<PAGE> 1
- --------------------------------------------------------------------------------
FORM 10-Q
--------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 1996. COMMISSION FILE NUMBER 1-11804
THE GEON COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 34-1730488
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Geon Center, Avon Lake, Ohio 44012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 930-1000
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
--- ---
As of September 30, 1996 there were 23,811,736 shares of common stock
outstanding. There is only one class of common stock.
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<PAGE> 2
THE GEON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 307.8 $ 310.2 $ 865.3 $ 1,004.0
Operating costs and expenses:
Cost of sales 280.4 271.3 800.3 853.4
Selling and administrative expenses 14.0 12.3 39.7 39.2
Employee separation and plant phase-out charges -- -- -- 56.5
--------- --------- --------- ---------
Operating income 13.4 26.6 25.3 54.9
Interest expense (2.8) (1.4) (8.3) (4.7)
Interest income .2 .4 1.2 1.0
Other expense, net (.5) (2.4) (.3) (6.5)
--------- --------- --------- -------
Income before income taxes 10.3 23.2 17.9 44.7
Income tax expense (4.2) (8.8) (7.3) (16.9)
--------- --------- --------- -------
Net income $ 6.1 $ 14.4 $ 10.6 27.8
========= ========= ========= =======
Earnings per share:
Net income $ .25 $ .56 $ .43 $ 1.06
========= ========= ========= =======
Number of shares used to compute earnings per share 24.3 25.5 24.9 26.2
Dividends paid per common share: $ .125 $ .125 $ .375 $ .375
</TABLE>
Page 2 of 9 Pages
<PAGE> 3
THE GEON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
------------ --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 16.9 $ 61.1
Accounts receivable, less allowance for doubtful
receivables ($2.4 in 1996 and $2.1 in 1995) 112.9 102.3
Inventories:
Finished products and in-process 90.4 94.4
Raw materials and supplies 37.5 27.4
------------ ------------
127.9 121.8
LIFO reserve (31.4) (29.6)
------------ ------------
96.5 92.2
Deferred income taxes 14.1 14.0
Prepaid expenses 15.4 13.4
------------ ------------
Total current assets 255.8 283.0
Property:
Land, buildings, machinery and equipment 1,177.0 1,131.9
Allowances for depreciation and amortization (722.9) (687.2)
------------ ------------
Property, net 454.1 444.7
Deferred charges and other assets 37.5 24.3
------------ ------------
Total assets $ 747.4 $ 752.0
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term bank debt $ 16.6 $ 8.6
Accounts payable 130.7 125.8
Accrued expenses 60.5 58.0
Current portion of long-term debt .7 .7
------------ ------------
Total current liabilities 208.5 193.1
Long-term debt 137.4 137.9
Deferred income taxes 39.5 37.3
Postretirement benefits other than pensions 86.8 86.7
Other non-current liabilities 82.3 88.1
------------ ------------
Total liabilities 554.5 543.1
Stockholders' equity:
Preferred stock, 10.0 shares authorized, no shares issued - -
Common stock, $.10 par, authorized 100.0 shares;
issued 27.9 shares in 1996 and in 1995 2.8 2.8
Additional paid-in capital 272.3 273.9
Common stock held in treasury (4.1 shares in 1996
and 3.2 shares in 1995) (105.0) (86.6)
Retained earnings 63.7 62.3
Cumulative translation adjustment (18.0) (19.1)
Equity adjustment to recognize minimum pension liability (19.7) (19.7)
Unearned portion of restricted stock awards (3.2) (4.7)
------------ ------------
Total stockholders' equity 192.9 208.9
------------ ------------
Total liabilities and stockholders' equity $ 747.4 $ 752.0
============ ============
</TABLE>
Page 3 of 9 Pages
<PAGE> 4
THE GEON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1996 1995
-------- ---------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $10.6 $27.8
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Employee separation and plant phase-out -- 56.5
Depreciation and amortization 41.6 44.0
Provision (credit) for deferred income taxes 3.0 (1.5)
Change in assets and liabilities:
Accounts receivable (10.0) 31.7
Inventories (3.4) (12.7)
Accounts payable 5.4 (42.7)
Accrued expenses (.6) (6.1)
Income taxes payable 3.1 (10.8)
Other (8.7) (8.7)
----- -----
Net cash provided by operating activities 41.0 77.5
INVESTING ACTIVITIES
Purchases of property (53.5) (45.5)
Investment in chlor-alkali joint venture (8.5) --
----- -----
NET CASH (USED) PROVIDED BY OPERATING AND INVESTING ACTIVITIES (21.0) 32.0
FINANCING ACTIVITIES
Increase in short-term debt 7.5 3.5
Repayment of long-term debt (.5) (.2)
Repurchase of common stock (21.8) (43.8)
Dividends (9.2) (9.6)
Proceeds from issuance of common stock .4 1.5
----- -----
Net cash used by financing activities (23.6) (48.6)
EFFECT OF EXCHANGE RATE CHANGES ON CASH .4 .7
----- -----
DECREASE IN CASH AND CASH EQUIVALENTS (44.2) (15.9)
CASH AND CASH EQUIVALENTS AT JANUARY 1 61.1 47.5
----- -----
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $16.9 $31.6
===== =====
</TABLE>
During the first nine months of 1996 and 1995 the Company paid net income taxes
of $2.3 and $34.9, respectively. Cash payments for interest including amounts
capitalized were $6.0 for the first nine months of 1996 and $5.9 for the same
period of 1995.
Page 4 of 9 Pages
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
NOTE A
- ------
The accompanying unaudited consolidated financial statements of The Geon Company
(Company or Geon) have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair financial presentation have been included. Operating results for the three
month and nine months periods ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. For further information refer to the consolidated financial statements and
notes thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 1995. Certain amounts for 1995 have been reclassified to
conform to the 1996 presentation.
NOTE B
- ------
There are pending or threatened against the Company or its subsidiaries various
claims, lawsuits and administrative proceedings, all arising from the ordinary
course of business with respect to commercial, product liability and
environmental matters, which seek remedies or damages. The Company believes that
any liability that may finally be determined should not have a material adverse
effect on the Company's consolidated financial position.
NOTE C
- ------
On August 1, 1996 the Board of Directors authorized the Company to repurchase up
to 2.5 million shares of Geon common stock. Future purchases will be dependent
on the price of Geon common stock and Company cash flow.
NOTE D
- ------
During the third quarter of 1996, Geon and Olin Corporation finalized terms of
the formation of a joint venture to build a chlor-alkali facility at Olin's
McIntosh, Alabama site. The first phase of the new plant is expected to be
completed in late 1997, with 250,000 short tons of chlorine capacity. The new
unit will initially supply approximately 35% of Geon's captive chlorine needs.
Page 5 of 9 Pages
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INDUSTRY CONDITIONS:
- --------------------
Based on The Society of Plastics Industry's September 1996 data, North American
(U.S. and Canada) producer shipments of polyvinyl chloride (PVC), including
exports, are estimated to have been 19% higher in the third quarter of 1996 over
the same quarter of 1995 and were about 4% lower than in the second quarter in
1996. For the first nine months of 1996, North American shipments are 13% higher
than the same period of last year. Exports from North America year-to-date
(which represent about 9% of total shipments) were 3% less than a year ago.
Capacity utilization (shipments/capacity) for North America was estimated at 95%
of effective capacity (88% of nameplate) during the third quarter of 1996. In
the second quarter of 1996 and third quarter 1995 shipments were 100% and 88% of
effective capacity. North American capacity in the third quarter of 1996 is
estimated to have increased 3% compared to the previous quarter and 8% since
last year's third quarter.
Chlorine prices were approximately the same in the third quarter of 1996 versus
a year ago. Ethylene prices, increased 11% in the third quarter of 1996 from the
previous quarter but were flat compared to the same period of the prior year.
The spread between PVC resin prices and purchased ethylene and chlorine in the
largest PVC resin markets is estimated to have been .5 cents per pound lower in
the third quarter of 1996 as compared to the previous quarter and 6.5 cents per
pound lower than the third quarter of 1995. Ethylene prices are likely to
increase in the fourth quarter as producers continue to push for higher pricing
to cover increasing feedstock (ethane and propane) costs while chlorine prices
should remain level with the third quarter. Pressure will continue on resin
sales prices as demand typically slows in late November through year end.
RESULTS OF OPERATIONS:
- ----------------------
The Company had sales of $307.8 million in the third quarter versus $310.2
million in the same quarter of 1995. Operating income was $13.4 million in the
third quarter of 1996. During the same period a year ago operating income was
$26.6 million. In the second quarter of 1996 Geon had sales of $311.8 million
and an operating income of $18.4 million. Net income for the third quarter of
1996 and 1995 was $6.1 million and $14.4 million, respectively.
The Company's third quarter 1996 resin shipments were 25% higher than the third
quarter of 1995 and were 8% lower than shipments in the second quarter of 1996.
The Company's average spread between resin prices and raw material costs
(ethylene and chlorine) declined in line with industry changes. Compound sales
volume in the third quarter of 1996 were approximately 15% above the same period
a year ago.
In the second quarter of 1996 Geon started up its 800 million pound LaPorte,
Texas VCM expansion, thereby producing VCM from purchased ethylene and chlorine
and reducing purchases of VCM. During the third quarter the Company experienced
some equipment problems related to the expansion which lowered operating income
approximately $2 million. Repairs were completed in the quarter with the plant
returning to full rates. During the third quarter of last year, the Company was
able to sell VCM into the export market at a substantial premium to domestic
prices. This benefited the 1995 quarters operating income, when compared to
1996, by approximately $5 million.
In the first nine months of 1996, sales were $865.3 million and net income was
$10.6 million. For the same period of 1995 the Company had sales of $1,004.0
million and net income of $62.3 million before the after-tax effect of a special
charge of $34.5 million ($56.5 million before-tax) for employee separation and
plant phase-out charges to reconfigure the Company's compounding operations.
INTEREST & OTHER EXPENSE:
- -------------------------
Interest expense of $2.8 million during the third quarter of 1996 increased from
$1.4 million during the same period in 1995. The increase mainly reflects
interest expense on higher average debt levels associated with the Company's
debt refinancing in December 1995. Other expense, net decreased in the third
quarter 1996 as compared to the same period in 1995 mainly from the effects of
favorable foreign currency rates and lower costs associated with the sale of
accounts receivable.
Page 6 of 9 Pages
<PAGE> 7
TAXES:
- ------
The third quarter of 1996 included an income tax expense of $4.2 million on
pre-tax income of $10.3 million as compared to an income tax expense of $8.8
million in the third quarter of 1995 on a pre-tax loss of $23.2 million. For the
first nine-months of 1996 income tax expense was $7.3 million on pre-tax income
of $17.9 million as compared to income tax expense of $16.9 million on pre-tax
income of $44.7 million during the same period 1995. Changes in effective tax
rates between the periods noted above were primarily attributable to the accrual
of dividend withholding taxes on foreign subsidiaries' undistributed earnings.
CAPITAL RESOURCES AND LIQUIDITY:
- --------------------------------
During the nine months ended September 30, 1996, the Company used $21.0 million
of net cash from operating and investing activities compared to providing $32.0
million during the same period of 1995. This change is primarily attributable to
lower earnings before any special charge.
Investing activities include the purchase of property of $53.5 million during
the first nine months of 1996 as compared to $45.5 million during the same
period in 1995. Capital expenditures for the full year of 1996 are estimated to
approximate $65 million or $5 million below 1995. Investing activities for 1996
include an $8.5 million investment in a joint venture constructing a
chlor-alkali plant which when completed in late 1997 will provide Geon with
approximately 35% of its captive chlorine requirements. During the first nine
months of 1996 operating working capital (accounts receivable plus inventory
less accounts payable) increased $8.0 million which was $15.7 million less than
the increase during the same period of 1995.
Financing activities in the first nine months of 1996 primarily reflects the
payment of dividends and the repurchase of 979,700 shares of common stock. As of
September 30, 1996 2.4 million shares are authorized for repurchase under an
August 1996 board of directors resolution. The timing of any stock repurchase
depends on the Company's cash flow and market price of its common stock
The Company believes it has sufficient funds to support dividends, debt service
requirements and normal capital expenditures plus expenditures associated with
the previously announced chlor-alkali plant based on projected operations, the
existing working capital facilities and other available permitted borrowings.
ENVIRONMENTAL MATTERS:
- ----------------------
The Company is subject to various federal, state and local environmental laws
and regulations concerning emissions to the air, discharges to waterways, the
release of materials into the environment, the generation, handling, storage,
transportation, treatment and disposal of waste materials or otherwise relating
to the protection of the environment.
The Company maintains a disciplined environmental and industrial safety and
health compliance program and conducts internal and external regulatory audits
at its plants in order to identify and categorize potential environmental
exposures and to ensure compliance with applicable environmental, health and
safety laws and regulations. This is an effort which has required and may
continue to require process or operational modifications, the installation of
pollution control devices and cleanups.
The Company estimates capital expenditures related to the limiting and
monitoring of hazardous and non-hazardous wastes during 1996 to approximate $4
million to $5 million.
The Company believes that compliance with current governmental regulations will
not have a material adverse effect on its capital expenditures, earnings, cash
flow or liquidity. At September 30, 1996, the Company had accruals totaling
approximately $27.2 million to cover future environmental remediation
expenditures. Environmental remediation expenditures are estimated to
approximate $6 million in 1996.
Page 7 of 9 Pages
<PAGE> 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
During the third quarter of 1996 The BFGoodrich Company ("BFG")
announced that Westlake Monomers Corporation terminated its right
to purchase BFG's Calvert Facilities at Calvert City, Kentucky.
Westlake's decision not to purchase the facilities and to
terminate its right of first refusal has the effect of
terminating all of its claims against The Geon Company in the
lawsuit brought against the Company and BFG. As previously
reported by the Company in its 1995 annual report, had BFG sold
the Calvert Facilities to Westlake, the Company's obligations
under the Put Agreement, whereby BFG has the right to require the
Company to purchase its Calvert Facilities between April 1, 2000
and March 31, 2003, at the then fair market value determined by
an independent appraisal would have lapsed. Given Westlake's
ultimate actions, however, BFG's rights under the Put Agreement
remain in effect in accordance with the terms of the Put
Agreement.
Item 4. Submission of Matters to a Vote of Security Holders:
None.
Item 5. Other Information:
None.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit 10(a) Sunbelt Chlor Alkali Partnership Agreement, by and
between 1997 Chloralkali Venture Inc., a wholly-owned subsidiary
of The Geon Company, and Olin Sunbelt, Inc. wholly-owned
subsidiary of the Olin Corporation, for the purpose of forming a
general partnership.
Exhibit 10(b) Chlorine Sales Agreement, by and between Sunbelt
Chlor Alkali Partnership, a general partnership organized under
the laws of the State of Delaware, and The Geon Company.
Exhibit 10(c) Intercompany guarantee agreement between the
Company on the one hand and Olin Corporation and Sunbelt Chlor
Alkali Partnership on the other hand.
Exhibit 10(d) Rate Swap Transaction as amended between The Geon
Company and NationsBank, N.A.
Exhibit 11 - Statement re Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On August 1, 1996 the Company filed on Form 8-K notice that its
Board of Directors authorized the Company to repurchase up to 2.5
million shares of Geon common stock, par value $0.10 per share.
The timing of any purchases will depend on the price of Geon
common stock and the Company's cash flow.
On August 26, 1996 the Company filed on Form 8-K notice that BFG
announced that Westlake Monomers Corporation exercised its right
to terminate an agreement to purchase BFG's Calvert Facilities at
Calvert City, Kentucky. As previously discussed in Part II Item I
Westlake's decision not to purchase the facilities has the effect
of terminating all of its claims against The Geon Company in the
lawsuit brought against the Company and BFG. Also as discussed,
BFG's rights under the Put Agreement remains in effect in
accordance with the terms of the Put Agreement.
On September 20, 1996 the Company filed on Form 8-K notice
anticipating third quarter 1996 earnings below the second quarter
as a result of lower resin margins and vinyl chloride monomer
manufacturing disruptions.
Page 8 of 9 Pages
<PAGE> 9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
November 11, 1996 THE GEON COMPANY
\S\T.A. WALTERMIRE
------------------
T. A. Waltermire
Chief Financial Officer,
(Principal Financial Officer)
\S\G. P. SMITH
--------------
G. P. Smith
Controller and Assistant Treasurer
(Principal Accounting Officer)
Page 9 of 9 Pages
<PAGE> 1
EXHIBIT 10(A)
-------------
PARTNERSHIP AGREEMENT
---------------------
THIS AGREEMENT (the "Agreement") is entered into and effective as of this 23rd
day of August, 1996, by and between 1997 CHLORALKALI VENTURE INC. (hereinafter
"1997 CVI"), an Alabama corporation, wholly-owned by The Geon Company
(hereinafter "GEON"), and OLIN SUNBELT, INC. (hereinafter "OSI"), a Delaware
corporation, wholly-owned by Olin Corporation (hereinafter "Olin") for the
purpose of forming a general partnership.
W I T N E S S E T H:
--------------------
WHEREAS, Geon has a requirement for chlorine for use in its production of Vinyl
Chloride Monomer ("VCM") at LaPorte, Texas; and
WHEREAS, Olin has a chlorine production facility ("Olin Plant") located on land
owned by Olin in McIntosh, Alabama ("Olin Plant Site") and OSI and 1997 CVI wish
to construct additional chlorine production facilities at the Olin Plant Site
for the purpose of supplying a portion of Geon's requirements for chlorine; and
WHEREAS, OSI and 1997 CVI desire to form a general partnership for the above
purpose; and
WHEREAS, these and other objectives will be accomplished through this Agreement
and other agreements between OSI, Olin, 1997 CVI, Geon and/or the Partnership
signed concurrent with this Agreement ("Ancillary Agreements") including, but
expressly not limited to, the following:
Engineering, Procurement, and Construction Agreement
Operating Agreement
Chlorine Sales Agreement
Real Estate Lease Agreement
NOW, THEREFORE, in consideration of the mutual rights and obligations set forth
herein, the parties agree as follows:
ARTICLE I
THE PARTNERSHIP
---------------
1.01 FORMATION OF THE PARTNERSHIP
(a) 1997 CVI and OSI (hereinafter "Partners") hereby form a general
partnership (hereinafter "Partnership") pursuant to the provisions
of the Delaware Uniform Partnership Act (the "Act") solely for the
purpose of carrying on the business of operating and maintaining
facilities to be constructed by or on behalf of the Partnership at
the Olin Plant Site ("Facilities") for the initial production of
approximately Two Hundred and Fifty Thousand (250,000) ECUs (1.0
tons chlorine plus approximately 1.1 ton caustic soda equal 1.0
ECUs) of chlorine and caustic soda per annum; and for the sale and
distribution of chlorine and caustic soda; and for the licensing of
all patents or technology owned now or in the future by the
Partnership.
(b) The Partners have executed contemporaneously with the execution of
this Agreement the assumed name certificate required under Delaware
law, which shall be filed with the Delaware Secretary of State and
as necessary in those states and counties in which the Partnership
conducts business. The Partners also agree to execute and deliver
such additional documents and perform such additional acts
consistent with the terms of this Agreement as may be necessary to
comply with the requirements of law for the formation,
qualification, and operation of the general partnership in each
jurisdiction in which the Partnership shall conduct business.
<PAGE> 2
1.02 NAME
The Partnership shall be operated under the name of Sunbelt Chlor Alkali
Partnership.
1.03 PRINCIPAL PLACE OF BUSINESS OF THE PARTNERSHIP
The principal place of business of the Partnership shall be located at
the Facilities.
1.04 PARTNERSHIP INTERESTS
(a) Each Partner shall own a fifty percent (50%) interest in the
Partnership.
(b) Each Partner shall have the right of access at all reasonable times
to all facilities and property owned or leased by the Partnership,
subject to reasonable health, safety, or security restrictions as
designated by the Operator and/or the Partnership.
1.05 DURATION OF PARTNERSHIP
The Partnership shall commence as of the effective date of this Agreement
and shall continue in full force and effect until terminated or dissolved
as set forth in Article 7 herein.
1.06 LEASE OF PROPERTY
For the purpose of constructing and operating the Facilities, the
Partnership shall lease from Olin a parcel of real estate at the Olin
Plant Site pursuant to the terms and conditions of the Real Estate Lease
Agreement, in the form attached hereto.
1.07 CONSTRUCTION OF FACILITIES
The Partnership shall enter into an Engineering, Procurement, and
Construction Agreement with Olin for construction of the Facilities, in
the form attached hereto.
1.08 RECONSTRUCTION OF FACILITIES
In the event of substantial damage to or total destruction of the
Facilities, the Partnership will determine whether or not to rebuild. In
the event the Partnership elects to rebuild, the Partnership will
reconstruct the Facilities as promptly as possible on the basis agreed to
by the Management Committee. In the event the Partnership elects not to
rebuild, then the Real Estate Lease Agreement will terminate and the
Partnership will comply with its obligations arising thereunder.
1.09 OPERATING AGREEMENT
The Partnership shall enter into an Operating Agreement with Olin for the
operation of the Facility, in the form attached hereto.
1.10 CHLORINE SALES AGREEMENT
The Partnership shall enter into a Chlorine Sales Agreement with Geon, in
the form attached hereto.
1.11 EXPANSION
(a)In the event that either Partner desires for the Facility to be
expanded, the Partner shall propose such expansion to the Management
Committee. If the Management Committee and the boards of each of the
Partners (to the extent required or deemed by a party necessary or
desirable) approves such expansion, it shall be undertaken by the
Partnership, with all capital requirements of the Partnership
contributed by the Partners in accordance with Section 2.02(a) hereof.
(b)If the Management Committee determines not to have the Partnership
fund the expansion, then the Partner proposing such expansion may
advance the funds on the Partnership's behalf for the capital costs
associated with the expansion, which advances shall be credited to the
Partner's capital account. Distributions of Operating Income/Loss (as
defined below) to be made under Section 2.05(a) hereof shall be
adjusted based on the ratio (the "Adjustment Ratio") of (i) the
Partner's funded share of the Nominal Capacity of the Facilities
(determined as provided under the Operating Agreement) after
expansion, to
-2-
<PAGE> 3
(ii) the total Nominal Capacity of the Facilities after expansion. The
Adjustment Ratio shall be applicable only for distributions from
Operating Income/Loss and capital account allocations, as provided in
Sections 2.05 and 2.09 respectively; all other rights, liabilities,
costs, expenses, obligations, distributions and allocations of the
Partnership and the Partners under this Partnership Agreement shall
remain unchanged from the ownership interests set forth in Section
1.04(a) hereof. "Operating Income/Loss" means Gross Margin (as defined
below) derived from manufacturing operations reduced by operating
expenses, such as but not limited to, selling expenses, administrative
expenses, research expenses, interest expense and any applicable
taxes. "Gross Margin" means net sales minus cost of goods sold. All
other items of income/loss or expenses are classified as non-operating
items.
(c)The Management Committee will be responsible for advising the Tax
Matters Partner of the application of Section 1.11(b) and the
Adjustment Ratio which will apply to each Partner. Advice will be
supplied by the last working day in January for the immediately
preceding year.
(d)In the event of an expansion pursuant to subsection (b) above, the
non-funding Partner's purchase or marketing obligations with respect
to chlorine and caustic under the Ancillary Agreements shall not be
applicable to the additional chlorine and caustic generated; provided
however, such non-funding Partner's other obligations, if any, under
the Ancillary Agreements shall remain unchanged. In addition, no
expansion beyond 400,000 ECU's annually shall be permitted unless the
Management Committee approves such expansion to be undertaken by the
Partnership pursuant to subsection (a) above.
ARTICLE 2
FINANCES, ACCOUNTING AND DISTRIBUTIONS
--------------------------------------
2.01 CAPITAL ACCOUNTS
A Partnership capital account shall be established and maintained for
each Partner in accordance with Treasury Regulations ss.
1.704-1(b)(2)(iv). The capital account of each Partner shall be credited
with the amount of cash and the asset value of any property, whether
solely or jointly owned, contributed to the Partnership by such Partner
and with any income and gain allocated to such Partner pursuant to this
Agreement, and be debited with the amount of cash and the asset value of
any property, whether solely or jointly owned, distributed to such
Partner by the Partnership and with any deductions and losses allocated
to such Partner pursuant to this Agreement.
2.02 CAPITAL CONTRIBUTIONS
(a)Each Partner shall be responsible for furnishing all capital required
by the Partnership to meet its obligations under the Ancillary
Agreements, as well as any additional Partnership capital requirements
approved by the Management Committee in proportion to its ownership
interest as set forth in Section 1.04(a) hereof.
(b)The initial total capitalization of the Partnership shall be One
Thousand Dollars ($1,000), which amount shall be fully paid in at the
time of formation.
(c)The Management Committee (as defined in Article 3) may determine from
time to time that additional capital is required in the interests of
the Partnership and that the capital of the Partnership should be
increased. If so, such Committee shall determine the amounts and
timing of additional Partnership capital contributions.
(d)No interest shall be paid by the Partnership on any capital
contribution to the Partnership. Neither Partner shall have the right
to receive or request the return of its capital contributions during
the term of the Partnership.
-3-
<PAGE> 4
2.03 BORROWINGS
The amount, form, and cost of Partnership borrowings, if any, and the
sharing of such costs between the Partners shall be agreed to by the
Management Committee before such borrowings are undertaken.
2.04 PATENTS
(a)As agreed by the Management Committee, each Partner and their
affiliates, I.E. any entity controlled by, in control of, or common
control with, a Partner (a "Partner Affiliate") shall grant to the
Partnership for as long as the Facilities continue to operate, without
charge, the nonexclusive and nonassignable license to use any patent
or technology owned by such Partner or Partner Affiliate reasonably
necessary for operation of the Facilities for use in making chlorine
and caustic soda by or on behalf of the Partnership. The value of any
licenses granted by a Partner (or a related Partner Affiliate) to the
Partnership shall not be credited to the capital account of the
contributing Partner.
(b)As agreed by the Management Committee, any patent or technology
license reasonably necessary for the operation of the Facilities for
use in making chlorine and caustic soda by or on behalf of the
Partnership, a license for which is held by, or is freely acquirable
by, either Partner (or a related Partner Affiliate) from a third party
shall be sublicensed to the Partnership on a nonexclusive and
nonassignable basis for as long as the Facilities continue to operate;
provided the license with the third party permits such a sublicense.
The Partnership shall reimburse the contributing Partner for any
license fees paid or payable by such Partner (or the related Partner
Affiliate) and attributable to sublicensing and the exercise of
sublicensed rights by the Partnership. The value of any sublicenses by
the Partners (or a related Partner Affiliate) to the Partnership shall
not be credited to the capital account of the contributing Partner.
(c)Technology and patents owned by the Partnership may, if practical, be
marketed or licensed by the Partnership under the terms agreed to by
the Management Committee. All revenue or proceeds earned by the
Partnership in marketing or licensing such technology or patents shall
be revenue to the Partnership divided between the then current
Partners in proportion to their ownership interests as set forth in
Section 1.04(a) herein.
(d)The Partnership shall also grant each Partner, without charge, a
nonexclusive and nonassignable license to use solely for their
internal use any patent or technology owned by the Partnership. This
right to use can be extended by either Partner to any corporation,
partnership or venture forty percent (40%) or more of whose equity
interest is owned, or directly or indirectly controlled by such
Partner. Should a Partner cease to be a partner in the Partnership,
all rights under this subparagraph (d) shall be subject to a
commercially reasonable royalty determined by good faith negotiation
and failing agreement, all such rights will cease.
(e)The Partnership shall cause inventors to assign to the Partnership
their interest in inventions created on behalf of the Partnership, and
the Partnership shall have the right to file applications for patents
in all countries on all inventions owned by the Partnership.
"Inventions created on behalf of the Partnership" shall mean
inventions created (i) during the course of their employment, by
employees of the Partnership, or by employees of either Partner who
have been assigned by such Partner to work on Partnership matters on a
full-time basis, or (ii) by employees of either Partner, or other
persons, who create such invention in the course of performing
research services for the Partnership pursuant to a written agreement.
If the Partnership does not file an application on a certain
invention, a Partner who timely expressed a desire to file may do so
at its own expense and the Partnership will assist the Partner in
filing the application and shall assign the application to that
Partner. Any patent(s) issuing from such an application shall belong
to said Partner, with the Partnership having a nonexclusive,
royalty-free license thereunder to practice under the patent in its
own operations.
(f)Except as provided in paragraphs (c) and (d) of this Section, no
license or sublicense granted pursuant to this Article shall operate
to provide the licensee or sublicensee with any right to grant any
sublicense.
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2.05 DISTRIBUTIONS
(a)Distributions of Operating Income/Loss of the Partnership shall be
made to the Partners in proportion to their ownership interests in the
Partnership set forth in Section 1.04(a), adjusted as set forth in
Section 1.11(b), if applicable. Distributions of non-operating income,
losses and gains shall be made in accordance with the ownership
interests set forth in Section 1.04(a) herein, and shall not be
subject to adjustment as set forth in Section 1.11(b).
(b)The Management Committee shall determine generally on a quarterly
basis (i) the estimated cash flow of the Partnership, and (ii) the
amount required for reasonably foreseeable cash needs of the
Partnership. The Partnership shall thereafter distribute, subject to
any restrictions in agreements for borrowed money, the difference
between Cash Flow and the amount determined in clause (ii), to each
Partner in the manner set forth in Section 2.05(a) above. "Cash Flow"
shall be calculated as set forth in Exhibit A. Upon determining the
distribution amount, the Partnership will make distributions within
five (5) business days by ACH, or such other method as the Partners
may agree.
(c)Any proceeds arising from the sale of Partnership capital assets,
other than upon dissolution, which the Management Committee determines
the Partnership should distribute to the Partners, shall be
distributed to the Partners in proportion to their ownership interests
set forth in Section 1.04(a) hereof. A Partner's interest in the
Partnership shall not be considered a Partnership asset for purposes
of this provision.
(d)Any modification to the Olin Plant or Olin Plant Site, the title to
which is to vest with Olin as provided in the Engineering, Procurement
and Construction Agreement, shall be distributed in kind at completion
of construction to OSI at the full cost incurred by the Partnership to
construct the modification. OSI's capital account for the Partnership
shall be adjusted accordingly (typically by reduction). Such costs
shall not be included in any service fee or asset base computation
charged by Olin to the Partnership.
2.06 BANKING
The Partnership shall maintain such Partnership bank account or accounts
as shall be deemed necessary by the Management Committee.
2.07 TAXES
It is intended and agreed that this Partnership shall constitute a
"partnership" as defined in Section 761 of the Internal Revenue Code for
Federal income tax purposes, and shall be subject to all the provisions
of Subchapter K of Chapter 1 of Subtitle A of the Code. The Management
Committee shall make timely elections with respect to tax matters
including, but not limited to, the following elections unless otherwise
agreed by the Management Committee: (1) to compute the Partnership's
taxable income under the accrual method of accounting; (2) to expense
research and development currently; and (3) to use the most accelerated
method of depreciation available.
2.08 TAX RETURNS
The Partnership shall prepare, or cause to be prepared, all necessary
Federal, State, and Local income and other tax or information returns of
the Partnership, together with Schedule K-1 to Internal Revenue Service
Form 1065 (or similar successor schedule or form), showing any amount and
items of Partnership income, gain, loss, deduction, or credit allocated
to such Partner, copies of all of which shall be provided to each
Partner. Such returns shall be prepared and filed by the due date
required by the respective taxing authority. The returns shall be
approved by the Management Committee prior to the filing thereof with the
Internal Revenue Service and with the appropriate State and local taxing
authorities. OSI will be designated the Tax Matters Partner for the
purpose of the Partnership and shall be responsible for preparing and
filing the necessary tax returns for the Partnership.
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2.09 ALLOCATIONS
Not less than annually, each Partner's share of Partnership income, gain,
loss, deduction, or credit shall be allocated to the Partners in
proportion to their ownership interest as set forth in Section 1.04(a),
provided that allocations of Operating Income/Loss, and related items of
credit, deduction or expense shall be adjusted as provided in Section
1.11(b), if applicable.
2.10 ACCOUNTING
The Partnership shall cause to be maintained full and accurate
Partnership books of account on the accrual basis of accounting in
accordance with generally accepted accounting principles applied on a
basis consistent with prior periods and, except as approved by the
Management Committee, the Partnership shall use Olin's standard plant
accounting procedures, as such standard plant accounting procedures are
modified by Olin from time to time. Olin shall notify the Partners of any
material changes in such standard plant accounting procedures at least
sixty (60) days prior to implementing such change, and in the event that
such change will have a material effect on a Partner's consolidated
financial statements, then such Partner may notify Olin within thirty
(30) days of Olin's notice of the change, that such change is not
acceptable to the Partner, in which case the change will not be
implemented. Each Partner and its respective independent public
accountant shall have access to, and the right to inspect, audit and
copy, such books and all other Partnership records. Unless otherwise
agreed by the Management Committee, Ernst & Young shall serve as the
Partnership's certified public accountant and shall certify the annual
financial statements of the Partnership.
2.11 ANNUAL ACCOUNTING
The period commencing January 1 through December 31 of each calendar year
shall be deemed the fiscal year of the Partnership for all purposes.
Promptly after the end of each fiscal year, a full, true, and accurate
account shall be made in writing of all of the assets and liabilities of
the Partnership, and of all its receipts, disbursements, costs, losses,
expenses, and gross and net income. The Management Committee shall
establish closing dates for accounting, billing, and related purposes
that closely correspond to the Partnership fiscal year.
2.12 PRODUCT SALES
The output of the Facilities shall be inventoried, sold and/or disposed
of as provided in the Ancillary Agreements.
ARTICLE 3
MANAGEMENT COMMITTEE
--------------------
3.01 MANAGEMENT COMMITTEE
The Partnership shall be managed through a Management Committee, the
members of which shall be appointed by the Partners in the manner
hereinafter set forth. When proceeding in the manner hereinafter set
forth, the acts or decisions of the Management Committee shall be
considered fully authorized joint acts or decisions of the Partners.
3.02 MEMBERSHIP OF COMMITTEE
The number of members of the Management Committee shall be set by the
Partners provided that the number of voting members shall be even and
shall not be less than two (2) nor more than four (4). Each Partner shall
have the right to appoint one-half (1/2) of the voting members of the
Management Committee. Initially, there shall only be two (2) voting
members of the Committee, with each Partner having the right to appoint
one (1) voting member. Each Partner may appoint up to two (2) non-voting
members of the Management Committee. The non-voting members shall be
appointed as appropriate to support the Committee through technical and
management skills. Promptly after formation of the Partnership, each
Partner shall designate its appointments to the Management Committee and
notify the other Partner thereof in writing.
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3.03 DECISIONS OF MANAGEMENT COMMITTEE
Decisions of the Management Committee shall be made by unanimous vote at
a meeting or by unanimous written approval of a proposed resolution. In
the event the Management Committee is unable to reach agreement regarding
any Decision of Importance set forth in Section 4.05 hereof, then any
voting member of the Management Committee may elect to have such dispute
referred upward within the respective business organizations of Olin and
Geon in a logical step-by-step manner so that, if not earlier resolved,
such dispute reaches the level of corporate President within 120 days
after initiation of such dispute resolution process.
3.04 APPOINTMENT AND REMOVAL OF MEMBERS
(a)Any member of the Management Committee may be removed at any time but
only by the Partner that appointed such member.
(b)In the case of any vacancy created by death, resignation or removal of
any member, the Partner that appointed such member shall endeavor to
appoint a new member within ten (10) days of the occurrence of such
vacancy. During the period that such vacancy exists, no action shall
be taken by the Management Committee; provided however, that if no
appointment is made within such ten (10) day period, the Chairman or
the Venture Manager shall give notice to the appointing Partner, and
if the vacancy is not filled within five (5) days after such notice,
the Management Committee is authorized thereafter to act, regardless
of whether the vacancy continues.
(c)Appointments and removals made pursuant to this Section and Section
3.02 shall be evidenced by an instrument in writing signed by the
appointing Partner and delivered to the other Partner.
(d)The Venture Manager shall not serve as a Management Committee voting
member during his tenure as Venture Manager.
3.05 CHAIRMAN
A Chairman, and in his absence a substitute voting member appointed by
such Chairman, shall preside over meetings of the Management Committee.
The Chairman shall be one of the voting members of the Committee. From
the effective date of this Agreement through the end of the calendar year
following twelve (12) months after Full Start-Up of the Facilities (as
defined in the Operating Agreement), the Chairman shall be appointed by
1997 CVI. Thereafter, the Partners shall alternate appointing the
Chairman every two (2) years.
3.06 SUBSTITUTE VOTING MEMBER
A voting member may appoint another member to act as a substitute voting
member for the Partner at any meeting of the Management Committee
provided there is tendered at or before such meeting a written proxy with
such authority signed by the voting member.
3.07 SECRETARY
The Chairman shall appoint a secretary who shall keep and transmit to the
Venture Manager and all members of the Management Committee minutes of
every Management Committee meeting and all resolutions adopted by the
Management Committee.
3.08 MINUTES
The decisions and resolutions of each meeting shall be reported in
minutes, which shall state the date and place of the meeting, the members
present and the Partners they represent, the resolutions put to a vote,
and the result of the voting. The minutes shall be submitted to the
members for approval promptly after the meeting. Once approved, they
shall be signed by each of the voting members and entered in a minute
book kept at the location of the current Venture Manager, who shall
provide copies to each of the voting members of the Management Committee.
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3.09 PLACE AND TIME OF MEETINGS
Meetings of the Management Committee shall be held at the Facilities or
at such other place as may, from time to time, be fixed by resolution of
the Management Committee. Regular meetings of the Management Committee
may be held at such times as shall be determined by resolution of the
Management Committee and no notice of such meetings need be given. Any
business that properly may be transacted by the Management Committee may
be transacted at any regular meeting thereof.
3.10 SPECIAL MEETINGS
Special meetings of the Management Committee may be called at any time by
any voting member of the Committee or by the Venture Manager. Notice of a
special meeting stating the time, place, and purpose or proposed purpose
thereof shall be telegraphed or telecopied to each member at his usual
place of business, or be received by mail or personally or by telephone,
not later than three (3) days before the day of such meeting. Any
Management Committee member waives notice of a special meeting by his
presence at such meeting, and if all voting members are present, such
meeting shall be valid despite inadequate notice. Unless otherwise agreed
by all of the voting members present at a special meeting, the business
to be transacted at any special meeting shall be limited to that stated
in the notice.
3.11 QUORUM; MANNER OF MEETING
At every meeting of the Management Committee, the presence of each
Partner's voting member(s) or a duly designated substitute shall be
necessary to constitute a quorum and to transact Partnership business.
Absent exigent circumstances, the Management Committee members shall
attend regular or special meetings in person, however, participation by
telephone or video conferencing shall also be permitted.
3.12 RESOLUTIONS
In lieu of convening a meeting, a voting member may request in writing
that the other voting member(s) approve in writing a proposed resolution.
In such event, the voting member requesting approval of the resolution
shall mail to the other voting member(s) two (2) signed copies of the
resolution and an explanation of the reasons for adoption thereof. If the
other voting member(s) agree with the resolution, they shall sign and
forward executed copies to the other voting member(s) for signature. Once
fully executed (which may be by counterparts), the executed resolutions
shall be furnished to the Secretary of the Management Committee for
filing in the minute book, with a photocopy to the Venture Manager. If
such execution is not made within thirty (30) days of the mailing of the
proposed resolution, then it shall be deemed to have been rejected.
3.13 COMPENSATION
Members of the Management Committee shall not be entitled to compensation
from the Partnership for their services or reimbursement for their
expenses. Notwithstanding the above, the Venture Manager's compensation
and expenses related to the Partnership shall be a Partnership expense.
ARTICLE 4
OPERATOR AND VENTURE MANAGER
----------------------------
4.01 OPERATOR
Olin is designated the Operator of the Facilities and shall have the
rights and obligations set forth in the Operating Agreement.
4.02 VENTURE MANAGER
(a)The Management Committee shall appoint a Venture Manager who, unless
otherwise agreed, will be an employee of one of the Partners. The
Partner which employs the Venture Manager shall have authority over
the transfer, retention, and career development of the Venture
Manager; provided, however, that said Partner shall use reasonable
efforts to retain any such employee appointed as Venture Manager for a
minimum of two (2) years. The Partnership shall reimburse the Partner
providing the Venture Manager for the salary, benefits, incentive
compensation and other expenses incurred in making the Venture
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Manager available, all of which shall be agreed upon by the Management
Committee prior to the Venture Manager's appointment. The initial
Venture Manager will be an employee of OSI or Olin.
(b)The Venture Manager shall be appointed for a term co-terminus with the
term of the Chairman of the Management Committee provided in Section
3.05 (I.E. the initial term shall run through the end of the calendar
year following twelve months after Full Start-Up of the Facilities (as
defined in the Operating Agreement), and thereafter for two-year
terms). At the expiration of each term, the Management Committee shall
either re-appoint the then Venture Manager for another term or appoint
a new Venture Manager. In the event that the Management Committee
cannot agree as to the appointment of the Venture Manager, the Partner
which is not appointing the Chairman of the Management Committee
pursuant to Section 3.05 hereof for the next term shall be entitled to
select one of its employees as the new Venture Manager for the next
term, such appointment to be reasonably acceptable to the
non-selecting Partner.
4.03 RESPONSIBILITY OF THE VENTURE MANAGER
The Venture Manager shall keep the Management Committee informed of the
business of the Partnership on a regular basis.
4.04 AUTHORITY OF VENTURE MANAGER
The day-to-day operating management authority for the Partnership and
the Facilities, including the following, are hereby delegated to the
Venture Manager:
(a) Managing the Partnership's relationship with Olin under the
Engineering, Procurement and Construction Agreement.
(b) Managing the Partnership's relationship with the Operator and
coordinating with the Operator with respect to supervision of all
of the manufacturing operations of the Facilities.
(c) Utilizing and coordinating with personnel of the Operator to handle
all environmental, safety and health, tax, labor, legal, financial,
and general administrative matters pertaining to the Partnership.
(d) Maintaining books and records for the Partnership.
(e) Preparing and proposing to the Management Committee annual
operating and capital budgets.
(f) Commencing the defense of any claims or lawsuits to avoid defaults
or penalties for the Partnership provided the Management Committee
is notified of the action taken promptly after the commencement of
such defense. Thereafter, the Management Committee shall have
authority thereover.
(g) Coordinating the marketing, sale and distribution of products of
the Facilities.
(h) Managing the provision of services to the Partnership pursuant to
the Ancillary Agreements.
4.05 LIMITATIONS ON AUTHORITY OF VENTURE MANAGER
Unless otherwise agreed to by the Management Committee, the Venture
Manager is not delegated the following decisions ("Decisions of
Importance"), which must be submitted to the Management Committee for
approval prior to proceeding:
(a) Approving annual operating and capital expenditure budgets,
provided, however, that the existing budgets shall be extended if
the new budgets have not yet been approved.
(b) Authorizing expenditures in excess of the approved total annual
operating and capital expenditure budgets.
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(c) Authorizing any expenditures on individual capital expenditure
projects exceeding $250,000.
(d) Entering into the following contracts:
(1) purchase contracts for materials or equipment where the total
commitment is estimated to be in excess of $250,000 in each
case;
(2) service contracts (including consultant contracts) if the total
commitment is estimated to be in excess of $250,000 in each
case;
(3) employment contracts and/or employee benefits, if the total
commitment is estimated to be in excess of $250,000 in each
case; and
(4) leases of real property or equipment where the commitment
exceeds $250,000 over the term of the lease in each case, or
the lease extends beyond three (3) years.
Provided that the Venture Manager may take such actions and
make expenditures of an emergency nature, or while the
Management Committee is unable to take action pursuant to
Section 3.04, if required in the Venture Manager's judgment to
protect life or property or maintain plant operation provided
that he notifies the Management Committee promptly of the
actions taken and such expenditures made.
(e) Authorizing expenditures for licensing or purchasing and/or sale of
technology and patents.
(f) Revising specifications for various kinds, types, grades, and
qualities of products to be produced by the Partnership.
(g) Investing undistributed funds not immediately required for
operations.
(h) Determining the scope of research and development projects and
approval of expenditures related thereto.
(i) Settling any claim or lawsuit having a settlement value estimated
to be in excess of $25,000. The Management Committee shall be
promptly notified of all settlements reached and any settlement not
approved in advance by the Management Committee shall have been
approved by responsible legal counsel as to form and substance.
(j) Handling, dealing with, or establishing any matter within the
authority of the Management Committee.
(k) Selling, transferring, leasing, or otherwise disposing of
Partnership assets in any amount to either Partner or an affiliate
of either Partner or in any amount exceeding $50,000 per
transaction to any other person.
(l) Abandoning the manufacture of any Product produced by the
Partnership or manufacturing or selling new products or product
lines.
(m) Opening and closing bank accounts and designating the persons who
have authority to make withdrawals.
(n) Issuing any press releases on behalf of the Partnership, unless
required by an emergency event and with prompt notice thereof to
the Management Committee.
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(o) Filing Partnership tax returns.
(p) Any other Decisions of Importance that the Management Committee
may, from time to time, define at any general or special meeting or
by resolution.
(q) Waiving or changing any quality specifications for products
produced by the Partnership or the operating rate of the
Facilities, contained in this Agreement or other agreements between
OSI and/or Olin, 1997 CVI and/or Geon signed contemporaneously
herewith or otherwise adopted by the Management Committee.
(r) Commencing any litigation or administrative proceedings.
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4.06 INDEMNITY
Notwithstanding anything to the contrary herein or in the Operating
Agreement, the indemnity provisions of the Operating Agreement shall
apply to Article 4 hereof.
ARTICLE 5
ASSIGNMENT OF PARTNERSHIP INTEREST
----------------------------------
5.01 ASSIGNMENT
No Partner shall sell, assign, pledge, hypothecate, or in any manner
transfer or encumber all or any part of its interest in the
Partnership, and any attempted disposition in contravention of this
Article 5 shall be null and void AB INITIO, except:
(a) at any time upon written notice to the other Partner a Partner's
interest can be assigned, sold, or otherwise transferred to a
Partner Affiliate, provided that such assignee is not, in the case
of an assignment by 1997 CVI, in competition with Olin's Chlor
Alkali business and, in the case of assignment by OSI, in
competition with Geon's PVC, VCM or EDC business, and so long as
such assignee assumes in writing all of the rights and obligations
of such Partner and so long as the assignor guarantees performance
by the assignee; and
(b) if a Partner is compelled to divest its interest by order of a
governmental body, or at any time after the date of Full Start-Up
of the Facilities and subject to the right of first refusal set
forth in Section 5.02, either Partner may sell, assign or otherwise
transfer all or part of its interest in the Partnership to any
third party, provided that such assignee is not, in the case of an
assignment by 1997 CVI, in competition with Olin's Chlor Alkali
business and, in the case of assignment by OSI, in competition with
Geon's PVC, VCM or EDC business, and provided that at the time of
such assignment the assignee (i) has a net worth which is not less
than that of the Assignor Entity (as defined below) on the date
hereof, (ii) has a Moody's Bond Rating of not less than that of the
Assignor Entity on the date hereof, and (iii) working capital and
debt/equity ratio at least equal to that of the Assignor Entity on
the date hereof; and provided further that the assignee assumes all
of the rights and obligations of the assigning Partner under this
Agreement. For purposes of the preceding sentence, "Assignor
Entity" shall mean Geon in the case of an assignment by 1997 CVI,
and shall mean Olin in the case of an assignment by OSI.
(c) OSI shall be entitled to transfer its interest in the Partnership
to any entity which purchases the Olin Plant provided that (if such
purchase is not in connection with the acquisition of a materially
larger portion of Olin assets) 1997 CVI shall have a right of first
refusal to purchase the Olin Plant and the Olin interest in the
Partnership, following the right of first refusal procedure set
forth in Section 5.02 below.
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5.02 RIGHT OF FIRST REFUSAL
(a) If one Partner (hereinafter the "Assigning Partner") receives a
bona fide offer from a third party to purchase the Assigning
Partner's interest in the Partnership at a specified price and
under specified terms and conditions that the Assigning Partner is
willing to accept, then the Assigning Partner shall promptly give
notice to the other Partner of the offer. Such notice shall be sent
by the Assigning Partner for each and every BONA FIDE offer
received, including any changes in the price or terms and
conditions of previously received bona fide offers. The other
Partner shall have the right of first refusal and privilege of
purchasing the Assigning Partner's interest in the Partnership at
the price offered by notifying the Assigning Partner in writing as
soon as possible but in all events within sixty (60) days of the
Assigning Partner's notice of the offer that it will purchase the
Assigning Partner's interest for the amount specified in such offer
and upon all the other terms and conditions contained in such offer
provided that to the extent that the third party offer contains a
term(s) which is reasonably incapable of performance by the other
Partner, then the Partners will thereafter negotiate in good faith
to substitute a payment obligation therefore reasonably reflecting
the value to the Assigning Partner of said term(s). If the Partners
are unable to arrive at such valuation within thirty (30) days
after notice of the other Partner's exercise of its right of first
refusal, then the Assigning Partner may proceed to sell to the
third party without further obligation to the other partner under
this Section.
(b) This procedure shall also apply with respect to a proposed sale of
the Olin Plant and the OSI interest in the Partnership, as provided
in Section 5.01(c) above. If such proposed sale is for not just the
Olin Plant but also Olin's interest in all or a larger portion of
the Olin Plant Site, then the right of first refusal (and
obligation, if the right of first refusal is exercised) shall apply
to the total Olin Plant Site and OSI interest being sold, without
exclusion.
5.03 RIGHT OF ASSIGNMENT WITH SHOT-GUN SALE
Sections 5.01 and 5.02 shall not apply to an assignment by OSI or 1997
CVI (the "Selling Partner") of its interest in the Partnership as part
of a sale involving (i) in the case of OSI, more than the Olin Plant
Site, or (ii) in the case of 1997 CVI, more than Geon's LaPorte Texas
facility; provided however, that in the event of such an assignment,
the Selling Partner shall notify the other partner (the "Remaining
Partner") of such assignment and the Remaining Partner shall have a
period of ninety (90) days after such notice to elect, in its
discretion, to notify the assignee of the Selling Partner's interest
that the Remaining Partner is triggering a Shot-Gun Sale, as set forth
in Article 6 below.
5.04 ANCILLARY AGREEMENTS; SUPPORT SERVICES
(a) In the event a Partner's interest is assigned or is transferred in
a Shot-Gun Sale, in accordance herewith, OSI will cause Olin and
1997 CVI will cause Geon to continue to honor any contractual
commitments previously entered into by it with the Partnership to
the extent required hereunder, or as provided in any of the
Ancillary Agreements. If support services and/or raw materials are
reasonably necessary from the Olin Plant to continue operation of
the Facilities after assignment or Shot-Gun Sale, and provided such
services and/or raw materials were previously supplied to the
Partnership, the Partners shall negotiate in good faith a contract
to supply such support services to the Partnership or the
purchasing Partner, as the case may be, after such assignment or
Shot-Gun Sale to the extent previously supplied and as allowed by
law.
(b) If Olin shuts down its production facilities at its Olin Plant,
Olin shall not be required thereafter to supply support services to
the Partnership but will offer the Partnership the opportunity to
purchase, upon terms to be mutually agreed, the fixed assets and
salt required by the Partnership to continue to operate the
Facilities at its then current capacity.
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5.05 SUBSEQUENT ASSIGNMENTS, SALES OR TRANSFERS
In the event of any assignment, sale, or transfer under this Article 5,
the assignee shall not subsequently sell, assign, transfer, or encumber
its interest in the Partnership, other than as permitted in this
Article 5.
ARTICLE 6
SHOT GUN SALE PROCEDURE
-----------------------
(a) A Partner triggering a Shot Gun Sale (the "Triggering Partner"),
under Section 5.03, shall give a written notice to the other
Partner (the "Receiving Partner") which notice states that it is
triggering the Shot Gun Sale, and specifying the price, timing, and
terms and conditions on which the Triggering Partner is offering to
purchase the Receiving Partner's interest in the Partnership (the
"Shot-Gun Terms"). Such offer cannot contain terms and conditions
which are unique to and impossible of performance by anyone other
than the Triggering Partner.
(b) Within sixty (60) days thereafter, the Receiving Partner shall
notify the Triggering Partner that it elects either to (i) purchase
the Triggering Partner's interest or (ii) sell the Receiving
Partner's interest, such purchase or sale to be on the Shot-Gun
Terms. In the event the Receiving Partner does not notify the
Triggering Partner within such time period, or its notice specifies
a price, timing or terms and conditions different from the Shot-Gun
Terms, the Triggering Partner shall have the option to (i) purchase
the Receiving Partner's interest on the Shot-Gun Terms, (ii) sell
its interest on the different terms set forth by the Receiving
Partner, if any, or (iii) terminate the Shot-Gun Sale procedure.
(c) Such purchase and sale shall close no later than thirty (30) days
after the notice electing to purchase is given.
DISSOLUTION AND WINDING UP
--------------------------
7.01 DISSOLUTION OF THE PARTNERSHIP
The Partnership shall be dissolved on December 31, 2094, or prior
thereto upon the occurrence of any of the events specified in Section
1531 of the Act, including without limitation:
(i) There being only one remaining Partner.
(ii)The written consent of all of the Partners.
(iii) The dissolution, liquidation, Bankruptcy (as defined below)
or withdrawal of a Partner, unless there are two or more
remaining Partners and the Partners elect to continue the
Partnership within ninety (90) days following the occurrence of
such event.
(iv)The Bankruptcy of the Partnership.
(v) Any event which shall make it unlawful for the existence or the
business of the Partnership to be continued.
"Bankruptcy" shall mean a voluntary or involuntary proceeding or
petition commenced or filed by or against a party under any bankruptcy,
insolvency or similar law or seeking the dissolution or reorganization
of such party, or the appointment of a receiver, trustee, custodian, or
liquidation for such party, or a substantial part of its property,
assets or business, or any writ, order, judgment, warrant of
attachment, execution or similar process is issued or levied against a
substantial part of the property, assets or business of such party and
such involuntary proceeding or petition shall not be dismissed, or such
writ, order, judgment, warrant of attachment, execution or similar
process shall not be released, vacated, or fully bonded, within sixty
(60) days after commencement, filing or levy as the case may be, or if
all or any part of the Partnership interest of a Partner shall be the
subject of any levy or attachment, and if such levy or attachment shall
not be discharged within sixty (60) days thereafter.
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<PAGE> 15
7.02 NEGATIVE CAPITAL ACCOUNTS
Upon dissolution and liquidation of the Partnership, each Partner
having a negative capital account shall restore the balance of such
capital account to zero by making a capital contribution in cash in an
amount equal to the deficit of such capital account.
7.03 DISTRIBUTION UPON LIQUIDATION
Upon dissolution of the Partnership, the assets of the Partnership
shall be liquidated in an orderly fashion and in accordance with the
Act or applicable successor legislation. All assets to which the
Partnership holds title shall be Partnership property and the Partners
waive any rights of partition with respect thereto. The proceeds from
such liquidation shall be distributed to the Partners in accordance
with the positive capital account balances of the Partners, after
taking into account all capital account adjustments required to be made
by the Partnership immediately prior to the liquidating distribution.
ARTICLE 8
LIMITATION ON PARTNERS' POWERS
------------------------------
8.01 LIMITATION ON PARTNER'S POWERS
No Partner shall, without the consent of the other Partner, take any
action that purports to be the action of, or to be binding upon, the
Partnership or the other Partner, it being the intent of this Agreement
that all such action be taken by the Management Committee or by joint
action of the Partners. Without limiting the generality of the
foregoing, subject to the express rights and obligations as set forth
in the Operating Agreement and the authority of the Venture Manager as
specified herein, no Partner shall:
(a) Borrow money in the Partnership name for any purpose or utilize
collateral owned by the Partnership as security for loans;
(b) Borrow from the Partnership or lend Partnership funds to any third
party;
(c) Assign, transfer, pledge, compromise or release any of the claims
of or debts due the Partnership except upon payment in full, or
arbitrate, or consent to the arbitration of, any of the disputes or
controversies of the Partnership;
(d) Make, execute, or deliver on behalf of the Partnership any
assignment, bond, confession of judgment, chattel mortgage,
security interest, deed, guarantee, indemnity bond, or surety bond
to any third party;
(e) Sell, exchange, transfer, lease, or mortgage any Partnership
property or any interest therein or enter into any contract for any
such purpose; or
(f) Obligate the Partnership as a surety, guarantor, or accommodation
party to any obligation.
ARTICLE 9
GENERAL
-------
9.01 SECRECY AGREEMENT
(a) 1997 CVI and OSI will make available to each other, to the extent
each is able to do so, information and data necessary to operate
and maintain the Facilities. All information considered proprietary
will be disclosed or confirmed in writing and identified as
confidential.
(b) The recipient will not disclose to third parties nor use for any
purpose other than to operate or maintain the Facilities the
information and data disclosed in writing and identified as
confidential pursuant to paragraph (a), at any time that the
recipient is a Partner of the Partnership and for a period of ten
(10) years thereafter.
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<PAGE> 16
(c) The obligations of paragraph (b) do not apply to any information or
data that
(1)is, at the time of disclosure, available to the public,
(2)becomes known to the public through no act or failure of the
recipient,
(3)the recipient can demonstrate, by written record, was within
its possession before receipt from the other party,
(4)becomes available to the recipient on a non-confidential basis
from a source other than the other party, without any breach
of any obligation of confidentiality,
(5)is independently developed by the recipient without reference
to the information disclosed by the other party, or
(6)the information is the subject of a subpoena or demand for
production of documents in connection with any suit,
arbitration proceeding, administrative procedure or before any
governmental agency. In such event, the recipient shall
promptly notify the disclosing party and shall cooperate with
the disclosing party in its attempts to protect the
confidentiality of its information such as by seeking a
protective order from a court of competent jurisdiction.
(d) The information and data subject to the obligations of paragraph
(a) can be disclosed to Geon, Olin and/or a third party selected
by the Partnership, provided that the receiving party agrees to
assume the same obligations in a writing containing terms no less
onerous than those set forth in this Section 9.01.
(e) As to information and data disclosed under paragraph (a) which
was obtained by either 1997 CVI, OSI, or the Partnership from
third parties under secrecy, OSI and 1997 CVI agree, when it is a
recipient, to maintain such information confidential in the same
manner and to the same extent required in agreements between the
disclosing party and the third party. If necessary, 1997 CVI and
OSI will sign secrecy agreements with the third parties
equivalent in scope with the agreement already executed by the
disclosing party.
9.02 RELATIONSHIP
(a) Without the prior written consent of the other Partner, neither
Partner shall, for and on behalf of the other, or for the account
of the Partnership directly or indirectly do any act inconsistent
with the provisions of this Agreement. In the event any Partner is
held liable either prior to or after termination of this Agreement,
for a claim of a third person by reason of acts of the Partnership,
then any payment to such third person shall be treated as an
expenditure of the Partnership and any Partner making such payment
shall be entitled to be indemnified by the Partnership to the
extent of the Partnership's insurance coverage. To the extent that
the Partnership's insurance coverage fails to indemnify fully the
paying Partner, such Partner shall be entitled to contribution from
the other Partner accordingly.
(b) Each Partner shall look solely to the assets of the Partnership for
the return of its respective capital, and if the assets remaining
after payment or discharge, or provision for payment or discharge,
of its debts or liabilities are insufficient to return the capital
to the Partners, no Partner shall have any recourse against the
separate assets of the other Partner for that purpose.
9.03 MODIFICATION; ENTIRE AGREEMENT
(a) This Agreement and the other agreements between OSI and/or Olin,
the Partnership, 1997 CVI and/or Geon signed contemporaneously
herewith, represent the entire agreement of the Partners with
respect
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<PAGE> 17
to the matters discussed herein. There shall be no modification,
amendment, change or alteration of this or such other agreements
unless reflected in a written instrument executed by both Partners.
(b) The Partners anticipate pursuing third party financing and agree
that as a part of such process, each will consider in good faith
any amendments or modifications to this Agreement or the Ancillary
Agreements required by the financing party in order to proceed with
the financing, and will implement any mutually acceptable
amendments or modifications, provided that neither Partner shall be
obligated to agree to any such amendment or modification.
9.04 WAIVER
No Partner shall be construed to have waived any of its respective
rights or interests in this Agreement by a failure, in any one
instance, to have asserted, or made claim with respect to such right at
the time such Partner was entitled to assert same.
9.05 BREACH
(a) If one Partner claims that its rights or interest under this
Agreement or any of the Ancillary Agreements, have been materially
adversely affected due to the breach of the other Partner, the
Partner claiming such breach shall give the other Partner notice
thereof in writing.
(b) If the alleged breaching Partner disputes in good faith the
existence of such breach, it will notify the other Partner of the
basis for its disputing the existence of the breach and thereafter
the Partners will cause the dispute to be referred upward in the
respective business organizations of Olin and Geon in a logical
step-by-step manner, so that if not earlier resolved, such dispute
reaches the level of corporate President within 120 days of
initiation of the dispute resolution process.
(c) If the alleged breaching Partner does not dispute the existence of
the breach, it shall have ten (10) days within which to cure such
breach, or if such breach is not readily curable within ten days,
to commence to cure such breach as promptly as possible and to set
forth in writing to the other Partner the basis and timing on which
such breach shall be cured, in all events to be cured within sixty
(60) days.
(d) In the event that the breach is not fully resolved or cured within
the applicable period provided in (b) and (c) above, then the other
Partner shall be entitled, in its sole discretion, to take
unilateral action to cure such breach on behalf of the other
Partner, with any funds advanced by the non-breaching Partner in
order to cure the breach, or damages suffered by the non-breaching
Partner by the breach to be secured by a lien on such breaching
Partner's interest in the Partnership, including the rights to
distributions hereunder, until such time as the non-breaching
Partner is fully compensated for such advances or damages. The
breaching Partner shall take all actions and execute all agreements
and instruments necessary at the time to cause such lien to be
fully perfected and a first priority lien.
(e) Without limiting the foregoing, upon expiration of the applicable
period provided in (b) and (c) above, either Partner may thereafter
submit the matter to binding arbitration as to whether a breach
occurred, and the matter of damages (if any). The arbitration shall
be conducted in accordance with the rules of the American
Arbitration Association (the "AAA"), including the appointment of a
single arbitrator from a list provided by the AAA to each party.
The loser shall pay the costs and expenses of arbitration, but not
the winner's attorney fees, costs and expenses. The arbitrator's
decision shall be final and binding upon the parties, enforceable
in accordance with its terms by any court of competent
jurisdiction.
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<PAGE> 18
9.06 NOTICES
Unless otherwise provided for herein, all notices or other
communications authorized or required between the Partners hereto by
any provision of this Agreement shall be in writing and delivered by
hand or transmitted by registered or certified mail, return receipt
requested, postage or other charges prepaid, and in all cases addressed
to the voting members on the Management Committee, at the address set
forth below or such other address as may be designated by the parties
hereto.
IF TO OSI, C/O OLIN CORPORATION, AT:
Chlor Alkali Products Division
650 25th Street, N.W.
Suite 300
Cleveland, Tennessee 37311
WITH A COPY TO: 501 Merritt 7
P.O. Box 4500
Norwalk, CT 06856-4500
Attn: Corporate Secretary
IF TO 1997 CVI, C/O THE GEON COMPANY, AT:
Two Kingwood Place
700 Rockmead Drive, Suite 250
Houston, Texas 77339-2111
WITH A COPY TO: One Geon Center
Avon Lake, Ohio 44012
Attn: Corporate Secretary
The date of delivery shall be deemed to be the date the notice is
given.
In the event either Partner is served with notice of a lawsuit or a
subpoena concerning the Partnership, such Partner shall promptly notify
the other Partner thereof.
9.07 CAPTIONS
Titles or captions of articles and sections contained in this Agreement
are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend, or describe the scope of this Agreement
or the intent of any provision hereof.
9.08 GOVERNING LAW
This Agreement shall be governed by and construed according to the laws
of the State of Delaware.
9.09 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and all of which shall constitute
one and the same instrument.
9.10 SEVERABILITY
If any of the terms and conditions of this Agreement are held to be
invalid or unenforceable by any court or agency of competent
jurisdiction, such holding shall not invalidate other terms and
conditions of the Agreement. Instead, this Agreement shall be construed
as if it did not contain the terms or conditions held to be invalid,
and the remainder of the Agreement shall remain in full force and
effect.
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<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed by their duly authorized representatives on the day and
year first above written.
1997 CHLORALKALI VENTURE INC.
By:\S\EDWARD C. MARTINELLI
-----------------------
Edward C. Martinelli
President
OLIN SUNBELT, INC.
By:\S\LEON B. ANZIANO
------------------
Leon B. Anziano
President
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<PAGE> 1
EXHIBIT 10(B)
CHLORINE SALES AGREEMENT
THIS AGREEMENT is entered into as of this 23rd day of August, 1996 by and
between SUNBELT CHLOR ALKALI PARTNERSHIP, having offices at P.O. Box 28,
McIntosh, Alabama 36553, a general partnership organized under the laws of the
State of Delaware (hereinafter "Seller") and THE GEON COMPANY, having offices at
Two Kingwood Place, 700 Rockmead Drive, Houston, Texas 77339-2111, a Delaware
corporation (hereinafter "Buyer").
WHEREAS Seller agrees to sell to Buyer and Buyer agrees to purchase from Seller,
the product described herein "Product" upon the terms and conditions herein set
forth.
ARTICLE 1.
PRODUCT
-------
1.01 Liquid Chlorine meeting the specifications attached hereto as Exhibit
"Chlorine Specification."
ARTICLE 2.
QUANTITY
--------
2.01 Buyer will purchase and receive, and Seller will deliver one hundred
(100%) percent of: (i) the Product produced by Seller at its chlorine
manufacturing (membrane cell) process facility at McIntosh, Alabama (the
"Plant") during each year, estimated to be two hundred fifty thousand
(250,000) tons annually; plus (ii) any expanded capacity for which Buyer,
or its affiliate, 1997 Chloralkali Venture Inc., has agreed to pay in
whole or in part to achieve such expanded capacity under Section 1.11(b)
of the Seller's Partnership Agreement dated the date hereof (the "Plant
Output"). Seller will deliver all Product purchased hereunder to any
Buyer owned and/or operated facility, for conversion into VCM and/or at
Buyer's sole discretion, to other facilities for conversion into one or
more raw materials to be delivered to (i) Buyer's LaPorte and/or other
Buyer owned and/or operated facility, for subsequent conversion into VCM,
or (ii) such other final destinations as the parties may mutually agree,
each acting reasonably.
2.02 During Buyer's annual scheduled shutdown or turnaround at its LaPorte
facility, not to exceed twenty-one (21) consecutive days, for which Buyer
has given Seller at least 90 days advance notice, Buyer may elect to: (i)
continue to purchase and receive Product from Seller and may use the same
internally or otherwise arrange for time trades for such Product, or (ii)
choose not to receive some or all of said Product during said period, in
which case Seller shall retain and sell same for the account of Seller.
In implementing the foregoing, Buyer and Seller will work together to
schedule to the extent reasonably possible, maintenance and turnaround
shutdowns at Buyer's LaPorte facility and Seller's McIntosh facility
coincidentally, to reduce to the extent possible the quantities of
chlorine Buyer cannot accept into its EDC/VCM/PVC business.
2.03 If at any time for reasons of force majeure (as defined in Section
10.05), Buyer's total chlorine requirements at its LaPorte facility will
be temporarily less than the Plant Output, and as a result thereof, Buyer
is unable to meet its obligations hereunder, Buyer will comply with the
requirements of Section 10.05 hereof. Thereafter, during the continuance
of such event of force majeure, Buyer shall not be obligated to take the
Plant Output; however, the parties will work together to optimize the
value of Seller's operations at the Plant, together with the value of
said chlorine.
2.04 If approved in advance by Seller, Buyer may arrange for a swap or other
arrangement of some or all of the chlorine which Buyer has an obligation
to take hereunder, outside the purview of Section 2.02 or 10.05. Seller
shall act reasonably and in good faith in considering whether to give
such approval. Any net-net (all transactions combined) freight savings
arising by reason of the substitution of chlorine from another source for
Seller's chlorine vis a vis the operation of Buyer's LaPorte facility in
connection with such swap shall
<PAGE> 2
inure to Seller; and further provided that in the event that any such
swap shall result in net-net (all transactions combined) freight loss to
Seller, Buyer shall make Seller whole for the same.
2.05 Notwithstanding any other provision of this Agreement, Buyer shall at all
times use the Plant Output to base load its facilities, I.E. the Plant
Output will be given first priority and all other sources of Product will
be modified or cut back to maximize Buyer's use of Plant Output at its
facilities.
ARTICLE 3.
TERM OF AGREEMENT
-----------------
3.01 This Agreement shall begin on the date of Full Start-Up of the Plant (as
defined in the Operating Agreement dated the date hereof between Seller
and Olin Corporation), and shall continue until the earliest to occur of:
(i) December 31, 2094 or (ii) the date upon which the Plant shall have
ceased operations for a period of three (3) continuous years, or (iii)
the parties shall mutually agree (the "Term").
3.02 The pricing terms of this Agreement contained in Article 6 ("Pricing
Terms") shall extend for an initial period ending December 31, 2007 (the
"original price end date"). Prior to December 31, 2007, the parties will
meet and discuss whether any Pricing Terms require amendment and/or
modification, and will use good faith to arrive upon an agreement as to
the terms of any such amendment(s) or modification(s). Should the parties
agree upon any such amendment(s) or modification(s), the parties will
reduce the same to writing. Unless specifically modified in such writing,
the Pricing Terms as originally set forth in this Agreement shall
continue through the end of December 31, 2012 (the "new price end date")
with the parties performing in accordance with the terms of this
Agreement, including any modifications thereto effected by such writing.
If the parties fail to so agree upon any such modification(s) or
amendment(s) to the Pricing Terms prior to the end of the new price end
date, then this Agreement will continue unaltered in full force and
effect, except that the price end date shall be extended by five (5)
years, and so on thereafter ad infinitum until the end of the Term of
this Agreement.
ARTICLE 4.
CONTAINER
---------
4.01 Bulk rail; other containers by mutual agreement.
ARTICLE 5.
METHOD AND TIMING OF SHIPMENTS
------------------------------
5.01 Initially, Seller will ship Product to Buyer's designated locations by
rail, with Buyer reserving a right to request shipment by barge if
economically feasible as from time to time requested by Buyer, subject to
Seller's and Buyer's mutual agreement.
5.02 Buyer and Seller will cooperate to ship Product as evenly as possible
throughout the year (approximately 8 rail cars per day, 7 days a week)
except during scheduled shutdowns or turnarounds described in Section
2.02.
ARTICLE 6.
PRICE
-----
6.01 At least fifteen (15) days prior to the commencement of a calendar
quarter, Buyer will supply Seller with a good faith estimate of Buyer's
average delivered acquisition price for elemental chlorine to be
purchased from all other of Buyer's suppliers during the impending
calendar quarter. During said calendar quarter, Seller shall invoice and
Buyer shall pay for Product purchased under this Agreement at said
average delivered acquisition price, less Five Dollars ($5.00) per ton,
F.O.B. Buyer's plant, freight allowed and prepaid to LaPorte, Texas.
Within fifteen (15) days following the end of the calendar quarter, Buyer
shall
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<PAGE> 3
inform Seller of Buyer's actual delivered acquisition price for
elemental chlorine purchased from all other of Buyer's suppliers during
the calendar quarter, and Seller shall issue additional invoicing and/or
credits as necessary to adjust the price paid for purchases hereunder to
equal Buyer's average delivered acquisition price from all others, less
Five Dollars ($5.00) per ton. Seller shall have rights of audit as to the
records of the Buyer reflecting the actual average delivered acquisition
price of Product received from all others during the calendar quarter.
For purposes of implementing this paragraph, Buyer shall have an
obligation to retain records for no less than three (3) years from the
calendar quarter recorded, and Seller may request an audit no more
frequently than twice per calendar year.
6.02 In the event that during any calendar quarter during the term of this
Agreement, Buyer purchases less than 12,500 tons of elemental chlorine
delivered into LaPorte from sources other than Seller, then both parties
will negotiate in good faith to reach a pricing mechanism designed to
reflect fair competitive pricing for elemental chlorine sold into the
vinyl industry which upon the parties reaching agreement shall comprise
the "average acquisition price" in paragraph 6.01 for the quarter.
Failing agreement within thirty (30) days of the end of the quarter in
which Buyer's purchases are first less than the amount specified above,
the price for chlorine delivered to Buyer will be the last quarterly
price charged by Seller, including the $5.00 per ton discount, adjusted
upward or downward on a quarterly basis by the percentage change in the
normal average of the Plant operator's price, F.O.B. McIntosh, to its
three largest chlorine-only purchasers.
6.03 Terms of Payment - Net cash within fifteen (15) days of date of invoice
(cycle billing) by ACH transfer to Seller's account.
ARTICLE 7.
ORIGIN
------
7.01 Seller's facility at McIntosh, Alabama.
ARTICLE 8
DESTINATION
-----------
8.01 Buyer's facility at LaPorte, Texas and other locations as from time to
time are permitted under Article 2 hereof.
ARTICLE 9.
BUYER'S UNLOADING FACILITY
--------------------------
9.01 Buyer will build a chlorine unloading facility at Buyer's LaPorte,
Texas plant at which it will receive Product tank cars from Seller.
Seller will subsidize Buyer's cost of construction of such chlorine
unloading facility by paying an annual fee in years 1998 through 2007
equal to one-half of the capital employed, multiplied by ten percent
(10%), for construction of the chlorine unloading facility, prorated
and paid monthly to Buyer. Costs to be included in the "capital
employed" for construction shall be capped at $5,600,000.
9.02 Seller will subsidize Buyer's operating costs by paying Buyer an
operating fee of up to fifty percent (50%) of actual costs for
maintaining and operating the chlorine unloading facility. The
operating fee shall be based on the percentage of the capacity of the
chlorine unloading facility utilized for unloading Seller's Product.
The percentage will equal:
BUDGETED RECEIPTS OF SUNBELT SUPPLIED PRODUCT
---------------------------------------------
Budgeted Receipts of all Product at Unloading Facility
To determine the operating fee (prorated and payable month by month),
the parties will multiply the percentage calculated by the one-half
budgeted operating costs. At year's end, the parties will adjust the
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<PAGE> 4
calculated fee by substituting actual receipts of Product and actual
incurred operating costs, issuing appropriate debits/credits. In no
event shall the operating fee exceed One Hundred Fifty Thousand Dollars
($150,000.00) per year through December 31, 2007. As of January 1,
2008, and at the end of each five (5) year period thereafter, said cap
will be adjusted upward or downward (i) as and for such period as the
parties may agree, or absent agreement, (ii) for a successive five year
period, by the percentage increase or decrease during the prior period
in the U.S. Gross Domestic Product Deflator (GDPD) as reported monthly
by the Bureau of Labor Statistics, U.S. Department of Labor. If such
index is not available, the parties shall mutually agree on an
alternate index that most nearly reflects the intention of the parties
in utilizing the index in this paragraph.
ARTICLE 10.
GENERAL TERMS AND CONDITIONS
----------------------------
10.01 Seller warrants that at the time of shipment the Product covered by
this Agreement meets Seller's published specifications, if any, or as
otherwise stated in this Agreement and that Seller has good and free
title therein and will convey the same to Buyer. SELLER GIVES THE ABOVE
WARRANTIES IN LIEU OF ALL OTHER WARRANTIES EITHER EXPRESS OR IMPLIED.
SELLER DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL SELLER HAVE LIABILITY FOR
ANY INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES. SELLER'S LIABILITY
FOR DAMAGES UNDER THIS AGREEMENT OR OTHERWISE SHALL IN NO EVENT EXCEED
THAT PART OF THE PURCHASE PRICE APPLICABLE TO THE PRODUCT WITH RESPECT
TO WHICH BUYER CLAIMS SUCH DAMAGES. Buyer must give Seller written
notice of any claim of breach of warranty within thirty (30) days after
occurrence of the event forming the foundation for such claim: the
failure of Buyer to give such written notice shall constitute a waiver
of all claims. Buyer assumes all risk of patent infringement by reason
of any use Buyer makes of the Product in combination with other
substances or in the operation of any process. The above warranties
extend only to the Buyer.
10.02 Buyer shall pay all amounts payable hereunder in cash, or in negotiable
paper collectible at face value in United States funds at the location
indicated on Seller's invoice. Should Seller at any time deem itself
insecure and determine not to ship on the terms of payment stated in
this Agreement, Seller may change the terms of payment and/or require
advance payment as a condition of shipment, and will so notify the
Buyer. Buyer shall not short pay invoices but shall submit claims to
Seller. Each shipment and invoice hereunder shall constitute a separate
transaction.
10.03 If the present or future interpretation or the future imposition of any
law, governmental decree, order, regulation or ruling under any
existing or future legislation shall prevent Seller from increasing the
price or revising the price as herein provided, or shall nullify or
reduce said price specified herein, Seller and Buyer shall promptly
meet to determine if mutually agreeable changes can occur to this
Agreement to cause it to conform with such law, decree, order,
regulation or ruling. If the parties cannot agree and effect the
changes within sixty (60) days after such meeting, Seller shall
thereupon have a right to terminate this Agreement forthwith by written
notice of such termination to Buyer.
10.04 Title to and risk of loss of all Product sold hereunder shall pass to
Buyer upon Seller's delivery to carrier at point of delivery (i.e.
Buyer's gate) whether or not Seller pays all or any part of the
freight. Buyer assumes, and agrees to indemnify, defend and hold
harmless Seller against, all risks and liabilities for results arising
out of unloading, discharge, storage, handling and use of the Product,
or arising out of compliance or non-compliance with federal, state,
municipal or local laws and regulations governing or controlling such
activity. Seller shall have no liability for the failure of discharge
or unloading equipment or materials used by Buyer, whether or not
supplied by Seller.
10.05 Either party shall have relief from liability hereunder for failure to
perform any of the obligations herein imposed, except the obligation to
pay for the Product already delivered, for the time and to the extent
of
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<PAGE> 5
such failure to perform, if Buyer's failure to take, use or consume,
or Seller's failure to make delivery, occurs by reason of: (i) acts of
God, fire, explosion, flood, hurricanes; (ii) strikes, lockouts or
other industrial disturbances or riots; (iii) war, declared or
undeclared; (iv) compliance with any Federal, State, Municipal or
Military law, regulation, order or rule, foreign or domestic, including
priority, rationing, allocation or preemption orders or regulations, or
cancellation of Seller's or Buyer's license to operate its plant; (v)
shortage or breakdown or other failure of facilities used for
manufacture or transportation, shortage of labor, power, fuel or raw
materials; (vi) total or partial shutdown due to Seller's normal plant
turnaround; (vii) or any other cause or causes of any kind or character
reasonably outside the control of the party failing to perform, whether
similar or dissimilar from the enumerated causes (any such cause herein
called "force majeure"). In the event force majeure renders a party
unable to carry out its obligations under this Agreement, other than to
make payments due hereunder, such party shall give notice and full
particulars including the expected duration of such force majeure in
writing or by telegraph to the other party not later than seventy-two
(72) hours after the occurrence of the cause relied on, and upon the
giving of such notice the obligations of the party giving such notice,
so far as they are affected by such force majeure shall suspend during
the continuance of any inability so caused, but for not longer period,
and the disabled party shall so far as possible remedy the cause with
all reasonable dispatch. Upon the cessation of the cause or causes for
any such failure or delay, performance hereof shall resume, but such
delay shall not, except by mutual agreement, operate to extend the term
of this Agreement or obligate the Seller to make up deliveries or Buyer
to purchase quantities so missed. The settlement of strikes or lockouts
involving the parties hereto shall lie entirely within the discretion
of the party having the difficulty, and the above requirements for
remedy of any force majeure with all reasonable dispatch shall not
require the settlement of strikes or lockouts by acceding to the
demands of the employees involved, when deemed inadvisable in the
discretion of the party having the difficulty. During any period of
shortage due to any of said causes enumerated above, Seller may
distribute its supply of raw materials and/or finished goods among
itself, for its own manufacturing uses, its customers and Buyer in such
manner as Seller deems practicable. Buyer will accept, as full and
complete performance by Seller, deliveries in accordance with such
determination as Seller may make. In no event must Seller purchase
material or Product from third persons in the event Seller invokes one
of the above mentioned clauses, nor will Seller bear liability for any
cost increases suffered by Buyer in purchasing Product from a third
party.
10.06 Buyer acknowledges that Seller has furnished to Buyer Material Safety
Data Sheets, including warnings and safety and health information
concerning the Product and/or the containers for Products sold
hereunder. Buyer will disseminate such information so as to give
warning of possible hazards to persons whom Buyer can reasonably
foresee may receive exposure to such hazards, including, but not
limited to, Buyer's employees, agents, contractors and customers.
10.07 Neither Buyer nor Seller may assign or transfer this Agreement in whole
or in part without the prior written consent of the other, not
unreasonably refused. The right and obligations of the parties
hereunder shall inure to the benefit of and be binding upon their
successors and assigns, including without limitation, upon a
Partnership dissolution, binding upon the owner/operator of Seller's
Plant.
10.08 No statement of agreements, oral or written, made before or at the
signing of this Agreement shall vary or modify the written terms
hereof, and neither party shall claim any amendment, modification or
release from any provision hereof unless such change occurs in a
writing signed by the other party and specifically identifying it as an
amendment to this Agreement. No modification or addition to this
Agreement shall occur by the acknowledgment or acceptance by Seller of
a Purchase Order, Acknowledgment, Release or other forms submitted by
Buyer containing additional or different terms or conditions, and
Seller hereby gives Buyer notice of the rejection of such additional
terms and conditions.
10.09 BUYER'S LIABILITY TO SELLER FOR BREACH HEREUNDER SHALL INCLUDE SELLER'S
LOST PROFITS FROM SALE OF CHLORINE AND ITS CO-PRODUCT, CAUSTIC SODA. IN
NO EVENT SHALL SELLER OR BUYER OTHERWISE HAVE ANY LIABILITY TO THE
OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT LOSSES OR
-5-
<PAGE> 6
DAMAGES ATTRIBUTABLE TO THE SALE OF PRODUCT UNDER THIS AGREEMENT OR TO
ANY OTHER MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
-6-
<PAGE> 7
The Parties, having agreed to all of the foregoing, each have caused
the execution of this Agreement by a duly authorized official.
SUNBELT CHLOR ALKALI
PARTNERSHIP BY
1997 CHLORALKALI VENTURE INC. -
PARTNER
By:\s\EDWARD C. MARTINELLI
-----------------------
Edward C. Martinelli
President
OLIN SUNBELT, INC. - PARTNER
By:\s\LEON B. ANZIANO
------------------
Leon B. Anziano
President
THE GEON COMPANY
By:\s\EDWARD C. MARTINELLI
----------------------
Edward C. Martinelli
Senior Vice President
-7-
<PAGE> 1
EXHIBIT 10(C)
THE GEON COMPANY
UNCONDITIONAL AND CONTINUING GUARANTY
WHEREAS, the undersigned, THE GEON COMPANY, a Delaware corporation
("Guarantor"), seeks to induce (i) OLIN SUNBELT, INC., a Delaware corporation
("OSI"), a wholly-owned subsidiary of OLIN CORPORATION, a Virginia corporation
("OC", and OSI and OC being singly and together referred to herein as "Olin") to
execute a partnership agreement (the "Partnership Agreement") with 1997
Chloralkali Venture Inc., an Alabama corporation ("Subsidiary"), a wholly-owned
subsidiary of Guarantor, to form a general partnership to be known as Sunbelt
Chlor Alkali Partnership (the "Partnership"), and (ii) OC to enter into a real
estate lease, an engineering, procurement and construction agreement, and an
operating agreement with the Partnership ("Contracts"); and
WHEREAS, the execution and delivery by Guarantor of this Unconditional and
Continuing Guaranty ("Guaranty") is a condition precedent to Olin's entering
into the Partnership and executing the Contracts;
WHEREAS, Guarantor will derive substantial benefits from such arrangements;
NOW, THEREFORE, in consideration of the premises and of other good valuable
consideration, the receipt of which is hereby acknowledged, Guarantor hereby
represents and agrees as follows:
1. GUARANTY. Guarantor hereby absolutely, irrevocably and
unconditionally guarantees to Olin the full and prompt performance by
Subsidiary of all of Subsidiary's covenants and obligations under the
Partnership Agreement, as amended and modified from time to time,
including, without limitation, the punctual and full performance or
payment when due, whether at the stated date or dates for such
payment, by acceleration or otherwise, of all indebtedness,
liabilities and obligations of Subsidiary under the Partnership
Agreement, whether absolute or contingent, now existing or hereafter
arising, and including, without limitation, all contributions,
interest, premiums, fees, cost and expense reimbursements and all
other obligations of Subsidiary pursuant to the Partnership
Agreement, together with all liabilities, rights of contribution and
indemnities in favor of the Partnership and Olin, imposed in law or
equity (all of the foregoing are hereinafter sometimes referred to as
the "Obligations"); provided however, that this Guaranty of the
Obligations shall be solely for the benefit of the Partnership and
Olin, and shall not be deemed to create any right in or be in whole
or in part for the independent benefit of any person other than the
Partnership and Olin, together with their successors and Permitted
Assignees. For purposes of this Guaranty, a "Permitted Assignee"
shall mean an assignee permitted under the Partnership Agreement or
the Contracts.
2. PERFORMANCE BY GUARANTOR. In the event of the occurrence of any
breach or default in the Obligations, Guarantor hereby agrees to
perform and/or make payment of each and every Obligation within five
(5) business days after receipt of notice from Olin of such breach or
default, provided that for those Obligations reasonably incapable of
cure within five (5) days, Guarantor shall have commenced a cure
within five (5) days and thereafter diligently pursue such cure.
3. OBLIGATIONS OF GUARANTOR UNCONDITIONAL. Guarantor hereby agrees that:
(a) Its liability hereunder is unconditional, irrespective of: (i)
any claim by Subsidiary of lack of authorization or insufficient
consideration with respect to the Obligations; (ii) the absence
of any action or effort by Olin or the Partnership to either
resort to, enforce or exhaust its remedies with respect to the
Obligations; (iii) the waiver or consent by Olin or the
Partnership with respect to any provision in the documentation of
the Obligations (provided that Guarantor shall be entitled to the
benefit of any such waiver or consent agreed to by Olin directly
or by the vote of the Management Committee on behalf of the
Partnership); or (iv) the recovery of any judgment against
Subsidiary or any action to enforce such judgment or any other
circumstance which might, absent the unconditional nature of this
Guaranty, constitute a legal or equitable discharge or defense of
Guarantor.
<PAGE> 2
(b) The liability of Guarantor hereunder will not be discharged
except by complete and final performance and/or payment of the
Obligations.
(c) The liability of Guarantor under this Guaranty shall be
reinstated with respect to any amount paid to the Partnership by
Subsidiary which is thereafter required to be returned to
Subsidiary or any trustee, receiver or other representative of or
for Subsidiary, upon or by reason of the bankruptcy, insolvency,
reorganization, or dissolution of Subsidiary, or for any other
reason, other than a valid defense on the merits to the same, all
as though such amount had never been paid by Subsidiary.
(d) This is a guarantee of payment and not merely of collection.
(e) Notwithstanding any provision herein to the contrary, this
Guaranty shall not limit, amend, modify, impair or otherwise
affect any right, claim or action of Guarantor or Subsidiary
arising under the Partnership Agreement or the Contracts.
4. WAIVERS. Guarantor hereby expressly waives (a) notice of the
acceptance of this Guaranty; (b) notice of any change in the rate at
which any of the Obligations are accruing interest or fees; (c)
diligence, presentment and demand for performance or payment of any
of the Obligations; (d) protest, notice of protest, notice of
dishonor and notice of nonperformance, nonpayment or default to
Guarantor or to any other person with respect to the Obligations; (e)
filings of claims or proof of claims with a court in the event of any
bankruptcy or insolvency proceedings to which Subsidiary is subject;
(f) any right to require a proceeding first against Subsidiary or any
other person; (g) any defenses available to a surety under law; and
(h) all other legally waivable notices to which Guarantor might
otherwise be entitled.
5. CONTINUING GUARANTY. This Guaranty is a continuing Guaranty and shall
remain in full force and effect and be binding upon Guarantor and its
successors and assigns, irrespective of any sale of or transfer by
Guarantor of any or all of the shares of capital stock of Subsidiary,
until satisfaction in full of all the Obligations.
6. MISCELLANEOUS.
(a) NOTICES. All notices, requests, demands or other communications
(including telecommunications) to or from Guarantor or Olin shall
be in writing and shall be deemed to have been duly given or made
when delivered (i) to Olin, at its office at Cleveland, TN, and
(ii) to Guarantor, at its address set next to its signature
below, or as to either party, at such other address as such party
may hereafter specify to the party in writing. Written notices
shall be deemed effectively delivered if delivered by hand or by
registered or certified mail, postage prepaid. The date of
delivery shall be deemed to be the date the notice is given.
(b) EXPENSES. Guarantor agrees that, with or without notice to or
demand upon Subsidiary or Guarantor, Guarantor will pay or
reimburse Olin (to the extent reimbursement has not already been
made by Subsidiary) for all expenses, including reasonable fees
and expenses of its legal counsel, incurred by Olin in connection
with the collection and the enforcement of any provisions of this
Guaranty.
(c) ASSIGNMENTS. Olin may assign its rights and powers under this
Guaranty to any successor or Permitted Assignee of the Olin
interest in the Partnership and/or the Contracts, with respect to
all or any of the Obligations, and, in the event of such
succession or assignment, the successor or Permitted Assignee of
such rights and powers, to the extent of such succession or
assignment, shall have the same rights and remedies as if
originally named herein in the place of its assignor or
predecessor in interest.
(d) WAIVER OF RIGHTS. No delay on the part of Olin in exercising any
rights hereunder or failure to exercise the same shall operate as
a waiver of such rights; no notice to or demand on Guarantor
shall be deemed to be a waiver of the obligation of Guarantor or
of the right of Olin to take other or further action without
notice or demand as provided herein. In any event no modification
or waiver of the provisions hereof shall be effective unless in
writing nor shall any waiver be applicable except with respect to
the specific person to whom and in the specific instance or
matter for which given.
-2-
<PAGE> 3
(e) CUMULATIVE REMEDIES. The obligations of Guarantor hereunder are
in addition to and not in substitution for any other obligations
now or hereafter held by Olin and shall not operate as a merger
of any contract or debt or suspend the fulfillment of, or affect
the rights, remedies or powers of Olin in respect of, any
obligation for the fulfillment thereof. The rights and remedies
provided herein and in any other instrument are cumulative and
not exclusive of any other rights or remedies provided by law.
(f) GOVERNING LAW. This Guaranty shall be governed by, determined
and construed in accordance with the laws of the State of
Delaware.
(g) SEVERABILITY. If any part of this Guaranty is contrary to,
prohibited by or deemed invalid under the applicable law or
regulations of any jurisdiction, such provision shall, as to such
jurisdiction, be inapplicable and deemed omitted to the extent so
contrary, prohibited or invalid, but the remainder hereof shall
not be invalidated thereby and shall be given full force and
effect so far as possible, and any such prohibition or invalidity
in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as
of the 23rd day of August, 1996.
WITNESS: THE GEON COMPANY
By: /s/Gregory L. Rutman
--------------------
Gregory L. Rutman
Title:Secretary
---------
Address: One Geon Center
Avon Lake, OH 44012
Attn: Corporate Secretary
-3-
<PAGE> 1
EXHIBIT 10(D)
233 South Wacker Ave. Suite 2800
Chicago, Illinois 60606
Tel 312 234-2934
Fax 312 234-3160
NationsBank
CONFIRMATION FOR U.S. DOLLAR RATE SWAP TRANSACTION
TO BE SUBJECT TO 1992 MASTER AGREEMENT
TO: THE GEON COMPANY
ONE GEON CENTER
AVON LAKE OH 44012
ATTN: JEAN MIKLOSKO
FAX: FAX 216-930-3727
FROM: NationsBank, N.A.
233 S. Wacker Drive
Chicago, Illinois 60606
MIKE ROPER / JIM O'DONNELL
Date: 27JUN96
Our Reference No. 501830
The purpose of this letter agreement is to confirm the terms and conditions of
the Swap Transaction entered into between us on the Trade specified below (the
"Swap Transaction"). This letter agreement constitutes a "Confirmation as
referred to in the Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.)
("Definitions) are incorporated into this Confirmation In the event of any
inconsistency between the Definitions and provisions and this Confirmation, this
Confirmation will govern. Each party represents and warrants to the other that
(i) it is duly authorized to enter into this Swap Transaction and to perform its
obligations hereunder and (ii) the person executing this Confirmation is duly
authorized to execute and deliver it.
1. This Confirmation supplements, forms part of, and is subject to, the Master
Agreement in the form published by ISDA in June, 1992 (the "Agreement"), as
if you and we had executed that agreement (but without any Schedule thereto)
and the Agreement shall be governed by and construed in accordance with the
laws of the State of New York. All provisions contained or incorporated by
reference in the Agreement shall govern this Confirmation except as
expressly modified below. In addition, you and we agree to use our best
efforts promptly to negotiate execute and deliver a Master Agreement (in the
form published by ISDA). Upon execution and delivery by you and us of that
agreement (i) this Confirmation shall supplement, form part of, and be
subject to that agreement and (ii) all provisions contained or incorporated
by reference in that agreement shall govern this Confirmation except as
expressly modified below.
<PAGE> 2
2. The terms of the Swap Transaction to which this Confirmation relates are as
follows:
Currency/Notional Amount: USD 150,000,000.00
Trade Date: 27JUN96
Effective Date: 01JUL96
Termination Date: 01JUL99
Upfront Payment: NationsBank shall pay The Geon Company
USD 125,000 on July 1, 1996
1. Floating Amounts
Floating Rate Payer I: NATIONSBANK, N.A.
Floating Payer I
Reset Dates: The First Day of Each Calculation
Period
Floating Payer I EACH JANUARY 1, APRIL 1, JULY 1, AND
OCTOBER 1,
Payment Dates: COMMENCING OCTOBER 1, 1996 AND ENDING
JULY 1, 1999, SUBJECT TO ADJUSTMENT IN
ACCORDANCE WITH THE MODIFIED FOLLOWING
BUSINESS DAY CONVENTION.
Floating Rate Payer I
Business Day Convention: MODIFIED FOLLOWING BUSINESS DAY
Floating Rate Payer I
Business Days: NEW YORK, LONDON
Floating Rate Payer I Option: USD-LIBOR-BBA
Designated Maturity: 3 MONTH
Spread: NONE
Floating Rate for
Initial Calculation Period: TO BE SET
Floating Rate Payer I
Day Count Fraction: ACTUAL/360
Averaging: INAPPLICABLE
2. Floating Amounts:
FLOATING Rate Payer II THE GEON COMPANY
Floating Payer II Reset
Dates: Last Day of Each Calculation Period
Floating Payer II Payment EACH JANUARY 1, APRIL 1, JULY 1, AND OCTOBER 1,
Dates: COMMENCING OCTOBER 1, 1996 AND ENDING JULY 1,
1999, SUBJECT TO ADJUSTMENT IN ACCORDANCE
WITH
-2-
<PAGE> 3
THE MODIFIED FOLLOWING BUSINESS DAY
CONVENTION.
Floating Rate Payer II
Business Days: NEW YORK, LONDON
Floating Rate Payer Ii
Business Day Convention: MODIFIED FOLLOWING BUSINESS DAY
Floating Rate Payer II USD-LIBOR-BBA SET IN ARREARS ON THE
RESET DATES provided that if the
Floating Rate Payer II Option is above 9%
for any Calculation Period, then Floating
Rate Payer II shall pay 9.00% on a Notional
amount of USD 75,000,000 and Floating Rate
Payer II Option on a Notional Amount of USD
75,000,000 for such Calculation Period.
Designated Maturity: 3 MONTH
Spread: NONE
Floating Rate for Initial
Calculation Period: TO BE SET
Floating Rate Payer II
Day Count Fraction: ACTUAL/360
Averaging: INAPPLICABLE
Rounding Factor: One-Hundredth-Thousandth of One Percent
Calculation Agent: NationsBank, N.A.
Assignment: This Swap Transaction may be assigned only
with prior written consent.
Legal and Out-of -Pocket
Expenses: For each party's own account.
Governing Law: The Laws of the State of New York.
Recording of Conversations:
Each party to this Agreement acknowledges
and agrees to the tape or electronic
recording of conversations between the
parties to this Agreement whether by one or
other or both of the parties, and that any
such recordings may be submitted in evidence
in any action or proceeding relating to the
Agreement or any Transaction.
Additional Termination Events. The following sub-paragraph (a) shall constitute
an Additional Termination Event:
-3-
<PAGE> 4
(a) If a Ratings Event (as defined below) shall occur with respect to a party
(the Affected Party), the other party (the non-Affected Party) may at any
time thereafter, by not more than 20 days notice to the Affected Party
(provided that the Ratings Event is then continuing), designate a day (not
earlier than the day such notice is effective) as an Early Termination Date
in respect of all Transactions. A "Ratings Event" shall occur with respect
to a party if a party's outstanding unsecured unsubordinated debt,
long-term deposits or certificates of deposit cease to be rated at least BB
by Standard & Poor's Corporation ("S&P") and Ba2 by Moody's Investors
Services, Inc. ("Moody's") or cease to be rated by S&P and Moody's
Investors Services, Inc.
Payment Instructions:
Payment to NationsBank: Payment to The Geon Company:
NationsBank, N.A. - Charlotte Please advise
ABA 053000196
ACCT: 10852016511
ATTN: DERIVATIVE OPERATIONS
Please confirm that the foregoing correctly sets forth the terms and conditions
of our agreement by responding of our agreement by responding within three (3)
Business Days by returning via telecopier an executed copy of this Confirmation
to the attention of the Swaps Documentation Group at Fax No. (312) 234-3160.
Failure to respond within such period shall not affect the validity or
enforceability of this Swap Transaction, and shall be deemed to be an
affirmation of the terms and conditions contained herein, absent manifest error.
Yours Sincerely,
NationsBank, N.A.
By:\s\JOHN STOCCHETTI
------------------
JOHN STOCCHETTI
SENIOR VICE PRESIDENT
Confirmed as of the date first written above:
THE GEON COMPANY
By:\s\JEAN M. MIKLOSKO
-------------------
Authorized Signatory
JEAN M. MIKLOSKO
ASSISTANT TREASURER
-4-
<PAGE> 5
233 South Wacker Ave. Suite 2800
Chicago, Illinois 60606
Tel 312 234-2934
Fax 312 234-3160
NationsBank
CONFIRMATION FOR U.S. DOLLAR RATE COLLAR TRANSACTION
TO BE SUBJECT TO 1992 MASTER AGREEMENT
TO: THE GEON COMPANY
ONE GEON CENTER
AVON LAKE OH 44012
ATTN: JEAN MIKLOSKO
FAX: FAX 216-930-3727
FROM: NationsBank, N.A.
233 S. Wacker Drive
Chicago, Illinois 60606
MIKE ROPER / JIM O'DONNELL
Date: 16JUL96
SUBJECT: Transaction Ref# 501830
The purpose of this letter is to amend and restate the terms and conditions of
the Rate Swap Transaction entered into between THE GEON COMPANY and NationsBank,
N.A. on the original trade date of June 27, 1996 (See Attached Exhibit I). All
previously stated terms will remain the same except as expressly modified below.
This Confirmation supplements, forms part of, and is subject to, the Master
Agreement in the form published by ISDA in June, 1992 (the "Agreement"), as if
you and we had executed that agreement (but without any Schedule thereto) and
the Agreement shall be governed by and construed in accordance with the laws of
the State of New York. All provisions contained or incorporated by reference in
the Agreement (in the form published by ISDA). Upon execution and delivery by
you and us of that agreement (I) this Confirmation shall supplement, form part
of, and be subject to that agreement and (ii) all provisions contained or
incorporated by reference in that agreement shall govern this Confirmation shall
supplement, form part of, and be subject to that agreement and (ii) all
provisions contained or incorporated by reference in that agreement shall govern
this Confirmation except as expressly modified below.
The terms of this Swap Transaction have been amended to reflect the following:
1) The Notional Amount of the Swap Transaction has been changed to USD
170,000,000.
2) The Floating Rate Payer II Option has been changed to USD-LIBOR-BBA SET IN
ARREARS ON THE RESET DATES provided that if the Floating Rate Payer II shall
pay 9.00% on a Notional amount of USD 85,000,000 for such Calculation
Period.
In consideration of the above amendment NationsBank, N.A. shall pay The Geon
Company USD 17,000.00 on July 17, 1996.
-5-
<PAGE> 6
Please confirm that the foregoing correctly sets forth the terms and conditions
of our agreement by responding with three (3) Business Days by returning via
telecopier an executed copy of this Confirmation to the attention of Swaps
Documentation Group, Fax No. (312) 431-3160.
NationsBank, N.A.
By:\s\John Stocchetti
------------------
John Stocchetti
Authorized Signatory
Confirmed as of the date first written above:
The Geon Company
By:\s\Jean M. Miklosko
--------------------
Jean M. Miklosko Assistant Treasurer
Authorized Signatory
-6-
<PAGE> 1
EXHIBIT 11
(In millions, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
1996 1995 1996 1995
-------- --------- ------- ------
PRIMARY EARNINGS PER SHARE:
<S> <C> <C> <C> <C>
NUMBER OF SHARES
Average shares outstanding 24.0 24.9 24.5 25.7
Net effect of dilutive stock options - based on treasury stock
method using average market price .3 .6 .4 .5
------ ------ ------ ------
Total common and common equivalent shares outstanding 24.3 25.5 24.9 26.2
====== ====== ====== ======
Net income per share $ .25 $ .56 $ .43 $ 1.06
====== ====== ====== ======
</TABLE>
The unaudited earnings per share for all periods presented were computed
based on the weighted average number of shares of common stock outstanding
and common stock equivalents. The market price of common stock on September
30, 1996 was below the average for the three month and nine month periods
ended September 30, 1996. Therefore, in a fully dilutive earnings per share
calculation, the impact of stock options would be anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 13
<SECURITIES> 4
<RECEIVABLES> 113
<ALLOWANCES> 02
<INVENTORY> 96
<CURRENT-ASSETS> 256
<PP&E> 1,177
<DEPRECIATION> 723
<TOTAL-ASSETS> 747
<CURRENT-LIABILITIES> 209
<BONDS> 138
<COMMON> 3
0
0
<OTHER-SE> 209
<TOTAL-LIABILITY-AND-EQUITY> 747
<SALES> 865
<TOTAL-REVENUES> 865
<CGS> 840
<TOTAL-COSTS> 840
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 18
<INCOME-TAX> 7
<INCOME-CONTINUING> 11
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
