the
assignee will become a "Lender," if not already a "Lender," for all
purposes of this Agreement and the other Security Instruments. The
assignor shall be relieved of its obligations hereunder to the extent of
such assignment (and if the assigning Lender no longer holds any rights or
obligations under this Agreement, such assigning Lender shall cease to be a
"Lender" hereunder except that its rights under Sections 4.06, 5.01, 5.05
and 12.03 shall not be affected).
(c) Each Lender may transfer, grant or assign participations in all
or any part of such Lender's interests hereunder pursuant to this
Section 12.06(c) to any Person, PROVIDED that: (i) such Lender shall remain
a "Lender" for all purposes of this Agreement and the transferee of such
participation shall not constitute a "Lender" hereunder; (ii) the amount
thereof shall be at least $1,000,000; and (iii) no participant under any
such participation shall have rights to approve any amendment to or waiver
of the Loan Documents except to the extent such amendment or waiver would
(x) forgive any principal owing or any loans hereunder or extend the Final
Maturity Date, (y) reduce the interest rate (other than as a result of
waiving the applicability of any post-default increases in interest rates)
or fees applicable to any of the Commitments or Loans or Letters of Credit
in which such participant is participating, or postpone the payment of any
thereof, or (z) release any guarantor of the Indebtedness or all or
substantially all of the collateral (except as expressly provided in this
Agreement or the Security Instruments) supporting any of the Commitments or
Loans or Letters of Credit in which such participant is participating. In
the case of any such participation, the participant shall not have any
rights under this Agreement or any of the Security Instruments (the
participant's rights against the granting Lender in respect of such
participation to be those set forth in the agreement with such Lender
creating such participation), and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such
participation, PROVIDED that such participant shall be entitled to receive
additional amounts under Article V on the same basis as if it were a Lender
and be indemnified under Section 12.03 as if it were a Lender. In
addition, each agreement creating any participation must include an
agreement by the participant to be bound by the provisions of
Section 12.15.
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(d) The Lenders may furnish any information concerning the Borrower
in the possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants); provided
that, such Persons agree to be bound by the provisions of Section 12.15
hereof.
(e) Notwithstanding anything in this Section 12.06 to the contrary,
any Lender may assign and pledge all or any of its Notes to any Federal
Reserve Bank or the United States Treasury as collateral security pursuant
to Regulation A of the Board of Governors of the Federal Reserve System and
any operating circular issued by such Federal Reserve System and/or such
Federal Reserve Bank. No such assignment and/or pledge shall release the
assigning and/or pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section 12.06, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of
any state.
Section 12.07 INVALIDITY. In the event that any one or more of the
provisions contained in any of the Loan Documents shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of the Loan Documents.
Section 12.08 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 12.09 REFERENCES. The words "herein," "hereof," "hereunder" and
other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10 SURVIVAL. The obligations of the parties under Section 4.06,
Article V, and Sections 11.05 and 12.03 shall survive the repayment of the Loans
and the termination of the Commitments. To the extent that any payments on the
Indebtedness or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Indebtedness so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Agent's and the Lenders' Liens, security interests,
rights, powers and remedies under this Agreement and each Security Instrument
shall continue in full force and effect. In such event, each Security
Instrument shall be automatically reinstated and the Borrower shall take such
action as may be reasonably requested by the Agent and the Lenders to effect
such reinstatement.
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Section 12.11 CAPTIONS. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
CONFLICTS OF LAW PROVISIONS).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK AND
OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK
(PROVIDED, HOWEVER, ANY ENFORCEMENT ACTION WITH RESPECT TO COLLATERAL
SECURITY MAY BE BROUGHT IN THE JURISDICTION IN WHICH THE COLLATERAL IS
LOCATED), AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER,
THE AGENT AND EACH LENDER HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER,
THE AGENT AND EACH LENDER HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES
NOT PRECLUDE THE AGENT OR ANY LENDER FROM OBTAINING JURISDICTION OVER THE
BORROWER IN ANY COURT OTHERWISE HAVING JURISDICTION.
(c) THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM
LOCATED AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS THE DESIGNEE,
APPOINTEE AND AGENT OF THE BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE
BORROWER, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS. IT IS UNDERSTOOD
THAT A COPY OF SUCH PROCESS SERVED ON SUCH
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AGENT WILL BE PROMPTLY FORWARDED BY OVERNIGHT COURIER TO THE BORROWER AT
ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW, BUT THE FAILURE OF THE
BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF
SUCH PROCESS. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS SAID ADDRESS, SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BORROWER, THE AGENT
OR ANY LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER IN ANY OTHER JURISDICTION. INCLUDING, WITHOUT
LIMITATION, THE COMMENCEMENT OF ENFORCEMENT PROCEEDINGS UNDER THE SECURITY
INSTRUMENTS IN ALL APPLICABLE JURISDICTIONS.
(e) EACH OF THE BORROWER AND EACH LENDER HEREBY (A) IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OTHER SECURITY INSTRUMENT AND FOR ANY COUNTERCLAIM THEREIN; (B) IRREVOCABLY
WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE
TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (C) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT
OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR
IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGE THAT IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT, THE OTHER SECURITY INSTRUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13.
Section 12.14 INTEREST. It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to it. Accordingly,
if the transactions contemplated hereby would be usurious as to any Lender under
laws applicable to it (including the laws of the United States of America and
the State of New York or any other jurisdiction whose laws may be mandatorily
applicable to such Lender notwithstanding the other provisions of this
Agreement), then, in that event, notwithstanding anything to the contrary in the
Notes, this Agreement or in any other Security Instrument or agreement entered
into in connection with or as security for the Notes, it is agreed as follows:
(i) the aggregate of all consideration which constitutes interest under law
applicable to any Lender that is contracted for, taken, reserved,
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charged or received by such Lender under any of the Loan Documents or otherwise
in connection with the Notes shall under no circumstances exceed the maximum
amount allowed by such applicable law, and any excess shall be cancelled
automatically and if theretofore paid shall be credited by such Lender on the
principal amount of the Indebtedness (or, to the extent that the principal
amount of the Indebtedness shall have been or would thereby be paid in full,
refunded by such Lender to the Borrower); and (ii) in the event that the
maturity of the Notes is accelerated by reason of an election of the holder
thereof resulting from any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to any Lender may never include
more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be cancelled
automatically by such Lender as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Lender on the principal
amount of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the full term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.14 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.14.
Section 12.15 CONFIDENTIALITY. In the event that the Borrower provides
to the Agent or the Lenders written confidential information belonging to the
Borrower, if the Borrower shall denominate such information in writing as
"confidential", the Agent and the Lenders and any participants (for purposes of
this Section 12.15, the term "Lenders" shall include all participants) shall
thereafter maintain such information in confidence in accordance with the
standards of care and diligence that each utilizes in maintaining its own
confidential information. This obligation of confidence shall not apply to such
portions of the information which (i) are in the public domain, (ii) hereafter
become part of the public domain without the Agent or the Lenders breaching
their obligation of confidence to the Borrower, (iii) are previously known by
the Agent or the Lenders from some source other than the Borrower, (iv) are
hereafter developed by the Agent or the Lenders without using the Borrower's
information, (v) are hereafter obtained by or available to the Agent or the
Lenders from a third party who owes no obligation of confidence to the Borrower
with respect to such information or through any other means other than through
disclosure by the Borrower, (vi) are disclosed with the Borrower's prior written
consent, (vii) must be disclosed either pursuant to any Governmental Requirement
or to Persons regulating the activities of the Agent or the Lenders, or
(viii) as may be required by law or
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regulation or order of any Governmental Authority in any judicial, arbitration
or governmental proceeding. Further, the Agent or a Lender may disclose any
such information to any other Lender, any independent petroleum engineers or
consultants, any independent certified public accountants, any outside legal
counsel employed by such Person in connection with this Agreement or any
Security Instrument, including without limitation, the enforcement or exercise
of all rights and remedies thereunder, or any assignee or participant (including
prospective assignees and participants) in the Loans; provided, however, that
the Agent or Lender shall receive a confidentiality agreement from the Person to
whom such information is disclosed such that said Person shall have the same
obligation to maintain the confidentiality of such information as is imposed
upon the Agent or Lender hereunder. Notwithstanding anything to the contrary
provided herein, this obligation of confidence shall cease five (5) years from
the date the information was furnished (and fifteen (15) years if such
information is technical information) unless the Borrower requests in writing at
least thirty (30) days prior to the expiration of such five year period, to
maintain the confidentiality of such information for an additional period of
like duration. The Borrower waives any and all other rights it may have to
confidentiality as against the Agent and the Lenders arising by contract,
agreement, statute or law except as expressly stated in this Section 12.15.
Section 12.16 RELEASES OF LIENS.
(a) When required to do so, the Lenders will release, or cause the Agent to
release, a Lien held by the Agent for the benefit of the Lenders upon any
Property which is the subject of an Asset Sale; provided, however:
(i) such Asset Sale is permitted under the terms of this Agreement;
(ii) the Borrower is in compliance with all of the terms and
conditions of this Agreement;
(iii) No Default has occurred and is continuing hereunder or would
be caused by such Asset Sale;
(iv) the Borrower shall receive consideration at the time of such
Asset Sale at least equal to the fair market value (evidenced by a
resolution of the board of directors of the Borrower) of the Property sold
or otherwise disposed of in such Asset Sale; provided, however, a
resolution of the board of directors of the Borrower shall not be necessary
for Asset Sales where the consideration to be received is under $1,000,000
and in such cases only the consent of the Agent (without the consent of any
other Lenders) shall be needed for such a release of Liens; and
(v) 80% of the consideration is in the form of cash or cash
equivalents (with any promissory notes or their equivalent to be pledged to
secure the Indebtedness).
The Borrowing Base shall be redetermined on any Asset Sale, as applicable.
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(b) So long as no Event of Default has occurred and is continuing,
whenever the aggregate amount outstanding under the Term Loans is equal to or
less than $25,000,000, the Agent on behalf of the Lenders shall release all
Liens granted to Lenders pursuant to this Agreement which burden or cover the
Borrower's Odessa, Texas plant and all fixed assets located at such plant which
are directly related thereto.
Section 12.17 EFFECTIVENESS. This Agreement shall be effective on the Closing
Date (the "EFFECTIVE DATE").
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The parties hereto have caused this Agreement to be duly executed as of the
day and year first above written.
BORROWER: REXENE CORPORATION
By:_____________________________
Name:
Title:
Address for Notices:
5005 LBJ Freeway
Occidental Tower
Dallas, Texas 75244
Telecopier No.: 214-450-9017
Telephone No.: 214-450-9000
Attention: General Counsel
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LENDER AND AGENT: THE BANK OF NOVA SCOTIA
BY: THE BANK OF NOVA SCOTIA, ATLANTA AGENCY
By:_________________________________
Name: F.C.H. Ashby
Title: Senior Manager
Lending Office for Base Rate Loans,
Eurodollar Advances and Address for Notices:
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Telecopier No.:
Telephone No.:
Attention: F.C.H. Ashby
With copy to:
Mr. Michael W. Nepveux
Relationship Manager
Energy Banking
The Bank of Nova Scotia
1100 Louisiana, Suite 3000
Houston, Texas 77002
Telecopier No.: 713/752-2425
Telephone No.: 713/752-0900
Mr. Nick Karsiotis
The Bank of Nova Scotia
Structured Finance
One Liberty Plaza
New York, New York 10006
<PAGE>
LENDERS: MELLON BANK, N.A.
By:_______________________________
Name: James Zicolello
Title: Vice President
Lending Office for Base Rate Loans:
Mellon Bank Center
1735 Market Street
6th Floor
Philadelphia, Pennsylvania 19101-7899
Lending Office for Eurodollar Advances:
Mellon Bank Center
1735 Market Street
6th Floor
Philadelphia, Pennsylvania 19101-7899
Address for Notices:
Mellon Bank Center
1735 Market Street
6th Floor
Philadelphia, Pennsylvania 19101-7899
Telecopier No.: 215/553-0201
Telephone No.: 215/553-2782
Attention: Mr. James Zicolello
With copy to:
Ms. Dot Enslin
Banking Officer, Collateral Administration Unit
Mellon Bank, N.A.
Mellon Bank Center
1735 Market Street
6th Floor
Philadelphia, Pennsylvania 19101-7899
Telecopier No.: 215/553-2224
Telephone No.: 215/553-2459
<PAGE>
LENDERS: THE FIRST NATIONAL BANK OF CHICAGO
By:__________________________________
Name: Daniel B. Catlin
Title: Assistant Vice President
Lending Office for Base Rate Loans:
One First National Plaza
Suite 0634, 10th Floor
Chicago, Illinois 60670
Lending Office for Eurodollar Advances:
One First National Plaza
Suite 0634, 10th Floor
Chicago, Illinois 60670
Address for Notices:
One First National Plaza
Suite 0634, 10th Floor
Chicago, Illinois 60670
Telecopier No.: 312/732-4840
Telephone No.: 312/732-8573
Attention: Mr. Greg Baranowski, Client
Services Professional
With copy to:
Mr. Daniel B. Catlin
Assistant Vice President
The First National Bank off Chicago
1100 Louisiana, Suite 3200
Houston, Texas 77002
Telecopier No.: 713/654-7370
Telephone No.: 713/654-7350
<PAGE>
LENDERS: DEN NORSKE BANK AS
By:____________________________________
Name:__________________________________
Title:_________________________________
By:____________________________________
Name:__________________________________
Title:_________________________________
Lending Office for Base Rate Loans:
600 5th Avenue
New York, New York 10020
Lending Office for Eurodollar Advances:
600 5th Avenue
New York, New York 10020
Address for Notices:
600 5th Avenue
New York, New York 10020
Telecopier No.: 212/756-3161
Telephone No.: 212/315-6559
Attention: Ms. Helene Vales
Assistant Treasurer
With copy to:
Mr. Nils Fykse
Vice President
Den Norske Bank AS
Three Allen Center
333 Clay Street
Suite 4890
Houston, Texas 77002
Telecopier No.: 713/757-1167
Telephone No.: 713/757-0008
<PAGE>
LENDERS: BANK OF AMERICA ILLINOIS
By:________________________________
Name: W. T. Barnett
Title: Vice President
Lending Office for Base Rate Loans:
231 S. LaSalle
Chicago, Illinois 60697
Lending Office for Eurodollar Advances:
231 S. LaSalle
Chicago, Illinois 60697
Address for Notices:
231 S. LaSalle
Chicago, Illinois 60697
Telecopier No.: 312/987-5833
Telephone No.: 312/828-6386
Attention: Mr. Ken Bell, Account
Administrator
With copy to:
Mr. W. T. Barnett
Vice President
Bank of America Illinois
333 Clay Street
Suite 4550
Houston, Texas 77002
Telecopier No.: 713/651-4841
Telephone No.: 713/651-4806
<PAGE>
LENDERS: SOCIETE GENERALE, SOUTHWEST AGENCY
By:____________________________________
Name: Matthew Flanigan
Title: First Vice President
By:____________________________________
Name: Benoit Desserre
Title: Assistant Vice President
Lending Office for Base Rate Loans:
2000 Ross Avenue
Suite 4800
Dallas, Texas 75201
Lending Office for Eurodollar Advances:
2000 Ross Avenue
Suite 4800
Dallas, Texas 75201
Address for Notices:
2000 Ross Avenue
Suite 4800
Dallas, Texas 75201
Telecopier No.: 214/754-0171
Telephone No.: 214/979-2743
Attention: Ms. Angela Aldridge
With copy to:
Mr. Benoit Desserre
Assistant Vice President
2000 Ross Avenue
Suite 4800
Dallas, Texas 75201
Telecopier No.: 214/979-1104
Telephone No.: 214/979-2777
<PAGE>
LENDERS: NATIONAL BANK OF CANADA
By:________________________________
Name: Larry L. Sears
Title:_____________________________
By:_________________________________
Name: David L. Schreiber
Title: Assistant Vice President
Lending Office for Base Rate Loans:
125 West 55th
New York, New York 10019-5366
Lending Office for Eurodollar Advances:
125 West 55th
New York, New York 10019-5366
Address for Notices:
125 West 55th
New York, New York 10019-5366
Telecopier No.: 212/632-8736
Telephone No.: 212-632-8566
Attention: Ms. Christina Tang
Assistant Manager
With copy to:
Mr. David L. Schreiber
Assistant Vice President
2121 San Jacinto, Suite 1850
Dallas, Texas 75201
Telecopier No.: 214/871-2015
Telephone No.: 214/871-1260
<PAGE>
LENDERS: THE FUJI BANK LIMITED
By:____________________________________
Name: David L. Kelley
Title: Vice President and Senior Manager
Lending Office for Base Rate Loans:
1221 McKinney, Suite 4100
Houston, Texas 77010
Lending Office for Eurodollar Advances:
1221 McKinney, Suite 4100
Houston, Texas 77010
Address for Notices:
1221 Mckinney, Suite 4100
Houston, Texas 77010
Telecopier No.: 713/759-0048
Telephone No.: 713/650-7852
Attention: Mr. David Kelley
Vice President and Senior
Manager
<PAGE>
SCHEDULE 6.02
TO
CREDIT AGREEMENT
LEASED WAREHOUSE SPACE
a. Warehouse
617 Market Street
Bridgeville, Sussex County, Delaware
(Landlord: Pet Poultry Products, Inc.)
b. Warehouse
Route 13 and Conrail Railroad
Harrington, Kent County, Delaware
(Landlord: Terre Hill Concrete Products, Inc.)
c. Document Repository
Pearce Leahy
1202 Avenue R
Grand Prairie, Dallas County, Texas 75050
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF REXENE CORPORATION
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
El Paso Products Sales Company Texas
Rexene Foreign Sales Company U.S. Virgin Islands
Rexene Cogeneration, Inc. Delaware
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-8 (No. 33-51759
and No. 33-51757) of Rexene Corporation of our report dated February 7, 1995
appearing on Page F-2 of this 1994 Annual Report on Form 10-K.
Price Waterhouse LLP
Dallas, Texas
March 9, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 45,822
<SECURITIES> 0
<RECEIVABLES> 81,402
<ALLOWANCES> 3,969
<INVENTORY> 62,726
<CURRENT-ASSETS> 205,351
<PP&E> 295,251
<DEPRECIATION> 37,132
<TOTAL-ASSETS> 506,954
<CURRENT-LIABILITIES> 65,312
<BONDS> 265,000
<COMMON> 186
0
0
<OTHER-SE> 74,690
<TOTAL-LIABILITY-AND-EQUITY> 506,954
<SALES> 537,957
<TOTAL-REVENUES> 537,957
<CGS> 418,048
<TOTAL-COSTS> 418,048
<OTHER-EXPENSES> 44,824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,885
<INCOME-PRETAX> 35,061
<INCOME-TAX> 13,557
<INCOME-CONTINUING> 21,504
<DISCONTINUED> 0
<EXTRAORDINARY> (25,831)
<CHANGES> 0
<NET-INCOME> (4,327)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
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