<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 of (I.R.S. Employer Identification No.)
incorporation or organization)
One Geon Center, Avon Lake, Ohio 44012-0122
(Address of principal executive offices) (Zip-Code)
Registrant's telephone number, including area code (216) 930-1000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
Common Stock, par value $.10 per share New York Stock Exchange
</TABLE>
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, and (2) has been subject to such filing requirements
for the last 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /x/
The aggregate market value of the voting stock, consisting solely of common
stock, held by non-affiliates of the registrant as of March 10, 1997 was
$519,521,490. On such date, 23,089,844 of such shares of the registrant's common
stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to stockholders for the year ended December 31,
1996 are incorporated by reference into Parts I and II.
Portions of the Proxy Statement dated and filed with the Securities and Exchange
Commission on March 21, 1997 are incorporated by reference into Part III.
The Exhibit Index is located herein beginning at page I-1.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
GENERAL
The Geon Company, together with its subsidiaries (Company), is a
leading North American producer and marketer of polyvinyl chloride (PVC) resins
and compounds. The Company also produces and markets vinyl chloride monomer
(VCM), an intermediate precursor to PVC. PVC is the world's second most widely
used plastic. It is an attractive alternative to traditional materials such as
glass, metal and wood and other plastic materials because of its versatility,
durability and cost competitiveness. PVC's largest applications are associated
with infrastructure development, building products and consumer durable goods.
The Company operates in one business segment with operations primarily
located in the United States and Canada.
The Company sells its PVC resins to third parties who produce their own
compounds for use primarily in larger volume construction applications, such as
pipe and pipe fittings, vinyl house siding, flooring and wall coverings and
window components. The Company also manufactures its own PVC compounds for sale
to third parties who use such compounds in a variety of applications, such as
electrical conduits and wire insulation, packaging (including film, bottle and
specialty packaging), residential windows and, more recently, higher-performance
applications, such as business machine housings, application components and
medical devices. As of December 31, 1996 the Company's North American nameplate
PVC capacity was approximately 2.9 billion pounds, or approximately 19% of total
U.S. and Canadian PVC capacity.
PRODUCTS
In 1996, 57% of the Company's total revenues were attributable to PVC
resin sales, 39% to compound sales, and the remaining 4% primarily to VCM export
sales. Approximately 74% of the Company's PVC shipments (in pounds) in 1996 were
sold as PVC resins, with 26% sold as PVC compounds.
The Company's resin products can be categorized generally as
suspension/mass resins and dispersion resins. Suspension/mass resins can be
further categorized as general purpose resins and specialty resins. General
purpose resins comprise the largest segment of resins by volume and are
typically used in rigid applications such as pipe and exterior siding. Specialty
resins are a broad category of resins possessing unique characteristics such as
color and clarity and are used in a wide variety of applications such as film,
medical and automotive products. Dispersion resins are made from a process which
yields a fine particle-size resin and are generally used for vinyl flooring,
vinyl wall coverings and fabrics, marine floatation devices and toys.
The Company's PVC compound products can be either flexible or rigid and
are fabricated by customers of the Company by extrusion, calendaring,
injection-molding or blow-molding. Flexible compounds are used for wire and
cable insulation, automotive interior and exterior trim, packaging and medical
devices. Rigid extrusion compounds are commonly used in window frames, vertical
blinds and construction applications. Injection-molding compounds are used in
specialty parts such as business machine components, application parts and
bottles. The Company's development of new compounds that can be injection-molded
into thin-walled complex parts or that have other unique characteristics has
opened new applications and markets for PVC products.
The Company supports its compound products by providing service to
customers through enhanced customer support. The Company's sales force works
with engineering and marketing experts of original equipment manufacturers in
addition to purchasing agents to create new uses for PVC products and to replace
more costly plastics and other materials through the development of
cost-effective solutions that meet specific customer needs. In addition, the
Company uses a combination of material science, computer-aided design and
prototype part production capabilities to assist customers in the development
and application of new uses for higher-performance PVC compounds.
COMPETITION
The Company competes with major U.S. chemical manufacturers and
diversified companies, some of which have greater financial resources than the
Company. Competition in the industry is based upon factors, the importance of
which vary depending on the specific characteristics of the product and the
applicable market, ranging from price and availability to product performance
and customer and technical support.
With respect to PVC resins, the Company competes primarily with six
major North American PVC producers: Borden Chemicals and Plastics Limited
Partnership; CONDEA Vista Chemical Company (a subsidiary of RWE-DEA Hamburg,
Germany); Formosa Plastics Corporation U.S.A. (a subsidiary of Formosa Plastic
Group, Taipei, Taiwan); Georgia Gulf Corporation; Occidental Chemical
Corporation (a subsidiary of Occidental Petroleum Corporation) and Shintech,
Inc. (a subsidiary of Shin Etsui Chemical Co., Ltd., Tokyo, Japan). The key
competitive factors are price, product availability and performance. In 1996,
the seven largest resin producers (one of which is the Company) accounted for
approximately 87% of the total estimated resin capacity. None of the producers
had more than 20% of total resin capacity. With respect to PVC compounds, the
Company competes with certain of the foregoing entities along with many
independent custom compounders.
Because there is no single PVC compound market, the manner in which the
Company competes varies from market to market, although in each market the
Company competes primarily on the basis of product consistency and customer
service in addition to price. In certain PVC compound markets, such as pipe
fittings, wire and cable, and bottles, the Company competes with other PVC
manufacturers. In the markets for higher performance PVC
1
<PAGE> 3
compounds, such as extrusion and injection molding compounds for business
equipment, appliances, telecommunications and construction, the Company competes
less with traditional PVC manufacturers and more with other non-PVC plastic
manufacturers, such as General Electric Company, Bayer AG and The Dow Chemical
Company. Manufacturing margins and prices in these markets tend to be higher and
more stable than PVC resin and other compound markets, although such areas have
higher support costs comprised of sales, marketing, technical service, customer
support and research and development. In the other PVC compound markets (rigid
extrusion compounds for custom profiles, window lineals and vertical blinds),
the Company competes with other PVC manufacturers and custom compounders.
RAW MATERIALS
The Company produces the majority of the VCM it requires for the
manufacture of PVC at its plant in LaPorte, Texas. In April 1996, the Company
began production at an 800 million pound expansion of the LaPorte facility,
bringing its annual capacity of VCM up to 2.4 billion pounds. In addition, the
Company has a long-term Canadian VCM supply contract providing substantially
all VCM requirements for the Company's Canadian PVC resin production located in
Scotford, Alberta. The Canadian supply contract remains effective through the
year 2000.
The two principal raw materials used by the Company to manufacture VCM
are ethylene and chlorine. The Company's ethylene requirements are provided
under long-term supply agreements, the largest supply being provided under an
agreement with an initial term through December 31, 2000, and continuing
thereafter unless two years prior notice of termination is given by either
party. An Intermediates Supply Agreement with The B.F.Goodrich Company (BFG)
also provides for ethylene purchases and swaps from the Calvert Facilities (BFG
chlor-alkali, ethylene and utility operations located at Calvert City,
Kentucky) through February 2000. These two agreements represent 80% of the
Company's ethylene requirements.
The Company's chlorine requirements are provided pursuant to long-term
supply agreements and spot-market purchases. The Company's long-term chlorine
supply agreements, which cover 70% of requirements, are with four different
domestic suppliers. One of the supply agreements, which provides 50% of the
requirements, is being extended through 1999. The Company does not anticipate
any problem in completing the agreement. The additional 20% of the Company's
long-term supply is provided under agreements which expire in 1999 or later. The
existing agreements generally contain volume commitments and various pricing
mechanisms which management believes provide a cost-effective sourcing of
chlorine. The Company has a 50% participation in a joint venture to construct
and operate a chlor-alkali plant. In the initial phase, the plant will have an
annual capacity of 250,000 tons of chlorine and 275,000 tons of caustic soda.
Mechanical completion is expected in late 1997. Geon will receive all chlorine
produced by the plant owned by the joint venture.
Historically, chlorine and ethylene have been produced in the United
States at a lower cost than elsewhere in the world. This cost advantage has
resulted in U.S. producers of PVC having lower raw materials costs than their
counterparts in many other parts of the world. In addition to the raw materials
for VCM, the Company purchases a variety of additives to manufacture its
compound products. These materials generally have adequate alternative sources
of supply and are not purchased under multi-year contracts.
RESEARCH AND DEVELOPMENT
The Company has developed substantial research and development
capability. The Company's efforts are devoted to (i) providing support to its
manufacturing plants for cost reduction, productivity and quality improvement
programs, (ii) providing quality technical services to assure the continued
success of its products for its customers' applications, (iii) providing
technology for improvements to its products, processes and applications and (iv)
developing new products to satisfy defined market needs. The Company operates a
research and development center in Avon Lake, Ohio. The laboratory is equipped
with modern analytical, synthesis, polymer characterization and testing
equipment and pilot plant and polymer compounding operations which simulate the
production facilities for rapid translation of new technology into new products.
A sophisticated application engineering and design capability assists customers
in designing and prototyping new applications for the Company's PVC compounds.
Expenditures for Company sponsored product research and product
development in 1996, 1995 and 1994 were $17.5 million, $18.0 million and $16.8
million, respectively. Expenditures in 1997 are anticipated to remain at
approximately the same level as in 1996.
2
<PAGE> 4
EMPLOYEES
As of December 31, 1996, the Company had approximately 1,683 full-time
employees of whom 130 employees are covered by collective bargaining agreements
which expire in May 1998 and July 2001. The bargaining unit employees are
employed at the Company's plants in Louisville, Kentucky and Altona, Australia.
The Company considers its employee relations to be good.
ENVIRONMENTAL, HEALTH AND SAFETY
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 endeavors
to ensure the safe and lawful operation of its facilities in manufacturing and
distribution of products and believes it is in compliance in all material
respects with applicable laws and regulations.
The Company maintains a disciplined environmental and occupational
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 program 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's capital expenditures related to the limiting and
monitoring of hazardous and non-hazardous wastes totaled $3 million, $7 million
and $1 million in 1996, 1995, and 1994, respectively. The Company estimates
capital expenditures for future environmental improvement programs to
approximate $2 million to $4 million in 1997. The projected future capital
expenditures are associated with a wide variety of environmental projects, such
as compliance with anticipated new regulations, achievement of internal company
programs and improved operating efficiencies. The primary areas for future
environmental capital expenditures can be broadly categorized as solid waste,
air quality, waste water and ground water improvements. Expenditures for
remediating various sites were $6.1 million, $3.0 million and $2.9 million in
1996, 1995 and 1994, respectively. 1997 expenditures for remediation of these
sites are projected to be $4 million to $7 million.
The Company has been notified by the United States Environmental
Protection Agency (EPA), a state agency, or a private party that it may be a
potentially responsible party (PRP) in connection with seven active and inactive
non-Company owned sites. The Company believes that it has potential continuing
liability with respect to only four such sites. In addition, the Company
initiates corrective and preventive environmental projects of its own to ensure
safe and lawful activities at its operations. 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.
The Company has accrued $27 million to cover these future environmental
remediation expenditures which are projected to be $19 million over the next
five years. Of this amount, approximately $16 million is attributable to future
remediation expenditures at the Calvert Facilities and less than $.2 million is
attributable to offsite environmental liabilities, including the four sites
mentioned above. The balance is primarily attributable to other environmental
remediation projects at Company-owned facilities. Pursuant to consent orders
signed with both the EPA and the Commonwealth of Kentucky Department of
Environmental Protection and the terms of a Resource Conservation and Recovery
Act (RCRA) post-closure permit, the Company is required to provide for a
site-wide remediation program at the Calvert Facilities, the cost of which is
included in the $27 million accrual as of December 31, 1996.
The Company participates in the EPA Compliance Audit Program (CAP)
under Section 8(e) of the Toxic Substances Control Act. That section requires
reporting of information indicating a substantial risk of injury to health or
the environment from a chemical substance or mixture. Under the CAP, the Company
conducts an audit of its files and reports any information that should have been
reported previously. The total potential maximum liability of the Company and
its subsidiaries under the CAP is $1 million. The first part of the CAP required
reporting of substantial risk information concerning health effects. The
remaining part of the CAP involves substantial risk information concerning the
environment. The Company will perform its obligations under this portion of the
CAP after the EPA issues guidance concerning the kinds of environmental
information that it believes are reportable. The Company does not believe that
its portion of any civil penalties arising from this portion of the CAP will
exceed $.2 million.
The risk of additional costs and liabilities is inherent in certain
plant operations and certain products produced at the Company's plants, as is
the case with other companies involved in the PVC industry. There can be no
assurance that additional costs and liabilities will not be incurred by the
Company in the future. It is also possible that other developments, such as
increasingly strict environmental, safety and health laws, regulations and
enforcement policies thereunder and claims for damages to property or persons
resulting from plant emissions or products, could result in additional costs and
liabilities to the Company. A number of foreign countries and domestic local
communities have enacted, or have under consideration, laws and regulations
relating to the use and disposal of plastic materials. Widespread adoption of
such laws and regulations, or public perception, may have an adverse impact on
plastic materials. Although many of the Company's major markets are in durable,
longer-life applications which could reduce the impact of any such environmental
regulation, there is no assurance that
3
<PAGE> 5
possible future legislation or regulation would not have an adverse effect on
the Company's business.
In previous years, there have been efforts by environmental groups to
ban chlorine - one of the Company's key raw materials. Proposed legislation to
ban chlorine has garnered little support in Congress. Research does not support
categorizing all uses of chlorine as harmful to the environment. Although the
Company believes that PVC is not harmful to the consumer or the environment due
to the stability of its chemical structure, PVC could not be produced if
chlorine and chlorine-based products were prohibited. Another issue being
addressed is the presence of dioxins in the environment. Dioxins are produced by
many types of combustion and the EPA has cited municipal, medical and industrial
incinerators as major sources of dioxin. Data generated to date by the American
Society of Mechanical Engineers and The Vinyl Institute indicate that vinyl and
vinyl production processes are at most minor contributors to overall dioxin
emissions.
The Company does not believe that there are any new laws which will
have a material impact on the industry or the Company's capital expenditures,
cash flow or liquidity.
The Company conducts a comprehensive occupational safety and health
program. Industry data shows that the Company's safety record is among the best
in the chemical industry.
ITEM 2. PROPERTIES.
The information required by this item appears on page 34 of the
Company's 1996 Annual Report to Stockholders and is incorporated herein by
reference thereto
ITEM 3. LEGAL PROCEEDINGS.
In addition to the matters regarding the environment described above
under the heading "Business - Environmental, Health and Safety", there are
pending or threatened against the Company 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 be
finally determined should not have a material effect on the Company's financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
4
<PAGE> 6
EXECUTIVE OFFICERS OF THE COMPANY. (INCLUDED PURSUANT TO INSTRUCTION 3 TO
PARAGRAPH (b) OF ITEM 401 OF REGULATION S-K)
Executive officers of the Company are elected by and serve at the
discretion of the Board of Directors. Except as otherwise noted, the executive
officers of the Company were elected to their respective positions immediately
following the formation of the Company. Their ages and positions are as follows:
<TABLE>
<CAPTION>
Name Age Position with Company
- ---- --- ---------------------
<S> <C> <C>
William F. Patient 62 Chairman of the Board, President and Chief Executive Officer
Donald P. Knechtges 55 Senior Vice President, Technology/Engineering
Louis M. Maresca 46 Vice President, Operations
Edward C. Martinelli 55 Senior Vice President, Commercial
Gregory L. Rutman 54 Vice President, General Counsel & Secretary
Thomas A. Waltermire 47 Chief Financial Officer, Senior Vice President, Human Resources
</TABLE>
William F. Patient
Mr. Patient received a degree in chemical engineering from Washington
University, St. Louis. Prior to the April 1993 Geon Initial Public Offering
(IPO) by BFG, Mr. Patient served as Senior Vice President of BFG and as
President of BFG's Geon Vinyl Division since May 1989. Prior to joining BFG,
Mr. Patient had been associated with Borg-Warner Chemicals since 1962, most
recently as Vice President.
Donald P. Knechtges
Mr. Knechtges received a B.A. in Chemistry from Marietta College in
1963 and a B.S. in Chemical Engineering from Case Institute of Technology in
1965. Mr. Knechtges joined BFG as an engineer in June 1965 and became Senior
Vice President, Commercial in December 1991. In August 1995, Mr. Knechtges was
named Senior Vice President, Technology/Engineering.
Louis M. Maresca
Dr. Maresca received a B.S. in Chemistry from Brooklyn College in 1972,
a Ph.D. in Physical/Organic Chemistry from Columbia University in 1976 and an
M.B.A. from the Weatherhead School at Case Western Reserve University in 1995.
Dr. Maresca joined BFG as Vice President, Research and Development for the Geon
Vinyl Division in April 1991. In August 1995 he became Vice President,
Operations. Prior to joining BFG, Dr. Maresca served General Electric Company in
several capacities, most recently General Manager, America's Product Technology.
Edward C. Martinelli
Mr. Martinelli received a B.S. in Chemical Engineering from the
University of Delaware in 1963 and, in 1985, completed the Harvard Business
School Advanced Management Program. He joined BFG in September 1963. In June
1987, Mr. Martinelli became Senior Vice President of BFG's Geon Vinyl Division
Operations and was named Senior Vice President, Commercial in August 1995.
Gregory L. Rutman
Mr. Rutman received a B.A. in Business Management from Baldwin-Wallace
College in 1964 and a J.D. degree from Cleveland Marshall College of Law in
1969. In 1987, he completed the Executive Program at the Darden Graduate School
of Business Administration, University of Virginia. Mr. Rutman joined BFG in
October 1974. Since 1985 he functioned as Staff Vice President of BFG and
Counsel to the BFG Geon Vinyl Division. Mr. Rutman was elected Secretary and
Assistant Treasurer of the Company after the completion of the IPO.
Thomas A. Waltermire
Mr. Waltermire received a B.S. in Biology from Ohio State University in
1971 and an M.B.A. from Harvard University in 1974. Mr. Waltermire joined BFG in
June 1974. In April 1993, he became Senior Vice President and Treasurer of the
Company, and in October 1993, became Chief Financial Officer. His duties also
include strategic planning, human resources, communication and information
technology.
5
<PAGE> 7
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock, $.10 par value per share, is reported on
the New York Stock Exchange. The information appearing under the captions
"Financial Highlights" on page 1 and "Quarterly Data" on page 31 of the
Company's 1996 Annual Report to Stockholders is incorporated herein by
reference thereto.
ITEM 6. SELECTED FINANCIAL DATA.
The Company has declared and paid cash dividends per share of common
stock in the amounts noted in each of the following years:
<TABLE>
<CAPTION>
1993 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Dividend paid per Share of Common Stock $.375 $.50 $.50 $.50
</TABLE>
The additional information required by this item appears on pages 31
and 32 of the Company's 1996 Annual Report to Stockholders and is incorporated
herein by reference thereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The information appearing under the captions "Management's Analysis"
on pages 16, 18 and 20 and "Cautionary Note on Forward-Looking Statements" on
page 33 of the Company's 1996 Annual Report to Stockholders is incorporated
herein by reference thereto.
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA.
The information required by this item appears on pages 17, 19 and 21
through 31 of the Company's 1996 Annual Report to Stockholders and is
incorporated herein by reference thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT.
The information regarding the Directors of the Company appearing
under the heading "Election of Directors" on pages 2 through 6 of the Company's
Proxy Statement for the 1997 Annual Meeting of Stockholders is incorporated
herein by reference thereto. Information concerning executive officers of the
Company is contained in Part I of this Report under the heading "Executive
Officers of the Company".
ITEM 11. EXECUTIVE COMPENSATION.
The information regarding Director and executive compensation appearing
under the headings "Compensation of Directors" on page 6 and "Executive
Compensation" on pages 10 through 20 of the Company's Proxy Statement for the
1997 Annual Meeting of Stockholders is incorporated herein by reference
thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.
The information regarding security ownership of certain beneficial
owners and management appearing under the heading "Ownership of Common Stock" on
pages 7 through 9 of the Company's Proxy Statement for the 1997 Annual Meeting
of Stockholders is incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
The information regarding certain relationships and related
transactions appearing under the heading "Compensation Committee Interlocks and
Insider Participation; Certain Other Relationships" on pages 20 through 23 of
the Company's Proxy Statement for the 1997 Annual Meeting of Stockholders is
incorporated herein by reference thereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) and (2) and (d) - The response to these portions of Item 14 are
submitted as a separate section of this Report beginning on page F-1 of this
Report.
(a)(3) and (c) - An index of Exhibits filed as part of this Report is
located beginning on page I-1 of this Report.
(b) Reports on Form 8-K Filed in the Fourth Quarter of 1996:
None.
6
<PAGE> 8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 27, 1997.
THE GEON COMPANY
By: /s/GREGORY L. RUTMAN
--------------------
Gregory L. Rutman
Vice President, General Counsel and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities indicated
on March 27, 1997.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
/s/WILLIAM F. PATIENT Chairman of the Board, President, Chief Executive Officer
- --------------------------- and Director (Principal Executive Officer)
William F. Patient
/s/THOMAS A. WALTERMIRE Chief Financial Officer, Senior Vice President, Human Resources
- --------------------------- (Principal Financial Officer)
Thomas A. Waltermire
/s/GREGORY P. SMITH Controller (Principal Accounting Officer)
- ---------------------------
Gregory P. Smith
/s/JAMES K. BAKER Director /s/HARRY A. HAMMERLY Director
- --------------------------- --------------------------
James K. Baker Harry A. Hammerly
/s/GALE DUFF-BLOOM Director /s/D. LARRY MOORE Director
- --------------------------- --------------------------
Gale Duff-Bloom D. Larry Moore
/s/JOHN A. BROTHERS Director /s/JOHN D. ONG Director
- --------------------------- --------------------------
John A. Brothers John D. Ong
/s/ J. DOUGLAS CAMPBELL Director /s/R. GEOFFREY P. STYLES Director
- --------------------------- --------------------------
J. Douglas Campbell R. Geoffrey P. Styles
</TABLE>
7
<PAGE> 9
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) AND (2) AND (d)
INDEX OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1996
THE GEON COMPANY
F-1
<PAGE> 10
ITEM 14(a)(1) AND (2) and (d).
-----------------------------
THE GEON COMPANY AND SUBSIDIARIES
- ---------------------------------
INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of The Geon Company and
subsidiaries, included in the Annual Report of the Registrant to its
Stockholders for the year ended December 31, 1996, are incorporated by
reference in Item 8.
Consolidated balance sheets - December 31, 1996 and 1995
Consolidated statements of income - Years ended December 31, 1996,
1995 and 1994.
Consolidated statements of stockholders' equity - Years ended
December 31, 1996, 1995 and 1994.
Consolidated statements of cash flows - Years ended December 31, 1996,
1995 and 1994.
Notes to consolidated financial statements - December 31, 1996.
Quarterly data (unaudited) - Years ended December 31, 1996 and 1995.
The following consolidated financial statements schedule of the Registrant and
its subsidiaries is included in Item 14(d)
Schedule II Page F-3 Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
F-2
<PAGE> 11
SCHEDULE II
THE GEON COMPANY AND SUBSIDIARIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Charged
Balance at to Costs Charged Balance
Beginning and to Other at End of
of Period Expenses Accounts Deductions Period
----------- ---------- --------- ---------- ---------
(C)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Reserves for doubtful accounts $ 2.1 $ .7 $ -- $ .1 (A) $ 2.7
Accrued liabilities for environmental matters 29.1 4.2 -- 6.1 (B) 27.2
Year Ended December 31, 1995
Reserves for doubtful accounts $ 1.7 $ .5 $ -- $ .1 (A) $ 2.1
Accrued liabilities for environmental matters 28.7 2.7 .7 3.0 (B) 29.1
Year Ended December 31, 1994
Reserves for doubtful accounts $ 1.5 $ .5 $ -- $ .3 (A) $ 1.7
Accrued liabilities for environmental matters 31.6 -- .1 3.0 (B) 28.7
</TABLE>
Notes:
- -----
(A) - Accounts charged off
(B) - Represents cash payments during the year
(C) - Translation adjustments and other accrued expenses
F-3
<PAGE> 12
THE GEON COMPANY
INDEX TO EXHIBITS
(Item 14(a)(3))
<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
3(i) Restated Certificate of Incorporation _____
3(ii) Amended and Restated By-Laws (a)
4 Instruments defining rights of security holders, including indentures: _____
4.1 Specimen Common Stock Certificate _____
4.2 Rights Agreement, dated May 28, 1993, between the Company and Bank of New York, as Rights Agent _____
4.3 Indenture dated as of December 1, 1995 between the Company and NBD Bank, Trustee _____
10 Material Contracts:
10.1 Incentive Stock Plan (1) _____
10.2 1995 Incentive Stock Plan (1) _____
10.3 Benefit Restoration Plan (Section 415) (1) _____
10.4 Benefit Restoration Plan (Section 401(a)(17)) (1) _____
10.5 Senior Executive Management Incentive Plan (1) _____
10.6 Non-Employee Directors Deferred Compensation Plan effective December 9, 1993 (1) _____
10.7 Form of Management Continuity Agreement (1) _____
10.8 U.S. $130 million Credit Agreement dated as of August 16, 1994 among the Company and Citibank, N.A.
as Agent and NationsBank of North Carolina, N.A. as Co-Agent _____
10.8a Amendment to the aforesaid Credit Agreement dated as of December 8, 1994 _____
10.8b Amendment Number 2 to the aforesaid Credit Agreement dated as of November 9, 1995 _____
10.8c Amendment Number 3 to the aforesaid Credit Agreement dated as of December 19, 1996 _____
10.9 U.S. $65 million Second Amended and Restated Trade Receivables Purchase and Sale Agreement among
the Company, CIESCO, L.P., Corporate Receivables Corporation and Citicorp N.A., Inc. as Agent
10.9a Amendment to the aforesaid Second Amended and Restated Trade Receivables Purchase and Sale Agreement _____
dated as of December 8, 1994
10.10 Second Amended and Restated Lease Dated December 19, 1996 between 1994 VCM Inc. and the
Company _____
10.11 Second Amended and Restated Participation Agreement Dated December 19, 1996 among the Company,
1994 VCM Inc., State Street Bank and Trust Company of Connecticut, National Association and Citibank,
N.A. as Agent. _____
10.12 Amended and Restated Instrument Guaranty dated as of December 19, 1996 _____
10.13 Amended and Restated Plant Services Agreement between the Company and The B.F. Goodrich Company
10.14 Amended and Restated Assumption of Liabilities and Indemnification Agreement dated _____
March 1, 1993 and amended and restated April 27, 1993
</TABLE>
I-1
<PAGE> 13
<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
10.15 Intermediates Supply Agreement ____
10.16 Put Agreement dated April 27, 1993 ____
10.17 Partnership Agreement, by and between 1997 Chloralkali Venture Inc., and Olin Sunbelt, Inc. (b)
dated August 23, 1996
10.18 Chlorine Sales Agreement, by and between Sunbelt Chlor Alkali Partnership and the Company (b)
dated August 13, 1996
10.19 Intercompany Guarantee Agreement between the Company on the one hand and Olin Corporation and (b)
Sunbelt Chlor Alkali Partnership on the other hand
10.20 Rate Swap Transaction as amended between the Company and NationsBank, N.A. (b)
11 Statement re computation of per share earnings ____
13 Annual Report to Stockholders For the Year Ended December 31, 1996
21 Subsidiaries ____
23 Consent of Independent Auditors ____
27 Financial Data Schedule ____
</TABLE>
- -------------------------------------------------------------------------------
(1) Indicates management contract or compensatory plan, contract or
arrangement in which one or more directors or executive officers of the
Registrants may be participants.
(a) Incorporated by reference to the corresponding Exhibit filed with the
Registrant's Form 10-Q for the Quarter Ended June 30, 1996
(b) Incorporated by reference to the corresponding Exhibit filed with the
Registrant's Form 10-Q for the Quarter Ended September 30, 1996
I-2
<PAGE> 1
EXHIBIT 3(i)
RESTATED CERTIFICATE OF INCORPORATION
OF
THE GEON COMPANY
It is hereby certified that:
FIRST: The present name of the corporation
(hereinafter called the "Corporation") is THE GEON COMPANY, which
is the name under which the Corporation was originally
incorporated; and the date of filing the original certificate of
incorporation of the Corporation with the Secretary of State of the
State of Delaware is February 11, 1993.
SECOND: The provisions of the certificate of
incorporation of the Corporation as heretofore amended and
supplemented, are hereby restated and integrated into the single
instrument which is hereinafter set forth, and which is entitled
RESTATED CERTIFICATE OF INCORPORATION OF THE GEON COMPANY without
any discrepancy between the provisions of the certificate of
incorporation as heretofore amended and supplemented, and the
provisions of said single instrument hereinafter set forth.
THIRD: The restatement of the Restated Certificate of
Incorporation herein certified has been duly adopted in accordance
with the provisions of Section 245 of the General Corporation Law
of the State of Delaware.
FOURTH: The certificate of incorporation of the
Corporation, as restated herein, shall at the effective time of
this Restated Certificate of Incorporation, read as follows:
<PAGE> 2
RESTATED CERTIFICATE OF INCORPORATION
OF
THE GEON COMPANY
___________________
FIRST: The name of the Corporation is:
THE GEON COMPANY
SECOND: The registered office of the Corporation in the State of
Delaware is located at 1209 Orange Street, City of Wilmington, County of
Newcastle. The name of its registered agent at such address is Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage, directly or
indirectly, in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware as from
time to time in effect.
FOURTH: The total authorized capital stock of the Corporation
shall be one hundred and ten million (110,000,000) shares consisting of one
hundred million (100,000,000) shares of common stock, par value ten cents
($.10) per share (the "Common Stock"), and ten million (10,000,000) shares of
series preferred stock, par value ten cents ($.10) per share (the "Series
Preferred Stock").
The preferences, relative, participating, optional or other
special rights, qualifications, limitations, restrictions, voting powers and
privileges of each class of the Corporation's capital stock shall be as
follows:
I. COMMON STOCK
(a) Issuance: Common Stock may be issued from time to time in
such amounts and for such purposes as shall be determined by the Board of
Directors of the Corporation.
(b) Voting Rights: Except as otherwise required by law and
the provisions of this Certificate of Incorporation and except as provided by
the resolution or resolutions of the Board of Directors creating or amending
any series
-2-
<PAGE> 3
of the Series Preferred Stock, the holders of the Common Stock of the
Corporation possess full voting power for the election of directors and for all
other purposes, and each holder thereof shall be entitled to one vote for each
share held by such holder.
(c) Dividends: Subject to the requirements of law, this
Certificate of Incorporation, as amended from time to time, and the resolution
or resolutions of the Board of Directors creating or modifying any series of
the Series Preferred Stock, the holders of Common Stock shall, after payment in
full of all dividends to which holders of the Series Preferred Stock shall be
entitled, be entitled to receive such dividends as and when the same may be
declared from time to time by the Board of Directors of the Corporation out of
funds legally available therefor.
(d) Liquidation: Subject to the requirements of law, this
Certificate of Incorporation, as amended from time to time, and the resolution
or resolutions of the Board of Directors creating or modifying any series of
the Series Preferred Stock, the holders of the Common Stock shall, in the event
of any liquidation, dissolution or other winding up of the Corporation, whether
voluntary or involuntary, and after all holders of the Series Preferred Stock
shall have been paid in full the amounts to which they respectively shall be
entitled, be entitled to receive all the remaining assets of the Corporation of
whatever kind, such assets to be distributed pro rata to the holders of the
Common Stock.
II. SERIES PREFERRED STOCK
(a) issuance: The Series Preferred Stock may be issued in such
one or more series as shall from time to time be created and authorized to be
issued by the Board of Directors as hereinafter provided.
(b) Authority Of the Board Of Directors: The Board of Directors
is hereby expressly authorized, by resolution or resolutions from time to time
adopted providing for the issuance of any series of the Series Preferred Stock,
to the extent not fixed by the provisions hereinafter set forth or otherwise
provided by law, to determine that any series of the Series Preferred Stock
shall be without voting powers and to fix and state the voting powers, full or
limited, if any, the designations, powers, preferences and relative,
participating, optional and other special rights, if any, of the shares of each
series of the Series Preferred Stock, and the qualifications, limitations and
restrictions thereof, including (but without limiting the generality of the
foregoing) any of the following:
(i) the number of shares to constitute such series (which number may
at any time, or from time to time, be increased or decreased by the
-3-
<PAGE> 4
Board of Directors, notwithstanding that shares of the series may be
outstanding at the time of such increase or decrease, unless the Board of
Directors shall have otherwise provided in creating such series) and the
distinctive name and serial designation thereof;
(ii) the annual dividend rate or rates and the date on which the
first dividend on shares of such series shall be payable and all subsequent
dividend payment dates;
(iii) whether dividends are to be cumulative or non-cumulative, the
participating or other special rights, if any, with respect to the payment of
dividends and the date from which dividends on all shares of such series
issued prior to the record date for the first dividend shall be cumulative
(such dividends shall be cumulative only if and to the extent set forth in a
certificate filed pursuant to law);
(iv) whether any series shall be subject to redemption and, if so,
the manner of redemption and the redemption price or prices for such series,
which may consist of a redemption price or scale of redemption prices appli-
cable only to redemption for a sinking fund (which terms as used in this
clause shall include any fund or provisions for the periodic purchase or
retirement of shares), and a different redemption price or scale of
redemption prices applicable to any other redemption;
(v) whether or not the shares of such series shall be subject to the
operation of a purchase, retirement or sinking fund, and, if so, whether such
purchase, retirement or sinking fund shall be cumulative or non-cumulative,
the extent to and the manner in which such fund shall be applied to the
purchase or redemption of the shares of such series for retirement or for
other corporate purposes and the terms and provisions relative to the
operation thereof;
(vi) the terms, if any, upon which shares of such series shall be
convertible into, or exchangeable for, or shall have rights to purchase or
other privileges to acquire shares of stock of any other class or of any
other series of the same or any other class, including the price or prices
or the rate or rates of conversion, exchange, purchase or acquisition and
the terms of adjustment, if any;
(vii) the limitations and restrictions, if any, to be effective while
any shares of such series are outstanding upon the payment of dividends or
making of other distributions on, and upon the purchase, redemption, or
-4-
<PAGE> 5
other acquisition of, the Common Stock or any other series or class of stock
of the Corporation ranking junior to the shares of such series, either as to
dividends or upon liquidation; and
(viii) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issuance of any additional
stock of any class (including additional shares of such series of the
Series Preferred Stock) ranking on a parity with or prior to the shares of
such series either as to dividends or upon liquidation.
Each share of each series of the Series Preferred Stock shall
have the same relative rights and be identical in all respect with all the
other shares of the same series, except that shares of any one series issued at
different times may differ as to the dates, if any, from which dividends
thereon shall be cumulative. Except as otherwise provided by law or specified
in this Article FOURTH, any series of the Series Preferred Stock may differ
from any other series with respect to any one or more of the voting powers,
designations, powers, preferences and relative, participating, optional and
other special rights, if any, and the qualifications, limitations and
restrictions thereof.
(c) Dividends: Before any dividends on any class of stock of the
Corporation ranking junior to the Series Preferred Stock (other than dividends
payable in shares of any class of stock of the Corporation ranking junior to
the Series Preferred Stock) shall be declared or paid or set apart for payment,
the holders of shares of each series of the Series Preferred Stock shall be
entitled to such cash dividends, but only when and as declared by the Board of
Directors out of funds legally available therefor, as they may be entitled to
in accordance with the resolution or resolutions adopted by the Board of
Directors providing for the issuance of such series, payable on such dates as
may be fixed in such resolution or resolutions.
(d) Liquidation: In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, before any
payment or distribution of the assets of the Corporation shall be made to or
set apart for the holders of shares of any class of stock of the Corporation
ranking junior to the Series Preferred Stock, the holders of the shares of each
series of the Series Preferred Stock shall be entitled to receive payment of
the amount per share fixed in the resolution or resolutions adopted by the
Board of Directors providing for the issuance of the shares of such series,
plus an amount equal to all dividends accrued thereon to the date of final
distribution to such holders. If, upon any liquidation, dissolution or winding
up of the Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of the shares of the Series
-5-
<PAGE> 6
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid, then such assets, or the proceeds thereof, shall be distributed
among such holders ratably in accordance with the respective amounts which
would be payable on such shares if all amounts payable thereon were paid in
full. For the purposes of this paragraph (d), the sale, conveyance, exchange
or transfer (for cash, shares of stock, securities or other consideration) of
all or substantially all of the property or assets of the Corporation or a
consolidation or merger of the Corporation with one or more corporations shall
not be deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary.
(e) The term "junior stock", as used in relation to the Series
Preferred Stock, shall mean the Common Stock and any other class of stock of
the Corporation hereafter authorized which by its terms shall rank junior to
the Series Preferred Stock as to dividends and as to the distribution of assets
on liquidation.
(f) Before the Corporation shall issue any shares of the Series
Preferred Stock of any series authorized as hereinbefore provided, a
certificate setting forth a copy of the resolution or resolutions with respect
to such series adopted by the Board of Directors of the Corporation pursuant to
the foregoing authority vested in said Board shall be made, filed and recorded
in accordance with the then applicable requirements, if any, of the laws of the
State of Delaware, or, if no certificate is then so required, such certificate
shall be signed and acknowledged on behalf of the Corporation by its Chief
Executive Officer, President or a Vice-President and its corporate seal shall
be affixed thereto and attested by its Secretary or an Assistant Secretary and
such certificate shall be filed and kept on file at the registered office of
the Corporation in the State of Delaware and in such other place or places as
the Board of Directors shall designate.
(g) Shares of any series of the Series Preferred Stock which
shall be issued and thereafter acquired by the Corporation through purchase,
redemption, conversion or otherwise, shall return to the status of authorized
but unissued shares of the Series Preferred Stock of the same series unless
otherwise provided in the resolution or resolutions of the Board of Directors.
Unless otherwise provided in the resolution or resolutions of the Board of
Directors providing for the issuance thereof, the number of authorized shares
of stock of any such series may be increased or decreased (but not below the
number of shares thereof then outstanding) by resolution or resolutions of the
Board of Directors and the filing of a certificate complying with the
requirements referred to in subparagraph (f) above. In case the number of
shares of any such series of the Series Preferred Stock shall be decreased, the
shares representing such decrease shall, unless otherwise provided in the
resolution or resolutions of the Board of Directors providing for the
issuance thereof,
-6-
<PAGE> 7
resume the status of authorized but unissued shares of the Series Preferred
Stock, undesignated as to series.
FIFTH: The business of the Corporation shall be managed under the
direction of the Board of Directors except as otherwise provided by law. The
number of Directors of the Corporation shall be fixed from time to time by, or
in the manner provided in, the By-Laws. Election of Directors need not be by
written ballot unless the By-Laws of the Corporation shall so provide. The
Board of Directors may make, alter or repeal the By-Laws of the Corporation
except as otherwise provided in the By-Laws adopted by the Corporation's
stockholders.
SIXTH: TRANSACTIONS WITH STOCKHOLDERS
A. Certain Purchases of Shares of the Corporation
Any direct or indirect purchase or other acquisition by the
Corporation of shares of any class of the Corporation's stock from any person
or persons known by the Corporation to be an Interested Stockholder (as
hereinafter defined) who has beneficially owned, directly or indirectly, any
such securities for less than two years prior to the date of such purchase or
any agreement in respect thereof shall, except as hereinafter expressly
provided, requires the approval of a majority of the non-officer directors of
the Corporation and the affirmative vote, to be solicited at the expense of
such Interested Stockholder, of not less than a majority of the votes entitled
to be cast by the holders of all then outstanding shares of Voting Stock (as
hereinafter defined), voting together as a single class. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or
that a lesser percentage or separate class vote may be specified, by law or any
other provision of this Certificate of Incorporation or the By-Laws of the
Corporation or otherwise. Notwithstanding the foregoing, no such affirmative
vote shall be required with respect to:
(a) any offer to purchase made by the Corporation which is made
on the same terms and conditions to holders of all shares of the same class of
stock of the Corporation, and
(b) any purchase by the Corporation of its stock at a price no
higher than the higher of (i) the Closing Price (as hereinafter defined) on the
on trading date immediately preceding the earlier of public disclosure of the
repurchase or the signing of a definitive repurchase agreement and (ii) the
average Closing Price during the 20 trading days immediately preceding the date
of such disclosure or agreement.
-7-
<PAGE> 8
The term "Closing Price" on the day in question means the
closing sale price on such day of a share of the Corporation's stock on the
Composite Tape for New York Stock Exchange-Listed Stocks, or, if the stock is
not quoted on the Composite Tape, on the New York Stock Exchange, Inc. or if
the stock is not listed on the New York Stock Exchange, Inc., on the principal
United States Securities Exchange registered under the Securities Exchange Act
of 1934 (the 'Exchange Act"), on which the stock is listed, or if the stock is
not listed on any such exchange, the highest closing bid quotation with respect
to a share of the stock on the National Association of Securities Dealers, Inc.
Automated Quotation System or any similar system then in use, or if no such
quotations are available, the market value of the stock as determined in good
faith by a majority of the non-officer directors of the Corporation present at
a meeting of the Board of Directors at which a quorum is present.
B. Business Combinations with Substantial Stockholders
In addition to any affirmative vote required by law or this
Certificate of Incorporation or the By-Laws of the Corporation, and except as
otherwise expressly provided in Section C of this Article SIXTH, a Business
Combination (as hereinafter defined) shall require the affirmative vote of not
less than eighty percent (80%) of the votes entitled to be cast by the holders
of all then outstanding shares of Voting Stock, voting together as a single
class. Such affirmative vote shall be required notwithstanding the fact that
no vote may be required, or that a lesser percentage or separate class vote may
be specified, by law or any other provision of this Certificate of
Incorporation or the By-Laws of the Corporation or otherwise.
C. When Higher Vote is Not Required
The provisions of Section B of this Article SIXTH shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is required by
law or by any other provision of this Certificate of Incorporation or the
By-Laws of the Corporation, if all of the conditions specified in either of the
following Paragraphs I or 2 are met:
1. APPROVAL BY DISINTERESTED DIRECTORS. The Business
Combination shall have been recommended by a majority (whether such
recommendation is made prior to or subsequent to the acquisition of beneficial
ownership of the Voting Stock that caused the Substantial Stockholder (as
hereinafter defined) to become a Substantial Stockholder) of the Disinterested
Directors (as hereinafter defined) present at a meeting of the Board of
Directors at which a quorum is present.
-8-
<PAGE> 1
Exhibit 4.1
[Artwork]
COMMON STOCK COMMON STOCK
============== ==============
N U M B E R S H A R E S
GC
============== ==============
PAR VALUE $0.10 PER SHARE PAR VALUE $0.10 PER SHARE
[LOGO]
THE GEON COMPANY
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that CUSIP 37246W 10 5
SEE REVERSE SIDE FOR CERTAIN DEFINITIONS
is the owner of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF THE GEON COMPANY
transferable on the books of the Company in person or by attorney upon
surrender of this Certificate properly endorsed. This Certificate is
not valid unless countersigned by a Transfer Agent and registered by a
Registrar. Witness the seal of the Company and the signatures of
its duly authorized officers.
DATED:
[THE GEON COMPANY CORPORATE SEAL]
/s/ Illegible Signature /s/ Illegible Signature
Vice President, General Chairman of the Board
Counsel and Secretary President and Chief
Executive Officer
Countersigned and Registered
THE BANK OF NEW YORK
By: Transfer Agent and Registrar
Authorized Signature
<PAGE> 2
THE GEON COMPANY
WITHIN FIVE DAYS AFTER RECIEPT OF A WRITTEN REQUEST THEREFOR, THE
COMPANY WILL MAIL WITHOUT CHARGE TO ANY SHAREHOLDER A COPY OF THE EXPRESS TERMS
OF THE SHARES REPRESENTED BY THIS CERTIFICATE AND OF EACH CLASS AND SERIES OF
SHARES WHICH THE COMPANY IS AUTHORIZED TO ISSUE. ANY SUCH WRITTEN REQUEST
SHOULD BE DIREECTED TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE,
6100 OAK TREE BOULEVARD, INDEPENDENCE, OHIO 44131.
This Certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between the Company and the
financial institution named therein as Rights Agent (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such Rights may be
redeemed, may expire, may be amended or may be evidenced by seperate
certificates and no longer be evidenced by this Certificate. Under certain
circumstances, Rights beneficially owned by an Aquiring Person or any Affliate
or Associate thereof (as such terms are defined in the Rights Agreement) and
any subsequent holder of such Rights may become null and void. The Company
will mail to the holder of this Certificate a copy of the Rights Agreement
without charge within five business days after receipt of a written request
therefor.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - .......Custodian.......
(CUST) (MINOR)
TEN ENT - as tenants by the entireties under Uniform Transfer to Minors
JT TEN - as joint tenants with right
of survivorship and not as Act...................
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value recieved,________ hereby sell, assign and transfer unto
PLEASSE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE
- --------------------------------
| |
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ----------------------------------------------------------------------- Shares
of the Common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
--------------------------------------------
- ------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated,
-----------------------------
-------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGE-
MENT, OR ANY CHANGE WHATEVER.
Signature Guaranteed
---------------------------------------------------------
<PAGE> 1
Exhibit 4.3
- --------------------------------------------------------------------------------
THE GEON COMPANY
and
THE BANK OF NEW YORK,
Rights Agent
----------------
Rights Agreement
Dated as of May 28, 1993
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 5
Section 3. Issue of Rights Certificates 6
Section 4. Form of Rights Certificates 8
Section 5. Countersignature and Registration 9
Section 6. Transfer, Split Up, Combination and
Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights
Certificates 10
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights 11
Section 8. Cancellation and Destruction of Rights
Certificates 14
Section 9. Reservation and Availability of Capital
Stock 14
Section 10. Capital Stock Record Date 16
Section 11. Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights 17
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares 28
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power 29
Section 14. Fractional Rights and Fractional Shares 32
Section 15. Rights of Action 34
Section 16. Agreement of Rights Holders 34
Section 17. Rights Certificate Holder Not Deemed a
Stockholder 35
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 18. Concerning the Rights Agent 36
Section 19. Merger or Consolidation or Change of Name
of Rights Agent 36
Section 20. Duties of Rights Agent 37
Section 21. Change of Rights Agent 40
Section 22. Issuance of New Rights Certificates 41
Section 23. Redemption and Termination 41
Section 24. Notice of Certain Events 43
Section 25. Notices 44
Section 26. Supplements and Amendments 44
Section 27. Successors 46
Section 28. Determinations and Actions by the Board of
Directors, etc 46
Section 29. Benefits of this Agreement 46
Section 30. Severability 47
Section 31. Governing Law 47
Section 32. Counterparts 47
Section 33. Descriptive Headings 47
Exhibit A - Form of Certificate of Designations of Series A
Junior Participating Preferred Shares
Exhibit B - Form of Rights Certificate
Exhibit C - Form of Summary of Rights
</TABLE>
(ii)
<PAGE> 4
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of May 28, 1993 (the "Agreement"), between
The Geon Company, a Delaware corporation (the "Company"), and The Bank of New
York, a New York banking corporation (the "Rights Agent") .
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, on March 31, 1993 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of common stock, par value $.10 per
share, of the Company (the "Common Shares") outstanding at the close of
business on May 28, 1993 (the "Record Date"), and has authorized the
issuance of one Right (as such number may be hereinafter adjusted pursuant to
the provisions of Section 11(p) hereof) for each Common Share issued or
delivered (whether originally issued or delivered from treasury) between the
Record Date and the Distribution Date (as such term is hereinafter defined)
and as otherwise provided herein, each Right initially representing the right
to purchase one five-hundredth of a Preferred Share (as herein-after defined)
having the rights, powers and preferences set forth in the form of Certificate
of Designations, Preferences and Rights attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth (individually a
"Right" and collectively the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such term
is hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, shall be the Beneficial Owner (as such term is hereinafter
defined) of 15% or more of the Common Shares then outstanding, but shall not
include (1) the Company, (2) any
<PAGE> 5
Subsidiary of the Company, (3) any Exempt Person, (4) any employee benefit
plan or employee stock plan of the Company or of any Subsidiary of the Company,
or any Person, trust or other entity organized, appointed or established or
holding Common Shares for or pursuant to the terms of any such plan, (5) any
Person or group whose ownership of 15% or more of the Common Shares then
outstanding results solely from a reduction in the number of issued and
outstanding Common Shares pursuant to a transaction or transactions approved by
the Board of Directors (provided that any Person or group that does not become
an Acquiring Person by reason of the application of the immediately preceding
clause shall become an Acquiring Person upon acquisition of any additional
Common Shares of the Company unless such acquisition of additional Common
Shares would not result in such Person or group becoming an Acquiring Person by
reason of such immediately preceding clause.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to beneficially own, any securities :
(i) which such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right or obligation to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of, or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (B) at any
time prior to the occurrence of a Triggering Event, securities issuable
upon exercise of the Rights, or (C) from and after the occurrence of a
Triggering Event, securities issuable upon exercise of Rights which were
acquired by such Person or any of such Person's Affiliates or Associates
prior to the Distribution Date or pursuant to Section 3(a) or Section 22
hereof (the "Original Rights") or pursuant to Section
-2-
<PAGE> 6
11(i) hereof in connection with an adjustment made with respect to any
Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act and any successor
provision thereof), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
any security under this subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a revocable proxy
given in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the General Rules
and Regulations under the Exchange Act, and (B) is not also then reportable
by such person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), but excluding
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities until the
expiration of forty days after the date of such acquisition, for the
purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in the proviso to subparagraph (ii) of this paragraph
(c)) or disposing of any voting securities of the Company.
(d) "BFG" shall mean The B.F.Goodrich Company, a New York corporation.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of Ohio are authorized or
obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00 P.M., Eastern
time, on such date; provided, however, that if such date is not a Business
Day it shall mean
-3-
<PAGE> 7
5:00 P.M., New York time, on the next succeeding Business Day.
(g) "Common Shares" shall mean the common stock, par value $.10 per
share, of the Company, except that "Common Shares" when used with reference to
any Person other than the Company shall mean the capital shares of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Continuing Director" shall mean (i) any member of the Board of
Directors of the Company, while such Person is a member of the Board, who is
not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person,
or a representative of an Acquiring Person or of any such Affiliate or
Associate, and was a member of the Board prior to the date of this Agreement,
or (ii) any Person who subsequently becomes a member of the Board, while such
Person is a member of the Board, who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, if such Person's
nomination for election or election to the Board is recommended or approved by
a majority of the Continuing Directors.
(i) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
(j) "Exempt Person" shall mean BFG and its Affiliates and any
Person to whom BFG transfers beneficial ownership of 10% or more of the
Common Shares then outstanding and any of such transferee's Affiliates.
Notwithstanding the foregoing, an Exempt Person (and such Exempt Person's
Affiliates) shall permanently lose its status as an Exempt Person at such time
as such Exempt Person and such Exempt Person's Affiliates beneficially own less
than 10% of the outstanding Common Shares.
(k) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(l) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(m) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
-4-
<PAGE> 8
(n) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.10 per share, of the Company having
the rights and preferences set forth in the form of Certificate of
Designations, Preferences and Rights attached to this Agreement as Exhibit A.
(o) "Preferred Share Fraction" shall mean one five-hundredth of a
Preferred Share.
(p) "Record Date" shall have the meaning set forth in the first WHEREAS
clause.
(q) "Section 11(a) (ii) Event" shall mean the event described in
Section 11(a) (ii) hereof.
(r) "Section 13 Event" shall mean any event described in clause (x),
(y) or (z) of Section 13(a) hereof.
(s) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person, that an Acquiring Person has become such.
(t) "Subsidiary" shall mean, with reference to any other Person, any
corporation or other entity of which securities or other ownership interest
having ordinary voting power, in the absence of contingencies, to elect at
least a majority of the directors or other persons performing similar functions
is beneficially owned, directly or indirectly, by such Person, or which is
otherwise controlled by such Person.
(u) "Triggering Event" shall mean any Section 11(a) (ii) Event or any
Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable upon five days prior written notice to the Rights Agent.
The Rights Agent shall have no duties to supervise, and shall in no event be
liable for, the acts or omissions of, any such Co-Rights Agent.
-5-
<PAGE> 9
Section 3. ISSUE OF RIGHTS CERTIFICATES. (a) Until the close of
business on the earlier of (i) the tenth day after the Stock Acquisition Date
(or, if the tenth day after the Stock Acquisition Date occurs before the Record
Date, the close of business on the Record Date) or (ii) the tenth business day
(or such later date as may be determined by the Company's Board of Directors)
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any Exempt Person, any employee benefit
plan or employee stock plan of the Company or of any Subsidiary of the Company,
or any Person, trust or other entity organized, appointed or established or
holding Common Shares for or pursuant to the terms of any such plan) is first
published or sent or given within the meaning of Rule 14d-2 (a) of the General
Rules and Regulations under the Exchange Act, if upon consummation thereof,
such Person would be the Beneficial Owner of 15% or more of the Common Shares
then outstanding (the earlier of (i) and (ii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for the
Common Shares registered in the names of the holders of the Common Shares
(which certificates for Common Shares shall be deemed also to be certificates
for Rights) and not by separate certificates, and (y) the Rights will
be transferable only in connection with the transfer of the underlying Common
Shares (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Rights Agent will send, at the Company's expense, by
first-class, postage prepaid mail, to each record holder of the Common Shares
as of the close of business on the Distribution Date, at the address of such
holder shown on the records of the Company, one or more Rights Certificates, in
substantially the form of Exhibit B hereto (individually a "Rights
Certificate" and collectively the "Rights Certificates"), evidencing
one Right for each Common Share so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per Common
Share has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a)
hereof) so that Rights Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Rights. As
of and after the Distribution Date, the Rights will be evidenced solely by
Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of
-6-
<PAGE> 10
Rights, in substantially the form attached hereto as Exhibit C (the "Summary of
Rights"), by first-class, postage prepaid mail, to each record holder of Common
Shares as of the close of business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to certificates for
the Common Shares outstanding on or after the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates for the
Common Shares with or without a copy of the Summary of Rights attached thereto
and the registered holders of the Common Shares shall also be the registered
holders of the associated Rights. Until the earlier of the Distribution Date
or the Expiration Date, the transfer of any certificates representing Common
Shares with or without a copy of the Summary of Rights attached thereto in
respect of which Rights have been issued shall also constitute the transfer of
the Rights associated with such Common Shares.
(c) Rights shall be issued in respect of all Common Shares which are
issued after the Record Date but prior to the earlier of the Distribution Date
or the Expiration Date. Certificates issued after the Record Date, but prior
to the earlier of the Distribution Date or the Expiration Date, shall also be
deemed to be certificates for Rights. Certificates issued after May 6, 1993,
but prior to the earlier of the close of business on the Distribution Date or
the Expiration Date shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between the Company
and the financial institution named therein as Rights Agent (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal executive offices of the
Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be redeemed, may expire, may be amended or may
be evidenced by separate certificates and no longer be evidenced by this
Certificate. Under certain circumstances, Rights beneficially owned by an
Acquiring Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) and any subsequent holder of such Rights
may become null and void. The Company will mail to the holder of this
Certificate a copy of the Rights Agreement without charge within five
business days after receipt of a written request therefor.
-7-
<PAGE> 11
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Shares represented by such certificates shall be evidenced by
such certificates alone and registered holders of Common Shares shall also be
the registered holders of the associated Rights, and the transfer of any of
such Certificates shall also constitute the transfer of the Rights associated
with the Common Shares represented by such Certificates.
Section 4. FORM OF RIGHTS CERTIFICATES. (a) The Rights Certificates
(and the forms of election to purchase and of assignment to be printed on the
reverse thereof) shall each be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of the Record Date
and on their face shall entitle the holders thereof to purchase such number of
Preferred Share Fractions as shall be set forth therein at the price set forth
therein (such exercise price per Preferred Share Fraction, the "Purchase
Price"), but the number of such Preferred Share Fractions purchased upon the
exercise of each Right and the Purchase Price thereof shall be subject to ad-
justment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights that are beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any. such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement, or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is
-8-
<PAGE> 12
part of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of Section 7(e) hereof, and any Rights Certificate issued
pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this sentence,
shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in
the Rights Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances specified
in Section 7(e) of the Rights Agreement.
The Company shall instruct the Rights Agent in writing of the Rights which
should be so legended and shall supply the Rights Agent with such legended
Rights Certificates.
The provisions of Section 7(e) of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Rights Certificates.
Section 5. COUNTERSIGNATURE AND REGISTRATION. (a) The Rights
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Rights
Certificates shall be countersigned manually by an authorized signatory of the
Rights Agent (which need not be the same authorized signatory for all of the
Rights Certificates), and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by an authorized signatory of the Rights Agent and issuance
and delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights
-9-
<PAGE> 13
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or office in New York, New York
designated in Section 25 hereof, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the certificate
number of each of the Rights Certificates, the number of Rights evidenced on
its face by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED. DESTROYED. LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section
14 hereof, at any time after the close of business on the Distribution Date,
and at or prior to the close of business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined
or exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase (or receive) a like number of Preferred Share
Fractions (or, following a Triggering Event, Common Shares, other securities,
cash or other assets, as the case may be) as the Rights Certificate or
Certificates surrendered then entitled such holder or holders in the case of a
transfer to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment set forth on the reverse
side of each such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof, along with a signature guarantee and such
other and further documentation as the Rights Agent and the Company may
reasonably request. Thereupon, the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the
Person entitled thereto a Rights Certificate or Rights Certificates, as
-10-
<PAGE> 14
the case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Rights Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Rights
Certificate, if mutilated, along with a signature guarantee and such other and
further documentation as the Rights Agent and the Company may reasonably
request, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS. (a) Subject to subsection (e) of this Section, the registered holder
of any Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section 11(a) (iii)
and Section 23(b) hereof) in whole or in part at any time after the
Distribution Date upon surrender of the Rights Certificate, with the form of
election to purchase set forth on the reverse side thereof and the certificate
contained therein duly executed, to the Rights Agent at the office or offices
of the Rights Agent designated for such purpose, along with a signature
guarantee and such other and further documentation as the Rights Agent and the
Company may reasonably request, together with payment of the Purchase Price
(except as provided in Section 11(q) hereof) with respect to each surrendered
Right for the total number of Preferred Share Fractions (or Common Shares or
other securities or property, as the case may be) as to which such surrendered
Rights are exercisable, at or prior to the earlier of (i) the close of
business on May 27, 2003 (the "Final Expiration Date"), or (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof (the earlier of
(i) or (ii) being herein referred to as the "Expiration Date") .
(b) The Purchase Price for each Preferred Share Fraction pursuant to
the exercise of a Right shall initially
-11-
<PAGE> 15
be $100, and shall be subject to adjustment from time to time as provided in
Section 11 and Section 13(a) hereof and shall be payable in accordance with
subsection (c) of this Section.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase set forth on the reverse side
thereof and the certificate contained therein duly executed, accompanied by
payment (except as provided in Section 11(q) hereof), with respect to each
Right so exercised, of the Purchase Price per Preferred Share Fraction (or
Common Shares or other securities or property, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer
tax, the Rights Agent shall, subject to Section 20(k) and Section 14(b),
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares (or make available, if the Rights Agent is the transfer agent for the
Preferred Shares) certificates for the total number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests subject to applicable law, or (B) if the
Company shall have elected to deposit the total number of Preferred Shares
issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of Preferred Share Fractions as are to be purchased (in which case
certificates for Preferred Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company will
direct the depositary agent to comply with such request, (ii) requisition from
the Company the amount of cash, if any, to be paid in lieu of fractional
Preferred Share Fractions in accordance with Section 14 hereof, (iii) after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) shall be made in cash or by certified bank check or money
order payable to the order of the Company. In the event that the Company is
obligated to issue other securities (including Common Shares) of the Company,
pay cash and/or distribute other property pursuant to Section 11(a) hereof,
the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate.
-12-
<PAGE> 16
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a) (ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Company has determined is part of
a plan, arrangement or understanding which has as a primary purpose or effect
the avoidance of this Section 7(e), shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall
have (i) completed and signed the certificate contained in the form of election
to purchase set forth on the reverse side of the Rights Certificate surrendered
for such exercise and (ii) provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or
-13-
<PAGE> 17
Affiliates or Associates thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall cancel and retire, any other Rights Certificate purchased or
acquired by the Company, otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or
shall, at the written request of the Company, (i) destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company or (ii) deliver such cancelled Rights Certificates to
the Company for destruction.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK. (a)
The Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares (and following
the occurrence of a Triggering Event, out of its authorized and unissued Common
Shares and/or other securities or out of its. authorized and issued shares held
in treasury) the number of Preferred Shares (and following the occurrence of a
Triggering Event, Common Shares and/or other securities) that, as provided in
this Agreement including Section 11(a) (iii) hereof, will be sufficient to
permit the exercise in full of all outstanding Rights.
(b) So long as the Preferred Shares (and following the occurrence of a
Triggering Event, Common Shares and/or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable (and the Company reasonably
anticipates that a Right may be exercised), all shares (or other securities)
reserved for such issuance to be listed on such exchange upon official notice
of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date
-14-
<PAGE> 18
after the first occurrence of a Section 11(a) (ii) event on which the
consideration to be delivered by the Company upon exercise of the Rights has
been determined pursuant to this Agreement (including in accordance with
Section 11(a) (iii) hereof), or as soon as is required by law or regulation
following the Distribution Date, as the case may be, a registration statement
under the Securities Act of 1933, as amended (the "Act"), with respect to the
Common Shares or other securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the date of the
expiration of the Rights. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or blue sky
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file
such registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement (a copy of which
shall be promptly delivered to the Rights Agent) stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained or the exercise thereof would be
in violation of applicable law. Unless the Rights Agent has received notice of
a suspension, the Rights Agent may assume that any Right exercised is permitted
to be exercised under applicable law and shall have no liability for acting in
reliance upon such assumption.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (and following the
occurrence of a Triggering Event, Common Shares and/or other securities)
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price except as otherwise provided in Section 11(q)
hereof), be duly and validly authorized and issued and fully paid and
nonassessable.
-15-
<PAGE> 19
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates
and of any certificates for a number of Preferred Share Fractions (or Common
Shares or other securities, as the case may be) upon the exercise of Rights.
The Company shall not, however, be required to pay any transfer tax which may
be payable in respect of any transfer or delivery of Rights Certificates to a
person other than, or the issuance or delivery of a number of Preferred Share
Fractions (or Common Shares or other securities, as the case may be) in respect
of a name other than that of, the registered holder of the Rights Certificates
evidencing Rights surrendered for exercise or to issue or deliver any
certificates for a number of Preferred Share Fractions (or Common Shares and/or
other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have
been paid (any such tax being payable by the holder of such Rights Certificates
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. CAPITAL STOCK RECORD DATE. Each person in whose name
any certificate for a number of Preferred Share Fractions (or Common Shares
or other securities, as the case may be) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of such
Preferred Share Fractions (or Common Shares and/or other securities, as
the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; PROVIDED, however, that if the date of such surrender and
payment is a date upon which the Preferred Share (or Common Share and/or other
security, as the case may be) transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares
(fractional or otherwise) on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Share (or Common Share and/or
other security, as the case may be) transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares (fractional or otherwise) for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any
-16-
<PAGE> 20
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in shares
of Preferred Shares or other capital stock, (B) subdivide the
outstanding Preferred Shares, (C) combine the outstanding Preferred Shares
into a smaller number of shares, or (D) issue any share of its capital stock
in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) , except as otherwise
provided in Section 11(a) (ii) and Section 7(e) hereof, the Purchase Price in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification, and the number and
kind of Preferred Shares or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares of
Preferred Shares or capital stock, as the case may be, which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Shares (or other capital stock, as the case may be) transfer books of the
Company were open, he would have owned upon such exercise and been entitled
to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both this Section 11(a) (i) and Section 11(a) (ii) hereof, the adjustment
provided for in this Section 11(a) (i) shall be in addition to, and shall be
made prior to any adjustment required pursuant to Section 11(a) (ii) hereof.
(ii) In the event any Person shall become an Acquiring Person, unless
the event causing such Person to become an Acquiring Person is a Section 13
Event, or is an acquisition of Common Shares pursuant to a tender offer or
exchange offer for all outstanding shares of Common Shares at a price and on
terms determined by at least a majority of the members of the Board of
Directors who are not officers of the
-17-
<PAGE> 21
Company and who are not representatives, nominees, Affiliates or Associates of
an Acquiring Person, after receiving advice from one or more investment banking
firms, to be (a) at a price which is fair to stockholders (taking into account
all factors which such members of the Board deem relevant including, without
limitation, prices which could reasonably be achieved if the Company or its
assets were sold on an orderly basis designed to realize maximum value) and (b)
otherwise in the best interests of the Company and its stockholders, then,
promptly following five (5) days after the date of the occurrence of the event
described in Section 11(a) (ii) hereof, proper provision shall be made so that
each holder of a Right (except as provided in Section 11(a) (iii), and in
Section 7(e) hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms
of this Agreement, in lieu of a number of Preferred Share Fractions, such
number of Common Shares of the Company as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the then number of
Preferred Share Fractions for which a Right was exercisable by such holder
immediately prior to the first occurrence of a Section 11(a) (ii) Event, and
(y) dividing that product (such product, following such first occurrence, shall
thereafter be referred to as the Purchase Price for each Right and for all
purposes of this Agreement) by 50% of the current market price (determined
pursuant to Section 11(d) hereof) per Common Share on the date of such first
occurrence (such number of Common Shares is herein called the "Adjustment
Shares") .
(iii) In the event that the number of Common Shares which are
authorized but not outstanding or reserved for issuance for purposes other than
upon exercise of the Rights is not sufficient to permit the exercise in full of
the Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company shall: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current Value")
over (2) the Purchase Price (such excess, the "Spread"), and (B) with respect
to each Right, make adequate provision to substitute for the Adjustment Shares,
upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) Common Shares or other equity securities of the Company
(including, without limitation, preferred shares, or units of preferred shares,
which the Board of Directors of the Company has deemed to be substantially
economically equivalent to the Common Shares (such preferred shares, "common
stock equivalents")), (4) debt securities of the Company, (5) other assets,
or (6) any combination of the
-18-
<PAGE> 22
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the majority of the Continuing Directors
in the office at the time after considering the advice of a nationally
recognized investment banking firm selected by the Board of Directors of the
Company; provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30)
days following the first occurrence of (x) a Section 11(a) (ii) Event or (y)
the date on which the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the "Section
11(a) (ii) Trigger Dates"), then the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring payment of the
Purchase Price, Common Shares (to the extent available) and then, if necessary,
cash, which cash and/or shares have an aggregate value equal to the Spread. If
the Continuing Directors of the Company shall determine in good faith that it
is likely that sufficient additional Common Shares could be authorized for
issuance upon exercise in full of the Rights, the thirty (30) day period set
forth above may be extended by resolution of the Board of Directors of the
Company to the extent necessary, but not more than ninety (90) days following
the first occurrence of a Section 11(a) (ii) Trigger Date, in order that the
Company may seek stockholder approval for the authorization of such additional
shares (such period, as it may be extended, the "Substitution Period") . To
the extent that the Company determines that some action need be taken pursuant
to the first and/or second sentences of this Section 11(a)(iii), the Company
(x) shall provide subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights have been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(e) (iii),
the value of the Common Shares shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of Common Shares on the Section
11(a) (ii) Trigger Date and the value of any common stock equivalents shall be
deemed to have the same value as the Common Shares on such date.
-19-
<PAGE> 23
(iv) If the rules of the national securities exchange, registered as
such pursuant to Section 6 of the Exchange Act, or of the national securities
association, registered as such pursuant to Section 15A of the Exchange Act, on
which the Common Shares are principally traded would prohibit such exchange
or association from listing or continuing to list, or from authorizing for
or continuing quotation and/or transaction reporting through an
inter-dealer quotation system, the Common Shares or other equity securities of
the Company if the Rights were to be exercised for Common Shares in accordance
with subparagraph (ii) of this Section 11(a) because such issuance would
nullify, restrict or disparately reduce the per share voting rights of holders
of Common Shares or for any other reason, the Company shall: (A) determine the
Spread, and (B) with respect to each Right, make adequate provision to
substitute for the Adjustment Shares, upon payment of the applicable Purchase
Price, (1) cash, (2) equity securities of the Company, including, without
limitation, "common stock equivalents," other than securities which would
have the effect of nullifying, restricting or disparately reducing the per
share voting rights of holders of Common Shares or otherwise cause the
prohibition described above, (3) debt securities of the Company, (4) other
assets, or (5) any combination of the foregoing, having an aggregate value
equal to the Current Value, where such aggregate value has been determined by
the Continuing Directors of the Company after considering the advice of a
nationally recognized investment banking firm selected by the Board of
Directors of the Company; provided, however, if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within thirty
(30) days following the Section 11(a) (ii) Trigger Date, then the Company shall
be obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, cash having an aggregate value equal
to the Spread. To the extent that the Company determines that an action needs
to be taken pursuant to the first sentence of this Section 11(a) (iv), the
Company (x) shall provide, subject to Section 7(e), that such action shall
apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights, but not longer than ninety (90) days after the
Section 11 (a) (ii) Trigger Date, in order to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement (a copy of which shall be delivered promptly to the Rights
Agent) stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at
-20-
<PAGE> 24
such time as the suspension is no longer in effect. For purposes of this
Section 11(a) (iv), the value of the Common Shares shall be the current market
price (as determined pursuant to Section 11(d) hereof) per share of Common
Shares on the Section 11(a) (ii) Trigger Date and the value of any "common
stock equivalent" shall be deemed to have the same value as the Common Shares
on such date.
(b) In case the Company shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Shares entitling them to subscribe for or purchase (for a period expiring
within forty-five (45) calendar days after such record date) Preferred
Shares, (or shares having the same rights, privileges and preferences
as the Preferred Shares ("equivalent preferred stock")) or securities
convertible into Preferred Shares or equivalent preferred stock at a price per
Preferred Share or equivalent preferred stock (or having a conversion price
per share, if a security convertible into Preferred Shares or equivalent
preferred stock) less than the current market price (as determined pursuant to
Section 11(d) hereof) per Preferred Share on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date, plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number
of Preferred Shares outstanding on such record date, plus the number of
additional Preferred Shares and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible securities to be
offered are initially convertible). In case such subscription price may be
paid by delivery of consideration part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and the holders of the Rights. Preferred Shares owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such rights or
warrants are not so issued, the Purchase Price
-21-
<PAGE> 25
shall be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the Company is the con-
tinuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend paid out of the earnings or retained earnings of the
Company) , assets (other than a dividend payable in Preferred Shares, but
including any dividend payable in shares other than Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the current
market price (as determined pursuant to Section 11(d) hereof) per Preferred
Share on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
cash, assets or evidences of indebtedness to be distributed or of such
subscription rights or warrants applicable to a share of Preferred Shares and
the denominator of which shall be such current market price (as determined
pursuant to Section 11(d) hereof) per share of preferred stock. Such
adjustments shall be made successively whenever such a record date is fixed,
and in the event that such distribution is not made, the Purchase Price shall
be adjusted to be the Purchase Price which would have been in effect if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a) (iii) hereof, the "current market
price" per Common Share on any date shall be deemed to be the average of the
daily closing prices per share of Common Shares for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a) (iii)
hereof, the current market prices per Common Share on any date shall be deemed
to be the average of the daily closing prices per Common Share for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
that in the event that the then current market price per Common Share is
determined during a period following the announcement by the issuer of such
Common Shares of (i) any dividend or distribution on such Common Shares payable
in such Common
-22-
<PAGE> 26
Shares or securities convertible into shares of Common Shares (other than the
Rights), (ii) any subdivision, combination or reclassification of such Common
Shares, and prior to the expiration of the requisite thirty (30) Trading Day or
ten (10) Trading Day period, as set forth above, after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, in each such case, the current market
prices shall be properly adjusted to take into account ex-dividend trading.
The closing price for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Common Shares are
not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Common Shares are listed or admitted to trading or, if the Common Shares are
not listed or admitted to trading on any national securities exchange, the last
quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
or such other system then in use, or, if on any such date the Common Shares are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Common Shares selected by the Board of Directors of the Company. If on any
such date no market maker is making a market in the Common Shares, the fair
value of such shares on such date as determined in good faith by the Board of
Directors of the Company shall be used and shall be conclusive for all
purposes. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the Common Shares are listed or admitted
to trading is open for the transaction of business or, if the Common Shares are
not listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Shares are not publicly held or not so listed or
traded, "current market prices per share" shall mean the fair value per share
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
-23-
<PAGE> 27
(ii) For the purpose of any computation hereunder, the "current market
price" per Preferred Share shall be determined in the same manner as set forth
above for the Common Shares in Section 11(d) (i) (other than the last sentence
thereof). If the current market price per Preferred Share cannot be
determined in the manner provided above or if the Preferred Shares are not
publicly held or listed or traded in a manner described in Section 11(d) (i),
the "current market price" per Preferred Share shall be conclusively deemed
to be an amount equal to 500 (as such number may be appropriately adjusted for
such events as stock splits, stock dividends and recapitalizations with respect
to the Common Shares occurring after the date of this Agreement) multiplied by
the current market price per Common Share. If neither the Common Shares nor
the Preferred Shares are publicly held or so listed or traded, "current market
price" per Preferred Share shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive
for all purposes. For all purposes of this Agreement, the "current market
price" of a Preferred Share Fraction shalt be equal to the "current market
price" of one Preferred Share divided by 500.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be
made to the nearest cent or to the nearest one ten-thousandth of a Common Share
or other share or one five-millionth of a Preferred Share, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any capital shares other than Preferred Shares, thereafter
the number of such other shares receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Shares contained in Sections 11(a),
-24-
<PAGE> 28
(b), (c), (e), (g), (h), (i), (j), (k) and (m) hereof, and the provisions of
Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares shall
apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Preferred Share
Fractions (or other consideration, as the case may be) purchasable from time
to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of Preferred Share
Fractions (calculated to the nearest one five-millionth) obtained by (i)
multiplying (x) the number of Preferred Share Fractions covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately
after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of Preferred Share Fractions purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of Preferred Share
Fractions for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number
of Rights shall become that number of Rights (calculated to the nearest one
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time,
the amount of the adjustment to be made. This record date may be the date on
which the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public
-25-
<PAGE> 29
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for
herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Preferred Share Fractions issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may continue
to express the Purchase Price per Preferred Share Fraction and the number of
Preferred Share Fractions which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of
Preferred Share Fractions issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
and nonassessable such number of Preferred Share Fractions at such adjusted
Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, the issuance to the holder of any Right exercised after such record date
of the number of Preferred Share Fractions and other capital shares or
securities of the Company, if any, issuable upon such exercise over and above
the number of Preferred Share Fractions and other capital shares and securities
of the Company, if any, issuable upon
-26-
<PAGE> 30
such exercise on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares of Common Shares and other capital shares or
securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and
to the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Shares, (ii) issuance for each of any Preferred
Share at less than the current market price, (iii) issuance wholly for cash of
Preferred Shares or securities which by their terms are convertible into or
exchangeable for Preferred Shares, (iv) stock dividends or (v) issuance of
rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holder of its Preferred Shares shall not be taxable to such
stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer),
in one transaction or a series of related transactions, assets or earning
power aggregating more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to, any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more transactions
each of which complies with Section 11(o) hereof), if (x) at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the shareholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
-27-
<PAGE> 31
(o) The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken
it is reasonably foreseeable that such action will diminish substantially or
eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the date of this Agreement and
prior to the Distribution Date (i) declare a dividend on the outstanding Common
Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares,
or (iii) combine the outstanding Common Shares into a smaller number of shares,
the number of Rights associated with each Common Share then outstanding, or
issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated
with each Common Share following any such event shall equal the result obtained
by multiplying the number of Rights associated with each Common Share
immediately prior to such event by a fraction the numerator which shall be the
total number of Common Shares outstanding immediately prior to the occurrence
of the event and the denominator of which shall be the total number of Common
Shares outstanding immediately following the occurrence of such event.
(q) In the event that the Rights become exercisable following
a Section 11(a) (ii) Event, the Company, by action of a majority of the
Continuing Directors in office at the time, may permit the Rights, subject to
Section 7(e), to be exercised for 50% of the Common Shares (or cash or other
securities or assets to be substituted for the Adjustment Shares
pursuant to Section 11 (a) (iii)) that would otherwise be purchasable under
subsection (a), in consideration of the surrender to the Company of the
Rights so exercised and without other payment of the Purchase Price. Rights
exercised under this subsection (q) shall be deemed to have been exercised in
full and shall be cancelled.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent, and with each transfer agent for the Preferred
Shares and the Common Shares, a copy of such certificate, and (c) mail a brief
-28-
<PAGE> 32
summary thereof to each holder of a Rights Certificate (or, if prior to the
Distribution Date, to each holder of a certificate representing shares of
Common Shares) in accordance with Section 25 hereof. The Rights Agent shall
be fully protected in relying on any such certificate and on any adjustment
therein contained.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. (a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company or an
Exempt Person) in a transaction which complies with Section 11(o) hereof), and
the Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the
Company or an Exempt Person) in a transaction which complies with Section 11(o)
hereof) shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or part of
the outstanding Common Shares shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (z) the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company or
an Exempt Person) in one or more transactions each of which complies with
Section 11(o) hereof), then, and in each such case and except as set forth in
Section 13(d) hereof, proper provision shall be made so that: (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter have
the right to receive, upon the exercise thereof at the then current Purchase
Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid, nonassessable and freely tradeable
Common Shares of the Principal Party (as such term is hereinafter defined), not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of Preferred Share Fractions for which a
Right is exercisable by such holder immediately prior to the first occurrence
of a Section 13 Event (or, if a Section 11(a) (ii) Event has occurred prior to
the Section 13 Event, multiplying the Purchase Price in effect immediately
prior to
-29-
<PAGE> 33
the first occurrence of such event set forth in Section 11(a) (ii) hereof by
the number of such Preferred Share Fractions for which a Right was exercisable
immediately prior to such first occurrence) and dividing that product (such
product, following the first occurrence of a Section 13 Event, shall be
referred to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by (2) 50% of the current market price (determined pursuant to
Section 11(d) (i) hereof with respect to the Common Shares) per Common Share of
such Principal Party on the date of consummation of the Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of
a sufficient number of its Common Shares) in connection with the consummation
of any such transaction as may be necessary to assure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably may be, in
relation to its Common Shares thereafter deliverable upon the exercise of the
Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no
effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Company are converted in such
merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
PROVIDED, however, that in any such case, (1) if the Common Shares of such
Person are not at such time and have not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act, and
such
-30-
<PAGE> 34
Person is a direct or indirect Subsidiary of another Person the Common Shares
of which are and have been so registered, "Principal Party" shall refer to such
other Person; (2) in case such Person is a Subsidiary, directly or indirectly,
of more than one Person, the Common Shares of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Shares having the greatest aggregate market value;
and (3) in case such Person is owned, directly or indirectly, by a joint
venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in (1) and (2) above shall
apply to each of the chains of ownership having an interest in such joint
venture as if such party were a "Subsidiary" of both or all of such joint
ventures and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized Common Shares which have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13
and unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and
further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense will:
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the Blue Sky laws
of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of
-31-
<PAGE> 35
its Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers
or consolidations or sales or other transfers. In the event that a Section
13 Event shall occur at any time after the occurrence of a Section 11(a) (ii)
Event, the Rights which have not theretofore been exercised shall thereafter
become exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary, Section
13 (other than this subsection (d)) shall not be applicable to a transaction
described in subparagraphs (x) and (y) of Section 13(a) if (i) such
transaction is consummated with a Person or Persons who acquired Common Shares
pursuant to a tender offer or exchange offer for all outstanding Common Shares
that complies with the provisions of Section 11(a)(ii) hereof (or a
wholly-owned Subsidiary of any such Person or Persons), (ii) the price per
Common Share offered in such transaction is not less than the price per Common
Share paid to all holders of Common Shares whose shares were purchased pursuant
to such tender offer or exchange offer, and (iii) the form of consideration
being offered to the remaining holders of Common Shares pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The
Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p) hereof, or to distribute Rights
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system
-32-
<PAGE> 36
with respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading, or
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company. If on any such date
no such market maker is making a market in the Rights the fair value of the
Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used and shall be conclusive for all purposes.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one five-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples of one five-hundredth of a Preferred Share). In
lieu of fractional Preferred Shares that are not integral multiples of one
five-hundredth of a Preferred Share, the Company may pay to the registered
holders of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one five-hundredth of a Preferred Share. For purposes of this Section
14 (b), the current market value of one five-hundredth of a Preferred Share
shall be one five-hundredth of the closing price of a Preferred Share (as
determined pursuant to Section 11(d) (ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of Common Shares upon exercise of the Rights
or to distribute certificates which evidence fractional Common Shares. In
lieu of fractional Common Shares, the Company may pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one
Common Share. For purposes of this Section 14(c), the
-33-
<PAGE> 37
current market value of one Common Share shall be the closing price of a Common
Share (as determined pursuant to Section 11(d) (i) hereof) for the Trading Day
immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional Preferred
Shares or Common Shares upon exercise of a Right, except as permitted by this
Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect of
this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of Common Shares), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to
specific performance of the obligations hereunder and injunctive relief against
actual or threatened violations of the obligations hereunder of any Person
subject to this Agreement. Holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred by them
in any action to enforce the provisions of this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the
-34-
<PAGE> 38
Rights Agent designated for such purposes, duly endorsed or accompanied by a
proper instrument of transfer, along with a signature guarantee and such other
and further documentation as the Rights Agent and the Company may reasonably
request, and with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common
Share certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common Share certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall, subject to the
last sentence of Section 7(e) hereof, be required to be affected by any notice
to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of
its obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of Preferred
Shares Fractions or any other securities of the Company which may at any time
be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as
-35-
<PAGE> 39
provided in Section 24 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights
Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to
pay to the Rights Agent such compensation as shall be agreed to in writing
between the Company and the Rights Agent for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reas-
onable expenses and counsel fees and disbursements and other disbursements
incurred in the administration and execution of this Agreement and the exercise
and performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability,
or expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including,
without limitation, the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or
other paper or document believed by it to be genuine and to be signed and
executed by the proper Person or Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation re-
sulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; PROVIDED, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Rights Certificates
shall have
-36-
<PAGE> 40
been countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights certificates either in the name of the predecessor or
in the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations expressly imposed by this Agreement, and no implied
duties or obligations shall be read into the Agreement against the Rights
Agent, upon the following terms and conditions, by all of which the Company and
the holders of Rights Certificates, by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market prices") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed)
may be deemed to be conclusively proved and established by a certificate
signed by the Chairman of the Board, the President, any Vice President, the
Treasurer, any Assistant Treasurer,
-37-
<PAGE> 41
the Secretary or any Assistant Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its countersigna-
ture on such Rights Certificates), but all such statements and recitals are and
shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution and delivery hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
or any adjustment required under the provisions of Section 11 or Section 13
hereof or responsible for the manner, method or amount of any such adjustment
or the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after actual notice of any such adjustment); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Common Shares or Preferred Shares to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any Common Shares or Preferred Shares will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
-38-
<PAGE> 42
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer or for
any delay in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction
in which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse
thereof, as the case may be, has either not been completed or indicates an
affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not
take any further action with respect to such requested exercise of
transfer without first consulting with the Company.
-39-
<PAGE> 43
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and
to each transfer agent of the Common Shares and Preferred Shares by registered
or certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Shares and Preferred Shares by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent
or by any registered holder of a Rights Certificate (who shall, with such
notice, submit his Rights Certificate for inspection by the Company), then [the
Company shall become the Rights Agent until a successor Rights Agent has been
appointed, and] any registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be (a) a corporation organized and doing business under the laws
of the United States or of the State of New York (or of any other state of the
United States so long as such corporation is authorized to do business in the
State of New York), in good standing, having a principal office in the State of
New York, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $100,000,000 or (b) an Affiliate
of any such corporation described in clause (a) above. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall file notice thereof
in writing with the predecessor Rights Agent and each transfer agent of
-40-
<PAGE> 44
the Common Shares and Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, subject to Section 4(b) hereof, issue new Rights
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares or other securities or property purchasable
under the Rights Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale of Common
Shares following the Distribution Date and prior to the Expiration Date, the
Company (a) shall, with respect to Common Shares so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement, or
upon the exercise, conversion or exchange of securities hereinafter issued by
the Company, and (b) may, in any other case, if deemed necessary or appropriate
by the Board of Directors of the Company, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificate shall be issued
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences
to the Company or the Person to whom such Rights Certificate would be issued,
and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. REDEMPTION AND TERMINATION. (a) The Board of Directors
of the Company may, at its option, at any time prior to the earlier of (i) the
time that an Acquiring Person becomes an Acquiring Person (or, if the Acquiring
Person shall have become such prior to the Record Date, the close of business
on the Record Date), or (ii) the Final Expiration Date, redeem all but not less
than all the then outstanding Rights at a redemption price of $.01 per Right,
as such amount shall be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price");
and the
-41-
<PAGE> 45
Company may, at its option, pay the Redemption Price either in Common Shares
(based on the "current market price," as defined in Section 11(d) (i), of the
Common Shares at the time of redemption), cash or any other form of
consideration deemed appropriate by the Board of Directors; provided, however,
that there must be Continuing Directors then in office at the time of such
authorization and such authorization shall require the concurrence of a
majority of such Continuing Directors in order for the Board of Directors of
the Company to authorize redemption of the Rights in the following
circumstances: (A) such authorization occurs on or after the time a Person
becomes an Acquiring Person, or (B) such authorization occurs on or after the
date of a change (resulting from a proxy or consent solicitation) in a
majority of the directors in office at the commencement of such solicitation if
any Person who is a participant in such solicitation has stated (or, if upon
the commencement of such solicitation, a majority of the Board of Directors of
the Company has determined in good faith) that such Person (or any of its
Affiliates or Associates) intends to take, or may consider taking, any action
which would result in such Person becoming an Acquiring Person or which would
cause the occurrence of a Triggering Event unless, concurrent with such
solicitation, such Person (or one or more of its Affiliates or Associates) is
making a cash tender offer pursuant to a Schedule 14D1 (or any successor
form) filed with the Securities and Exchange Commission for all outstanding
Common Shares not beneficially owned by such Person (or by its Affiliates or
Associates).
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price
for each Right so held. Promptly after the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding Rights
by mailing such notice to all such holders at each holder's last address as it
appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Transfer Agent for the Common
Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the Redemption
Price will be made.
-42-
<PAGE> 46
Section 24. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall
propose, at any time after the Distribution Date, (i) to pay any dividend
payable in shares of any class to the holders of Preferred Shares or to make
any other distribution to the holders of Preferred Shares (other than a regular
quarterly cash dividend paid out of earnings or retained earnings of the
Company), or (ii) to offer to the holders of Preferred Shares rights or
warrants to subscribe for or to purchase any additional Preferred Shares or
shares of stock of any class or any other securities, rights or options, or
(iii) to effect any reclassification of its Preferred Shares (other than a
reclassification involving only the subdivision of outstanding Preferred
Shares), or (iv) to effect any consolidation or merger into or with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof and other than an Exempt Person), or to effect any
sale or other transfer (or to permit one or more of its Subsidiaries to effect
any sale or other transfer), in one transaction or series of related
transactions, of more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person (other than the
Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof and other than an Exempt Person), or
(v) to effect the liquidation, dissolution or winding up of the Company, then,
in each such case, the Company shall give to each holder of a Rights
Certificate and to the Rights Agent, to the extent feasible, and in accordance
with Section 25 hereof, a notice of such proposed action, which shall specify
the record date for the purposes of such share dividend, distribution of rights
or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take
place and the date of participation therein by the holders of Preferred Shares,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of Preferred Shares for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Preferred Shares, whichever
shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then, in any such case, (i) the Company shall as soon as practicable
thereafter give to each holder of a Rights Certificate and to the Rights Agent,
to
-43-
<PAGE> 47
the extent feasible, in accordance with Section 25 hereof, a notice of the
occurrence of such event and the consequences of the event to holders of Rights
under Section 11(a)(ii) hereof and (ii) all references in the preceding
paragraph to Preferred Shares shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other securities.
Section 25. NOTICES. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any
Rights Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
The Geon Company
6100 Oak Tree Boulevard
Independence, Ohio 44131
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
The Bank of New York
Stock Transfer Administrator
101 Barclay - 12W
New York, New York 10286
Attention: Susan McFarland
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or if
prior to the Distribution Date, to the holder of certificates representing
Common Shares) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as
shown on the registry books of the Company.
Section 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution
Date and subject to the next to last sentence of this Section 26, the Company
and the Rights Agent
-44-
<PAGE> 48
shall, if the Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of certificates representing
Common Shares. From and after the Distribution Date and subject to the next to
last sentence of this Section 26, the Company and the Rights Agent shall, if
the Company so directs, supplement or amend this Agreement without the approval
of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii)
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, (iii) to change or supplement
the provisions hereunder in any manner which the Company may deem necessary
or desirable and which shall not adversely affect the interests of the holders
of Rights Certificates (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person), or (iv) to shorten or lengthen any time
period hereunder (which lengthening or shortening, following the first
occurrence of an event set forth in the first proviso to Section 23 (a) hereof,
shall be effective only if there are Continuing Directors and shall require the
concurrence of a majority of such Continuing Directors); provided, this
Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iv) of this sentence, (A) a time period relative to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights. Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 26, the Rights Agent shall execute such
supplement or amendment. Notwithstanding anything contained in this Agreement
to the contrary, no supplement or amendment shall be made (i) which changes the
Redemption Price, the Final Expiration Date, the Purchase Price, or the number
of Preferred Share Fractions for which a Right is exercisable or (ii) which
adversely affects any Exempt Person, who at the time of such supplement or
amendment beneficially owns (without including for purposes of this clause
(ii), ownership by such Person's Affiliates) Common Shares without the consent
of such Exempt Person. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Shares. Notwithstanding any other provision hereof, the Rights
Agent's consent must be obtained regarding any amendment or supplement pursuant
to this Section 26 which alters the Rights Agent's rights or duties.
-45-
<PAGE> 49
Section 27. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares of
which any Person is the Beneficial Owner, shall be made in accordance with the
last sentence of Rule 13d-3(1) (i) of the General Rules and Regulations under
the Exchange Act as in effect as of the date hereof. The Board of Directors of
the Company (with, where specifically provided for herein, the concurrence of
the Continuing Directors) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board (with, where specifically provided for herein, the
concurrence of the Continuing Directors) or the Company, or as may be necessary
or advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem
or not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (ii) below, all omissions with respect to the foregoing) which are done
or made by the Board (with, where specifically provided for herein, the
concurrence of the Continuing Directors) in good faith, shall (i) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (ii) not subject the Board (or the
Continuing Directors) to any liability to the holders of the Rights.
Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of Common Shares) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Rights Agent
and the registered holders of the Rights Certificates (and, prior to the Dis-
tribution Date, registered holders of the Common Shares) .
-46-
<PAGE> 50
Section 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated; provided, however, that notwithstanding anything in this Agreement
to the contrary, if any such term, provision, covenant or restriction is held
by such court or authority to be invalid, void or unenforceable and the Board
of Directors of the Company determines in its good faith judgment that severing
the invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23
hereof shall be reinstated and shall not expire until the close of business on
the tenth day following the date of such determination by the Board of
Directors.
Section 31. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State.
Section 32. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. DESCRIPTIVE HEADINGS. Descriptive headings of the
several sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
-47-
<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: THE GEON COMPANY
By /s/ Joe A. Powell By /s/ Gregory L. Rutman
--------------------------- ---------------------------
Name: Joe A. Powell Name: Gregory L. Rutman
Title: General Patent Counsel Title: Vice President and
and Assistant Secretary General Counsel
Attest: THE BANK OF NEW YORK
as Rights Agent
By /s/ Susan A. McFarland By /s/ John I. Sivertsen
--------------------------- ---------------------------
Name: Susan A. McFarland Name: John I. Sivertsen
Title: Assistant Treasurer Title: Vice President
-48-
<PAGE> 52
EXHIBIT A
---------
FORM OF CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF SERIES A
JUNIOR PARTICIPATING PREFERRED SHARES
of
THE GEON COMPANY
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, William F. Patient, President and Chief Executive Officer,
and Gregory L. Rutman, Secretary, of The Geon Company, a corporation organized
and existing under the General Corporation Law of the State of Delaware
(the "Corporation"), in accordance with the provisions of Section 103 thereof,
DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on March 31, 1993, adopted the following resolutions creating a
series of 60,000 Preferred Shares designated as Series A Junior
Participating Preferred Shares:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Shares of the Corporation
be and it hereby is created and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional, and other
special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "Series A Junior Participating Preferred Shares" and the
number of shares constituting such series shall initially be 60,000, par value
$0.10 per share, such number of shares to be subject to
<PAGE> 53
EXHIBIT A
Page 2
increase or decrease by action of the Board of Directors as evidenced by a
certificate of designations.
Section 2. Dividends and Distributions.
----------------------------
(A) Subject to the prior and superior rights of the holders of any
series of Preferred Shares ranking prior and superior to the Series A Junior
Participating Preferred Shares with respect to dividends, the holders of shares
of Series A Junior Participating Preferred Shares shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on the
last day of March, June, September and December in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series A Junior Participating Preferred Shares, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $10
or (b) subject to the provision for adjustment hereinafter set forth, 500 times
the aggregate per share amount of all cash dividends, and 500 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in Common Shares or a subdivision
of the outstanding Common Shares (by reclassification or otherwise), declared
on the shares of common stock, par value $.10 per share, of the Corporation
(the "Common Shares") since the immediately preceding Quarterly Dividend
Payment Date, or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of Series A Junior
Participating Preferred Shares. In the event the Corporation shall at any
time after May 28, 1993 (the "Rights Declaration Date") (i) declare any
dividend on Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares, or (iii) combine the outstanding Common Shares into
a smaller number of shares, then in each such case the amounts to which holders
of Series A Junior Participating Preferred Shares were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is
the number of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares that were outstanding
immediately prior to such event.
<PAGE> 54
EXHIBIT A
Page 3
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Shares as provided in paragraph (A)
above immediately after it declares a dividend or distribution on the Common
Shares (other than a dividend payable in Common Shares); provided that, in the
event no dividend or distribution shall have been declared on the Common Shares
during the period between any quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the
Series A Junior Participating Preferred Shares shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding Series A Junior Participating Preferred Shares from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Shares, unless the date of issue of such share
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Junior Participating Preferred Shares entitled
to receive a Quarterly Dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the Series A Junior
Participating Preferred Shares in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders
of Series A Junior Participating Preferred Shares entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be no
more than 30 days prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of Series A Junior
Participating Preferred Shares shall have the following voting rights:
<PAGE> 55
EXHIBIT A
Page 4
(A) Subject to the provision for adjustment hereinafter set
forth, each Series A Junior Participating Preferred Share shall entitle the
holder thereof to 500 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Shares payable in common stock, (ii) subdivide the outstanding Common Shares
or (iii) combine the outstanding Common Shares into a smaller number of shares,
then in each such case the number of votes per share to which holders of Series
A Junior Participating Preferred Shares were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
Series A Junior Participating Preferred Shares and the holders of Common Shares
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Shares shall be in arrears in an amount equal to six
(6) quarterly dividends thereon, the occurrence of such contingency shall
mark the beginning of a period (herein called a "default period") which
shall extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all Series A Junior Participating Preferred Shares then
outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of Preferred Shares (including
holders of the Series A Junior Participating Preferred Shares) with
dividends in arrears in an amount equal to (6) quarterly dividends thereon,
voting as a class, irrespective of series, shall have the right to elect
two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Shares may be exercised initially
at a special
<PAGE> 56
EXHIBIT A
Page 5
meeting called pursuant to subparagraph (iii) of this Section 3(C) or
at any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Shares, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised
unless the holders of ten percent in number of Preferred Shares outstanding
shall be present in person or by proxy. The absence of a quorum of the
holders of Common Shares shall not affect the exercise by the
holders of Preferred Shares of such voting right. At any meeting at which
the holders of Preferred Shares shall exercise such voting right initially
during an existing default period, they shall have the right, voting as a
class, to fill such vacancies, if any, in the Board of Directors as may
then exist up to two (2) Directors or, if such right is exercised at an
annual meeting, to elect two (2) Directors. If the number which may be so
elected at any special meeting does not amount to the required number, the
holders of Preferred Shares shall have the right to make such increase in
the number of Directors as shall be necessary to permit the election by
them of the required number. After the holders of Preferred Shares shall
have exercised their right to elect Directors in any default
period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders
of Preferred Shares as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A Junior
Participating Preferred Shares.
(iii) Unless the holders of Preferred Shares shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of Preferred Shares outstanding, irrespective of series, may
request, the calling of a special meeting of the holders of Preferred
Shares, which meeting shall thereupon be called by the Chairman of the
Board, the President or the Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Preferred Shares are
<PAGE> 57
EXHIBIT A
Page 6
entitled to vote pursuant to this paragraph (C) (iii) shall be given
to each holder of record of Preferred Shares by mailing a copy of such
notice to such holder at such holder's last address as the same appears on
the books of the Corporation. Such meeting shall be called for a time not
earlier than 10 days and not later than 60 days after such order or
request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of Preferred Shares outstanding.
Notwithstanding the provisions of this paragraph (C) (iii), no such special
meeting shall be called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Shares, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Shares shall have exercised their right to elect two (2)
Directors voting as a class, after the exercise of which right (x) the
Directors so elected by the holders of Preferred Shares shall continue in
office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the
Board of Directors may (except as provided in paragraph (C) (ii) of this
Section 3) be filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class of stock which elected the
Director whose office shall have become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular class of
stock shall include Directors elected by such Directors to fill vacancies
as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Shares as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of
Preferred Shares as a class shall terminate, and (z) the number of
Directors shall be such number as may be provided for in the Certificate of
Incorporation or By-Laws irrespective of any increase made pursuant to
<PAGE> 58
EXHIBIT A
Page 7
the provisions of paragraph (C) (ii) of this Section 3 (such number
being subject, however, to change thereafter in any manner provided by
law or in the Certificate of Incorporation or By-Laws) . Any vacancies in
the Board of Directors effected by the provisions of clauses (y) and (z) in
the preceding sentence may be filled by a majority of the remaining
Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Shares shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Shares as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Shares as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on Series A Junior
Participating Preferred Shares outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Shares;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Shares, except dividends paid ratably on the Series
A Junior Participating Preferred Shares and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution
<PAGE> 59
EXHIBIT A
Page 8
or winding up) with the Series A Junior Participating Preferred
Shares, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior
Participating Preferred Shares; or
(iv) purchase or otherwise acquire for consideration any Series A
Junior Participating Preferred Shares, or any shares of stock ranking
on a parity with the Series A Junior Participating Preferred Shares, except
in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences
of the respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. REACQUIRED SHARES. Any Series A Junior Participating
Preferred Shares purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares upon their cancellation become authorized but unissued
Preferred Shares and may be reissued as part of a new series of Preferred
Shares to be created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any
liquidation (voluntary or otherwise), dissolu- tion or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
<PAGE> 60
EXHIBIT A
Page 9
winding up) to the Series A Junior Participating Preferred Shares unless, prior
thereto, the holders of Series A Junior Participating Preferred Shares shall
have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of Series A Junior Participating
Preferred Shares unless, prior thereto, the holders of Common Shares shall have
received an amount per share (the "Common Adjustment") equal to the quotient
obtained by dividing (i) the Series A Liquidation Preference by (ii) 500
(as appropriately adjusted as set forth in subparagraph C below to reflect such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Shares) (such number in clause (ii), the "Adjustment Number") .
Following the payment of the full amount of the Series A Liquidation Preference
and the Common Adjustment in respect of all outstanding Series A Junior
Participating Preferred Shares and outstanding Common Shares, respectively,
holders of Series A Junior Participating Preferred Shares and holders of Common
Shares shall receive their ratable and proportionate share of the remaining
assets to be distributed in the ratio of the Adjustment Number to 1 with
respect to such Preferred Shares and Common Shares, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference
and the liquidation preferences of all other series of preferred stock, if
any, which rank on a parity with the Series A Junior Participating Preferred
Shares, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Shares.
(C) If the Corporation shall at any time after the Rights Declaration
Date (i) declare any dividend on Common Shares payable in Common Shares,
(ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding
Common Shares into a smaller number of shares, then in each
<PAGE> 61
EXHIBIT A
Page 10
such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares that
were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. If the Corporation shall
enter into any consolidation, merger, combination or other transaction in
which the Common Shares are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the Series A
Junior Participating Preferred Shares shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 500 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each Common Share is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration
Date (i) declare any dividend on Common Shares payable in Common Shares, (ii)
subdivide the outstanding Common Shares, or (iii) combine the outstanding
Common Shares into a smaller number of shares, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of Series A Junior Participating Preferred Shares shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
Common Shares outstanding immediately after such event and the denominator of
which is the number of shares of Common Shares that were outstanding
immediately prior to such event.
Section 8. NO REDEMPTION. The Series A Junior Participating Preferred
Shares shall not be redeemable.
Section 9. RANKING. The Series A Junior Participating
Preferred Shares shall rank junior to all other series of the Corporation's
Preferred Shares as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide otherwise.
Section 10. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Junior
<PAGE> 62
EXHIBIT A
Page 11
Participating Preferred Shares so as to affect them adversely without the
affirmative vote of the holders of two-thirds (2/3) or more of the outstanding
Series A Junior Participating Preferred Shares, voting separately as a class.
Section 11. FRACTIONAL SHARES. Series A Junior Participating
Preferred Shares may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred
Shares.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this ____
day of May, 1993.
------------------------------
William F. Patient
President and Chief Executive
Officer
Attest:
- -------------------------
Gregory L. Rutman
Secretary
<PAGE> 63
EXHIBIT B
---------
[Form of Rights Certificate]
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER May 27, 2003 OR EARLIER IF REDEEMED BY THE COMPANY. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT (AS DEFINED HEREIN) .
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF THE RIGHTS AGREEMENT.] 1/
Rights Certificate
THE GEON COMPANY
This certifies that ______________________, or registered assigns, is
the registered holder of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of May 28, 1993 (as it may be amended from time
to time, the "Rights Agreement") , between The Geon Company, a Delaware
corporation (the "Company"), and The Bank of New York, a New York banking
corporation (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 P.M. (New York time) on May 27, 2003 at the office or offices of
the Rights Agent designated for such purpose, or its successors as Rights
Agent, one five- hundredth of a share of the Company's Series A Junior
Participating Preferred Shares, $0.10 par value (the "Preferred Shares"),
at a purchase price (the "Purchase
- -------------------------
1/ The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE> 64
EXHIBIT B
Page 2
Price") of $100 per one five-hundredth of a share (such fraction, a "Preferred
Share Fraction") upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase set forth on the reverse hereof and the
Certificate contained therein duly executed. The Purchase Price shall be paid
at the election of the holder in cash or by certified bank check or money order
payable to the order of the Company. The number of Rights evidenced by this
Rights Certificate, the number of Preferred Share Fractions which may be
purchased upon exercise thereof and the Purchase Price per Preferred Share
Fraction, set forth above, are the number of Rights, number of Preferred Share
Fractions and Purchase Price as of May 28, 1993, based on the Preferred Shares
as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or any Affiliate
or Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any rights with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
of Preferred Share Fractions and kind of shares of Preferred Shares or other
securities, which may be purchased upon the exercise of the Rights evidenced by
this Rights Certificate are subject to modification and adjustment upon the
happening of certain events, including Triggering Events (as such term is
defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent,
<PAGE> 65
EXHIBIT B
Page 3
the Company and the holder of the Rights Certificate, which limitations of
rights include the temporary suspension of the exercisability of such Rights
under the specific circumstances set forth in the Rights Agreement. Copies
of the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available upon written request to the Rights Agent.
The Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of one five-hundredths of a
Preferred Share as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Board of Directors of the Company at
its option at a redemption price of $.01 per Right at any time prior to the
earlier of the close of business on (i) a Stock Acquisition Date, and (ii) the
Final Expiration Date.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one five-hundredth of a share of Preferred Shares, which may, at
the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Preferred Shares
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
<PAGE> 66
EXHIBIT B
Page 4
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Rights Certificate shall
have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ___________, 19
ATTEST: THE GEON COMPANY
____________________________ By____________________________
Secretary Title:
Countersigned:
Dated as of _____________ , 19
THE BANK OF NEW YORK
By___________________________
Authorized Signature
<PAGE> 67
EXHIBIT B
Page 5
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder
desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _________________________________________ hereby sells,
assigns and transfers unto _____________________________________________
________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company with full power of substitution.
Dated: ________________________ , 19__
--------------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights
<PAGE> 68
EXHIBIT B
Page 6
evidenced by this Rights Certificate from any Person who is, was or
subsequently became an Acquiring Person 'or an Affiliate or Associate of an
Acquiring Person.
Dated: _____________ , 19 ___________________________________
signature
NOTICE
------
The signatures to the foregoing Assignment and Certificate must correspond to
the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE> 69
EXHIBIT B
Page 7
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if the registered holder desires to exercise Rights
represented by the Rights Certificate.)
To: THE GEON COMPANY
The undersigned hereby irrevocably elects to exercise _______ Rights
represented by this Rights Certificate to purchase Preferred Shares issuable
upon the exercise of the Rights (or such other securities of the Company or of
any other person which may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name of and
delivered to:
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
Please insert social security
or other identifying number: _________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
<PAGE> 70
EXHIBIT B
Page 8
Please insert social security
or other identifying number: _________________________________________________
Dated: ___________, 19
_________________________________________________
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are defined
in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ___________, 19 ____________________________
Signature
Signature Guaranteed:
NOTICE
------
The signatures to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change
whatsoever.
<PAGE> 71
EXHIBIT C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On March 31, 1993, the Board of Directors of The Geon Company (the
"Company") declared a dividend distribution of one Right for each outstanding
share of Common Stock, $.10 par value, of the Company (each, a "Common
Share") to shareholders of record at the close of business on May 28, 1993.
Each Right entitles the registered holder to purchase from the Company one
five-hundredth of a share (a "Preferred Share Fraction") of the Series A
Junior Participating Preferred Stock, par value $.10 per share, of the Company
(the "Preferred Shares"), or, in certain circumstances, a combination of
securities and assets of equivalent value, at a Purchase Price of $100 per
Preferred Share Fraction, subject to adjustment. Except as otherwise provided
in the Rights Agreement, the Purchase Price shall be paid in cash. The terms of
the Rights are set forth in a Rights Agreement (the "Rights Agreement") between
the Company and The Bank of New York, as Rights Agent.
Initially, ownership of the Rights will be evidenced by the
Common Share certificates representing shares then outstanding, and no separate
Rights Certificates will be distributed. The Rights will separate from the
Common Shares and a Distribution Date will occur upon the earlier of (i) the
close of business on the tenth day after the date of a public announcement that
a person or group of affiliated or associated persons (an "Acquiring Person")
has acquired, or obtained the right to acquire, beneficial ownership of 15%
or more of the outstanding Common Shares (the "Stock Acquisition Date"), or
(ii) the close of business on the tenth business day after the date of the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 15% or more of the outstanding Common Shares.
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Share certificates and will be transferred with and only with such Common Share
certificates, (ii) new Common Share certificates issued after May 28, 1993 will
contain a notation incorporating the Rights Agreement by reference and (iii)
the surrender for transfer of any certificates for Common Shares outstanding
will also constitute the transfer of the Rights associated with the Common
Shares represented by such certificate.
<PAGE> 72
EXHIBIT C
Page 2
The definition of Acquiring Person does not include any of the
following persons: (1) the Company, (ii) any subsidiary of the Company,
(iii) any Exempt Person (as defined below), (iv) any employee benefit plan or
employee stock plan of the Company or of any subsidiary of the Company, or any
trust or other entity organized, appointed, established or holding Common
Shares for or pursuant to the terms of any such plan or (v) any person or group
whose ownership of 15% or more of the Common Shares then outstanding
results solely from a reduction in the number of issued and outstanding
Common Shares pursuant to a transaction or transactions approved by the
Board of Directors; provided, however, that any person who is not an Acquiring
Person by reason of application of the immediately preceding clause (v) to such
person shall immediately become an Acquiring Person upon the acquisition of
additional Common Shares unless such acquisition would not result in such
person or group becoming an Acquiring Person by reason of such immediately
preceding clause (v).
"Exempt Person" shall mean The B.F.Goodrich Company ("BFG") and its
affiliates and any person to whom BFG transfers beneficial ownership of 10% or
more of the Common Shares then outstanding and any of such transferee's
affiliates. Notwithstanding the foregoing, an Exempt Person (and such Exempt
Person's affiliates) shall permanently lose its status as an Exempt Person at
such time as such Exempt Person and such Exempt Person's Affiliates
beneficially own less than 10% of the outstanding Common Shares.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on May 27, 2003, unless earlier redeemed
by the Company as described below or unless a transaction under Section 13(d)
of the Rights Agreement has occurred.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Shares as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined
by the Board of Directors, and except in connection with the exercise of
employee stock options or stock appreciation rights or under any other benefit
plan for employees or directors or in connection with the exercise of
<PAGE> 73
EXHIBIT C
Page 3
warrants or conversion of convertible securities, only Common Shares issued
prior to the Distribution Date will be issued with Rights.
Except in the circumstances described below, after the Distribution
Date each Right will be exercisable into one five-hundredth of a Preferred
Share (a "Preferred Share Fraction") . Each Preferred Share Fraction carries
voting and dividend rights that are intended to produce the equivalent of one
Common Share. The voting and dividend rights of the Preferred Shares are
subject to adjustment in the event of dividends, subdivisions and combinations
with respect to the Common Shares of the Company. In lieu of issuing
certificates for Preferred Share Fractions which are less than an integral
multiple of one Preferred Share (i.e. 500 Preferred Share Fractions), the
Company may pay cash representing the current market value of the Preferred
Share Fractions.
In the event that at any time, a person becomes the beneficial owner of
15% or more of the then outstanding Common Shares other than pursuant to a
tender or exchange offer for all outstanding Common Shares determined to be
fair to and otherwise in the best interests of the shareholders, each holder of
a Right will thereafter have the right to receive, upon exercise, Common
Shares (or, in certain circumstances, cash, property or other securities of
the Company) having a value equal to two times the Purchase Price of the Right.
In lieu of requiring payment of the Purchase Price upon exercise of the Rights
following any such event, the Company may permit the holders simply to
surrender the Rights, in which event they will be entitled to receive Common
Shares (and other property, as the case may be) with a value of 50% of what
could be purchased by payment of the full Purchase Price. Notwithstanding any
of the foregoing, following the occurrence of the event set forth in the first
sentence of this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person will be null and void.
For example, at an exercise price of $100 per Right, each Right not
otherwise voided following an event set forth in the preceding paragraph would
entitle its holder to purchase $200 worth of Common Shares (or other
consideration,
<PAGE> 74
EXHIBIT C
Page 4
as noted above) for $100. Assuming that the Common Shares had a per share
value of $50 at such time, the holder of each valid Right would be entitled to
purchase four Common Shares for $100. Alternatively, the Company could permit
the holder to surrender each Right in exchange for one Common Share (with a
value of $50) without the payment of any consideration other than the
surrender of the Right.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger that is described in, or that follows a tender offer or exchange offer
described in, the second preceding paragraph), or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights that previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common shares of the
acquiring company having a value equal to two times the exercise price of the
Right.
The Purchase Price payable, and the number of Preferred Share
Fractions or other securities or property issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i)
in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) if holders of the Preferred
Shares are granted certain rights or warrants to subscribe for Preferred Shares
or convertible securities at less than the current market price of the
Preferred Shares, or (iii) upon the distribution to holders of the Preferred
Shares of evidences of indebtedness or assets (excluding regular quarterly
dividends) or of subscription rights or warrants (other than those referred
to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fraction of a Preferred Share Fraction will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the
Preferred Shares on the last trading date prior to the date of exercise.
<PAGE> 75
EXHIBIT C
Page 5
At any time prior to a the time that an Acquiring Person becomes an
Acquiring Person, the Company may redeem the Rights in whole, but not in part,
at a price of $.01 per Right. Under certain circumstances set forth in the
Rights Agreement, the decision to redeem will require the concurrence of
a majority of the Continuing Directors. Immediately upon the action of the
Board of Directors ordering redemption of the Rights, with, where required, the
concurrence of the Continuing Directors, the Rights will terminate and the only
right of the holders of Rights will be to receive the $.01 redemption price.
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Continuing
Directors, but shall not include an Acquiring Person, or an affiliate or
associate of an Acquiring Person, or any representative of the foregoing
entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders
may, depending upon the circumstances, recognize taxable income in the
event that the Rights become exercisable for Preferred Shares (or other
consideration) of the Company or for common shares of the acquiring company as
set forth above.
Other than those provisions relating to the principal economic
terms of the Rights and other than amendments which would adversely affect
Exempt Persons, any of the provisions of the Rights Agreement may be amended by
the Board of Directors of the Company prior to the Distribution
Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended by the Board (in certain circumstances, with the
concurrence of the Continuing Directors) in order to cure any ambiguity, to
make changes that do not adversely affect the interests of holders of Rights
(other than an Acquiring Person), or to shorten or lengthen any time period
under the Rights Agreement; provided, however, that no amendment to
adjust the time
<PAGE> 76
EXHIBIT C
Page 6
period governing redemption shall be made at such time as the Rights are not
redeemable.
A copy of the Rights Agreement is being filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company.
This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
<PAGE> 1
Exhibit 4.3
THE GEON COMPANY
TO
NBD BANK
TRUSTEE
______________
INDENTURE
Dated as of December 1, 1995
______________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions:
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate; control . . . . . . . . . . . . . . . . . . . . . . . . . 2
Attributable Value . . . . . . . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capital Lease Obligations . . . . . . . . . . . . . . . . . . . . . . 3
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Request; Company Order . . . . . . . . . . . . . . . . . . . 3
Consolidated Tangible Assets . . . . . . . . . . . . . . . . . . . . 3
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . 3
corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . 3
Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . 3
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Incur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . 5
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
______________
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . 6
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 6
Original Issue Discount Security . . . . . . . . . . . . . . . . . . 6
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . 7
Redeemable Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 8
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . 8
Sale and Leaseback Transaction . . . . . . . . . . . . . . . . . . . 8
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Security Register and Security Registrar . . . . . . . . . . . . . . 8
Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 8
Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
U.S. Government Obligation . . . . . . . . . . . . . . . . . . . . . 9
Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . 10
SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . 10
SECTION 104. Acts of Holders; Record Dates . . . . . . . . . . . . . . . . . . . . 11
SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . . . . . . 13
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . 14
SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . . . . . . 14
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
ARTICLE TWO
SECURITY FORMS
<S> <C> <C>
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 202. Form of Face of Security . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . . 17
SECTION 204. Form of Legend for Global Securities . . . . . . . . . . . . . . . . 21
SECTION 205. Form of Trustee's Certificate of Authentication . . . . . . . . . . . 22
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . . 22
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . . . . . . 25
SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 305. Registration, Registration of Transfer and Exchange . . . . . . . . . 27
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . 29
SECTION 307. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . 29
SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . 31
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 502. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . 34
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . . 36
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . 36
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 506. Application of Money Collected . . . . . . . . . . . . . . . . . . . 37
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . 38
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . 39
SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . 39
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 515. Waiver of Usury, Stay or Extension Laws . . . . . . . . . . . . . . . 40
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . 40
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 604. Not Responsible for Recitals or Issuance of Securities . . . . . . . 42
SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . 43
SECTION 608. Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . 43
SECTION 610. Resignation and Removal; Appointment of Successor . . . . . . . . . . 44
SECTION 611. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . 45
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 613. Preferential Collection of Claims Against Company . . . . . . . . . . 47
SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . . . . . . 47
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
<S> <C> <C>
SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 702. Preservation of Information; Communications
to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders . . . . . . . . . 51
SECTION 902. Supplemental Indentures with Consent of Holders . . . . . . . . . . . 53
SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . . . . . . 54
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . 54
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . 54
SECTION 906. Reference in Securities to Supplemental Indentures . . . . . . . . . 54
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest . . . . . . . . . . . . . 55
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . 55
SECTION 1003. Money for Securities Payments to Be Held in Trust . . . . . . . . . . 55
SECTION 1004. Statement by Officers as to Default . . . . . . . . . . . . . . . . . 56
SECTION 1005. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
-v-
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1006. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 1007. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . 57
SECTION 1008. Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 1009. Limitation on Sale and Leaseback Transactions . . . . . . . . . . . . 58
SECTION 1010. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . 59
SECTION 1103. Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . 60
SECTION 1104. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . 61
SECTION 1106. Securities Payable on Redemption Date . . . . . . . . . . . . . . . . 61
SECTION 1107. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities . . . . . . . . 62
SECTION 1203. Redemption of Securities for Sinking Fund . . . . . . . . . . . . . . 63
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 1302. Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 1303. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 1304. Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . 64
SECTION 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions . . . . . . . . . . 66
SECTION 1306. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
-vii-
<PAGE> 9
PAGE
----
-viii-
<PAGE> 10
..............................................................
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318,
INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 608
610
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . 701
702
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 702
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 702
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . 703
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 703
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 703
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 703
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . 704
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . 101
1004
(b) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . . . . . . . 514
Section 316(a) . . . . . . . . . . . . . . . . . . . . . . . . . 101
(a)(1) (A) . . . . . . . . . . . . . . . . . . . . . . . . . 502
512
(a)(1) (B) . . . . . . . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . 107
</TABLE>
___________________
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
-ix-
<PAGE> 11
INDENTURE, dated as of December 1, 1995, between The Geon Company, a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 6100 Oak Tree
Boulevard, Independence, Ohio, 44131, and NBD Bank, a Michigan banking
corporation duly organized and existing under the laws of the State of
Michigan, as trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of Indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture
provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as are
generally accepted at the date of such computation;
<PAGE> 12
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable and at any date as of which the amount thereof is
to be determined, the total net amount of rent required to be paid by such
Person under such lease during the initial term thereof as determined in
accordance with generally accepted accounting principles, discounted from such
initial term date to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capital Lease Obligation with like
term in accordance with generally accepted accounting principles. The net
amount of rent required to be paid under any such lease for any such period
shall be the lesser of: (1) the aggregate amount of rent payable by the lessee
with respect to such period after excluding amounts required to be paid on
account of insurance, taxes, assessments, utility, operating and labor costs
and similar charges and (2) in the case of any lease which is terminable by the
lessee upon the payment of a penalty, the net amount calculated pursuant to (1)
but adjusted to also include the amount of such penalty and to exclude any rent
which would otherwise be required to be paid under such lease subsequent to the
first date upon which it may be so terminated.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the Company
or any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
-2-
<PAGE> 13
"Business Day", when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in that Place of Payment are authorized or
obligated by law or executive order to close.
"Capital Lease Obligations" of any Person means the obligations to pay
rent or other amounts under a lease of (or other Indebtedness arrangements
conveying the right to use) real or personal property of such Person which are
required to be classified and accounted for as a capital lease or a liability
on the face of a balance sheet of such Person in accordance with generally
accepted accounting principles, and the amount of such obligations shall be the
capitalized amount thereof in accordance with generally accepted accounting
principles and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Commission" means the Securities and Exchange Commission, from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Tangible Assets" of a Person and its Subsidiaries means the
sum of the Tangible Assets of such Person and its Subsidiaries after
eliminating inter-company items, all determined in accordance with generally
accepted accounting principles, including appropriate deductions for any
minority interest in Tangible Assets of such Subsidiaries; provided that, with
respect to the Company and its Subsidiaries, adjustments following the date of
this Indenture to the accounting books and records of the Company and its
Subsidiaries resulting from the acquisition of control of the Company by
another Person in accordance with Accounting Principles Board Opinions Nos. 16
and 17 or otherwise will not be given effect to.
"Corporate Trust Office" means the principal corporate trust office of
the Trustee, which office as of the date of this indenture is the address of
the Trustee set forth in Section 105, at which at any particular time its
corporate trust business shall be administered.
"corporation" means a corporation, association, company, joint-stock
company or business trust.
-3-
<PAGE> 14
"Covenant Defeasance" has the meaning specified in Section 1303.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any series issuable in
whole or in part in the form of one or more Global Securities, a clearing
agency registered under the Exchange Act that is designated to act as
Depositary for such Securities as contemplated by Section 301.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 104.
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 204 (or such
legend as may be specified as contemplated by Section 301 for such Securities).
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person guaranteeing any Indebtedness of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, and including, without
limitation, any obligation of such Person, directly or indirectly (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Indebtedness, (ii) to
purchase property, securities or services for the purpose of assuring the
holder of such Indebtedness of the payment of such Indebtedness, or (iii) to
maintain working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary obligor to pay
such Indebtedness (and "Guaranteed" and "Guaranteeing" shall have meanings
correlative to the foregoing); provided, however, that a Guarantee by any
Person shall not include endorsements by such Person for collection or deposit,
in either case, in the ordinary course of business; and provided, further, that
the term "Guarantee" shall not include contracts made in the ordinary course of
business of the Company and its Subsidiaries for the purchase of utilities,
services, and raw materials that require payment to be made to the provider of
utilities, services or raw materials regardless whether delivery is ever made
of such utilities, services or raw materials so long as the quantities of
utilities, services, or raw materials purchased under each such contract do not
exceed the Company's or its contracting Subsidiary's reasonably anticipated
consumption thereof on the date of the contract. The amount of the Guarantee
shall be equal to the amount of the obligation covered thereby.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
-4-
<PAGE> 15
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, Guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Indebtedness or other
obligation on the balance sheet of any such Person (and "Incurrence,"
"Incurred," "Incurrable" and "Incurring" shall have meanings correlative to the
foregoing); provided, that a change in generally accepted accounting principles
that results in an obligation of such Person that exists at such time becoming
Indebtedness shall not be deemed an Incurrence of such Indebtedness, and
"Incur" means with respect to any Lien, to create, incur or assume such Lien on
any asset or property (and "Incurrence," "Incurred," "Incurrable" and
"Incurring" shall have meanings correlative to the foregoing).
"Indebtedness" means (without duplication), with respect to any Person,
(i) every obligation of such Person for money borrowed, (ii) every obligation
of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property (other than accounts payable described in clause (iv) below),
assets or businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property (but excluding trade
accounts payable or accrued liabilities arising in the ordinary course of
business which are not overdue by more than 90 days or which are being
contested in good faith), (v) the amount of every Capital Lease Obligation of
such Person, (vi) the maximum fixed redemption or repurchase price of
Redeemable Stock of such Person, (vii) every obligation of such Person under
interest rate swap or similar agreements, or foreign currency or commodity
hedge, exchange or similar agreements of such Person, (viii) the Attributable
Value with respect to any Sale and Leaseback Transaction to which such Person
is party and (ix) every obligation of the type referred to in clauses (i)
though (viii) of another Person and all dividends of another Person for the
payment of which, in either case, such Person has Guaranteed or is responsible
or liable, directly or indirectly, as obligor, Guarantor or otherwise.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of particular
series of Securities established as contemplated by Section 301.
"interest", when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an instalment of interest on such Security.
-5-
<PAGE> 16
"Investment Company Act" means the Investment Company Act of 1940 and any
statute successor thereto, in each case as amended from time to time.
"Lien" means with respect to any property or asset, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an instalment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 501(4) or 501(5).
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 1004 shall be the principal
executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of the Company or other counsel for the Company, and who shall be
acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(1) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(2) Securities, or any portion thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited with
the Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if the Company shall act as
its own Paying Agent) for the Holders of such Securities; provided that, if
such Securities are to be redeemed, notice of such
-6-
<PAGE> 17
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(3) Securities as to which Defeasance has been effected pursuant to
Section 1302; and
(4) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser in
whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding shall be the amount
of the principal thereof which would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to Section 502, (B)
if, as of such date, the principal amount payable at the Stated Maturity of a
Security is not determinable, the principal amount of such Security which shall
be deemed to be Outstanding shall be the amount as specified or determined as
contemplated by Section 301, (C) the principal amount of a Security denominated
in one or more foreign currencies or currency units which shall be deemed to be
Outstanding shall be the U.S. dollar equivalent, determined as of such date in
the manner provided as contemplated by Section 301, of the principal amount of
such Security (or, in the case of a Security described in Clause (A) or (B)
above, of the amount determined as provided in such Clause), and (D) Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or of such other obligor shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, waiver or other action, only Securities which the Trustee
knows to be so owned shall be so disregarded. Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of and any premium and
interest on the Securities of that series are payable as specified as
contemplated by Section 301.
-7-
<PAGE> 18
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redeemable Stock" means any equity security that by its terms or
otherwise is required to be redeemed prior to the final stated maturity of the
Securities or is redeemable or exchangeable into Indebtedness (other than
Redeemable Stock) at the option of the holder thereof at any time prior to the
final stated maturity of the Securities.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Department (or any successor department)
including without limitation any vice president, any assistant vice president,
any trust officer, any assistant secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Sale and Leaseback Transaction" means with respect to any Person an
arrangement with any bank, insurance company or other lender or investor (or
pool thereof) or to which such lender or investor (or pool thereof) is a party,
providing for the leasing by such Person or any of its Subsidiaries of any
property or asset of such Person or any of its Subsidiaries which has been or
is being sold or transferred by such Person or such Subsidiary more than 270
days after the acquisition thereof or the completion of construction or
commence of operation thereof to such lender or investor or to any Person to
whom funds have been or are to be advanced by such lender or investor on the
security of such property or asset.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
-8-
<PAGE> 19
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
instalment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such instalment of principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
"Tangible Assets" of any Person means, at any date, the gross book value
as shown by the accounting books and records of such Person of all its property
both real and personal, less the net book value of (i) all its licenses,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
non-compete agreements or organizational expenses and other like intangibles,
(ii) unamortized Indebtedness discount and expense, (iii) all reserves for
depreciation, obsolescence, depletion and amortization of its properties and
(iv) all other proper reserves which in accordance with generally accepted
accounting principles should be provided in connection with the business
conducted by such Person; provided, however, that with respect to the Company
and its Subsidiaries, adjustments following the date of this Indenture to the
accounting books and records of the Company and its Subsidiaries resulting from
the acquisition of control of the Company by another Person in accordance with
Accounting Principles Board Opinions Nos. 16 and 17 or otherwise shall not be
given effect to.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
as in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean or include each Person who is then a Trustee hereunder, and if at any time
there is more than one such Person, "Trustee" as used with respect to the
Securities of any series shall mean the Trustee with respect to Securities of
that series.
"U.S. Government Obligation" has the meaning specified in Section 1304.
-9-
<PAGE> 20
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee such certificates and opinions as may be required or requested under
the Trust Indenture Act. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be given by an officer of the Company,
or an Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include,
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his
-10-
<PAGE> 21
certificate or opinion is based are erroneous. Any such certificate or opinion
of counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
a certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such
instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
-11-
<PAGE> 22
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date; provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be cancelled and of no effect), and nothing in this paragraph shall be
construed to render ineffective any action taken by Holders of the requisite
principal amount of Outstanding Securities of the relevant series on the date
such action is taken. Promptly after any record date is set pursuant to this
paragraph, the Company, at its own expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be
given to the Trustee in writing and to each Holder of Securities of the
relevant series in the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
join in the giving or making of (i) any Notice of Default, (ii) any declaration
of acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be cancelled and of no effect), and nothing in
this paragraph shall be construed to render ineffective any action taken by
Holders of the requisite principal amount of Outstanding Securities of the
relevant series on the date such action is taken. Promptly after any record
date is set pursuant to this paragraph, the Trustee, at the Company's expense,
shall cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Company in writing and to each
Holder of Securities of the relevant series in the manner set forth in Section
106.
-12-
<PAGE> 23
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 106, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard
to all or any part of the principal amount of such Security or by one or more
duly appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing to
or with the Trustee at 611 Woodward Avenue, Detroit Michigan 48266
Attention: Corporate Trust Administration, 11th Floor, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company addressed
to it at the address of its principal office specified in the first
paragraph of this instrument or at any other address previously furnished in
writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such
-13-
<PAGE> 24
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver. Any notice mailed to a
Holder in the manner prescribed herein shall be conclusively deemed to have
been received by such Holder hereunder, whether or not such Holder actually
received such notice.
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail, then
such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act which is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
-14-
<PAGE> 25
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the
Securities (other than a provision of any Security which specifically states
that such provision shall apply in lieu of this Section)) payment of interest
or principal (and premium, if any) need not be made at such Place of Payment on
such date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date, or at the Stated Maturity.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution and set forth, or determined in the manner
provided in an Officers' Certificate, or established in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or Depositary therefor or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution thereof. If the form of Securities of any
series is established by action taken pursuant to a Board Resolution, a copy of
an appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 303 for the
authentication and delivery of such Securities.
-15-
<PAGE> 26
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
SECTION 202. Form of Face of Security.
[Insert any legend required by the Internal Revenue Code and the regulations
thereunder.]
THE GEON COMPANY
...........................................
No. ......... [$ .......]
[insert principal amount in
other currency if applicable]
The Geon Company, a corporation duly organized and existing under the
laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to...........................................,
or registered assigns, the principal sum of......................... [Dollars]
[insert other currency unit if applicable] on ................................
........................ [if the Security is to bear interest prior to
Maturity, insert -- , and to pay interest thereon from ............. or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on ............ and ............ in each year,
commencing ........., at the rate of ....% per annum, until the principal
hereof is paid or made available for payment, provided that any principal and
premium, and any such instalment of interest, which is overdue shall bear
interest at the rate of ...% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are
due until they are paid or made available for payment, and such interest
shall be payable on demand. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the ....... or ....... (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said
Indenture].
-16-
<PAGE> 27
[If the Security is not to bear interest prior to Maturity, insert -- The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of ....% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are
due until they are paid or made available for payment. Interest on any overdue
principal or premium shall be payable on demand. Any such interest on overdue
principal or premium which is not paid on demand shall bear interest at the
rate of ......% per annum (to the extent that the payment of such interest on
interest shall be legally enforceable), from the date of such demand until the
amount so demanded is paid or made available for payment. Interest on any
overdue interest shall be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable,
insert -- any such] interest on this Security will be made at the office or
agency of the Company maintained for that purpose in ............, in such coin
or currency of [the United States of America][insert applicable country if
Security denominated in a currency other than U.S. Dollars] as at the time of
payment is legal tender for payment of public and private debts [if applicable,
insert -- ; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register].
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
THE GEON COMPANY
By...........................
Attest:
.........................................
-17-
<PAGE> 28
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of ............, 1995 (herein called
the "Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and ..................., as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof [if applicable,
insert -- , limited in aggregate principal amount to [$..........][insert other
currency if applicable]].
[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable, insert
- -- (1) on ........... in any year commencing with the year ...... and ending
with the year ...... through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time
[if applicable, insert -- on or after .........., 19..], as a whole or in part,
at the election of the Company, at the following Redemption Prices (expressed
as percentages of the principal amount): If redeemed [if applicable, insert --
on or before ..............., ...%, and if redeemed] during the 12-month period
beginning ............. of the years indicated,
Redemption Redemption
Year Price Year Price
---- ------------- ---- -------------
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption [if applicable, insert -- (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest instalments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.]
[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on ............ in
any year commencing with the
-18-
<PAGE> 29
year .... and ending with the year .... through operation of the sinking fund
for this series at the Redemption Prices for redemption through operation of
the sinking fund (expressed as percentages of the principal amount) set forth
in the table below, and (2) at any time [if applicable, insert -- on or after
............], as a whole or in part, at the election of the Company, at the
Redemption Prices for redemption otherwise than through operation of the
sinking fund (expressed as percentages of the principal amount) set forth in
the table below: If redeemed during the 12-month period beginning ............
of the years indicated,
Redemption Price
For Redemption Redemption Price For
Through Operation Redemption Otherwise
of the Than Through Operation
Year Sinking Fund of the Sinking Fund
---- ------------------- -------------------------
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest instalments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert -- Notwithstanding the foregoing, the Company may
not, prior to ............., redeem any Securities of this series as
contemplated by [if applicable, insert -- Clause (2) of] the preceding
paragraph as a part of, or in anticipation of, any refunding operation by the
application, directly or indirectly, of moneys borrowed having an interest cost
to the Company (calculated in accordance with generally accepted financial
practice) of less than .....% per annum.]
[If applicable, insert -- The sinking fund for this series provides for
the redemption on ............ in each year beginning with the year ....... and
ending with the year ...... of [if applicable, insert -- not less than
[$..........][insert other currency if applicable] ("mandatory sinking fund")
and not more than] $......... aggregate principal amount of Securities of this
series. Securities of this series acquired or redeemed by the Company otherwise
than through [if applicable, insert -- mandatory] sinking fund payments may be
credited against subsequent [if applicable, insert -- mandatory] sinking fund
payments otherwise required to be made [if applicable, insert -- , in the
inverse order in which they become due].]
-19-
<PAGE> 30
[If the Security is subject to redemption of any kind, insert -- In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert -- The Indenture contains provisions for
defeasance at any time of [the entire Indebtedness of this Security] [or]
[certain restrictive covenants and Events of Default with respect to this
Security] [, in each case] upon compliance with certain conditions set forth in
the Indenture.]
[If the Security is not an Original Issue Discount Security, insert -- If
an Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert -- If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to -- insert formula for determining the
amount. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with
the consent of the Holders of 66 2/3% in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made
written request to the Trustee to institute proceedings in respect of such
Event of
-20-
<PAGE> 31
Default as Trustee and offered the Trustee reasonable indemnity, and the
Trustee shall not have received from the Holders of a majority in principal
amount of Securities of this series at the time Outstanding a direction
inconsistent with such request, and shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities
of this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of [$.......][insert other currency if
applicable] and any integral multiple thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of this series
and of like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for
all purposes, whether or not this Security be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
-21-
<PAGE> 32
SECTION 204. Form of Legend for Global Securities.
Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, every Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY
BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A
NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
SECTION 205. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
NBD Bank
..........................................,
As Trustee
By.........................................
Authorized Signatory
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 303,
set forth, or determined
-22-
<PAGE> 33
in the manner provided, in an Officers' Certificate, or established in one or
more indentures supplemental hereto, prior to the issuance of Securities of any
series,
(1) the title of the Securities of the series (which shall distinguish
the Securities of the series from Securities of any other series);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 304, 305, 306, 906 or 1107 and except for any
Securities which, pursuant to Section 303, are deemed never to have been
authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series shall be
payable, if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest;
(4) the date or dates on which the principal of any Securities of the
series is payable;
(5) the rate or rates at which any Securities of the series shall bear
interest, if any, the date or dates from which any such interest shall
accrue, the Interest Payment Dates on which any such interest shall be
payable and the Regular Record Date for any such interest payable on any
Interest Payment Date;
(6) the place or places where the principal of and any premium and
interest on any Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at which and
the terms and conditions upon which any Securities of the series may be
redeemed, in whole or in part, at the option of the Company and, if other
than by a Board Resolution, the manner in which any election by the Company
to redeem the Securities shall be evidenced;
(8) the obligation, if any, of the Company to redeem or purchase any
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of the Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions upon
which any Securities of the series shall be redeemed or purchased, in whole
or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which any Securities of the series shall be
issuable;
(10 ) if the amount of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts shall be determined;
-23-
<PAGE> 34
(11) if other than the currency of the United States of America, the
currency, currencies or currency units in which the principal of or any
premium or interest on any Securities of the series shall be payable and the
manner of determining the equivalent thereof in the currency of the United
States of America for any purpose, including for purposes of the definition
of "Outstanding" in Section 101;
(12) if the principal of or any premium or interest on any Securities of
the series is to be payable, at the election of the Company or the Holder
thereof, in one or more currencies or currency units other than that or
those in which such Securities are stated to be payable, the currency,
currencies or currency units in which the principal of or any premium or
interest on such Securities as to which such election is made shall be
payable, the periods within which and the terms and conditions upon which
such election is to be made and the amount so payable (or the manner in
which such amount shall be determined);
(13) if other than the entire principal amount thereof, the portion of
the principal amount of any Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to Section
502;
(14) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more
dates prior to the Stated Maturity, the amount which shall be deemed to be
the principal amount of such Securities as of any such date for any purpose
thereunder or hereunder, including the principal amount thereof which shall
be due and payable upon any Maturity other than the Stated Maturity or which
shall be deemed to be Outstanding as of any date prior to the Stated
Maturity (or, in any such case, the manner in which such amount deemed to be
the principal amount shall be determined);
(15) if applicable, that the Securities of the series, in whole or any
specified part, shall be defeasible pursuant to Section 1302 or Section 1303
or both such Sections and, if other than by a Board Resolution, the manner
in which any election by the Company to defease such Securities shall be
evidenced;
(16) if applicable, that any Securities of the series shall be issuable
in whole or in part in the form of one or more Global Securities and, in
such case, the respective Depositaries for such Global Securities, the form
of any legend or legends which shall be borne by any such Global Security in
addition to or in lieu of that set forth in Section 204 and any
circumstances in addition to or in lieu of those set forth in Clause (2) of
the last paragraph of Section 305 in which any such Global Security may be
exchanged in whole or in part for Securities registered, and any transfer of
such Global Security in whole or in part may be registered, in the name or
names of Persons other than the Depositary for such Global Security or a
nominee thereof;
(17) any addition to or change in the Events of Default which applies to
any Securities of the series and any change in the right of the Trustee or
the requisite Holders of such Securities to declare the principal amount
thereof due and payable pursuant to Section 502;
-24-
<PAGE> 35
(18) any addition to or change in the covenants set forth in Article Ten
which applies to Securities of the series; and
(19) any other terms of the series (which terms shall not be inconsistent
with the provisions of this Indenture, except as permitted by Section
901(5)).
All Securities of any one series shall be substantially identical except
as to denomination and except as may otherwise be provided in or pursuant to
the Board Resolution referred to above and (subject to Section 303) set forth,
or determined in the manner provided, in the Officers' Certificate referred to
above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 302. Denominations.
The Securities of each series shall be issuable only in registered form
without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination
with respect to the Securities of any series denominated in the currency of the
United States, the Securities of such series shall be issuable in denominations
of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by
the Company to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Securities, and the Trustee in
accordance with the Company Order shall authenticate and deliver such
Securities. In authenticating such Securities, and accepting
-25-
<PAGE> 36
the additional responsibilities under this Indenture in relation to such
Securities, the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel
satisfactory to the Trustee which is substantially to the following effect,
(1) the form of such Securities has been established in conformity with
the provisions of this Indenture;
(2) the terms of such Securities have been established in conformity
with the provisions of this Indenture; and
(3) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
The Trustee shall not be required to authenticate such Securities, unless
prior to such authentication the Trustee has received an Officers' Certificate
stating that all conditions precedent to such authentication have been
satisfied.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder. Notwithstanding
the foregoing, if any Security shall have been authenticated and delivered
hereunder but never issued and sold by the Company, and the Company shall
deliver such Security to the Trustee for cancellation as provided in Section
309, for all purposes of this Indenture such Security shall be deemed never to
have been
-26-
<PAGE> 37
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series, of any authorized denominations and of like
tenor and aggregate principal amount. Until so exchanged, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of such series and tenor.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of a series
at the office or agency of the Company in a Place of Payment for that series,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new
Securities of the same series, of any authorized denominations and of like
tenor and aggregate principal amount.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount, upon surrender of the Securities to
be exchanged at such
-27-
<PAGE> 38
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
If the Securities of any series (or of any series and specified tenor)
are to be redeemed in part, the Company shall not be required (A) to issue,
register the transfer of or exchange any Securities of that series (or of that
series and specified tenor, as the case may be) during a period beginning at
the opening of business 15 days before the day of the mailing of a notice of
redemption of any such Securities selected for redemption under Section 1103
and ending at the close of business on the day of such mailing, or (B) to
register the transfer of or exchange any Security so selected for redemption in
whole or in part, except the unredeemed portion of any Security being redeemed
in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only to
Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security
or a nominee thereof and delivered to such Depositary or a nominee thereof
or custodian therefor, and each such Global Security shall constitute a
single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and
no transfer of a Global Security in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Security or
a nominee thereof unless (A) such Depositary (i) has notified the Company
that it is unwilling or unable to continue as Depositary for such Global
Security or (ii) has ceased to be a clearing agency registered under the
Exchange Act, (B) there shall have occurred and be continuing an Event of
Default with respect to such Global Security or (C) there shall exist such
-28-
<PAGE> 39
circumstances, if any, in addition to or in lieu of the foregoing as have
been specified for this purpose as contemplated by Section 301.
(3) Subject to Clause (2) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued
in exchange for a Global Security or any portion thereof shall be registered
in such names as the Depositary for such Global Security shall direct.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 304, 306, 906 or
1107 or otherwise, shall be authenticated and delivered in the form of, and
shall be, a Global Security, unless such Security is registered in the name
of a Person other than the Depositary for such Global Security or a nominee
thereof.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and
(ii) such security or indemnity as may be required by them to save each of them
and any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and proportionately
with any and all other Securities of that series duly issued hereunder.
-29-
<PAGE> 40
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise provided as contemplated by Section 301 with respect
to any series of Securities, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be
paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security of such series and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of the
notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given to
each Holder of Securities of such series in the manner set forth in
Section 106, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted Interest shall
be paid to the Persons in whose names the Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the
-30-
<PAGE> 41
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed payment
pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of and any premium and
(subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be destroyed and a certificate
of destruction delivered to the Company.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
-31-
<PAGE> 42
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Securities
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited
or caused to be deposited with the Trustee as trust funds in trust for
the purpose money in an amount sufficient to pay and discharge the entire
Indebtedness on such Securities not theretofore delivered to the Trustee
for cancellation, for principal and any premium and interest to the date
of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may
be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
-32-
<PAGE> 43
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium
and interest for whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
(2) default in the payment of the principal of or any premium on any
Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as due
by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with or which has expressly been included in this
Indenture solely for the benefit of series of Securities other than that
series), and continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least
-33-
<PAGE> 44
25% in principal amount of the Outstanding Securities of that series a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
provided that, with respect to a default in the performance of any covenant
hereunder with respect to which Securities have been defeased pursuant to
Section 1303, the Securities which have been so defeased, shall not be
deemed Outstanding for the purposes of this subsection (4); or
(5) a default under any bond, debenture, note or other evidence of
Indebtedness for money borrowed by the Company (including a default with
respect to Securities of any series other than that series) having an
aggregate principal amount outstanding of at least $25,000,000, or under any
mortgage, indenture or instrument (including this Indenture) under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company having an aggregate principal
amount outstanding of at least $25,000,000, whether such Indebtedness now
exists or shall hereafter be created, which default shall have resulted in
such Indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable, without such
Indebtedness having been discharged or such acceleration having been
rescinded or annulled, in each such case, within a period of 10 days after
there shall have been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of that series a
written notice specifying such default and requiring the Company to cause
such Indebtedness to be discharged or cause such acceleration to be
rescinded or annulled, as the case may be, and stating that such notice is a
"Notice of Default" hereunder; provided that, with respect to a default in
the performance of any covenant hereunder with respect to which Securities
have been defeased pursuant to Section 1303, the Securities which have been
so defeased, shall not be deemed Outstanding for the purposes of this
subsection (5); or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(7) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or
order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
-34-
<PAGE> 45
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission
by it in writing of its inability to pay its debts generally as they become
due, or the taking of corporate action by the Company in furtherance of any
such action; or
(8) any other Event of Default provided with respect to Securities of
that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(6) or 501(7)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount of all the
Securities of that series (or, if any Securities of that series are Original
Issue Discount Securities, such portion of the principal amount of such
Securities as may be specified by the terms thereof) to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable. If an Event of Default
specified in Section 501(6) or 501 (7) with respect to Securities of any series
at the time Outstanding occurs, the principal amount of all the Securities of
that series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) shall automatically, and without any
declaration or other action on the part of the Trustee or any Holder, become
immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in
this Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of that
series which have become due otherwise than by such declaration of
acceleration and any interest thereon at the rate or rates prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate or rates prescribed therefor in such
Securities, and
-35-
<PAGE> 46
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series
by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
-36-
<PAGE> 47
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys
or other property payable or deliverable on any such claims and to distribute
the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any
premium or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607; and
-37-
<PAGE> 48
SECOND: To the payment of the amounts then due and unpaid for principal
of and any premium and interest on the Securities in respect of which or for
the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable
on such Securities for principal and any premium and interest,
respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all
of such Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption,
-38-
<PAGE> 49
on the Redemption Date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
-39-
<PAGE> 50
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or interest on any
Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess costs
against any such party litigant, in the manner and to the extent provided in
the Trust Indenture Act; provided that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the
Company.
SECTION 515. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
-40-
<PAGE> 51
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, (a) no provision of
this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to the Trustee shall be subject to the provisions of this Section and (b) no
provision of this Indenture shall require the Trustee to determine the maximum
interest rate permissible under applicable law.
SECTION 602. Notice of Defaults.
If a default occurs hereunder with respect to Securities of any series,
the Trustee shall give the Holders of Securities of such series notice of such
default as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(4) with respect to Securities of such series, no such notice to Holders
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.
The Trustee shall not be deemed to have knowledge of any default or Event
of Default except (i) an Event of Default described in Section 501(1), (2) or
(3) or (ii) any default or Event of Default of which the Trustee shall have
received written notification or of which a Responsible Officer of the Trustee
shall have actual knowledge, provided that, the receipt of information
contained in any report or other documents furnished under Section 704 of this
Indenture shall not constitute such notification.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of Indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
-41-
<PAGE> 52
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any
resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith
on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of Indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the
Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. Neither
the Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of Securities or the proceeds thereof.
-42-
<PAGE> 53
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee such compensation as has been agreed upon in
writing for all services rendered by it hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee and each predecessor Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel
and of all other persons not regularly in its employ), except any such
expense, disbursement or advance as may be attributable to its negligence or
bad faith; and
(3) to indemnify the Trustee and each predecessor Trustee and the
officers, directors, employees and agents of the Trustee or any such
predecessor Trustee (the Trustee, each predecessor Trustee and such
officers, directors, employees and agents being hereinafter referred to in
this Section collectively as the "Indemnified Parties" and individually as
an "Indemnified Party") for, and to hold each Indemnified Party harmless
against, any loss, liability or expenses incurred without negligence or bad
faith on the part of such Indemnified Party, arising out of or in connection
with the acceptance or administration of this Indenture or the trusts
hereunder and the duties of the Trustee hereunder, and the costs and
expenses incurred by such Indemnified Party in the course of defending
itself against or investigating any claim of liability in the premises.
The obligations of the Company under this Section to compensate and
indemnify the Indemnified Parties and to pay or reimburse each Indemnified
Party for expenses,
-43-
<PAGE> 54
disbursements and advances shall constitute an additional obligation hereunder
and shall survive the satisfaction and discharge of this Indenture. To secure
the Company's payment obligations in this Section, the Trustee shall have a
lien prior to the Securities on all money or property held or collected by the
Trustee, in its capacity as Trustee, except money or property held in trust to
pay principal of, premium, if any, and interest, if any, on particular
Securities.
If the Trustee incurs expenses or renders services after the occurrence
of an Event of Default specified in clause (8) or (9) of Section 501 of this
Indenture, the expenses and the compensation for the services will be intended
to constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any other applicable federal or state law for the relief of
debtors.
SECTION 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee hereunder with
respect to the Securities of each series, which may be Trustee hereunder for
Securities of one or more other series. Each Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and either (i) has
a reported capital and surplus aggregating at least $50,000,000 or (ii) is a
wholly-owned subsidiary of a bank, a trust company or a bank holding company
having a reported capital and surplus aggregating at least $50,000,000. If any
such Person publishes reports of condition at least annually, pursuant to law
or to the requirements of its supervising or examining authority, then for the
purposes of this Section and to the extent permitted by the Trust Indenture
Act, the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee with respect to the
Securities of any series shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
-44-
<PAGE> 55
The Trustee may resign at any time with respect to the Securities of one
or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
The Trustee may be removed at any time with respect to the Securities of
any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
If the Trustee shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all
of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable requirements
of Section 611, become the successor Trustee with respect to the Securities of
such series and to that extent supersede the successor Trustee appointed by the
Company. If no
-45-
<PAGE> 56
successor Trustee with respect to the Securities of any series shall have been
so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 611, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
The Company shall give notice of each resignation and each removal of the
Trustee with respect to the Securities of any series and each appointment of a
successor Trustee with respect to the Securities of any series to all Holders
of Securities of such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee with respect
to all Securities, every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee with respect
to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1)
shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of
that or those series to which the appointment of such successor Trustee
relates, (2) if the retiring Trustee is not retiring with respect to all
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery of
such
-46-
<PAGE> 57
supplemental indenture the resignation or removal of the retiring Trustee shall
become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring Trustee shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee
hereunder with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates.
Upon request of any such successor Trustee, the Company shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts referred to in the
first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange,
-47-
<PAGE> 58
registration of transfer or partial redemption thereof or pursuant to Section
306, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or
the Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.
-48-
<PAGE> 59
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
NBD Bank
........................................,
As Trustee
By......................................,
As Authenticating Agent
By.......................................
Authorized Signatory
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(1) semi-annually, not later than ............... and
................... in each year, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders of Securities
of each series as of the preceding .............. or .............., as the
case may be, and
(2) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such
list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
-49-
<PAGE> 60
SECTION 702. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. Reports by Trustee.
Within 60 days after May 15, beginning with May 15, 1996, the Trustee
shall transmit to Holders such reports concerning the Trustee and its actions
under this Indenture as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant thereto.
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
(a) The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
(b) The Company will deliver to the Trustee, within forty days of the
date of
-50-
<PAGE> 61
original issuance of any Original Issue Discount Securities, an Officers'
Certificate, setting forth (i) the amount of the original issue discount on
such Original Issue Discount Securities, expressed as a U.S. dollar amount per
$1,000 of principal amount at Stated Maturity, (ii) the yield to maturity for
such Original Issue Discount Securities, and (iii) a table of the amount of the
original issue discount on such Original Issue Discount Securities, expressed
as a U.S. dollar amount per $1,000 of principal amount at Stated Maturity.
On or before December 15 of each year during which any Original Issue
Discount Securities are outstanding, the Company shall furnish to the Trustee
such information as may be requested by the Trustee in order that the Trustee
may prepare the information which is required to report for such year on
Internal Revenue Services Forms 1096 and 1099 pursuant to Section 6049 of the
Internal Revenue Code of 1986, as amended. Such information shall include the
amount of original issue discount includible in income for each $1,000 of
principal amount at Stated Maturity of Outstanding Original Issue Discount
Securities during such year.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust,
shall be organized and validly existing under the laws of the United States
of America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and any premium and interest on all the
Securities and the performance or observance of every covenant of this
Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and treating any
Indebtedness which becomes an obligation of the Company or any Subsidiary as
a result of such transaction as having been incurred by the Company or such
Subsidiary at the
-51-
<PAGE> 62
time of such transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall
have happened and be continuing;
(3) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, properties or assets of the Company would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by this Indenture, the Company or
such successor Person, as the case may be, shall take such steps as shall be
necessary effectively to secure the Securities equally and ratably with (or
prior to) all Indebtedness secured thereby; and
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such consolidation or into which
the Company is merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except
in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company herein and
in the Securities; or
-52-
<PAGE> 63
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional Events of
Default are to be for the benefit of less than all series of Securities,
stating that such additional Events of Default are expressly being included
solely for the benefit of such series); provided, however, that in respect
of any such additional Events of Default such supplemental indenture may
provide for a particular period of grace after default (which period may be
shorter or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the
remedies available to the Trustee upon such default or may limit the right
of the Holders of a majority in aggregate principal amount of that or those
series of Securities to which such additional Events of Default apply to
waive such default; or
(4) to add to or change any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that any
such addition, change or elimination (A) shall neither (i) apply to any
Security of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (ii) modify the
rights of the Holder of any such Security with respect to such provision or
(B) shall become effective only when there is no such Security Outstanding;
or
(6) to secure the Securities pursuant to the requirements of Section
1008 or otherwise; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Securities of one or more series
and to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, pursuant to the requirements of Section
611; or
(9) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising
under this Indenture, provided
-53-
<PAGE> 64
that such action pursuant to this Clause (9) shall not adversely affect the
interests of the Holders of Securities of any series.
SECTION 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than 66 2/3% in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any instalment of
principal of or interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal of an Original
Issue Discount Security or any other Security which would be due and payable
upon a declaration of acceleration of the Maturity thereof pursuant to
Section 502, or change any Place of Payment where, or the coin or currency
in which, any Security or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section, Section 513 or Section
1010, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby;
provided, however, that this clause shall not be deemed to require the
consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section and Section 1010, or the
deletion of this proviso, in accordance with the requirements of Sections
611 and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
-54-
<PAGE> 65
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
-55-
<PAGE> 66
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of the Holders of each
series of Securities that it will duly and punctually pay the principal of and
any premium and interest on the Securities of that series in accordance with
the terms of the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal and any premium and interest so
becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
-56-
<PAGE> 67
Whenever the Company shall have one or more Paying Agents for any series
of Securities, it will, prior to each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (1) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (2) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent for payment in
respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating
-57-
<PAGE> 68
whether or not to the best knowledge of the signers thereof the Company is in
default in the performance and observance of any of the terms, provisions and
conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon any officer becoming aware of (i) any
default of Event or Default or (ii) any default or event of default under any
other mortgage, indenture or instrument, an Officers' Certificate specifying
such default, Event of Default or default and what action the Company is taking
or proposes to take with respect thereto.
SECTION 1005. Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 1007. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim
-58-
<PAGE> 69
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 1008. Limitations on Liens.
The Company shall not, and shall not permit any of its Subsidiaries to,
Incur or suffer to exist any Lien on property or assets now owned or hereafter
acquired to secure Indebtedness without making, or causing such Subsidiary to
make, effective provision for securing the Securities (and, if the Company
shall so determine, any other Indebtedness of the Company which is not
subordinate to the Securities or of such Subsidiary) equally and ratably with
such Indebtedness as to such property or assets for so long as such
Indebtedness shall be so secured.
The foregoing restrictions will not apply to Liens in respect of
Indebtedness existing at the date of the Indenture or to: (i) Liens on property
existing at the time of acquisition thereof; (ii) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the
Company or any Subsidiary; (iii) Liens on property of the Company or any
Subsidiary in favor of the United States of America, any state thereof, or any
instrumentality of either to secure certain payments pursuant to any contract
or statue; (iv) Liens to secure Indebtedness Incurred for the purpose of
financing all or any part of the purchase price or the cost of construction or
improvement of the property subject to such Liens, and securing only the
property so purchased, constructed or improved; (v) Liens for taxes or
assessments or other governmental charges or levies, Liens imposed by law, such
as mechanics' and materialmen's Liens, for sums not due or sums being contested
in good faith and with respect to which adequate reserves are being maintained,
to the extent required by generally accepted accounting principles and Liens
securing reimbursement obligations with respect to trade letters of credit,
banker's acceptances and sight drafts incurred in the ordinary course of
business which encumber documents and other property relating to such trade
letters of credit, banker's acceptances and sight drafts; (vi) Liens to secure
obligations under worker's compensation laws or similar legislation, including
Liens with respect to judgments which are not currently dischargeable; (vii)
Liens created by or resulting from any litigation or other proceeding which is
being contested in good faith by appropriate proceedings, including Liens
arising out of judgments or awards against the Company or any Subsidiary with
respect to which the Company or such Subsidiary is in good faith prosecuting an
appeal or proceedings for review or for which the time to make an appeal has
not yet expired; or final unappealable judgment Liens which are satisfied
within 15 days of the date of judgment; or Liens incurred by the Company or any
Subsidiary for the purpose of obtaining a stay or discharge in the course of
any litigation or other proceeding to which the Company or such Subsidiary is a
party; and (viii) Liens to secure any extension, renewal or refinancing (or
successive extensions, renewals or refinancings), in whole or in part, of any
Indebtedness secured by Liens referred to in the foregoing clauses (i) to (vii)
so long as such Liens do not extend to any other property and the Indebtedness
so secured is not increased.
-59-
<PAGE> 70
In addition to the foregoing, the Company or any Subsidiary may Incur a
Lien to secure Indebtedness or enter into a Sale and Leaseback Transaction,
without equally and ratably securing the Securities, if the sum of (a) the
amount of Indebtedness subject to a Lien entered into after the date of the
Indenture and otherwise prohibited by the Indenture, and (b) the Attributable
Value of Sale and Leaseback Transactions entered into under clause (i) of the
covenant described under "Limitation on Sale and Leaseback Transactions" does
not exceed 5% of Consolidated Tangible Assets of the Company at the time of
such determination.
SECTION 1009. Limitation on Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Subsidiaries to
enter into any Sale and Leaseback Transaction (except for a period not
exceeding 36 months) unless (i) the Company or such Subsidiary would be
entitled to Incur a Lien to secure Indebtedness in an amount equal to the
Attributable Value of the Sale and Leaseback Transaction in accordance with the
"Limitation on Liens" covenant above, without equally and ratably securing the
Securities; or (ii) the Company or the Subsidiary applies or commits to apply
within 120 days an amount equal to the net proceeds of the property sold
pursuant to the Sale and Leaseback Transaction to the redemption or repurchase
of Securities or, if no Securities are redeemable or available for purchase, to
the redemption or repayment of Company Indebtedness which is pari passu to the
Securities or, if no pari passu Indebtedness is redeemable or payable, other
Company or Subsidiary Indebtedness which is redeemable or payable.
SECTION 1010. Waiver of Certain Covenants.
Except as otherwise specified as contemplated by Section 301 for
Securities of such series, the Company may, with respect to the Securities of
any series, omit in any particular instance to comply with any term, provision
or condition set forth in any covenant provided pursuant to Section 301(18),
901(2) or 901(7) for the benefit of the Holders of such series or in Sections
1008 and 1009, if before the time for such compliance the Holders of at least
66 2/3% in principal amount of the Outstanding Securities of such series shall,
by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such term, provision or condition, but no such
waiver shall extend to or affect such term, provision or condition except to
the extent so expressly waived, and, until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in respect of any
such term, provision or condition shall remain in full force and effect;
provided that, in determining the amount of Outstanding Securities in
connection with a waiver of compliance pursuant to this Section, Securities
which have been defeased pursuant to Section 1303, shall not be deemed
Outstanding.
-60-
<PAGE> 71
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for such Securities) in
accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution or in another manner specified as contemplated by Section
301 for such Securities. In case of any redemption at the election of the
Company of less than all the Securities of any series (including any such
redemption affecting only a single Security), the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date, of the principal amount of Securities of such series to be redeemed and,
if applicable, of the tenor of the Securities to be redeemed. In the case of
any redemption of Securities prior to the expiration of any restriction on such
redemption provided in the terms of such Securities or elsewhere in this
Indenture, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed (unless
all the Securities of such series and of a specified tenor are to be redeemed
or unless such redemption affects only a single Security), the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of such series
not previously called for redemption, by such method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of
a portion of the principal amount of any Security of such series, provided that
the unredeemed portion of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all the Securities of such series
and of a specified tenor are to be redeemed (unless such redemption affects
only a single Security), the particular Securities to be redeemed shall be
selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series and specified tenor not
previously called for redemption in accordance with the preceding sentence.
-61-
<PAGE> 72
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to
be redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series consisting
of more than a single Security are to be redeemed, the identification (and,
in the case of partial redemption of any such Securities, the principal
amounts) of the particular Securities to be redeemed and, if less than all
the Outstanding Securities of any series consisting of a single Security are
to be redeemed, the principal amount of the particular Security to be
redeemed,
(4) that on the Redemption Date the Redemption Price will become due and
payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(5) the place or places where each such Security is to be surrendered
for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
-62-
<PAGE> 73
SECTION 1105. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued
interest to the Redemption Date; provided, however, that, unless otherwise
specified as contemplated by Section 301, instalments of interest whose Stated
Maturity is on or prior to the Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such
at the close of business on the relevant Record Dates according to their terms
and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at
a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities of the same series and of like
tenor, of any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
-63-
<PAGE> 74
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.
The minimum amount of any sinking fund payment provided for by the terms
of any Securities is herein referred to as a "mandatory sinking fund payment",
and any payment in excess of such minimum amount provided for by the terms of
such Securities is herein referred to as an "optional sinking fund payment". If
provided for by the terms of any Securities, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section 1202. Each
sinking fund payment shall be applied to the redemption of Securities as
provided for by the terms of such Securities.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to any Securities of such series required to be made
pursuant to the terms of such Securities as and to the extent provided for by
the terms of such Securities; provided that the Securities to be so credited
have not been previously so credited. The Securities to be so credited shall be
received and credited for such purpose by the Trustee at the Redemption Price,
as specified in the Securities so to be redeemed, for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 100 days prior to each sinking fund payment date for any
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant
to Section 1202 and will also deliver to the Trustee any Securities to be so
delivered. Not less than 100 days prior to each such sinking fund payment date,
the Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 1103 and cause notice of the
redemption thereof
-64-
<PAGE> 75
to be given in the name of and at the expense of the Company in the manner
provided in Section 1104. Such notice having been duly given, the redemption of
such Securities shall be made upon the terms and in the manner stated in
Sections 1106 and 1107.
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may elect, at its option at any time, to have Section 1302 or
Section 1303 applied to any Securities or any series of Securities, as the case
may be, designated pursuant to Section 301 as being defeasible pursuant to such
Section 1302 or 1303, in accordance with any applicable requirements provided
pursuant to Section 301 and upon compliance with the conditions set forth below
in this Article. Any such election shall be evidenced by a Board Resolution or
in another manner specified as contemplated by Section 301 for such Securities.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, the
Company shall be deemed to have been discharged from its obligations with
respect to such Securities as provided in this Section on and after the date
the conditions set forth in Section 1304 are satisfied (hereinafter called
"Defeasance"). For this purpose, such Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by
such Securities and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), subject to the following which shall survive until
otherwise terminated or discharged hereunder: (1) the rights of Holders of such
Securities to receive, solely from the trust fund described in Section 1304 and
as more fully set forth in such Section, payments in respect of the principal
of and any premium and interest on such Securities when payments are due, (2)
the Company's obligations with respect to such Securities under Sections 304,
305, 306, 1002 and 1003, (3) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and (4) this Article. Subject to compliance with this
Article, the Company may exercise its option (if any) to have this Section
applied to any Securities notwithstanding the prior exercise of its option (if
any) to have Section 1303 applied to such Securities.
-65-
<PAGE> 76
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, (1)
the Company shall be released from its obligations under Section 801(3),
Sections 1006 through 1009, inclusive, and any covenants provided pursuant to
Section 301(18), 901(2) or 901(7) for the benefit of the Holders of such
Securities and (2) the occurrence of any event specified in Sections 501(4)
(with respect to any of Section 801(3), Sections 1006 through 1009, inclusive,
and any such covenants provided pursuant to Section 301(18), 901(2) or 901(7)),
501(5) and 501(8) shall be deemed not to be or result in an Event of Default,
in each case with respect to such Securities as provided in this Section on and
after the date the conditions set forth in Section 1304 are satisfied
(hereinafter called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that, with respect to such Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent so specified
in the case of Section 501(4)), whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or by reason of any reference in
any such Section to any other provision herein or in any other document, but
the remainder of this Indenture and such Securities shall be unaffected
thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section 1302
or Section 1303 to any Securities or any series of Securities, as the case may
be:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 609 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust for the
purpose of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefits of the Holders of such
Securities, (A) money in an amount, or (B) U.S. Government Obligations which
through the scheduled payment of principal and interest in respect thereof
in accordance with their terms will provide, not later than one day before
the due date of any payment, money in an amount, or (C) a combination
thereof, in each case sufficient, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee (or any such other qualifying trustee) to pay and
discharge, the principal of and any premium and interest on such Securities
on the respective Stated Maturities, in accordance with the terms of this
Indenture and such Securities. As used herein, "U.S. Government Obligation"
means (x) any security which is (i) a direct obligation of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged or (ii) an obligation of a Person controlled or
supervised by and acting as an agency or instrumentality of the United
States of America the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America, which, in
either case (i) or (ii), is not callable or redeemable at the option
-66-
<PAGE> 77
of the issuer thereof, and (y) any depositary receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian with respect
to any U.S. Government Obligation which is specified in Clause (x) above and
held by such bank for the account of the holder of such depositary receipt,
or with respect to any specific payment of principal of or interest on any
U.S. Government Obligation which is so specified and held, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt
from any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest evidenced by
such depositary receipt.
(2) In the event of an election to have Section 1302 apply to any
Securities or any series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (A)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this instrument, there has
been a change in the applicable Federal income tax law, in either case (A)
or (B) to the effect that, and based thereon such opinion shall confirm
that, the Holders of such Securities will not recognize gain or loss for
Federal income tax purposes as a result of the deposit, Defeasance and
discharge to be effected with respect to such Securities and will be subject
to Federal income tax on the same amount, in the same manner and at the same
times as would be the case if such deposit, Defeasance and discharge were
not to occur.
(3) In the event of an election to have Section 1303 apply to any
Securities or any series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that
the Holders of such Securities will not recognize gain or loss for Federal
income tax purposes as a result of the deposit and Covenant Defeasance to be
effected with respect to such Securities and will be subject to Federal
income tax on the same amount, in the same manner and at the same times as
would be the case if such deposit and Covenant Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that neither such Securities nor any other
Securities of the same series, if then listed on any securities exchange,
will be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or both would
become, an Event of Default with respect to such Securities or any other
Securities shall have occurred and be continuing at the time of such deposit
or, with regard to any such event specified in Sections 501(6) and (7), at
any time on or prior to the 90th day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied until
after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause the Trustee
to have a conflicting interest within the meaning of the Trust Indenture Act
(assuming all Securities are in default within the meaning of such Act).
-67-
<PAGE> 78
(7) Such Defeasance or Covenant Defeasance shall not result in a breach
or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which it is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in the trust
arising from such deposit constituting an investment company within the
meaning of the Investment Company Act unless such trust shall be registered
under such Act or exempt from registration thereunder.
(9) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been
complied with.
SECTION 1305. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee or other qualifying trustee (solely for purposes of
this Section and Section 1306, the Trustee and any such other trustee are
referred to collectively as the "Trustee") pursuant to Section 1304 in respect
of any Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any such Paying Agent (including the
Company acting as its own Paying Agent) as the Trustee may determine, to the
Holders of such Securities, of all sums due and to become due thereon in
respect of principal and any premium and interest, but money so held in trust
need not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1304
with respect to any Securities which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect the Defeasance or Covenant
Defeasance, as the case may be, with respect to such Securities.
-68-
<PAGE> 79
SECTION 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1302 or 1303 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to
apply all money held in trust pursuant to Section 1305 with respect to such
Securities in accordance with this Article; provided, however, that if the
Company makes any payment of principal of or any premium or interest on any
such Security following such reinstatement of its obligations, the Company
shall be subrogated to the rights (if any) of the Holders of such Securities to
receive such payment from the money so held in trust.
-69-
<PAGE> 80
_____________________________
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
The Geon Company
By.........................
Attest:
.............................
NBD Bank
By.........................
Attest:
.............................
-70-
<PAGE> 81
STATE OF OHIO )
) ss.:
COUNTY OF LORAIN )
On the .... day of ..........., ...., before me personally came
..........................., to me known, who, being by me duly sworn, did
depose and say that he is .................... of
................................., one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
...............................................
STATE OF MICHIGAN )
) ss.:
COUNTY OF WAYNE )
On the .... day of ..........., ...., before me personally came
..........................., to me known, who, being by me duly sworn, did
depose and say that she is .................... of NBD Bank, one of the
corporations described in and which executed the foregoing instrument; that she
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that she signed her name thereto by like
authority.
...............................................
-71-
<PAGE> 1
EXHIBIT 10.1
THE GEON COMPANY
INCENTIVE STOCK PLAN
--------------------
PURPOSE
The purpose of the Incentive Stock Plan (the "Plan") is to promote the
interests of the stockholders by furthering the long-term performance of The
Geon Company (the "Company") and to enable the Company to be competitive in
encouraging key employees who perform services of special importance to the
management, operation and the development of the business of the Company or
its subsidiaries, to remain in its service, to attract others to it, and to
provide such employees with an additional incentive to contribute to the
prosperity of the Company and its stockholders.
INCENTIVES
Incentives under the Plan may be granted in any one or a combination of (a)
stock options which may consist of (i) Incentive Stock Options (or other
statutory stock options) and/or (ii) Non-Qualified Stock Options; (b) Stock
Appreciation Rights; (c) Limited Stock Appreciation Rights; and (d) stock
awards which may consist of (i) Restricted Stock and/or (ii) Performance
Incentive Stock (together "Incentives"). All Incentives shall be subject to the
terms and conditions set forth herein and to such other terms and conditions as
may be established in the manner prescribed by the Board of Directors.
ADMINISTRATION
To the extent permitted by law the Board may delegate any or all of its powers
under this Plan to a committee (the "Committee") of not less than two
Directors, who are not Officers or employees of the Company, and who are not
eligible to participate in the Plan and have not participated in the Plan for
at least one year. The Board or the Committee may delegate to the chief
executive officer of the Company its duties under the Plan, with respect to not
more than 10% of the shares authorized under this Plan, pursuant to such
conditions or limitations as the Board or Committee may establish, except that
only the Board or the Committee may select participants and grant options,
appreciation rights and stock awards to participants who are subject to Section
16 of the Securities Exchange Act of 1934, as amended. The Board, the Committee
or the chief executive officer, as the case may be, shall be referred to as the
"Granting Authority".
ELIGIBILITY
Regular key employees of the Company and its subsidiaries, including officers
whether or not Directors, shall be eligible to participate in the Plan.
Directors who are not regular employees are not eligible. Participation in the
Plan shall be limited to those key employees of the Company selected by the
Granting Authority.
STOCK OPTIONS
The Granting Authority may in its discretion from time to time grant to
eligible employees options to purchase, except as provided below, at a cash
price not less than 100% of the fair
<PAGE> 2
market value on the date of grant (the "option price"), treasury stock or
authorized but unissued common stock of the Company, subject to the conditions
set forth in this Plan. Within 60 days of the Company's initial public
offering, the Board or the Committee may grant options to purchase common stock
of the Company at less than 100% of the fair market value to Company employees
who hold stock options from The B.F.Goodrich Company in substitution for such
options in compliance with Section 424 of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code") on condition that (i) the eligible
employees surrender all their then unexercised stock options issued by The
B.F.Goodrich Company; (ii) the excess of the aggregate fair market value of the
stock subject to the option immediately after the substitution over the
aggregate option price of such stock is not more than the excess of the
aggregate fair market value of all stock subject to the option immediately
before such substitution over the aggregate option price of such stock; and
(iii) the new options do not provide the participants any additional benefits
than the surrendered options.
The Granting Authority, at the time of granting to any employee an Incentive
under the Plan, may designate options Incentive Stock Options pursuant to
Section 422 of the Internal Revenue Code or any other statutory stock option
that may be permitted under the Internal Revenue Code from time to time,
provided, however that (i) the date on which such options and related
appreciation rights shall expire, if not exercised, may not be later than ten
years after the date of grant of the option, (ii) in the case of options
designated as Incentive Stock Options, the aggregate fair market value of stock
optioned to an employee (determined at time of grant) under this plan or any
other plan of this Company and its subsidiaries with respect to which incentive
stock options are exercisable for the first time by such employee during any
calendar year shall be limited to $100,000 (unless such Section 422 limit is
revised, then in conformance with such revision) and (iii) in case of any other
statutory stock option permitted under the Internal Revenue Code, then in
accordance with such provisions as in effect from time to time.
Within the foregoing limitations, the Granting Authority shall have the
authority in its discretion to specify all other terms and conditions,
including but not limited to provisions for the exercise of options in
installments, the time limits during which options may be exercised, and in
lieu of payment in cash, the exercise in whole or in part of options by
tendering common stock of the Company owned by the employee, valued at the fair
market value on the date of exercise or other acceptable forms of consideration
equal in value to the option price. The Board or Committee may, in its
discretion, establish rules or conditions with respect to utilization of common
stock for all or part of the option price. Furthermore, the Board or Committee
may, in its discretion, establish rules or conditions for the surrendering of a
portion of a grant in satisfaction of any withholding tax obligation.
APPRECIATION RIGHTS
The Granting Authority may, in its discretion, grant Stock Appreciation Rights
and Limited Stock Appreciation Rights (as hereinafter described) in connection
with any stock option, either at the time of grant of such stock option or any
time thereafter during the term of such stock option. Except for the terms of
this Plan with respect to Limited Stock Appreciation Rights, each such
appreciation right shall be subject to the same terms and
-2-
<PAGE> 3
conditions as the related stock option and shall be exercisable at such times
and to such extent as the Granting Authority shall determine, but only so long
as the related option is exercisable. The number of Stock Appreciation Rights
or LimIted Stock Appreciation Rights granted shall not exceed the number of
shares which may be purchased upon exercise of a related option. The number of
both Stock Appreciation Rights and Limited Stock Appreciation Rights shall be
reduced not only by the number of appreciation rights exercised but also by the
number of shares purchased upon the exercise of a related option. A related
stock option shall cease to be exercisable to the extent surrendered for the
exercise of an appreciation right.
STOCK APPRECIATION RIGHTS
Upon surrender to the Company of the unexercised related stock option, or any
portion thereof, a Stock Appreciation Right shall entitle the optionee to
receive from the Company in exchange therefor (a) a payment in stock as
determined below, or (b) to the extent determined by the Granting Authority,
the cash equivalent of the fair market value of such payment in stock on the
exercise date had the employee been awarded a payment in stock instead of cash,
or any combination of stock and cash. The number of shares which shall be
issued pursuant to the exercise of Stock Appreciation Rights shall be
determined by dividing (1) the total number of Stock Appreciation Rights being
exercised multiplied by the amount by which the fair market value of a share of
common stock of the Company on the exercise date exceeds the option price of
the related option, by (2) the fair market value of a share of common stock of
the Company on the exercise date. No fractional shares shall be issued.
LIMITED STOCK APPRECIATION RIGHT
The grant of a Limited Stock Appreciation Right will permit a grantee to
exercise such right for cash during a sixty-day period commencing on the date
on which any of the events described in the definition of Change of Control
occurs, each of which events shall hereinafter be known as a "Change in Control
Event." Notwithstanding the foregoing, however, if the Change in Control Event
occurs within six months after the date on which a Limited Stock Appreciation
Right was granted, then the sixty-day period during which such right may be
exercised for cash shall commence six months after the date on which the
Limited Stock Appreciation Right was granted. The amount of cash received upon
the exercise of any Limited Stock Appreciation Right under either of the
preceding two sentences shall equal the excess, if any, of the fair market
value of a share of the Company's common stock on the date of exercise of the
Limited Stock Appreciation Right, over the option price of the stock option to
which the Limited Stock Appreciation Right relates.
STOCK AWARDS
The Granting Authority in lieu of or in addition to granting stock options with
or without appreciation rights under this Plan, may make awards ("stock
awards") in common stock or denominated in units of common stock. All or part
of any stock award may be subject to conditions established by the Granting
Authority, which may include, but are not limited to, continuous service with
the Company ("Restricted Stock") and attainment of specific
-3-
<PAGE> 4
performance objectives ("Performance Stock"). Stock awards may include the
awarding of additional stock ("Additional Stock") upon attainment of
performance objectives. If the common stock is awarded subject to attainment of
performance objectives or continued service with the Company, the stock may be
registered in the participant's names when initially awarded, but possession of
the certificates for the stock, or appropriate book entry, shall be retained by
the Company for the benefit of participants, subject to the conditions of the
stock awards. In such event, each participant shall have the right to receive
all dividends and other distributions made with respect to stock awards
registered in his or her name and shall have the right to vote or execute
proxies with respect to such registered shares. Stock awards with respect to
which the restrictions are not removed in accordance with the provision of the
stock awards shall be forfeited and shall revert to the treasury of the
Company.
ASSIGNABILITY
Incentives granted under this Plan shall not be transferable other than by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined in the Internal Revenue Code and such Incentive
shall be exercisable during the employee's lifetime only by the employee or by
the employee's guardian or legal representative or permitted transferee or, in
the event of death, by the employee's estate or by a person who acquires the
Incentive by bequest or inheritance.
CORPORATE REORGANIZATION
The number and kind of shares authorized for delivery under this Plan and, if
appropriate, the purchase price per share, shall be adjusted appropriately in
the event of any stock split,, stock dividend, combination of shares, merger,
consolidation, reorganization, or other change in the nature of the shares of
the Company (any one or more of the foregoing hereinafter a "corporate
reorganization"). The determination of what adjustments, if any, are
appropriate shall be made by the Board or Committee.
CORPORATE REORGANIZATIONS
In the event of a dissolution or liquidation of the Company or a merger,
consolidation, sale of all or substantially all of its assets, or other
corporate reorganization in which the Company is not the surviving corporation
or any merger in which the Company is the surviving corporation but the holders
of its common stock receive securities of another corporation, any outstanding
options hereunder shall terminate, provided that each optionee shall, in such
event,, have the right immediately prior to such dissolution, liquidation,
merger, consolidation, sale of assets or reorganization in which the Company is
not the surviving corporation or any merger in which the Company is the
surviving corporation but the holders of its common stock receive securities of
another corporation, to exercise any unexpired option and/or Stock Appreciation
Right in whole or in part without regard to the exercise date contained in such
option. Nothing herein contained shall prevent the assumption and continuation
of any outstanding option or the substitution of a new option by the surviving
corporation.
-4-
<PAGE> 5
CHANGE IN CONTROL
Options and any related appreciation rights that are not exercisable shall
become immediately exercisable in the event of a Change in Control. Anything to
the contrary notwithstanding, in the event a Change in Control of the Company
shall occur, then an interim removal of restrictions on all or a portion of the
Performance Stock award and the awarding of Additional Stock, if appropriate,
(the "Interim Action") shall be made to each participant within five days
following the occurrence of the Change in Control with respect to all
outstanding Performance Stock awarded to such participant. The Interim Action
with respect to each outstanding Performance Stock award shall be calculated
(i) based upon the performance objectives attained as of the end of the most
recent quarter in the plan cycle related to each such award (the "Determination
Date") ending prior to the Change in Control and as if the Determination Date
were the end of the last quarter in such plan cycle and (ii) based upon the
number of full and partial months through the occurrence of the Change in
Control that have elapsed in the plan cycle with respect to each such
Performance Stock award. The amount of such Interim Action with respect to each
such outstanding Performance Stock award shall be a prorated portion (based
upon the number of full and partial months through the occurrence of the Change
in Control that have elapsed in the plan cycle related to such award) of the
amount of the Performance Stock award that would have been payable to the
participant at the end of the relevant plan cycle, calculated assuming
attainment of the greater of (i) 100% of the performance objective with respect
to such plan cycle or (ii) the actual percentage (annualizing a partial year,
if any) of the performance objective attained as of the Determination Date and
as if the Determination Date were the end of the plan cycle related to such
Performance Stock award. The Interim Action shall not reduce the obligation of
the Company to make a final removal of restrictions or award of additional
stock ("Final Action") under the terms of the Plan, but any Interim Action made
with respect to a Performance Stock award shall be offset against the Final
Action, if any, required under the terms of the Plan with respect to such
Performance Stock award at the actual end of the plan cycle related to such
Performance Stock award. Notwithstanding the foregoing, in no event shall a
participant be required to return stock or refund to the Company, or have
offset against any other payment due such participant from or on behalf of the
Company, all or any portion of an Interim Action. In the event of a Change in
Control all restrictions on Restricted Stock shall lapse and the participant
shall immediately receive all Restricted Stock free of further restrictions.
For purposes of the Plan, a Change in Control shall mean
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common
Stock") or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the
Company (other than by exercise of a conversion privilege), (B) any
acquisition by the Company or any of its subsidiaries, (C) any
acquisition by any
-5-
<PAGE> 6
employee benefit plan (or related trust) sponsored or maintained by
the Company or any of its subsidiaries or (D) any acquisition by any
corporation with respect to which, following such acquisition, more
than 70% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting Securities
immediately prior to such acquisition in substantially the same
proportions as their ownership, immediately prior to such acquisition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(ii) During any period of two consecutive years,
individuals who, as of the beginning of such period, constitute the
Board (the "Incumbent Board"), cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the beginning of such period whose
election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or
(iii) approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation, do not,
following such reorganization, merger or consolidation, beneficially
own, directly or indirectly, more than 70% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their ownership, immediately
prior to such reorganization, merger or consolidation of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) a sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, more than 70% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities
-6-
<PAGE> 7
who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in substantially
the same proportion as their ownership, immediately prior to such sale
or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be.
(v) Notwithstanding the foregoing, the acquisition of the
beneficial ownership of the Outstanding Company Common Stock from or
by The B.F.Goodrich Company shall not constitute a Change in Control.
SHARES AVAILABLE FOR INCENTIVES
Subject to adjustment as provided in the following paragraph, there is hereby
reserved for issuance under the Plan, 2,500,000 shares in 1993, and in each
calendar year thereafter one % of the outstanding shares of the Company's
Common Stock as of the first business day of each calendar year. The shares
available for granting Incentives in any year shall be increased by the number
of shares available under the Plan in previous years but not covered by
Incentives granted under the Plan in those years plus any shares as to which
options or other benefits granted under the Plan have lapsed, expired,
terminated, forfeited or been cancelled for any reason without being exercised.
However, upon surrender of a stock option on exercise of the related
appreciation right, the number of shares subject to the surrendered option
shall be charged against the maximum number of shares issuable under the Plan
and shall not be available for future options.
FAIR MARKET VALUE
For all purposes of this Plan the fair market value of a share of stock shall
be the mean of the high and low prices of the Company's common stock on the
relevant date or, if no sale was made on such date, then on the next preceding
day on which such a sale was made (a) if the Company's stock is listed on the
New York Stock Exchange, as reported on the New York Stock Exchange Composite
Transactions listing (or similar report), or (b) if the Company's stock is
listed on the NASDAQ National Market System, then as reported on such system,
or (c) if not listed on either the New York Stock Exchange or the NASDAQ
National Market System, as determined by the Board or Committee.
TERMINATION OF EMPLOYMENT
Upon the termination of employment of any employee for any reason, his or her
options and any related appreciation rights shall terminate at that time with
respect to all shares which were not then purchasable by him or her, provided,
however, that if the termination of employment is by reason of death,
disability or retirement the Board may in its sole discretion provide that such
options and related appreciation rights shall not terminate upon death,
disability or retirement and may become immediately exercisable or continue to
become exercisable in accordance with the terms of the original grant.
-7-
<PAGE> 8
COMPLIANCE WITH LAW
Notwithstanding any other provisions of the Plan, the issuance or delivery of
any shares may be postponed for such period as may be required to comply with
any applicable requirements of any national securities exchange or any
requirements under any other law or regulation applicable to the issuance or
delivery of such shares, and the Company shall not be obligated to issue or
deliver any such shares if the issuance or delivery thereof shall constitute a
violation of any provision of any law or any regulation of any governmental
authority or any national securities exchange.
EMPLOYMENT
Nothing in the Plan or in any agreement entered into pursuant to the Plan shall
confer upon any participant the right to continue in the employment of the
Company or affect any right which the Company may have to terminate the
employment of such participant.
GRANTING AUTHORITY'S DETERMINATION
The Granting Authority's determinations under the Plan including without
limitation, determinations of the participants to receive awards or grants, the
form, amount and timing of such awards or grants, the terms and provisions of
such awards or grants and the agreements evidencing same, and the establishment
of any performance objectives need not be uniform and may be made by it
selectively among participants who receive, or are eligible to receive
Incentives under the Plan whether or not such participants are similarly
situated.
INTERPRETATION AND AMENDMENT
The Board or Committee shall have the power to interpret the provisions of this
Plan and of all Incentives granted hereunder and the Board shall have the power
to amend this Plan from time to time, provided, however, that no amendment
shall be made without the approval of stockholders which has the effect of
increasing the number of shares of stock subject to this Plan (other than in
connection with a corporate reorganization), changing the class of employees
eligible to participate, reducing the purchase price of shares pursuant to
options to an amount less than 100% of the fair market value on the date of
grant or extending the time during which options may be granted hereunder, or
otherwise materially increasing the benefits accruing to participants under
this Plan. The Granting Authority shall have the authority to amend the terms
of any Incentive granted by it subject to the foregoing limitations and
provided that no such amendment shall deprive any optionee of any rights
thereunder without his written consent unless such amendment or rescission is
required by law.
-8-
<PAGE> 1
EXHIBIT 10.2
THE GEON COMPANY
1995 INCENTIVE STOCK PLAN
1. Purpose
The Geon Company 1995 Incentive Stock Plan (the "Plan") is designed to
foster and promote the long-term growth and performance of the Company by
enhancing the Company's ability to attract and retain qualified Directors and
key employees and motivating Directors and key employees through stock
ownership and performance-based incentives. To achieve this purpose, this Plan
provides authority for the grant of Stock Options, Director Options, Restricted
Stock, Stock Equivalent Units, Stock Appreciation Rights, Performance-Based
Stock Awards, and other stock and performance-based incentives.
2. Definitions
(a) "Affiliate" -- This term has the meaning given to it in Rule
12b-2 under the Exchange Act.
(b) "Award" -- The grant of Stock Options, Director Options,
Restricted Stock, Stock Equivalent Units, Stock Appreciation Rights,
Performance-Based Stock Awards, and other stock and performance-based
incentives under this Plan.
(c) "Award Agreement" -- Any agreement between the Company and a
Participant that sets forth terms, conditions, and restrictions applicable to
an Award.
(d) "Board of Directors" -- The Board of Directors of the Company.
(e) "Change in Control" -- A "Change in Control" will be deemed to
occur if at any time after the date of the adoption of this Plan:
(1) Any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act, acquires
beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 20% or more of either (a) the then outstanding Common
Stock of the Company (the "Outstanding Company Common Stock") or (b)
the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change in Control:
(i) any acquisition directly from the Company (other than by exercise
of a conversion privilege), (ii) any acquisition by the Company of any
of its subsidiaries, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
of its subsidiaries or (iv) any acquisition by any corporation with
respect to which following such acquisition, more than 70% of,
respectively, the then outstanding shares of common stock of
-1-
<PAGE> 2
such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting Securities
immediately prior to such acquisition in substantially the same
proportions as their ownership, immediately prior to such acquisition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be;
(2) During any period of two consecutive years,
individuals who, at of the beginning of such period, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided, however, that any individual
becoming a director subsequent to the beginning of such period whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act);
(3) The stockholders of the Company approve any
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation, do not,
following such reorganization, merger or consolidation, beneficially
own, directly or indirectly, more than 70% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the company
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their ownership, immediately
prior to such reorganization, merger or consolidation of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(4) The stockholders of the Company approve (a) a complete
liquidation or dissolution of the Company or (b) a sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which following such sale
or other disposition, more than 70% of, respectively, the then
outstanding shares of common stock of such company and the combined
voting power of the then outstanding voting securities of such company
entitled to vote generally in the election of directors is then
beneficially owned. directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities
-2-
<PAGE> 3
immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be.
(f) "Code" -- The Internal Revenue Code of 1986, or any law
that supersedes or replaces it, as amended from time to time.
(g) "Committee" -- The Compensation Committee of the Board of
Directors, or any other committee of the Board of Directors that the Board of
Directors authorizes to administer this Plan. The Committee will be constituted
in a manner that satisfies all applicable legal requirements, including
satisfying the disinterested administration standard set forth in Rule 16b-3
and the outside director requirement under Section 162(m).
(h) "Common Stock" or "stock" -- Common Stock, $.10 par value,
of the Company, including authorized and unissued shares and treasury shares.
(i) "Company" -- The Geon Company, a Delaware corporation, and
its direct and indirect subsidiaries.
(j) "Continuing Director" -- A Director following a Change in
Control who was a Director prior to such Change in Control or who was
recommended or elected to succeed a Continuing Director by a majority of the
Continuing Directors then in office.
(k) "Director" -- A director of the Company.
(l) "Director Option" -- A right to purchase Common Stock
granted to a Director pursuant to Section 7.
(m) "Exchange Act" -- The Securities Exchange Act of 1934, as
amended, or any law that supersedes or replaces it, as the same may be amended
from time to time.
(n) "Fair Market Value" of Common Stock -- The Fair Market
Value of a share of Common Stock on any particular date means the mean of the
high and low prices of the Common Stock on the relevant date or, if no sale was
made on such date, then on the next preceding day on which such a sale was made
(a) if the Common Stock is listed on the New York Stock Exchange, as reported
on the New York Stock Exchange Composite Transactions listing (or similar
report), or (b) if the Common Stock is listed on the NASDAQ National Market
System, then as reported on such system or (c) if not listed on either the New
York Stock Exchange or the NASDAQ National Market System, as determined by the
Board or Committee.
(o) "Incentive Stock Option" -- A Stock Option that meets the
requirements of Section 422 of the Code.
-3-
<PAGE> 4
(p) "Non-Employee Director" -- A Director who is not an employee of
the Company.
(q) "Notice of Award" -- Any notice by the Committee to a Participant
that advises the Participant of the grant of an Award or sets forth terms,
conditions, and restrictions applicable to an Award.
(r) "Participant" -- Any person to whom an Award has been granted
under this Plan.
(s) "Performance-Based Stock Award" -- A Stock Award granted to a
Participant pursuant to Section 8.
(t) "Restricted Stock" -- An Award of Common Stock subject to
restrictions or risk of forfeiture.
(u) "Rule 16b-3" -- Rule 16b-3 under the Exchange Act as the same may
be amended, modified, superseded or replaced from time to time.
(v) "Section 162(m)"-- Section 162(m) of the Code, together with the
regulations promulgated by the Internal Revenue Service thereunder, as the same
may be amended, modified, superseded or replaced from time to time.
(w) "Stock Appreciation Right" -- This term has the meaning given to
it in Section 6(b) (ii).
(x) "Stock Award" -- This term has the meaning given to it in Section
6(b) (iii).
(y) "Stock Equivalent Unit" -- An Award that is valued by reference to
the value of Common Stock.
(z) "Stock Option" -- This term has the meaning given to it in Section
6(b) (iv).
3. Eligibility
All key employees of the Company and its Affiliates, including
officers whether or not Directors, are eligible for the grant of Awards (other
than Director Options). The selection of key employees to receive Awards
(other than Director Options) will be within the discretion of the Committee.
More than one Award may be granted to the same key employee.
All Non-Employee Directors are eligible for the grant of Director
Options, as provided in Section 7. Non-Employee Directors are not, however,
eligible for the grant of any Awards other than Director Options.
-4-
<PAGE> 5
4. Common Stock Available for Awards; Adjustment
(a) Number of Shares of Common Stock. Subject to adjustment as
provided for in Section 4(d), the aggregate number of shares of Common Stock
that may be subject to Awards granted under this Plan shall be 2,500,000 shares
of Common Stock. The assumption of awards granted by an organization acquired
by the Company, or the grant of Awards under this Plan in substitution for any
such awards, will not reduce the number of shares of Common Stock available for
the grant of Awards under this Plan.
Common Stock subject to an Award that expires or is forfeited,
terminated, or canceled will again be available for grant under this Plan,
without reducing the number of shares of Common Stock available for grant of
Awards under this Plan, except to the extent that the availability of those
shares of Common Stock would cause this Plan or any Awards granted under this
Plan to fail to qualify for the exemption provided by Rule 16b-3.
Notwithstanding the foregoing, Common Stock subject to awards of Stock Options
and Stock Appreciation Rights to Participants who are employees which expire or
are forfeited, terminated, or canceled in the same year such Award is granted
will, upon such expiration or forfeiture, termination, or cancellation,
continue to be counted against the maximum number of shares with respect to
which Options and Stock Appreciation Rights may be granted under this Plan in
such year to such Participants holding the expired or forfeited, terminated or
canceled Stock Options or Stock Appreciation Rights.
(b) Limitations on Certain Awards. (i) The aggregate number of
shares of Common Stock that may be issued upon exercise of Incentive Stock
Options is 2,000,000.
(ii) The maximum number of shares with respect to which Options
(including Incentive Stock Options) and Stock Appreciation Rights may be
granted under this Plan in any one fiscal year to any individual Participant
who is an employee is 100,000.
(iii) The aggregate number of shares of Restricted Stock (other than
Restricted Stock which is a Performance-Based Stock Award) that may be awarded
under this Plan is 2,000,000.
(c) No Fractional Shares. No fractional shares will be issued, and
the Committee will determine the manner in which the value of fractional shares
will be treated.
(d) Adjustment. In the event of any change in the number of shares of
Common Stock by reason of a merger, consolidation, reorganization,
recapitalization, or similar transaction, or in the event of a stock dividend,
stock split, or distribution to stockholders (other than normal cash
dividends), the Committee will adjust the number and class of shares that may
be issued under this Plan, the number and class of shares subject to
outstanding Awards, the exercise price applicable to
-5-
<PAGE> 6
outstanding Awards, and the Fair Market Value of the shares of Common Stock and
other value determinations applicable to outstanding Awards.
5. Administration
(a) Committee. This Plan will be administered by the
Committee. The Committee will, subject to the terms of this Plan, have the
authority to: (i) select the eligible employees who will receive Awards, (ii)
grant Awards (other than Director Options), (iii) determine the number and
types of Awards to be granted to employees, (iv) determine the terms,
conditions, vesting periods, and restrictions applicable to Awards (other than
Director Options), (v) adopt, alter, and repeal administrative rules and
practices governing this Plan, (vi) interpret the terms and provisions of this
Plan and any Awards granted under this Plan, (vii) prescribe the forms of any
Notices of Award, Award Agreements, or other instruments relating to Awards,
and (viii) otherwise supervise the administration of this Plan. All decisions
by the Committee will be made with the approval of not less than a majority of
its members.
(b) Delegation. The Committee may delegate any of its
authority to any other person or persons that it deems appropriate, provided
the delegation does not cause this Plan or any Awards granted under this Plan
to fail to qualify for the exemption provided by Rule 16b-3 under the Exchange
Act.
(c) Decisions Final. All decisions by the Committee, and
by any other person or persons to whom the Committee has delegated authority,
will be final and binding on all persons.
6. Awards
(a) Grant of Awards. The Committee will determine the
type or types of Awards to be granted to each Participant and will set forth in
the related Notice of Award or Award Agreement the terms, conditions, vesting
periods, and restrictions applicable to each Award. Awards may be granted
singly or in combination or tandem with other Awards, except to the extent that
any grants in combination or tandem would impair the exemption for performance
based compensation provided for under Section 162(m). Awards may also be
granted in replacement of, or in substitution for, other awards granted by the
Company, whether or not granted under this Plan, except that, with respect to
Performance-Based Stock Awards, the new Award must also be wholly contingent on
the attainment of performance goals established by the Committee; without
limiting the foregoing, if a Participant pays all or part of the exercise price
or taxes associated with an Award by the transfer of Common Stock or the
surrender of all or part of an Award (including the Award being exercised), the
Committee may, in its discretion. grant a new Award (which, in the case of
Awards intended to replace Performance-Based Stock Awards, must also be wholly
contingent on the attainment of performance goals established by the Committee)
to replace the shares of Common Stock that were transferred or the Award that
was surrendered. The Company may assume awards granted by an organization
acquired by the Company or may grant Awards in replacement of, or in
substitution for, any such awards.
-6-
<PAGE> 7
(b) Types of Awards. Awards may include, but are not
limited to, the following:
(i) Director Option -- A right to purchase Common Stock
granted to a Director pursuant to Section 7.
(ii) Stock Appreciation Right -- A right to receive a
payment, in cash or Common Shares, equal to the excess of (A) the Fair
Market Value of a specified number of shares of Common Stock on the
date the right is exercised over (B) the Fair Market Value on the date
the right is granted. The right may be conditioned upon the occurrence
of certain events, such as a Change in Control of the Company, or may
be unconditional, as determined by the Committee.
(iii) Stock Award -- An Award that is made in Common Stock,
Restricted Stock, or Stock Equivalent Units or that is otherwise based
on, or valued in whole or in part by reference to, the Common Shares,
including Performance-Based Stock Awards. All or any part of any Stock
Award may be subject to such conditions, restrictions, and risks of
forfeiture, as and to the extent established by the Committee and,
with respect to Performance-Based Stock Awards, such conditions and
restrictions as may be required under Section 162(m), so that the
Performance-Based Stock Awards constitute performance-based
compensation thereunder. Stock Awards may be based on the Fair Market
Value of the Common Stock, or on other specified values or methods of
valuation, as determined by the Committee.
(iv) Stock Option -- A right to purchase a specified
number of shares of Common Stock, during a specified period, and at a
specified exercise price, all as determined by the Committee. A Stock
Option may be an Incentive Stock Option or a Stock Option that does
not qualify as an Incentive Stock Option (a "non-qualified Stock
Option"). In addition to the terms, conditions, vesting periods, and
restrictions established by the Committee, Incentive Stock Options
must comply with the requirements of Section 422 of the Code. The
exercise price of a Stock Option, including a non-qualified Stock
Option, may be no less than the Fair Market Value of the Common Shares
on the date the Stock Option is granted.
(v) Performance-Based Stock Awards - A Stock Award
granted to a Participant pursuant to Section 8.
7. Director Options
(a) Grant of Director Options; Number of Shares of Common
Stock. Upon approval of this Plan at the 1995 Annual Meeting of Stockholders,
each Non-Employee Director of the Company will receive a Director Option for
5,000 shares of Common Stock on the date of such meeting. Each Non-Employee
Director who first becomes a Director at any time thereafter, will receive a
Director Option for 5,000
-7-
<PAGE> 8
shares of Common Stock on the date that he or she is first elected or appointed
as a Non-Employee Director. Each Director who ceases to be an employee of the
Company during his or her term in office will receive a Director Option on the
date that he or she is first elected as a Director after ceasing to be an
employee. Each Non-Employee Director who receives a Director Option under this
Plan and continues in office will receive an additional Director Option for
1,000 shares of Common Stock annually on each anniversary date of the date on
which the previous Director Option was received. No action by the Committee
will be required to effect the grant of these Director Options.
Notwithstanding the provisions of Section 14, the number of shares of Common
Stock to which the annual Director Options relates may not be amended more than
once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act, as amended, or the rules thereunder.
(b) Exercise Price. The purchase price of the Common
Stock subject to each Director Option will be the Fair Market Value of the
Common Shares at the date of grant.
(c) Date Director Options Become Exercisable. Each
Director Option will become exercisable one year after the date of grant or
upon the earlier occurrence of a Change in Control.
(d) Expiration Date. Unless terminated earlier pursuant
to the next sentence, each Director Option will terminate, and the right of the
holder to purchase Common Stock upon exercise of the Director Option will
expire, at the close of business on the tenth anniversary date of the date of
grant. Bach Director Option will terminate, and the right of the holder to
purchase Common Stock upon exercise of the Director Option will expire, upon
the completion of a transaction of the type identified in Sections 2(e) (3) and
(4), but only if provision satisfactory to the Committee is made for the
payment to the holder of the Director Option of the excess of (i) the Fair
Market Value of the Common Stock subject to the Director Option immediately
prior to the completion of the transaction over (ii) the exercise price.
(e) Not Incentive Stock Options. None of the Director
Options will be Incentive Stock Options.
(f) Continuous Service as a Director. No Director Option
may be exercised unless the Non-Employee Director to whom the Director Option
was granted has continued to be a Non-Employee Director from the time of grant
through the time of exercise, except as provided in this Section 7(f).
(i) If the service in office of a Non-Employee Director
is terminated due to the death of the Non-Employee Director, the
Non-Employee Director's estate, executor, administrator, personal
representative, or beneficiary will have the right to exercise the
Director Option in whole or in part prior to the earlier of (i) 12
months after the date of the holder's death and (ii) the expiration of
the Director Option.
-8-
<PAGE> 9
(ii) If a Non-Employee Director ceases to be a
Non-Employee Director by reason of his employment by the Company, the
Director Option granted to that Non-Employee Director will be treated
the same as Stock Options held by employees and will continue to be
exercisable prior to the expiration of the Director Option, subject to
the limitations on exercise following termination of employment
established by the Committee pursuant to Section 12.
(iii) If the service in office of a Non-Employee Director
is terminated for any reason other than those set forth in Sections
7(f)(i) and 7(f)(ii), the holder of the Director Option may exercise
the Director Option in whole or in part only with the consent of the
Committee. In any such event, the consent of the Committee must be
obtained and the Director Option exercised prior to the earlier of (i)
three months after the date of the termination of service in office of
a Non-Employee Director and (ii) the expiration of the Director
Option.
8. Performance-Based Stock Awards
(a) Performance-Based Stock Awards. The Committee may, in
its discretion, grant Stock Awards valued by reference to shares of Common
Stock that are wholly contingent on the attainment of performance goals
established by the Committee from time to time. The performance goals will
relate to one or more of the following performance measures, as determined by
the Committee for each applicable performance period: (i) return to
stockholders, (ii) cash flow, (iii) return on equity, (iv) Company created
income (for example, income due to Company initiated cost reductions or
productivity improvements), (v) sales growth, (vi) earnings and earnings
growth, (vii) return on assets, (viii) stock price, (ix) earnings per share,
(x) market share, (xi) customer satisfaction, and (xii) safety and/or
environmental performance. Any such performance goals and the applicable
performance measures will be determined by the Committee at the time of grant
and reflected in a written award agreement. The number or value of
Performance-Based Stock Awards that will be paid out to any Participant at the
end of the applicable performance period, which may be one year or longer as
determined by the Committee, will depend on the extent to which the Company
attains the established performance goals.
(b) Maximum Amount of Performance-Based Stock Awards. No
participant who is an employee may be awarded Performance-Based Stock Awards in
any one fiscal year in excess of an aggregate of 50,000 shares of Common Stock.
The maximum dollar value, based on the Fair Market Value of the number of
shares of Common Stock awarded, of any Performance-Based Stock Award to any
Participant who is an employee shall not exceed $1,200,000 in any one fiscal
year.
9. Deferral of Payment
With the approval of the Committee, the delivery of the Common
Stock, cash, or any combination thereof subject to an Award (other than
Director Options) may be deferred, either in the form of installments or a
single future delivery.
-9-
<PAGE> 10
The Committee may also permit selected Participants to defer the payment of
some or all of their Awards, as well as other compensation, in accordance with
procedures established by the Committee to assure that the recognition of
taxable income is deferred under the Code. Deferred amounts may, to the extent
permitted by the Committee, be credited as cash or Stock Equivalent Units. The
Committee may also establish rules and procedures for the crediting of interest
on deferred cash payments and dividend equivalents on Stock Equivalent Units.
10. Payment of Exercise Price
The exercise price of a Stock Option, Director Option, and any
Stock Award for which the Committee has established an exercise price may be
paid in cash, by the transfer of Common Stock, by the surrender of all or part
of an Award (including the Award being exercised), or by a combination of these
methods, as and to the extent permitted by the Committee. The Committee may
prescribe any other method of paying the exercise price that it determines to
be consistent with applicable law and the purpose of this Plan.
In the event shares of Restricted Stock are used to pay the
exercise price of a Stock Award, a number of the shares of Common Stock issued
upon the exercise of the Award equal to the number of shares of Restricted
Stock used to pay the exercise price will be subject to the same restrictions
as the Restricted Stock.
11. Taxes Associated with Award
Prior to the payment of an Award, the Company may withhold, or
require a Participant to remit to the Company, an amount sufficient to pay any
Federal, state, and local taxes associated with the Award. The Committee may,
in its discretion and subject to such rules as the Committee may adopt, permit
a Participant to pay any or all taxes associated with the Award in cash, by the
transfer of Common Stock, by the surrender of all or part of an Award
(including the Award being exercised), including Performance-Based Stock
Awards, or by a combination of these methods. The Committee may permit a
Participant to pay any or all taxes associated with an Incentive Stock Option
in cash, by the transfer of Common Stock, or by a combination of these methods.
12. Termination of Employment
Subject to Section 13, if the employment of a Participant
terminates for any reason, all unexercised, deferred, and unpaid Awards may be
exercisable or paid only in accordance with rules established by the Committee.
Subject to the foregoing exception, these rules may provide, as the Committee
deems appropriate, for the expiration, continuation, or acceleration of the
vesting of all or part of the Awards.
13. Change in Control
-10-
<PAGE> 11
In the event of a Change in Control of the Company, unless and to the
extent otherwise determined by the Board of Directors, (i) all Stock
Appreciation Rights and Stock Options then outstanding will become fully
exercisable as of the date of the Change in Control and (ii) all restrictions
and conditions applicable to Restricted Stock and other Stock Awards, including
Performance-Based Stock Awards, will be deemed to have been satisfied as of the
date of the Change in Control. Any such determination by the Board of Directors
that is made after the occurrence of a Change in Control will not be effective
unless a majority of the Directors then in office are Continuing Directors and
the determination is approved by a majority of the Continuing Directors.
14. Amendment, Suspension, or Termination of this Plan; Amendment of
Outstanding Awards
(a) Amendment, Suspension, or Termination of this Plan. The Board of
Directors may amend, suspend, or terminate this Plan at any time. Stockholder
approval for any such amendment will be required only to the extent necessary
to preserve the exemption provided by Rule 16b-3 for this Plan and Awards
granted under this Plan.
(b) Amendment of Outstanding Awards. The Committee may, in its
discretion, amend the terms of any Award (other than a Director Option),
including, waiving, in whole or in part, any restrictions or conditions
applicable to, or accelerating the vesting of, any Award, prospectively or
retroactively, but no such amendment may impair the rights of any Participant
without his or her consent or cause Awards intended to qualify as performance
based compensation under Section 162(m) to fail to so qualify.
15. Awards to Foreign Nationals and Employees Outside the United
States
To the extent that the Committee deems appropriate to comply with
foreign law or practice and to further the purpose of this Plan, the Committee
may, without amending this Plan, (i) establish special rules applicable to
Awards granted to Participants who are foreign nationals, are employed outside
the United States, or both, including rules that differ from those set forth in
this Plan, and (ii) grant Awards to such Participants in accordance with those
rules.
16. Nonassignability
Unless otherwise determined by the Committee, (i) no Award granted
under this Plan may be transferred or assigned by the Participant to whom it is
granted other than by will, pursuant to the laws of descent and distribution,
or pursuant to a qualified domestic relations order and (ii) an Award granted
under this Plan may be exercised, during the Participant's lifetime, only by
the Participant or by the Participant's guardian or legal representative;
except that, no Incentive Stock Option may
-11-
<PAGE> 12
be transferred or assigned pursuant to a qualified domestic relations order or
exercised, during the Participant's lifetime, by the Participant's guardian or
legal representative.
17. Governing Law
The interpretation, validity, and enforcement of this Plan
will, to the extent not otherwise governed by the Code or the securities laws
of the United States, be governed by the laws of the State of Ohio.
18. Rights of Employees
Nothing in this Plan will confer upon any Participant the
right to continued employment by the Company or limit in any way the Company's
right to terminate any Participant's employment at will.
19. Effective and Termination Dates
(a) Effective Date. This Plan will become effective on
the date it is approved by the stockholders.
(b) Termination Date. This Plan will continue in effect
until terminated by the Board of Directors.
-12-
<PAGE> 1
EXHIBIT 10.3
THE GEON COMPANY
SECTION 415
BENEFIT RESTORATION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
I DEFINITIONS 2
II ELIGIBILITY TO PARTICIPATE 6
III BENEFIT RESTORATION UNDER THE PENSION PLAN 7
IV BENEFIT RESTORATION UNDER THE SAVINGS PLAN;
NONDUPLICATION 8
V PAYMENT OF BENEFITS 10
VI LIMITATIONS ON BOTH PENSION AND SAVINGS PLANS 11
VII MISCELLANEOUS 12
VIII EFFECTIVE DATE 17
</TABLE>
-i-
<PAGE> 3
PREAMBLE
The purpose of this Plan is to insure that the benefits which would be received
by employees participating in the Savings Plan and Pension Plan of the Company,
under the terms of the relevant plans, are not limited solely by the application
of Section 415 of the Code. This Plan should be read and construed so as to
accomplish the foregoing objective. This Plan is intended to be an "excess
benefit plan" as that term is defined in Section 3(36) of the Employee
Retirement Income Security Act of 1974, as amended.
<PAGE> 4
SECTION I
DEFINITIONS
1.1 Affiliate means any corporation, partnership or other organization
which, during any period of employment of a Participant, was at least
50% controlled by the Company or an affiliate of the Company.
1.2 Annual Addition means, with respect to the Savings Plan, the sum of
employer contributions, employee contributions and forfeitures, as
defined in Section 415(c)(2) of the Code, including the exceptions
described in such Section .
1.3 Committee means the Compensation Committee of the Board of Directors of
the Company, or any person or entity to whom the Compensation Committee
of the Board of Directors of the Company has delegated any authority or
responsibility under the Plan.
1.4 Code means the Internal Revenue Code of 1986, as amended.
1.5 Company means The Geon Company.
1.6 Participant means any employee or former employee who is receiving any
of the benefits provided by this Plan.
-2-
<PAGE> 5
1.7 Plan means The Geon Company Section 415 Benefit Restoration Plan.
1.8 Plan Account means a book reserve account maintained under the Plan on
behalf of a Participant, to which the amounts to which such Participant
is entitled under Articles 4.1 and 4.2 are credited.
1.9 Pension Plan means The Geon Pension Plan.
1.10 Basic Pension Plan Benefit means the pension benefit payable from the
Pension Plan to a Participant, computed without regard to the benefit
limitations imposed on the Plan by Section 415 of the Code.
1.11 Pension Plan Benefit means the pension benefit payable from the Pension
Plan to a Participant, taking into account and including the
limitations contained in Section 415 of the Code.
1.12 Savings Plan means The Geon Retirement Savings Plan.
1.13 Basic Savings Plan Match means the amount of Company matching
contributions which would be credited to the Participant under the
Savings Plan without regard to the limitations imposed on the Savings
Plan by Section 415 of the Code, and assuming that
-3-
<PAGE> 6
contributions (as a percentage) of Earnings by the Participant under
the Savings Plan on the date during a Plan Year on which the
Participant's Annual Additions under the Savings Plan is first limited
by Section 415 of the Code had continued at the same percentage rate
until the earlier of the last day of such Plan Year or the termination
of the Participant's employment.
1.14 Basic Savings Plan Success Sharing Contribution means the amount of
Company contribution that would be credited to the Participant pursuant
to Section 4.2(d) of the Savings Plan without regard to the limitations
imposed on the Savings Plan by Section 415 of the Code.
1.15 Savings Plan Match means the amount of Company matching contributions
actually credited to the Participant under the Savings Plan for the
Plan Year.
1.16 Savings Plan Success Sharing Contribution means the amount of Company
contributions actually credited to the Participant for the Plan Year
pursuant to Section 4.2(d) of the Savings Plan.
1.17 Supplemental Restoration Benefit means an amount which is determined by
subtracting the Participant's Pension Plan Benefit from the
Participant's Basic Pension Plan Benefit.
-4-
<PAGE> 7
1.18 Valuation Date means the last day on which the New York Stock Exchange
is open for trading occurring in the calendar month immediately
preceding the calendar month in which the Participant's employment
covered under the Plan terminates.
1.19 Words and phrases used herein with initial capital letters which are
defined in the Savings Plan or the Pension Plan shall have the
definitions given to them in such Plans.
-5-
<PAGE> 8
SECTION II
ELIGIBILITY TO PARTICIPATE
2.1 All participants in the Pension Plan shall participate in this Plan
whenever their Basic Pension Plan Benefit exceeds the amount of their
Pension Plan Benefit. All participants in the Savings Plan shall be
eligible to participate in this Plan whenever any part of their Annual
Addition under the Savings Plan would be unavailable due solely to the
limitations imposed by Section 415 of the Code.
-6-
<PAGE> 9
SECTION III
BENEFIT RESTORATION UNDER THE PENSION PLAN
3.1 The Company shall pay to each Participant in the Pension Plan who is
participating in this Plan a Supplemental Restoration Benefit. Such
Supplemental Restoration Benefit shall be paid in accordance with
Article 5.1.
-7-
<PAGE> 10
SECTION IV
BENEFIT RESTORATION UNDER THE SAVINGS PLAN
4.1 The Company shall maintain a Plan Account for each employee whose
Annual Additions to the Savings Plan have been (or would have been, but
for the application of Sections 401(k) and 401(m) of the Code)
restricted solely by the limitations of Section 415 of the Code. With
respect to a Participant in the Savings Plan who is restricted by the
limitations imposed by Section 415 of the Code, the Company shall
credit the Plan Account of such a Participant for a Plan Year with the
difference between the Basic Savings Plan Match and the Savings Plan
Match (if any) and the difference between the Basic Savings Plan
Success Sharing Contribution and the Savings Plan Success Sharing
Contribution. Notwithstanding the foregoing or any other provision of
the Plan, the Company may elect to pay or cause to be paid to an
employee or former employee in cash all or any portion of any amount
that is to be credited to his or her Plan Account pursuant to the
immediately preceding sentence, in which case such amount, to the
extent of such cash payment, shall not be credited to the employee's or
former employee's Plan Account pursuant to the immediately preceding
sentence. Such cash payment as provided in the immediately preceding
sentence shall be made not later than twelve months following the date
on which the restricted portion of the Basic Savings Plan Match and/or
Basic Savings Plan Success Sharing Contribution would have been
credited to the employee's or former employee's account under the
Savings Plan but for the
-8-
<PAGE> 11
limitations of Section 415 of the Code, and, may, in the Company's
discretion include an amount in respect of any earnings or gains such
restricted portion would have experienced if it had been credited in
the Savings Plan.
4.2 The Plan Accounts hereunder (if any) will be credited on a monthly
basis with earnings: (1) for periods prior to January 1, 1995, and for
periods after February 28, 1997, at a rate equal to the monthly rate of
earnings paid under the Fixed Income Fund of the Savings Plan; and (2)
for periods after December 31, 1994 but prior to March 1, 1997, at a
rate equal to the monthly rate of earnings paid under the Fixed Income
Fund of the Savings Plan, rounded up to the next whole percent (if
applicable), for the last full calendar month of the Plan Year ending
most recently prior to the month for which the crediting is being done.
In the event that the Fixed Income Fund of the Savings Plan no longer
exists, the Company shall, in its sole discretion, establish an
alternate rate of return for the immediately preceding sentence, which
alternate rate of return shall be intended by the Company to provide a
rate of return comparable to that of the Fixed Income Fund.
-9-
<PAGE> 12
SECTION V
PAYMENT OF BENEFITS
5.1 Pension. The Supplemental Restoration Benefit shall be payable in the
same form as elected under the Pension Plan and in accordance with and
subject to all of the terms and conditions applicable to the
Participant's benefits under the Pension Plan including the actuarial
equivalents of, as provided in the Pension Plan, the optional benefits
he or she has elected or is deemed to have elected.
5.2 Savings. The Company shall distribute in a lump sum to each Participant
in this Plan or his or her designated beneficiary under the Savings
Plan, upon the termination of employment of such Participant under
circumstances entitling him or her or such beneficiary to a
distribution of the Participant's interest in the Savings Plan, except
as provided below, an amount in cash equal to the value of his or her
Plan Account as provided in Section IV herein, which is vested in
accordance with the terms of the Savings Plan at the time of
termination of employment, valued as of the close of business on the
Valuation Date. A Participant of this Plan employed by a Successor
Company may, subject to Committee approval, be considered to have
terminated employment with the Company for purposes of this paragraph
5.2 only.
-10-
<PAGE> 13
SECTION VI
LIMITATIONS ON BOTH PENSION AND SAVINGS PLANS; NONDUPLICATION
6.1 Pension and Savings. Where Section 415 of the Code places combined
limits on both the Pension Plan and the Savings Plan, the Savings Plan
will be the primary qualified plan.
6.2 401(a)(17) Plan. Notwithstanding any other provision herein to the
contrary, in no event will benefits under this Plan duplicate any
benefits provided for under The Geon Company Section 401(a)(17) Benefit
Restoration Plan (the "401(a)(17) Plan"), and in the event of any such
potential duplication, benefits shall be payable under the 401(a)(17)
Plan rather than under this Plan.
-11-
<PAGE> 14
SECTION VII
MISCELLANEOUS
7.1 Administration. The Committee shall have full discretionary authority
to administer the Plan, determine all questions arising in connection
with the Plan, interpret the provisions of the Plan, adopt procedural
rules, and employ and rely on such legal counsel, actuaries,
accountants and agents as it may deem advisable to assist in the
administration of the Plan. Decisions of the Committee shall be
conclusive and binding on all persons.
7.2 Termination. This Plan may be terminated at any time by the Board of
Directors of the Company, in which event the rights of Participants to
their accrued and vested Supplemental Restoration Benefits and to the
balances in their Plan Accounts established under this Plan (if any)
shall become nonforfeitable. If the Company shall terminate the Pension
Plan or the Savings Plan, any Supplemental Restoration Benefits or Plan
Accounts payable to the Participants in accordance with this Plan shall
be payable to them in accordance with all of the terms and conditions
applicable to employee benefits under the Pension Plan in the event of
its termination, and the amounts to the credit of Participants in their
Plan Accounts established under this Plan shall be distributed to such
Participants in accordance with all of the terms and conditions of the
Savings Plan then applicable.
-12-
<PAGE> 15
7.3 No Assignability. The right of an employee or any other person to a
benefit payment pursuant to this Plan shall not be assigned,
transferred, pledged or encumbered except by will or the laws of
descent and distribution.
7.4 Rights. Nothing in this Plan shall be construed as giving any employee
the right to be retained in the employ of the Company as an executive
or in any other capacity. The Company expressly reserves the right to
dismiss any employee at any time without regard to the effect which
such dismissal might have upon him or her under the Plan.
7.5 Amendment. This Plan may be amended at any time by the Committee,
except that no such amendment shall deprive any Participant of his or
her Supplemental Restoration Benefit accrued at the time of such
amendment or reduce the amount then credited to his Plan Account
established under this Plan (if any).
7.6 Funding. Benefits payable under this Plan shall not be funded and shall
be paid out of the general funds of the Company. The Company shall not
be required to segregate any assets with respect to this Plan. Nothing
contained in this Plan shall create or be construed to create a
fiduciary relationship between the Company and any employee, former
employee, or any designated beneficiary of any Participant or any other
person. Any amounts credited to a Participant under the provisions of
this Plan shall continue for all purposes to be part of the general
funds of the Company, and no person other than
-13-
<PAGE> 16
the Company shall by virtue of the provisions of this Plan have any
interest in such funds. No person shall have any property interest
whatsoever in any specific assets of the Company by reason of the Plan.
Any right to receive payments pursuant to the Plan shall be no greater
than the right of any unsecured creditor of the Company.
7.7 Benefit Claims and Appeal Procedure. The Committee shall have full
discretionary authority to make all determinations as to the right of
any person to a Supplemental Restoration Benefit. The Committee shall
have full discretionary authority to make all determinations as to the
right of any person to the amounts described in Articles 4.1 and 4.2.
Any Participant or beneficiary, or a duly authorized representative
thereof whose claim for a benefit made pursuant to the Plan is denied,
may request the Committee to review such denial. Such request must be
in writing and must be made within 60 days after receipt of the written
notice that his or her claim has been denied. Participants or
beneficiaries making such requests may review pertinent documents and
may submit issues and comments in writing. Upon receipt of the written
request, such Committee shall render a decision on the request within
60 days.
The Committee shall have full discretionary authority to make a
determination on any matter relating to the Plan on which it is asked
to make a determination pursuant to the
-14-
<PAGE> 17
foregoing procedures. The decision of such Committee shall be final,
shall be provided in writing, and shall include specific reasons for
the decision, written in a manner calculated to be understood by the
person making the claim and with specific references to the pertinent
provisions of the Plan on which the decision is based.
7.8 Continuation of Portion of Goodrich Plan. The Plan shall provide all
payments in respect of similar benefits provided for under a similar
plan (the "Goodrich Plan") of The B.F. Goodrich Company ("Goodrich")
owed after April 29, 1993 to those persons who were last employed by
Goodrich in the Geon Vinyl Division, and those employees who were last
employed by Goodrich in a department which became a part of the Geon
Vinyl Division when the Geon Vinyl Division was formed, who were
receiving such benefits under the Goodrich Plan as of April 29, 1993 or
who would have commenced receiving such benefits under the Goodrich
Plan on or after April 29, 1993 because of events occurring prior to
April 29, 1993, all in accordance with the provisions of the Goodrich
Plan (as in effect on April 28, 1993 or such prior date(s) as
applicable to the time(s) at which such person accrued such benefits),
if any. The Plan is a continuation of the Goodrich Plan with respect to
those employees of the Company who were Participants in the Goodrich
Plan immediately prior to April 29, 1993. Whenever in this Plan it is
necessary to calculate any compensation or earnings of any such
Participant for any period prior to April 29, 1993, or to use any
period of service prior to that date for any purpose in the Plan, such
Participant's period of service, compensation, and/or earnings
-15-
<PAGE> 18
taken into account under the Goodrich Plan prior to April 29, 1993
shall be taken into account under the Plan.
-16-
<PAGE> 19
SECTION VIII
EFFECTIVE DATE
8.1 This Plan shall be construed, administered and enforced according to
applicable federal law, and to the extent not applicable or preempted
thereby, the laws of the State of Delaware.
8.2 This Plan was established and became effective April 29, 1993.
IN WITNESS WHEREOF, the undersigned has executed this document as of April 29,
1993.
THE GEON COMPANY
By:
----------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.4
THE GEON COMPANY
SECTION 401(a)(17)
BENEFIT RESTORATION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
SECTION PAGE
<S> <C>
I DEFINITIONS 2
II ELIGIBILITY TO PARTICIPATE 7
III BENEFIT RESTORATION UNDER THE PENSION PLAN 8
IV BENEFIT RESTORATION UNDER THE SAVINGS PLAN 9
V PAYMENT OF BENEFITS 11
VI LIMITATIONS ON BOTH PENSION AND SAVINGS PLANS 14
VII MISCELLANEOUS 15
VIII EFFECTIVE DATE 21
</TABLE>
-i-
<PAGE> 3
PREAMBLE
The primary purpose of this Plan is to provide deferred compensation to
employees who are determined by the Company to be management or highly
compensated employees. This Plan should be read and construed so as to
accomplish the foregoing objective. This Plan is intended to meet the
requirements of Section 201(2) of the Employee Retirement Income Security Act of
1974, as amended.
<PAGE> 4
SECTION I
DEFINITIONS
1.1 Affiliate means any corporation, partnership or other organization
which, during any period of employment of a Participant, was at least
50% controlled by the Company or an affiliate of the Company.
1.2 Annual Addition means, with respect to the Savings Plan, the sum of
employer contributions, employee contributions and forfeitures, as
defined in Section 415(c)(2) of the Code, including the exceptions
described in such Section.
1.3 Basic Pension Plan Benefit means the pension benefit payable from the
Pension Plan to a Participant, computed without regard to the benefit
limitations imposed on the Pension Plan by Sections 415 and 401(a)(17)
of the Code, and, in the case of an MIP/SIP Limited Participant,
computed taking into account the MIP/SIP Limited Participant's MIP/SIP
Limited Compensation as eligible earnings under the Pension Plan.
1.4 Basic Savings Plan Match means the amount of Company matching
contribution which would be credited to the Participant under the
Savings Plan without regard to the limitations imposed on the Savings
Plan by Sections 415, 401(k), 401(m), and 401(a)(17) of the Code,
determined based on the Participant's Current
-2-
<PAGE> 5
Maximum Participation Percentage Rate beginning on the date during each
Plan Year in which the Participant's continued ability to make Pre-Tax
Contributions or After-Tax Contributions is first limited by Section
401(a)(17) of the Code and continuing (at the applicable rate) until
the earlier of the last day of such Plan Year or, if earlier, the
termination of the Participant's employment, and, in the case of an
MIP/SIP Limited Participant, treating the MIP/SIP Limited Participant's
MIP/SIP Limited Compensation as eligible earnings under the Savings
Plan.
1.5 Committee means the Compensation Committee of the Board of Directors of
the Company, or any person or entity to whom the Compensation Committee
of the Board of Directors of the Company has delegated any authority or
responsibility under the Plan.
1.6 Code means the Internal Revenue Code of 1986, as amended.
1.7 Company means The Geon Company.
1.8 Current Maximum Participation Percentage Rate means the maximum
aggregate percentage of Earnings which the Participant could elect as
Pre-Tax Contributions and/or After-Tax Contributions for the applicable
portion of the Plan Year under the provisions of the Savings Plan,
determined without regard
-3-
<PAGE> 6
to any provisions of the Savings Plan in respect of Sections
401(a)(17), 401(k), 401(m), and 415 of the Code.
1.9 MIP/SIP Limited Compensation means the portion of an award under the
Company's Management Incentive Program and/or Sales Incentive Program,
as applicable, of an MIP/SIP Limited Participant that, after January
31, 1995, would have been paid in cash if the Company's Management
Incentive Program and/or Sales Incentive Program, as applicable, did
not provide for payment of all or a portion of the awards thereunder in
a form other than cash and any portion of an MIP/SIP Limited
Participant's award payable in cash under the Company's Management
Incentive Plan and/or Sales Incentive Program, as applicable, the
receipt of which is deferred at the election of the MIP/SIP Limited
Participant; provided, however, that in no event shall MIP/SIP Limited
Compensation include any premium related to payment of an award in a
form other than cash under the Company's Management Incentive Plan
and/or Sales Incentive Program nor any amount that is eligible earnings
under the Pension Plan and/or Savings Plan; and, provided, however,
that any portion of an MIP/SIP Limited Participant's award payable in
cash under the Company's Management Incentive Plan and/or Sales
Incentive Program, as applicable, that is deferred at the election of
the Participant shall be MIP/SIP Limited Compensation only for the
period in which it would have been received but for the deferral.
-4-
<PAGE> 7
1.10 MIP/SIP Limited Participant means a Participant whose award under the
Company's Management Incentive Program and/or Sales Incentive Program,
as applicable, is mandatorily paid in a form other than cash at a
percentage that exceeds twenty percent (20%) of the award (excluding
any premium).
1.11 Participant means any employee or former employee who is receiving any
of the benefits provided by this Plan.
1.12 Plan means The Geon Company Section 401(a)(17) Benefit Restoration
Plan.
1.13 Plan Account means a book reserve account maintained under the Plan on
behalf of a Participant, to which the amounts to which such Participant
is entitled under Articles 4.1, 4.2, and 4.3 are credited.
1.14 Pension Plan means The Geon Pension Plan.
1.15 Pension Plan Benefit means the pension benefit payable from the Pension
Plan to a Participant (taking into account and including the
limitations contained in Sections 415 and 401(a)(17) of the Code).
1.16 Savings Plan means The Geon Retirement Savings Plan.
-5-
<PAGE> 8
1.17 Savings Plan Match means the amount of Company matching contribution
actually credited to the Participant under the Savings Plan for the
Plan Year.
1.18 Supplemental Restoration Benefit means an amount which is determined by
subtracting the Participant's Pension Plan Benefit from the
Participant's Basic Pension Plan Benefit.
1.19 Valuation Date means the last day on which the New York Stock Exchange
is open for trading occurring in the calendar month immediately
preceding the calendar month in which the Participant's employment
covered under the Plan terminates.
1.20 Words and phrases used herein with initial capital letters which are
defined in the Savings Plan or the Pension Plan shall have the
definitions given to them in such Plans.
-6-
<PAGE> 9
SECTION II
ELIGIBILITY TO PARTICIPATE
2.1 All participants in the Pension Plan shall participate in this Plan
whenever their Basic Pension Plan Benefit exceeds the amount of their
Pension Plan Benefit. All employees eligible to participate in the
Savings Plan shall participate in this Plan whenever any part of their
Annual Addition would be unavailable due to the limitations imposed by
Section 401(a)(17) of the Code.
-7-
<PAGE> 10
SECTION III
BENEFIT RESTORATION UNDER THE PENSION PLAN
3.1 The Company shall pay to each Participant in the Pension Plan who is
participating in this Plan a Supplemental Restoration Benefit. Such
Supplemental Restoration Benefit shall be paid in accordance with
Article 5.1.
-8-
<PAGE> 11
SECTION IV
BENEFIT RESTORATION UNDER THE SAVINGS PLAN
4.1 The Company shall maintain a Plan Account for each Participant whose
Annual Additions to the Savings Plan have been restricted by the
limitations of Section 401(a)(17) of the Code. The Company shall credit
the Plan Account of such a Participant for a Plan Year with the
difference between the Basic Savings Plan Match and the Savings Plan
Match.
4.2 A Participant with respect to whom the limitation of Section 401(a)(17)
of the Code applicable under the Savings Plan has been reached may
elect to reduce his or her compensation in excess of such limitation at
a percentage rate of earnings elected by the Participant on a form
provided by the Company, but in no event more than 6% of the
Participant's Earnings under the Savings Plan in excess of the
limitation of Section 401(a)(17) of the Code, and have the amount by
which the Participant's compensation is reduced credited to the
Participant's Plan Account. Such election shall be made at such time
and in such manner as the Company shall require, but such election
shall be made prior to the date on which the compensation to which it
relates is earned and shall be irrevocable for the period to which it
relates.
-9-
<PAGE> 12
4.3 The Plan Accounts hereunder will be credited on a monthly basis with
earnings: (1) for periods prior to January 1, 1995, and for periods
after February 28, 1997, at a rate equal to the monthly rate of
earnings paid under the Fixed Income Fund of the Savings Plan; and (2)
for periods after December 31, 1994 but prior to March 1, 1997, at a
rate equal to the monthly rate of earnings paid under the Fixed Income
Fund of the Savings Plan, rounded up to the next whole percent (if
applicable), for the last full calendar month of the Plan Year ending
most recently prior to the month for which the crediting is being done.
In the event that the Fixed Income Fund of the Savings Plan no longer
exists, the Company shall, in its sole discretion, establish an
alternate rate of return for the immediately preceding sentence, which
alternate rate of return shall be intended by the Company to provide a
rate of return comparable to that of the Fixed Income Fund.
Notwithstanding the foregoing provisions of this Article 4.3: The
Committee may establish rules and procedures whereunder a Participant
may elect that the Participant's Account be credited or debited with
earnings and losses equal to the earnings and losses on a specified
investment or specified investments other than the Fixed Income Fund of
the Savings Plan (or alternative rate of return, if applicable). Such
election shall be made at such time(s) and in such manner as the
Committee's rules and procedures shall require, shall be prospective
only, and shall be irrevocable with respect to the period to which it
relates.
-10-
<PAGE> 13
SECTION V
PAYMENT OF BENEFITS
5.1 Pension. The Supplemental Restoration Benefit shall be payable in the
same form as elected under the Pension Plan and in accordance with and
subject to all of the terms and conditions applicable to the
Participant's benefits under the Pension Plan including the actuarial
equivalents of, as provided in the Pension Plan, the optional benefits
he or she has elected or is deemed to have elected.
5.2 Savings.
(a) The Company shall distribute in a lump sum to each Participant in
this Plan or his or her designated beneficiary under the Savings Plan,
upon the termination of employment of such Participant under
circumstances entitling him or her or such beneficiary to a
distribution of the Participant's interest in the Savings Plan, except
as provided below, an amount in cash equal to (i) the value of his or
her Plan Account attributable to the deemed matching contribution of
the Company, as provided in paragraph 4.1 herein, to the extent vested
determined in accordance with the terms of the Savings Plan, at the
time of termination of employment, valued as of the close of business
on the Valuation Date, and (ii) the value of his or her Plan Account
attributable to contributions made pursuant to an election under
Article 4.2, as of the close of business on the Valuation Date.
-11-
<PAGE> 14
A Participant employed by a Successor Company may, subject to Committee
approval, be considered to have terminated employment with the Company
for purposes of this Article 5.2 only.
(b) Notwithstanding Article 5.2(a) hereof, with respect to employment
terminations occurring on and after November 1, 1996 and prior to
February 6, 1997, a Participant who is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934, as amended (a
"Section 16 Insider") at the time of employment termination, and who
with respect to any portion of his or her Plan Account which, if not
held for six months, would subject the Participant to short-swing
liability under Section 16 of such Act, shall not be entitled to a
distribution under the Plan of any portion of such Participant's Plan
Account as to which the Participant has elected to be credited or
debited with earnings and losses equal to the earnings and losses on a
specified investment which derives its return from the value of the
equity securities of the Company (a "Company Equity Fund") until such
date that is six months and one day following the termination of such
Participant's employment under circumstances entitling him or her or
his or her designated beneficiary to a distribution of the
Participant's interest in the Savings Plan. Any amounts distributed in
accordance with this Article 5.2(b) shall be valued as of the close of
business on the last day on which the New York Stock Exchange is open
for trading occurring in the calendar month immediately preceding the
calendar month in which the Participant is
-12-
<PAGE> 15
entitled to a distribution under this Article 5.2(b), rather than as of
the Valuation Date.
-13-
<PAGE> 16
SECTION VI
LIMITATIONS ON BOTH PENSION AND SAVINGS PLANS
6.1 Where Section 415 of the Code places combined limits on both the
Pension Plan and the Savings Plan, the Savings Plan will be the primary
qualified plan.
-14-
<PAGE> 17
SECTION VII
MISCELLANEOUS
7.1 Administration. The Committee shall have full discretionary authority
to administer the Plan, determine all questions arising in connection
with the Plan, interpret the provisions of the Plan, adopt procedural
rules, and employ and rely on such legal counsel, actuaries,
accountants and agents as it may deem advisable to assist in the
administration of the Plan. Decisions of the Committee shall be
conclusive and binding on all persons.
7.2 Termination. This Plan may be terminated at any time by the Board of
Directors of the Company, in which event the rights of Participants to
their accrued and vested Supplemental Restoration Benefits and to the
balances in their Plan Accounts established under this Plan (if any)
shall become nonforfeitable. If the Company shall terminate the Pension
Plan or the Savings Plan, any Supplemental Restoration Benefits or Plan
Accounts payable to the Participants in accordance with this Plan shall
be payable to them in accordance with all of the terms and conditions
applicable to employee benefits under the Pension Plan in the event of
its termination, as applicable, and, if applicable, the amounts to the
credit of Participants in their Plan Accounts shall be distributed to
such Participants as provided herein, but in accordance with any of the
terms and conditions of the
-15-
<PAGE> 18
Savings Plan then applicable providing for earlier distribution, as
applicable. Notwithstanding the immediately preceding sentence, a
Participant who is subject to the provisions of Section 16 of the
Securities Exchange Act of 1934, as amended shall not be entitled to a
distribution under the Plan of any portion of such Participant's Plan
Account as to which the Participant has elected to be credited or
debited with earnings and losses equal to the earnings and losses on a
specified investment which derives its return from the value of the
equity securities of the Company until such time as is provided in
Article 5.2.
7.3 No Assignability. The right of an employee or any other person to a
benefit payment pursuant to this Plan shall not be assigned,
transferred, pledged or encumbered except by will or the laws of
descent and distribution.
7.4 Rights. Nothing in this Plan shall be construed as giving any employee
the right to be retained in the employ of the Company as an executive
or in any other capacity. The Company expressly reserves the right to
dismiss any employee at any time without regard to the effect which
such dismissal might have upon him or her under the Plan.
7.5 Amendment. This Plan may be amended at any time by or pursuant to
action of the Committee, except that no such amendment shall: (1)
deprive any Participant of his or her Supplemental Restoration Benefit
accrued at the time of such
-16-
<PAGE> 19
amendment; (2) reduce the amount then credited to a Participant's Plan
Account (if any); (3) if approved or adopted after August 1, 1996,
amend the Plan in any other manner that would not be permitted under
Section 411(d)(6) of the Internal Revenue Code of 1986, as in effect on
August 1, 1996, or the regulations thereunder as in effect on August 1,
1996, but not including any regulation in respect of Section 204(h) of
the Employee Retirement Income Security Act of 1974, as amended (if the
Plan were a plan subject to Section 411(d)(6) of the Internal Revenue
Code of 1986, as in effect on August 1, 1996), except to the extent
that a Participant who would be affected by the amendment consents in
writing thereto; or (4) if approved or adopted after August 1, 1996,
change the method of crediting hypothetical earnings (or losses) under
Article 4.3 of the Plan to a method that would not be permissible under
a plan qualified under Section 401(a) of the Internal Revenue Code of
1986, as in effect on August 1, 1996, except that the provisions of
Article 4.3 of the Plan as in effect prior to August 1, 1996 and any
provisions substantially similar to the provisions of Article 4.3 of
the Plan as in effect on August 1, 1996 shall be deemed a method or
methods permissible under Section 401(a) of the Internal Revenue Code
of 1986, as in effect on August 1, 1996, and that a provision shall not
be deemed impermissible under a plan qualified under Section 401(a) of
the Internal Revenue Code of 1986, as in effect on August 1, 1996,
because the provision credits hypothetical (as opposed to actual)
earnings (or losses), and except to the
-17-
<PAGE> 20
extent that a Participant who would be affected by the amendment
consents in writing thereto.
7.6 Funding. Benefits payable under this Plan shall not be funded and shall
be paid out of the general funds of the Company. The Company shall not
be required to segregate any assets with respect to this Plan. Nothing
contained in this Plan shall create or be construed to create a trust
of any kind, or a fiduciary relationship between the Company and any
employee, former employee or any designated beneficiary of any
Participant or any other person. Any amounts credited to a Participant
under the provisions of this Plan shall continue for all purposes to be
part of the general funds of the Company, and no person other than the
Company shall by virtue of the provisions of this Plan have any
interest in such funds. No person shall have any property interest
whatsoever in any specific assets of the Company by reason of the Plan.
Any right to receive payments pursuant to the Plan shall be no greater
than the right of any unsecured creditor of the Company.
7.7 Benefit Claims and Appeal Procedure. The Committee shall have full
discretionary authority to make all determinations as to the right of
any person to a Supplemental Restoration Benefit. The Committee shall
have full discretionary authority to make all determinations as to the
right of any person to the amounts described in Articles 4.1, 4.2, and
4.3.
-18-
<PAGE> 21
Any Participant or beneficiary, or a duly authorized representative
thereof whose claim for a benefit made pursuant to the Plan is denied,
may request the Committee to review such denial. Such request must be
in writing and must be made within 60 days after receipt of the written
notice that his or her claim has been denied. Participants or
beneficiaries making such a request may review pertinent documents and
may submit issues and comments in writing. Upon receipt of the written
request, the Committee shall render a decision on the request within 60
days.
The Committee shall have full discretionary authority to make a
determination on any matter relating to the Plan on which it is asked
to make a determination pursuant to the foregoing procedures. The
decision of the Committee shall be final, shall be provided in writing,
and shall include specific reasons for the decision, written in a
manner calculated to be understood by the person making the claim and
with specific references to the pertinent provisions of the Plan on
which the decision is based.
7.8 Continuation of Portion of Goodrich Plan. The Plan shall provide all
payments in respect of similar benefits provided for under a similar
plan (the "Goodrich Plan") of The B.F. Goodrich Company ("Goodrich")
owed after April 29, 1993 to those persons who were last employed by
Goodrich in the Geon Vinyl Division and those employees who were last
employed by Goodrich in a
-19-
<PAGE> 22
department which became a part of the Geon Vinyl Division when the Geon
Vinyl Division was formed, who were receiving such benefits under the
Goodrich Plan as of April 29, 1993 or who would have commenced
receiving such benefits under the Goodrich Plan on or after April 29,
1993 because of events occurring prior to April 29, 1993, all in
accordance with the provisions of the Goodrich Plan (as in effect on
April 28, 1993 or such prior date(s) as applicable to the time(s) at
which such person accrued such benefits), if any. The Plan is a
continuation of the Goodrich Plan with respect to those employees of
the Company who were participants in the Goodrich Plan immediately
prior to April 29, 1993. Whenever in this Plan it is necessary to
calculate any compensation or earnings of any such Participant for any
period prior to April 29, 1993, or to use any period of service prior
to that date for any purpose in the Plan, such Participant's period of
service, compensation, and/or earnings taken into account under the
Goodrich Plan prior to April 29, 1993 shall be taken into account under
the Plan.
-20-
<PAGE> 23
SECTION VIII
EFFECTIVE DATE
8.1 This Plan shall be construed, administered and enforced according to
applicable federal law, and to the extent not preempted thereby, the
laws of the State of Delaware.
8.2 This Plan was established and became effective April 29, 1993.
IN WITNESS WHEREOF, the undersigned has executed this document as of April 29,
1993.
THE GEON COMPANY
By:
----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.5
THE GEON COMPANY
SENIOR EXECUTIVE MANAGEMENT INCENTIVE PLAN
1. PURPOSE. The Geon Company Senior Executive Management
Incentive Plan (the "Senior Executive MIP") has been established to provide
opportunities to certain key executive personnel to receive incentive
compensation as a reward for high levels of personal performance above the
ordinary performance standards compensated by base salary, and for their
contributions to strong performance of the Company. The Senior Executive MIP is
designed to provide a competitive level of performance-based incentive
compensation when all relevant performance objectives are achieved.
2. ADMINISTRATION. The Senior Executive MIP will be administered
by the Compensation Committee of the Board of Directors (the "Committee"). The
Committee is authorized to interpret the Senior Executive MIP and to establish
and maintain guidelines necessary or desirable for the administration of the
Senior Executive MIP. Decisions and determinations of the Committee shall be
binding on all persons claiming rights under the Senior Executive MIP.
3. ELIGIBILITY.
(a) Participation in the Senior Executive MIP will be limited to
those key executive personnel who have the potential to influence significantly
and positively the performance of the Company. Participants will include such
key executive officers of the Company who, based upon the recommendation, in
writing, of the Chief Executive Officer of the Company, may be selected by the
Committee annually.
(b) To be eligible for participation in any particular year during
the term of the Senior Executive MIP (a "Plan Year"), a key executive must have
assumed the duties of an incentive-eligible position and have been selected for
participation in the Senior Executive MIP within 90 days of the commencement of
the applicable Plan Year. Additionally, employees who, following such 90-day
period, are hired or promoted into an incentive-eligible position will
participate in the Senior Executive MIP Plan for the Plan Year in which they
are hired or promoted based on their base salary (pro-rated) and at the target
award level associated with the position. The current list of the
incentive-eligible positions, which may be amended for each Plan Year by the
Committee within 90 days of the commencement of the applicable Plan Year, is
attached as Attachment A hereto. To receive any award, the participant must
remain employed by the Company through December 15 of the applicable Plan Year.
4. PARTICIPANT CATEGORIES; TARGET AWARD LEVELS.
(a) For each Plan Year, each participant will be assigned to an
incentive category based on organizational level and potential impact on
Company results. Participant categories define the target level of incentive
opportunity ("Incentive
-1-
<PAGE> 2
Percentage") stated as a percentage (up to a maximum of 200%) of base salary
that will be available to the participant upon achievement of the Performance
Targets (as hereinafter defined) for the applicable Plan Year.
(b) Category assignments for each Plan Year (other than that of
the Chief Executive Officer) will be based on the recommendation of the Chief
Executive Officer of the Company and will be approved by the Compensation
Committee within 90 days of the commencement of the applicable Plan Year. The
category assignment for the Chief Executive Officer of the Company will be
determined and approved by the Compensation Committee within 90 days of the
commencement of the applicable Plan Year.
5. PERFORMANCE MEASURES AND TARGETS.
(a) Within 90 days of the commencement of each applicable Plan
Year, the Committee shall determine the performance goal target level
("Performance Target") applicable to the measures of Company performance
("Performance Measures") which must be achieved in order for any awards to paid
under the Senior Executive MIP. The Performance Measures will include one or
more of the following, as determined by the Committee for each Plan Year: (i)
return to stockholders, (ii) cash flow, (iii) return on equity, (iv) Company
created income (for example, income due to Company initiated cost reductions or
productivity improvements), (v) sales growth, (vi) earnings and earnings
growth, (vii) return on assets, (viii) stock price, (ix) earnings per share,
(x) market share, (xi) customer satisfaction, and (xii) safety and for
environmental performance.
(b) The Performance Measures selected by the Committee for each
Plan Year will be weighted by the Committee to reflect their relative
importance to the Company in the applicable Plan Year. The weightings of the
Performance Measures shall also be determined by the Committee within 90 days
of the commencement of each applicable Plan Year.
6. CERTIFICATION OF ACHIEVEMENT. Promptly following the end of
each Plan Year the Committee will meet to certify achievement by the Company of
the Performance Targets for the applicable Plan Year and, if such goals have
been achieved, to review management recommendations and approve actual awards
under the Senior Executive MIP.
7. DETERMINATION OF AWARDS.
(a) If all of the Performance Targets are achieved, the amount of
incentive awards available for payment under the Senior Executive MIP will be
the product of the participant's salary and the Incentive Percentage; provided
that the maximum annual dollar award (after giving effect to the 25% premium
for restricted stock deferrals provided for in Section 8) paid to any
participant for any one Plan Year will be $1,000,000.
-2-
<PAGE> 3
(b) If one or more, but less than all, of the Performance Targets
are achieved, the percentage will be reduced from 100% based on the weightings
assigned to the Performance Measures with respect to which the Performance
Targets were met. For example, if there were three Performance Measures
selected for a Plan Year with each Performance Measure having an equal
weighting, i.e. 33-1/3%, and the Performance Targets for only two of the
Performance Measures were achieved, the amount of the available incentive award
would be 66-2/3% of the product of the participant's salary and the Incentive
Percentage. No awards will be paid under the Senior Executive MIP if none of
the Performance Targets is achieved.
(c) Notwithstanding the amount of any available incentive award
under the Senior Executive MIP, the Committee may, in its discretion, reduce or
eliminate the amount of any incentive award actually paid to a participant
based on individual performance or otherwise. In no event may the Committee
increase the amount of any available incentive award provided for under the
Senior Executive MIP.
8. PAYMENT OF AWARDS.
(a) Awards will be paid as soon as practicable after
approval by the Committee. A portion of each participant's award, as determined
by the Committee within 90 days of the commencement of the applicable Plan
Year, will be paid in the form of restricted stock (the "Basic Deferral").
Participants will also have the opportunity to elect additional optional
deferrals so that they may receive up to 100% of their award, if any, as
restricted stock.
(b) Any award paid as restricted stock will be enhanced
with a 25% "premium", i.e. for every $100 deferred, the participant will
receive $125 in restricted stock. Restrictions on the stock will be determined
by the Committee at the time awards are approved in accordance with the
provisions of the Company's Incentive Stock Plan. The number of shares of
restricted stock to be delivered to a participant in respect of his or her
incentive award under the Senior Executive MIP shall be determined by dividing
the dollar amount of the incentive award (after giving effect to the 25%
premium for restricted stock deferrals) under the Senior Executive MIP by the
fair market value of one share of the Company's common stock on the first
business day of the year immediately succeeding the Plan Year in respect of
which the incentive award is made; provided, that in no event shall the sum of
the cash portion of the incentive award and the fair market value (determined
as of the date the award is approved by the Committee) of any restricted stock
deliverable in respect of the award exceed 120% of the amount of the incentive
award (after giving effect to the 25% premium for restricted stock deferrals).
(c) For purposes of the Senior Executive MIP, fair market
value of one share of stock shall be the mean of the high and low prices of the
Company's common stock on the relevant date (or, if no sale was made on such
date, then on the next preceding date on which such a sale was made) on The New
York Stock Exchange (or, if the Company's common stock is reported on NASDAQ
National Market System, then on such system). If the Company's common stock is
not listed or reported on The
-3-
<PAGE> 4
New York Stock Exchange or the NASDAQ National Market System, the fair market
value of one share of stock shall be as determined by the Committee.
(d) Any portion of a participant's award not paid as restricted
stock will be paid in cash.
9. OTHER PROVISIONS.
(a) No awards under the Senior Executive MIP are to be considered
earned until received.
(b) Awards to participants who serve in incentive-eligible
positions for less than a full year, or who within a year serve in two or more
positions that are of significantly difference size, may be adjusted on a pro
rata basis.
10. PAYMENT UPON CHANGE IN CONTROL.
(a) Anything to the contrary notwithstanding, within five days
following the occurrence of a "Change in Control" (as defined in Attachment B
hereto), the Company shall pay to each participant an interim lump-sum cash
payment (the "Interim Payment") with respect to his or her participation in the
Senior Executive MIP. The amount of the Interim Payment shall equal the
product of the number of months, including fractional months, that have elapsed
until the occurrence of the Change in Control in the calendar year in which the
Change in Control occurs and one-twelfth of the greater of (i) the amount most
recently paid to each participant for a full calendar year, or (ii) the level
of incentive opportunity for each participant in effect prior to the Change in
Control for the calendar year in which the Change in Control occurs, in each
case under the terms of the Senior Executive MIP.
(b) The Interim Payment shall not reduce the obligation of the
Company to make a final payment under the terms of the Senior Executive MIP,
but any Interim Payment made shall be offset against any later payment required
to be made under the terms of the Senior Executive MIP for the Plan Year in
which a Change in Control occurs. In no event shall any participant be required
to refund to the Company, or have offset against any other payment due any
participant from or on behalf of the Company, all or any portion of the Interim
Payment.
11. AMENDMENT; TERM OF THE SENIOR EXECUTIVE MIP.
(a) The Senior Executive MIP may be amended by the Committee to
the extent required in order to comply with the provisions of Section 162(m) of
the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder regarding "performance-based" compensation.
(b) The Senior Executive MIP will, subject to stockholder approval
at the 1995 Annual Meeting, be effective for the year beginning January 1, 1995
and remain in effect thereafter until terminated by the Committee.
-4-
<PAGE> 5
ATTACHMENT A
THE GEON COMPANY
SENIOR EXECUTIVE MANAGEMENT INCENTIVE PLAN
INCENTIVE ELIGIBLE POSITIONS FOR THE 1995 PLAN YEAR
Chairman of the Board and President and Chief Executive Officer
Senior Vice President, Operations
Chief Financial Officer, Senior Vice President, Human Resources
Senior Vice President, Commercial
Vice President, General Counsel and Secretary
Vice President, Research and Development
-5-
<PAGE> 6
ATTACHMENT B
THE GEON COMPANY
SENIOR EXECUTIVE MANAGEMENT INCENTIVE PLAN
DEFINITION OF "CHANGE IN CONTROL"
For purposes of the Senior Executive Management Incentive
Plan, "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change in Control: (A) any acquisition directly from the
Company (other than by exercise of a conversion privilege), (B) any
acquisition by the Company of any of its subsidiaries, (C) any
acquisitions by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any of its subsidiaries or (D) any
acquisition by any corporation with respect to which following such
acquisition, more than 70% of; respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Company
Voting Securities immediately prior to such acquisition in
substantially the same proportions as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be;
(b) During any period of two consecutive years,
individuals who, at of the beginning of such period, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided, however, that any individual
becoming a director subsequent to the beginning of such period whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a
-6-
<PAGE> 7
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act);
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation, do not,
following such reorganization, merger or consolidation, beneficially
own, directly or indirectly, more than 70% of; respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the company
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their ownership, immediately
prior to such reorganization, merger or consolidation of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(d) Approval by the stockholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) a sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, more than 70% of, respectively, the
then outstanding shares of common stock of such company and the
combined voting power of the then outstanding voting securities of
such company entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be.
-7-
<PAGE> 1
EXHIBIT 10.6
THE GEON COMPANY
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
(Effective December 9, 1993)
ARTICLE I
PURPOSE OF THE PLAN
The purpose of The Geon Company (the "Company") Deferred Compensation
Plan for Non-Employee Directors is to provide any Non-Employee Director of the
Company the option to defer receipt of the compensation payable for services as
a Director and to build loyalty to the Company through increased ownership in
the Company's Common Stock.
ARTICLE II
DEFINITIONS
As used herein, the following words shall have the meaning stated
after them unless otherwise specifically provided:
2.1 "Calendar Year" shall mean the twelve month period January 1
through December 31.
2.2 "Change in Control" shall mean the occurrence of either of the
following events:
(1) If any "person" (as such term is used in Sections
13(d) (3) and 14(d) (2) of the Exchange Act) becomes the "beneficial
owner" (as such term is used in Rule 13d-3 under the Exchange Act) of
securities of the Company representing 20 percent or more of the
combined voting power of the Company's then outstanding securities and
exercises, or indicates an intent to exercise, such voting power on
any issue contrary to the recommendations of management; or
(2) When individuals who, at the beginning of any
two-year period, constitute the Board of Directors of the Company
cease for any reason to constitute at least three-fourths thereof
unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of
at least two- thirds of the directors then still in office who were
directors at the beginning of such period.
2.3 "Committee" shall mean the Compensation Committee
described in Section 8.1 hereof.
<PAGE> 2
2.4 "Common Stock" shall mean the Common Stock, par value $0.10
per share, of the Company.
2.5 "Company" shall mean The Geon Company.
2.6 "Director" shall mean any non-employee director of the
Company.
ARTICLE III
ELECTIONS BY DIRECTORS
3.1 ELECTION TO DEFER. A Director may elect to defer receipt of
the compensation payable to him or her for future services as a Director. Such
election shall be made on an election form specified by the Committee
("Election Form"). Such election shall indicate the portion of the Director's
compensation to be invested in an interest-bearing account and the portion of
such compensation to be invested in Common Stock.
3.2 EFFECTIVENESS OF ELECTIONS. Elections shall be effective and
irrevocable upon the delivery of an Election Form to the Committee.
Notwithstanding anything to the contrary set forth herein, the effective date
of any transaction in which amounts deferred hereunder are invested in Common
Stock shall be not less than six months after the date of such election.
Subject to the provisions of Article VI, amounts deferred pursuant to such
elections shall be distributed at the time and in the manner set forth in such
election.
3.3 AMENDMENT AND TERMINATION OF ELECTIONS. A Director may
terminate or amend his or her election to defer receipt of compensation by
written notice delivered to the Committee six months prior to the commencement
of the period with respect to which such compensation will be earned.
Amendments which serve only to change the beneficiary designation shall be
permitted at any time and as often as necessary. Amounts credited to a
Director's Account pursuant to Section 5.2 hereof prior to the effective date
of any termination or amendment shall not be affected thereby and shall be paid
at the time and in the manner specified in the election form in effect when the
deferral occurred.
ARTICLE IV
COMMON STOCK AVAILABLE UNDER THE PLAN
4.1 COMMON STOCK. The aggregate number of shares of Common Stock
that may be granted under this Plan in any fiscal year of the Company during
the term of this Plan will be equal to one tenth of one percent (0.1%) of the
number of shares of Common Stock outstanding as of the first day of that fiscal
year.
-2-
<PAGE> 3
4.2 ADJUSTMENT. In the event of any change in the Common Stock of
the Company by reason of a merger, consolidation, reorganization, or similar
transaction, or in the event of a stock dividend, stock split, or distribution
to shareholders (other than normal cash dividends), the Committee will adjust
the number and class of shares that may be issued under this Plan, the number
and class of shares subject to outstanding deferrals, and the fair market value
of the Common Stock, and other determinations applicable to outstanding
awards.
ARTICLE V
ACCOUNTS
5.1 ACCOUNTS. The Company shall establish and maintain a
Deferred Compensation Account (an "Account") for each Director who elects to
defer compensation under the Plan. If the Director elects to have deferred
compensation invested in an interest-bearing account, the Company shall credit
the Account of the Director with an amount equal to one hundred percent (100%)
of the compensation deferred pursuant to this Plan. In the event that a
Director elects to have some or all of his or her compensation invested in
Common Stock, then the Company shall credit the Account of the Director with an
amount equal to one hundred twenty five percent (125%) of such compensation, in
the form of a number of shares of Common Stock, valued at its Fair Market
Value. As used herein, the Fair Market Value of Common Stock shall be the
average of the high and low prices of the Company's Common Stock as reported on
the composite tape for securities listed on the New York Stock Exchange for the
date immediately preceding the date of crediting the Account, provided that if
no sales of Common Stock were made on said exchange on that date, the Fair
Market Value shall be the average of the high and low prices of Common Stock as
reported on said composite tape for the preceding day on which sales of Common
Stock were made on said Exchange. The Accounts shall be credited as of the
date on which the compensation would otherwise have been paid to the Director,
if not deferred under the Plan.
5.2 ADJUSTMENT OF ACCOUNTS. As of December 31 of each Calendar
Year and on such other dates as the Committee directs, the fair market value of
the Account of each Director shall be determined by crediting to the Account an
amount equal to the income earned during the Calendar Year, or other
appropriate period, the number of shares of Common Stock credited to the
Account, and then determining the fair market value of the shares and other
amounts credited to the Account.
-3-
<PAGE> 4
ARTICLE VI
PAYMENT OF ACCOUNTS
6.1 TIME OF PAYMENT. Payment of the amount credited to a
Director's Account shall commence upon a date which is not more than thirty
days after the earlier of (i) the attainment of the date specified (not
younger than age 55) in his Election Form or (ii) upon a Change in Control.
6.2 METHOD OF PAYMENT. The amount credited to a Director's
Deferred Compensation Account shall be paid, in whole or in part, to the
Director in a lump sum and/or in annual installments over a period of not
more than ten years as specified in each Director's Election Form. Deferred
Compensation Accounts shall be paid in kind, in cash, or shares of Common
Stock, as credited to the Account.
6.3 HARDSHIP DISTRIBUTION. Prior to the time a Director's Account
becomes payable, the Committee, in its sole discretion, may elect to distribute
all or a portion of the Director's Account in the event such Director
requests a distribution on account of severe financial hardship. For purposes
of this Plan, severe financial hardship shall be deemed to exist in the event
the Committee determines that a Director needs a distribution to meet immediate
and heavy financial needs resulting from a sudden or unexpected illness or
accident of the Director or a member of his or her family, loss of the
Director's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Director. A distribution based on financial hardship shall not exceed the
amount required to meet the immediate financial need created by the hardship.
The amount of a Director's Account shall be reduced by the amount of any
hardship distribution to such Director.
6.4 DESIGNATION OF BENEFICIARY. Upon the death of a Director, the
amount credited to his or her Account shall be paid to the beneficiary or
beneficiaries designated by him or her. If there is no designated beneficiary,
or no designated beneficiary surviving at a Director's death, payment of a
Director's Account shall be made to his or her estate. Beneficiary
designations shall be made in writing. A Director may designate a new
beneficiary or beneficiaries at any time by notifying the Committee.
6.5 TAXES. In the event any taxes are required by law to be
withheld or paid from any payments made pursuant to the Plan, the appropriate
amounts shall be deducted from such payments and transmitted to the appropriate
taxing authority.
-4-
<PAGE> 5
ARTICLE VII
CREDITORS
7.1 CLAIMS OF THE COMPANY'S CREDITORS. The rights of a Director
or his or her beneficiaries to any payment under the Plan shall be no greater
than the rights of an unsecured creditor of the Company.
ARTICLE VIII
ADMINISTRATION
8.1 APPOINTMENT OF COMMITTEE. The Board of Directors of the
Company shall appoint a Committee consisting of not less than three persons to
administer the Plan. Members of the Committee shall hold office at the pleasure
of the Board of Directors and may be dismissed at any time with or without
cause. Such persons serving on the Committee need not be members of the Board
of Directors of the Company.
8.2 POWERS OF THE COMMITTEE. The Committee shall administer the
Plan and resolve all questions of interpretation arising under the Plan with
the help of legal counsel, if necessary. Whenever directions,
designations, applications, requests or other notices are to be given by a
Director under the Plan, they shall be filed with the Committee. The Committee
shall have no discretion with respect to Plan contributions or
distributions but shall act in an administrative capacity only.
ARTICLE IX
MISCELLANEOUS
9.1 TERM OF PLAN. The Company reserves the right to amend or
terminate the Plan at any time; provided, however, that no amendment or
termination shall affect the rights of Directors to amounts previously
credited to their Accounts pursuant to Section 5.1 or to future income to
be credited to their Accounts pursuant to Section 5.2.
9.2 ASSIGNMENT. No right or interest of any Director (or any
person claiming through or under such Director) in any benefit or payment
herefrom other than the surviving spouse of such Director after he or she is
deceased, shall be assignable or transferable in any manner or be subject
to alienation, anticipation, sale, pledge, encumbrance, or other legal process
or in any manner be liable for or subject to the debts or liabilities of such
Director. If any Director or any such person (other than the surviving spouse
of such Director after he or she is deceased) shall attempt to or shall
transfer, assign, alienate, anticipate, sell, pledge, or otherwise encumber his
or her benefits hereunder
-5-
<PAGE> 6
or any part thereof, or if by reason of his or her bankruptcy or other event
happening at any time such benefits would devolve upon anyone else or would not
be enjoyed by him or her, then the Committee, in its discretion, may terminate
his or her interest in any such benefit to the extent the Committee considers
necessary or advisable to prevent or limit the effects of such occurrence.
Termination shall be effected by filing a written "termination declaration"
with the Committee records and making reasonable efforts to deliver a copy to
such Director or his or her legal representative.
As long as any Director is alive, any benefits affected by the
termination may, in the Committee's sole and absolute judgment, be paid to or
expended for the benefit of such Director, his or her spouse, his or her
children or any other person or persons in fact dependent upon him or her in
such a manner as the Committee shall deem proper. Upon the death of any
Director, all benefits withheld from him or her and not paid to others in
accordance with the preceding sentence shall be distributed to such
Director's estate or to his or her creditors and if such Director shall have
descendants, including adopted children, then living, distribution shall
be made to such Director's then living descendants, including adopted
children, per stirpes.
9.3 EFFECTIVE DATE OF PLAN. The Plan shall be effective as of
December 9, 1993, subject to approval by the stockholders of the Company. Any
amounts credited to a Director's Deferred Compensation Account prior to such
stockholder approval shall be contingent on such approval.
-6-
<PAGE> 7
Amendment of Deferred Compensation Plan
for Non-Employee Directors
Adopted by the
Board of Directors
on February 1, 1996
NOW, THEREFORE, BE IT RESOLVED, that Section 6.2 of the Company's
Deferred Compensation Plan for Non-Employee Directors (the "Plan") be amended
with respect to amounts deferred under the Plan from and after January 1, 1996,
to read as follows:
"6.2 METHOD OF PAYMENT. The amount credited to a Director's
Deferred Compensation Account shall be paid, in whole or in part, to
the Director in a lump sum and/or in annual installments over a period
of not more than ten years as specified in each Director's Election
Form. A Director may elect to change his or her original payment
period election, as specified in such Director's Election Form;
provided, that (i) such change is approved by the Committee, (ii) the
election to change is made at least 18 months prior to date specified
in the electing Director's Election Form on which payment of the
amount credited to the Director's account is to commence, and (iii) a
Director may make such an election to change only one time, an such
election to change shall apply to all of the Director's Election Forms
with respect to amounts deferred under the Plan from and after January
1, 1996. In the event that a Director who makes an election to change
is a member of the Committee, such Director shall abstain from the
Committee's determination whether or not to approve the change.
Deferred Compensation Accounts shall be paid in kind, in cash, or
shares of Common Stock, as credited to the Account."
<PAGE> 1
Exhibit 10.7
[GEON LOGO]
One Geon Center
Avon Lake, Ohio 44012
216-930-1000
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Dear
The Geon Company (the "Company") considers the establishment and
maintenance of a sound and vital senior management to be essential to protecting
and enhancing the best interests of the Company and its stockholders. In this
connection, the Company recognizes that, as is the case with many publicly-held
corporations, the possibility of a change of control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the distraction and even the departure of senior
management personnel to the detriment of the Company and its stockholders.
Accordingly, the Company's Board of Directors has determined that appropriate
steps should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's senior management, including yourself, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of the
Company.
In order to induce you to remain in the employ of the Company, and to
continue your employment notwithstanding the occurrence or threat of occurrence
of a transaction that results in a change of control of the Company, this letter
agreement ("Agreement") sets forth the employment arrangement and benefits which
the Company agrees will be provided to you in the event a Change of Control (as
hereinafter defined in Paragraph 3) should occur during the term of this
Agreement and in the event that your employment is thereafter terminated under
such circumstances as are expressly provided in Paragraph 5 hereof
In making provision for the payment of these benefits, it is not the
Company's intention to alter in any way the compensation and benefits that would
be paid to you in the absence of a Change of control.
1. TERM. This Agreement shall commence on November 6, 1996 and shall
continue through December 31, 1996, provided, however, that commencing on
January 1, 1997 and each January 1st thereafter, the term of this Agreement
shall automatically be extended for one additional year, unless at least 90 days
prior to such January 1st date, the Company shall have
- 1 -
<PAGE> 2
given notice that it does not wish to extend this Agreement. Upon the occurrence
of a Change of control during the term of this Agreement, including any
extensions thereof, this Agreement shall automatically be extended until the end
of your Period of Employment (as hereinafter defined Paragraph 2), and may not
be terminated by the Company during such time.
2. PERIOD OF EMPLOYMENT. Your "Period of Employment" shall commence on
the date on which a Change of control occurs and shall end on the later to occur
of (i) the date which is 24 months after the date on which such Change of
control occurs, or (ii) the date which is 24 months after the first date on
which a majority of the Board of Directors (the "Board") of the Company consists
of persons who were not members of the Board on the date immediately preceding
the date on which a Change of control occurs. Notwithstanding the foregoing,
however, your Period of Employment shall not extend beyond either any Mandatory
Retirement Date (as hereinafter defined in Paragraph 3) applicable to you or the
date which is 48 months after the date on which a Change of control occurs.
3. CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) A "Change of Control shall mean
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of voting
securities of the Company where such acquisition causes such Person to own 20%
or more of the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (i), the following acquisitions shall not be deemed to result
in a Change of Control: (A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any corporation pursuant to
a transaction that complies with clauses (A), (B) and (C) of subsection (iii)
below; provided, further, that if Person's beneficial ownership of the
Outstanding Company Voting Securities reaches or exceeds 20% as a result of a
transaction described in clause (A) or (B) above, and such Person subsequently
acquires beneficial ownership of additional voting securities of the Company,
such subsequent acquisition shall be treated as an acquisition that causes such
Person to own 20% or more of the Outstanding Company Voting Securities; and
provided, further, that if at least a majority of the members of the Incumbent
Board determines in good faith that a Person has acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of the Outstanding Company Voting Securities inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares so that such
Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) less than 20% of the Outstanding Company Voting Securities, then
no Change of Control shall have occurred as a result of such Person's
acquisition; or
(ii) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
- 2 -
<PAGE> 3
nomination for election by the Company's shareholders, was approved by A vote
of at least A majority of the directors then comprising the Incumbent Board
shall be considered AS though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual
or threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(iii) The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of another corporation
("Business Combination") excluding, however, such a Business Combination
pursuant to which (A) all or substantially all of the individuals and entities
who were the beneficial owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, (B) no Person
(excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (C) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(iv) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(b) The term "Mandatory Retirement Date" shall mean the compulsory
retirement date, if any, established by the Company for those executives of
the Company who, by reason of their positions and the size of their
nonforfeitable annual retirement benefits under the Company's pension,
profit-sharing, and deferred compensation plans, are exempt from the
provisions of the Age Discrimination in Employment Act, 29 U.S.C. Sections
621, et seq, which date shall not in any event be earlier for any executive
than the last day of the month in which such executive reaches age 65.
4. COMPENSATION DURING PERIOD OF EMPLOYMENT. For so long during
your Period of Employment as you are an employee of the Company, the Company
shall be obligated to compensate you as follows:
(a) You shall continue to receive your full base salary at the rate
in effect immediately prior to the Change of control. Your base salary shall
be increased annually, with each such
- 3 -
<PAGE> 4
increase due on the anniversary date of your most recent previous increase. Each
such increase shall be no less than an amount which at least equals on a
percentage basis the mean of the annualized percentage increases in base salary
for all elected officers of the Company during the two full calendar years
immediately preceding the Change of control.
(b) You shall continue to participate in all benefit and compensation
plans (including but not limited to stock options under the Incentive Stock
Plan, awards under Long-Term Incentive Plan (based upon the Incentive Stock
Plan), Management Incentive Program, pension plan, savings plan, flexible
benefits plan, life insurance plan, health and accident plan or disability plan,
executive insurance programs, and Disability Benefit Arrangement) in which you
were participating immediately prior to the Change of control, or in plans
providing substantially similar benefits, in either case upon terms and
conditions and at levels at least as favorable as those provided to you under
the plans in which you were participating immediately prior to the Change of
control;
(c) You shall continue to receive all fringe benefits, perquisites, and
similar arrangements which you were entitled to receive immediately prior to the
Change of control; and
(d) You shall continue to receive annually the number of paid vacation
days and holidays which you were entitled to receive immediately prior to the
Change of control.
5. COMPENSATION UPON TERMINATION OF EMPLOYMENT. If, during the Period
of Employment, the Company shall terminate your employment for any reason (other
than for a reason and as expressly provided in Paragraph 6 hereof), or if you
shall terminate your employment for "Good Reason" (as hereinafter defined in
subparagraph 5(f)), then the Company shall be obligated to compensate you as
follows:
(a) The Company shall, at your election (which shall be made on the
signing of this Agreement and which may be changed by you as of any January I
which occurs prior to a Change of control by giving prior written notice of such
change to the Company), either (i) continue your base salary as provided for
under subparagraph 4(a) immediately prior to the Date of Termination (as
hereinafter defined in Paragraph 8) for a period equal to the shorter of (A)
three (3) years, commencing on the Date of Termination, or (B) the period from
the Date of Termination to your Mandatory Retirement Date, if any, (whichever
period applies shall hereinafter be known as the "Payment Period") or (ii) pay
to you in a lump sum, by not later than the fifth day following the Date of
Termination, an amount equal to one-twelfth of your annualized base salary, as
provided for under subparagraph 4(a), immediately prior to the Date of
Termination, multiplied by the number of months, including fractional months, in
the Payment Period;
(b) By not later than the fifth day following the Date of Termination,
the Company shall pay you in a lump sum an amount equal to the product of (x)
the number of months, including fractional months, in the Payment Period and (y)
the sum of
(i) under the Company's Management Incentive Program the
greatest of one-twelfth of: (A) the amount most recently paid to you
for a full calendar year; (B) your "target incentive amount" for the
calendar year in which your Date of Termination occurs;
- 4 -
<PAGE> 5
or (C) your "target incentive amount" in effect prior to the Change of
control for the calendar year in which the Change of control occurs;
plus, if applicable,
(ii) under the Company's Long-Term Incentive Plan the greatest
of one-thirty-sixth of the "calculated market value" of (A) with
respect to the most recently completed Plan Cycle, if any, the sum of
(1) the Restricted Stock awarded to you, (2) the Performance Stock as
to which restrictions were removed, if any, and (3) the awarding of
Additional Stock, if any, if the applicable financial objectives were
exceeded; (B) with respect to the most recently commenced Plan Cycle
prior to your Date of Termination, the sum of (1) the Restricted Stock,
if any, awarded to you, and (2) the Performance Stock, if any, awarded
to you; or (C) with respect to the most recently commenced Plan Cycle
prior to the date of the occurrence of the Change of control, the sum
of (1) the Restricted Stock, if any, awarded to you, and (2) the
Performance Stock, if any, awarded to you.
Your "target incentive amount" under the Management Incentive Program
is determined by multiplying your salary range midpoint by the incentive target
percentage which is applicable to your incentive category under such Program.
The "calculated market value" of Restricted Stock, Performance Stock or
Additional Stock under the Long-Term Incentive Plan shall be the mean of the
high and low prices of the Company's common stock on the relevant date or, if no
sale was made on such date, then on the next preceding day on which such a sale
was made (x) if the Company's stock is listed on the New York Stock Exchange, as
reported on the New York Stock Exchange Composites Transactions listing (or
similar report), or, (y) if the Company's stock is listed on the NASDAQ National
Market System then as reported on such system or (z) if not listed on either the
New York Stock Exchange or the NASDAQ National Market System, as determined by
the Board of Directors, multiplied by the number of shares involved in the
calculation. The relevant date for clauses 5(b)(ii)(A)(1), 5(b)(ii)(B) and
5(b)(ii)(C) is the date upon which the Board of Directors or the Compensation
Committee ("Committee") of the Board of Directors awarded the stock in question;
and for clauses 5(b)(ii)(A)(2) and 5(B)(ii)(A)(3) is the date on which the Board
or Committee made a determination of financial objectives and removed
restrictions on Performance Stock and, if applicable, awarded Additional Stock;
(c) If you are under age 55 at the Date of Termination, the Company
shall maintain in full force and effect, for your continued benefit, for the
Payment Period, all health and welfare benefit plans and programs or
arrangements in which you were entitled to participate immediately prior to
the Date of Termination, as long as your continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that your participation in any such plan or program is barred, the Company shall
provide you with benefits substantially similar to those to which you would have
been entitled to receive under such plans and programs, had you continued to
participate in them as an executive of the Company plus an amount in cash equal
to the amount necessary to cause the amount of the aggregate after-tax
compensation and employee benefits you receive pursuant to this provision to be
equal to the aggregate after-tax value of the benefits which you would have
received if you continued to receive such benefits as an employee. If you are
age 55 or over on the Date of Termination, the Company shall provide you with
those health and welfare benefits to which you would be entitled under the
Company's general retirement policies if you retired on the Termination Date
with the Company paying that percentage of the premium cost of the plans which
it would have paid under the terms of the plans in effect immediately prior to
the Change of Control with respect to individuals who retire at age
- 5 -
<PAGE> 6
65, regardless of your actual age on the Termination Date, provided such
benefits would be at least equal to those which would have been payable if you
had been eligible to retire and had retired immediately prior to the Change of
control;
(d) The Company shall, for the Payment Period, continue and you shall
be entitled to receive each and every fringe benefit program, perquisite, and
similar arrangement which you were entitled to receive or in which you were
entitled to participate immediately prior to the Date of Termination; and
(e) The Company shall, in addition to the benefits to which you are
entitled under the retirement plans or programs in which you participate, pay
you in a lump sum in cash at your normal retirement date (or earlier
retirement date should you so elect), as defined in the retirement plans or
programs in which you participate, an amount equal to
the actuarial equivalent of the retirement pension to which you would
have been entitled under the terms of such retirement plans or
programs had you accumulated additional years of continuous service
under such plans equal in length to your Payment Period. The length
of the Payment Period will be added to total years of continuous
service for determining vesting, the amount of benefit accrual and to
the age which you will be considered to be for the purposes of
determining eligibility for normal or early retirement calculations.
Your actual age, however, will be used for determining the amount of
any actuarial reduction. For the purposes of calculating benefit
accrual, the amount of compensation you will be deemed to have
received during each month of your Payment Period shall be equal to
the sum of your annual base salary prorated on a monthly basis as
provided for under subparagraph 4(a) immediately prior to the Date of
Termination (including salary increases), plus under the Company's
Management Incentive Program the greatest of one-twelfth of,
(i) the amount most recently paid to you for a full calendar
year,
(ii) your "target incentive amount" for the calendar year
in which your Date of Termination occurs, or
(iii) your "target incentive amount" in effect prior to the
Change of control for the calendar year in which the Change
of control occurs
reduced by the actuarial equivalent of any amounts to which you are
actually entitled pursuant to the provisions of said retirement plans
and programs.
For purposes of illustration, but not intending to be exhaustive, the
following are examples of how inclusion of the Payment Period may affect the
calculation of your retirement benefit.
A. If as of your Date of Termination your actual years of
service under the retirement plans or programs plus the length of your
Payment Period is at least 10, then
1) If as of your Date of Termination your age plus the
length of your Payment Period is at least 65, your retirement
benefit under subparagraph 5(e) will
- 6 -
<PAGE> 7
be calculated as a "normal retirement" benefit to which you
would have been entitled under the terms of the retirement
plan in which you participate had you accumulated continuous
service equal to such sum; and
2) If as of your Date of Termination your age plus
the length of your Payment Period is at least 55 but less than
65, your retirement benefit under subparagraph 5(e) will be
calculated as an "early retirement" benefit to which you would
have been entitled under the terms of the retirement plan in
which you participate had you accumulated continuous service
equal to such sum. The actuarial reduction used shall be the
actuarial reduction factor for early retirement, calculated to
your actual age at your Date of Termination.
Furthermore, if you were on the active rolls of The B.F.
Goodrich Company or one of its subsidiaries as of December 31, 1989 and
if the sum of your actual years of service under the Company's
retirement plans or programs plus the length of your Payment Period is
at least 10 but less than 24, then for purposes of subparagraph 5(e)
you will also receive an Additional Credit for up to 4 years. The
Additional Credit you will receive will depend upon the sum of the
years of your actual service plus the length of your Payment Period
and will be equal to the lesser of:
(x) 4 years of Additional Credit; or
(y) The amount of Additional Credit needed such that,
when added to the sum of your actual years of service under
the retirement plans or programs plus the length of your
Payment Period, it will create a total of exactly 24.
No Additional Credit will be applied if the sum of your actual years of
service under the retirement plans or programs plus the length of your
Payment Period is 24 or greater. You will not receive any Additional
Credit if you commenced employment with The B.F.Goodrich Company or one
of its subsidiaries on or after January 1, 1990.
B. If as of your Date of Termination the sum of your
actual years of service under the retirement plans or programs plus the
length of your Payment Period is less than 10, or your age plus the
length of your Payment Period is less than 55, your retirement benefit
under subparagraph 5(e) will be calculated as a "deferred vested
pension" to which you would have been entitled under the terms of the
retirement plan in which you participate had you accumulated continuous
service equal to such sum. The actuarial reduction used shall be the
actuarial reduction factor for a deferred vested pension, calculated
to your actual age at your Date of Termination.
For purposes of this subparagraph 5(e), "actuarial equivalent" shall be
determined using the same methods and assumptions as those utilized under the
Company's retirement plans and programs immediately prior to the Change of
control.
(f) For purposes of this Agreement, "Good Reason" shall mean:
- 7 -
<PAGE> 8
(i) except as a result of the termination of your employment
pursuant to Paragraph 6 hereof and without your express written
consent, (A) the assignment to you of any new duties or
responsibilities inconsistent with your positions, duties,
responsibilities, and reporting relationships and status within the
Company immediately prior to a Change of control, (B) a change in your
duties, responsibilities, reporting relationships, titles or offices as
in effect immediately prior to a Change of control, except that a
reduction in your duties or responsibilities which occurs solely
because the Company is no longer an independent publicly-held entity
shall not be deemed to be a reduction in your duties, or (C) any
removal of you from or any failure to re-elect you to any of such
positions;
(ii) the failure of the Company to comply with any of its
obligations under Paragraph 4 herein;
(iii) the relocation of the offices of the Company at which
you were employed immediately prior to the Change of control to a
location which is more than twenty (20) miles from such prior location,
any increase in your obligation to travel on the Company's business
over your present business travel obligations, or the failure of the
Company to (A) pay or reimburse you, in accordance with the Company's
presently existing relocation policy for its employees, for all
reasonable costs and expenses, plus "gross-ups" referred to in such
policy incurred by you relating to a change of your principal residence
in connection with any relocation of the Company's offices to which you
consent, and (B) indemnify you against any loss (defined as the
difference between the actual sale price of such residence and the
higher of (1) your aggregate investment in such residence or (2) the
fair market value of such residence as determined by the Prudential
Relocation Management or any successor relocation firm contracted by
the Company (or other real estate appraiser designated by you and
reasonably satisfactory to the Company)) realized in the sale of your
principal residence in connection with any such change of residence;
(iv) the failure of the Company to obtain the assumption of
and the agreement to perform this Agreement by any successor as
contemplated in Paragraph 11 hereof, or
(v) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Paragraph 7 hereof
6. TERMINATION FOR CAUSE. If your employment is terminated for any of
the following reasons and in accordance with the provisions of this Paragraph 6,
you shall not be entitled by virtue of this Agreement to any of the benefits
provided in the foregoing Paragraph 5:
(a) If, as a result of your incapacity due to physical or mental
illness, you shall have been absent from your duties with the Company on a
full-time basis for 120 consecutive business days, and within thirty (30) days
after a written Notice of Termination (as hereinafter defined in Paragraph 7) is
given, you shall not have returned to the full-time performance of your duties;
(b) If the Company shall have Cause. For the purposes of this
Agreement, the Company shall have "Cause" to terminate your employment hereunder
upon (i) the willful and continued failure by you to substantially perform your
duties with the Company, which failure causes material and demonstrable injury
to the Company (other than any such failure resulting from your
- 8 -
<PAGE> 9
incapacity due to physical or mental illness), after a demand for
substantial performance is delivered to you by the Board which specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties, and after you have been given a period
(hereinafter known as the "Cure Period") of at least thirty (30) days to correct
your performance, or (ii) the willful engaging by you in other gross misconduct
materially and demonstrably injurious to the Company. For purposes of this
paragraph, no act, or failure to act, on your part shall be considered "willful"
unless conclusively demonstrated to have been done, or omitted to be done, by
you not in good faith and without reasonable belief that your action or
omission was in the best interests of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership of
the Board at a meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in clauses (i), including the
expiration of the Cure Period without the correction of your performance, or
(ii) of the preceding subparagraph and specifying the particulars thereof in
detail.
(c) If you die while employed by the Company or if you retire from such
employment during your Period of Employment, then you shall not be entitled to
any of the benefits provided by this Agreement and the benefits to which you or
your beneficiary shall be entitled shall be determined without regard to the
provisions hereof
7. NOTICE OF TERMINATION. Any termination of your employment by the
Company or any termination by you for Good Reason shall be communicated by
written notice to the other party hereto. For purposes of this Agreement, such
notice shall be referred to as a "Notice of Termination." Such notice shall, to
the extent applicable, set forth the specific reason for termination, and shall
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so indicated.
8. DATE OF TERMINATION. "Date of Termination" shall mean:
(a) If you terminate your employment for Good Reason, the date
specified in the Notice of Termination, but in no event more than sixty (60)
days after Notice of Termination is given.
(b) If your employment is terminated for Cause under subparagraph
6(b), the date on which a Notice of Termination is given, except that the Date
of Termination shall not be any date prior to the date on which the Cure Period
expires without the correction of your performance.
(c) If your employment pursuant to this Agreement is terminated
following absence due to physical incapacity, under subparagraph 6(a), then the
Date of Termination shall be thirty (30) days after Notice of Termination is
given (provided that you shall not have returned to the performance of your
duties on a full-time basis during such thirty (30) day period).
- 9 -
<PAGE> 10
A termination of employment by either the Company or by you shall not
affect any rights you or your surviving spouse may have pursuant to any other
agreement or plan of the Company providing benefits to you, except as provided
in such agreement or plan.
9. CERTAIN ADDITIONAL PAYMENTS. (a) Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment
or distribution by the Company to you or for your benefit (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this paragraph 9) (a "Payment") would be subject to the excise tax imposed
by Section 4999 (or any successor provisions) of the Internal Revenue Code of
1986, as amended (the "Code"), or any interest or penalties are incurred by you
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then you shall be entitled to receive an additional payment (a "Gross-Up
Payment",) in an amount such that after payment by you of all taxes (including
any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed on the Gross-Up Payment, you retain
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of subparagraph 9(c), all determinations
required to be made under this paragraph 9, including whether and when such a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
Ernst & Young (or their successors) (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and to you within fifteen
(15) business days of the receipt of notice from you that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of control, you shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
paragraph 9, shall be paid by the Company to you within five (5) days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by you, it shall furnish you with a
written opinion that failure to report the Excise Tax on your applicable federal
income tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the
Company and you. As a result of the uncertainty of the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and you thereafter are required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to you or for your benefit.
(c) You shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after you
- 10-
<PAGE> 11
are informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
You shall not pay such claim prior to the expiration of the thirty (30) day
period following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies you in writing prior to the expiration of
such period that it desires to contest such claim, you shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold you harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this subparagraph 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of any such claim and may, at its sole option,
either direct you to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and you agree to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs you to pay such claim
and sue for a refund, the Company shall advance the amount of such payment to
you, on an interest-free basis and shall indemnify and hold you harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for your taxable year with respect to which such contested amount is claimed to
be due is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and you shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by you of an amount advanced by the Company
pursuant to subparagraph 9(c), you become entitled to receive any refund with
respect to such claim, you shall (subject to the Company's complying with the
requirements of subparagraph 9(c)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by you of an amount advanced by the
- 11 -
<PAGE> 12
Company pursuant to subparagraph 9(c), a determination is made that you shall
not be entitled to any refund with respect to such claim and the Company does
not notify you in writing of its intent to contest such denial of refund prior
to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof the amount of Gross-Up
Payment required to be paid.
10. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER
CONTRACTUAL RIGHTS. You shall not be required to refund the amount of any
payment or employee benefit provided for or otherwise mitigate damages under
this Agreement by seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for under this Agreement be reduced by any
compensation or the value of any benefits earned by you as the result of any
employment by another employer after the date of termination of your employment
with the Company, or otherwise.
The provisions of this Agreement, and any payment or benefit provided
for hereunder, shall not reduce any amount otherwise payable, or in any way
diminish your existing rights, or rights which would occur solely as a result of
the passage of time, under any other agreement, contract, plan or arrangement
with the Company.
11. SUCCESSORS AND BINDING AGREEMENT. (a) The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the
Company, by agreement in form and substance satisfactory to you, to assume and
agree to perform this Agreement.
(b) This Agreement shall be binding upon the Company and any successor
of or to the Company, including, without limitation, any person acquiring
directly or indirectly all or substantially all of the assets of the Company
whether by merger, consolidation, sale or otherwise (and such successor shall
thereafter be deemed "the Company" for the purposes of this Agreement), but
shall not otherwise be assignable by the Company.
(c) This Agreement shall inure to the benefit of and be enforceable by
you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amounts would still be payable to you pursuant to Paragraph 5 hereunder if
you had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to your devisee,
legatee, or other designee or, if there be no such designee, to your estate.
12. NOTICES. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
- 12 -
<PAGE> 13
13. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Ohio, without giving effect to the principles of conflict of laws of
such State.
14. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in a writing signed by you and the Company. No waiver by either party hereto at
any time of any breach by the other party hereto or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof, have been made by either party which are not set forth expressly in this
Agreement.
15. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement which shall remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same agreement.
17. WITHHOLDING OF TAXES The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
18. NONASSIGNABILITY. This Agreement is personal in nature and neither
of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, except as
provided in Section 11 above. Without limiting the foregoing, your right to
receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than by a transfer
by your will or by the laws of descent and distribution and in the event of any
attempted assignment or transfer contrary to this Section the Company shall have
no liability to pay any amounts so attempted to be assigned or transferred.
19. LEGAL FEES AND EXPENSES. If a Change of control shall have
occurred, thereafter the Company shall pay and be solely responsible for any and
all attorneys' and related fees and expenses incurred by you to successfully (in
whole or in part, and whether by modification of the Company's position,
agreement, compromise, settlement, or administrative or judicial determination)
enforce this Agreement or any provision hereof or as a result of the Company
or any stockholder of the Company contesting the validity or enforceability of
this Agreement or any provision hereof To secure the foregoing obligation, the
Company shall, within 90 days after being requested by you to do so, enter into
a contract with an insurance company, open a letter of credit or establish an
escrow in a form satisfactory to you.
- 13 -
<PAGE> 14
20. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement
shall create any right or duty on your part or on the part of the Company to
have you remain in the employment of the Company prior to the commencement
of the Period of Employment; provided, however, that any termination of your
employment, for any reason other than those set forth in Paragraph 6, following
the commencement of any discussion with a third party, or the announcement by a
third party of the commencement of, or the intention to commence, a tender
offer, or other intention to acquire all or a portion of the equity securities
of the Company that ultimately results in a Change of control shall (unless such
termination is conclusively demonstrated to have been wholly unrelated to any
such activity relating to a Change of control) be deemed to be a termination of
your employment after a Change of control for purposes of this Agreement and
both the Period of Employment and the Payment Period shall be deemed to have
begun on the date of such termination.
21. RIGHT OF SETOFF. There shall be no right of setoff or counterclaim
against, or delay in, any payment by the Company to you or your designated
beneficiary or beneficiaries provided for in this Agreement in respect of any
claim against you or any debt or obligation owed by you, whether arising
hereunder or otherwise.
22. RIGHTS TO OTHER BENEFITS. The existence of this Agreement and your
rights hereunder shall be in addition to, and not in lieu of, your rights under
any other of the Company's compensation and benefit plans and programs, and
under any other contract or agreement between you and the Company.
- 14 -
<PAGE> 15
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
THE GEON COMPANY
ACCEPTED AND AGREED TO By direction of the Compensation
AS OF THE DATE HEREOF. Committee
By /s/ Thomas A. Waltermire
- ------------------------------ --------------------------------------
Employee Signature Thomas A. Waltermire
I hereby elect to take any base salary amounts which may be payable under
subparagraph 5(a)
in a lump sum
- ---------- or (check one)
in installments
- ----------
------------------------------------------------
Employee Signature
- 15 -
<PAGE> 1
EXHIBIT 10.8
EXECUTION COPY
U.S. $130,000,000
CREDIT AGREEMENT
Dated as of August 16, 1994
Among
THE GEON COMPANY
as Borrower
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
and
CITIBANK, N.A.
as Administrative Agent
and
NATIONSBANK OF NORTH CAROLINA, N.A.
as Co-Agent
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms .............................. 1
SECTION 1.02. Computation of Time Periods ........................ 15
SECTION 1.03. Accounting Terms ................................... 15
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances ...................... 15
SECTION 2.02. Making the Revolving Credit Advances ............... 16
SECTION 2.03. The Competitive Bid Advances ....................... 18
SECTION 2.04. Fees ............................................... 22
SECTION 2.05. Termination or Reduction of the Commitments ........ 22
SECTION 2.06. Repayment of Revolving Credit Advances ............. 23
SECTION 2.07. Interest on Revolving Credit Advances .............. 23
SECTION 2.08. Interest Rate Determination ........................ 24
SECTION 2.09. Optional Conversion of Revolving Credit Advances ... 25
SECTION 2.10. Optional Prepayments of Revolving Credit Advances... 26
SECTION 2.11. Increased Costs .................................... 26
SECTION 2.12. Illegality ......................................... 27
SECTION 2.13. Payments and Computations .......................... 27
SECTION 2.14. Taxes .............................................. 28
SECTION 2.15. Sharing of Payments, Etc. .......................... 30
SECTION 2.16. Use of Proceeds .................................... 31
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections
2.01 and 2.03 ................................................... 31
<PAGE> 3
ii
SECTION 3.02. Conditions Precedent to Each Revolving Credit
Borrowing ..................................................... 33
SECTION 3.03. Conditions Precedent to Each Competitive Bid
Borrowing ..................................................... 33
SECTION 3.04. Determinations Under Section 3.01 ................ 34
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower ... 34
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants ............................ 37
SECTION 5.02. Negative Covenants ............................... 41
SECTION 5.03. Financial Covenants .............................. 43
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default ................................ 43
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action ......................... 46
SECTION 7.02. Administrative Agent's Reliance, Etc. ........... 46
SECTION 7.03. Citibank and Affiliates .......................... 47
SECTION 7.04. Lender Credit Decision ........................... 47
SECTION 7.05. Indemnification .................................. 47
SECTION 7.06. Successor Administrative Agent ................... 48
<PAGE> 4
iii
SECTION 7.07. Co-Agent ......................................... 48
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. ................................. 49
SECTION 8.02. Notices, Etc. .................................... 49
SECTION 8.03. No Waiver; Remedies .............................. 50
SECTION 8.04. Costs and Expenses ............................... 50
SECTION 8.05. Right of Set-off ................................. 52
SECTION 8.06. Binding Effect ................................... 52
SECTION 8.07. Assignments and Participations ................... 52
SECTION 8.08. Confidentiality .................................. 55
SECTION 8.09. Governing Law .................................... 56
SECTION 8.10. Execution in Counterparts ........................ 56
SECTION 8.11. Jurisdiction, Etc. ............................... 56
SECTION 8.12. Waiver of Jury Trial ............................. 56
Schedules
Schedule I - List of Applicable Lending Offices
Schedule 3.01(b) - Disclosed Litigation
Schedule 5.02(a) - Existing Liens
Exhibits
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Revolving Credit Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C. - Form of Assignment and Acceptance
Exhibit D. - Form of Opinion of Counsel for the Borrower
<PAGE> 5
CREDIT AGREEMENT
Dated as of August 16, 1994
THE GEON COMPANY, a Delaware corporation (the "Borrower"), the
banks, financial institutions and other institutional lenders (the "Initial
Lenders") listed on the signature pages hereof, and CITIBANK, N.A. ("Citibank"),
as administrative agent (the "Administrative Agent") for the Lenders (as
hereinafter defined), and NATIONSBANK OF NORTH CAROLINA, N.A., as co-agent (the
"Co-Agent"), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent at Citibank
with its office at 399 Park Avenue, New York, New York 10043, Account
No.3685 2248, Attention: NAIB Agency/MTF Reference: Geon
"Advance" means a Revolving Credit Advance or a Competitive Bid
Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 5% or, if such
Person is the Borrower, 15%, or more of the Voting Stock of such Person or
to direct or cause the direction of the management and policies of such
Person, whether through the ownership of Voting Stock, by contract or
otherwise.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance and, in the case of a Competitive Bid Advance, the office of such
Lender notified by such Lender to the Administrative Agent as its
Applicable Lending Office with respect to such Competitive Bid Advance.
"Applicable Margin" means (i) as of any date during the period from
the Effective Date until the later of the first anniversary of the
Effective Date and the date upon which the Borrower obtains a Public Debt
Rating, a percentage per annum determined by reference to the Performance
Level of the Borrower on such date and the Usage on such date as set forth
below:
<PAGE> 6
2
Performance Level Usage Applicable Margin
for
Eurodollar Rate
Advances
Level I less than or equal to 50% 0.375%
greater than 50% 0.50%
Level II less than or equal to 50% 0.625%
greater than 50% 0.75%
and (ii) after the later of the first anniversary of the Effective Date and the
date upon which the Borrower obtains a Public Debt Rating, as of any date, a
percentage per annum determined by reference to the Public Debt Rating in effect
on such date and the Usage on such date as set forth below:
<TABLE>
<CAPTION>
Public Debt Rating Applicable Margin for
S&P/Moody's/ Eurodollar Rate
Duff & Phelps Usage Advances
------------------ ------------------------- ----------------------
<S> <C> <C>
Level 1 less than or equal to 50% 0.125%
A-/A3/A- greater than 50% 0.250%
Level 2 less than or equal to 50% 0.225%
BBB+/Baa1/BBB+ greater than 50% 0.325%
Level 3 less than or equal to 50% 0.300%
BBB/Baa2/BBB greater than 50% 0.425%
Level 4 less than or equal to 50% 0.375%
BBB-/Baa3/BBB- greater than 50% 0.500%
Level 5 less than or equal to 50% 0.625%
BB+/Ba1/BB+ greater than 50% 0.750%
Level 6 less than or equal to 50% 0.625%
BB/Ba2/BB greater than 50% 0.750%
</TABLE>
<PAGE> 7
3
"Applicable Percentage" means (i) as of any date from the date
hereof until the later of the first anniversary of the Effective Date and
the date upon which the Borrower obtains a Public Debt Rating, a
percentage per annum determined by reference to the Performance Level of
the Borrower on such date as set forth below:
Performance Level Applicable Percentage
Level I 0.250%
Level II 0.375%
and (ii) as of any date after the later of the first anniversary of the
Effective Date and the date upon which the Borrower obtains a Public Debt
Rating, a percentage per annum determined by reference to the Public Debt
Rating in effect on such date as set forth below:
Public Debt Rating Applicable
S&P/MoodY's/Duff & Percentage
Phelps
Level 1 0.125%
A-/A3/A-
Level 2 0.15%
BBB+/Baal/BBB+
Level 3 0.20%
BBB/Baa2/BBB
Level4 0.25%
BBB-/Baa3/BBB-
Level 5 0.375%
BB+/Ba1/BB+
Level 6 0.50%
BB/Ba2/BB
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in substantially the form of Exhibit C hereto.
<PAGE> 8
4
"Base Rate" means a fluctuating interest rate per annum in effect
from time to time, which rate per annum shall at all times be equal to the
highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of 1% or, if there
is no nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1%
per annum, plus (ii) the rate obtained by dividing (A) the latest
three-week moving average of secondary market morning offering rates in
the United States for three-month certificates of deposit of major United
States money market banks, such three-week moving average (adjusted to the
basis of a year of 360 days) being determined weekly on each Monday (or,
if such day is not a Business Day, on the next succeeding Business Day)
for the three-week period ending on the previous Friday by Citibank on the
basis of such rates reported by certificate of deposit dealers to and
published by the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations for such
rates received by Citibank from three New York certificate of deposit
dealers of recognized standing selected by Citibank, by (B) a percentage
equal to 100% minus the average of the daily percentages specified during
such three-week period by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve requirement
(including, but not limited to, any emergency, supplemental or other
marginal reserve requirement) for Citibank with respect to liabilities
consisting of or including (among other liabilities) three-month U.S.
dollar non-personal time deposits in the United States, plus (iii) the
average during such three-week period of the annual assessment rates
estimated by Citibank for determining the then current annual assessment
payable by Citibank to the Federal Deposit Insurance Corporation (or any
successor) for insuring U.S. dollar deposits of Citibank in the United
States; and
(c) 1/2 of one percent per annum above the Federal Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance that bears
interest as provided in Section 2.07(a)(i).
"Borrowed Debt" means Debt described in clauses (a) through (e) of
the definition thereof plus obligations under the LaPorte Financing minus
the obligations under the second catoxid reactor feedstock purchase and
sale arrangement.
"Borrowing" means a Revolving Credit Borrowing or a Competitive Bid
Borrowing.
<PAGE> 9
5
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on which
dealings are carried on in the London interbank market.
"Cash Interest Expense" means, for any fiscal period of the
Borrower, interest expense on all Debt of the Borrower and its
Subsidiaries, net of interest income, in accordance with GAAP and
including, without limitation, to the extent not otherwise included in
accordance with GAAP, (a) interest expense in respect of Debt resulting
from Advances, (b) the interest component of obligations under leases that
have or should have been or should be, in accordance with GAAP, recorded
as capital leases, (c) commissions, discounts and other fees and charges
payable in connection with letters of credit issued for the account of the
Borrower or any of its Subsidiaries, (d) the net payment, if any, payable
in connection with Hedge Agreements and (e) fees paid pursuant to Section
2.04(a), but excluding, in each case, (w) any amounts accrued or payable
in connection with the LaPorte Financing or the Receivables Financing, (x)
amortization of original issue discount, (y) the interest portion of any
deferred payment obligation and (z) other interest not payable in cash.
"Commitment" has the meaning specified in Section 2.01.
"Competitive Bid Advance" means an advance by a Lender to the
Borrower as part of a Competitive Bid Borrowing resulting from the auction
bidding procedure described in Section 2.03 and refers to a Fixed Rate
Advance or a LIBO Rate Advance.
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose offer
to make one or more Competitive Bid Advances as part of such borrowing has
been accepted under the auction bidding procedure described in Section
2.03.
"Competitive Bid Note" means the promissory note of the Borrower
payable to the order of the Administrative Agent for the benefit of each
Lender making a Competitive Bid Advance, in substantially the Form of
Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to the
Lenders resulting from Competitive Bid Advances made by the Lenders.
"Competitive Bid Reduction" has the meaning specified in Section
2.01.
"Competitive Bid Register" has the meaning specified in Section
2.03(a)(vi).
"Confidential Information" means information that the Borrower
furnishes to the Administrative Agent, the Co-Agent or any Lender in a
writing designated as confidential
<PAGE> 10
6
or otherwise on a confidential basis if such information otherwise
furnished is reduced to a writing designated as confidential within 30
days of the initial disclosure thereof to the Administrative Agent, the
Co-Agent or any Lender, but does not include any such information that is
or becomes generally available to the public other than a result of a
breach by any of the Administrative Agent, the Co-Agent or any Lender of
its obligations hereunder or that is or becomes available to the
Administrative Agent, the Co-Agent or such Lender from a source other than
the Borrower or any consultant employed by the Administrative Agent to
provide technical advice that is not, to the best of the Administrative
Agent's, the Co-Agent's or such Lender's knowledge, acting in violation of
a confidentiality agreement with the Borrower.
"Consolidated" refers to the consolidation of accounts in accordance
with GAAP.
"Convert", "Conversion" and "Converted" each refers to a conversion
of Revolving Credit Advances of one Type into Revolving Credit Advances of
the other Type pursuant to Section 2.08 or 2.09.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of property or services (other
than trade payables not overdue by more than 60 days incurred in the
ordinary course of such Person's business), (c) all obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments,
(d) all obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all obligations of
such Person as lessee under leases that have been or should be, in
accordance with GAAP, recorded as capital leases, (f) all obligations,
contingent or otherwise, of such Person in respect of acceptances, letters
of credit or similar extensions of credit and (g) obligations under direct
or indirect guaranties in respect of, and obligations (contingent or
otherwise) to in effect guaranty any Debt of others of the kinds referred
to in clauses (a) through (f) above through an agreement (1) to pay or
purchase such Debt or to advance or supply funds for the payment or
purchase of such Debt, (2) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such
services are rendered) primarily for the purpose of enabling the debtor to
make payment of such Debt or to assure the holder of such Debt against
loss or (3) otherwise to assure a creditor against loss; provided, that
the term "Debt" shall not include obligations under the LaPorte Financing
or the Receivables Financing.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
<PAGE> 11
7
"Disclosed Litigation" has the meaning specified in Section 3.01(b).
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant
to which it became a Lender, or such other office of such Lender as such
Lender may from time to time specify to the Borrower and the
Administrative Agent.
"EBITDA" means, for any period, net income (or net loss) plus the
sum of (a) interest expense, (b) income tax expense, (c) depreciation
expense and (d) amortization expense, in each case determined in
accordance with GAAP for such period.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (i) an Affiliate of a Lender; (ii) a
Lender; (iii) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$5,000,000,000; (iv) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof, and
having total assets in excess of $3,000,000,000; (v) a commercial bank
organized under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development or has concluded
special lending arrangements with the International Monetary Fund
associated with its General Arrangements to Borrow or of the Cayman
Islands, or a political subdivision of any such country, and having total
assets in excess of $5,000,000,000, so long as such bank is acting through
a branch or agency located in the country in which it is organized or
another country that is described in this clause (v); (vi) a finance
company, insurance company or other financial institution or fund (whether
a corporation, partnership, trust or other entity) that is engaged in
making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business and having total assets in excess of
$3,000,000,000; provided, however, that each Person described in clauses
(ii) through (vi) shall be approved by the Administrative Agent (or, in
the case of an assignment demanded by the Borrower of the rights and
obligations of Citibank in its capacity as a Lender hereunder pursuant to
Section 8.07(a), the Co-Agent) and the Borrower, such approval not to be
unreasonably withheld or delayed; and (vii) any other Person approved by
the Administrative Agent and the Borrower, such approval not to be
unreasonably withheld or delayed; provided, further, however, that neither
the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible
Assignee.
"Environmental Action" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of
non-compliance or violation, notice of liability or potential liability,
investigation, proceeding, consent order or consent agreement arising
under any Environmental Law or Environmental Permit or relating to
<PAGE> 12
8
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment, including, without limitation, (a) by
any governmental or regulatory authority for enforcement, cleanup,
removal, response, remedial or other actions or damages and (b) by any
governmental or regulatory authority or any third party for damages,
contribution, indemnification, cost recovery, compensation or injunctive
relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment, decree
or judicial or agency interpretation, policy or guidance relating to the
environment or Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the Borrower's controlled group, or under common
control with the Borrower, within the meaning of Section 414 of the
Internal Revenue Code.
"ERISA Event" means (a) the occurrence of a reportable event, within
the meaning of Section 4043 of ERISA, with respect to any Plan unless the
30-day notice requirement with respect to such event has been waived by
the PBGC; (b) the application for a minimum funding waiver with respect
to a Plan; (c) the provision by the administrator of any Plan of a notice
of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment referred to in
Section 4041(e) of ERISA); (d) the cessation of operations at a facility
of the Borrower or any of its ERISA Affiliates in the circumstances
described in Section 4062(e) of ERISA; (e) the withdrawal by the Borrower
or any of its ERISA Affiliates from a Multiple Employer Plan during a plan
year for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (f) the failure by the Borrower or any of its ERISA
Affiliates to make a payment to a Plan if the conditions for the
imposition of a lien under Section 302(f)(1) of ERISA are satisfied; (g)
the adoption of an amendment to a Plan requiring the provision of security
to such Plan, pursuant to Section 307 of ERISA; or (h) the institution by
the PBGC of proceedings to terminate a Plan, pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in Section
4042 of ERISA that could reasonably be expected to constitute grounds for
the termination of, or the appointment of a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
<PAGE> 13
9
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender (or, if no such office is specified,
its Domestic Lending Office), or such other office of such Lender as such
Lender may from time to time specify to the Borrower and the
Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
Rate Advance comprising part of the same Revolving Credit Borrowing, an
interest rate per annum equal to the rate per annum obtained by dividing
(a) the average (rounded upward to the nearest whole multiple of 1/16 of
1% per annum, if such average is not such a multiple) of the rate per
annum at which deposits in U.S. dollars are offered by the principal
office of each of the Reference Banks in London, England to prime banks in
the London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount substantially
equal to such Reference Bank's Eurodollar Rate Advance comprising part of
such Revolving Credit Borrowing to be outstanding during such Interest
Period and for a period equal to such Interest Period by (b) a percentage
equal to 100% minus the Eurodollar Rate Reserve Percentage for such
Interest Period. The Eurodollar Rate for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Revolving Credit
Borrowing shall be determined by the Administrative Agent on the basis of
applicable rates furnished to and received by the Administrative Agent
from the Reference Banks two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section 2.08.
"Eurodollar Rate Advance" means a Revolving Credit Advance that
bears interest as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing means the
reserve percentage applicable two Business Days before the first day of
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New York
City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate
on Eurodollar Rate Advances is determined) having a term equal to such
Interest Period .
"Events of Default" has the meaning specified in Section 6.01.
<PAGE> 14
10
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
"Fixed Rate Advances" has the meaning specified in Section
2.03(a)(i).
"GAAP" has the meaning specified in Section 1.03.
"Hazardous Materials" means petroleum and petroleum products,
byproducts or breakdown products, radioactive materials,
asbestos-containing materials, radon gas and any other chemicals,
materials or substances designated, classified or regulated as being
"hazardous" or "toxic", or words of similar import, under any federal,
state, local or foreign statute, law, ordinance, rule, regulation, code,
order, judgment, decree or judicial or agency interpretation, policy or
guidance.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"Information Memorandum" means the information memorandum dated
June, 1994 used by the Administrative Agent in connection with the
syndication of the Commitments.
"Insufficiency" means, with respect to any Plan, the amount, if any,
of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"Interest Coverage Ratio" means, with respect to any fiscal quarter,
the ratio of EBITDA to Cash Interest Expense, in each case in the
aggregate for the period of four consecutive fiscal quarters ended at the
end of such fiscal quarter.
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same Revolving Credit Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of any
Base Rate Advance into such Eurodollar Rate Advance and ending on the last
day of the period selected by the Borrower pursuant to the provisions
below and, thereafter, each subsequent period commencing on the last day
of the immediately preceding Interest Period and ending on the last day of
the period selected by the Borrower pursuant to the provisions below.
<PAGE> 15
11
The duration of each such Interest Period shall be one, two, three or six
months, as the Borrower may, upon notice received by the Administrative
Agent not later than 11:00 A.M. (New York City time) on the third Business
Day prior to the first day of such Interest Period, select; provided,
however, that:
(i) the Borrower may not select any Interest Period that ends
after any principal repayment installment date unless, after giving
effect to such selection, the aggregate principal amount of Base
Rate Advances and of Eurodollar Rate Advances having Interest
Periods that end on or prior to such principal repayment installment
date shall be at least equal to the aggregate principal amount of
Advances due and payable on or prior to such date;
(ii) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Revolving
Credit Borrowing shall be of the same duration;
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that, if such extension
would cause the last day of such Interest Period to occur in the
next following calendar month, the last day of such Interest Period
shall occur on the next preceding Business Day; and
(iv) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated
and rulings issued thereunder.
"LaPorte Financing" means, collectively, the transactions
contemplated by (i) the Participation Agreement dated as of August 16,
1994 (the "Participation Agreement") among the Borrower, 1994 VCM Inc.,
State Street Bank and Trust Company of Connecticut, National Association,
as trustee, the financial institutions parties thereto and Citibank, N.A.,
as agent, and (ii) the other Operative Documents (as defined in the
Participation Agreement).
"Lenders" means the Initial Lenders and each Person that shall
become a party hereto pursuant to Section 8.07.
<PAGE> 16
12
"Level I" means, as of any date of determination, that the Borrower
maintained for the last fiscal quarter for which financial statements have
been delivered to the Administrative Agent (i) an Interest Coverage Ratio
greater than or equal to 10.0:1.0 and (ii) a Leverage Percentage of less
than or equal to 47.0%.
"Level II" means, as of any date of determination, that the
performance of the Borrower does not meet the requirements of Level I.
"Leverage Percentage" means, for any fiscal period of the Borrower,
the ratio (expressed as a percentage) computed by dividing (a)
Consolidated Borrowed Debt by (b) the sum of Consolidated Borrowed Debt
plus shareholder's equity of the Borrower.
"LIBO Rate Advances" has the meaning specified in Section
2.03(a)(i).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance or
properties of the Borrower or the Borrower and its Subsidiaries taken as a
whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance or
properties of the Borrower or the Borrower and its Subsidiaries taken as a
whole, (b) the rights and remedies of the Administrative Agent or any
Lender under this Agreement or any Note or (c) the ability of the Borrower
to perform its obligations under this Agreement or any Note.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any of its ERISA
Affiliates is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(l5) of ERISA, that (a) is maintained for employees of the
Borrower or any of its ERISA Affiliates and at least one Person other than
the Borrower and its ERISA Affiliates or (b) was so maintained and in
respect of which the Borrower or any of its ERISA Affiliates could have
liability under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
<PAGE> 17
13
"Note" means a Revolving Credit Note or the Competitive Bid Note.
"Notice of Competitive Bid Borrowing" has the meaning specified in
Section 2.03(a).
"Notice of Revolving Credit Borrowing" has the meaning specified in
Section 2.02(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Performance Level" means, as of any date, Level I or Level II, in
each case determined by reference to the most recent financial statements
delivered to the Administrative Agent pursuant to Section 5.01(i)(i) or
(ii).
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture, limited liability company or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Public Debt Rating" means, as of any date, the rating most recently
announced by each of S&P, Moody's or Duff & Phelps, as the case may be,
for any class of long-term senior unsecured debt issued by the Borrower.
For purposes of the foregoing, (a) if only one of S&P, Moody's and Duff &
Phelps shall have in effect a Public Debt Rating, the Applicable Margin
and the Applicable Percentage shall be determined by reference to the
available rating or, if only two ratings are then in effect, the lower
rating; (b) if none of S&P, Moody's or Duff & Phelps shall have in effect
a Public Debt Rating, the Applicable Margin and the Applicable Percentage
will be set in accordance with clause (i) of the definition of "Applicable
Margin" or "Applicable Percentage", as the case may be; (c) if the ratings
established by S&P, Moody's and Duff & Phelps shall fall within different
levels, the Applicable Margin and the Applicable Percentage shall be
established by the rating remaining after disregarding the highest and the
lowest of the three available ratings; (d) if any rating established by
S&P, Moody's or Duff & Phelps shall be changed, such change shall be
effective as of the date on which such change is first announced publicly
by the rating agency making such change; and (e) if S&P, Moody's or Duff &
Phelps shall change the basis on which ratings are established, each
reference to the Public Debt Rating announced by S&P, Moody's or Duff &
Phelps, as the case may be, shall refer to the then equivalent rating by
S&P, Moody's or Duff & Phelps, as the case may be.
<PAGE> 18
14
"Receivables Financing" means, collectively, the transactions
contemplated by (i) the Trade Receivables Purchase and Sale Agreement
dated as of August 16, 1994 among the Borrower, Corporate Receivables
Corporation and Citicorp North America, Inc., as Agent, and (ii) the
Parallel Purchase Commitment dated as of August 16, 1994 among the
Borrower, the banks named therein and Citicorp North America, Inc., as
Agent.
"Reference Banks" means Citibank, NationsBank of North Carolina,
N.A. and NBD Bank, N.A.
"Register" has the meaning specified in Section 8.07(d).
"Required Lenders" means at any time Lenders owed at least 66-2/3%
of the then aggregate unpaid principal amount of the Revolving Credit
Advances owing to Lenders, or, if no such principal amount is then
outstanding, Lenders having at least 66-2/3% of the Commitments.
"Revolving Credit Advance" means an advance by a Lender to the
Borrower as part of a Revolving Credit Borrowing and refers to a Base Rate
Advance or a Eurodollar Rate Advance (each of which shall be a "Type" of
Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by each of
the Lenders pursuant to Section 2.01.
"Revolving Credit Note" means a promissory note of the Borrower
payable to the order of any Lender, in substantially the form of Exhibit
A-1 hereto, evidencing the aggregate indebtedness of the Borrower to such
Lender resulting from the Revolving Credit Advances made by such Lender.
"S&P" means Standard & Poor's Ratings Group.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any of its ERISA Affiliates and no Person other than the
Borrower and its ERISA Affiliates or (b) was so maintained and in respect
of which the Borrower or any of its ERISA Affiliates could have liability
under Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether at the time capital
<PAGE> 19
15
stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency), (b) the
interest in the capital or profits of such partnership or joint venture or
(c) the beneficial interest in such trust or estate is at the time
directly or indirectly owned or controlled by such Person, by such Person
and one or more of its other Subsidiaries or by one or more of such
Person's other Subsidiaries.
"Termination Date" means the earlier of August 16, 1999 and the date
of termination in whole of the Commitments pursuant to Section 2.05 or
6.01.
"Usage" means, as of any date of determination, the ratio (expressed
as a percentage) computed by dividing the aggregate principal amount of
Advances outstanding by the aggregate Commitments of the Lenders.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening
of such a contingency.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. Accounting Terms . All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements dated as of December 31, 1993 ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances. Each Lender severally
agrees, on the terms and conditions hereinafter set forth, to make Revolving
Credit Advances to the Borrower from time to time on any Business Day during the
period from the Effective Date until the Termination Date in an aggregate amount
not to exceed at any time outstanding the amount set forth opposite such
Lender's name on the signature pages hereof or, if such Lender has entered into
any Assignment and Acceptance, set forth for such Lender in the Register
<PAGE> 20
16
maintained by the Administrative Agent pursuant to Section 8.07(d), as such
amount may be reduced pursuant to Section 2.05 (such Lender's "Commitment"),
provided that the aggregate amount of the Commitments of the Lenders shall be
deemed used from time to time to the extent of the aggregate amount of the
Competitive Bid Advances then outstanding and such deemed use of the aggregate
amount of the Commitments shall be allocated among the Lenders ratably according
to their respective Commitments (such deemed use of the aggregate amount of the
Commitments being a "Competitive Bid Reduction"). Each Revolving Credit
Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple
of $1,000,000 in excess thereof (or, if less, an aggregate amount equal to the
amount by which the aggregate amount of a proposed Competitive Bid Borrowing
requested by the Borrower exceeds the aggregate amount of Competitive Bid
Advances offered to be made by the Lenders and accepted by the Borrower in
respect of such Competitive Bid Borrowing, if such Competitive Bid Borrowing is
made on the same date as such Revolving Credit Borrowing) and shall consist of
Revolving Credit Advances of the same Type made on the same day by the Lenders
ratably according to their respective Commitments. Within the limits of each
Lender's Commitment, the Borrower may borrow under this Section 2.01, prepay
pursuant to Section 2.10 and reborrow under this Section 2.01.
SECTION 2.02. Making the Revolving Credit Advances. (a) Each
Revolving Credit Borrowing shall be made on notice, given not later than 11:00
A.M. (New York City time) on the third Business Day prior to the date of the
proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing
consisting of Eurodollar Rate Advances, or the first Business Day prior to the
date of the proposed Revolving Credit Borrowing in the case of a Revolving
Credit Borrowing consisting of Base Rate Advances, by the Borrower to the
Administrative Agent, which shall give to each Lender prompt notice thereof by
telecopier or telex. Each such notice of a Revolving Credit Borrowing (a "Notice
of Revolving Credit Borrowing") shall be by telecopier or telex, confirmed
immediately in writing, in substantially the form of Exhibit B-1 hereto,
specifying therein the requested (i) date of such Revolving Credit Borrowing,
(ii) Type of Advances comprising such Revolving Credit Borrowing, (iii)
aggregate amount of such Revolving Credit Borrowing, and (iv) in the case of an
Revolving Credit Borrowing consisting of Eurodollar Rate Advances, initial
Interest Period for each such Revolving Credit Advance. Each Lender shall,
before 11:00 A.M. (New York City time) on the date of such Revolving Credit
Borrowing, make available for the account of its Applicable Lending Office to
the Administrative Agent at the Administrative Agent's Account, in same day
funds, such Lender's ratable portion of such Revolving Credit Borrowing. After
the Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the Borrower by depositing such funds into an
account of the Borrower maintained with the Administrative Agent at the
Administrative Agent's address referred to in Section 8.02 or to such other
account as the Borrower may from time to time direct.
<PAGE> 21
17
(b) Anything in subsection (a) above to the contrary
notwithstanding, the Borrower may not select Eurodollar Rate Advances for any
Revolving Credit Borrowing if the aggregate amount of such Revolving Credit
Borrowing is less than $10,000,000 or if the obligation of the Lenders to make
Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or
2.12.
(c) Each Notice of Revolving Credit Borrowing shall be binding on
the Borrower. In the case of any Revolving Credit Borrowing that the related
Notice of Revolving Credit Borrowing specifies is to be comprised of Eurodollar
Rate Advances, the Borrower shall indemnify each Lender against any loss, cost
or expense incurred by such Lender as a result of any revocation of such Notice
of Revolving Credit Borrowing by the Borrower or any failure to fulfill on or
before the date specified in such Notice of Revolving Credit Borrowing for such
Revolving Credit Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Revolving Credit
Advance to be made by such Lender as part of such Revolving Credit Borrowing
when such Revolving Credit Advance, as a result of such revocation or failure,
is not made on such date.
(d) Unless the Administrative Agent shall have received notice from
a Lender prior to the date of any Revolving Credit Borrowing that such Lender
will not make available to the Administrative Agent such Lender's ratable
portion of such Revolving Credit Borrowing, the Administrative Agent may assume
that such Lender has made such portion available to the Administrative Agent on
the date of such Revolving Credit Borrowing in accordance with subsection (a) of
this Section 2.02 and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such ratable
portion available to the Administrative Agent, such Lender and the Borrower
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower, the
interest rate applicable at the time to Revolving Credit Advances comprising
such Revolving Credit Borrowing and (ii) in the case of such Lender, the Federal
Funds Rate. If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount so repaid shall constitute such Lender's
Revolving Credit Advance as part of such Revolving Credit Borrowing for purposes
of this Agreement.
(e) The failure of any Lender to make the Revolving Credit Advance
to be made by it as part of any Revolving Credit Borrowing shall not relieve any
other Lender of its obligation, if any, hereunder to make its Revolving Credit
Advance on the date of such Revolving Credit Borrowing, but no Lender shall be
responsible for the failure of any other
<PAGE> 22
18
Lender to make the Revolving Credit Advance to be made by such other Lender on
the date of any Revolving Credit Borrowing.
SECTION 2.03. The Competitive Bid Advances. (a) Each Lender
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the date hereof until the date occurring seven days prior to the Termination
Date in the manner set forth below; provided that, following the making of each
Competitive Bid Borrowing, the aggregate amount of the Advances then outstanding
shall not exceed the aggregate amount of the Commitments of the Lenders
(computed without regard to any Competitive Bid Reduction).
(i) The Borrower may request a Competitive Bid Borrowing under this
Section 2.03 by delivering to the Administrative Agent, by telecopier or
telex, confirmed immediately in writing, a notice of a Competitive Bid
Borrowing (a "Notice of Competitive Bid Borrowing"), in substantially the
form of Exhibit B-2 hereto, specifying therein (v) date of such proposed
Competitive Bid Borrowing, (w) aggregate amount of such proposed
Competitive Bid Borrowing, (x) the maturity date for repayment of each
Competitive Bid Advance to be made as part of such Competitive Bid
Borrowing (which maturity date may not be earlier than the date occurring
seven days after the date of such Competitive Bid Borrowing or later than
the Termination Date), (y) the interest payment date or dates relating
thereto, and (z) any other terms to be applicable to such Competitive Bid
Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one
Business Day prior to the date of the proposed Competitive Bid Borrowing,
if the Borrower shall specify in the Notice of Competitive Bid Borrowing
that the rates of interest to be offered by the Lenders shall be fixed
rates per annum (the Advances comprising any such Competitive Bid
Borrowing being referred to herein as "Fixed Rate Advances") and (B) at
least four Business Days prior to the date of the proposed Competitive Bid
Borrowing, if the Borrower shall instead specify in the Notice of
Competitive Bid Borrowing the basis to be used by the Lenders in
determining the rates of interest to be offered by them (the Advances
comprising such Competitive Bid Borrowing being referred to herein as
"LIBO Rate Advances"). The Borrower may not select a maturity date for any
Competitive Bid Borrowing which ends after any principal repayment
installment date unless, after giving effect to such selection, the
aggregate unpaid principal amount of Base Rate Advances and Advances
having maturity dates on or prior to such principal repayment installment
date shall be at least equal to the principal amount of Advances due and
payable on and prior to such date. The Administrative Agent shall in turn
promptly notify each Lender of each request for a Competitive Bid
Borrowing received by it from the Borrower by sending such Lender a copy
of the related Notice of Competitive Bid Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to do
so, irrevocably offer to make one or more Competitive Bid Advances to the
Borrower as part of such
<PAGE> 23
19
proposed Competitive Bid Borrowing at a rate or rates of interest
specified by such Lender in its sole discretion, by notifying the
Administrative Agent (which shall give prompt notice thereof to the
Borrower), before 10:00 A.M. (New York City time) on the date of such
proposed Competitive Bid Borrowing, in the case of a Competitive Bid
Borrowing consisting of Fixed Rate Advances and three Business Days before
the date of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of LIBO Rate Advances, of the minimum
amount and maximum amount of each Competitive Bid Advance which such
Lender would be willing to make as part of such proposed Competitive Bid
Borrowing (which amounts may, subject to the proviso to the first sentence
of this Section 2.03(a), exceed such Lender's Commitment, if any), the
rate or rates of interest therefor and such Lender's Applicable Lending
Office with respect to such Competitive Bid Advance; provided that if the
Administrative Agent in its capacity as a Lender shall, in its sole
discretion, elect to make any such offer, it shall notify the Borrower of
such offer before 9:00 A.M. (New York City time) on the date on which
notice of such election is to be given to the Administrative Agent by the
other Lenders. If any Lender shall elect not to make such an offer, such
Lender shall so notify the Administrative Agent, before 10:00 A.M. (New
York City time) on the date on which notice of such election is to be
given to the Administrative Agent by the other Lenders, and such Lender
shall not be obligated to, and shall not, make any Competitive Bid Advance
as part of such Competitive Bid Borrowing; provided that the failure by
any Lender to give such notice shall not cause such Lender to be obligated
to make any Competitive Bid Advance as part of such proposed Competitive
Bid Borrowing.
(iii) The Borrower shall, in turn, before 11:00 A.M. (New York City
time) on the date of such proposed Competitive Bid Borrowing, in the case
of a Competitive Bid Borrowing consisting of Fixed Rate Advances and
before 1:00 P.M. (New York City time) three Business Days before the date
of such proposed Competitive Bid Borrowing, in the case of a Competitive
Bid Borrowing consisting of LIBO Rate Advances, either:
(x) cancel such Competitive Bid Borrowing by giving the
Administrative Agent notice to that effect, or
(y) accept one or more of the offers made by any Lender or
Lenders pursuant to paragraph (ii) above, by giving notice to the
Administrative Agent of the amount of each Competitive Bid Advance
(which amount shall be equal to or greater than the minimum amount,
and equal to or less than the maximum amount, notified to the
Borrower by the Administrative Agent on behalf of such Lender for
such Competitive Bid Advance pursuant to paragraph (ii) above) to be
made by each Lender as part of such Competitive Bid Borrowing, and
reject any remaining offers made by Lenders pursuant to paragraph
(ii) above by giving the Administrative Agent notice to that effect.
If the Borrower accepts any offers
<PAGE> 24
20
made by Lenders pursuant to paragraph (ii) above, such offers shall
be accepted in the order of the lowest to highest interest rates or,
if two or more Lenders offer to make Competitive Bid Advances at the
same interest rate, such offers, if any, shall be accepted in
proportion to the amount offered by each such Lender at such
interest rate.
(iv) If the Borrower notifies the Administrative Agent that such
Competitive Bid Borrowing is cancelled pursuant to paragraph (iii)(x)
above, the Administrative Agent shall give prompt notice thereof to the
Lenders and such Competitive Bid Borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers made by any
Lender or Lenders pursuant to paragraph (iii)(y) above, the Administrative
Agent shall in turn promptly notify (A) each Lender that has made an offer
as described in paragraph (ii) above, of the date and aggregate amount of
such Competitive Bid Borrowing and whether or not any offer or offers made
by such Lender pursuant to paragraph (ii) above have been accepted by the
Borrower, (B) each Lender that is to make a Competitive Bid Advance as
part of such Competitive Bid Borrowing, of the amount of each Competitive
Bid Advance to be made by such Lender as part of such Competitive Bid
Borrowing, and (C) each Lender that is to make a Competitive Bid Advance
as part of such Competitive Bid Borrowing, upon receipt, that the
Administrative Agent has received forms of documents appearing to fulfill
the applicable conditions set forth in Article III. Each Lender that is to
make a Competitive Bid Advance as part of such Competitive Bid Borrowing
shall, before 12:00 noon (New York City time) on the date of such
Competitive Bid Borrowing specified in the notice received from the
Administrative Agent pursuant to clause (A) of the preceding sentence or
any later time when such Lender shall have received notice from the
Administrative Agent pursuant to clause (C) of the preceding sentence,
make available for the account of its Applicable Lending Office to the
Administrative Agent at the Administrative Agent's Account, in same day
funds, such Lender's portion of such Competitive Bid Borrowing. Upon
fulfillment of the applicable conditions set forth in Article III and
after receipt by the Administrative Agent of such funds, the
Administrative Agent will make such funds available to the Borrower at the
Administrative Agent's address referred to in Section 8.02. Promptly after
each Competitive Bid Borrowing the Administrative Agent will notify each
Lender of the amount of the Competitive Bid Borrowing, the consequent
Competitive Bid Reduction and the dates upon which such Competitive Bid
Reduction commenced and will terminate.
(vi) The Administrative Agent shall maintain at its address referred
to in Section 8.02 a copy of each Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above and a register for the
recordation of the date, amount, maturity, interest rate, interest payment
dates, other terms and Lender of each Competitive Bid
<PAGE> 25
21
Advance accepted by the Borrower from time to time pursuant to this
subsection (a) (the "Competitive Bid Register"). The entries in the
Competitive Bid Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Administrative Agent and the
Lenders may treat the entries recorded in the Competitive Bid Register as
evidence of Competitive Bid Advances made pursuant to this Section 2.03.
The Competitive Bid Register shall be available for inspection by the
Borrower, or by any Lender as to its Competitive Bid Advances, at any
reasonable time and from time to time upon reasonable prior notice.
(b) Each Competitive Bid Borrowing shall be in an aggregate amount
of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and,
following the making of each Competitive Bid Borrowing, the Borrower shall be in
compliance with the limitation set forth in the proviso to the first sentence of
subsection (a) above.
(c) Within the limits and on the conditions set forth in this
Section 2.03, the Borrower may from time to time borrow under this Section 2.03,
repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 2.03, provided that a Competitive Bid Borrowing shall not be made within
three Business Days of the date of any other Competitive Bid Borrowing.
(d) The Borrower shall repay to the Administrative Agent for the
account of each Lender that has made a Competitive Bid Advance, on the maturity
date of each Competitive Bid Advance (such maturity date being that specified by
the Borrower for repayment of such Competitive Bid Advance in the related Notice
of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and
recorded in the Competitive Bid Register with respect to such Competitive Bid
Advance), the then unpaid principal amount of such Competitive Bid Advance. The
Borrower shall have no right to prepay any principal amount of any Competitive
Bid Advance unless, and then only on the terms, specified by the Borrower for
such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above and set forth in the Competitive
Bid Register with respect to such Competitive Bid Advance.
(e) The Borrower shall pay interest on the unpaid principal amount
of each Competitive Bid Advance from the date of such Competitive Bid Advance to
the date the principal amount of such Competitive Bid Advance is repaid in full,
at the rate of interest for such Competitive Bid Advance specified by the Lender
making such Competitive Bid Advance in its notice with respect thereto delivered
pursuant to subsection (a)(ii) above, payable on the interest payment date or
dates specified by the Borrower for such Competitive Bid Advance in the related
Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i)
above, as recorded in the Competitive Bid Register with respect to such
Competitive Bid Advance. Upon the occurrence and during the continuance of an
Event of Default under Section 6.01(a), the Borrower shall pay interest on the
amount of unpaid principal of and interest on each
<PAGE> 26
22
Competitive Bid Advance owing to a Lender, payable in arrears on the date or
dates interest is payable thereon, at a rate per annum equal at all times to 2%
per annum above the rate per annum required to be paid on such Competitive Bid
Advance as recorded in the Competitive Bid Register with respect to such
Competitive Bid Advance unless otherwise agreed by the Borrower and the Lender
making such Competitive Bid Advance.
(f) The indebtedness of the Borrower resulting from each Competitive
Bid Advance made to the Borrower as part of a Competitive Bid Borrowing shall be
evidenced by a master Competitive Bid Note of the Borrower payable to the order
of the Administrative Agent for the benefit of the Lender making such
Competitive Bid Advance.
SECTION 2.04. Fees. (a) Facility Fee. The Borrower agrees to pay to
the Administrative Agent for the account of each Lender a facility fee on the
aggregate amount of such Lender's Commitment from the date hereof in the case of
each Initial Lender and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Lender in the case of each other Lender
until the Termination Date at a rate per annum equal to the Applicable
Percentage in effect from time to time, payable in arrears quarterly on the last
day of each March, June, September and December, commencing September 30, 1994,
and on the Termination Date.
(b) Administrative Agent's Fees. The Borrower shall pay to the
Administrative Agent for its own account such fees as may from time to time be
agreed between the Borrower and the Administrative Agent.
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional. The Borrower shall have the right, upon at least three Business Days'
notice to the Administrative Agent, to terminate in whole or reduce ratably in
part the unused portions of the respective Commitments of the Lenders, provided
that each partial reduction shall be in the aggregate amount of $10,000,000 or
an integral multiple of $1,000,000 in excess thereof and provided further that
the aggregate amount of the Commitments of the Lenders shall not be reduced to
an amount that is less than the aggregate principal amount of the Competitive
Bid Advances then outstanding.
<PAGE> 27
23
(b) Mandatory. The Commitments shall be permanently reduced ratably
in an aggregate amount of $80,000,000 on the following dates in the aggregate
amounts indicated:
Date Amount
---- ------
December 31, 1994 $10,000,000
December 31, 1995 25,000,000
December 31, 1996 25,000,000
June 30, 1997 20,000,000
provided that if the Borrower or any of its Subsidiaries issues any public debt
before June 30, 1997, on the date of receipt of the proceeds of such debt
issuance the Commitments of the Lenders shall be reduced ratably by an amount
equal to the lesser of (i) the net proceeds of such debt issuance and (ii) the
aggregate amount of the remaining Commitment reductions set forth above, which
Commitment reductions shall be credited toward the Commitment reductions set
forth above in inverse order.
SECTION 2.06. Repayment of Revolving Credit Advances. (a) Commitment
Reductions. The Borrower shall, on each Business Day, prepay an aggregate
principal amount of Revolving Credit Advances comprising part of the same
Borrowings equal to the amount by which the aggregate principal amount of
Advances exceeds the aggregate Commitments of the Lenders on such Business Day.
(b) Termination. The Borrower shall repay to the Administrative
Agent for the ratable account of the Lenders on the Termination Date the
aggregate principal amount of the Revolving Credit Advances then outstanding.
SECTION 2.07. Interest on Revolving Credit Advances. (a) Scheduled
Interest. The Borrower shall pay interest on the unpaid principal amount of each
Revolving Credit Advance owing to each Lender from the date of such Revolving
Credit Advance until such principal amount shall be paid in full, at the
following rates per annum:
(i) Base Rate Advances. During such periods as such Revolving Credit
Advance is a Base Rate Advance, a rate per annum equal at all times to the
Base Rate in effect from time to time, payable in arrears quarterly on the
last day of each March, June, September and December during such periods
and on the date such Base Rate Advance shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such Revolving
Credit Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Revolving Credit Advance to the
sum of (x) the Eurodollar Rate
<PAGE> 28
24
for such Interest Period for such Revolving Credit Advance plus (y) the
Applicable Margin in effect from time to time, payable in arrears on the
last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day that occurs during such
Interest Period every three months from the first day of such Interest
Period and on the date such Eurodollar Rate Advance shall be Converted or
paid in full.
(b) Default Interest. Upon the occurrence and during the continuance
of an Event of Default under Section 6.01(a), the Borrower shall pay interest on
(i) the unpaid principal amount of each Revolving Credit Advance owing to each
Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii)
above, at a rate per annum equal at all times to 2% per annum above the rate per
annum required to be paid on such Revolving Credit Advance pursuant to clause
(a)(i) or (a)(ii) above and (ii) the amount of any interest, fee or other amount
payable hereunder that is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal at all
times to 2% per annum above the rate per annum required to be paid on Base Rate
Advances pursuant to clause (a)(i) above.
SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank
agrees to furnish to the Administrative Agent timely information for the purpose
of determining each Eurodollar Rate. If any one or more of the Reference Banks
shall not furnish such timely information to the Administrative Agent for the
purpose of determining any such interest rate, the Administrative Agent shall
determine such interest rate on the basis of timely information furnished by the
remaining Reference Banks. The Administrative Agent shall give prompt notice to
the Borrower and the Lenders of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.07(a)(i) or (ii) and the rate, if
any, furnished by each Reference Bank for the purpose of determining the
interest rate under Section 2.07(a)(ii).
(b) If, with respect to any Eurodollar Rate Advances, the Required
Lenders notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such Advances will not adequately reflect the cost to such
Required Lenders of making, funding or maintaining their respective Eurodollar
Rate Advances for such Interest Period, the Administrative Agent shall forthwith
so notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate
Advance will automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance, and (ii) the obligation of the
Lenders to make, or to Convert Revolving Credit Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist.
(c) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower
<PAGE> 29
25
and the Lenders and such Advances will automatically, on the last day of the
then existing Interest Period therefor, Convert into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $10,000,000, such Advances shall
automatically Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of any Event of
Default under Section 6.01(a), (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
(f) If fewer than two Reference Banks furnish timely information to
the Administrative Agent for determining the Eurodollar Rate for any Eurodollar
Rate Advances,
(i) the Administrative Agent shall forthwith notify the Borrower and
the Lenders that the interest rate cannot be determined for such
Eurodollar Rate Advances,
(ii) each such Advance will automatically, on the last day of the
then existing Interest Period therefor, Convert into a Base Rate Advance
(or if such Advance is then a Base Rate Advance, will continue as a Base
Rate Advance), and
(iii) the obligation of the Lenders to make, or to Convert Revolving
Credit Advances into, Eurodollar Rate Advances shall be suspended until
the Administrative Agent shall notify the Borrower and the Lenders that
the circumstances causing such suspension no longer exist.
SECTION 2.09. Optional Conversion of Revolving Credit Advances. The
Borrower may on any Business Day, upon notice given to the Administrative Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Sections
2.08 and 2.12, Convert all Revolving Credit Advances of one Type comprising the
same Borrowing into Revolving Credit Advances of the other Type; provided,
however, that any Conversion of Eurodollar Rate Advances into Base Rate Advances
shall be made only on the last day of an Interest Period for such Eurodollar
Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate
Advances shall be in an amount not less than the minimum amount specified in
Section 2.02(b). Each such notice of a Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the Revolving
Credit Advances to be Converted, and (iii) if such Conversion is into Eurodollar
Rate Advances, the duration of the initial Interest Period for each such
Advance. Each notice of Conversion shall be binding on the Borrower. In the case
of any
<PAGE> 30
26
Conversion of Base Rate Advances into Eurodollar Rate Advances, the Borrower
shall indemnify each Lender against any loss, cost or expense incurred by such
Lender as a result of any revocation of such notice of Conversion, including,
without limitation, any loss (including loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund the revolving Credit Advance to be
Converted by such Lender as a result of such revocation.
SECTION 2.10. Optional Prepayments of Revolving Credit Advances. The
Borrower may, upon at least one Business Day's notice, in the case of Base Rate
Advances, or three Business Days' notice, in the case of Eurodollar Rate
Advances, to the Administrative Agent stating the proposed date and aggregate
principal amount of the prepayment, and if such notice is given the Borrower
shall, prepay the outstanding principal amount of the Revolving Credit Advances
comprising part of the same Revolving Credit Borrowing in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, however, that (x) each partial prepayment
shall be in an aggregate principal amount of $10,000,000 or an integral multiple
of $1,000,000 in excess thereof and (y) in the event of any such prepayment of a
Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 8.04(c).
SECTION 2.11. Increased Costs. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law)
which becomes effective after the date hereof, there shall be any increase in
the cost to any Lender of agreeing to make or making, funding or maintaining
Eurodollar Rate Advances or LIBO Rate Advances, then the Borrower shall from
time to time, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost setting
forth the basis thereof in reasonable detail and submitted to the Borrower and
the Administrative Agent by such Lender shall be conclusive and binding for all
purposes, absent manifest error.
(b) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) which becomes effective after the date
hereof, there shall be any increase in the amount of capital required or
expected to be maintained by such Lender or any corporation controlling such
Lender as a result of or based upon the existence of such Lender's commitment to
lend hereunder and other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Administrative Agent), the Borrower
shall pay to the Administrative Agent for the account of such Lender, from time
to time as specified by such Lender, additional amounts sufficient to compensate
such Lender or such corporation in the light of such
<PAGE> 31
27
circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's commitment
to lend hereunder. A certificate as to such amounts setting forth the basis
thereof in reasonable detail and submitted to the Borrower and the
Administrative Agent by such Lender shall be conclusive and binding for all
purposes, absent manifest error. Notwithstanding the foregoing and except in the
case of any such law, regulation, guideline or request having retroactive
effect, the Borrower shall not be required to pay to the Administrative Agent or
any Lender such additional amounts to the extent such amounts relate to periods
prior to six months before the Borrower's receipt of such notice.
SECTION 2.12. Illegality. Notwithstanding any other provision of
this Agreement, if any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for any Lender or its Eurodollar Lending
Office to perform its obligations hereunder to make Eurodollar Rate Advances or
LIBO Rate Advances or to fund or maintain Eurodollar Rate Advances or LIBO Rate
Advances hereunder, (i) each Eurodollar Rate Advance or LIBO Rate Advance, as
the case may be, will automatically, upon such demand, Convert into a Base Rate
Advance or an Advance that bears interest at the rate set forth in Section
2.07(a)(i), as the case may be, and (ii) the obligation of the Lenders to make,
or to Convert Revolving Credit Advances into, Eurodollar Rate Advances shall be
suspended until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist.
SECTION 2.13. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes not later than 11:00 A.M. (New York
City time) on the day when due in U.S. dollars to the Administrative Agent at
the Administrative Agent's Account in same day funds. The Administrative Agent
will promptly thereafter cause to be distributed like funds relating to the
payment of principal or interest or facility fees ratably (other than amounts
payable pursuant to Section 2.03, 2.11, 2.14 or 8.04(c)) to the Lenders for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Lender to such Lender for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to Section 8.07(d), from and after the effective date
specified in such Assignment and Acceptance, the Administrative Agent shall make
all payments hereunder and under the Notes in respect of the interest assigned
thereby to the Lender assignee thereunder, and the parties to such Assignment
and Acceptance shall make all appropriate adjustments in such payments for
periods prior to such effective date directly between themselves.
(b) The Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made to the Administrative Agent when due
hereunder or under the
<PAGE> 32
28
Note held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.
(c) All computations of interest based on the Base Rate shall be
made by the Administrative Agent on the basis of a year of 365 or 366 days, as
the case may be, and all computations of interest based on the Eurodollar Rate
or the Federal Funds Rate and of facility fees shall be made by the
Administrative Agent on the basis of a year of 360 days, in each case for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or facility fees are payable.
Each determination by the Administrative Agent of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or facility fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances or LIBO Rate Advances to
be made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(e) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.14,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Administrative
Agent, taxes imposed on its income, and franchise taxes imposed on it in lieu of
income taxes, by the jurisdiction under the laws of which such Lender or the
Administrative Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes imposed on its
income, and franchise taxes imposed on it in lieu of income taxes, by the
jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and
<PAGE> 33
29
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender or the Administrative Agent, (i) the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.14) such Lender or the Administrative Agent (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or under the Notes or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender or the Administrative Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. This indemnification shall
be made within 30 days from the date such Lender or the Administrative Agent (as
the case may be) makes written demand therefor in reasonable detail.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Agent, at its address referred to in
Section 8.02, the original or a certified copy of a receipt evidencing payment
thereof. In the case of any payment hereunder or under the Notes by or on behalf
of the Borrower through an account or branch outside the United States or on
behalf of the Borrower by a payor that is not a United States person, if the
Borrower determines that no Taxes are payable in respect thereof, the Borrower
shall furnish, or shall cause such payor to furnish, to the Administrative
Agent, at such address, an opinion of counsel acceptable to the Administrative
Agent stating that such payment is exempt from Taxes. For purposes of this
subsection (d) and subsection (e), the terms "United States" and "United States
person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Initial Lender and on the date of the Assignment
and Acceptance pursuant to which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or
any successor or other form prescribed by the Internal Revenue Service,
certifying that such Lender
<PAGE> 34
30
is exempt from or entitled to a reduced rate of United States withholding tax on
payments of interest pursuant to this Agreement or the Notes. If the form
provided by a Lender at the time such Lender first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from "Taxes" as
defined in Section 2.14(a). If any form or document referred to in this
subsection (e) requires the disclosure of information, other than information
necessary to compute the tax payable and information required on the date hereof
by Internal Revenue Service form 1001 or 4224, that the Lender reasonably
considers to be confidential, the Lender shall give notice thereof to the
Borrower and shall not be obligated to include in such form or document such
confidential information.
(f) For any period with respect to which a Lender has failed to
provide the Borrower with the appropriate form described in Section 2.14(e)
(other than if such failure is due to a change in law occurring subsequent to
the date on which a form originally was required to be provided, or if such form
otherwise is not required under the first sentence of subsection (e) above),
such Lender shall not be entitled to indemnification under Section 2.14(a) with
respect to Taxes imposed by the United States; provided, however, that should a
Lender become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as the Lender shall reasonably
request to assist the Lender to recover such Taxes.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Revolving Credit Advances owing to
it (other than pursuant to Section 2.11, 2.14 or 8.04(c)) in excess of its
ratable share of payments on account of the Revolving Credit Advances obtained
by all the Lenders, such Lender shall forthwith purchase from the other Lenders
such participations in the Revolving Credit Advances owing to them as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery together with an amount
equal to such Lender's ratable share (according to the proportion of (i) the
amount of such Lender's required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.15 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
<PAGE> 35
31
SECTION 2.16. Use of Proceeds. The proceeds of the Advances shall be
available (and the Borrower agrees that it shall use such proceeds) solely for
general corporate purposes of the Borrower and its Subsidiaries.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01
and 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective on and
as of the first date (the "Effective Date") on which the following conditions
precedent have been satisfied:
(a) There shall have occurred no Material Adverse Change since
December 31, 1993.
(b) There shall exist no action, suit, investigation, litigation or
proceeding affecting the Borrower or any of its Subsidiaries pending or
threatened before any court, governmental agency or arbitrator that (i)
could be reasonably likely to have a Material Adverse Effect other than
the matters described on Schedule 3.01(b) hereto (the "Disclosed
Litigation") or (ii) purports to affect the legality, validity or
enforceability of this Agreement or any Note or the consummation of the
transactions contemplated hereby, and there shall have been no adverse
change in the status, or financial effect on the Borrower or any of its
Subsidiaries, of the Disclosed Litigation from that described on Schedule
3.01(b) hereto that could reasonably be expected to have a Material
Adverse Effect.
(c) Nothing shall have come to the attention of the Lenders during
the course of their due diligence investigation to lead them to believe
that the Information Memorandum was or has become misleading, incorrect or
incomplete in any material respect; without limiting the generality of the
foregoing, the Lenders shall have been given such access to the
management, records, books of account, contracts and properties of the
Borrower and its Subsidiaries as they shall have reasonably requested.
(d) All governmental and third party consents and approvals
necessary in connection with the transactions contemplated hereby shall
have been obtained (without the imposition of any conditions that are not
acceptable to the Lenders) and shall remain in effect, and no law or
regulation shall be applicable in the reasonable judgment of the Lenders
that restrains, prevents or imposes materially adverse conditions upon the
transactions contemplated hereby.
<PAGE> 36
32
(e) The Borrower shall have notified each Lender and the
Administrative Agent in writing as to the proposed Effective Date.
(f) The Borrower shall have paid all accrued fees and expenses of
the Administrative Agent and the Lenders (including the accrued fees and
expenses of counsel to the Administrative Agent).
(g) On the Effective Date, the following statements shall be true
and the Administrative Agent shall have received for the account of each
Lender a certificate signed by a duly authorized officer of the Borrower,
dated the Effective Date, stating that:
(i) The representations and warranties contained in Section
4.01 are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that constitutes
a Default.
(h) The Administrative Agent shall have received on or before the
Effective Date the following, each dated such day, in form and substance
satisfactory to the Administrative Agent and (except for the Notes) in
sufficient copies for each Lender:
(i) The Revolving Credit Notes to the order of the Lenders,
respectively.
(ii) The Competitive Bid Note to the order of the
Administrative Agent.
(iii) Certified copies of the resolutions of the Board of
Directors of the Borrower approving this Agreement and the Notes,
and of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement and
the Notes.
(iv) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement and the
Notes and the other documents to be delivered hereunder.
(v) A favorable opinion of Thompson, Hine and Flory, counsel
for the Borrower, substantially in the form of Exhibit D hereto and
as to such other matters as any Lender through the Administrative
Agent may reasonably request.
<PAGE> 37
33
(vi) A favorable opinion of Shearman & Sterling, counsel for
the Administrative Agent, in form and substance satisfactory to the
Administrative Agent.
SECTION 3.02. Conditions Precedent to Each Revolving Credit
Borrowing. The obligation of each Lender to make a Revolving Credit Advance on
the occasion of each Revolving Credit Borrowing shall be subject to the
conditions precedent that the Effective Date shall have occurred and on the date
of such Revolving Credit Borrowing (a) the following statements shall be true
(and each of the giving of the applicable Notice of Revolving Credit Borrowing
and the acceptance by the Borrower of the proceeds of such Revolving Credit
Borrowing shall constitute a representation and warranty by the Borrower that on
the date of such Borrowing such statements are true):
(i) The representations and warranties contained in Section 4.01 are
correct on and as of the date of such Revolving Credit Borrowing, before
and after giving effect to such Revolving Credit Borrowing and to the
application of the proceeds therefrom, as though made on and as of such
date, and
(ii) No event has occurred and is continuing, or would result from
such Revolving Credit Borrowing or from the application of the proceeds
therefrom, that constitutes a Default:
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Lender through the Administrative Agent may
reasonably request.
SECTION 3.03. Conditions Precedent to Each Competitive Bid
Borrowing. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Administrative Agent shall have received the
written confirmatory Notice of Competitive Bid Borrowing with respect thereto,
(ii) on or before the date of such Competitive Bid Borrowing, but prior to such
Competitive Bid Borrowing, the Administrative Agent shall have received for
recordation in the Competitive Bid Register information as to each of the one or
more Competitive Bid Advances to be made by the Lenders as part of such
Competitive Bid Borrowing, the principal amount of each such Competitive Bid
Advance and such other terms as were agreed to for each such Competitive Bid
Advance in accordance with Section 2.03, and (iii) on the date of such
Competitive Bid Borrowing the following statements shall be true (and each of
the giving of the applicable Notice of Competitive Bid Borrowing and the
acceptance by the Borrower of the proceeds of such Competitive Bid Borrowing
shall constitute a representation and warranty by the Borrower that on the date
of such Competitive Bid Borrowing such statements are true):
<PAGE> 38
34
(a) The representations and warranties contained in Section 4.01 are
correct on and as of the date of such Competitive Bid Borrowing, before
and after giving effect to such Competitive Bid Borrowing and to the
application of the proceeds therefrom, as though made on and as of such
date,
(b) No event has occurred and is continuing, or would result from
such Competitive Bid Borrowing or from the application of the proceeds
therefrom, that constitutes a Default, and
(c) No event has occurred and no circumstance exists as a result of
which the information concerning the Borrower that has been provided to
the Administrative Agent and each Lender by the Borrower in connection
herewith would include an untrue statement of a material fact or omit to
state any material fact or any fact necessary to make the statements
contained therein, in the light of the circumstances under which they were
made, not misleading.
SECTION 3.04. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Administrative Agent responsible for the transactions contemplated by
this Agreement shall have received notice from such Lender prior to the proposed
Effective Date, as notified by the Borrower to the Lenders, specifying its
objection thereto. The Administrative Agent shall promptly notify the Lenders of
the occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Notes, and the consummation of the transactions
contemplated hereby, are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene
(i) the Borrower's charter or by-laws or (ii) law or any contractual
restriction binding on or affecting the Borrower.
<PAGE> 39
35
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for the due execution, delivery and
performance by the Borrower of this Agreement or the Notes.
(d) This Agreement has been, and each of the Notes when delivered
hereunder will have been, duly executed and delivered by the Borrower.
This Agreement is, and each of the Notes when delivered hereunder will be,
the legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with their respective terms.
(e) The Consolidated balance sheet of the Borrower and its
Subsidiaries as at December 31, 1993, and the related Consolidated
statements of income and cash flows of the Borrower and its Subsidiaries
for the fiscal year then ended, accompanied by an opinion of Ernst &
Young, independent public accountants, and the Consolidated balance sheet
of the Borrower and its Subsidiaries as at March 31, 1994 and the related
Consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for the three months then ended, duly certified by the chief
financial officer of the Borrower, copies of which have been furnished to
each Lender, fairly present, subject, in the case of said balance sheet as
at March 31, 1994 and said statements of income and cash flows for the
three months then ended, to year-end audit adjustments, the Consolidated
financial condition of the Borrower and its Subsidiaries as at such dates
and the Consolidated results of the operations of the Borrower and its
Subsidiaries for the periods ended on such dates, all in accordance with
generally accepted accounting principles consistently applied. Since
December 31, 1993, there has been no Material Adverse Change.
(f) To the best of the Borrower's knowledge, there is no pending or
threatened action, suit, investigation, litigation or proceeding,
including, without limitation, any Environmental Action, affecting the
Borrower or any of its Subsidiaries before any court, governmental agency
or arbitrator that (i) could be reasonably likely to have a Material
Adverse Effect (other than the Disclosed Litigation) or (ii) purports to
affect the legality, validity or enforceability of this Agreement or any
Note or the consummation of the transactions contemplated hereby, and
there has been no adverse change in the status, or financial effect on the
Borrower or any of its Subsidiaries, of the Disclosed Litigation from that
described on Schedule 3.01(b) hereto.
(g) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning
of Regulation U issued by the Board of Governors of the Federal Reserve
System).
<PAGE> 40
36
(h) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan.
(i) Neither the Borrower nor any of its ERISA Affiliates has
incurred or is reasonably expected to incur any Withdrawal Liability to
any Multiemployer Plan.
(j) Neither the Borrower nor any of its ERISA Affiliates has been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or has been terminated, within the meaning of
Title IV of ERISA, and no such Multiemployer Plan is reasonably expected
to be in reorganization or to be terminated, within the meaning of Title
IV of ERISA.
(k) Except as set forth in the financial statements referred to in
Section 4.01(e), the Borrower and its Subsidiaries have no material
liability with respect to "expected post retirement benefit obligations"
within the meaning of Statement of Financial Accounting Standards No.106.
(1) The operations and properties of the Borrower and each of its
Subsidiaries comply in all material respects with all Environmental Laws,
all necessary Environmental Permits have been obtained and are in effect
for the operations and properties of the Borrower and its Subsidiaries,
the Borrower and its Subsidiaries are in compliance in all material
respects with all such Environmental Permits, and no circumstances exist
that could be reasonably likely to (i) form the basis of an Environmental
Action against the Borrower or any of its Subsidiaries or any of their
properties that could have a Material Adverse Effect or (ii) cause any
such property to be subject to any restrictions on ownership, occupancy,
use or transferability under any Environmental Law that could have a
Material Adverse Effect.
(m) None of the properties currently or formerly owned or operated
by the Borrower or any of its Subsidiaries is listed or proposed for
listing on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("NPL") or
on the Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the U.S. Environmental Protection Agency
("CERCLIS") or any analogous state list of sites requiring investigation
or cleanup, the listing, or proposed listing of which would be reasonably
likely to have a Material Adverse Effect, except as described in the
registration statement, Registration No.33-70998, declared effective by
the Securities and Exchange Commission on November 23, 1993 or, to the
best knowledge of the Borrower, is adjacent to any such property.
(n) Except where noncompliance would not individually or in the
aggregate have a Material Adverse Effect (i) neither the Borrower nor any
of its Subsidiaries has
<PAGE> 41
37
transported or arranged for the transportation of any Hazardous Materials
to any location that is listed or proposed for listing on the NPL or on
the CERCLIS or any analogous state list, and (ii) all Hazardous Materials
generated, used, treated, handled or stored at or transported to or from
any property currently or formerly owned or operated by the Borrower or
any of its Subsidiaries have been disposed of in compliance with all
Environmental Laws and Environmental Permits,
(o) Following application of the proceeds of each Advance, not more
than 25 percent of the value of the assets (either of the Borrower only or
of the Borrower and its Subsidiaries on a Consolidated basis) subject to
the provisions of Section 5.02(a) or subject to any restriction contained
in any agreement or instrument between the Borrower and any Lender or any
Affiliate of any Lender relating to Debt and within the scope of Section
6.01(d) will be margin stock (within the meaning of Regulation U issued by
the Board of Governors of the Federal Reserve System).
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and Environmental Laws as provided in
Section 5.01(j).
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (ii) all lawful claims that, if
unpaid, might by law become a Lien upon its property; provided, however,
that neither the Borrower nor any of its Subsidiaries shall be required to
pay or discharge any such tax, assessment, charge or claim that is being
contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained, unless and until any Lien
resulting therefrom attaches to its property and becomes enforceable
against its other creditors.
(c) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the
<PAGE> 42
38
Borrower or such Subsidiary operates; provided, however, that the Borrower
and its Subsidiaries may self-insure to the same extent as is consistent
with its past practice and to the extent consistent with prudent business
practice.
(d) Preservation of Corporate Existence, Etc. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its corporate
existence, rights (charter and statutory) and franchises; provided,
however, that the Borrower and its Subsidiaries may consummate any merger
or consolidation permitted under Section 5.02(b) and provided farther that
neither the Borrower nor any of its Subsidiaries shall be required to
preserve any right or franchise if the Board of Directors of the Borrower
or such Subsidiary shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Borrower or such
Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to the Borrower, such Subsidiary
or the Lenders.
(e) Visitation Rights. At any reasonable time and from time to time,
permit the Administrative Agent or any of the Lenders or any agents or
representatives thereof, to examine and make copies of and abstracts from
the records and books of account of, and visit the properties of, the
Borrower and any of its Subsidiaries, and to discuss the affairs, finances
and accounts of the Borrower and any of its Subsidiaries with any of their
officers or directors and with their independent certified public
accountants.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which fall and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted.
(h) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under this
Agreement with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower or such Subsidiary than
it would obtain in a comparable arm's-length transaction with a Person not
an Affiliate.
<PAGE> 43
39
(i) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of
the Borrower, Consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such quarter and Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, duly certified
(subject to year-end audit adjustments) by the chief financial
officer or the controller of the Borrower as having been prepared in
accordance with GAAP, it being agreed that delivery of the
Borrower's Quarterly Report on Form l0-Q will satisfy this
requirement, together with a certificate of said officer stating the
Interest Coverage Ratio and the Leverage Percentage as of the end of
such quarter;
(ii) as soon as available and in any event within 120 days
after the end of each fiscal year of the Borrower, a copy of the
annual audit report for such year for the Borrower and its
Subsidiaries, containing Consolidated balance sheets of the Borrower
and its Subsidiaries as of the end of such fiscal year and
Consolidated statements of income and cash flows of the Borrower and
its Subsidiaries for such fiscal year, in each case accompanied by
an opinion acceptable to the Required Lenders by Ernst & Young or
other independent public accountants acceptable to the Required
Lenders, together with a certificate of the chief financial officer
of the Borrower stating the Interest Coverage Ratio and the Leverage
Percentage as of the end of such fiscal year;
(iii) as soon as possible and in any event within five
Business Days after the occurrence of each Default continuing on the
date of such statement, a statement of an officer of the Borrower
having knowledge of or responsibility for such matters setting forth
details of such Default and the action that the Borrower has taken
and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof, copies of
all reports that the Borrower sends to any of its securityholders,
and copies of all reports and registration statements that the
Borrower or any Subsidiary files with the Securities and Exchange
Commission or any national securities exchange;
(v) promptly after the commencement thereof, notice of the
commencement and nature of all actions and proceedings before any
court, governmental agency or arbitrator affecting the Borrower or
any of its Subsidiaries of the type described in Section 4.01(f);
<PAGE> 44
40
(vi) promptly and in any event within 10 days after the
Borrower or any of its ERISA Affiliates knows or has reason to know
that any ERISA Event has occurred, a statement of an officer of the
Borrower having knowledge of or responsibility for such matters
describing such ERISA Event and the action, if any, that the
Borrower or such ERISA Affiliate has taken and proposes to take with
respect thereto;
(vii) promptly and in any event within seven Business Days
after receipt thereof by the Borrower or any of its ERISA
Affiliates, copies of each notice from the PBGC stating its
intention to terminate any Plan or to have a trustee appointed to
administer any such Plan;
(viii) promptly and in any event within 30 days after the
receipt thereof by the Borrower or any of its ERISA Affiliates, a
copy of the latest annual actuarial report for each Plan if the
ratio of the fair market value of the assets of such Plan to its
current liability (as defined in Section 412 of the Internal Revenue
Code) is less than 60%;
(ix) promptly and in any event within five Business Days after
receipt thereof by the Borrower or any of its ERISA Affiliates from
the sponsor of a Multiemployer Plan, copies of each notice
concerning (A) the imposition of Withdrawal Liability by any such
Multiemployer Plan, (B) the reorganization or termination, within
the meaning of Title IV of ERISA, of any such Multiemployer Plan or
(C) the amount of liability incurred, or that may be incurred, by
the Borrower or any of its ERISA Affiliates in connection with any
event described in clause (A) or (B); and
(x) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Lender through the Administrative Agent may from
time to time reasonably request.
(j) Compliance with Environmental Laws. Comply, and cause each of
its Subsidiaries and all lessees and other Persons operating or occupying its
properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew and cause each of
its Subsidiaries to obtain and renew all Environmental Permits necessary for its
operations and properties; and conduct, and cause each of its Subsidiaries to
conduct, any investigation, study, sampling and testing, and undertake any
cleanup, removal, remedial or other action necessary to remove and clean up all
Hazardous Materials from any of its properties pursuant to the order of any
regulatory authority and generally in accordance with the requirements of all
Environmental Laws; provided, however, that neither the Borrower nor any of its
Subsidiaries shall be required to undertake any such cleanup, removal, remedial
or other action to the extent that its obligation to do so is being
<PAGE> 45
41
contested in good faith and by proper proceedings and appropriate reserves are
being maintained with respect to such circumstances.
(k) Preparation of Environmental Reports. If an Event of Default
shall have occurred and be continuing, at the request of the Administrative
Agent with respect to any Environmental Action, condition or occurrence that the
Administrative Agent or the Required Lenders reasonably deem to be material,
provide to the Lenders within 90 days after such request, at the expense of the
Borrower, an environmental site assessment report for the properties described
in such request, prepared by an environmental consulting firm acceptable to the
Administrative Agent, indicating the presence or absence of Hazardous Materials
and the estimated cost of any compliance, removal or remedial action in
connection with any Hazardous Materials on such properties; without limiting the
generality of the foregoing, if the Administrative Agent determines at any time
that a material risk exists that any such report will not be provided within the
time referred to above, the Administrative Agent may retain an environmental
consulting firm to prepare such report at the expense of the Borrower, and the
Borrower hereby grants and agrees to cause any Subsidiary that owns any property
described in such request to grant at the time of such request, to the
Administrative Agent, the Lenders, such firm and any agents or representatives
thereof an irrevocable non-exclusive license, subject to the rights of tenants,
to enter onto their respective properties to undertake such an assessment.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will not:
(a) Liens. Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien on or with respect to
any of its properties, whether now owned or hereafter acquired, or assign,
or permit any of its Subsidiaries to assign, any right to receive income,
other than:
(i) (A) Liens for taxes, assessments and governmental charges
or levies to the extent not required to be paid under Section
5.01(b) hereof (including contracts entered into in connection with
major construction projects); (B) Liens imposed by law, such as
materialmen' s, mechanics', carriers', workmen's and repairmen's
Liens and other similar Liens arising in the ordinary course of
business securing obligations; (C) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation
or to secure public or statutory obligations; and (D) easements,
rights of way and other encumbrances on title to real property that
do not materially adversely affect the use of such property for its
present purposes, provided in each case, that no enforcement,
execution, levy or foreclosure proceeding shall have been commenced
that is not being contested in good faith and by proper proceedings
with appropriate reserves being maintained,
<PAGE> 46
42
(ii) purchase money Liens upon or in any property acquired or
held by the Borrower or any Subsidiary in the ordinary course of
business to secure the purchase price of such property or to secure
Debt incurred solely for the purpose of financing the acquisition of
such property, or Liens existing on such property at the time of its
acquisition (other than any such Lien created in contemplation of
such acquisition) or extensions, renewals or replacements of any of
the foregoing for the same or a lesser amount, provided, however,
that no such Lien shall extend to or cover any property other than
the property being acquired, and no such extension, renewal or
replacement shall extend to or cover any property not theretofore
subject to the Lien being extended, renewed or replaced, provided
further that the aggregate principal amount of the indebtedness
secured by the Liens referred to in this clause (ii) shall not
exceed $25,000,000 at any time outstanding as such Liens relate to
the properties that are the subject of the LaPorte Financing or, in
all other cases, $10,000,000 at any time outstanding,
(iii) the Liens existing on the Effective Date and described
on Schedule 5.02(a) hereto,
(iv) other Liens securing Debt in an aggregate principal
amount not to exceed $20,000,000 at any time outstanding,
(v) the replacement, extension or renewal of any Lien
permitted by clauses (ii) and (iii) above upon or in the same
property theretofore subject thereto or the replacement, extension
or renewal (without increase in the amount or change in any direct
or contingent obligor) of the Debt secured thereby, and
(vi) Liens, if any, resulting from the documents evidencing
the LaPorte Financing and the Receivables Financing.
(b) Mergers, Etc. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to, any Person, or permit any of its
Subsidiaries to do so, except that any Subsidiary of the Borrower may
merge or consolidate with or into, or dispose of assets to, any other
Subsidiary of the Borrower, and except that any Subsidiary of the Borrower
may merge into or dispose of assets to the Borrower and the Borrower may
merge with any other Person so long as the Borrower is the surviving
corporation, provided, in each case, that no Default shall have occurred
and be continuing at the time of such proposed transaction or would result
therefrom.
<PAGE> 47
43
(c) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally accepted
accounting principles.
SECTION 5.03. Financial Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will:
(a) Interest Coverage Ratio. Maintain an Interest Coverage Ratio of
at least 8.0:1.0.
(b) Leverage Percentage. Maintain a Leverage Percentage of not
greater than 50%.
(c) Minimum Shareholders' Equity. Maintain, at all times,
shareholders' equity in an amount of not less than $180,000,000.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance when
the same becomes due and payable or the Borrower shall fail to pay any
interest on any Advance or make any other payment under this Agreement or
any Note within five Business Days after the same becomes due and payable;
or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) in connection with this Agreement
shall prove to have been incorrect in any material respect when made; or
(c) (i) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 5.01(d) or (i)(iii), 5.02 or
5.03, or (ii) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement on its part to be
performed or observed if such failure shall remain unremedied for 30 days
after written notice thereof shall have been given to the Borrower by the
Administrative Agent or any Lender; or
(d) The Borrower or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Debt that is outstanding in a
principal or notional amount
<PAGE> 48
44
of at least $10,000,000 in the aggregate (but excluding Debt outstanding
hereunder) of the Borrower or such Subsidiary (as the case may be), when
the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating
to any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such
event or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid or redeemed (other than by a regularly
scheduled required prepayment or redemption), purchased or defeased, or an
offer to prepay, redeem, purchase or defease such Debt shall be required
to be made, in each case prior to the stated maturity thereof; or
(e) The Borrower or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against the Borrower or any of its Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it), either
such proceeding shall remain undismissed or unstayed for a period of 30
days, or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment
of a receiver, trustee, custodian or other similar official for, it or for
any substantial part of its property) shall occur; or the Borrower or any
of its Subsidiaries shall take any corporate action to authorize any of
the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against the Borrower or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(g) Any non-monetary judgment or order shall be rendered against the
Borrower or any of its Subsidiaries that could be reasonably expected to
have a Material Adverse Effect, and there shall be any period of 30
consecutive days during which a stay
<PAGE> 49
45
of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(h) (i) Any Person or two or more Persons acting in concert shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934),
directly or indirectly, of Voting Stock of the Borrower (or other securities
convertible into such Voting Stock) representing 33-1/3% or more of the
combined voting power of all Voting Stock of the Borrower; or (ii) during any
period of up to 24 consecutive months, commencing after the date of this
Agreement, individuals who at the beginning of such 24-month period were
directors of the Borrower shall cease for any reason (other than due to death
or disability) to constitute a majority of the board of directors of the
Borrower (except to the extent that individuals who at the beginning of such
24-month period were replaced by individuals (x) elected by 50% of the
remaining members of the nominating committee of the board of directors of the
Borrower or (y) nominated for election by a majority of the remaining members
of the nominating committee of the board of directors of the Borrower and
thereafter elected as directors by the shareholders of the Borrower); or (iii)
any Person or two or more Persons acting in concert shall have acquired by
contract or otherwise, or shall have entered into a contract or arrangement
that, upon consummation prior to the Termination Date, will result in its or
their acquisition of the power to exercise, directly or indirectly, a
controlling influence over the management or policies of the Borrower; or
(i) Any ERISA Event shall have occurred and the sum (determined as of
the date of occurrence of such ERISA Event) of the Insufficiency of the Plan
with respect to which such ERISA Event shall have occurred and the
Insufficiency of any and all other Plans with respect to which an ERISA Event
shall have occurred and then exist (or the liability of the Borrower and its
ERISA Affiliates related to any such ERISA Event) has, or is reasonably likely
to have, a Material Adverse Effect; or
(j) The Borrower or any of its ERISA Affiliates shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount that, when aggregated with
all other amounts required to be paid to Multiemployer Plans by the Borrower
and its ERISA Affiliates as Withdrawal Liability (determined as of the date of
such notification), exceeds $25,000,000 or requires payments exceeding
$5,000,000 per annum; or
(k) The Borrower or any of its ERISA Affiliates shall have been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of ERISA,
and as a result of such reorganization or termination the aggregate annual
contributions of the Borrower and its ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or being
<PAGE> 50
46
terminated have been or will be increased over the amounts contributed to
such Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or
termination occurs by an amount exceeding $10,000,000;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Required Lenders, by notice to the Borrower,
declare the Notes, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Notes, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the Notes, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers and discretion under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together with such
powers and discretion as are reasonably incidental thereto. As to any matters
not expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Notes), the Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action that exposes the Administrative Agent to personal liability or that
is contrary to this Agreement or applicable law. The Administrative Agent agrees
to give to each Lender prompt notice of each notice given to it by the Borrower
pursuant to the terms of this Agreement.
SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this
<PAGE> 51
47
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Administrative Agent:
(j) may treat the payee of any Note as the holder thereof until the
Administrative Agent receives and accepts an Assignment and Acceptance entered
into by the Lender that is the payee of such Note, as assignor, and an Eligible
Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal
counsel (including counsel for the Borrower), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (iii) makes no warranty or representation to
any Lender and shall not be responsible to any Lender for any statements,
warranties or representations (whether written or oral) made in or in connection
with this Agreement; (iv) shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions of
this Agreement on the part of the Borrower or to inspect the property (including
the books and records) of the Borrower; (v) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in respect
of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopier, telegram or telex) believed
by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect to its
Commitment, the Advances made by it and the Note issued to it, Citibank shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Administrative Agent; and the term
"Lender" or "Lenders" shall, unless otherwise expressly indicated, include
Citibank in its individual capacity. Citibank and its Affiliates may accept
deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from and generally engage in any kind of business
with, the Borrower, any of its Subsidiaries and any Person who may do business
with or own securities of the Borrower or any such Subsidiary, all as if
Citibank were not the Administrative Agent and without any duty to account
therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that
it has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Section
4.01(e) and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed by the Borrower), ratably
according to the
<PAGE> 52
48
respective principal amounts of the Revolving Credit Notes then held by each of
them (or if no Revolving Credit Notes are at the time outstanding or if any
Revolving Credit Notes are held by Persons that are not Lenders, ratably
according to the respective amounts of their Commitments), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of this Agreement or
any action taken or omitted by the Administrative Agent under this Agreement,
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Administrative Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel fees) incurred by
the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, to the extent that
the Administrative Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Administrative Agent. The Administrative
Agent may resign at any time by giving written notice thereof to the Lenders and
the Borrower and may be removed at any time with or without cause by the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint a successor Administrative Agent, which
successor Administrative Agent, so long as no Default has occurred and is
continuing, shall be approved by the Borrower, which approval shall not be
unreasonably withheld or delayed. If no successor Administrative Agent shall
have been so appointed by the Required Lenders in accordance with the
immediately preceding sentence, and shall have accepted such appointment, within
30 days after the retiring Administrative Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring Administrative
Agent, then the retiring Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent, which shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, discretion, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
SECTION 7.07. Co-Agent. Each Lender hereby acknowledges that the
Co-Agent has no liability hereunder other than in its capacity as Lender.
<PAGE> 53
49
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Revolving Credit Notes, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Lenders, do any of the
following: (a) waive any of the conditions specified in Section 3.01, (b)
increase the Commitments of the Lenders or subject the Lenders to any additional
obligations, (c) reduce the principal of, or interest on, the Revolving Credit
Notes or any fees or other amounts payable hereunder, (d) postpone any date
fixed for any reduction of Commitment or for any payment of principal of, or
interest on, the Revolving Credit Notes or any fees or other amounts payable
hereunder, (e) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Revolving Credit Notes, or the number of Lenders,
that shall be required for the Lenders or any of them to take any action
hereunder or (f) amend this Section 8.01; and provided further that no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such
action, affect the rights or duties of the Administrative Agent under this
Agreement or any Note.
SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic or
telex communication) and mailed, telecopied, telegraphed, telexed or delivered,
if to the Borrower, at its address at 6100 Oak Tree Boulevard, Cleveland, Ohio
44131, Attention: Secretary, with a copy to: Chief Financial Officer at such
address; if to any Initial Lender, at its Domestic Lending Office specified
opposite its name on Schedule I hereto; if to any other Lender, at its Domestic
Lending Office specified in the Assignment and Acceptance pursuant to which it
became a Lender; and if to the Administrative Agent, at its address at Bank Loan
Syndications, 1 Court Square, Seventh Floor, Long Island City, New York, 11120,
Attention: Mr. Ed Volwinkel, with a copy to 399 Park Avenue, New York, New York
10043, Attention: Chemicals Department; or, as to the Borrower or the
Administrative Agent, at such other address as shall be designated by such party
in a written notice to the other parties and, as to each other party, at such
other address as shall be designated by such party in a written notice to the
Borrower and the Administrative Agent. All such notices and communications
shall, when mailed, telecopied, telegraphed or telexed, be effective when
deposited in the mails, telecopied, delivered to the telegraph company or
confirmed by telex answerback, respectively, except that notices and
communications to the Administrative Agent pursuant to Article II, III or VII
shall not be effective until received by the Administrative Agent.
<PAGE> 54
50
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
Lender or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
demand all costs and expenses of the Administrative Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, (A) all due diligence, syndication (including
printing, distribution and bank meetings), transportation, computer,
duplication, appraisal, consultant, and audit expenses and (B) the reasonable
fees and expenses of counsel for the Administrative Agent with respect thereto
and with respect to advising the Administrative Agent as to its rights and
responsibilities under this Agreement. The Borrower further agrees to pay on
demand all costs and expenses of the Administrative Agent and the Lenders, if
any (including, without limitation, reasonable counsel fees and expenses), in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of this Agreement, the Notes and the other documents to be
delivered hereunder, including, without limitation, reasonable fees and expenses
of counsel for the Administrative Agent and each Lender in connection with the
enforcement of rights under this Section 8.04(a).
(b) (i) The Borrower agrees to indemnify and hold harmless the
Administrative Agent and each Lender and each of their Affiliates and their
officers, directors, employees, agents and advisors (each, an "Indemnified
Party") from and against any and all claims, damages, losses, liabilities and
expenses (including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against any Indemnified
Party, in each case arising out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any investigation, litigation
or proceeding arising out of, related to or in connection with (i) the Notes,
this Agreement, any of the transactions contemplated herein or the actual or
proposed use of the proceeds of the Advances or (ii) the actual or alleged
presence of Hazardous Materials on any property of the Borrower or any of its
Subsidiaries or any Environmental Action relating in any way to the Borrower or
any of its Subsidiaries, in each case whether or not such investigation,
litigation or proceeding is brought by the Borrower, its directors, shareholders
or creditors or an Indemnified Party or any other Person or any Indemnified
Party is otherwise a party thereto and whether or not the transactions
contemplated hereby are consummated, except to the extent such claim, damage,
loss, liability or expense resulted from such Indemnified Party's gross
negligence or willful misconduct. The Borrower also agrees not to assert any
claim against the Administrative Agent, any Lender, any of their Affiliates, or
any of their respective directors, officers, employees, attorneys and agents, on
any theory of liability, for special or indirect damages arising out of or
otherwise relating to the Notes, this Agreement, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the
Advances.
<PAGE> 55
51
(ii) Each Indemnified Party shall, promptly after becoming aware of
any actual or threatened action or claim against such Indemnified Party in
respect of which indemnification may be sought against the Borrower
pursuant to this Section 8.04(b), notify the Borrower in writing of such
action or claim. In case any such action shall be brought against any
Indemnified Party and such Indemnified Party shall notify the Borrower of
the commencement thereof, the Borrower may participate therein or assume
the defense thereof and after notice from the Borrower to such Indemnified
Party of an election so to assume the defense thereof, such Indemnified
Party shall cooperate fully, completely and promptly in the defense
thereof, including without limitation, the settlement of outstanding
claims, and the Borrower will not be liable to such Indemnified Party
under this Section 8.04(b) for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof
other than reasonable costs of investigation incurred with the consent of
the Borrower, which consent shall not be unreasonably withheld or delayed;
provided, however, that unless and until the Borrower so assumes the
defense of any such action, the Borrower shall have the right to
participate at its own expense in the defense of any such action to which
it is a party. If the Borrower shall not have so assumed the defense of
any such action or if any Indemnified Party shall have reasonably
concluded that there may be defenses available to it or them which are
different from or additional to those available to the Borrower (in which
case the Borrower shall not have the right to direct the defense of such
action on behalf of such Indemnified Party), legal and other expenses
incurred by such Indemnified Party shall be borne by the Borrower;
provided that the Borrower shall be liable only for the expenses of a
single legal counsel for all Indemnified Parties in connection with any
single action. Notwithstanding the foregoing, the Borrower shall not be
liable for any settlement of any action or claim effected without its
consent.
(iii) The Borrower will not settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification has been sought hereunder
(whether or not an Indemnified Party is a party to such claim, action,
suit or proceeding) without the prior written consent of the
Administrative Agent, unless such settlement, compromise or consent
includes an unconditional release of the Administrative Agent and each
Indemnified Party from all liability arising from such claim, action, suit
or proceeding.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance or LIBO Rate Advance is made by the Borrower to or for the account
of a Lender other than on the last day of the Interest Period for such Advance,
as a result of a payment or Conversion pursuant to Section 2.08(d) or (e), 2.10
or 2.12, acceleration of the maturity of the Notes pursuant to Section 6.01 or
for any other reason, the Borrower shall, upon demand by such Lender (with a
copy of such demand to the Administrative Agent), pay to the Administrative
Agent for the account of such Lender any amounts required to compensate such
Lender for any additional losses, costs or expenses that it may reasonably incur
as a result of
<PAGE> 56
52
such payment or Conversion, including, without limitation, any loss (including
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Lender to
fund or maintain such Advance.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Sections 2.11, 2.14 and 8.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the Notes.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender and each of its Affiliates is hereby
authorized at any time that payment owed to such Lender is not made by the
Borrower to the Administrative Agent when due and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender or such Affiliate to or for
the credit or the account of the Borrower against any and all of the obligations
of the Borrower now or hereafter existing under this Agreement and the Note held
by such Lender, whether or not such Lender shall have made any demand under this
Agreement or such Note and although such obligations may be unmatured. Each
Lender agrees promptly to notify the Borrower after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender and its
Affiliates under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that such Lender and
its Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective
(other than Sections 2.01 and 2.03, which shall only become effective upon
satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Borrower and the Administrative Agent and when
the Administrative Agent shall have been notified by each Initial Lender that
such Initial Lender has executed it and thereafter shall be binding upon and
inure to the benefit of the Borrower, the Administrative Agent and each Lender
and their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may
and, if demanded by the Borrower (following a demand by such Lender pursuant to
Section 2.11 or Section 2.14) upon at least 20 Business Days' notice to such
Lender and the Administrative Agent, will assign to one or more Persons all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Revolving Credit Advances
owing to it and the Revolving Credit Note or Notes held by it); provided,
however, that (i) each such assignment shall be of a constant, and not a
varying, percentage of
<PAGE> 57
53
all rights and obligations under this Agreement (other than any right to make
Competitive Bid Advances or Competitive Bid Advances owing to it), (ii) except
in the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof, (iii) each such assignment shall be to an Eligible Assignee, (iv) each
such assignment made as a result of a demand by the Borrower pursuant to this
Section 8.07(a) shall be arranged by the Borrower after consultation with the
Administrative Agent and shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an assignment of a
portion of such rights and obligations made concurrently with another such
assignment or other such assignments that together cover all of the rights and
obligations of the assigning Lender under this Agreement, (v) no Lender shall be
obligated to make any such assignment as a result of a demand by the Borrower
pursuant to this Section 8.07(a) unless and until such Lender shall have
received one or more payments from either the Borrower or one or more Eligible
Assignees in an aggregate amount at least equal to the aggregate outstanding
principal amount of the Advances owing to such Lender, together with accrued
interest thereon to the date of payment of such principal amount and all other
amounts payable to such Lender under this Agreement and (vi) the parties to each
such assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with any Revolving Credit Note subject to such assignment and a processing and
recordation fee of $3,000. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall,to the extent that rights
and obligations hereunder have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
<PAGE> 58
54
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01(e) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement as are delegated to the Administrative Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Revolving Credit Note or Notes subject to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit C hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Borrower. Within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Revolving Credit Note a new Note to the order of such Eligible Assignee in an
amount equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Commitment hereunder, a
new Revolving Credit Note to the order of the assigning Lender in an amount
equal to the Commitment retained by it hereunder. Such new Revolving Credit Note
or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Revolving Credit Note or Notes, shall be
dated the effective date of such Assignment and Acceptance and shall otherwise
be in substantially the form of Exhibit A-1 hereto.
(d) The Administrative Agent shall maintain at its address referred
to in Section 8.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitment of, and principal amount of the Advances owing
to, each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
<PAGE> 59
55
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note or Notes held by it);
provided, however, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Commitment to the Borrower hereunder) shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender shall
remain the holder of any such Note for all purposes of this Agreement, (iv) the
Borrower, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement or any Note, or any consent to any departure by the
Borrower therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower; provided that, prior to any such disclosure,
the assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any Confidential Information relating to the
Borrower received by it from such Lender.
(g) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and the Note or Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
SECTION 8.08. Confidentiality. Neither the Administrative Agent nor
any Lender shall disclose any Confidential Information to any Person without the
consent of the Borrower, other than (a) to the Administrative Agent's or such
Lender's Affiliates and their officers, directors, employees, agents and
advisors and to actual or prospective assignees and participants, and then only
on a confidential basis, (b) as required by any law, rule or regulation or
judicial process, (c) to any rating agency when required by it, provided that,
prior to any such disclosure, such rating agency shall undertake to preserve the
confidentiality of any Confidential Information relating to the Borrower
received by it from such Lender and (d) as requested or required by any state,
federal or foreign authority or examiner regulating banks or banking.
<PAGE> 60
56
SECTION 8.09. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.10. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.11. Jurisdiction. Etc. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Agreement or
the Notes in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the Notes
in any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
SECTION 8.12. Waiver of Jury Trial. Each of the Borrower, the
Administrative Agent and the Lenders hereby irrevocably waives all right to
trial by jury in any action,
<PAGE> 61
57
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or the Notes or the actions of the
Administrative Agent or any Lender in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE GEON COMPANY
By
--------------------------------
Title: Asst. Secretary
CITIBANK, N.A.,
as Administrative Agent
By
--------------------------------
Title: Vice President
NATIONSBANK OF NORTH
CAROLINA, N.A., as
Co-Agent
By
--------------------------------
Title: Assistant Vice President
Initial Lenders
Commitment
$23,075,000 CITIBANK, N.A.
By
--------------------------------
Title: Vice President
<PAGE> 62
58
$22,425,000 NATIONSBANK OF NORTH
CAROLINA, N.A.
By
--------------------------------
Title: Assistant Vice President
$16,250,000 BANK OF MONTREAL
By
--------------------------------
Title: Director, U.S. Corporate Banking
$16,250,000 THE BANK OF NEW YORK
By
--------------------------------
Title: Vice President
$16,250,000 CANADIAN IMPERIAL BANK OF
COMMERCE
By
--------------------------------
Title: Authorized Signatory
$16,250,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
--------------------------------
Title: Vice President
<PAGE> 63
59
$9,750,000 NBD BANK, N.A.
By
--------------------------------
Title: V.P.
$9,750,000 NATIONAL CITY BANK
By
--------------------------------
Title: Vice President
$130,000,000 Total of the Commitments
<PAGE> 1
EXHIBIT 10.8a
AMENDMENT
Dated as of December 8, 1994
This AMENDMENT among The Geon Company, a Delaware corporation
(the "BORROWER"), the banks, financial institutions and institutional lenders
parties to the Credit Agreement referred to below (the "INSTITUTIONAL
LENDERS"), and Citibank, N.A. ("CITIBANK"), as administrative agent (the
"ADMINISTRATIVE AGENT") for the Lenders (as defined in the Credit Agreement),
and NationsBank of North Carolina, N.A., as co-agent (the "CO-AGENT")
thereunder
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders, the Administrative Agent
and the Co-Agent have entered into a Credit Agreement dated as of August 16,
1994 (the "CREDIT AGREEMENT"; the terms defined therein being used herein as
therein defined unless otherwise defined herein).
(2) The Borrower and the lenders have agreed to amend the
Credit Agreement as hereinafter set forth.
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction
of the conditions precedent set forth in Section 2 hereof, hereby amended as
follows:
(a) Section 2.05(b) is amended in full to read as
follows:
MANDATORY. The Commitments shall be permanently
reduced ratably in an aggregate amount of $80,000,000 on the
following dates in the aggregate amounts indicated:
Date Amount
---- ------
December 31, 1996 $25,000,000
June 30, 1997 55,000,000
PROVIDED that if the Borrower or any of its Subsidiaries
issues any public debt before June 30, 1997, on the date of
receipt of the proceeds of such debt issuance the Commitments
of the lenders shall be reduced ratably by an
<PAGE> 2
2
amount equal to the lesser of (i) the net proceeds of such
debt issuance and (ii) the aggregate amount of the remaining
Commitment reductions set forth above. which Commitment
reductions shall be credited toward the Commitment reductions
set forth above in inverse order.
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective when, and only when, on or before December 15, 1994, the
Administrative Agent shall have received (a) counterparts of this Amendment
executed by the Borrower and all of the lenders or, as to any of the lenders,
advice satisfactory to the Administrative Agent that such lenders have executed
this Amendment and (b) a certificate signed by a duly authorized officer of the
Borrower, in form and substance satisfactory to the Administrative Agent and
dated the date of receipt thereof by the Administrative Agent, stating that:
(i) The representations and warranties contained
in Section 3 hereof are correct on and as of the date of such
certificate as though made on and as of such date, and
(ii) No event has occurred and is continuing which
constitutes an Event of Default or would constitute an Event
of Default but for the requirement that notice be given or
time elapse or both.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
indicated at the beginning of this Amendment.
(b) The execution, delivery and performance by the
Borrower of this Amendment and the Loan Documents, as amended hereby,
to which it is or is to be a party are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate action
and do not contravene (i) the Borrower's charter or by-laws, (ii) law
or any contractual restriction binding on or affecting the Borrower.
(c) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by
the Borrower of this Amendment or any of the Loan Documents, as
amended hereby, to which it is or is to be a party.
(d) This Amendment and each of the other Loan Documents,
as amended hereby, to which the Borrower is a party constitute, and
each of the other Loan Documents to which the Borrower is to be a
party when delivered hereunder will
<PAGE> 3
3
constitute, legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective
terms.
(e) To the best of the Borrower's knowledge. there is no
pending or threatened action, Suit, investigation, litigation or
proceeding, including, without limitation, any Environmental Action,
affecting the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator that (i) could be reasonably likely
to have a Material Adverse Effect (other than the Disclosed Litigation
as described on Schedule 3.01(b) of the Credit Agreement and as
described on Schedule A hereto (collectively, the "Current
Litigation")) or (ii) purports to affect the legality, validity or
enforceability of this Amendment, the Credit Agreement as amended
hereby or any Note or the consummation of the transactions
contemplated hereby, and there has been no adverse change in the
status, or financial effect on the Borrower or any of its
Subsidiaries, of the Current Litigation from that described on
Schedule 3.01(b) of the Credit Agreement and on Schedule A hereto.
SECTION 4. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a)
Upon the effectiveness of Section 1 hereof, on and after the date hereof each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit
Agreement and all other Loan Documents are and shall continue to be in full
force and effect and are hereby in all respects ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of any lender or the Administrative Agent under
any of the Loan Documents, nor constitute a waiver of any provision of any of
the Loan Documents.
SECTION 5. COSTS AND EXPENSES. The Borrower agrees to pay on
demand all costs and expenses of the Administrative Agent in connection with
the preparation, execution, delivery, administration, modification and
amendment of this Amendment and the other instruments and documents to be
delivered hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent with respect
thereto and with respect to advising the Administrative Agent as to its rights
and responsibilities hereunder and thereunder.
SECTION 6. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each
<PAGE> 4
4
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart of a signature page of this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
SECTION 7. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
<PAGE> 5
5
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE GEON COMPANY
By
-------------------------------------
Title: Asst. Treasurer
CITIBANK, N.A.,
as Administrative Agent
By
-------------------------------------
Title: Vice President
NATIONSBANK, OF NORTH
CAROLINA, N.A.,
as Co-Agent
By
-------------------------------------
Title: Vice President
CITIBANK, N.A.
By /
-------------------------------------
Title: Vice President
NATIONSBANK OF NORTH
CAROLINA, N.A.
By
-------------------------------------
Title: Vice President
<PAGE> 6
6
BANK OF MONTREAL
By
-------------------------------------
Title: Director, U.S. Corporate Banking
THE BANK OF NEW YORK
By
-------------------------------------
Title: Vice President
CANADIAN IMPERIAL BANK OF
COMMERCE
By
-------------------------------------
Title: Agent
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
-------------------------------------
Title: Vice President
NBD BANK, N.A.
By
-------------------------------------
Title: Vice President
NATIONAL CITY BANK
By
-------------------------------------
Title: Vice President
<PAGE> 7
SCHEDULE A
TO THE CREDIT AGREEMENT AMENDMENT
<TABLE>
<S> <C>
Alsobrooks v. Geon Contractor, chemical burns
Stazk v. Conoco et al. Exposure to VCM. Wrongful death.
Thompson, Gordon v. Conoco et al. Exposure to VCM.
Martin, Christine v. BFGoodrich and Geon Birth defects/fetal exposure.
Coppola, Peter v. BFGoodrich et al. Fell. Permanent injuries.
Turner, Thomas et ux. v. BFG and Geon Angiosarcoma. Wrongful death.
Vassar, Winzy v. Air Products et al. Class action. Conspiracy. Failure to warn.
Attinoto v. Geon FeIl. Injured.
</TABLE>
<PAGE> 1
Exhibit 10.8(b)
AMENDMENT NUMBER 2 TO THE
CREDIT AGREEMENT
Dated as of November 9, 1995
AMENDMENT NUMBER 2 TO THE CREDIT AGREEMENT among The Geon
Company, a Delaware corporation (the "BORROWER"), the banks, financial
institutions and other institutional lenders parties to the Credit Agreement
referred to below (collectively, the "Lenders"), Citibank, N.A. ("Citibank") as
administrative agent (the "ADMINISTRATIVE AGENT") for the Lenders, and
NationsBank of North Carolina, N.A. as co-agent (the "CO-AGENT") thereunder.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders, the Administrative Agent and
the Co-Agent have entered into a Credit Agreement dated as of August 16, 1994
and the amendment thereto dated as of December 8, 1994 (such Credit Agreement,
as so amended and as otherwise supplemented or modified through the date
hereof, the "CREDIT AGREEMENT"). Capitalized terms not otherwise defined in
this Amendment have the same meanings as specified in the Credit Agreement.
(2) The Borrower and the Lenders have agreed to further
amend the Credit Agreement as hereinafter set forth.
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit
Agreement is, effective as of the date hereof, hereby amended as follows:
(a) The definition of "APPLICABLE MARGIN" in Section 1.01
is amended by deleting the table in clause (ii) thereof and
substituting therefor the following:
<PAGE> 2
2
<TABLE>
<CAPTION>
Public Debt Rating Usage Applicable Margin
S&P/Moody's/ for
Duff & Phelps Eurodollar Rate
Advances
==============================================================================================
<S> <C> <C>
Level 1 < 50% 0.150%
A-/A3/A- or above -
----------------------------------------------------------------
> 50% 0.250%
----------------------------------------------------------------------------------------------
Level 2 < 50% 0.1875%
BBB+/Baa1/BBB+ -
----------------------------------------------------------------
> 50% 0.2625%
----------------------------------------------------------------------------------------------
Level 3 < 50% 0.270%
BBB/Baa2/BBB -
----------------------------------------------------------------
> 50% 0.350%
----------------------------------------------------------------------------------------------
Level 4 < 50% 0.2625%
BBB-/Baa3/BBB- -
----------------------------------------------------------------
> 50% 0.3375%
----------------------------------------------------------------------------------------------
Level 5 < 50% 0.500%
BB+/Ba1/BB+ -
----------------------------------------------------------------
> 50% 0.625%
----------------------------------------------------------------------------------------------
Level 6 < 50% 0.750%
BB/Ba2/BB -
----------------------------------------------------------------
> 50% 0.875%
==============================================================================================
</TABLE>
(b) The definition of "APPLICABLE PERCENTAGE" in Section 1.01 is
amended by deleting the table in clause (ii) thereof and substituting therefor
the following:
<PAGE> 3
3
<TABLE>
<CAPTION>
Public Debt Rating Applicable
S&P/Moody's/Duff & Percentage
Phelps
=====================================================
<S> <C>
Level 1 0.100%
A-/A3/A- or above
-----------------------------------------------------
Level 2 0.125%
BBB+/Baa1/BBB+
-----------------------------------------------------
Level 3 0.150%
BBB/Baa2/BBB
-----------------------------------------------------
Level 4 0.225%
BBB-/Baa3/BBB-
-----------------------------------------------------
Level 5 0.375%
BB+/Ba1/BB+
-----------------------------------------------------
Level 6 0.375%
BB/Ba2/BB
=====================================================
</TABLE>
(c) Section 1.01 is amended by adding the following new definitions
in appropriate alphabetical order:
"'BORROWED DEBT/EBITDAR RATIO' means, as of any date, the ratio
computed by dividing (a) Borrowed Debt of the Borrower and its
subsidiaries on a Consolidated basis as of such date by (b) EBITDAR of
the Borrower and its subsidiaries on a Consolidated basis for the four
consecutive fiscal quarters of the Borrower most recently ended as of
such date."
"'EBITDAR' means, for any period, net income (or net loss) PLUS
the sum of (a) interest expense, (b) income tax expense, (c)
depreciation expense, (d) amortization expense and (e) rental expense
incurred in connection with the LaPorte Financing, in each case
determined in accordance with GAAP for such period."
(d) The definition of "INTEREST COVERAGE RATIO" in Section 1.01 is
amended in full to read as follows:
"'INTEREST COVERAGE RATIO' means, with respect to any fiscal
quarter, the ratio of FBITDA of the Borrower and its subsidiaries on a
Consolidated basis to Cash Interest Expense, in each case in the
aggregate for the period of four consecutive fiscal quarters ended at
the end of such fiscal quarter. "
(e) The definition of "LAPORTE FINANCING" in Section 1.01 is amended
in full to read as follows:
<PAGE> 4
4
"'LAPORTE FINANCING' means, collectively, the transactions
contemplated by (i) the Amended and Restated Participation Agreement
dated as of November 9, 1995 (the "PARTICIPATION AGREEMENT") among the
Borrower, 1994 VCM Inc., State Street Bank and Trust Company of
Connecticut, National Association, as trustee, the financial
institutions parties thereto and Citibank, N.A., as agent, and (ii) the
other Operative Documents (as defined in the Participation Agreement)."
(f) The definition of "TERMINATION DATE" in Section 1.01 is amended
by deleting "August 16,1999" therein and substituting therefor "November 9,
2000".
(g) Section 2.05(b) is amended in full to read as follows:
"(b) MANDATORY. The Commitments shall be permanently reduced
ratably in an aggregate amount of $80,000,000 on the following dates in
the aggregate amounts indicated:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
December 31,1997 $25,000,000
December 31,1998 $55,000,000
</TABLE>
PROVIDED that if the Borrower or any of its Subsidiaries consummates an
issuance of public debt in an aggregate principal amount equal to or
greater than $100,000,000 (the "TRIGGER EVENT"), then (1) if the Trigger
Event occurs before December 31, 1998, the Commitments of the Lenders
shall be reduced ratably (A) if the Trigger Event occurs before December
31, 1997, by $30,000,0000 or (B) if the Trigger Event occurs on or after
December 31, 1997 and before December 31, 1998, by $5,000,000 (after
giving effect to the reduction described above of $25,000,000 on
December 31, 1997) and, in the case of a reduction under clause (A) or
(B), no reduction of the Commitments under this Section 2.05(b) shall be
required thereafter or (2) if the Trigger Event occurs on or after
December 31, 1998, the Commitments of the Lenders (after giving effect
to the reductions described above of $25,000,000 on December 31, 1997
and $55,000,000 on December 31, 1998) shall be increased ratably so that
the aggregate amount of the Commitments shall be $100,000,000
immediately after such increase."
(h) Section 5.03 is amended in full to read as follows:
"SECTION 5.03. FINANCIAL COVENANTS. So long as
any Advance shall remain unpaid or any Lender shall have any Commitment
hereunder, the Borrower will:
(a) INTEREST COVERAGE RATIO. Maintain an
Interest Coverage Ratio of at least 6:1.
<PAGE> 5
5
(b) BORROWED DEBT/EBITDAR RATIO. Maintain a
Borrowed Debt/EBITDAR Ratio of not more than 3.5:1.
(c) MINIMUM RETAINED EARNINGS. Either (i) for
each fiscal quarter, maintain retained earnings equal to
or exceeding $150,000,000 or (ii) for any period of four
consecutive fiscal quarters, not incur net losses in
excess of $50,000,000."
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Amendment shall become
effective as of the date first above written when, and only when, on or before
November 9, 1995 the Administrative Agent shall have received counterparts of
this Amendment executed by the Borrower and all of the Lenders or, as to any of
the Lenders, advice satisfactory to the Administrative Agent that such Lender
has executed this Amendment. This Amendment is subject to the provisions of
Section 8.01 of the Credit Agreement.
SECTION 3. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
NOTES. (a) On and after the effectiveness of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of
like import referring to the Credit Agreement, and each reference in the Notes
to "the Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement, shall mean and be a reference to the Credit
Agreement, as amended by this Amendment.
(b) The Credit Agreement and the Notes, as specifically amended by
this Amendment, are and shall continue to be in full force and effect and are
hereby in all respects ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any Lender or the Administrative Agent under the
Credit Agreement, nor constitute a waiver of any provision of the Credit
Agreement.
SECTION 4. COSTS, EXPENSES. The Borrower agrees to pay on demand all
costs and expenses of the Administrative Agent in connection with the
preparation, execution, delivery and administration, modification and amendment
of this Amendment and the other instruments and documents to be delivered
hereunder (including, without limitation, the reasonable fees and expenses of
counsel for the Administrative Agent) in accordance with the terms of Section
8.04 of the Credit Agreement.
SECTION 5. EXECUTION IN COUNTERPARTS. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one
<PAGE> 6
6
and the same agreement. Delivery of an executed counterpart of a signature page
to this Amendment by telecopier shall be effective as delivery of a manually
executed counterpart of this Amendment.
SECTION 6. GOVERNING LAW . This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE GEON COMPANY
By
-----------------------------------
Title: Assistant Treasurer
CITIBANK, N.A.,
as Administrative Agent and as Lender
By
-----------------------------------
Title: Vice President
NATIONSBANK OF NORTH
CAROLINA, N.A., as Co-Agent
and as Lender
By
-----------------------------------
Title: Senior Vice President
BANK OF MONTREAL
By
-----------------------------------
Title: Director
<PAGE> 7
7
THE BANK OF NEW YORK
By
-----------------------------------
Title: Vice President
CANADIAN IMPERIAL BANK OF
COMMERCE
By
-----------------------------------
Title: Assistant Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
-----------------------------------
Title: Vice President
NBD BANK, N.A.
By
-----------------------------------
Title: Vice President
NATIONAL CITY BANK
By
-----------------------------------
Title: Sr. Vice President
<PAGE> 1
Exhibit 10.8c
EXECUTION COPY
AMENDMENT NUMBER 3 TO THE
CREDIT AGREEMENT
Dated as of December 19, 1996
This AMENDMENT NUMBER 3 (the "Amendment") among The Geon Company, a
Delaware corporation (the "Borrower"), the banks, financial institutions and
institutional lenders parties to the Credit Agreement referred to below (the
"Lenders"), and Citibank, N.A. ("Citibank"), as administrative agent (the
"Administrative Agent") for the Lenders, and NationsBank, N.A., as co-agent (the
"Co-Agent") thereunder.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders, the Administrative Agent and the
Co-Agent have entered into a Credit Agreement dated as of August 16, 1994, and
the amendments thereto dated as of December 8, 1994, and November 9, 1995,
respectively (such Credit Agreement, as so amended and as otherwise supplemented
or modified through the date hereof, the "Credit Agreement"). Capitalized terms
not otherwise defined in this Amendment are used herein as defined in the Credit
Agreement.
(2) The Borrower and the Lenders have agreed to amend the Credit
Agreement as hereinafter set forth.
SECTION 1. Amendments to Credit Agreement. The Credit Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(a) The definition of "Applicable Margin" in Section 1.01 is
amended by deleting the table in clause (ii) thereof and
substituting therefor the following:
<PAGE> 2
2
<TABLE>
<CAPTION>
Applicable
Public Debt Rating for
S&P/Moody's/ Eurodollar Rate
Duff & Phelps Usage Advances
- ------------------------------------------------------------------------
<S> <C> <C>
Level 1 less than or equal to 50% 0.150%
A-/A3/A- or above greater than 50% 0.200%
Level 2 less than or equal to 50% 0.175%
BBB+/Baa1/BBB+ greater than 50% 0.225%
Level 3 less than or equal to 50% 0.225%
BBB/Baa2/BBB greater than 50% 0.300%
Level 4 less than or equal to 50% 0.2175%
BBB-/Baa3/BBB- greater than 50% 0.2875%
Level 5 less than or equal to 50% 0.375%
BB+/Ba1/BB+ greater than 50% 0.500%
Level 6 less than or equal to 50% 0.625%
BB/Ba2/BB greater than 50% 0.750%
</TABLE>
(b) The definition of "LaPorte Financing" in Section 1.01 is amended
in full to read as follows:
"'LaPorte Financing' means, collectively, the transactions
contemplated by (i) the Amended and Restated Participation Agreement
dated as of December 19, 1996 (the "Participation Agreement") among
the Borrower, 1994 VCM Inc., State Street Bank and Trust Company of
Connecticut, National Association, as trustee, the financial
institutions parties thereto and Citibank, N.A., as agent, and (ii)
the other Operative Documents (as defined in the Participation
Agreement)."
(c) The definition of "Termination Date" in Section 1.01 is amended
by deleting the date "August 16, 1999" and substituting therefor the date
"December 19, 2001".
SECTION 2. Conditions of Effectiveness. This Amendment shall become
effective when, and only when, on or before December 19, 1996, the
Administrative Agent shall have received (a) counterparts of this Amendment
executed by the Borrower and all of the Lenders or, as to any of the Lenders,
advice satisfactory to the Administrative Agent that such Lenders have executed
this
<PAGE> 3
3
Amendment and (b) a certificate signed by a duly authorized officer of the
Borrower, in form and substance satisfactory to the Administrative Agent and
dated the date of receipt thereof by the Administrative Agent, stating that:
(i) The representations and warranties contained in Section 3
hereof are correct on and as of the date of such certificate as
though made on and as of such date, and
(ii) No event has occurred and is continuing which constitutes
an Event of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
SECTION 3. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction indicated at the
beginning of this Amendment.
(b) The execution, delivery and performance by the Borrower of this
Amendment and the Credit Agreement, as amended hereby, are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action and do not contravene (i) the Borrower's charter or
by-laws, (ii) law or any contractual restriction binding on or affecting
the Borrower.
(c) No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Borrower of this
Amendment or the Credit Agreement, as amended hereby.
(d) This Amendment and the Credit Agreement, as amended hereby,
constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective
terms.
(e) To the best of the Borrower's knowledge, there is no pending or
threatened action, suit, investigation, litigation or proceeding,
including, without limitation, any Environmental Action, affecting the
Borrower or any of its Subsidiaries before any court, governmental agency
or arbitrator that (i) could be reasonably likely to have a Material
Adverse Effect (other than the Disclosed Litigation as described on
Schedule 3.01(b) of the Credit Agreement and as described on Schedule A
hereto (collectively, the "Current Litigation")) or (ii) purports to
affect the legality, validity or enforceability of this Amendment, the
Credit Agreement as amended hereby or any Note or the consummation of the
transactions contemplated hereby, and there has been no adverse change in
the status, or financial effect on the Borrower or any of its
Subsidiaries, of the Current Litigation from that described on Schedule
3.01(b) of the Credit Agreement and on Schedule A hereto.
<PAGE> 4
4
SECTION 4. Reference to and Effect on the Credit Agreement and
Notes. (a) Upon the effectiveness of Section 1 hereof, on and after the date
hereof each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Credit Agreement, and each
reference in the other Notes to "the Credit Agreement", "thereunder", "thereof"
or words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement and
the Notes are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed.
SECTION 5. Costs and Expenses. The Borrower agrees to pay on demand
all costs and expenses of the Administrative Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Amendment and the other instruments and documents to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Administrative Agent with respect thereto and with
respect to advising the Administrative Agent as to its rights and
responsibilities hereunder and thereunder.
SECTION 6. Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement. Delivery of an executed counterpart of a signature page of this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
SECTION 7. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE GEON COMPANY
By
-----------------------------
Title: Assistant Treasurer
CITIBANK, N.A.
as Administrative Agent and as Lender
By
-----------------------------
Title: ATTORNEY-IN-FACT
<PAGE> 5
5
NATIONSBANK, N.A.,
as Co-Agent and as Lender
By
-----------------------------
Title: VP
BANK OF MONTREAL
By
-----------------------------
Title:
THE BANK OF NEW YORK
By
-----------------------------
Title: Vice President
CANADIAN IMPERIAL BANK OF
COMMERCE
By
-----------------------------
Title: Authorized Signatory
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
-----------------------------
Title: Vice President
NBD BANK, N.A.
By
-----------------------------
Title: First Vice President
<PAGE> 6
6
NATIONAL CITY BANK
By
---------------------------------
Title: V.P. & Sr. Lending Officer
<PAGE> 1
Exhibit 10.9
[EXECUTION COPY]
U.S. $65,000,000
TRADE RECEIVABLES PURCHASE AND SALE AGREEMENT
Dated as of April 1, 1993
as Amended and Restated as of May 10, 1993
Among
THE GEON COMPANY
as Seller
---------
and
CIESCO L.P.
and
CITICORP NORTH AMERICA, INC.
as Agent
--------
<PAGE> 2
TABLE OF CONTENTS
PRELIMINARY STATEMENTS........................................ 1
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms....................... 2
Adverse Claim............................... 2
Affiliate................................... 2
Affiliated Obligor.......................... 2
Agent's Account............................. 2
Alternate Base Rate......................... 2
Applicable Margin........................... 3
Assignee.................................... 4
Assignee Rate............................... 4
Assignment.................................. 5
Average Maturity............................ 5
BFG......................................... 5
BFG Agreement............................... 5
BFG Owners.................................. 5
Business Day................................ 5
Capital..................................... 5
Certificate................................. 5
Citibank.................................... 5
Collection Agent............................ 6
Collection Agent Fee........................ 6
Collection Agent Fee Reserve................ 6
Collections................................. 6
Concentration Limit......................... 6
Confidential Information.................... 6
Consolidated................................ 6
Contract.................................... 6
Credit Agreement............................ 7
Credit and Collection Policy................ 7
Debt........................................ 7
Default Ratio............................... 7
Defaulted Receivable........................ 7
Delinquency Ratio........................... 7
Delinquent Receivable....................... 8
Designated Obligor.......................... 8
Determination Date.......................... 8
EBITD....................................... 8
Eligible Asset.............................. 8
Eligible Receivable......................... 9
ERISA....................................... 11
Eurocurrency Liabilities.................... 11
Eurodollar Rate............................. 11
i
<PAGE> 3
Eurodollar Rate Reserve Percentage.......... 11
Event of Investment Ineligibility........... 11
Excluded Obligors........................... 11
Excluded Receivables........................ 11
Facility.................................... 12
Facility Termination Date................... 12
Federal Funds Rate.......................... 12
Fixed Period................................ 12
GAAP........................................ 13
Investor.................................... 13
Investor Rate............................... 13
Liquidation Day............................. 14
Liquidation Fee............................. 14
Liquidation Yield........................... 14
Loan Documents.............................. 15
Lock-Box Account............................ 15
Lock-Box Agreement.......................... 15
Lock-Box Bank............................... 15
Loss Percentage............................. 15
Loss Reserve................................ 15
Net Receivables Pool Balance................ 15
Notice of Effectiveness..................... 16
Obligor..................................... 16
Outstanding Balance......................... 16
Owner....................................... 16
Parallel Purchase Commitment................ 16
Person...................................... 16
Pool Receivable............................. 16
Purchase.................................... 16
Purchase Limit.............................. 16
Rate Ratio.................................. 16
Receivable.................................. 16
Receivables Pool............................ 17
Reinvestment Termination Date............... 17
Related Security............................ 17
Responsible Officer......................... 17
Seller Report............................... 18
Settlement Period........................... 18
Subsidiary.................................. 18
Termination Date............................ 18
UCC......................................... 18
Yield....................................... 18
Yield Reserve............................... 19
SECTION 1.02. Other Terms................................. 19
SECTION 1.03. Computation of Time Periods................. 19
SECTION 1.04. Accounting Terms............................ 20
ii
<PAGE> 4
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Facility.................................... 20
SECTION 2.02. Making Purchases............................ 20
SECTION 2.03. Termination of Facility or
Reduction of the Purchase Limit............. 21
SECTION 2.04. Eligible Asset.............................. 21
SECTION 2.05. Non-Liquidation
Settlement Procedures....................... 22
SECTION 2.06. Liquidation Settlement Procedures........... 23
SECTION 2.07. General Settlement Procedures............... 24
SECTION 2.08. Payments and Computations, Etc. ............ 25
SECTION 2.09. Dividing or Combining of
Eligible Assets............................. 25
SECTION 2.10. Fees and Payments........................... 26
SECTION 2.11. Increased Costs............................. 26
SECTION 2.12. Additional Yield on Eligible
Assets Bearing a Eurodollar Rate............ 28
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to
Initial Purchase............................ 28
SECTION 3.02. Conditions Precedent to All
Purchases and Reinvestments................. 31
SECTION 3.03. Conditions Precedent to Effectiveness
of the Amendment and Restatement
of the Original Agreement................... 32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties
of the Seller............................... 34
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller......... 37
SECTION 5.02. Reporting Requirements of the Seller........ 39
SECTION 5.03. Negative Covenants of the Seller............ 41
iii
<PAGE> 5
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent............. 42
SECTION 6.02. Duties of Collection Agent.................. 42
SECTION 6.03. Rights of the Agent......................... 44
SECTION 6.04. Responsibilities of the Seller.............. 45
SECTION 6.05. Further Action Evidencing Purchases......... 45
ARTICLE VII
EVENTS OF INVESTMENT INELIGIBILITY
SECTION 7.01. Events of Investment Ineligibility.......... 46
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action.................... 49
SECTION 8.02. Agent's Reliance, Etc. ..................... 49
SECTION 8.03. CNAI and Affiliates......................... 50
SECTION 8.04. Investor's Purchase Decision................ 50
ARTICLE IX
ASSIGNMENT
SECTION 9.01. Assignment..................................... 50
SECTION 9.02. Annotation of Certificate...................... 52
ARTICLE X
INDEMNIFICATION
SECTION 10.01. Indemnities by the Seller..................... 52
SECTION 10.02. Additional Indemnities........................ 54
SECTION 10.03. Limited Recourse.............................. 54
iv
<PAGE> 6
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc. ........................... 56
SECTION 11.02. Notices, Etc. .............................. 56
SECTION 11.03. No Waiver; Remedies......................... 56
SECTION 11.04. Binding Effect.............................. 56
SECTION 11.05. Governing Law............................... 56
SECTION 11.06. Costs, Expenses and Taxes................... 57
SECTION 11.07. No Proceedings.............................. 58
SECTION 11.08. Confidentiality............................. 58
SECTION 11.09. Execution in Counterparts................... 59
v
<PAGE> 7
LIST OF EXHIBITS
EXHIBIT A Form of Assignment
EXHIBIT B Form of Certificate
EXHIBIT C Seller Report
EXHIBIT D Form of Letter to Lock-Box Account Banks
EXHIBIT E Form of Opinion of Seller's Counsel
SCHEDULE I List of Lock-Box Banks
SCHEDULE II Description of Credit and Collection Policy
SCHEDULE III Form of Contracts
SCHEDULE IV List of Offices of Seller where Records
Relating to the Receivables are Kept
vi
<PAGE> 8
TRADE RECEIVABLES
PURCHASE AND SALE AGREEMENT
Dated as of April 1, 1993
As Amended and Restated as of May 10, 1993
THE GEON COMPANY, a Delaware corporation (the "Seller"), CIESCO L.P., a
New York limited partnership (the "Investor"), and CITICORP NORTH AMERICA, INC.,
a Delaware corporation ("CNAI"), as agent for the Owners (as defined in Section
1.01 hereof) (the "Agent"), agree as follows:
PRELIMINARY STATEMENTS. (1) Certain terms which are capitalized and used
throughout this Agreement (in addition to those defined above) are defined in
Article I of this Agreement.
(2) The Seller has, and expects to have, Pool Receivables in which the
Seller intends to sell interests referred to herein as Eligible Assets.
(3) The Investor desires to purchase Eligible Assets from the Seller.
(4) In consideration of the reinvestment in Pool Receivables of daily
Collections (other than with regard to accrued Yield and the Collection Agent
Fee) attributable to an Eligible Asset, the Seller will sell to the Owner of
such Eligible Asset additional interests in the Pool Receivables as part of such
Eligible Asset until such reinvestment is terminated. It is intended that such
daily reinvestment of Collections be effected by an automatic daily adjustment
to each Owner's Eligible Assets.
(5) CNAI has been requested and is willing to act as Agent.
(6) This Agreement is an amendment and restatement of the Trade
Receivables Purchase and Sale Agreement, dated as of April 1, 1993, as amended
to date (the "Original Agreement"). The Original Agreement is being amended and
restated hereby to extend the term of the Facility and to make certain other
changes.
NOW, THEREFORE, the parties agree that the Original Agreement is amended
and restated as follows:
<PAGE> 9
2
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ADVERSE CLAIM" means a lien, security interest, charge or
encumbrance, or other right or claim of any person.
"Affiliate" when used with respect to a Person means any other Person
controlling, controlled by or under common control with such Person.
"AFFILIATED OBLIGOR" means any Obligor which is an Affiliate of
another Obligor
"AGENT'S ACCOUNT" means the special account (account number 4060-5071)
of the Agent maintained at the office of Citibank at 399 Park Avenue, New
York, New York.
"ALTERNATE BASE RATE" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be equal
to the highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of 1% or, if there is no
nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1% per
annum, plus (ii) the rate obtained by dividing (A) the latest
three-week moving average of secondary market morning offering rates
in the United States for three-month certificates of deposit of major
United States money market banks, such three-week moving average
(adjusted to the basis of a year of 365/366 days) being determined
weekly on each Monday (or, if such day is not a Business Day, on the
next succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication
<PAGE> 10
3
shall be suspended or terminated, on the basis of quotations for such
rates received by Citibank from three New York certificate of deposit
dealers of recognized standing selected by the Agent, by (B) a
percentage equal to 100% minus the average of the daily percentages
specified during such three-week period by the Board of Governors of
the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for
Citibank with respect to liabilities consisting of or including (among
other liabilities) three-month U.S. dollar non-personal time deposits
in the United States, plus (iii) the average during such three-week
period of the annual assessment rates estimated by Citibank for
determining the then current annual assessment payable by Citibank to
the Federal Deposit Insurance Corporation (or any successor) for
insuring U.S. dollar deposits of Citibank in the United States; and
(c) 1/2 of 1% per annum above the Federal Funds Rate.
"APPLICABLE MARGIN" means, as of any date (a) prior to March 31, 1994,
0% per annum for interest calculated at the Alternate Base Rate and 7/8 of
1% per annum for interest calculated at the Eurodollar Rate and (b) on or
after March 31, 1994, that percentage per annum set forth below for such
interest rate opposite the description of Rate Ratio set forth below in
which is included the Rate Ratio in effect on such date:
Alternate
Base Eurodollar
Rate Ratio Rate Rate
- ---------- ---- ----------
less than .75:1.0 0% 5/8%
.75:1.0 or greater,
but less than 1.5:1.0 0% 7/8%
1.5:1.0 or greater 1/4% 1-1/8%
PROVIDED, HOWEVER, that no change in the Applicable Margin shall be
effective until three Business Days after the date on which the Agent
receives financial statements
<PAGE> 11
4
pursuant to Section 5.02(a) or 5.02(b), demonstrating such Rate Ratio as of
the last day of the period covered by such financial statements.
"ASSIGNEE" means Citibank, CNAI or the Investor or any of their
respective Affiliates or any other Person acceptable to the Agent as the
assignee of an Eligible Asset pursuant to Section 9.01.
"ASSIGNEE RATE" for any Fixed Period for any Eligible Asset means an
interest rate per annum equal to the Eurodollar Rate for such Fixed Period
plus the Applicable Margin then applicable to such Eurodollar Rate,
PROVIDED, HOWEVER, that in the case of
(i) any Fixed Period on or prior to the first day of which the
Owner shall have notified the Agent that, after reasonable efforts by
such Owner (consistent with its internal policy and legal and
regulatory restrictions) to designate a lending office that would
allow such Owner to fund an Eligible Asset at the Assignee Rate set
forth above and which would not, in the judgment of such Owner, be
otherwise disadvantageous to such Owner, the introduction of or any
change occurring on or after the effective date of this Agreement or
in the interpretation of any law or regulation makes it unlawful, or
any central bank or other governmental authority asserts that it is
unlawful, for the Owner to fund such Eligible Asset at the Assignee
Rate set forth above (and the Owner shall not have subsequently
notified the Agent that such circumstances no longer exist),
(ii) any Fixed Period of 1 to (and including) 29 days,
(iii) any Fixed Period as to which the Agent does not receive
notice, by no later than 12:00 noon (New York City time) on the third
Business Day preceding the first day of such Fixed Period, that the
related Eligible Asset will not be funded by issuance of commercial
paper, or
(iv) any Fixed Period for an Eligible Asset the Capital of which
allocated to the Owner is less than $500,000,
the "ASSIGNEE RATE" for such Fixed Period for such Eligible Asset shall be
an interest rate per annum equal to the Alternate Base Rate in effect on
the first day of such Fixed Period plus the "Applicable Margin" then
applicable to "Base Rate Advances" under the Credit
<PAGE> 12
5
Agreement; PROVIDED FURTHER, however, that the Agent and the Seller may
agree in writing from time to time upon a different "Assignee Rate."
"ASSIGNMENT" means an assignment, in substantially the form of Exhibit
A hereto, by which an Eligible Asset may be assigned pursuant to Section
9.01 or the Asset Purchase Agreement, dated as of the date of this
amendment and restatement.
"AVERAGE MATURITY" means, on any day, that period (expressed in days)
equal to the average maturity of the Pool Receivables as shall be
calculated by the Collection Agent as set forth in the most recent Seller
Report in accordance with the provisions thereof; provided, however, that,
if the Agent shall disagree with any such calculation, the Agent may
recalculate the Average Maturity for such day.
"BFG" means The B.F. Goodrich Company, a New York corporation.
"BFG AGREEMENT" means the Trade Receivables Purchase and Sale
Agreement, dated as of May 8, 1987 as amended and restated as of July 10,
1992 among BFG, the Investor and the Agent.
"BFG OWNERS" means collectively each "Owner" under the BFG Agreement.
"BUSINESS DAY" means any day on which (i) banks are not authorized or
required to close in New York City and (ii) if this definition of "Business
Day" is utilized in connection with the Eurodollar Rate, dealings are
carried out in the London interbank market.
"CAPITAL" of any Eligible Asset means the original amount paid to the
Seller for such Eligible Asset at the time of its acquisition by the
Investor pursuant to Sections 2.01 and 2.02, or such amount divided or
combined by any dividing or combining of such Eligible Asset pursuant to
Section 2.09, in each case reduced from time to time by Collections
received and distributed on account of such Capital pursuant to Section
2.06; PROVIDED, HOWEVER, that such Capital of such Eligible Asset shall not
be reduced by any distribution of any portion of Collections if at any time
such distribution is rescinded or must otherwise be returned for any
reason.
"CERTIFICATE" means a certificate of assignment by the Seller to the
Agent in the form of Exhibit B hereto, evidencing each Eligible Asset.
"CITIBANK" means Citibank, NA., a national banking association.
<PAGE> 13
6
"COLLECTION AGENT" means at any time the Person (including the Agent)
then authorized pursuant to Article VI to service, administer and collect
Pool Receivables.
"COLLECTION AGENT FEE" has the meaning assigned to that term in
Section 2.10.
"COLLECTION AGENT FEE RESERVE" for any Eligible Asset at any time
means the unpaid Collection Agent Fee relating to such Eligible Asset
accrued to such time.
"COLLECTIONS" means, with respect to any Pool Receivable, all cash
collections and other cash proceeds of such Pool Receivable, including,
without limitation, all cash proceeds of Related Security with respect to
such Pool Receivable, and any Collection of such Pool Receivable deemed to
have been received pursuant to Section 2.07.
"CONCENTRATION LIMIT" for any Obligor means at any time 3 1/3%, or
such other percentage ("SPECIAL CONCENTRATION LIMIT") for any Obligor
designated by the Agent in a writing delivered to the Seller; PROVIDED,
HOWEVER, that in the case of an Obligor with any Affiliated Obligor, the
Concentration Limit shall be calculated as if such Obligor and such
Affiliated Obligor are one Obligor; PROVIDED, HOWEVER, that the Agent may
cancel any Special Concentration Limit upon three Business Days' notice to
the Seller.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in the
Credit Agreement in effect on the date hereof.
"CONSOLIDATED" refers to the consolidation of accounts in accordance
with GAAP.
"CONTRACT" means an agreement between the Seller and an Obligor, in
substantially the form of one of the forms of written contract set forth in
Schedule III hereto or otherwise approved by the Agent, or in the case of
an open account agreement, as evidenced by one of the forms of invoices set
forth in Schedule III hereto or otherwise approved by the Agent, pursuant
to or under which such Obligor shall be obligated to pay for merchandise,
insurance or services from time to time.
<PAGE> 14
7
"CREDIT AGREEMENT" means the Credit Agreement, dated as of the date
hereof, among the Seller, the Banks party thereto and Citibank, as Agent,
as the same may be amended from time to time in accordance with its terms.
"CREDIT AND COLLECTION POLICY" means those credit and collection
policies and practices in effect on the date hereof relating to Contracts
and Receivables described in Schedule II hereto, as modified in compliance
with Section 5.03(c).
"DEBT" shall have the meaning set forth in the Credit Agreement in
effect on the date hereof; any capitalized terms used in the definition of
Debt set forth in the Credit Agreement shall have the meanings given to
such terms in the Credit Agreement as of such date and are hereby
incorporated herein by reference.
"DEFAULT RATIO" means the ratio (expressed as a percentage) computed
as of the last day of each calendar month by dividing (i) the aggregate
Outstanding Balance of all Pool Receivables that were Defaulted Receivables
on such date or would have been Defaulted Receivables on such date had they
not been written off the books of the Seller during such month by (ii) the
aggregate Outstanding Balance of all Pool Receivables on such date.
"DEFAULTED RECEIVABLE" means a Receivable:
(i) as to which any payment, or part thereof, remains unpaid for
91 days or more from the original due date for such payment,
(ii) as to which the Obligor thereof has taken any action, or
suffered any event to occur, of the type described in Section 7.01(g),
(iii) which is subject to any dispute, offset, counterclaim or
defense whatsoever (except the discharge in bankruptcy of the Obligor
thereof) or
(iv) which, consistent with the Credit and Collection Policy,
would be written off the Seller's books as uncollectible.
"DELINQUENCY RATIO" means the ratio (expressed as a percentage)
computed as of the last day of each calendar month by dividing (i) the
aggregate Outstanding Balance of all Pool Receivables that were Delinquent
Receivables
<PAGE> 15
8
at the end of such month by (ii) the aggregate Outstanding Balance of all
Pool Receivables on such date.
"DELINQUENT RECEIVABLE" means a Receivable that is not a Defaulted
Receivable and:
(i) as to which any payment, or part thereof, remains unpaid for
61 to 90 days from the original due date for such payment; or
(ii) which, consistent with the Credit and Collection Policy,
would be classified as delinquent by the Seller.
"DESIGNATED OBLIGOR" means, at any time, all Obligors; provided,
however, that any Obligor shall cease to be a Designated Obligor upon three
Business Days notice by the Agent to the Seller or pursuant to Section
10.03.
"DETERMINATION DATE" has the meaning assigned to that term in Section
10.03.
"EBITD" means, for any period, net income (or net loss) plus the sum
of (a) interest expense minus (b) the amount of such interest expense which
shall have been capitalized during such period, plus (c) income tax expense
plus (d) depreciation expense, in each case determined in accordance with
GAAP for such period.
"ELIGIBLE ASSET" means, at any time, an undivided percentage ownership
interest at such time in (i) all then outstanding Pool Receivables arising
prior to the time of the most recent computation or recomputation of such
undivided percentage interest pursuant to Section 2.04, (ii) all Related
Security with respect to such Pool Receivables and (iii) all Collections
with respect to, and other proceeds of, such Pool Receivables. Such
undivided percentage interest for such Eligible Asset shall be computed as
C + YR + LR + CAFR
------------------
NRPB
where:
C = the Capital of such Eligible Asset at the
time of such computation.
YR = the Yield Reserve of such Eligible Asset
at the time of such computation.
<PAGE> 16
9
LR = the Loss Reserve of such Eligible Asset at
the time of such computation.
CAFR = the Collection Agent Fee Reserve of such
Eligible Asset at the time of such
computation.
NRPB = the Net Receivables Pool Balance at the
time of such computation.
Each Eligible Asset shall be determined from time to time pursuant to the
provisions of Section 2.04.
"ELIGIBLE RECEIVABLE" means, at any time and with respect to any
Eligible Asset, a Receivable:
(i) the Obligor of which is a United States resident, is not an
Affiliate of any of the parties hereto, and is not a government or a
governmental subdivision or agency;
(ii) the Obligor of which at the time of the initial creation of
an interest therein hereunder is a Designated Obligor;
(iii) the Obligor of which at the time of the initial creation of
an interest therein hereunder is not the Obligor of any Defaulted
Receivables in the aggregate amount of 5% or more of the aggregate
Outstanding Balance of all Pool Receivables of such Obligor;
(iv) which at the time of the initial creation of an interest
therein hereunder is not a Defaulted Receivable or a Delinquent
Receivable;
(v) which, according to the Contract related thereto, is required
to be paid in full within 30 days (or, in the case of Receivables
having an Outstanding Balance not exceeding 25% of the Outstanding
Balance of all Pool Receivables, 90 days) of the original billing date
therefor;
(vi) which is an account receivable representing all or part of
the sales price of merchandise, insurance and services within the
meaning of Section 3(c)(5) of the Investment Company Act of 1940, as
amended;
<PAGE> 17
10
(vii) a purchase of which with the proceeds of notes would
constitute a "current transaction" within the meaning of Section
3(a)(3) of the Securities Act of 1933, as amended;
(viii) which is an "account" within the meaning of Section 9-106
of the UCC of the State of Ohio;
(ix) which is denominated and payable only in United States
dollars in the United States;
(x) which arises under a Contract which has been duly authorized
and which, together with such Receivable, is in full force and effect
and constitutes the legal, valid and binding obligation of the Obligor
of such Receivable enforceable against such Obligor in accordance with
its terms and is not subject to any dispute, offset, counterclaim or
defense whatsoever (except the discharge in bankruptcy of such
Obligor);
(xi) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect;
(xii) which (A) satisfies all applicable requirements of the
Credit and Collection Policy and (B) complies with such other criteria
and requirements (other than those relating to the collectibility of
such Receivable) as the Agent may from time to time specify to the
Seller upon 30 days notice; and
(xiii) as to which, at or prior to the time of the initial
creation of an interest therein through a Purchase, the Agent has not
notified the Seller that the Agent has determined, in its sole
discretion, that such Receivable (or class of Receivables) is not
acceptable for purchase by the Investor hereunder.
<PAGE> 18
11
"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended from time to time and the regulations promulgated and
rulings issued thereunder.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"EURODOLLAR RATE" means, for any Fixed Period, an interest rate per
annum at which deposits in U.S. dollars are offered by the principal office
of Citibank in London, England to prime banks in the London interbank
market at 11:00 A.M. (London time) two Business Days before the first day
of such Fixed Period in an amount substantially equal to the Capital
associated with such Fixed Period on such first day and for a period equal
to such Fixed Period.
"EURODOLLAR RATE RESERVE PERCENTAGE" of any Owner for any Fixed Period
in respect of which Yield is computed by reference to the Eurodollar Rate
means the reserve percentage applicable during such Fixed Period (or, if
more than one such percentage shall be so applicable, the daily average of
such percentages for those days in such Fixed Period during which any such
percentage shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for such Owner with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or with respect to any
other category of liabilities that includes deposits by reference to which
the interest rate on Eurocurrency Liabilities is determined) having a term
equal to such Fixed Period.
"EVENT OF INVESTMENT INELIGIBILITY" has the meaning assigned to that
term in Section 7.01.
"EXCLUDED OBLIGORS" has the meaning assigned to that term in Section
10.03.
"EXCLUDED RECEIVABLES" has the meaning assigned to that term in
Section 10.03.
"FACILITY" means the willingness of the Investor to consider, in its
sole discretion pursuant to Article II,
<PAGE> 19
12
the purchase from the Seller of undivided percentage interests in Pool
Receivables by making Purchases of Eligible Assets from time to time.
"FACILITY TERMINATION DATE" means the earlier of December 31, 1997 or
the date of termination of the Facility pursuant to Section 2.03 or Section
7.01.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by
the Agent from three federal funds brokers of recognized standing selected
by it.
"FIXED PERIOD" means with respect to any Eligible Asset:
(a) initially the period commencing on the date of the Purchase
of such Eligible Asset and ending such number of days, as the Seller
shall select and the Agent shall approve pursuant to Section 2.02, up
to 270 days from such date; and
(b) thereafter each period commencing on the last day of the
immediately preceding Fixed Period for such Eligible Asset and ending
such number of days (not to exceed 270 days as the Seller shall select
and the Agent shall approve on notice by the Seller received by the
Agent (including notice by telephone, confirmed in writing) not later
than 11:00 A.M. (New York City time) on such last day, except that if
the Agent shall not have received such notice or the Agent and the
Seller shall not have so mutually agreed before 11:00 A.M. (New York
City time) on such last day, such period shall be one day;
PROVIDED, HOWEVER, THAT:
(i) any Fixed Period in respect of which Yield is computed by
reference to the Assignee Rate shall be a period of from one to and
including 29 days, or a period of one, two, three or six months as the
Seller may select as provided for above;
<PAGE> 20
13
(ii) any such Fixed Period (other than of one day) which would
otherwise end on a day which is not a Business Day shall be extended
to the next succeeding Business Day (PROVIDED, HOWEVER, if Yield in
respect of such Fixed Period is computed by reference to the
Eurodollar Rate, and such Fixed Period would otherwise end on a day
which is not a Business Day, and there is no subsequent Business Day
in the same calendar month as such day, such Fixed Period shall end on
the next preceding Business Day);
(iii) in the case of Fixed Periods of one day for any Eligible
Asset, (A) if such Fixed Period is such Eligible Asset's initial Fixed
Period, such Fixed Period shall be the day of the related Purchase;
(B) any subsequently occurring Fixed Period which is one day shall, if
the immediately preceding Fixed Period is more than one day, be the
last day of such immediately preceding Fixed Period, and, if the
immediately preceding Fixed Period is one day, be the day next
following such immediately preceding Fixed Period; and (C) which
occurs on a day immediately preceding a day which is not a Business
Day shall be extended to the next succeeding Business Day; and
(iv) in the case of any Fixed Period for any Eligible Asset which
commences before the Termination Date for such Eligible Asset and
would otherwise end on a date occurring after such Termination Date,
such Fixed Period shall end on such Termination Date and the duration
of each Fixed Period which commences on or after the Termination Date
for such Eligible Asset shall be of such duration as shall be selected
by the Agent.
"GAAP" has the meaning specified in Section 1.04.
"INVESTOR" means Ciesco L.P. and any successor or assign of Ciesco
L.P. that is a receivables investment company which in the ordinary course
of its business issues commercial paper or other securities to fund its
acquisition and maintenance of receivables.
"INVESTOR RATE" for any Fixed Period for any Eligible Asset means, to
the extent the Investor funds such Eligible Asset for such Fixed Period by
issuing
<PAGE> 21
14
commercial paper, the rate equivalent to the rate (or if more than one
rate, the weighted average of the rates) at which commercial paper notes of
the Investor having a term equal to such Fixed Period and to be issued to
fund the Purchase or maintenance of such Eligible Asset may be sold by any
placement agent or commercial paper dealer selected by the Agent on behalf
of the Investor, as agreed between each such agent or dealer and the Agent
and notified by the Agent to the Collection Agent; PROVIDED, HOWEVER, if
the rate (or rates) as agreed between any such agent or dealer and the
Agent with regard to any Fixed Period for any Eligible Asset is a discount
rate (or rates), the "INVESTOR RATE" for such Fixed Period shall be the
rate (or if more than one rate, the weighted average of the rates)
resulting from converting such discount rate (or rates) to an
interest-bearing equivalent rate per annum.
"LIQUIDATION DAY" for any Eligible Asset means either (i) each day
during any Settlement Period for such Eligible Asset on which the
conditions set forth in Section 3.02 are not satisfied (or such failure of
conditions is not waived by the Agent), or (ii) each day which occurs on or
after the Termination Date for such Eligible Asset.
"LIQUIDATION FEE" means, for any Fixed Period during which a
Liquidation Day occurs, the amount, if any, by which (i) the additional
Yield (calculated without taking into account any Liquidation Fee or any
shortened duration of such Fixed Period pursuant to clause (iv) of the
definition thereof) which would have accrued during such Fixed Period on
the reductions of Capital of the Eligible Asset relating to such Fixed
Period had such reductions remained as Capital, exceeds (ii) the income, if
any, received by the Owner's investing the proceeds of such reductions of
Capital.
"LIQUIDATION YIELD" means, for any Eligible Asset at any date, an
amount equal to the product of (i) the Capital of such Eligible Asset as at
such date and (ii) the product of (a) the Assignee Rate for such Eligible
Asset for a Fixed Period deemed to commence at such time for a period of 30
days and (b) a fraction having as its numerator the number of days in the
period equal to the Average Maturity (as in effect at such date) and 360 as
its denominator.
<PAGE> 22
15
"LOAN DOCUMENTS" shall have the meaning set forth in the Credit
Agreement.
"LOCK-BOX ACCOUNT" means an account maintained at a Lock-Box Bank for
the purpose of receiving Collections.
"LOCK-BOX AGREEMENT" means an agreement, in substantially the form of
Exhibit D hereto, from the Seller to any Lock-Box Bank with such
modifications as may be acceptable to the Agent.
"LOCK-BOX BANK" means any of the banks holding one or more Lock-Box
Accounts.
"LOSS PERCENTAGE" means, for any Eligible Asset at any date, the
greatest of (i) three times the highest Default Ratio as of the last day of
the 12 months ended immediately preceding such date, (ii) three times the
Concentration Limit and (iii) 10%.
"LOSS RESERVE" means, for any Eligible Asset at any date, an amount
equal to
LP x (C + YR)
where :
LP = the Loss Percentage for such Eligible Asset at
the close of business of the Collection Agent
on such date.
C = the Capital of such Eligible Asset at the close
of business of the Collection Agent on such
date.
YR = the Yield Reserve for such Eligible Asset at
the close of business of the Collection Agent
on such date.
"NET RECEIVABLES POOL BALANCE" means, at any time, the Outstanding
Balance of the Eligible Receivables in the Receivables Pool at such time
reduced by the sum of (i) the aggregate Outstanding Balance of the
Defaulted Receivables in the Receivables Pool at such time and (ii) the
aggregate amount by which the Outstanding Balance of Eligible Receivables
(other than Defaulted Receivables) of each Obligor then in the Receivables
Pool exceeds the
<PAGE> 23
16
product of (a) the Concentration Limit for such Obligor multiplied by (b)
the Outstanding Balance of the Eligible Receivables then in the Receivables
Pool.
"NOTICE OF EFFECTIVENESS" means a notice of effectiveness in the form
of Annex 1 to Exhibit D hereto.
"OBLIGOR" means a Person obligated to make payments pursuant to a
Contract.
"OUTSTANDING BALANCE" of any Receivable at any time means the then
outstanding principal balance thereof.
"OWNER" means the Investor and all other owners by assignment or
otherwise of an Eligible Asset and, to the extent of the undivided
interests so purchased, shall include any participants.
"PARALLEL PURCHASE COMMITMENT" means the Parallel Purchase Commitment,
dated as of May 10, 1993, among the Seller, Citibank, the other financial
institutions party thereto and CNAI, as Agent, as the same may be amended
from time to time in accordance with its terms.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"POOL RECEIVABLE" means a Receivable in the Receivables Pool.
"PURCHASE" means a purchase by the Investor of an Eligible Asset from
the Seller pursuant to Article II.
"PURCHASE LIMIT" means $65,000,000, as such amount may be reduced
pursuant to Section 2.03.
"RATE RATIO" means, as of any date, the ratio of (a) Consolidated
total Debt of the Seller and its Subsidiaries as of such date to (b)
Consolidated EBITD of the Seller and its Subsidiaries for the period of
four consecutive fiscal quarters ended on or immediately before such date.
"RECEIVABLE" means the indebtedness of any Obligor under a Contract
arising from a sale by Seller, and
<PAGE> 24
17
includes the right to payment of any interest or finance charges and other
obligations of such Obligor with respect thereto.
"RECEIVABLES POOL" means at any time the aggregation of each then
outstanding Receivable in respect of which the Obligor is a Designated
Obligor or, as to any Receivable in existence on such date, was a
Designated Obligor on the date of any Purchase or reinvestment pursuant to
Section 2.05, and which is not excluded from the Receivables Pool pursuant
to Section 10.03.
"REINVESTMENT TERMINATION DATE" for any Eligible Asset means that
Business Day which the Seller designates, or, if the conditions precedent
in Section 3.02 are not satisfied, such Business Day which the Agent
designates, as the Reinvestment Termination Date for such Eligible Asset by
notice to the Agent (if the Seller so designates) or to the Seller (if the
Agent so designates) at least one Business Day prior to such Business Day.
"RELATED SECURITY" means with respect to any Receivable :
(i) all of the Seller's interest in the merchandise (including
returned merchandise), if any, relating to the sale which gave rise to
such Receivable;
(ii) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable; and
(iii) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of such Receivable whether pursuant to the Contract
related to such Receivable or otherwise.
"RESPONSIBLE OFFICER" means the chief financial officer, controller or
chief accounting officer of the Seller.
<PAGE> 25
18
"SELLER REPORT" means a report, in substantially the form of Exhibit C
hereto, furnished by the Collection Agent to the Agent for each Owner
pursuant to Section 2.07.
"SETTLEMENT PERIOD" for any Eligible Asset means each period
commencing on the first day of each Fixed Period for such Eligible Asset
and ending on the last day of such Fixed Period, and, on and after the
Termination Date for such Eligible Asset, such period (including, without
limitation, a daily period) as shall be selected from time to time by the
Agent or, in the absence of any such selection, each period of thirty days
from the last day of the immediately preceding Settlement Period.
"SUBSIDIARY" of any Person means any corporation, partnership, joint
venture, trust or estate of which (or in which) more than 50% of (a) the
issued and outstanding capital stock having ordinary voting power to elect
a majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such
partnership or joint venture or (c) the beneficial interest in such trust
or estate is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by one
or more of such Person"s other Subsidiaries.
"TERMINATION DATE" for any Eligible Asset means the earlier of (i) the
Reinvestment Termination Date for such Eligible Asset and (ii) the Facility
Termination Date.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
"YIELD" means:
(i) for each Eligible Asset for any Fixed Period to the extent
the Investor will be funding such Eligible Asset on the first day of
such Fixed Period through the issuance of commercial paper,
IR x C x ED + LF
--
360
<PAGE> 26
19
(ii) for each Eligible Asset for any Fixed Period to the extent
the Owner will not be funding such Eligible Asset on the first day of
such Fixed Period through the issuance of commercial paper,
AR x C x ED + LF
--
360
where:
AR = the Assignee Rate for such Eligible Asset for
such Fixed Period.
C = the Capital of such Eligible Asset during such
Fixed Period.
IR = the Investor Rate for such Eligible Asset for
such Fixed Period.
ED = the actual number of days elapsed during such
Fixed Period.
LF = the Liquidation Fee, if any, for such Eligible
Asset for such Fixed Period.
PROVIDED, HOWEVER, that no provision of this Agreement or the Certificate
shall require the payment or permit the collection of Yield in excess of
the maximum permitted by applicable law; and PROVIDED FURTHER that Yield
for any Eligible Asset shall not be considered paid by any distribution if
at any time such distribution is rescinded or must otherwise be returned
for any reason.
"YIELD RESERVE" for any Eligible Asset at any time means the sum of
(i) the Liquidation Yield at such time for such Eligible Asset, and (ii)
the accrued and unpaid Yield for such Eligible Asset.
SECTION 1.02. OTHER TERMS. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
SECTION 1.03. COMPUTATION OF TIME PERIODS. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified
<PAGE> 27
20
date, the word "from" means "from and including" and the words "to" and "until"
each mean 'to but excluding."
SECTION 1.04. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(e) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. FACILITY. On the terms and conditions hereinafter set
forth, the Investor may, in its sole discretion, make Purchases from time to
time during the period from the date hereof to the Facility Termination Date.
Under no circumstances shall the Investor make any Purchase if, after giving
effect to such Purchase, the aggregate outstanding Capital of Eligible Assets,
together with the aggregate outstanding "Capital" of "Eligible Assets" under the
Parallel Purchase Commitment would exceed the Purchase Limit. The Owner of each
Eligible Asset shall, with the proceeds of Collections attributable to such
Eligible Asset, reinvest, pursuant to Section 2.05, in additional undivided
percentage interests in the Pool Receivables by making an appropriate
readjustment of such Eligible Asset. Nothing in this Agreement shall be deemed
to be or construed as a commitment by the Investor (or CNAI or Citibank) to
purchase any Eligible Asset at any time.
SECTION 2.02. MAKING PURCHASES. (a) Each Purchase shall be made on at
least three Business Days' notice from the Seller to the Agent. Each such notice
of a proposed Purchase shall specify the desired amount (which shall not be less
than $5,000,000), date and duration of the initial Fixed Period for the Eligible
Asset to be purchased. The Agent shall promptly notify the Seller whether such
terms are acceptable to the Investor.
(b) On the date of each Purchase, the Investor shall, upon satisfaction
of the applicable conditions set forth in Article III, make available to the
Agent the amount of its Purchase by deposit of such amount in same day funds to
the Agent's Account, and, after receipt by the Agent of such funds, the Agent
will cause such funds to be made immediately available to the Seller at
Citibank's office at
<PAGE> 28
21
399 Park Avenue, New York, New York. The Investor shall on the date of each
Purchase, and the Owner of each Eligible Asset shall on the first day of each
Fixed Period (other than the initial Fixed Period) for such Eligible Asset,
notify the Agent of the Investor Rate or Assignee Rate, as the case may be, for
such Fixed Period.
SECTION 2.03. TERMINATION OF FACILITY OR REDUCTION OF THE PURCHASE LIMIT.
(a) OPTIONAL. The Seller may, upon at least five Business Days' notice to the
Agent, terminate the Facility in whole or reduce in part the unused portion of
the Purchase Limit; PROVIDED, HOWEVER, that for purposes of this Section
2.03(a), the unused portion of the Purchase Limit shall be computed as the
excess of (A) the Purchase Limit immediately prior to giving effect to such
termination or reduction over (B) the sum of (i) the aggregate Capital of
Eligible Assets outstanding at the time of such computation and (ii) the
aggregate "Capital" of "Eligible Assets" outstanding under the Parallel Purchase
Commitment at such time; PROVIDED FURTHER that each partial reduction shall be
in an amount equal to $5,000,000 or an integral multiple of $1,000,000 in excess
thereof.
(b) MANDATORY. On each day on which the Seller shall, pursuant to Section
2.03(a) of the Parallel Purchase Commitment, reduce in part the unused portion
of the Commitment (as defined in the Parallel Purchase Commitment), the Purchase
Limit shall automatically reduce by an equal amount. The Purchase Limit shall
automatically terminate in whole on any day on which the Seller shall terminate
in whole the Commitment pursuant to Section 2.03(a) of the Parallel Purchase
Commitment.
SECTION 2.04. ELIGIBLE ASSET. (a) Each Eligible Asset shall be initially
computed as of the opening of business of the Collection Agent on the date of
Purchase of such Eligible Asset. Thereafter until the Termination Date for such
Eligible Asset, such Eligible Asset shall be automatically recomputed as of the
close of business of the Collection Agent on each day (other than a Liquidation
Day). Such Eligible Asset shall remain constant from the time as of which any
such computation or recomputation is made until the time as of which the next
such recomputation, if any, shall be made. Any Eligible Asset, as computed as of
the day immediately preceding the Termination Date for such Eligible Asset,
shall remain constant at all times on and after such Termination Date. Such
Eligible Asset shall become zero at such time as the Owner of such Eligible
Asset shall have
<PAGE> 29
22
received the accrued Yield for such Eligible Asset and shall have recovered the
Capital of such Eligible Asset, and the Collection Agent shall have received the
accrued Collection Agent Fee for such Eligible Asset.
(b) If any Eligible Asset would otherwise be reduced on any day on
account of Receivables arising as or becoming Pool Receivables, the Owner of
such Eligible Asset may prevent such reduction by giving notice to the
Collection Agent, before the close of business of the Collection Agent on such
day, that such Eligible Asset's interest in such Receivables is to be limited so
as to prevent such reduction. If such notice is given for any day for any
Eligible Asset, the Receivables Pool for such Eligible Asset, and the Net
Receivables Pool Balance for such Eligible Asset, will include, with respect to
Receivables arising as or becoming Pool Receivables on such day, only such
number of such Receivables or such portion of such Receivables as shall cause
such Eligible Asset to remain constant, such Receivables or portion thereof
being included in the Receivables Pool for such Eligible Asset in the order of
the Seller's account numbers for such Receivables up to an aggregate amount so
as to cause such Eligible Asset to remain constant, and the remainder of such
Receivables or portion thereof shall be treated as Receivables arising on the
next succeeding Business Day.
SECTION 2.05. NON-LIQUIDATION SETTLEMENT PROCEDURES. On each day (other
than a Liquidation Day) during each Settlement Period for each Eligible Asset,
the Collection Agent shall: (i) out of Collections of Pool Receivables
attributable to such Eligible Asset received on such day, set aside and hold in
trust for the Owner of such Eligible Asset an amount equal to the Yield and
Collection Agent Fee accrued through such day for such Eligible Asset and not so
previously set aside and (ii) reinvest the remainder of such Collections, for
the benefit of such Owner, by recomputation of such Eligible Asset pursuant to
Section 2.04 as of the end of such day and the payment of such remainder to the
Seller; PROVIDED, HOWEVER, that, to the extent that the Agent or any Owner shall
be required for any reason to pay over any amount of Collections which shall
have been previously reinvested for the account of such Owner pursuant hereto,
such amount shall be deemed not to have been so applied but rather to have been
retained by the Seller and paid over for the account of such Owner and,
notwithstanding any provision hereof to the contrary, such Owner shall have a
claim for such amount. On the last day of each Settlement
<PAGE> 30
23
Period for each Eligible Asset, the Collection Agent shall deposit to the
Agent's Account for the account of the Owner of such Eligible Asset the amounts
set aside as described in clause (i) of the first sentence of this Section 2.05.
Upon receipt of such funds by the Agent, the Agent shall distribute them to the
Owner of such Eligible Asset in payment of the accrued Yield for such Eligible
Asset and to the Collection Agent in payment of the accrued Collection Agent Fee
payable with respect to such Eligible Asset. If there shall be insufficient
funds on deposit for the Agent to distribute funds in payment in full of the
aforementioned amounts, the Agent shall distribute funds, FIRST, in payment of
the accrued Yield for such Eligible Asset, and SECOND, in payment of the accrued
Collection Agent Fee payable with respect to such Eligible Asset.
SECTION 2.06. LIQUIDATION SETTLEMENT PROCEDURES. On each Liquidation Day
during each Settlement Period for each Eligible Asset, the Collection Agent
shall set aside and hold in trust for the Owner of such Eligible Asset the
Collections of Pool Receivables attributable to such Eligible Asset received on
such day. On the last day of each Settlement Period for each Eligible Asset, the
Collection Agent shall deposit to the Agent's Account for the account of the
Owner of such Eligible Asset the amounts set aside pursuant to the preceding
sentence but not to exceed the sum of (i) the accrued Yield for such Eligible
Asset, (ii) the Capital of such Eligible Asset, (iii) the accrued Collection
Agent Fee payable with respect to such Eligible Asset and (iv) the aggregate
amount of other amounts owed hereunder by the Seller to the Owner of such
Eligible Asset. Any amounts set aside pursuant to the first sentence of this
Section 2.06 and not required to be deposited to the Agent's Account pursuant to
the preceding sentence shall be paid to the Seller by the Collection Agent;
PROVIDED, HOWEVER, that, if amounts are set aside during such Settlement Period
pursuant to the first sentence of this Section 2.06 on any Liquidation Day and
thereafter during such Settlement Period the conditions set forth in Section
3.02 are satisfied or are waived by the Agent, such previously set aside amounts
shall, to the extent representing a return of Capital, be applied pursuant to
clause (ii) of the first sentence of Section 2.05 on the day of such subsegment
satisfaction or waiver of conditions. Upon receipt of funds deposited to the
Agent's Account pursuant to the preceding sentence or Section 7.07 of the Credit
Agreement, the Agent shall distribute them (i) to the Owner of such Eligible
Asset (a) in payment of the accrued Yield for such Eligible Asset, (b) in
reduction (to zero) of the Capital of such Eligible Asset and (c) in payment
<PAGE> 31
24
of any other amounts owed by the Seller hereunder to such Owner and (ii) to the
Collection Agent in payment of the accrued Collection Agent Fee payable with
respect to such Eligible Asset. If there shall be insufficient funds on deposit
for the Agent to distribute funds in payment in full of the aforementioned
amounts, the Agent shall distribute funds, FIRST, in payment of the accrued
Yield for such Eligible Asset, SECOND, in reduction of Capital of such Eligible
Asset, THIRD, in payment of other amounts payable to such Owner, and FOURTH, in
payment of the accrued Collection Agent Fee payable with respect to such
Eligible Asset.
SECTION 2.07. GENERAL SETTLEMENT PROCEDURES. If on any day the
Outstanding Balance of a Pool Receivable is either (a) reduced as a result of
any defective, rejected or returned merchandise, insurance or services, any cash
discount, or any adjustment by the Seller, or (b) reduced or cancelled as a
result of a setoff in respect of any claim by the Obligor thereof against the
Seller (whether such claim arises out of the same or a related transaction or an
unrelated transaction), the Seller shall be deemed to have received on such day
a Collection of such Receivable in the amount of such reduction or cancellation.
If on any day any of the representations or warranties in Section 4.01(h) is no
longer true with respect to a Pool Receivable, the Seller shall be deemed to
have received on such day a Collection in full of such Pool Receivable. Except
as stated in the preceding sentences of this Section 2.07 or as otherwise
required by law or the underlying Contract, all Collections received from an
Obligor of any Receivable shall be applied to Receivables then outstanding of
such Obligor in the order of the age of such Receivables, starting with the
oldest such Receivable, except if payment is designated by such Obligor for
application to specific Receivables. Prior to the tenth Business Day of each
month, the Collection Agent shall prepare and forward to the Agent for each
Owner of an Eligible Asset (i) a Seller Report, relating to each Eligible Asset,
as of the close of business of the Collection Agent on the last day of the
immediately preceding month, and (ii) at the request of the Agent, a listing by
Obligor of all Pool Receivables, together with an analysis as to the aging of
such Receivables. On or prior to the day the Collection Agent is required to
make a deposit with respect to a Settlement Period pursuant to Section 2.05 or
2.06, the Seller will advise the Agent of each Liquidation Day occurring during
such Settlement Period and of the allocation of the amount of such deposit to
each outstanding Eligible
<PAGE> 32
25
Asset; PROVIDED, HOWEVER, that, if the Seller is not the Collection Agent, the
Seller shall also advise the Collection Agent of the occurrence of each such
Liquidation Day occurring during such Settlement Period on or prior to such day.
SECTION 2.08. PAYMENTS AND COMPUTATIONS, ETC. All amounts to be paid or
deposited by the Seller hereunder shall be paid or deposited in accordance with
the terms hereof no later than 11:00 A.M. (New York City time) on the day when
due in lawful money of the United States of America in same day funds to the
Agent's Account. The Seller shall, to the extent permitted by law, pay to the
Agent interest on all amounts not paid or deposited when due hereunder at 2% per
annum above the Alternate Base Rate, payable on demand, PROVIDED, HOWEVER, that
such interest rate shall not at any time exceed the maximum rate permitted by
applicable law. Such interest shall be retained by the Agent except to the
extent that such failure to make a timely payment or deposit has continued
beyond the date for distribution by the Agent of such overdue amount to an Owner
of an Eligible Asset, in which case such interest accruing after such date shall
be for the account of, and distributed by the Agent to the Owners ratably in
accordance with their respective interests in such overdue amount. All
computations of interest and all computations of Yield, Liquidation Yield and
fees hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the first but excluding the last day) elapsed.
SECTION 2.09. DIVIDING OR COMBINING OF ELIGIBLE ASSETS. The Seller may,
on notice received by the Agent not later than 11:00 A.M. (New York City time)
three Business Days before the last day of any Fixed Period for any then
existing Eligible Asset (an "EXISTING ELIGIBLE ASSET"), divide such Existing
Eligible Asset on such last day into two or more new Eligible Assets, each such
new Eligible Asset having Capital as designated in such notice and all such new
Eligible Assets collectively having aggregate Capital equal to the Capital of
such Existing Eligible Asset. The Seller may, on notice received by the Agent
not later than 11:00 A.M. (New York City time) three Business Days before the
last day of any Fixed Periods ending on the same day for two or more Existing
Eligible Assets owned by the same Owner or the date of any proposed Purchase (if
the last day of such Fixed Period is the date of such proposed Purchase), either
(i) combine such Existing Eligible Assets or (ii) combine such Existing Eligible
Asset or Eligible Assets, if owned by the
<PAGE> 33
26
Investor, and such proposed Eligible Asset to be purchased, on such last day
into one new Eligible Asset, such new Eligible Asset having Capital equal to the
aggregate Capital of such Existing Eligible Assets, or such Existing Eligible
Asset or Eligible Assets and such proposed Eligible Asset, as the case may be.
On and after any division or combination of Eligible Assets as described above,
each of the new Eligible Assets resulting from such division, or the new
Eligible Asset resulting from such combination, as the case may be, shall be a
separate Eligible Asset having Capital as set forth above, and shall take the
place of such Existing Eligible Asset or Eligible Assets or proposed Eligible
Asset, as the case may be, in each case under and for all purposes of this
Agreement, and the Agent shall annotate the Certificate accordingly.
SECTION 2.10. FEES AND PAYMENTS. (a) The Seller shall pay certain fees to
the Agent as more fully set forth in a letter agreement of even date herewith.
(b) Each Owner shall pay to the Collection Agent a collection fee (the
"COLLECTION AGENT FEE") of 1/4 of 1% per annum on the average daily amount of
Capital of each Eligible Asset owned by such Owner, from the date thereof until
the later of the Facility Termination Date or the date on which such Capital is
reduced to zero, payable on the last day of each Settlement Period for such
Eligible Asset; PROVIDED, HOWEVER, that, upon three Business Days' notice to the
Agent, the Collection Agent may (if not the Seller) elect to be paid, as such
fee, another percentage per annum on the average daily amount of Capital of each
such Eligible Asset, but in no event in excess of 110% of the costs and expenses
referred to in Section 6.02(b); and PROVIDED FURTHER that such fee shall be
payable only from Collections pursuant to, and subject to the priority of
payment set forth in, Sections 2.05 and 2.06.
SECTION 2.11. INCREASED COSTS. (a) If CNAI, an Owner, any entity which
enters into a commitment to purchase Eligible Assets or interests therein, or
any of their respective Affiliates (each an "AFFECTED PERSON") determines that
compliance with any law or regulation or any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) issued on or after the effective date of this Agreement affects or will
affect the amount of capital required or expected to be maintained by such
Affected Person and such Affected Person determines that the amount of such
capital is increased by or
<PAGE> 34
27
based upon the existence of any commitment to make purchases of or otherwise to
maintain the investment in Pool Receivables or interests therein related to this
Agreement or to the funding thereof and other commitments of the same type
relating to this Agreement, then, within five Business Days after receipt of a
written demand by such Affected Person (with a copy to the Agent), the Seller
shall immediately pay to the Agent, for the account of such Affected Person (as
a third-party beneficiary), from time to time as specified by such Affected
Person, additional amounts sufficient to compensate such Affected Person in the
light of such circumstances, to the extent that such Affected Person reasonably
determines such increase in capital to be allocable to the existence of any of
such commitments. A certificate as to such amounts setting forth in reasonable
detail the calculations used in determining, and the basis of the requirements
for, such amounts, submitted to the Seller and the Agent by such Affected
Person, shall be conclusive and binding for all purposes, absent evidence of
error. Notwithstanding anything to the contrary contained in this subsection
(a), an Owner shall only be entitled to receive reimbursement for such
additional amounts pursuant to this subsection (a) to the extent (i) incurred
within 60 days prior to, and at any time after, the date on which such Owner
gives to the Seller a notice that an event has occurred as a result of which
such additional amounts will arise or a notice that the Seller is obligated to
pay such additional amounts, whichever first occurs and (ii) such Owner shall
not have been reimbursed for such additional amounts under a separate Section of
this Agreement.
(b) If, due to either (i) the introduction of or any change occurring on
or after the effective date of this Agreement (other than any change by way of
imposition or increase of reserve requirements referred to in Section 2.12) in
or in the interpretation of any law or regulation or (ii) the compliance with
any guideline or request from any central bank or other governmental authority
(whether or not having the force of law) issued on or after the effective date
of this Agreement, there shall be any increase in the cost to an Owner of
agreeing to purchase or purchasing, or maintaining the ownership of Eligible
Assets in respect of which Yield is computed by reference to the Eurodollar
Rate, then, within five Business Days after receipt of a written demand by such
Owner (with a copy to the Agent), the Seller
<PAGE> 35
28
shall pay to the Agent, for the account of such Owner (as a third-party
beneficiary), from time to time as specified, additional amounts sufficient to
compensate such Owner for such increased costs. A certificate as to the amount
of such increased cost setting forth in reasonable detail the calculations used
for determining, and the basis of the requirements for, such increased costs,
submitted to the Seller and the Agent by such Owner shall be conclusive and
binding for all purposes, absent evidence of error. Notwithstanding anything to
the contrary contained in this subsection (b), an Owner shall only be entitled
to receive reimbursement for such increased costs to the extent (i) incurred
within 60 days prior to, and at any time after, the date on which such Owner
gives to the Seller a notice that an event has occurred as a result of which
such increased costs will arise or a notice that the Seller is obligated to pay
increased costs, whichever first occurs and (ii) such Owner shall not have been
reimbursed for such increased cost under a separate Section of this Agreement.
SECTION 2.12. ADDITIONAL YIELD ON ELIGIBLE ASSETS BEARING A EURODOLLAR
RATE. The Seller shall pay to an Owner, so long as such Owner shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional Yield on the unpaid Capital of
each Eligible Asset of such Owner during each Fixed Period in respect of which
Yield is computed by reference to the Eurodollar Rate, for such Fixed Period, at
a rate per annum equal at all times during such fixed Period to the remainder
obtained by subtracting (i) the Eurodollar Rate for such Fixed Period from (ii)
the rate obtained by dividing such Eurodollar Rate referred to in clause (i)
above by that percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage of such Owner for such Fixed Period, payable on each date on which
Yield is payable on such Eligible Asset. A certificate as to such additional
Yield submitted to the Seller and the Agent by such Owner shall be conclusive
and binding for all purposes, absent evidence of error.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial
Purchase hereunder was subject to the condition precedent that the Agent
received on or before the
<PAGE> 36
29
date of such Purchase the following, each of which (unless otherwise indicated)
was to be dated the date of such Purchase, and was in form and substance
satisfactory to the Agent:
(a) The Certificate;
(b) A copy of the resolutions adopted by the Board of Directors of the
Seller approving this Agreement, the Certificate and the other documents to
be delivered by it thereunder and the transactions contemplated thereby,
certified by its Secretary or Assistant Secretary;
(c) A certificate of the Secretary or Assistant Secretary of the
Seller certifying the names and true signatures of the officers authorized
on its behalf to sign this Agreement, the Certificate and the other
documents to be delivered by it hereunder (on which certificate the Agent
and each Owner shall be entitled to conclusively rely until such time as
the Agent received from the Seller a revised certificate meeting the
requirements of this subsection (c));
(d) Acknowledgment copies of proper Financing Statements (Form UCC-1),
dated a date reasonably near to the date of the initial Purchase, naming
the Seller as the assignor of Receivables and CNAI, as Agent, as assignee,
or other similar instruments or documents, as shall be necessary or, in the
opinion of the Agent, desirable under the UCC of all appropriate
jurisdictions or any comparable law to perfect the ownership interests in
all Receivables in which an interest could have been assigned thereunder;
(e) Copies of proper Financing Statements (Form UCC-3) executed by
CNAI, as agent under the BFG Agreement, releasing all security interests
and other rights of CNAI as agent under the BFG Agreement, in the
Receivables previously granted by BFG to CNAI, as agent under the BFG
Agreement;
(f) Certified copies of Requests for Information or Copies (Form
UCC-11) (or a similar search report certified by a party acceptable to the
Agent), dated a date reasonably near to the date of the initial Purchase,
listing all effective financing statements (including those referred to
above in subsection (d)) which name the Seller (under its then present name
and any previous
<PAGE> 37
30
name) as debtor and which were filed in the jurisdictions in which filings
were made pursuant to subsection (d) above, together with copies of any
such financing statements (none of which, after giving effect to the
financing statements filed pursuant to clause (e) above, shall cover any
Receivables, Contracts or Related Security);
(g) Executed copies of Lock-Box Agreements duly executed by the Seller
and each Lock-Box Bank;
(h) An Acknowledgment and Authorization in the form of Annex 2 to
Exhibit D executed by each Lock-Box Bank;
(i) Undated copies of Notices of Effectiveness to each Lock-Box Bank
duly executed by the Seller;
(j) A favorable opinion of counsel for the Seller, substantially in
the form of Exhibit E hereto and as to such other matters as the Agent may
reasonably request;
(k) A favorable opinion of counsel for the Agent, as the Agent may
reasonably request;
(l) BFG shall have purchased from the BFG Owners all "Eligible Assets"
as defined in the BFG Agreement and paid to the BFG Owners all accrued and
unpaid "Yield" as defined in the BFG Agreement and all accrued and unpaid
amounts owed (including, without limitation, fees and expenses) under the
BFG Agreement to the BFG Owners;
(m) (i) A certificate of an officer of BFG that BFG has transferred to
the Seller all right, title and interest in and to all "Receivables", all
"Contracts" and all "Related Security" (as each such term is defined in the
BFG Agreement) free of any Adverse Claim and (ii) a certificate of an
officer of the Seller that the Seller has assumed all obligations of BFG in
respect thereto;
(n) Letters and certificates, in form and substance satisfactory to
the Agent, attesting to the solvency of each of the Seller and BFG after
giving effect to the transactions contemplated hereby, from their
respective treasurers or chief accounting officers; and
(o) Executed copies of the Waiver, dated April 1, 1993, among the
Seller and the Agent.
<PAGE> 38
31
SECTION 3.02. CONDITIONS PRECEDENT TO ALL PURCHASES AND REINVESTMENTS.
Each Purchase (including the initial Purchase) hereunder and the right of the
Collection Agent to reinvest in Pool Receivables those Collections attributable
to an Eligible Asset pursuant to Sections 2.05 or 2.06 shall be subject to the
further conditions precedent that:
(a) With respect to any such Purchase, on or prior to the date of such
Purchase, the Collection Agent shall have delivered to the Agent, in form
and substance satisfactory to the Agent, a completed Seller Report, dated
within 35 days prior to the date of such Purchase, together with a listing
by Obligor of all Pool Receivables and such additional information as may
be reasonably requested by the Agent,
(b) On the date of such Purchase or reinvestment the following
statements shall be true (and the Seller by accepting proceeds of such
Purchase or by receiving the proceeds of such reinvestment shall be deemed
to have certified on the date of such purchase or reinvestment that):
(i) The representations and warranties contained in Section 4.01
hereof and contained in each other Loan Document are correct on and as
of such date as though made on and as of such date before and after
giving effect to such Purchase or reinvestment and to the application
of proceeds therefrom other than representations or warranties that,
by their terms, refer to a date other than the date of such Purchase,
(ii) No event has occurred and is continuing, or would result
from such Purchase or reinvestment or from the application of proceeds
therefrom, which constitutes an Event of Investment Ineligibility or
would constitute an Event of Investment Ineligibility but for the
requirement that notice be given or time elapse or both,
(iii) The Agent shall not have delivered to the Seller a notice
that the Investor shall not make any further Purchases hereunder
and/or that the Collection Agent shall not reinvest in any Pool
Receivables on behalf of the Owner of an Eligible Asset,
<PAGE> 39
32
(iv) On such date, all of the Seller's long-term public senior
debt securities, if rated, are rated at least BBB- by Standard &
Poor's Corporation and Baa3 by Moody's Investors Service, Inc., or, if
not rated, such securities are deemed to merit a BBB rating in the
sole discretion of the Agent, and
(v) On such date, the fee agreement noted in Section 2.10 of this
Agreement shall be effective, and
(c) the Agent shall have received such other approvals, opinions or
documents as the Agent may reasonably request.
SECTION 3.03. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THE AMENDMENT AND
RESTATEMENT OF THE ORIGINAL AGREEMENT. The effectiveness of the amendment and
restatement of the Original Agreement is subject to the condition precedent that
the Agent shall have received on or before the date hereof the following, each
(unless otherwise indicated) dated the date hereof, in form and substance
satisfactory to the Agent:
(a) A copy of the resolutions adopted by the Board of Directors of the
Seller approving this Agreement and the other documents to be delivered by
it hereunder and the transactions contemplated hereby, certified by its
Secretary or Assistant Secretary;
(b) A certificate of the Secretary or Assistant Secretary of the
Seller certifying the names and true signatures of the officers authorized
on its behalf to sign this Agreement, the Certificate and the other
documents to be delivered by it hereunder (on which certificate the Agent
and each Owner shall be entitled to conclusively rely until such time as
the Agent received from the Seller a revised certificate meeting the
requirements of this subsection (c));
(c) Acknowledgment copies of proper Financing Statement Amendments
(Form UCC-3), amending the Financing Statements referred to in Section
3.01(d);
(d) Acknowledgment copies of proper Financing Statements (Form UCC-3),
if any, necessary to release all security interests and other rights of any
Persons other than of CNAI in the Receivables, Contracts or Related
Security previously granted by the Seller or BFG.
<PAGE> 40
33
(e) Certified copies of Requests for Information or Copies (From
UCC-11) (or a similar search report certified by a party acceptable to the
Agent), dated a date reasonably near to the date of the amendment and
restatement of the Original Agreement, listing all effective financing
statements (including those referred to in Section 3.01(d)) which name the
Seller (under its present name and any previous name) as debtor and which
are filed in Cuyahoga County, Ohio and with the Secretary of State of the
State of Ohio, together with copies of any such financing statements (none
of which, after giving effect to the financing statements filed pursuant to
clause (d) above, shall cover any Receivables, Contracts or Related
Security);
(f) Executed copies of Lock-Box Agreements (or amendments thereto, if
necessary, providing for such matters as the Agent may reasonably request)
duly executed by the Seller and each Lock-Box Bank;
(g) An Acknowledgment and Authorization (or amendments thereto, if
necessary, providing for such matters as the Agent may reasonably request)
in the form of Annex 2 to Exhibit D executed by each Lock-Box Bank;
(h) Undated copies of Notices of Effectiveness (or amendments thereto,
if necessary, providing for such matters as the Agent may reasonably
request) to each Lock-Box Bank duly executed by the Seller;
(i) A favorable opinion of (i) in-house counsel for the Seller in
substantially the form of Exhibit E-1 hereto and (ii) White & Case, special
counsel to the Seller, in substantially the form of Exhibit E-2 hereto and
as to such other matters as the Agent may reasonably request;
(j) A favorable opinion of counsel for the Agent, as the Agent may
reasonably request; and
(k) A certificate of the Seller to the effect that (i) the Seller has
delivered each document which it believes is required to be delivered by it
pursuant to Sections 3.01 and 3.02 of the Credit Agreement and (ii) the
"Lenders" (as such term is defined in the Credit Agreement) have made the
initial "Advances" (as such term is defined in the Credit Agreement) under
the Credit Agreement.
<PAGE> 41
34
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants as follows:
(a) The Seller is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified to do business, and is in good standing, in every jurisdiction
where the nature of its business requires it to be so qualified, except
where the failure to so qualify would not have a material adverse effect on
the Seller.
(b) The execution, delivery and performance by the Seller of this
Agreement and all other instruments and documents to be delivered
hereunder, the transactions contemplated hereby and thereby, and the
Seller's use of the proceeds of Purchases, are within the Seller's
corporate powers, have been duly authorized by all necessary corporate
action, do not contravene (i) the Seller's charter or by-laws or (ii) law
or any contractual restriction binding on or affecting the Seller and do
not result in or require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to any of its material
properties, other than as a result of the transactions contemplated by this
Agreement; and no transaction contemplated hereby requires compliance with
any bulk sales act or similar law.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Seller of this
Agreement or any other document or instrument to be delivered hereunder
EXCEPT for the filing of the UCC Financing Statements referred to in
Article III, all of which, at the time required in Article III, shall have
been duly made and shall be in full force and effect.
(d) This Agreement is, and the Certificate when delivered hereunder
will be, the legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms except to the extent that
the enforceability thereof is limited by applicable bankruptcy, insolvency,
reorganization, moratorium or
<PAGE> 42
35
other similar laws affecting creditors' rights generally and by equitable
principles (regardless of whether enforcement is sought in equity or at
law).
(e) (i) The Consolidated balance sheet of the Seller and its
Subsidiaries as at December 31, 1992, and the related Consolidated
statement of income and cash flows of the Seller and its Subsidiaries for
the fiscal year then ended, accompanied by an opinion of Ernst & Young,
independent public accountants, copies of which have been furnished to the
Agent, fairly present, the Consolidated financial condition of the Seller
and its Subsidiaries as at such dates and the Consolidated results of the
operations of the Seller and its Subsidiaries for the periods ended on such
dates, all in accordance with generally accepted accounting principles
applied on a consistent basis, and (ii) since December 31, 1992, there has
been no material adverse change in any such condition or operations.
(f) There are no actions, suits or proceedings pending, or to the
knowledge of the Seller threatened, against or affecting the Seller or any
Subsidiary, or the property of the Seller or of any subsidiary, in any
court, or before any arbitrator of any kind, or before or by any
governmental body, which, taking into account its probability of success,
may materially adversely affect the financial condition of the Seller or
the Seller and its Consolidated Subsidiaries taken as a whole or materially
adversely affect the ability of the Seller to perform its obligations under
this Agreement; neither the Seller nor any Subsidiary is in default with
respect to any order of any court, arbitrator or governmental body except
for defaults with respect to orders of governmental agencies which defaults
are not material to the business or operations of the Seller or any
Subsidiary.
(g) No proceeds of any Purchase or reinvestment will be used by the
Seller to acquire any equity security (other than the Common Stock of the
Seller to the extent permitted under Section 5.02(g) of the Credit
Agreement) of a class that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.
(h) Each Pool Receivable is (i) together with the Contract related
thereto owned by the Seller free and clear of any Adverse Claim except as
provided for herein and (ii) an Eligible Receivable; upon each Purchase or
<PAGE> 43
36
reinvestment, the Owner making such Purchase or reinvestment will acquire a
valid and perfected first priority undivided percentage ownership interest
to the extent of the pertinent Eligible Asset in each Pool Receivable then
existing or thereafter arising and in the Related Security and Collections
with respect thereto free and clear of any Adverse Claim except as provided
hereunder; and no effective financing statement or other instrument similar
in effect covering any Contract or any Pool Receivable or the Related
Security or Collections with respect thereto is on file in any recording
office except such as may be filed in favor of CNAI, as Agent, in
accordance with this Agreement.
(i) Each Seller Report (if prepared by the Seller, or to the extent
that information contained therein is supplied by the Seller), information,
exhibit, financial statement, document, book, record or report furnished at
any time by the Seller to the Agent or any Owner in connection with this
Agreement is accurate in all material respects as of its date or (except as
otherwise disclosed to the Agent or such Owner, as the case may be, at such
time) as of the date so furnished, and no such document contains any
material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not materially
misleading.
(j) The chief executive office of the Seller is located at the address
of the Seller referred to in Section 11.02 hereof and the chief place of
business and the offices where the Seller keeps all its books, records and
documents evidencing Pool Receivables or the related Contracts are located
at the address specified in Schedule IV hereto (or at such other locations,
notified to the Agent in accordance with Section 5.01(f), in jurisdictions
where all action required by Section 6.05 has been taken and completed).
(k) The names and addresses of all the Lock-Box Banks, together with
the account numbers of the Lock-Box Accounts of the Seller at such Lock-Box
Banks, are specified in Schedule I hereto (or at such other Lock-Box Banks
and/or with such other Lock-Box Accounts as have been notified to the Agent
in accordance with Section 5.03(d)).
<PAGE> 44
37
(l) Neither the Seller nor any Affiliate of the Seller has any direct
or indirect ownership or other financial interest in the Investor, the
Agent or any "Original Bank" (as such term is defined in the Parallel
Purchase Commitment).
(m) Each purchase of an Eligible Asset hereunder, and each
reinvestment of Collections in Pool Receivables made hereunder, will
constitute (i) a "current transaction" within the meaning of Section
3(a)(3) of the Securities Act of 1933, as amended, and (ii) a purchase or
other acquisition of notes, drafts, acceptances, open accounts receivable
or other obligations representing part or all of the sales price of
merchandise, insurance or services within the meaning of Section 3(c)(5) of
the Investment Company Act of 1940, as amended.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE SELLER. Until the later of the
Facility Termination Date and the date upon which no Capital for any Eligible
Asset shall be existing, the Seller will, unless the Agent shall otherwise
consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with
all applicable laws, rules, regulations and orders with respect to it, its
business and properties and all Pool Receivables and related Contracts,
Related Security and Collections with respect thereto.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as
a foreign corporation in each jurisdiction where the failure to preserve
and maintain such existence, rights, franchises, privileges and
qualification would materially adversely affect the interests of the Owners
or the Agent hereunder or in the Pool Receivables and the Related Security,
or the ability of the Seller or the Collection Agent to perform their
respective obligations hereunder or the ability of the Seller to perform
its obligations under the Contracts.
<PAGE> 45
38
(c) AUDITS. At any time and from time to time during regular business
hours and upon reasonable prior notice, permit the Agent, or its agents or
representatives, (i) to examine and make copies of and abstracts from all
books, records and documents (including, without limitation, computer tapes
and disks) in the possession or under the control of the Seller relating to
Pool Receivables and the Related Security, including, without limitation,
the related Contracts, and (ii) to visit the offices and properties of the
Seller for the purpose of examining such materials described in clause (i)
above, and to discuss matters relating to Pool Receivables and the Related
Security or the Seller's performance hereunder or under the Contracts with
any of the officers or employees of the Seller having knowledge of such
matters.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Pool Receivables in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for
the collection of all Pool Receivables (including, without limitation,
records adequate to permit the daily identification of each new Pool
Receivable and all Collections of and adjustments to each existing Pool
Receivable).
(e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS. At its
expense, timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by it under the
Contracts related to the Pool Receivables.
(f) LOCATION OF RECORDS. Keep its chief place of business and chief
executive office, and the offices where it keeps its records concerning the
Pool Receivables and all Contracts related thereto (and all original
documents relating thereto), at the address(es) of the Seller referred to
in Section 4.01(j) or, upon 30 days' prior written notice to the Agent, at
such other locations in a jurisdiction where all action required by Section
6.05 shall have been taken and completed.
(g) CREDIT AND COLLECTION POLICIES. Comply in all material respects
with its Credit and Collection Policy in regard to each Pool Receivable and
the related Contract.
<PAGE> 46
39
(h) COLLECTIONS. Instruct all Obligors to cause all Collections to be
deposited directly to a Lock-Box Account.
(i) UCC SEARCHES. Provide the Agent prior to or on June 30, 1993 with
search reports of the type specified in Section 3.03(e) hereof confirming
the filing of the Financing Statement Amendments referred to in Section
3.03(c) with Cuyahoga County, Ohio and the Secretary of State of the State
of Ohio.
SECTION 5.02. REPORTING REQUIREMENTS OF THE SELLER. Until the later of
the Facility Termination Date and the date upon which no Capital for any
Eligible Asset shall be existing, the Seller will, unless the Agent shall
otherwise consent in writing, furnish to the Agent:
(a) as soon as available and in any event within 60 days after the end
of each of the first three quarters of each fiscal year of the Seller
commencing with the Fiscal Quarter ended June 30, 1993, a Consolidated
balance sheet of the Seller and its Subsidiaries as of the end of such
quarter and Consolidated statements of income and cash flows of the Seller
and its Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, setting forth in each
case in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year, all in reasonable detail, duly
certified (subject to year-end audit adjustments) by a Responsible Officer
of the Seller as having been prepared in accordance with GAAP, it being
agreed that delivery of the Seller's Quarterly Report on Form 10-Q will
satisfy this requirement, together with (i) a certificate of said officer
stating that, to his knowledge after reasonable investigation, no Event of
Investment Ineligibility has occurred and is continuing or, if a Event of
Investment Ineligibility has occurred and is continuing, a statement as to
the nature thereof and the action that the Seller has taken and proposes to
take with respect thereto and (ii) a schedule in form satisfactory to the
Agent of the computations used by the Seller in determining the Rate Ratio;
(b) as soon as available and in any event within 120 days after the
end of each fiscal year of the Seller, commencing with the fiscal year
ended December 31, 1993, a copy of the annual audit report for such year
for the Seller and its Subsidiaries, including therein a Consolidated
balance sheet of the Seller and its Subsidiaries as of the end of such
fiscal year and Consolidated statements of income and cash flows of the
Seller and its Subsidiaries for such fiscal year, in each case accompanied
by an opinion without qualification of independent public accountants of
recognized standing acceptable to the Agent, it being agreed that delivery
of
<PAGE> 47
40
the Seller's Annual Report on Form 10-K will satisfy this requirement,
together with (i) a certificate of such accounting firm to the Agent
stating that in the course of the regular audit of the business of the
Seller and its Subsidiaries, which audit was conducted by such accounting
firm in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge that an Event of Investment
Ineligibility has occurred insofar as such Event of Investment
Ineligibility relates to accounting matters and is continuing, or if an
Event of Investment Ineligibility has occurred and is continuing, a
statement as to the nature thereof, (ii) a schedule in form satisfactory to
the Agent of the computations used by the Seller in determining, as of the
end of such fiscal year, the Rate Ratio, and (iii) a certificate of a
Responsible Officer of the Seller stating that, to his knowledge after
reasonable investigation, no Event of Investment Ineligibility has occurred
and is continuing or, if a Event of Investment Ineligibility has occurred
and is continuing, a statement as to the nature thereof and the action that
the Seller has taken and proposes to take with respect thereto;
(c) promptly after the sending or filing thereof, copies of all
reports which the Seller sends to any of its security holders in their
capacity as such and copies of all reports and registration statements
which the Seller files with the Securities and Exchange Commission or any
national securities exchange other than (i) registration statements
relating to employee benefit plans and (ii) any exhibits to, or documents
incorporated by reference in, any such filings;
(d) promptly after the filing or receiving thereof, copies of all
reports and notices relating to the Seller and its significant domestic
subsidiaries with respect to any Reportable Event defined in Article IV of
ERISA which the Seller or any such subsidiary files under ERISA with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation or the
U.S. Department of Labor or which the Seller or any subsidiary receives
from such corporation;
(e) as soon as possible and in any event within five days after the
occurrence of each Event of Investment Ineligibility or each event which,
with the giving of notice or lapse of time or both, would constitute an
Event of Investment Ineligibility, the statement of the chief accounting
officer, treasurer or
<PAGE> 48
41
assistant treasurer of the Seller setting forth details of such Event of
Investment Ineligibility or event and the action which the Seller proposes
to take with respect thereto; and
(f) promptly, from time to time, such other information, documents,
records or reports respecting the Receivables or the conditions or
operations, financial or otherwise, of the Seller, or any subsidiary, as
the Agent may from time to time request in order to protect any Owner's or
the Agent's interests under or contemplated by this Agreement.
SECTION 5.03. NEGATIVE COVENANTS OF THE SELLER. Until the later of the
Facility Termination Date and the date upon which no Capital for any Eligible
Asset shall be existing, the Seller will not, without the written consent of the
Agent:
(a) SALES, LIENS, ETC. Except as otherwise provided herein, or
pursuant to the Parallel Purchase Commitment, sell, assign (by operation of
law or otherwise) or otherwise dispose of, or grant any option with respect
to or create or suffer to exist any Adverse Claim upon or with respect to,
the Seller's undivided interest in any Pool Receivable or Related Security
or Collections in respect thereof, or upon or with respect to any related
Contract, or upon or with respect to any lock-box account to which any
Collections of any Pool Receivable are sent, or assign any right to receive
income in respect thereof.
(b) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as otherwise
permitted in Section 6.02(a), extend, amend or otherwise modify the terms
of any Pool Receivable, or amend, modify or waive any term or condition of
any Contract related thereto.
(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make any
change in the character of its business or in the Credit and Collection
Policy, which change would, in either case, impair the collectibility of
any Pool Receivable.
(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Add or terminate any
bank as a Lock-Box Bank from those listed in Schedule I hereto or make any
change in its instructions to Obligors regarding payments to be made to
<PAGE> 49
42
the Seller or payments to be made to any Lock-Box Bank, unless the Agent
shall have received notice of such addition, termination or change and
executed copies of Lock-Box Agreements (together with an executed
acknowledgment of the Lock-Box Bank in the Form of Annex 2 to Exhibit D
hereto and an undated executed Notice of Effectiveness) with each new
Lock-Box Bank.
(e) DEPOSITS TO LOCK-BOX ACCOUNTS. Deposit or otherwise credit, or
cause or permit to be so deposited or credited, to any Lock-Box Account
cash or cash proceeds other than Collections of Pool Receivables.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. DESIGNATION OF COLLECTION AGENT. The servicing,
administering and collection of the Pool Receivables shall be conducted by such
Person (the "Collection Agent") so designated from time to time in accordance
with this Section 6.01. Until the Agent gives three Business Days' notice to the
Seller of a designation of a new Collection Agent, the Seller is hereby
designated as, and hereby agrees to perform the duties and obligations of, the
Collection Agent pursuant to the terms hereof. The Agent may at any time
designate as Collection Agent any Person (including itself) to succeed the
Seller or any successor Collection Agent, on the condition in each case that any
such Person so designated shall agree to perform the duties and obligations of
the Collection Agent pursuant to the terms hereof. The Collection Agent may,
with the prior consent of the Agent, subcontract with any other Person for
servicing, administering or collecting the Pool Receivables, PROVIDED that the
Collection Agent shall remain liable for the performance of the duties and
obligations of the Collection Agent pursuant to the terms hereof.
SECTION 6.02. DUTIES OF COLLECTION AGENT. (a) The Collection Agent shall
take or cause to be taken all such actions as may be necessary or advisable to
collect each Pool Receivable from time to time, all in accordance with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy. Each of the Seller, each
Owner and the Agent hereby appoints as its agent the Collection Agent, from time
to time designated pursuant to Section 6.01, to enforce
<PAGE> 50
43
its respective rights and interests in and under the Pool Receivables, the
Related Security and the Contracts. The Collection Agent shall set aside and
hold in trust for the account of the Seller and each Owner their respective
allocable shares of the Collections of Pool Receivables in accordance with
Sections 2.05 and 2.06 but shall not be required (unless otherwise requested by
the Agent) to segregate the funds constituting such portion of such Collections
prior to the remittance thereof in accordance with said Sections. If instructed
by the Agent, the Collection Agent shall segregate and deposit with a bank
(which may be Citibank) designated by the Agent such allocable share of
Collections of Pool Receivables, set aside for each Owner, on the first Business
Day following receipt by the Collection Agent of such Collections. Provided no
Event of Investment Ineligibility shall have occurred and be continuing, the
Seller, while it is Collection Agent, may, in accordance with the Credit and
Collection Policy, extend the maturity or adjust the Outstanding Balance of any
Defaulted Receivable as the Seller may determine to be appropriate to maximize
Collections thereof. The Seller shall deliver to the Collection Agent, and the
Collection Agent shall hold in trust for the Seller and each Owner in accordance
with their respective interests, all documents, instruments and records
(including, without limitation, computer tapes or disks) which evidence or
relate to Pool Receivables.
(b) The Collection Agent shall as soon as practicable following receipt
turn over to the Seller (i) that portion of Collections of Pool Receivables
representing its undivided interest therein, less, in the event the Seller is
not the Collection Agent, all reasonable and appropriate out-of-pocket costs and
expenses of such Collection Agent of servicing, collecting and administering the
Pool Receivables to the extent not covered by the Collection Agent Fee received
by it and (ii) the Collections of any Receivable which is not a Pool Receivable.
The Collection Agent, if other than the Seller, shall as soon as practicable
upon demand deliver to the Seller all documents, instruments and records in its
possession which evidence or relate to Receivables of the Seller other than Pool
Receivables, and copies of documents, instruments and records in its possession
which evidence or relate to Pool Receivables. The Collection Agent's
authorization under this Agreement shall terminate, after the Facility
Termination Date, upon receipt by each Owner of an Eligible Asset of an amount
equal to the Capital plus accrued Yield for such Eligible Asset plus all other
amounts owed to the Agent, each Owner and the Seller
<PAGE> 51
44
and (unless otherwise agreed by the Agent and the Collection Agent) the
Collection Agent under this Agreement.
SECTION 6.03. RIGHTS OF THE AGENT. (a) The Agent is hereby authorized at
any time upon three Business Days notice to the Seller if the Agent shall
determine in its sole discretion that such action is necessary to protect its
interest in the Receivables, to date, and to deliver to the Lock-Box Banks, the
Notices of Effectiveness delivered hereunder. The Seller hereby, when the Agent
shall deliver the Notices of Effectiveness to the Lock-Box Banks, transfers to
the Agent the exclusive ownership and control of the Lock-Box Accounts to which
the Obligors of Pool Receivables shall make payments, and shall take any further
action that the Agent may reasonably request to effect such transfer. In case
any authorized signatory of the Seller whose signature shall appear on any
Notice of Effectiveness shall cease to have such authority before the delivery
of such Notice of Effectiveness, such signature shall nevertheless be valid and
sufficient for all purposes as if such authority had remained in force at the
time of such delivery. Further, the Agent may notify, at any time upon three
Business Days' notice to the Seller if the Agent shall determine in its sole
discretion that such action is necessary to protect its interest in the
Receivables, or at any time after the designation of a Collection Agent other
than the Seller and at the Seller's expense, the Obligors of Pool Receivables,
or any of them, of the ownership of Eligible Assets by the Owners.
(b) At any time following the designation of a Collection Agent other
than the Seller pursuant to Section 6.01:
(i) The Agent may direct the Obligors of Pool Receivables, or any of
them, that payment of all amounts payable under any Pool Receivable be made
directly to the Agent or its designee.
(ii) The Seller shall, at the Agent's request and at the Seller's
expense, give notice of such ownership to each said Obligor and direct that
payments be made directly to the Agent or its designee.
(iii) Seller shall, at the Agent's request, (A) assemble all of the
documents, instruments and other records (including, without limitation,
computer tapes and disks) which evidence the Pool Receivables, and the
<PAGE> 52
45
related Contracts and Related Security, or which are otherwise necessary or
desirable to collect such Pool Receivables, and shall make the same
available to the Agent at a place selected by the Agent or its designee and
(B) segregate all cash, checks and other instruments received by it from
time to time constituting Collections of Pool Receivables in a manner
acceptable to the Agent and shall, promptly upon receipt, remit all such
cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the Agent or its designee.
(iv) Each of the Seller and the Investor hereby authorizes the Agent
to take any and all steps in the Seller's name and on behalf of the Seller
and the Owners necessary or desirable, in the determination of the Agent,
to collect all amounts due under any and all Pool Receivables, including,
without limitation, endorsing the Seller's name on checks and other
instruments representing Collections and enforcing such Pool Receivables
and the related Contracts.
SECTION 6.04. RESPONSIBILITIES OF THE SELLER. Anything herein to the
contrary notwithstanding:
(a) The Seller shall perform all of its obligations under the
Contracts related to the Pool Receivables to the same extent as if Eligible
Assets had not been sold hereunder and the exercise by the Agent of its
rights hereunder shall not relieve the Seller from such obligations or its
obligations with respect to Pool Receivables; and
(b) Neither the Agent nor the Owners shall have any obligation or
liability with respect to any Pool Receivables or related Contracts, nor
shall any of them be obligated to perform any of the obligations of the
Seller thereunder.
SECTION 6.05. FURTHER ACTION EVIDENCING PURCHASES. The Seller agrees that
from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action that the Agent
may reasonably request in order to perfect, protect or more fully evidence the
Eligible Assets purchased by the Owners hereunder, or to enable any of them or
the Agent to exercise or enforce any of their respective rights hereunder.
Without limiting the generality of the foregoing, the Seller will,
<PAGE> 53
46
upon the request of the Agent: (i) execute and file such financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate; (ii) if the
Agent shall determine in its sole discretion that such action is necessary to
protect its interest in the Receivables, mark conspicuously each invoice
evidencing each Pool Receivable and the related Contract with a legend,
acceptable to the Agent, evidencing that such Eligible Assets have been sold in
accordance with this Agreement; and (iii) mark its master data processing
records evidencing such Pool Receivables and related Contracts with such legend.
The Seller hereby authorizes the Agent to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Pool Receivables and the Related Security now
existing or hereafter arising without the signature of the Seller where
permitted by law. If the Seller fails to perform any of its agreements or
obligations under this Agreement, the Agent may (but shall not be required to)
itself perform, or cause performance of, such agreement or obligation, and the
expenses of the Agent incurred in connection therewith shall be payable by the
Seller as provided in Section 10.01.
ARTICLE VII
EVENTS OF INVESTMENT INELIGIBILITY
SECTION 7.01. EVENTS OF INVESTMENT INELIGIBILITY. If any of the following
events ("EVENTS OF INVESTMENT INELIGIBILITY") shall occur and be continuing:
(a) The Collection Agent (if other than the Agent) (i) shall fail to
perform or observe any term, covenant or agreement hereunder (other than as
referred to in clause (ii) of this Section 7.01(a)) and such failure shall
remain unremedied for three Business Days or (ii) shall fail to make any
payment or deposit to be made by it hereunder when due; or
(b) The Seller shall fail to perform or observe any term, covenant or
agreement contained in Section 5.03(e) or Section 6.03(a); or
(c) Any representation or warranty made or deemed to be made by the
Seller (or any of its officers) under or in connection with this Agreement,
the other Loan
<PAGE> 54
47
Documents or any Seller Report or other information or report delivered
pursuant hereto shall prove to have been false or incorrect in any material
respect when made; or
(d) The Seller shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be
performed or observed and any such failure shall remain unremedied for
seven Business Days after written notice thereof shall have been given by
the Agent to the Seller; or
(e) The Seller shall fail to pay any Debt in excess of $10,000,000 or
any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure
shall continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt; or any other default under
any agreement or instrument relating to any such Debt, or any other event,
shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of
such Debt; or any such Debt shall be declared to be due and payable or
required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Debt shall be required to be made, in each
case prior to the stated maturity thereof; or
(f) Any Purchase or any reinvestment pursuant to Section 2.05 shall
for any reason, except to the extent permitted by the terms hereof, cease
to create, or any Eligible Asset shall for any reason cease to be, a valid
and perfected first priority undivided percentage ownership interest to the
extent of the pertinent Eligible Asset in each applicable Pool Receivable
and the Related Security and Collections with respect thereto; or
(g) (i) The Seller shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against the Seller seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
<PAGE> 55
48
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and, if
instituted against the Seller, either such proceeding shall not be stayed
or dismissed for 60 days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against it
or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property) shall occur;
or (ii) the Seller shall take any corporate action to authorize any of the
actions set forth in clause (i) above in this subsection (g); or
(h) The Default Ratio as at the last day of any calendar month shall
exceed 6% or the Delinquency Ratio as at the last day of any calendar month
shall exceed 4% and a repurchase, if required pursuant to Section 10.03, is
not made when due; or
(i) The Net Receivables Pool Balance shall for a period of five
consecutive Business Days be less than 120% of the sum of the aggregate
outstanding Capital of all Eligible Assets and of the aggregate outstanding
"Capital" of all "Eligible Assets" under the Parallel Purchase Commitment;
or
(j) There shall have been any material adverse change in the financial
condition or operations of the Seller since December 31, 1992, or there
shall have occurred any event which materially adversely affects the
collectibility of the Pool Receivables, or there shall have occurred any
other event which materially adversely affects the ability of the Seller to
collect Pool Receivables or the ability of the Seller to perform hereunder;
or
(k) Any "Event of Default" shall have occurred and be continuing under
the Credit Agreement;
then, and in any such event, the Agent may, by notice to the Seller, declare the
Facility Termination Date to have occurred, EXCEPT that, in the case of any
event described above in clause (i) of subsection (g) or described above in
subsection (f), the Facility Termination Date shall be deemed to have occurred
automatically upon the occurrence of such
<PAGE> 56
49
event. Upon any Such termination of the Facility, the Agent and the Owners shall
have, in addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of the
applicable jurisdiction and other applicable laws, which rights shall be
cumulative. Without limiting the foregoing or the general applicability of
Article IX hereof, any Owner may elect to assign pursuant to Article IX hereof
any Eligible Asset owned by such Owner to an Assignee following the occurrence
of any Event of Investment Ineligibility.
ARTICLE VIII
THE AGENT
SECTION 8.01. AUTHORIZATION AND ACTION. Each Owner hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto.
SECTION 8.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them as Agent under or in connection with this
Agreement (including, without limitation, the Agent's servicing, administering
or collecting Pool Receivables as Collection Agent pursuant to Section 6.01),
except for its or their own gross negligence or willful misconduct. Without
limiting the foregoing, the Agent:
(i) may consult with legal counsel (including counsel for the Seller),
independent public accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts;
(ii) makes no warranty or representation to any Owner and shall not be
responsible to any Owner for any statements, warranties or representations
made in or in connection with this Agreement;
(iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of
this Agreement on the
<PAGE> 57
50
part of the Seller or to inspect the property (including the books and
records) of the Seller;
(iv) shall not be responsible to any Owner for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of
this Agreement, the Certificate or any other instrument or document
furnished pursuant hereto; and
(v) shall incur no liability under or in respect of this Agreement by
acting upon any notice (including notice by telephone), consent,
certificate or other instrument or writing (which may be by facsimile)
believed by it to be genuine and signed or sent by the proper party or
parties.
SECTION 8.03. CNAI AND AFFILIATES. With respect to any Eligible Asset
owned by CNAI, CNAI shall have the same rights and powers under this Agreement
as would any Owner and may exercise the same as though it were not the Agent.
CNAI and its Affiliates may generally engage in any kind of business with the
Seller or any Obligor, any of their respective Affiliates and any Person who may
do business with or own securities of the Seller or any Obligor or any of their
respective Affiliates, all as if CNAI were not the Agent and without any duty to
account therefor to the Owners.
SECTION 8.04. INVESTOR'S PURCHASE DECISION. The Investor acknowledges
that it has, independently and without reliance upon the Agent, any of its
Affiliates or any other Owner and based on such documents and information as it
has deemed appropriate, made its own evaluation and decision to enter into this
Agreement and, if it so determines, to purchase an undivided ownership interest
in Pool Receivables hereunder.
ARTICLE IX
ASSIGNMENT
SECTION 9.01. ASSIGNMENT. (a) The Investor may assign to any other
Assignee, and any such Assignee may assign to any other Assignee, any Eligible
Asset. Upon any such assignment, (i) the Assignee shall become the Owner of such
Eligible Asset for all purposes of this Agreement and (ii) the Owner assignor
thereof shall relinquish its rights with respect to such Eligible Asset for all
purposes of this
<PAGE> 58
51
Agreement. Such assignments shall be upon such terms and conditions as the
assignor and the Assignee of such Eligible Asset may mutually agree, the parties
thereto shall deliver to the Agent an Assignment, duly executed by such parties,
and such assignor shall promptly execute and deliver all further instruments and
documents, and take all further action, that the Assignee may reasonably request
in order to perfect, protect or more fully evidence the Assignee's right, title
and interest in and to such Eligible Asset, and to enable the Assignee to
exercise or enforce any rights hereunder or under the Certificate. The Agent
shall provide notice to the Seller of any assignment of an Eligible Asset
hereunder.
(b) By executing and delivering an Assignment, the Owner assignor
thereunder and the Assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment, such assigning Owner makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
the Certificate or any other instrument or document furnished pursuant hereto;
(ii) such assigning Owner makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Seller or the
performance or observance by the Seller of any of its obligations under this
Agreement, the Certificate or any other instrument or document furnished
pursuant hereto; (iii) such Assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and to purchase such Eligible Asset; (iv) such Assignee will,
independently and without reliance upon the Agent, any of its Affiliates, such
assigning Owner or any other Owner and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (v) such Assignee
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers as are reasonably incidental
thereto; (vi) such Assignee appoints as its agent the Collection Agent from time
to time designated pursuant to Section 6.01 to enforce its respective
<PAGE> 59
52
rights and interests in and under the Pool Receivables, the Related Security and
the related Contracts; and (vii) such Assignee agrees that it will not institute
against the Investor any proceeding of the type referred to in Section 7.01(g)
so long as any commercial paper issued by the Investor shall be outstanding or
there shall not have elapsed one year plus one day since the last day on which
any such commercial paper shall have been outstanding.
(c) The Seller may not assign its rights or obligations hereunder or any
interest herein without the prior written consent of the Agent.
SECTION 9.02. Annotation of Certificate. The Agent shall annotate the
Certificate to reflect any assignments made pursuant to Section 9.01 or
otherwise.
ARTICLE X
INDEMNIFICATION
SECTION 10.01. INDEMNITIES BY THE SELLER. Without limiting any other
rights which the Agent, any Owner or any of their respective Affiliates (each an
"Indemnified Party") may have hereunder or under applicable law, the Seller
hereby agrees to indemnify each Indemnified Party from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
by any of them arising out of or as a result of this Agreement or the use of
proceeds of Purchases or the ownership of Eligible Assets or in respect of any
Receivable or any Contract, excluding, however, (i) Indemnified Amounts to the
extent resulting from gross negligence or willful misconduct on the part of such
Indemnified Party or (ii) recourse (except as otherwise specifically provided in
this Agreement) for uncollectible Receivables. Without limiting or being limited
by the foregoing, the Seller shall pay on demand to each Indemnified Party any
and all amounts necessary to indemnify such Indemnified Party for Indemnified
Amounts relating to or resulting from:
(i) the creation of an undivided percentage ownership interest in any
Receivable which is not at the date of the creation of such interest an
Eligible Receivable or which thereafter ceases to be an Eligible
Receivable;
<PAGE> 60
53
(ii) reliance on any representation or warranty made by the Seller (or
any of its officers) under or in connection with this Agreement, any Seller
Report or any other information or report delivered by the Seller pursuant
hereto, which shall have been false or incorrect in any material respect
when made or deemed made;
(iii) the failure by the Seller to comply with any applicable law,
rule or regulation with respect to any Pool Receivable or the related
Contract, or the nonconformity of any Pool Receivable or the related
Contract with any such applicable law, rule or regulation;
(iv) the failure to vest in the Owner of an Eligible Asset an
undivided percentage ownership interest, to the extent of such Eligible
Asset, in the Receivables in, or purporting to be in, the Receivables Pool
and the Related Security and Collections in respect thereof, free and clear
of any Adverse Claim;
(v) the failure to file, or any delay in filing, financing statements
or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any Receivables in,
or purporting to be in, the Receivables Pool and the Related Security and
Collections in respect thereof, whether at the time of any Purchase or
reinvestment or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
in, or purporting to be in, the Receivables Pool (including, without
limitation, a defense based on such Receivable or the related Contract not
being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting from
the sale of the merchandise or services related to such Receivable or the
furnishing or failure to furnish such merchandise or services;
(vii) any failure of the Seller, as Collection Agent or otherwise, to
perform its duties or obligations in accordance with the provisions of
Article VI or to perform its duties or obligations under the Contracts;
(viii) any products liability claim arising out of or in connection
with merchandise, insurance or services which are the subject of any
Contract; or
<PAGE> 61
54
(ix) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of Purchases or the ownership of Eligible
Assets or in respect of any Receivable or any Contract; or
(x) the commingling of Collections of Pool Receivables at any time
with other funds; provided, that without in any way limiting the scope of
the foregoing indemnity, such indemnity is not intended to restrict the
Seller from servicing Receivables as the Collection Agent pursuant to
Article 6 of this Agreement.
SECTION 10.02. ADDITIONAL INDEMNITIES. Section 8.04(b) of the Credit
Agreement is incorporated in this Agreement by reference, with the same force
and effect as if the same was set out in this Agreement in full; PROVIDED, that
references to the "Borrower" and any "Lender" therein shall mean the Seller and
any Owner, respectively, and, without limitation, all references in such
incorporated provision to "Indemnified Party" and "Loan Documents" shall mean
and refer to Indemnified Party and Loan Documents under this Agreement,
respectively; likewise, to the extent any word or phrase is defined in this
Agreement, any such word or phrase appearing in the provision so incorporated by
reference from the Credit Agreement shall have the meaning given to it in this
Agreement; and PROVIDED FURTHER, words or phrases used in such incorporated
provision and not otherwise defined in this Agreement shall be also incorporated
herein by reference; and provided further, that notwithstanding the foregoing,
such incorporated provision shall exclude recourse (except as otherwise
specifically provided in this Agreement) for uncollectible Receivables. The
incorporation by reference into this Agreement from the Credit Agreement is for
convenience only and this Agreement and the Credit Agreement shall at all times
be, and be deemed to be and treated as, separate and distinct facilities.
Incorporations by reference in this Agreement from the Credit Agreement shall
not be affected or impaired by any subsequent expiration or termination of the
Credit Agreement, nor by any amendment thereof or waiver thereunder unless the
Agent, as Agent for the Owners, shall have consented to such amendment or waiver
in writing.
SECTION 10.03 LIMITED RECOURSE. On the first day (the "DETERMINATION
DATE") on which (a) the Default Ratio or the Delinquency Ratio exceeds the
percentage therefor set forth in Section 7.01(h) and (b) such percentage would
not be exceeded if such ratio were calculated by excluding from the numerator
and denominator thereof all the Pool Receivables of
<PAGE> 62
55
either (i) the Obligor with the largest, (ii) the Obligors with the two largest
or (iii) the Obligors with the three largest Outstanding Balances of Pool
Receivables that on the Determination Date are either Defaulted Receivables or
Delinquent Receivables, as the case may be (the amount of such Outstanding
Balances of the minimum number of such Obligors required so that such percentage
would not be exceeded being called the "EXCLUDED RECEIVABLES", and the one, two
or three Obligors owing such Excluded Receivables being the "EXCLUDED
OBLIGORS"), then the Seller shall repurchase a portion of Eligible Assets
ratably from each Owner by paying to the Agent for the benefit of the Owners on
the first Business Day after the Determination Date:
(i) an amount of Capital equal to the product obtained by multiplying
all Capital outstanding as of the Determination Date by a fraction the
numerator of which shall be the Outstanding Balances of the Excluded
Receivables and the denominator of which shall be the Outstanding Balances
of all Pool Receivables, in each case as of the Determination Date, PLUS
(ii) all Yield accrued thereon through the date of such repurchase
PLUS
(iii) the amount, if any, by which (A) the additional Yield which
would have accrued on the portion of the Eligible Assets so repurchased
during the Fixed Period (computed without regard to clause (iv) of the
definition of "Fixed Period") during which such repurchase occurs if such
portion of such Eligible Assets had remained outstanding in its entirety
exceeds (B) the income, if any, received by the Owner by investing the
proceeds of such repurchase attributable to the portion of the Eligible
Assets so repurchased.
On and after the date on which such payment is made in full, each Excluded
Obligor shall automatically and immediately cease to be a Designated Obligor,
and the Receivables of such Obligor shall automatically and immediately be
excluded from the Receivables Pool. Upon receipt of funds paid to the Agent
pursuant to this Section 10.03, the Agent shall distribute such funds to the
Owners ratably (i) in payment of the accrued Yield for such portion of each
Eligible Asset repurchased, (ii) in reduction of the Capital of such portion of
each Eligible Asset repurchased and (iii) in payment of any other amounts owed
by the Seller hereunder to such Owner.
<PAGE> 63
56
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Seller therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Agent, as Agent for the Owners, and then such amendment, waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
SECTION 11.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing and
mailed, faxed or delivered, as to each party hereto, to its address set forth
under its name on the signature pages hereof or at such other address as shall
be designated by such party in a written notice to the other parties hereto.
Notices and communications by facsimile shall be effective when sent, and
notices and communications sent by other means shall be effective when received,
in each case addressed as aforesaid.
SECTION 11.03. NO WAIVER; REMEDIES. No failure on the part of the Agent,
Citibank or an Owner to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 11.04. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Seller, the Agent, the Owners and their respective
successors and assigns. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect until such time, after the Facility
Termination Date, as no Capital of any Eligible Asset shall be outstanding;
provided, however, that rights and remedies with respect to any breach of any
representation and warranty made by the Seller pursuant to Article IV, the
indemnification provisions of Article X and the provisions of Sections 11.06,
11.07 and 11.08 shall be continuing and shall survive any termination of this
Agreement for a period of three years.
SECTION 11.05. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of
<PAGE> 64
57
the State of New York, except to the extent that the validity or perfection of
the interests of the Owners in the Receivables, or remedies hereunder, in
respect thereof are governed by the laws of a jurisdiction other than the State
of New York.
SECTION 11.06. COSTS, EXPENSES AND TAXES. (a) In addition to the rights
of indemnification granted to the Indemnified Parties under Article X hereof,
the Seller agrees to pay on demand all costs and expenses in connection with the
preparation, execution, delivery and administration (including periodic
auditing) of this Agreement, the Certificate and the other documents to be
delivered hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Agent, the Investor, Citibank, CNAI
and their respective Affiliates with respect thereto and with respect to
advising the Agent, the Investor, Citibank, CNAI and their respective Affiliates
as to their respective rights and remedies under this Agreement. The Seller
further agrees to pay on demand all costs and expenses, if any (including
reasonable counsel fees and expenses), of the Agent, CNAI, the Owners and their
respective Affiliates, in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement, the Certificate
and the other documents to be delivered hereunder, including, without
limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 11.06(a).
(b) In addition, the Seller shall pay any and all commissions of
placement agents and commercial paper dealers in respect of commercial paper
notes of the Investor issued to fund the Purchase or maintenance of any Eligible
Asset and any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of this
Agreement or the other documents to be delivered hereunder, and agrees to
indemnify the Agent, the Investor, Citibank, CNAI and their respective
Affiliates against any liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and fees.
(c) In addition, the Seller shall pay on demand all other costs, expenses
and taxes (excluding income taxes) incurred by the Investor or any general or
limited partner of the Investor ("OTHER COSTS"), including, without limitation,
the cost of auditing the Investor's books by certified public accountants, the
cost of rating the Investor"s commercial
<PAGE> 65
58
paper by independent financial rating agencies, the taxes (excluding income
taxes) resulting from the Investor's operations, and the reasonable fees and
out-of-pocket expenses of counsel for the Investor or any counsel for any
general or limited partner of the Investor with respect to (i) advising the
Investor or such general or limited partner as to its rights and remedies under
this Agreement, (ii) the enforcement of this Agreement and the other documents
to be delivered hereunder, or (iii) advising the Investor or such general or
limited partner as to matters relating to the Investor's operations; PROVIDED,
HOWEVER, that if the Investor enters into agreements for the purchase of
interests in receivables from one or more other Persons ("OTHER SELLERS"), the
Seller and such Other Sellers shall each be liable for such Other Costs ratably
in accordance with the usage under the respective facilities of the Investor to
purchase receivables or interests therein from the Seller and each Other Seller;
and PROVIDED, FURTHER, that if such Other Costs are attributable to the Seller
and not attributable to any Other Seller, the Seller shall be solely liable for
such Other Costs.
SECTION 11.07. NO PROCEEDINGS. Each of the Seller, the Agent, each Owner,
each assignee of an Eligible Asset or any interest therein and each entity which
enters into a commitment to purchase Eligible Assets or interests therein hereby
agrees that it will not institute against the Investor any proceeding of the
type referred to in clause (i) of Section 7.01(g) so long as any commercial
paper issued by the Investor shall be outstanding or there shall not have
elapsed one year plus one day since the last day on which any such commercial
paper shall have been outstanding.
SECTION 11.08. CONFIDENTIALITY. (a) Except to the extent otherwise
required by applicable law, the Seller agrees to maintain the confidentiality of
this Agreement (and all drafts thereof) in communications with third parties and
otherwise; PROVIDED, HOWEVER, that the Agreement may be disclosed to third
parties to the extent such disclosure is (i) required in connection with a sale
of securities of the Seller, (ii) made solely to persons who are legal counsel
for the purchaser or underwriter of such securities, (iii) limited in scope to
the provisions of Articles V, VII, X and, to the extent defined terms are used
in Articles V, VII and X, such terms defined in Article I of this Agreement and
(iv) made pursuant to a written agreement of confidentiality in form and
substance reasonably satisfactory to the Agent; PROVIDED, FURTHER, HOWEVER, that
the Agreement may be disclosed to the Seller's legal counsel pursuant to an
<PAGE> 66
59
agreement of the type referred to in clause (iv), above; and PROVIDED, FURTHER,
HOWEVER, that the Seller shall have no obligation of confidentiality in respect
of any information which may be generally available to the public or becomes
available to the public through no fault of the Seller.
(b) Each Owner understands that this Agreement is a confidential document
and no Owner will disclose it to any other Person without the Agent's prior
written consent other than (i) to such Owner's Affiliates and their and their
Affiliates' officers, directors, employees, agents, rating agencies, counsel,
auditors and advisors and then only on a confidential basis, (ii) to actual or
prospective Assignees and participants, and then only if such Assignee has
agreed in writing to maintain such information on a confidential basis, (iii) as
required by any law, rule or regulation or judicial process or (iv) as requested
or required by any state, federal or foreign authority or examiner regulating
banks or banking.
(c) Neither the Agent nor any Owner shall disclose any Confidential
Information to any Person without the consent of the Seller, other than (i) to
the Agent's or such Owner's Affiliates and their and their Affiliates' officers,
directors, employees, agents, rating agencies, counsel, auditors and advisors
and then only on a confidential basis, (ii) to actual or prospective Assignees
and participants, and then only if such Assignee has agreed in writing to
maintain such Confidential Information on a confidential basis, (iii) as
required by any law, rule or regulation or judicial process and (iv) as
requested or required by any state, federal or foreign authority or examiner
regulating banks or banking.
SECTION 11.09. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
<PAGE> 67
60
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
THE GEON COMPANY
By:
-------------------------------------
Title: Sr. Vice President & Treasurer
6100 Oak Tree Boulevard
Independence, Ohio 44131
(Cuyahoga County)
Attention: Thomas A. Waltermire
Facsimile No. (216) 447-7727
CIESCO L.P.
By: Citicorp North America, Inc.
as Attorney-in-Fact
By:
-------------------------------------
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: President
Facsimile No. (914) 899-7890
CITICORP NORTH AMERICA, INC.,
as Agent
By:
-------------------------------------
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: Corporate Asset
Funding Department
Facsimile No. (914) 899-7890
<PAGE> 68
61
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
THE GEON COMPANY
By:
-------------------------------------
Title: Sr. Vice President & Treasurer
6100 Oak Tree Boulevard
Independence, Ohio 44131
(Cuyahoga County)
Attention: Thomas A. Waltermire
Facsimile No. (216) 447-7727
CIESCO L.P.
By: Citicorp North America, Inc.
as Attorney-in-Fact
By:
-------------------------------------
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: President
Facsimile No. (914) 899-7890
CITICORP NORTH AMERICA, INC.,
as Agent
By:
-------------------------------------
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: Corporate Asset
Funding Department
Facsimile No. (914) 899-7890
<PAGE> 1
Exhibit 10.9a
AMENDMENT
Dated as of December 8, 1994
This AMENDMENT among The Geon Company, a Delaware corporation
(the "SELLER"), the banks parties to the Amended and Restated Parallel Purchase
Agreement referred to below (the "ORIGINAL BANKS"), Corporate Receivables
Corporation, a California corporation ("CRC"), Ciesco, L.P., a New York limited
partnership ("CIESCO", and together with CRC, the "Investors") and Citicorp
North America, Inc., a Delaware corporation ("CNAI"), as agent (the "AGENT")
for the Banks (as defined in the Parallel Purchase Agreement) and for the
Owners (as defined in the Purchase and Sale Agreement referred to below) under
the Parallel Purchase Agreement and the Purchase and Sale Agreement,
respectively.
PRELIMINARY STATEMENTS:
(1) The Seller, the Investors and the Agent have entered
into an Amended and Restated Trade Receivables Purchase and Sale Agreement
dated as of August 16, 1994 (the "PURCHASE AND SALE AGREEMENT"; the terms
defined therein being used herein as therein defined unless otherwise defined
herein).
(2) The Seller, the Banks, and the Agent have entered
into an Amended and Restated Parallel Purchase Agreement dated as of August 16,
1994 (the "PARALLEL PURCHASE AGREEMENT").
(3) The Seller and the Investors have agreed to amend the
Purchase and Sale Agreement as hereinafter set forth. The Seller and the Banks
have agreed to amend the Parallel Purchase Agreement as hereinafter set forth.
SECTION 1. AMENDMENT TO THE PURCHASE AND SALE AGREEMENT. The
Purchase and Sale Agreement is, effective as of the date hereof and subject to
the satisfaction of the conditions precedent set forth in Section 3 hereof,
hereby amended as follows:
(a) The definition of Purchase Limit in Section 1.01 is
amended in full as follows:
"PURCHASE LIMIT" means $85,000,000, as such amount
may be reduced pursuant to Section 2.03.
<PAGE> 2
2
SECTION 2. AMENDMENTS TO PARALLEL PURCHASE AGREEMENT. The
Parallel Purchase Agreement is, effective as of the date hereof and subject to
the satisfaction of the conditions precedent set forth in Section 3 hereof,
hereby amended as follows:
(a) The definition of Bank Commitment in Section 1.01(b)
is amended in full as follows:
"BANK COMMITMENT" of any Bank means (a) with respect
to each Original Bank the amount set forth opposite such
Original Bank's name as such Original Bank's Commitment as
indicated below or such amount as reduced by any
assignment agreement entered into between such Original Bank
and other Banks:
<TABLE>
<CAPTION>
Original Bank Commitment
------------- ----------
<S> <C>
Citibank, N.A. $15,087,500
NationsBank of North Carolina, N.A. $14,662,500
Bank of Montreal $10,625,000
The Bank of New York $10,625,000
Canadian Imperial Bank of Commerce $10,625,000
Morgan Guaranty Trust Company $10,625,000
of New York
NBD Bank, N.A. $ 6,375,000
National City Bank $ 6,375,000
-----------
$85,000,000;
===========
</TABLE>
or (b) with respect to a Bank that has entered into an
assignment agreement, the amount set forth therein as such
Bank's Bank Commitment or such amount as reduced by an
assignment agreement entered into between such Bank and an
Eligible Assignee, in each case as reduced (or terminated)
pursuant to the next sentence. Any reduction (or termination)
of the Commitment pursuant to the terms of this Agreement
shall reduce ratably (or terminate) each Bank's Bank
Commitment.
<PAGE> 3
3
(b) The definition of "Commitment" in Section 1.01(b) is
amended in full as follows:
"Commitment" means $85,000,000, as such amount may be
reduced pursuant to Section 2.03.
SECTION 3. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective when, and only when, on or before December 15, 1994, the Agent
shall have received counterparts of this Amendment executed by the Seller, all
of the Banks and the Investors or, as to any of the Banks or, as to either of
the Investors, advice satisfactory to the Agent that such Banks and Investors
have executed this Amendment, and Sections 1 and 2 hereof shall become
effective when, and only when, on or before December 15, 1994, the Agent shall
have additionally received all of the following documents, each document
(unless otherwise indicated) being dated the date of receipt thereof by the
Agent (which date shall be the same for all such documents), in form and
substance satisfactory to the Agent:
(a) Certified copies of (i) the resolutions of the Board
of Directors of the Seller approving this Amendment and the matters
contemplated hereby and thereby and (ii) all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect to this Amendment and the matters contemplated hereby and
thereby.
(b) A certificate of the Secretary or an Assistant
Secretary of the Seller certifying the names and true signatures of its
officers authorized to sign this Amendment.
(c) A favorable opinion of (i) in-house counsel for the
Seller and (ii) Thompson, Hine and Flory, special counsel to the
Seller, to the effect that this Amendment has been duly authorized,
executed and delivered by the Seller and confirming the opinions of
such counsel furnished on August 16, 1994 pursuant to Section 3.01(i)
of the Purchase and Sale Agreement and pursuant to Section 3.01(g) of
the Parallel Purchase Agreement, with references therein to the
Purchase and Sale Agreement and to the Parallel Purchase Agreement to
mean the Purchase and Sale Agreement and the Parallel Purchase
Agreement, respectively, as amended by this Amendment.
(d) A certificate signed by a duly authorized officer of
the Seller stating that:
(i) The representations and warranties contained in
Section 4 hereof are correct on and as of the date of
such certificate as though made on and as of such date, and
<PAGE> 4
4
(ii) No event has occurred and is continuing which
constitutes an Event of Termination or would constitute an
Event of Termination but for the requirement that notice be
given or time elapse or both.
SECTION 4. Representations and Warranties of the Seller. The
Seller represents and warrants as follows:
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
indicated at the beginning of this Amendment.
(b) The execution, delivery and performance by the Seller
of this Amendment are within the Seller's corporate powers, have been
duly authorized by all necessary corporate action and do not contravene
(i) the Seller's charter or by-laws, (ii) law or any contractual
restriction binding on or affecting the Seller.
(c) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the
Seller of this Amendment.
(d) This Amendment constitutes a legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance
with its terms.
(e) There is no pending or overtly threatened action,
suit, investigation, litigation or proceeding against or affecting the
Seller or any of its Subsidiaries, or the property of the Seller or of
any of its Subsidiaries, in any court, or before any arbitrator of any
kind, or before or by any governmental body, which, taking into account
its probability of success, may materially adversely affect the
financial condition the Seller or the Seller and its Consolidated
Subsidiaries taken as a whole (other than the litigation as described
on Schedule A hereto (the "Current Litigation")) or materially
adversely affect the ability of the Seller to perform its obligations
under this Amendment, or the Purchase and Sale Agreement or the
Parallel Purchase Agreement, each as amended hereby; there has been no
adverse change in the status, or financial effect on the Borrower or
any of its Subsidiaries, of the Current Litigation from that described
on Schedule A hereto; neither the Seller nor any of its Subsidiaries is
in default with respect to any order of any court, arbitrator or
governmental body except for defaults with respect to orders of
governmental agencies which defaults are not material to the business
or operations of the Seller or any of its Subsidiaries.
SECTION 5. REFERENCE TO AND EFFECT ON THE PURCHASE AND SALE
AGREEMENT AND ON THE PARALLEL PURCHASE AGREEMENT. (a) Upon the effectiveness of
Sections 1 and 2 hereof, on and after the date hereof (i) each reference in the
Purchase and Sale Agreement to
<PAGE> 5
5
"this Agreement", "hereunder", "hereof" or words of like import referring to
the Purchase and Sale Agreement, and each reference in the other documents to
"the Purchase and Sale Agreement", "thereunder", "thereof", or words of like
import referring to the Purchase and Sale Agreement, shall mean and be a
reference to the Purchase and Sale Agreement as amended hereby; and (ii) each
reference in the Parallel Purchase Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Parallel Purchase Agreement,
and each reference in the other documents to "the Parallel Purchase Agreement",
"thereunder", "thereof" or words of like import referring to the Parallel
Purchase Agreement, shall mean and be a reference to the Parallel Purchase
Agreement as amended hereby.
(b) Except as specifically amended above, the Purchase
and Sale Agreement and the Parallel Purchase Agreement are and shall continue
to be in full force and effect and are hereby in all respects ratified and
confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of any Bank, either of the Investors or the Agent
under the Purchase and Sale Agreement, the Parallel Purchase Agreement or under
any of the other documents, or constitute a waiver of any provision of the
Purchase and Sale Agreement, the Parallel Purchase Agreement or any of the
other documents.
SECTION 6. COSTS AND EXPENSES. The Seller agrees to pay on
demand all costs and expenses of the Agent in connection with the preparation,
execution, delivery, administration, modification and amendment of this
Amendment and the other instruments and documents to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for the Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities hereunder and thereunder.
SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement. Delivery of an executed counterpart of a signature
page of this Amendment by telecopier shall be effective as delivery of a
manually executed counterpart of this Amendment.
SECTION 8. GOVERNING LAW. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
<PAGE> 6
6
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE GEON COMPANY
By
--------------------------
Title: Asst. Treasurer
6100 Oak Tree Boulevard
Independence, Ohio 44131
(Cuyahoga County)
Attn: Secretary
Facsimile No.: (216) 447-7727
CITICORP NORTH AMERICA, INC.,
as Agent
By
--------------------------
Title: Vice President
450 Marmaroneck Avenue
Harrison, New York 10528
Attn: Corporate Asset Funding Dept.
Facsimile: (914) 899-7890
<PAGE> 7
7
CORPORATE RECEIVABLES
CORPORATION
By: Citicorp North America, Inc.,
as Attorney-in-Fact
By:
--------------------------
Title: Vice President
CIESCO, L.P.
By: Citicorp North America, Inc.,
as Attorney-in-Fact
By:
--------------------------
Title: Vice President
CITIBANK, N.A.
By
--------------------------
Title: Vice President
NATIONSBANK, OF NORTH
CAROLINA, N.A.
By
--------------------------
Title: Vice President
BANK OF MONTREAL
By
--------------------------
Title: Director, U.S. Corporate Banking
<PAGE> 8
8
THE BANK OF NEW YORK
By
--------------------------
Title: Vice President
CANADIAN IMPERIAL BANK OF
COMMERCE
By
--------------------------
Title: Agent
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
--------------------------
Title: Vice President
NBD BANK, N.A.
By
--------------------------
Title: Vice President
NATIONAL CITY BANK
By
--------------------------
Title: Vice President
<PAGE> 9
<TABLE>
<CAPTION>
SCHEDULE A
TO THE PURCHASE AND SALE AGREEMENT
AND PARALLEL PURCHASE AGREEMENT AMENDMENT
<S> <C>
Christensen, William v. BFG Slipped on ice, Pedricktown
Dublon, Inc. Unpaid invoices
Florida Adjustatrak Collection for Unpaid Invoices
Riverside International Non Payment for Goods Received
Krypton Corp d/b/a B&H Tool Unpaid Invoices
ERI Extrusion Monies due for Unpaid Goods
Bilcor Plastics Unpaid invoices due BFG
Action Extruded Unpaid invoices
Smith's Transfer/American Freight Unpaid freight bills
Overland Express Unpaid freight bills
Olympia Holding/P*I*E Unpaid tariffs
South Jersey Gas Dispute over gas
Westlake Monomers Breach/Right of first refusal
R.A.S. Welding Stripper vessels/pd not rec'd
Weiler v. Geon Canada Inc. Breach of lease action/tires
Chiancone, Anthony J. Landscape Balance due for landscaping service
Garcia, Barbara v. BFG, Geon Sex discrimination/retaliation
Brubaker-Schaub v. Geon, BFG Sex discrimination
Calvert City RCRA Cleanup Calvert City plant site
Calvert CERCLA Cleanup site, Calvert City, Ky
Maxey Flats Landfill Cleanup site, Morehead, KY
Water Withdrawal Permit Appeal
ISRA/ECRA Review
Boiler Permit Appeal Protective appeal of air permit
Epton Industries Remediation
NESHAPS Violations (89-93) USEPA Information request
NESHAPS Info Request (Sec 114) Information Request
MSD Wastewater Permit
Starks, James Exposure to VCM
Thompson, Gordon Vinyl chloride exposure
Monaghan, Mary Ann v. Allied Chem Exposure to VCM
Bostick v. American Hoechst Exposure to toxic chemicals
Bostick v. Anco Insulation Asbestos exposure
Miller III, Howard Exposure unknown asbestos products
De la Garza, Manual Padilla Employee injury/LaPorte Plant
Mangion, Josephine Vehicle accident in Canada
Georgian, Arlene Plaintiff auto struck by Geon employee
McKay, Elizabeth v. Eddy Hines Auto accident, company car
Climatech claim Alleged out-of-specification goods
LaPorte Release Release of VCM to air
Henry Reporting Violation Sampling dispute with EPA
Operating Industries, Inc. Landfill Superfund site
Fithian v. BFG et al. Hit by train
</TABLE>
<PAGE> 10
-2-
<TABLE>
<S> <C>
Alsobrooks v. Geon Contractor, chemical burns
Stark v. Conoco et al. Exposure to VCM. Wrongful death.
Thompson, Gordon v. Conoco et al. Exposure to VCM.
Martin, Christine v. BFGoodrich and Geon Birth defects/fetal exposure.
Coppola, Peter v. BFGoodrich et al. Fell. Permanent injuries.
Turner, Thomas et ux. v. BFG and Geon Angiosarcoma. Wrongful death.
Vassar, Winzy v. Air Products et al. Class action. Conspiracy. Failure to warn.
Attinoto v. Geon Fell. Injured.
</TABLE>
<PAGE> 1
EXHIBIT 10.10
SECOND AMENDED AND RESTATED LEASE
dated as of December 19, 1996,
between
1994 VCM INC.
Lessor,
and
THE GEON COMPANY,
Lessee
THIS LEASE HAS BEEN MANUALLY EXECUTED IN COUNTERPARTS NUMBERED CONSECUTIVELY
FROM l TO 13. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER
(AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OF THIS LEASE OTHER THAN
COUNTERPART NO. 1.
This is Counterpart No. ___
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Lease)
<TABLE>
<CAPTION>
Paragraph Page
- --------- ----
<C> <C>
1. Lease of Property; Title and Condition........................................................... 1
2. Use; Quiet Enjoyment; Hazardous Materials........................................................ 2
2A. Construction; Financing.......................................................................... 4
3. Term ............................................................................................ 4
4. Rent ............................................................................................ 5
5. Net Lease; Non-Terminability..................................................................... 6
6. Taxes and Assessments; Compliance with Law; Certain
Agreements.................................................................................. 7
7. Matters of Title; Assignability.................................................................. 8
8. [Intentionally Omitted].......................................................................... 9
9. Maintenance and Repair........................................................................... 10
10. Additional Improvements; Removal................................................................. 11
11. Lessee's Right to Contest Real Property Taxes.................................................... 12
12. Condemnation and Casualty........................................................................ 13
13. Environmental Event.............................................................................. 17
14. Offer to Purchase................................................................................ 19
14A. HCL Termination Notice........................................................................... 19
15. Procedure Upon Purchase.......................................................................... 19
16. Insurance........................................................................................ 21
17. Subletting....................................................................................... 24
18. Permitted Contests............................................................................... 25
18A. Unwind Fee....................................................................................... 26
19. Default Provisions............................................................................... 26
20. Additional Rights; Mortgage...................................................................... 31
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Paragraph Page
- --------- ----
<C> <C>
21. Notices, Demands and Other Instruments .......................................................... 34
22. No Default Certificate........................................................................... 34
23. Surrender........................................................................................ 35
24. Separability; Binding Effect; Governing Law; Non-
Recourse.................................................................................... 36
25. Headings and Table of Contents................................................................... 37
26. Lessor's Right to Cure Lessee's Default.......................................................... 37
27. Lessee's Options Upon Expiration................................................................. 38
28. Limitations on Amounts Payable................................................................... 39
29. Waiver of Trial by Jury.......................................................................... 39
30. No Merger of Title............................................................................... 40
31. Payments to the Trustee.......................................................................... 40
</TABLE>
Schedule A - Description of the Parcel
Schedule A-1 - Description of the Chlorine Facility Easement
Schedule A-2 - HCL Parcel
Schedule B - Fixed Rent and Additional Rent Schedule
Schedule C - Termination Value
ii
<PAGE> 4
SECOND AMENDED AND RESTATED LEASE dated as of December 19,
1996 (this "Lease") between 1994 VCM INC., a Texas corporation (the "Lessor"),
having an address at c/o State Street Bank and Trust Company of Connecticut,
N.A., 750 Main Street, Hartford, Connecticut 06103 and THE GEON COMPANY, a
Delaware corporation (the "Lessee"), having an address at One Geon Center, Avon
Lake, Ohio 44012. Schedules A, A-1, A-2, B and C referred to in this Lease are
hereby incorporated by reference herein. Capitalized terms used but not defined
herein shall have the respective meanings set forth in the Second Amended and
Restated Participation Agreement dated as of the date hereof by and among the
Lessee, the Lessor, State Street Bank and Trust Company of Connecticut, National
Association, not in its individual capacity but solely as Trustee under the
Declaration, the financial institutions and Persons named therein and Citibank,
N.A. as Agent (as the same may be further amended, modified or supplemented from
time to time, the "Participation Agreement").
Preliminary Statement
Lessor has acquired a leasehold interest in the Parcel
described on Schedule A hereto, an easement to the parcel described on Schedule
A-1 hereto and title to the Original Improvements.
Lessor and Lessee entered into a Lease dated as of August 16,
1994 which was amended pursuant to the First Amendment to Lease dated as of
December 1, 1994 and the Amended and Restated Lease dated as of November 9, 1995
(as amended, the "Original Lease").
The parties desire to further amend and restate the Original
Lease to extend the term of the Lease and add the HCL Parcel and the HCL
Improvements to the Property.
NOW, THEREFORE, the parties do hereby agree as follows:
1. Lease of Property; Title and Condition. (a) In
consideration of the rents and covenants herein stipulated to be paid and
performed by the Lessee and upon the terms and conditions herein specified, (i)
the Lessor hereby subleases to Lessee the Ground Lease Property, and leases to
Lessee all of the Improvements, and (ii) the Lessee hereby subleases from the
Lessor the Ground Lease Property and leases from the Lessor the Improvements.
The Property is subleased or leased, as the case may be, to the Lessee subject
to (x) all applicable Legal Requirements and all of the insurance requirements
set forth in paragraphs 16(a) through (c) hereof (collectively, the "Insurance
Requirements") now or hereafter
<PAGE> 5
in effect; (y) all Permitted Encumbrances; and (z) the terms, covenants and
provisions of this Lease. The Lessee has examined the Property and title thereto
and has found the same satisfactory for all purposes of this Lease.
(b) THE LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PROPERTY OR ANY FIXTURE OR OTHER ITEM CONSTITUTING
A PORTION THEREOF, OR THE LOCATION, USE, DESCRIPTION, DESIGN, MERCHANTABILITY,
SUITABILITY, FITNESS FOR USE FOR ANY PARTICULAR PURPOSE, CONDITION OR DURABILITY
THEREOF OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, OR AS TO
THE LESSOR'S TITLE THERETO OR OWNERSHIP THEREOF OR OTHERWISE, IT BEING AGREED
THAT ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY THE LESSEE. IN THE EVENT OF
ANY DEFECT OR DEFICIENCY OF ANY NATURE IN THE PROPERTY OR ANY FIXTURE OR OTHER
ITEM CONSTITUTING A PORTION THEREOF, WHETHER PATENT OR LATENT, THE LESSOR SHALL
HAVE NO RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO. THE PROVISIONS OF THIS
PARAGRAPH 1(b) HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE A COMPLETE EXCLUSION
AND NEGATION OF ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, BY THE LESSOR WITH
RESPECT TO THE PROPERTY OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION
THEREOF, WHETHER ARISING PURSUANT TO THE UCC OR ANY OTHER LAW, NOW OR HEREAFTER
IN EFFECT.
2. Use; Quiet Enjoyment; Hazardous Materials. (a) The Lessee
shall use the Property solely as a vinyl chloride monomer production facility,
storage facilities and related business offices, in a first class and reputable
manner. The Lessee covenants that it will cause the Improvements at all times to
be located on the Ground Lease Property. The Lessee's use of the Property shall
be subject to the same terms and conditions contained in paragraph 4(a) of the
Ground Lease as the Ground Lessee thereunder is subject to.
(b) During the Term, or any Extended Term (as defined below),
the Lessor covenants that, unless an Event of Default, Unwind Event or
Environmental Trigger has occurred and is continuing, it will not, and will not
permit any party claiming by or under the Lessor to, interfere with the peaceful
and quiet possession and enjoyment of the Property by the Lessee; provided,
however, that the Lessor, the Trustee, the Agent, the Independent Engineer, the
Environmental Consultant, the Appraiser and their respective successors,
assigns, representatives and agents (the "Lessor Group"), at Lessor's sole cost
and expense, may, upon advance written notice to the Lessee (unless the Lessor
in its sole discretion has reason to believe that a Default or an Event of
Default has occurred or other exigent or emergency conditions exist, in which
case, such entrance and examination shall be at Lessee's sole cost and expense
and no such notice shall be
2
<PAGE> 6
necessary), enter upon and examine the Property or any part thereof at
reasonable times in compliance with and subject to Lessee's standard safety and
security procedures, in effect from time to time; provided, further, that if an
Event of Default, Unwind Event or Environmental Trigger has occurred or if the
Lessee has exercised its option to terminate this Lease pursuant to clause (i)
or (ii) of paragraph 27(a), then Lessee shall give the Lessor Group such
additional access to the Property and to Lessee's books and records relating to
the operation, use, maintenance, construction or occupancy of the Property as it
may require for any purpose, including, without limitation, for marketing,
selling, operating or otherwise disposing of the Property.
(c) Lessor, at Lessee's sole cost and expense, shall cooperate
or assist with Lessee's efforts to obtain all services, Permits and contracts
necessary and useful for the construction of the Improvements and the
acquisition, operation and maintenance of the Property for the intended purposes
thereof, and the Lessor may, and to the extent required in paragraph 7(c) shall,
execute such documents or papers as may be reasonably necessary for such
purposes. Lessee further covenants that it shall at its own cost and expense on
behalf of and in the name of the Lessor, apply for, obtain and maintain all
Permits required in order to permit the lawful ownership of the Property by the
Lessor during the Term or any Extended Term.
(d) Any failure by the Lessor or such other Person to comply
with the foregoing provisions of this paragraph 2 or any other provisions of
this Lease shall not give the Lessee any right to cancel or terminate this
Lease, or to abate, reduce or make deduction from or offset against any Fixed
Rent, Additional Rent or other sum payable under this Lease, or to fail to
perform or observe any other covenant, agreement or obligation hereunder.
(e) The Lessee shall, and it shall require and ensure that any
and all sublessees, employees, contractors, subcontractors, agents,
representatives, affiliates, consultants, occupants and any and all other
Persons, (i) comply in all material respects with all applicable Environmental
Laws, and (ii) use, employ, process, emit, generate, store, handle, transport,
dispose of and/or arrange for the disposal of any and all Hazardous Materials
in, on or, directly or indirectly, related to or in connection with the Property
or any part thereof in a manner consistent with prudent industry practice and in
material compliance with all applicable Environmental Laws, and in a manner
which does not then pose a significant recognized risk to human health, safety
(including occupational health and safety) or the environment.
3
<PAGE> 7
2A. Construction; Financing. (a) The Lessee has entered into
the Agency Agreement with the Lessor pursuant to which the Lessee as
Construction Agent has agreed to complete the construction of the HCL
Improvements. The HCL Improvements shall, as the construction of same is
completed upon the Parcel, become a part of the Improvements, and title thereto
shall remain in the Lessor.
(b) In order to finance the acquisition by the Lessor of its
interest in the HCL Parcel, work in process pertaining to the HCL Improvements
and to finance the cost of construction of the HCL Improvements, the Note
Purchasers, as contemplated by the Participation Agreement, will advance to the
Trustee the Actual HCL Project Costs up to their respective Interim Note (HCL)
Commitments and the Certificate Purchaser will make a HCL Investment in the 1994
VCM Plant Trust equal to its Certificate (HCL) Commitment, and in consideration
therefor, the Trustee will issue the Interim Notes (HCL Series) to the Note
Purchasers and the Certificates (HCL Series) to the Certificate Purchasers
pursuant to the Declaration. The Trustee will loan to the Lessor the aggregate
proceeds of the HCL Advances and the HCL Investment and in consideration
therefor, the Lessor will execute and deliver to the Trustee the VCMI Note and
the VCMI Mortgage.
(c) On the Interim Note (HCL) Maturity Date, the Interim Notes
(HCL Series) will, as provided in the Participation Agreement, be refinanced
through the issuance of a specified proportion of A-Notes and B-Notes to be
issued under the Declaration in an aggregate principal amount equal to the
aggregate principal amount of, and accrued but unpaid interest on, the Interim
Notes (HCL Series). The Lessee agrees to execute and deliver such supplements,
amendments, certificates and other documents which shall reasonably be necessary
to effect the issuance of the A-Notes and B-Notes.
3. Term. The Property is leased for a primary term (the
"Primary Term") which (other than in the case of the HCL Improvements) commenced
on June 10, 1996 and in the case of the HCL Improvements shall commence on the
Interim Note (HCL) Maturity Date and which in each case shall end on December
19, 2001 (the "Expiration Date"), or such earlier date as this Lease shall be
terminated pursuant to any provision hereof; provided, however, that the HCL
Improvements will also be leased for a period of construction (the "Construction
Period" and, collectively with the Primary Term, the "Term") which shall
commence on the Second Refinancing Date and shall end on the Interim Note (HCL)
Maturity Date; and provided, further that this Lease may be extended for
Extended Terms pursuant to paragraph 27(d) hereof.
4
<PAGE> 8
4. Rent. (a) During the Term, Lessee shall pay to the Trustee,
on behalf of the Lessor, Fixed Rent on each Payment Date in the amounts
determined in accordance with Schedule B hereto.
(b) All amounts that the Lessee is required to pay to the
Lessor (or to the Trustee on behalf of the Lessor) pursuant to this Lease (other
than Fixed Rent), including, but not limited to, (i) unpaid Charges and all
amounts set forth in paragraph 4(e)(ii) hereof, (ii) all sums, costs and
expenses pursuant to paragraphs 23 and 26 hereof, (iii) all costs and expenses
relating to the Property or the Lessee's use or the Lessor's leasehold interest
therein or ownership thereof, (iv) any and all amounts payable upon transfer or
purchase of (or otherwise relating to) the Property, together with every fine,
penalty, interest and cost that may be added for non-payment or late payment
thereof and (v) Additional Costs, shall constitute "Additional Rent". The
Trustee shall give Lessee notice of any Additional Rent due hereunder promptly
after it has knowledge of such Additional Rent, and shall use reasonable efforts
to notify Lessee in advance of the due date and amount of such Additional Rent;
provided that failure to give such prompt notice shall not relieve the Lessee of
its obligation to pay such Additional Rent, subject to, as applicable, the
Lessee's rights, if any, under paragraph 18 hereof.
(c) The Lessee shall pay to the Trustee, on behalf of the
Lessor, within 5 Business Days of demand therefor, interest at the Default Rate
on all amounts payable by it to the Lessor (or the Trustee on behalf of the
Lessor) hereunder from the due date thereof until paid in full.
(d) All amounts payable by the Lessee hereunder shall be paid
in lawful money of the United States of America and in immediately available
funds by 11:00 a.m. (New York City time) on the applicable Payment Date or on
the date when due, unless any such due date is not a Business Day in which case
payment shall be due and payable on the next succeeding Business Day, on behalf
of the Lessor at the Trustee's address as set forth in the Participation
Agreement, or at such other address or to such other person in the United States
of America or in such other manner as the Trustee from time to time may
designate to the Lessee by written instructions.
(e) The Lessee shall perform all of its obligations under this
Lease at its sole cost and expense and shall pay, when due and without notice or
demand (except as otherwise provided in this Lease), all amounts due hereunder.
The Lessee agrees to pay within 5 Business Days of demand therefor (i) all
Charges (subject to Lessee's rights pursuant to paragraphs 11 and 18) and (ii)
all indemnity obligations and
5
<PAGE> 9
all charges, reasonable fees, expenses and out-of-pocket costs of the Lessor,
the Trustee, the Purchasers and the Agent, including, without limitation, the
fees and expenses of the Trustee's Counsel, the Special Counsel, the Certificate
Purchasers' Counsel, the Appraiser, the Environmental Consultant, the
Independent Engineer and the Special Environmental Counsel (and in the case of
(iii) below, attorneys' fees and expenses of other counsel to the Purchasers),
in connection with or arising out of:
(i) the preparation, execution, delivery, administration,
performance, modification and amendment of this Lease and the other
Operative Documents and any other documents to be delivered in
connection herewith or therewith or delivered to any person who is a
party to the Operative Documents in connection with the Certificate
Purchasers' Investment (solely to the extent such expenses are caused
by the preparation, execution, delivery, administration, performance,
modification or amendment of this Lease and the other Operative
Documents);
(ii) any refinancing or refunding of the transactions
contemplated by the Operative Documents, with respect to advising any
of them as to their respective rights and responsibilities hereunder or
thereunder; and
(iii) the enforcement (whether through negotiations, legal
proceedings or otherwise) of the Operative Documents and such other
documents.
5. Net Lease; Non-Terminability. (a) This Lease is a net lease
and, except as otherwise expressly provided in this Lease, any present or future
Law to the contrary notwithstanding, shall not terminate, nor shall the Lessee
be entitled to any abatement, reduction, set-off, counterclaim, defense or
deduction with respect to any Fixed Rent, Additional Rent or other sum payable
hereunder. Except as otherwise expressly provided in this Lease, the obligations
of the Lessee shall not be affected by reason of: (i) any damage to or
destruction of the Parcel or the Property or any part thereof by any cause
whatsoever (including, without limitation, by fire, Casualty or act of God or
enemy or any other force majeure event); (ii) any Condemnation, including,
without limitation, a temporary Condemnation of the Parcel or the Property or
any part thereof; (iii) any prohibition, limitation, restriction or prevention
of the Lessee's use, occupancy or enjoyment of the Parcel or the Property or any
part thereof by any Person; (iv) any matter affecting title to the Parcel or the
Property or any part thereof; (v) any eviction of the Lessee from, or loss of
possession by the
6
<PAGE> 10
Lessee of, the Parcel or the Property or any part thereof, by reason of title
paramount or otherwise; (vi) any default by the Lessor or the Trustee hereunder
or under any other agreement; (vii) the invalidity or unenforceability of any
provision hereof or the impossibility or illegality of performance by the Lessor
or the Lessee or both; (viii) any action of any Federal, state or local
governmental authority; or (ix) any other cause or occurrence whatsoever,
whether similar or dissimilar to the foregoing. The parties intend that the
obligations of the Lessee hereunder shall continue unaffected unless such
obligations shall have been modified or terminated pursuant to an express
provision of this Lease.
(b) The Lessee shall remain obliged under this Lease in
accordance with its terms and shall not take any action to terminate, rescind or
avoid this Lease, notwithstanding any bankruptcy, insolvency, reorganization,
liquidation, dissolution or other proceeding affecting the Lessor or any action
with respect to this Lease which may be taken by any trustee, receiver or
liquidator or by any court. Except as expressly permitted in this Lease, the
Lessee waives all rights to terminate or surrender this Lease, or to any
abatement or deferment of Fixed Rent, Additional Rent or other sums payable
hereunder. The Lessee shall remain obliged under this Lease in accordance with
its terms, and the Lessee hereby waives any and all rights now or hereafter
conferred by Law or otherwise to modify or to avoid strict compliance with its
obligations under this Lease. All payments made to or for the benefit of the
Lessor hereunder as required hereby shall be final, and the Lessee shall not
seek to recover any such payment or any part thereof for any reason whatsoever,
absent manifest error.
6. Taxes and Assessments; Compliance with Law; Certain
Agreements. (a) The Lessee shall pay or cause to be paid, subject to paragraph
18, all Charges before any fine, penalty, interest or cost may be added or any
default may be claimed or any termination or foreclosure or forfeiture
procedures for nonpayment may be commenced. If any Property Charge may legally
be paid in installments, such Property Charge may be so paid in installments
provided that, if the Lessee has not paid the Offer Purchase Price and purchased
the Property pursuant to the terms hereof, the Lessee shall pay all such
installments that may be due from time to time (whether before or after the
Expiration Date) on or before the Expiration Date or earlier termination of this
Lease.
(b) The Lessee shall comply, and cause the Property to comply,
in all material respects, with all Legal Requirements. "Legal Requirements"
means (i) all Laws, foreseen or unforeseen, ordinary or extraordinary, or
arising from any restriction of record or otherwise, which now or at
7
<PAGE> 11
any time hereafter may be applicable to the Lessor, as owner of the
Improvements; the Lessor, as Ground Lessee; the Lessee, as Ground Lessor; the
Lessee, as lessee and sublessee hereunder; or the Parcel, the Property or any
part thereof, or any of the adjoining sidewalks, or the ownership, construction,
operation, mortgaging, occupancy, possessing, use, non-use or condition of the
Parcel, the Property or any part thereof and any other governmental rules,
orders and determinations now or hereafter enacted, made or issued, and
applicable to the Lessor, as owner of the Improvements and Ground Lessee, the
Lessee, as lessee and sublessee hereunder and Ground Lessor, or the Property or
any part thereof or the ownership, construction, operation, mortgaging,
occupancy, possession, use, non-use or condition thereof whether or not
presently contemplated; and (ii) all agreements (including, without limitation,
all Facility Agreements), Permits, covenants, and restrictions applicable to the
Parcel, the Property or any part thereof or the ownership, construction,
operation, mortgaging, occupancy, possession, use, non-use or conditions
thereof.
(c) The Lessee shall, and (unless a Default, Environmental
Trigger, Unwind Event or Event of Default has occurred and is continuing and
Lessor has revoked such authority) is hereby authorized by Lessor to, fully and
promptly keep, observe, perform and satisfy, on behalf of Lessor, any and all
obligations, conditions, covenants and restrictions of or on the Lessor under
any and all Facility Agreements so that there will be no default thereunder and
so that the other parties thereunder shall be and remain at all times obliged to
perform their obligations thereunder, and the Lessee, to the extent within its
control, shall not permit to exist any condition, event or fact that could allow
or serve as a basis or justification for any such Person to avoid such
performance.
7. Matters of Title; Assignability. (a) The Lessee shall not
create or permit to be created or exist, and shall promptly remove and
discharge, any Lien upon this Lease, the Ground Lease Property, the Parcel or
the Property or any part thereof or interest therein, or upon any Fixed Rent,
Additional Rent or other sum paid hereunder, which Lien arises for any reason,
including, without limitation, any and all Liens which arise out of the
ownership, use, condition, occupancy, construction, possession, repair or
rebuilding of the Property or any part thereof (including, without limitation,
by reason of construction and start-up of the Improvements) or by reason of
labor or materials furnished or claimed to have been furnished to the Lessee or
for the Property or any part thereof, but excluding Permitted Encumbrances.
Lessee's obligation to remove any of the above-described Liens arising prior to
the termination of this Lease
8
<PAGE> 12
(or arising due to circumstances occurring prior to the termination of this
Lease) shall survive the termination of this Lease. Nothing contained in this
Lease shall be considered as constituting the consent or request of the Lessor,
express or implied, to or for the performance by any contractor, laborer,
materialman, or vendor of any labor or services or for the furnishing of any
materials for any construction, alteration, addition, repair or demolition of or
to the Property or any part thereof. NOTICE IS HEREBY GIVEN THAT THE LESSOR IS
NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO
BE FURNISHED TO THE LESSEE, OR TO ANYONE HOLDING OR POSSESSING THE PROPERTY OR
ANY PART THEREOF THROUGH OR UNDER THE LESSEE, AND THAT NO MECHANIC'S OR OTHER
SIMILAR STATUTORY LIENS FOR ANY LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR
AFFECT THE LESSOR'S INTEREST OR ESTATE IN THE PROPERTY OR ANY PART THEREOF.
(b) The Lessor shall not create any Lien upon this Lease, the
Ground Lease, the Parcel or the Property or any part thereof except (i) the
Permitted Encumbrances, (ii) those created or permitted by the Participation
Agreement, the Ground Lease, the Bills of Sale, the HCL Bill of Sale, this
Lease, the VCMI Mortgage or the Declaration, and (iii) in respect of any action
taken by the Lessor, the Trustee or the Holders from time to time of the
Instruments in connection with the enforcement of any rights under any Operative
Document.
(c) Lessor agrees that Lessee during the Term shall have the
exclusive right (so long as no Environmental Trigger, Unwind Event or Event of
Default has occurred and is continuing and no Termination Notice has been
delivered or has been deemed to have been delivered) to secure subdivision
approvals, site plan approvals, annexation or de-annexation approvals, zoning
variances and Permits necessary or desirable for the development, use,
operation, maintenance or condition of the Property or any part thereof;
provided that the fair market value or use of the Property is not materially
lessened by such action taken as a whole with the actions referred to in
paragraphs 9(a), 10(a) and 10(b) hereof. Lessor agrees to execute such documents
and take all other actions as shall be reasonably necessary, and otherwise
cooperate with Lessee, in connection with the matters described above; provided,
however, that all costs and expenses incurred by the Lessor in connection
therewith shall be borne by Lessee and that Lessor shall not be required to
execute any documents which would, in the reasonable opinion of the Agent,
adversely affect the value or use of the Property or otherwise adversely affect
the transactions contemplated by the Operative Documents or the interests of the
Lessor, the Trustee or the Holders from time to time of the Instruments.
9
<PAGE> 13
8. [Intentionally Omitted].
9. Maintenance and Repair. (a) The Lessee, at its own cost and
expense, will manage and maintain the Property in good mechanical condition and
repair, in accordance with prudent industry practice and in a manner consistent
with that of other similar properties owned or operated by it or its Affiliates,
and will take all action, and will make all changes and repairs, structural and
nonstructural, foreseen and unforeseen, ordinary and extraordinary, which may be
required to maintain the Property in good mechanical condition and repair, in
accordance with prudent industry practice, or which may be required pursuant to
any Legal Requirement or Insurance Requirement at any time in effect. Lessee
shall, in accordance with prudent industry practice, repair or replace each item
constituting the Improvements that shall have become worn out, damaged,
inoperative or obsolete in whole or in part; provided, however, that (i) the
fair market value or use of the Property shall not be materially lessened by
such replacements and repairs taken as a whole with the actions referred to in
paragraphs 7(c), 10(a) and 10(b) hereof, and (ii) such replacements shall be of
a type suitable for use in the industry for the same purpose and having a useful
life at least as long as that of the Improvements (or any part thereof) repaired
or replaced (prior to obsolescence, loss or damage and the like). All repairs,
replacements and rebuilding by the Lessee hereunder, to the extent permitted by
Law, shall immediately become and shall remain part of the Property of the
Lessor, subject to this Lease. The Lessor shall not be required to, and Lessee
hereby waives any right to require the Lessor to, manage, maintain, replace,
repair or rebuild the Property or any part thereof and the Lessee waives any and
all rights it may now or hereafter have to make any repairs at the cost and
expense of the Lessor pursuant to any Legal Requirement, Insurance Requirement,
or otherwise, at any time in effect.
(b) Except for Permitted Encumbrances, in the event that all
or any part of the Improvements shall encroach upon any property or right-of-way
adjoining or adjacent to the Parcel or any part thereof, or shall violate any
agreements or conditions affecting the Parcel or the Property or any part
thereof, or shall obstruct any easement or right-of-way to which the Parcel or
the Property or any part thereof may be subject, then the Lessee shall, at its
sole cost and expense, either (i) contest such matter pursuant to paragraph 18
hereof, (ii) obtain valid and effective Permits for or consents to such
encroachments and/or violations (without any liability to Lessor, the Trustee,
the Agent or the Holders of the Instruments for which such parties are not
indemnified by the Lessee) or waivers or settlements of all claims,
10
<PAGE> 14
liabilities and damages resulting therefrom, or (iii) make such changes,
including alteration or removal, to the Improvements and take such other action
as shall be reasonably necessary to rectify such encroachments, violations,
hindrances, obstructions or impairments, subject to the Lessor's consent if and
to the extent required by paragraph 10(a) hereof.
(c) The Lessee shall give the Lessor and the Paying Agent
prompt notice of any scheduled maintenance or reconditioning which requires
shutdown of operations of the Lessee's vinyl chloride monomer production
facility to be located on the Parcel for a period of time in excess of five (5)
Business Days and shall state the specific reasons for such shutdown.
10. Additional Improvements; Removal. (a) At any time, so long
as no Default, Unwind Event, Environmental Trigger or Event of Default shall
have occurred and be continuing and no Termination Notice has been delivered or
has been deemed to have been delivered, the Lessee may, at its own cost and
expense, make Additional Improvements to the Property or any part thereof;
provided, however, that (i) the fair market value of the Property shall not be
materially lessened by such Additional Improvements taken as a whole; (ii) such
Additional Improvements taken as a whole with the actions referred to in
paragraphs 7(c), 9(a) and 10(b) hereof shall not materially diminish the
capacity, efficiency or useful life of the Improvements; and (iii) such work
shall be completed in a good and workmanlike manner free and clear of any Liens
for labor, services or materials (other than Permitted Encumbrances) and in
compliance with all applicable Legal Requirements and Insurance Requirements.
"Additional Improvements" means additions to, alterations of or replacements
for the Improvements or any part thereof (other than in connection with the
completion of construction of the Improvements contemplated by the HCL
Construction Plans as of the date hereof) made by or for the Lessee, excluding
any replacements installed as part of scheduled maintenance procedures.
(b) The Lessee shall be permitted at any time during, or upon
the expiration or termination of, the Term, and at its sole cost and expense, to
remove or demolish any portion or part of the Additional Improvements in
accordance with prudent industry practices; provided, however, that, such
removal taken as a whole with the actions referred to in paragraphs 7(c), 9(a)
and 10(a) hereof shall not (i) materially impair the intended use or reduce the
fair market value of the Property or any part thereof below its fair market
value at the commencement of the Primary Term with respect to the HCL
Improvements; (ii) materially diminish the
11
<PAGE> 15
capacity, efficiency or useful life of the Improvements or any part thereof
below the capacity, efficiency or useful life as of the commencement of the
Primary Term; or (iii) cause a violation of any Legal Requirement or Insurance
Requirement or significantly increase any risk of liability under any
Environmental Law or any risk to human health or the environment. Any damage to
the Property or any part thereof caused by such removal shall promptly be
repaired by the Lessee and the Property or any part thereof shall be restored to
its condition (or the reasonable equivalent thereof) as it existed immediately
prior to the construction of such removed Additional Improvements, at the
Lessee's sole cost and expense. The Lessee may place upon the Property or any
part thereof any inventory, fixtures, machinery, equipment or other property
belonging to the Lessee or third parties and remove the same at any time during
the Term and Lessee may, and at the request of the Lessor shall, remove the same
at the expiration or termination hereof unless the Lessee shall have paid the
Offer Purchase Price and purchased the Property pursuant to the terms of this
Lease; provided that any damage to the Property or any part thereof caused by
such removal shall promptly be repaired by the Lessee, and the Property or such
part thereof restored to its condition (or the reasonable equivalent thereof) as
it existed immediately prior to the placement of any such property upon the
Parcel, all at the Lessee's sole cost and expense.
(c) The Lessee shall notify the Lessor of any Additional
Improvements, the cost of which is anticipated to exceed in the aggregate $1
million in any calendar year with respect to the Property, which notice shall
include a reasonably detailed description of the work that will be done. All
Additional Improvements shall become and remain Property of the Lessor and shall
be subject to this Lease, unless and until removed by the Lessee in accordance
with subparagraph 10(b).
11. Lessee's Right to Contest Real Property Taxes. The Lessee,
at its own cost and expense and in compliance with paragraph 18, shall have the
sole right, at any time, to seek, in good faith, a reduction in the assessed
valuation of the Property or any part thereof or to contest, in good faith, any
real or personal property taxes for the Property or the Additional Improvements,
or any part thereof. Lessor shall not be required to join in any proceeding or
contest brought by Lessee unless the provisions of any Legal Requirement require
that the proceeding or contest be brought by or in the name of the owner of the
Property. In that case Lessor shall join in the proceeding or contest or permit
it to be brought in Lessor's name as long as Lessee reimburses the Lessor for
any and all costs and expenses incurred by Lessor in connection therewith.
Lessee, on a final non-appealable
12
<PAGE> 16
determination of the proceeding or contest, shall immediately pay, discharge and
satisfy any decision or judgment rendered, together with all costs, interest and
penalties incidental to the decision or judgment.
12. Condemnation and Casualty. (a) General. The Lessee hereby
irrevocably assigns to the Trustee, on behalf of the Lessor, any award or
compensation or insurance payment or other proceeds to which the Lessee may
become entitled by reason of its interest in the Property or any part thereof if
(i) the Parcel, the Ground Lease Property, the Improvements or the Property or
any part thereof is damaged or destroyed by fire or other casualty (each, a
"Casualty") or (ii) the use, occupancy or title of the Parcel, the Ground Lease
Property or the Improvements or any part thereof is taken or requisitioned or
sold in, or on account of any actual or threatened condemnation or eminent
domain proceedings, or other action by any Person having the power of eminent
domain (each, a "Condemnation").
The Lessee shall promptly notify the Lessor in writing of any
such Casualty or Condemnation and shall appear in any proceeding or action to
defend, negotiate, prosecute or adjust any claim for any award or compensation
or insurance payment on account of any Casualty or Condemnation and shall take
all appropriate action in connection with any Casualty or Condemnation,
including the employment of counsel reasonably satisfactory to the Lessor. The
Lessor shall have the right to appear and participate and to employ counsel in
any such proceeding or action, and the fees and expenses of such counsel shall
be paid by the Lessee. If the Lessee shall elect not to appear or shall fail to
prosecute diligently, the Lessor may assume the prosecution thereof and the
Lessee shall pay all of the costs and expenses of the Lessor (including, but not
limited to, fees and expenses of Lessor's counsel) and the fees and expenses of
the Special Counsel. No settlement of any such proceeding or action shall be
made by the Lessee or the Lessor without the written consent of the other party
hereto, which consent shall not unreasonably be withheld or delayed.
Any and all amounts representing proceeds paid in connection
with any such Condemnation or Casualty, as the case may be (collectively, the
"Proceeds"), shall be paid over to the Proceeds Trustee (as defined below) to be
held in trust by such Proceeds Trustee and distributed pursuant to this
paragraph 12 and paragraph 15 hereof or pursuant to the Declaration of Trust, as
appropriate (all such Proceeds, less the costs and expenses incurred by the
Lessor and the Lessee in collecting such amounts, but including any
reimbursement by the Lessee for costs and expenses in connection therewith to
which the Lessor, the Trustee and the Purchasers are entitled
13
<PAGE> 17
pursuant to this Lease, are the "Net Proceeds"). Any and all Proceeds received
by the Lessee in connection with any such proceeding or action shall be received
by the Trustee and held in trust for the benefit of the Trustee and the Lessor,
shall be segregated from other funds of the Trustee and shall be forthwith paid
over to the Proceeds Trustee. The Lessee agrees that this Lease shall control
the rights of the Lessor and the Lessee in any such Proceeds, and any present or
future Law to the contrary is hereby waived. Any and all reasonable charges,
fees and expenses of the Proceeds Trustee shall be paid from the Net Proceeds.
"Proceeds Trustee" shall mean SSBTC or such title company or other independent
bank or trust company as may be designated by the Lessor.
(b) Condemnation or Casualty with Termination.
(i) If a Casualty or a Condemnation shall in the good faith
opinion of an Officer of Lessee affect the Property in such manner as
to render it unsuitable for restoration or for continued use, in whole,
or in part and occupancy by the Lessee for the intended purposes
thereof, then the Lessee may deliver to the Lessor, not later than
thirty (30) days after such occurrence a written notice (herein called
a "Termination Notice") describing the event giving rise to such
termination and describing the status of any proceeding or action and
the amount of any Proceeds received or expected to be received in
connection therewith, together with the date, or estimated date, of
such receipt.
(ii) If a Casualty or Condemnation occurs during the Primary
Term (or any Extended Term) and the Lessor has received an opinion,
which shall be at the Lessee's sole cost and expense, of the
Independent Engineer to the effect that the restoration of the Property
could not be expected to restore and rebuild the Property to its
previous capacity, efficiency and useful life or such restoration and
rebuilding could not be expected to be completed in full prior to the
Expiration Date or that the cost of such restoration or rebuilding
would exceed 25% of the fair market value of the Property immediately
prior to such Casualty or Condemnation, then the Lessor may, in its
sole discretion, deliver a notice ("Lessor Termination Notice")
declaring Lessor's intention to terminate this Lease and the Lessee
shall be deemed to have delivered a Termination Notice with respect to
the Property to the Lessor as of the date of the Lessor Termination
Notice.
(iii) Simultaneous with the delivery of a Termination Notice
pursuant to (i) above (or a deemed delivery of a Termination Notice
pursuant to (ii) above), the Lessee
14
<PAGE> 18
shall deliver (or shall be deemed to have delivered in the case of (ii)
above) to the Lessor an Offer to Purchase in accordance with paragraphs
14 and 15.
(c) Condemnation or Casualty Without Termination. If, after a
Casualty or Condemnation, the Lessee has not given a Termination Notice and the
Lessor has not given a Lessor Termination Notice in accordance with subparagraph
12(b), then this Lease shall continue in full force and effect, and the Lessee
shall, at its sole cost and expense, promptly commence and diligently pursue to
completion the rebuilding, replacement or repair of any damage to the Property
caused by such event in conformity with the requirements of paragraph 9 or 10,
as applicable, in order to restore the Property (in the case of a Condemnation,
as nearly as practicable) to the value and operating condition thereof
immediately prior to such event. In connection with such restoration the Lessee
shall, before beginning such restoration, submit plans and specifications for
such restoration, together with an estimate of the cost thereof, and all
necessary construction contracts therefor for the Lessor's and the Independent
Engineer's approval, which will not be unreasonably withheld; provided that (i)
the capacity, efficiency and useful life of the Improvements, shall not, after
all such restoration taken as a whole, be materially less than the capacity,
efficiency and useful life prior to such Casualty or Condemnation; (ii) the fair
market value of the Property shall not, after all such restoration taken as a
whole, be materially less than its fair market value prior to such Casualty or
Condemnation; and (iii) if the estimated cost to complete such restoration
exceeds the amount of Net Proceeds, the Lessor is, in its sole judgment,
satisfied that the Lessee shall have sufficient funds (the "Excess Funds")
available to pay such excess, which Excess Funds shall be deposited by the
Lessee with the Proceeds Trustee and distributed to the Lessee as hereinafter
provided. Such work shall be completed in a good and workmanlike manner free and
clear of all Liens for labor, services or materials and in compliance with all
applicable Legal Requirements and Insurance Requirements. All fees and expenses
of the Independent Engineer in connection with any rebuilding and restoration
shall be at the Lessee's sole cost and expense.
The Lessee shall be entitled to receive payment from the Net
Proceeds or the Excess Funds, as the case may be, from time to time as such work
of rebuilding, replacement or repair progresses, but only after presentation of
certificates of the Independent Engineer, delivered by the Lessee to the
Proceeds Trustee (with a copy to the Lessor) from time to time as such work of
rebuilding, replacement or repair progresses. Each such certificate of the
Independent Engineer shall describe the work for which the Lessee is requesting
permission to pay or requesting payment and the cost incurred by the Lessee in
15
<PAGE> 19
connection therewith and shall state that such work has been properly completed
and that the Lessee has not theretofore received payment for such work, and
shall be accompanied by (i) an Officer's Certificate of the Lessee certifying
that no Default, Environmental Trigger, Unwind Event or Event of Default has
occurred and is continuing and that the Net Proceeds and Excess Funds held by
the Proceeds Trustee are adequate to complete such rebuilding, replacement or
repair in accordance with this paragraph 12(c), and (ii) duly executed Lien
waivers executed by each materialman or mechanic furnishing materials or labor
for which the Lessee is requesting permission to pay. The Proceeds Trustee shall
deliver, or cause to be delivered, payment within ten (10) days after its
receipt of the certificates required above. In connection with such payments,
the Proceeds Trustee shall first apply the Excess Funds to the cost of such
restoration prior to the disbursement of any Net Proceeds by the Proceeds
Trustee for such purpose. Upon receipt by the Proceeds Trustee (with a copy to
the Lessor) of an Officer's Certificate from the Lessee, to the effect that
final payment has been made for any such work and stating that the rebuilding,
replacement or repair has been completed in compliance with the terms and
conditions of this Lease, the remaining amount of such Net Proceeds shall be
paid to the Lessee. The Lessee shall be responsible for the cost of any such
repair, rebuilding or restoration in excess of such Net Proceeds and Excess
Funds, for which cost the Lessee shall make adequate provision acceptable to the
Lessor.
Notwithstanding the foregoing, any Net Proceeds paid to the
Proceeds Trustee in connection with any Condemnation or Casualty affecting both
the Parcel, Property or any part thereof and the Company Plant in excess of the
lesser of (i) Termination Value and (ii) the cost of the repair, rebuilding or
restoration of the Parcel, the Property or any part thereof as certified by the
Independent Engineer shall be paid to the Lessee for restoration of the Company
Plant. If the Independent Engineer has determined that the cost of restoration
of the Property would exceed Termination Value, the Lessor may either deliver a
Lessor Termination Notice pursuant to paragraph 12(b)(ii) or allow the Lessee to
restore the Property at the Lessee's cost and expense as to any costs in excess
of the Net Proceeds.
(d) Temporary Condemnation or Lease Termination.
Notwithstanding any provision to the contrary contained in this paragraph 12, in
the event of any temporary Condemnation this Lease shall remain in full force
and effect, and provided no Default or Event of Default, Unwind Event or
Environmental Trigger has occurred and is continuing, the Lessee shall be
entitled to receive the Net Proceeds allocable to such temporary Condemnation,
except that if this Lease shall expire
16
<PAGE> 20
or terminate during such temporary Condemnation, then Lessee shall be entitled
to the Net Proceeds allocable to the period after the termination or expiration
of this Lease only if it has paid the Offer Purchase Price for the Property.
13. Environmental Event. (a) The Lessee shall promptly, but in
any case within five (5) Business Days, notify the Lessor, the Agent, the
Trustee and the Purchasers if (i) any environmental event has occurred or any
environmental condition is discovered in, on, beneath, from or involving the
Property or any part thereof (including, but not limited to, the presence,
emission or release of Hazardous Materials or the violation of any applicable
Environmental Law) that could reasonably be anticipated to result in penalties
or other liabilities in excess of $75,000, (ii) the Lessee has received
notification that it, the Property or any part thereof is the subject of a
proceeding that could reasonably be expected to result in any ordered
remediation or corrective action or other liability related to an environmental
event or condition the cost of which liability is reasonably expected to exceed
$100,000 or (iii) the Lessee has received notification from any governmental
agency or authority that the air permit no. R-3855B does not authorize
construction or operation of the Improvements (each of (i), (ii) and (iii) an
"Environmental Event").
(b) Following the receipt of a notice pursuant to (a) above,
the Lessor, the Agent, the Holders of the B-Notes and the Certificate Holder, in
each case in their sole discretion, may require the Lessee to conduct, or cause
to be conducted, an environmental audit of the Property, the scope of which
audit shall be limited to confirming the magnitude and anticipated cost of the
liability resulting in the Environmental Event and to provide a copy of the
Environmental Consultant's report on its audit to the Lessor, the Agent, the
Trustee and the Purchasers. Notwithstanding the foregoing, if a pattern, in the
opinion of the Lessor and the Holders of the B-Notes and Certificates, of such
Environmental Events exists, the Lessor may conduct a more comprehensive
environmental audit of the Property to determine the scope and nature of such
pattern and its effect on the Property. If it is the opinion of the Agent and
the Environmental Consultant that an Environmental Event has occurred or exists
and a Permitted Remediation is not available or the Environmental Event cannot
be cured through a Permitted Remediation or the Environmental Event will result
in the cessation of operation of the Improvements for 90 days or more (each an
"Environmental Trigger"), the Lessor, the Agent and the Purchasers shall have
the option, each in its sole discretion, to require the Lessee to purchase the
Property for the Offer Purchase Price in the manner provided in paragraphs 14
and 15 hereof. A "Permitted Remediation" means any remediation of an
Environmental Event
17
<PAGE> 21
(a) the cost of which remediation is not anticipated, in the sole opinion of the
Agent and the Environmental Consultant (the cost and expense of which
Environmental Consultant shall be borne by the Lessee), to exceed $1,000,000,
(b) during and after which such Environmental Event could not be expected to
result in any additional environmental liability incurred by Lessor for which
Lessor, the Trustee, the Agent and the Purchasers have not received additional
indemnification in an amount and from a Person satisfactory to the Lessor, the
Agent and the Holders of the B-Notes and the Certificates in their sole and
absolute discretion and (c) permitted and effected in compliance with all
applicable Environmental Laws. If the Lessee is required to purchase the
Property due to an Environmental Trigger, and so long as no Default or Event of
Default has occurred and is continuing, a portion of the Offer Purchase Price
equal to the then-outstanding principal balance of the Notes may be paid by the
pro rata issuance by the Lessee of unsecured senior promissory notes (which
shall be at least pari passu with the Lessee's other unsecured senior debt) to
the Noteholders in the aggregate amount of the outstanding principal amount of
the Notes and with the same maturity and rate of interest as the A-Notes and
upon the same representations and warranties (other than those representations
and warranties that cannot be given by virtue of the events resulting in the
Environmental Trigger) as those made in connection with the A-Notes and
otherwise in form and substance satisfactory to the Noteholders, in their sole
discretion. The remainder of the Offer Purchase Price shall be paid in full in
cash.
(c) Irrespective of whether an Environmental Trigger has
occurred, Lessee shall immediately initiate, at its sole cost and expense, such
actions as may be necessary to comply in all material respects with all
applicable Environmental Laws and to alleviate any significant risk to human
health or the environment if the same arises from a condition on or in respect
of the Property or any part thereof, whether existing prior to, on or after the
date of this Lease. Without limiting the generality of the foregoing, if
necessary the Lessee's obligations under this paragraph shall extend even to the
providing or obtaining of emissions offsets under federal or state air quality
Laws to the extent necessary to satisfy new source review requirements for the
construction and operation of the Improvements. Once Lessee commences such
actions, Lessee shall thereafter diligently and expeditiously proceed to comply
materially and in a timely manner with all Environmental Laws and to eliminate
any significant risk to human health or the environment and shall, at the
request of the Lessor or the Agent during the Term or any Extended Term, give
periodic progress reports on its compliance efforts and actions.
18
<PAGE> 22
14. Offer to Purchase. (a) At any time during the Term but
prior to exercising its options pursuant to paragraph 27(a) hereof, Lessee may
(unless otherwise required to do so, in which case it shall) deliver to Lessor
and the Agent a written offer to purchase the Property (an "Offer to Purchase")
upon and subject to the applicable terms of this Lease.
(b) Any Offer to Purchase delivered or deemed to be delivered
by the Lessee hereunder shall, notwithstanding anything to the contrary set
forth therein, be irrevocable and unconditional and shall set forth the
Termination Value to be paid by Lessee.
(c) The Lessor shall be deemed to have accepted such Offer to
Purchase the Property on the date Lessor receives the same. The procedure for
the purchase of the Property and the purchase price therefor shall be governed
by paragraph 15 hereof.
14A. HCL Termination Notice. (a) At any time during the Term but
prior to exercising its options pursuant to paragraph 27(a) hereof, the Lessee
may deliver to the Lessor and the Agent an irrevocable written offer to purchase
the HCL Improvements and to assign or terminate the Ground Lease with respect to
VCMI's leasehold interest in the HCL Parcel (an "HCL Termination Notice")
subject to the applicable terms of this Lease and the Ground Lease (an "HCL
Termination")
(b) Any HCL Termination Notice delivered or deemed to be
delivered by the Lessee hereunder shall, notwithstanding anything to the
contrary set forth therein, be irrevocable and unconditional and shall set forth
the Closing Date and Allocated Termination Value to be paid by the Lessee.
(c) The Lessor shall be deemed to have accepted such HCL
Termination Notice on the date the Lessor receives the same. The procedure for
the purchase of the HCL Improvements and the purchase price therefor shall be
governed by paragraph 15 hereof.
15. Procedure Upon Purchase. (a) The date of the closing of
the Lessee's purchase of the Property (the "Closing Date") shall be (i) on the
Expiration Date pursuant to paragraph 27 hereof or (ii) if the Lessee shall
deliver (or shall be deemed to have delivered) an Offer to Purchase pursuant to
paragraph 14(a) hereof or an HCL Termination Notice pursuant to paragraph 14A(a)
hereof, on the next scheduled Payment Date following the date of Lessor's
acceptance or deemed acceptance of such Offer to Purchase, (iii) if the Lessee
shall deliver (or be deemed to have
19
<PAGE> 23
delivered) an Offer to Purchase pursuant to paragraphs 12(b) or 13(b) hereof or
Section 7.04 of the Participation Agreement, on the fifteenth day following the
date of Lessor's acceptance or deemed acceptance of such Offer to Purchase, or
(iv) if the Lessee shall deliver (or be deemed to have delivered) an Offer to
Purchase pursuant to paragraph 19(h), on the fifth day following the date of
Lessor's acceptance or deemed acceptance of such Offer to Purchase. On the
Closing Date, upon receipt by the Trustee (on behalf of the Lessor) of the Offer
Purchase Price (or in the case of an HCL Termination, the HCL Purchase Price),
the Lessor shall convey, or cause to be conveyed, the Property (or portion
thereof) (or, in the case of Casualty or Condemnation, the remaining portion
thereof) to the Lessee or its designee by an appropriate recordable assignment
or termination of the Ground Lease (or appropriate portion thereof) and an
appropriate recordable deed and bill of sale to the Improvements, in each case
containing no representation or warranty (expressed or implied) except that the
Property is free and clear of any conveyance, mortgage, lease or Lien or other
adverse interest of any kind created or caused by the Lessor or any person
claiming by, through or under the Lessor (except Permitted Encumbrances and as
consented to or created or caused by the Lessee and except as to any interest
created by the Lessor upon the exercise of any right hereunder upon any Default,
Event of Default, Unwind Event, Environmental Trigger or upon the delivery of a
Termination Notice or a Lessor Termination Notice).
(b) On the Closing Date, the Lessee shall pay, or cause to be
paid, to the Trustee (on behalf of the Lessor) (i) in the case of an Offer to
Purchase, the Termination Value for the Property, as specified in the Offer to
Purchase related thereto, and all Fixed Rent, Additional Rent and other sums
then due and payable hereunder relating to the Property up to and including such
Closing Date (such amounts, plus all Closing Costs, are herein referred to as
the "Offer Purchase Price") and (ii) in the case of an HCL Termination, the
Allocated Termination Value for the HCL Improvements and VCMI's leasehold
interest in the HCL Parcel, and all Fixed Rent, Additional Rent and other sums
then due and payable hereunder and under the other Operative Documents relating
to such portion of the Property up to and including the Closing Date (such
amounts, plus all Closing Costs, are herein referred to as the "HCL Purchase
Price"). The Lessor shall simultaneously (i) deliver to the Lessee or its
designee the instruments referred to in paragraph 15(a) above with respect to
the Property and any other instruments reasonably necessary to assign and convey
to the Lessee or its designee the Property (or in the case of an HCL
Termination, the HCL Improvements and VCMI's leasehold interest in the HCL
Parcel) and assign all Facility Agreements related to the Property (or
20
<PAGE> 24
portion thereof, as the case may be) (other than any rights of the Lessor to any
indemnities thereunder) and any other related property then required to be
assigned pursuant hereto, and (ii) convey, or cause to be conveyed, to the
Lessee or its designee any Net Proceeds related to the Property (or portion
thereof, as the case may be) and/or the right to receive the same.
(c) On the Closing Date, the Trustee shall (i) apply, pursuant
to the VCMI Loan Agreement, the Offer Purchase Price to the amount due to the
Trustee from VCMI, in full satisfaction of VCMI's obligations under the VCMI
Note and (ii) execute a discharge and satisfaction of the VCMI Mortgage.
(d) Upon the completion of any purchase of the Property (or
portion thereof) pursuant to this paragraph 15, but not prior thereto, this
Lease shall terminate with respect to such Property (or portion thereof) except
with respect to obligations and liabilities of the Lessee actual or contingent
which have arisen with respect to the Property on or prior to such date of
purchase, and except as elsewhere expressly provided herein.
16. Insurance. (a) The Lessee will purchase and maintain, or
cause to be purchased and maintained, insurance with respect to the Property of
the following types and in the following amounts (or in such greater amounts as
may become necessary from time to time to prevent the Lessor, the Lessee, the
Trustee, the Agent and the Holders from time to time of the Instruments from
becoming co-insurers of any loss), and in no event in amounts less than those
maintained by the Lessee or its Affiliates for other similar facilities owned
and/or operated by them:
(i) Property Insurance: Insurance against physical damage to
the Property (with sublimits and deductibles as are acceptable to
Lessor and with a maximum self-insured retention allowable of
$5,000,000) caused by perils now or hereafter embraced by or defined in
a manuscript "all risks" insurance policy, including flood, earth
movement, earthquake, subsidence and collapse, business
interruption/extra expense and boiler and machinery coverage;
(ii) Builder's Risk Insurance: During the Construction Period
and during the construction of any Additional Improvements, builder's
"all risks" and "general risks" insurance (with sublimits and
deductibles as are acceptable to Lessor), including flood, earth
movement, earthquake, subsidence and collapse, business
interruption/extra expense and boiler and machinery
21
<PAGE> 25
coverage with respect to the Property and any on-site and off-site work
and materials related thereto protecting the Lessee, the Lessor and all
contractors and subcontractors, in an amount not less than the full
replacement cost of the Property and such on-site and off-site work;
(iii) General Liability Insurance: Comprehensive general
liability (including contractual, completed operations and product
liability) insurance against claims for bodily injury (including
death), personal injury and property damage occurring on, in or in
respect of the Property or resulting from activities on or related to
the Property, in the minimum combined single limit amount of $100
million in the annual aggregate and $100 million, for each occurrence
for bodily injury (or death) and/or property damage with a maximum
self-insured retention allowable of $5,000,000;
(iv) Workers' Compensation Insurance: Workers'
compensation insurance at statutory levels and employers'
liability insurance, with a limit of $1,000,000, in the
aggregate; and
(v) Other Insurance: Such other insurance, including
automobile liability, in such amounts and against such risks, as is
either (x) customarily carried by companies owning, operating or
leasing property or conducting businesses similar and/or similarly
situated to the Property and/or the Lessee, or (y) reasonably requested
from time to time by Lessor.
Such insurance shall be written by companies that are
nationally recognized (including Lloyd's of London or other recognized
international insurers with an ISI rating of not less than BBB); primary
insurance shall be written by companies rated at least AXI in the most recent
edition of Best's Key Rating Guide, or as otherwise agreed to by the Agent, the
Lessor and the Purchasers, selected by the Lessee and, other than the insurance
specified in paragraph 16(a)(i)-(ii) and (iv), shall name Lessor, SSBTC (in its
individual capacity and as Trustee) and the Agent, on its own behalf and on
behalf of the Holders from time to time of the Instruments and their assignees,
as additional insureds, as their interests may appear. Notwithstanding the
foregoing, insurance coverage shall continue to be based on market conditions,
capacity and costs and in no event will the Lessee be required to maintain
coverage in amounts in excess of those maintained for businesses similar in
size, nature and creditworthiness to the Lessee under prevailing market
conditions.
22
<PAGE> 26
(b) The insurance referred to in paragraph 16(a)(i) and (ii)
for the Property may be a blanket policy and shall (i) at all times be in an
amount at least equal to the greater of (x) one hundred percent (100%) of the
full replacement cost value (without depreciation) of the Property and the
Lessee's leasehold improvements and (y) Termination Value; (ii) include a
lenders' loss payable endorsement in favor of the Lessor and any loss or damage
under such insurance policies shall be payable solely to the Trustee on behalf
of the Lessor, as Lessor's interest may appear, to be held and applied pursuant
to the terms of this Lease; (iii) provide that the interests of the Lessor, the
Trustee, the Agent and the Holders from time to time of the Instruments shall be
insured regardless of any breach or violation by the Lessee of any warranties,
declarations or conditions contained in such insurance; (iv) provide that such
insurance shall not be invalidated by any act, omission or negligence of the
Lessee, the Lessor, the Trustee, the Agent or the Holders from time to time of
the Instruments, nor by any foreclosure or other proceedings or notices thereof
relating to the Property or any part thereof, nor by legal title to, or
ownership of the Property or any part thereof becoming vested in or by Lessor or
its agents, nor by occupancy or use of the Property or any part thereof for
purposes more hazardous than permitted by such policy; and (v) provide that all
insurance claims pertaining to the Property or any part thereof shall be
adjusted by the insurers thereunder with the Lessee but that the Lessor must
consent to any such adjusted claim.
All policies of insurance required to be maintained pursuant
to paragraph 16(a)(iii) which cover liability for bodily injury or property
damage shall provide that all provisions of such insurance, except the limits of
liability (which shall be applicable to all insureds as a group) and liability
premiums (which shall be solely a liability of the Lessee), shall operate in the
same manner as if there were a separate policy covering each such insured and/or
additional insured, without right of contribution from any other insurance which
may be carried by an insured and/or additional insured.
Every policy required under paragraph 16(a) shall (i)
expressly provide that it will not be canceled or terminated except upon 60
days' written notice to the Lessor and the Lessee, except in the case of
cancellation or termination due to a lapse for non-payment, in which case only
30 days' written notice shall be required; (ii) include a waiver of all rights
of subrogation against the Lessor, the Trustee, the Agent and the Holders from
time to time of the Instruments and any recourse against the Lessor, the
Trustee, the Agent or the Holders from time to time of the Instruments for
payment of any premiums or assessments under any policy;
23
<PAGE> 27
and (iii) not contain a provision relieving the insurer thereunder of liability
for any loss by reason of the existence of other policies of insurance covering
the Property or any part thereof against the peril involved, whether collectible
or not, if such other policies do not name the Lessor, the Trustee, the Agent
and the Holders from time to time of the Instruments as additional insureds with
loss payable as provided in the Lease. The Lessee shall advise the Lessor
promptly of any policy cancellation or any change adversely affecting the
coverage provided thereby.
(c) The Lessee shall deliver to the Lessor the certificates of
insurance and any other documentation required by the Lessor evidencing the
existence of all insurance which is required to be maintained by the Lessee
hereunder including descriptions of the previously mentioned Insurance
Requirements, such delivery to be made (i) as provided in Section 2.01(k) of the
Participation Agreement, (ii) within twenty-one (21) days of the issuance of any
additional policies or amendments or supplements to any of such insurance, and
(iii) at least twenty-one (21) days prior to the expiration date of any such
insurance. The Lessee shall notify Lessor and Agent of any nonrenewal of any
policy required hereunder and shall cause each insurer under each policy
required hereunder to give the Lessor notice of any lapse under any such policy.
The Lessee shall not obtain or carry separate insurance concurrent in form, or
contributing in the event of loss, with that required by this paragraph 16
unless the Lessor, the Trustee, the Agent and the Holders from time to time of
the Instruments are named as additional insureds therein, with loss payable as
provided in this Lease. The Lessee shall immediately notify the Lessor, the
Trustee, the Agent and the Holders from time to time of the Instruments whenever
any such separate insurance is obtained and shall deliver to the Lessor the
certificates of insurance and any other documentation (other than blanket
policies) required by Lessor evidencing the same as is required hereunder.
(d) The requirements of subparagraphs (a) through (c) of this
paragraph 16 shall not be construed to negate or modify the Lessee's obligations
under Section 9.15 of the Participation Agreement.
17. Subletting. (a) The Lessee shall not sublet the Property
or any part thereof, unless (i) at the time of any such sublease, no Default,
Environmental Event, Unwind Event or Event of Default shall have occurred and be
continuing and no Termination Notice has been delivered or has been deemed to
have been delivered; (ii) any such sublease shall by its terms be expressly made
subject and subordinate to the terms of this Lease (and the Ground Lease and the
VCMI Mortgage); (iii) the Lessee shall provide the Lessor sixty
24
<PAGE> 28
(60) days prior to the effective date of such sublease with notice of such
sublease; (iv) the Lessee shall provide the Lessor 5 Business Days prior to the
effective date of such sublease with a conformed copy of the instrument creating
such sublease; (v) the Lessor has consented to such sublease; and (vi) the Final
Completion Date shall have occurred.
(b) No sublease pursuant to this paragraph 17 shall modify or
limit any right or power of the Lessor hereunder or affect or reduce any
obligation of the Lessee hereunder, and all such obligations of the Lessee shall
continue in full force and effect as obligations of a principal and not of a
guarantor or surety, as though no subletting had been made or occupancy
permitted.
(c) If the Lessee shall request, in connection with any
sublease, that the Lessor execute an attornment and non-disturbance agreement
with respect to such sublease, the Lessor shall consider each such sublease on a
case-by-case basis and may give its consent to its execution and delivery of an
attornment and non-disturbance agreement. The Lessee shall not mortgage, pledge
or otherwise encumber its interest in and to this Lease or in and to any
sublease or the rentals payable thereunder without the prior written consent of
the Lessor. Any sublease made, and any mortgage, pledge or assignment of the
Lessee's interest hereunder or under any such sublease granted, otherwise than
as expressly permitted by this paragraph 17, shall be null and void and of no
force or effect.
18. Permitted Contests. (a) So long as (w) no Unwind Event,
Environmental Trigger or Event of Default has occurred, (x) no Termination
Notice has been delivered or been deemed to have been delivered, (y) the Lessee
shall not have notified the Lessor pursuant to paragraph 27(a)(ii) that it is
terminating this Lease and abandoning the Property or (z) the Lessee shall not
have otherwise surrendered or be required to surrender the Property to the
Lessor for any reason (including, without limitation, pursuant to paragraph
23(a)), the Lessee shall not be required, nor shall the Lessor have the right,
to pay, discharge or remove any Charges or to comply or cause the Property or
any part thereof to comply with any applicable Legal Requirement or to pay any
materialman's, laborer's or undischarged or unremoved Lien, as long as the
Lessee shall at its sole cost and expense contest, or cause to be contested,
diligently and in good faith, the existence, amount or validity thereof by
appropriate proceedings, which shall (i) in the case of an unpaid Property
Charge or undischarged or unremoved Lien, prevent the collection thereof from
the Lessor or against the Property or any part thereof, (ii) prevent the sale,
forfeiture or loss of the Property or any part thereof, and (iii) in the case of
a
25
<PAGE> 29
Legal Requirement, not subject the Lessor, the Agent, the Trustee or the Holders
from time to time of the Instruments to the risk of any criminal liability or
civil liability for failure to comply therewith. The Lessee shall give such
assurances as may be reasonably demanded by the Lessor to insure ultimate
payment of such Charges or the discharge or removal of any such materialman's,
laborer's or mechanic's Lien or to insure compliance with such Legal Requirement
and to prevent any sale or forfeiture of the Property or any part thereof, or
any interference with or deductions from any Fixed Rent, Additional Rent or any
other sum required to be paid by the Lessee hereunder by reason of such
non-payment, non-discharge, non-removal or non-compliance.
(b) The Lessor shall cooperate with the Lessee in any contest
and shall allow the Lessee to conduct such contest (in the name of the Lessor,
if necessary) at the Lessee's sole cost and expense. The Lessee shall notify the
Lessor of each such proceeding at least ten days prior to the commencement
thereof, which notice shall describe such proceeding in reasonable detail.
(c) The Lessee shall, promptly after the final determination
(including appeals) of any contest brought by it pursuant to this paragraph 18,
pay and discharge all amounts which shall be determined to be payable therein
and shall be entitled to receive and retain for its own account all amounts
refunded and/or rebated as a result of any such contest and if the Lessor
receives any amount as a result of such contest to which it is not otherwise
entitled pursuant to this Lease, it shall promptly return such amount to the
Lessee.
(d) Except as otherwise specifically provided in this Lease,
this paragraph 18 shall not apply in the case of Charges upon, or in respect of,
any Person other than the Lessor or in respect of the property or income of any
such Person.
18A. Unwind Fee. Upon payment by the Lessee of the Unwind Fee
and the surrender of the Property to the Lessor pursuant to the conditions set
forth in Section 7.05 of the Participation Agreement, this Lease shall
terminate.
19. Default Provisions. (a) Any of the following occurrences
or acts shall constitute an event of default (each, an "Event of Default") under
this Lease:
(i) if the Lessee shall fail to pay (a) any Fixed Rent within
five days or Additional Rent within ten days after the date on which
payment is due or (b) any other sum required to be paid hereunder on
the date on which such payment is due;
26
<PAGE> 30
(ii) subject to the terms of paragraphs 11 and 18 relating to
permitted contests, if the Lessee shall fail to pay any Charges when
such payment shall become due or within any grace period provided for
payment of such Charges;
(iii) if the Lessee shall fail to comply with any
Insurance Requirement;
(iv) if the Lessee shall fail to comply with the requirements
of paragraph 27(b) within the time periods provided therein;
(v) if the Lessee shall grant, suffer to exist or create any
Lien (other than Permitted Encumbrances) upon the Parcel, this Lease,
the Ground Lease, or the Property or any part thereof or interest
therein or upon any Fixed Rent, Additional Rent or other sum paid
hereunder;
(vi) if the Lessee shall fail to observe or perform any other
covenant, condition or other provision hereof and such failure shall
continue for fifteen (15) days after the earlier of (i) the date on
which the Lessee becomes aware of such failure or (ii) notice by the
Lessor, the Agent or the Trustee to the Lessee of such failure
provided, however, that if such failure is of such nature that it
cannot be corrected by the payment of money or otherwise within such
15-day period, such failure shall not constitute an Event of Default so
long as (x) curative action reasonably satisfactory to the Lessor is
instituted within such period and diligently pursued to completion
thereafter and (y) periodic progress reports thereon are delivered to
the Lessor;
(vii) if an "Event of Default" (as defined in any such other
Operative Document, but excluding any Unwind Event) under the
Participation Agreement or any other Operative Document shall have
occurred;
(viii) if the Lessee has elected not to purchase the Lessor's
interest in the Property pursuant to paragraph 27(a)(ii), and if, ten
(10) Business Days before the Expiration Date, either (a) the Lessee is
then rebuilding or restoring, or would be required by the terms hereof
to rebuild or restore, the Property pursuant to paragraph 12(c) hereof
or (b) a temporary Condemnation has occurred and is scheduled to
continue after the Expiration Date;
(ix) if any Operative Document shall for any reason no longer
be in full force and effect (except if such is the result of a purchase
of the Property by the Lessee pursuant to this Lease);
27
<PAGE> 31
(x) if the Lessee shall have abandoned the Ground Lease
Property or the Improvements or if the Ground Lease Property or the
Improvements become vacant for a period of thirty (30) consecutive
days.
(b) The Lessor may take all steps to protect and enforce the
rights of the Lessor or obligations of the Lessee hereunder, whether by action,
suit or proceeding at law or in equity (for the specific performance of any
covenant, condition or agreement contained in this Lease, or in aid of the
execution of any power herein granted or for any foreclosure, or for the
enforcement of any other appropriate legal or equitable remedy) or otherwise as
the Lessor shall deem necessary or advisable.
(c) (i) If an Event of Default shall have occurred and be
continuing, including an Event of Default arising from the breach of a covenant,
condition or other provision hereof, then upon five (5) Business Days' prior
written notice by the Lessor to the Lessee, in addition to all other rights,
remedies or recourses available, the Lessor may either (A) terminate this Lease
or (B) terminate the Lessee's right to possession of the Property or any part
thereof. If Lessor should elect to terminate this Lease as provided in
subparagraph (c)(i)(A) above, then this Lease and the estate hereby granted
shall expire and terminate at midnight on the fifth (5th) Business Day (or such
later date as may be specified therein) after the date of such notice, as fully
and completely and with the same effect as if such date was the date herein
fixed for the expiration of the Term and all rights of the Lessee shall
terminate, but the Lessee shall remain liable as hereinafter provided.
(ii) Should the Lessor elect not to terminate this Lease,
this Lease shall continue in effect and Lessor may enforce all Lessor's rights
and remedies under this Lease including the right to recover the Fixed and
Additional Rent as each becomes due under this Lease. For the purposes hereof,
the following do not constitute a termination of this Lease:
(A) Acts of maintenance or preservation of the
Property or any part thereof or efforts to relet the Property or any
part thereof, including, without limitation, termination of any
sublease of the Property to a third party and removal of such subtenant
from the Property; and/or
(B) The appointment of a receiver upon initiative of
the Lessor to protect the Lessor's interest under this Lease.
28
<PAGE> 32
(d) If an Event of Default shall have occurred and be
continuing, and the Lessor has elected to terminate this Lease or terminate the
Lessee's right to possession of the Property or part thereof, upon five (5)
Business Days' notice, Lessor shall have (i) the right, whether or not this
Lease shall have been terminated pursuant to paragraph 19(c) hereof, to re-enter
and repossess the Property or any part thereof, as the Lessor may elect, by
summary proceedings, ejectment, any other legal action or in any other lawful
manner the Lessor determines to be necessary or desirable and (ii) the right to
remove all Persons and property therefrom. The Lessor shall be under no
liability by reason of any such re-entry, repossession or removal. No such
re-entry or repossession of the Property or any part thereof shall be construed
as an election by the Lessor to terminate this Lease unless a notice of such
termination is given to the Lessee pursuant to paragraph 19(c) hereof, or unless
such termination is decreed by a court or other governmental tribunal of
competent jurisdiction. Should the Lessor elect to re-enter the Property as
herein provided or should the Lessor take possession pursuant to legal
proceedings or pursuant to any notice provided for by Law or upon termination of
this Lease of the Lessee's right to possession of the Property or any part
thereof pursuant to paragraph 19(c) hereof or otherwise as permitted by Law, the
Lessee shall peaceably quit and surrender the Property or any part thereof to
the Lessor. In any such event, neither the Lessee nor any Person claiming
through or under the Lessee, by virtue of any Law, shall be entitled to
possession or to remain in possession of the Property or any such part thereof,
but shall forthwith quit and surrender the Property to the Lessor.
(e) At any time or from time to time after the re-entry or
repossession of the Property or any part thereof pursuant to paragraph 19(d)
hereof, whether or not this Lease shall have been terminated pursuant to
paragraph 19(c) hereof, the Lessor may (but shall be under no obligation to)
relet the Property or any part thereof, for the account of the Lessee, without
notice to the Lessee, for such term or terms and on such conditions and for such
uses as the Lessor, in its sole and absolute discretion, may determine. The
Lessor may collect and receive any rents payable by reason of such reletting.
The Lessor shall not be liable for any failure to relet the Property or any part
thereof or for any failure to collect any rent due upon any such reletting.
(f) No termination of this Lease or of the Lessee's right to
possession of the Property or any part thereof pursuant to paragraph 19(c)
hereof, or by operation of Law, and no re-entry or repossession of the Property
or any part thereof, pursuant to paragraph 19(d) hereof, and no reletting of the
Property or any part thereof pursuant to paragraph
29
<PAGE> 33
19(e) hereof, shall relieve the Lessee of its liabilities and obligations
hereunder, all of which shall survive such termination, re-entry, repossession
or reletting.
(g) In the event of any termination of this Lease or of the
Lessee's right to possession of the Property or any part thereof by reason of
the occurrence of any Event of Default, the Lessee shall pay to the Lessor all
Fixed Rent, Additional Rent and other sums required to be paid to and including
the date of such termination of this Lease or of the Lessee's right to
possession; and thereafter, until the end of the Term or the Extended Term, as
applicable, whether or not the Property or any part thereof shall have been
relet, the Lessee to the extent permitted by applicable Law shall be liable to
the Lessor for, and shall pay to the Lessor, on the days on which such amounts
would be payable under this Lease in the absence of such termination, re-entry
or repossession, as agreed current damages and not as a penalty: all Fixed Rent,
Additional Rent and other sums which would be payable under this Lease by the
Lessee, in the absence of such termination, re-entry or repossession, and all
costs (including attorneys' fees and expenses incurred by the Lessor hereunder
(payable on demand)) and all costs of any environmental remediation required by
Environmental Law. To the extent permitted by Law, at such time after the
termination or expiration of this Lease as the Lessee shall have paid all
amounts required to be paid by it under this Lease and the Lessor shall have
discharged any and all obligations to the Holders from time to time of the
Instruments, then the Lessor shall pay to the Lessee, when received, the net
proceeds, if any, of any reletting effected for the account of the Lessee
pursuant to paragraph 19(e), after deducting from such proceeds all of the
Lessor's expenses in connection with such reletting (including, but not limited
to, all repossession costs, brokerage commissions, attorneys' fees and expenses,
employees' expenses, alteration costs and expenses of preparation for such
reletting and all costs at any environmental remediation required by
Environmental Law).
(h) Notwithstanding the foregoing, if an Event of Default
shall have occurred, the Lessee may within five (5) Business Days of the
earliest of the Lessor's, Agent's or Trustee's notice of such occurrence
thereafter pay to the Lessor an amount equal to the Offer Purchase Price in
which event the Lessor shall be obliged to convey the Property to Lessee in
compliance with paragraph 15.
(i) At any time after such termination of the Term (or
Extended Term) of this Lease or re-entry or repossession of the Property by
reason of the occurrence of an Event of Default, the Lessor shall be entitled to
recover from the
30
<PAGE> 34
Lessee, and the Lessee will pay to the Lessor on demand, in lieu of all
liquidated damages in respect of Fixed Rent beyond the date of such demand (but
in addition to any claim for current damages in respect of Fixed Rent prior to
the date of such demand), an amount equal to the Termination Value.
(j) In the event of foreclosure of the lien of the VCMI
Mortgage or if the Property or any part thereof is conveyed to the Trustee by
deed in lieu of foreclosure, the Lessee shall attorn to the Trustee as landlord
under the Lease. Such attornment shall be effective and self-operative without
the execution of any further instrument by the parties hereto.
20. Additional Rights; Mortgage. (a) No right or remedy
hereunder shall be exclusive of any other right or remedy, but shall be
cumulative and in addition to any other right or remedy hereunder or now or
hereafter existing by Law or in equity and the exercise by the Lessor of any one
or more of such rights, powers or remedies shall not preclude the simultaneous
exercise of any or all of such other rights, powers or remedies. Failure to
insist upon the strict performance of any provision hereof or to exercise any
option, right, power or remedy contained herein shall not constitute a waiver or
relinquishment thereof for the future. Receipt by the Lessor (or by the Trustee
on behalf of the Lessor) of any Fixed Rent, Additional Rent or other sum payable
hereunder with knowledge of the breach by Lessee of any provision hereof shall
not constitute waiver of such breach, and no waiver by the Lessor or the Trustee
of any provision hereof shall be deemed to have been made unless made in
writing. The Lessor and the Trustee shall be entitled to injunctive relief in
case of the violation or attempted or threatened violation of any of the
provisions hereof, a decree compelling performance of any of the provisions
hereof or any other remedy allowed to the Lessor by Law or in equity.
(b) The Lessee hereby waives and surrenders for itself and all
those claiming under it, including creditors of all kinds, (i) any right and
privilege which they may have to redeem the Property or any part thereof or to
have a continuance of this Lease after termination of the Lessee's right of
occupancy by Law or by any legal process or writ, or under the terms of this
Lease, or after the termination of the term of this Lease as herein provided and
(ii) the benefits of any Law which exempts property from liability for debt or
for distress for rent.
(c) If an Event of Default exists hereunder, the Lessee shall
pay to the Trustee, on behalf of the Lessor, all fees and out-of-pocket expenses
incurred by the Lessor or the
31
<PAGE> 35
Trustee in enforcing its rights under this Lease, including attorneys' fees and
expenses.
(d) Lessor and Lessee intend that the Lessee shall treat this
Lease, for accounting purposes, as an operating lease. If a court of competent
jurisdiction determines that the transaction represented by this Lease and the
other Operative Documents will be treated as a financing transaction, then in
such event it is the intention of the parties hereto (i) that this Lease be
treated as a deed of trust and security agreement or other similar instrument
with a power of sale (the "Mortgage") from Lessee, as mortgagor, to the Trustee
for the benefit of Lessor, as mortgagees, encumbering the Property, and that the
Lessee, as mortgagor, hereby (A) grants, bargains and sells, in trust, with
power of sale to the Trustee for the benefit of the Lessor and the Trustee, as
mortgagee, or any successor thereto, for the use and benefit of the Holders of
the Applicable B Percentage of the Interim Notes, the Holders of the B-Notes and
the Holders of the Certificates, as beneficiaries, a first and paramount Lien on
the Property, and (B) grants a security interest to the Lessor and the Trustee
in the Property, (ii) that Lessor and the Trustee shall have, as a result of
such determination, all of the rights, powers and remedies of a mortgagee and/or
secured party available under applicable Law to take possession of and sell
(whether by foreclosure, power of sale or otherwise) the Property, (iii) that
the effective date of the Mortgage shall be the effective date of this Lease,
(iv) that the recording of an instrument referencing this provision shall be
deemed to be the recording of the Mortgage and (v) that the obligations secured
by the Mortgage shall be the Secured Obligations.
(e) If this Lease shall hereafter be treated as the Mortgage
as provided in subparagraph 20(d) above, then the following provisions shall
apply in respect of the Lessor's and Trustee's enforcement of their rights under
such Mortgage: (i) Upon request by the Lessor or the Trustee, the Trustee shall
proceed to sell the Property and any and every part thereof, at public venue, to
the highest bidder, at the customary time and place in the county where the
Property is located, and at the time, place, and under the terms designated in
said notice of sale for cash, first giving the public notice and notice to the
Lessee required by law of the time, terms and place of sale, and of the property
to be sold; and upon such sale shall execute and deliver a deed of conveyance of
the Property sold to the purchaser or purchasers thereof, and any statement or
recital of fact in such deed in relation to the nonpayment of money hereby
secured to be paid, existence of the indebtedness so secured, notice of
advertisement, sale, receipt of money, and the happening of any of the events
whereby any successor Trustee became
32
<PAGE> 36
successor as herein provided, shall be prima facie evidence of the truth of such
statement or recital; and the Trustee shall receive the proceeds of such sale,
out of which the Trustee shall pay, first the cost and expenses of executing
this trust, including attorneys' fees and compensation to the Trustee for its
services, and next to the Lessor or its endorsees or assignees, upon the usual
vouchers therefor, all monies paid pursuant to or under any provisions set forth
herein or in the Operative Documents; and next all monies due and owing as to
the Secured Obligations then due and unpaid (with interest and Distributions at
the Default Rate on any overdue amounts) up to the time of such payment, and if
not enough therefor, then apply what remains; and next to all other unpaid sums
secured hereby in such order as the Lessor may elect; and the balance of such
proceeds, if any, shall be paid to the person or persons legally entitled
thereto; and the Trustee covenants faithfully to perform the trust herein
created; (ii) Until a sale shall be held hereunder, the Trustee hereby lets the
Property to the Lessee, upon the following terms and conditions, to-wit: the
Lessee, and every and all persons claiming or possessing the Property, and any
part thereof, by, through, or under it, shall or will pay rent therefor during
said term at the rate of one cent per month, payable monthly upon demand, and
shall and will surrender peaceable possession of the Property, and any and every
part thereof, to the Trustee, its successors, assignees, or purchasers thereof,
without notice or demand therefor, upon the occurrence of said sale; (iii) Upon
any sale or sales made hereunder, whether made under the power of sale herein
granted or under or by virtue of judicial proceedings or of a judgment or decree
of foreclosure and sale, the Lessor or the Trustee may bid for and acquire the
Property or any part thereof and, in lieu of paying cash therefor, may make
settlement for the purchase price by crediting upon the Secured Obligations the
net sales price after deducting therefrom the expenses of sale and the cost of
the action and any other sums which the Lessor is authorized to deduct under
this Lease, and, in such event, this Lease and the Operative Documents
evidencing the Secured Obligations may be presented to the persons or person
conducting the sale in order that the amount so used or applied may be credited
upon the Secured Obligations as having been paid; (iv) the Lessor and the
Trustee shall have the option to proceed with foreclosure in satisfaction of any
part of the Secured Obligations without declaring the whole of the Secured
Obligations as immediately due and payable, and such foreclosure may be made
subject to the part of the Secured Obligations not due and payable, and it is
agreed that such foreclosure, if so made, shall not in any manner affect the
part of the Secured Obligations, but as to such part this Lease, as treated as
the Mortgage, as well as the other Operative Documents, shall remain in full
force and effect just as though no foreclosure had been made. Several
33
<PAGE> 37
foreclosures may be made without exhausting the right of foreclosure for any
part of the Secured Obligations not due and payable, it being the purpose to
provide for a foreclosure and sale of the security for any due and payable
portion of the Secured Obligations without exhausting the power of foreclosure
and power to sell the Property for any other part of the Secured Obligations;
and (v) the Lessor and the Trustee may, from time to time, substitute another
trustee in place of the Trustee herein named. Upon such appointment, and without
conveyance to the successor trustee, the latter shall be vested with all the
titles, estates, rights, powers and trusts conferred upon the Trustee herein
named. Such appointment shall be made by written instrument executed by the
Lessor and the Trustee which shall be recorded among the public records in the
county where the Property is located, and shall be conclusive proof of the
proper appointment of the successor trustee.
(f) In the exercise of any of the Lessor's and the Trustee's
rights under this paragraph 20, the Lessor and the Trustee shall comply with all
applicable requirements of Section 51.002 of the Texas Property Code, as the
same may be amended from time to time.
2l. Notices, Demands, and Other Instruments. All notices,
offers, consents and other instruments given pursuant to this Lease shall be
sent to the parties hereto at the addresses set forth on Schedule I to the
Participation Agreement and shall be given in the manner and shall be effective
at the times and under the terms set forth in Section 9.02 of the Participation
Agreement; provided that each of the Lessor and the Lessee may from time to time
specify, by giving not less than 15 days' prior written notice thereof to the
other party (i) any other address in the United States as its address for
purposes of this Lease and (ii) any other Person that is to receive copies of
notices, offers, consents and other instruments hereunder; and provided that
neither party shall be entitled to designate more than two other Persons to
receive copies of notices hereunder. The Lessee shall send to the Trustee
copies of all notices, offers, consents, advices and other instruments
hereunder sent to the Lessor. Notwithstanding anything to the contrary herein
or in the Operative Documents, all notices, consents and other instruments
required to be given by the Lessor hereunder may alternatively be given by the
Trustee on the Lessor's behalf.
22. No Default Certificate. Each party hereto shall, at the
reasonable request of the other party hereto, deliver to such other party a
certificate stating whether such first party has knowledge of, or has received
notice from any
34
<PAGE> 38
person of, any Casualty, Condemnation, Default, Environmental Trigger, Unwind
Event or Event of Default.
23. Surrender. (a) If upon the expiration or termination of
the Term (or the Extended Term, as the case may be) or the termination of
Lessee's possession of the Property, Lessee or its designee has not purchased
the Property as provided hereunder, the Lessee shall surrender (i) the Ground
Lease Property to the Lessor in the condition in which the Ground Lease Property
was upon the commencement of the Term hereof (subject to Improvements and other
alterations and maintenance made in accordance herewith) together with such
additional easements, rights of way or other rights as Lessor may require to
assure unrestricted access to the Property for the remaining term of the Ground
Lease and (ii) the Improvements in the operating condition, efficiency and with
the useful life, they were or had upon the commencement of the Primary Term,
except as repaired, rebuilt, altered, added to or built as permitted or required
hereby and except for ordinary wear and tear. To the extent that the Property is
not in compliance with the above upon such expiration or termination (except as
a consequence of a Casualty or Condemnation, as to which paragraph 12 applies),
the Lessee shall pay to the Trustee on behalf of the Lessor such additional
amounts as are required to place it in compliance therewith.
(b) The Lessee shall also surrender the Property to the Lessor
free and clear of all Liens, easements, consents and restrictive covenants and
agreements affecting the Property which the Lessee is obliged hereunder to
remove.
(c) The Lessee shall also surrender the Property in a
condition such that the Property is in compliance with all applicable
Environmental Laws at surrender (irrespective of whether the deadline for such
compliance would otherwise expire before the end of the Term). Nothing contained
in this paragraph 23 shall relieve or discharge or in any way affect the
obligation of the Lessee to cure promptly pursuant to this Lease any violations
of Legal Requirements referred to in this Lease, or to pay and discharge any
Liens and Impositions against the Property, subject, however, to the right of
the Lessee to contest the same pursuant to the provisions of paragraphs 11 and
18. Lessee shall cooperate, to the fullest extent, with the Lessor, its
subsequent lessees, operators or purchasers to effect the transfer of all of
Lessee's Applicable Permits for the Property to such Persons.
(d) The Lessee, at its sole cost and expense, shall remove
from the Property on or prior to such expiration or termination all property
situated thereon which is not owned by the Lessor and shall repair any damage
caused by such
35
<PAGE> 39
removal and shall restore the Property to the condition and working order (or
reasonable equivalent thereof) in which they existed immediately prior to the
installation of such property, except for ordinary wear and tear. Lessee shall
indemnify and hold harmless the Lessor, its successors and assigns against any
loss, liability or claim arising out of the Lessee's removal of such property
from the Property including, without limitation, any environmental liability
arising therefrom. Any such property of the Lessee not so removed shall become
the property of the Lessor, and the Lessor may cause such property to be removed
from the Property and disposed of, and the cost of any such removal and
disposition of the Lessee's property and of repairing any damage caused by such
removal and of the restoration of the Property to the condition and working
order (or reasonable equivalent thereof) in which it existed immediately prior
to the installation of such property, ordinary wear and tear excepted, shall be
borne by the Lessee.
(e) The Lessee shall comply with the conditions set forth in
Section 7.05(b) of the Participation Agreement in addition to those set forth in
this paragraph 23.
(f) The obligations of the Lessee under this paragraph 23
shall survive the expiration or any termination of this Lease (whether by
operation of Law or otherwise) for all matters described in this paragraph 23
which occur or arise prior to such expiration or termination or arise out of or
result from facts, events, claims, liabilities, actions or conditions occurring,
arising or existing on or before such expiration or termination.
24. Separability; Binding Effect; Governing Law; Non-Recourse.
(a) Except as expressly provided otherwise in this Lease, each provision hereof
shall be separate and independent and the breach of any such provision by the
Lessor shall not discharge or relieve the Lessee from its obligations to perform
each and every covenant to be performed by the Lessee hereunder. If any
provision hereof or the application thereof to any Person or circumstance shall
be invalid or unenforceable, the remaining provisions hereof, or the application
of such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision
hereof shall be valid and shall be enforceable to the extent permitted by Law.
(b) All provisions contained in this Lease shall be binding
upon, inure to the benefit of, and be enforceable by, the respective permitted
successors and assigns of the Lessor and the Lessee to the same extent as if
each successor and assignee were named as a party hereto. Except for subleases
36
<PAGE> 40
permitted or created in accordance with paragraph l7 hereof, the Lessee may not
assign its rights hereunder or any interest herein without the prior written
consent of the Lessor. Subject to the provisions of the other Operative
Documents, the Lessor may assign all or any part of the Property and/or its
rights under this Lease. This Lease may not be changed, modified or discharged
except by a writing signed by the Lessor and the Lessee. Any change,
modification or discharge made otherwise than as expressly permitted by this
paragraph 24 shall be null and void.
(c) THIS LEASE SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
(d) This Lease, when delivered, shall constitute an original,
fully enforceable counterpart for all purposes except that only the counterpart
stamped or marked "COUNTERPART NUMBER ONE" or "COUNTERPART NUMBER l" shall
constitute, to the extent applicable, "chattel paper" or other "collateral"
within the meaning of the Uniform Commercial Code in effect in any jurisdiction.
(e) No recourse shall be had against the Lessor, the Agent,
the Trustee, SSBTC or any Holder of any Instrument or their respective
successors, assigns, directors, officers, employees, agents or shareholders, for
any claim based on any failure by the Lessor in the performance or observance of
any of the agreements, covenants or provisions contained in this Lease and in
the event of any such failure, recourse shall be had solely against the
Property; provided, however, that nothing contained in this Lease shall be taken
to prevent enforcement of any claim against the Lessor or any other Person
arising out of or in connection with this Lease based on fraud, gross negligence
or willful misconduct of the Lessor and nothing shall prevent enforcement
against any other Person to which any part thereof shall have been transferred,
or obligations undertaken or assumed in writing by such Person.
25. Headings and Table of Contents. The table of contents and
the headings of the various paragraphs and schedules of this Lease are for
convenience only and shall not affect the meaning of the terms and conditions of
this Lease.
26. Lessor's Right to Cure Lessee's Default. If the Lessee
shall fail to make any payment or perform any act required to be made or
performed under this Lease, the Lessor, without waiving any default or releasing
Lessee from any obligation, may (but shall be under no obligation to) make such
payment or perform such act for the account and at the cost and expense of the
Lessee, and may enter upon the Property for such purpose and take all such
action thereon as, at the Lessor's sole discretion, may be necessary or
37
<PAGE> 41
appropriate therefor. No such entry shall be deemed an eviction of the Lessee or
a breach of the Lessor's covenant for quiet possession pursuant to paragraph
2(b). All sums so paid by the Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses so incurred,
together with interest thereon to the extent permitted by Law) shall be paid by
the Lessee to the Lessor on demand as Additional Rent.
27. Lessee's Options Upon Expiration. (a) In addition to its
rights under paragraphs l2 and 14 hereof, Lessee shall, by notice given not less
than nine (9) months prior to the Expiration Date, elect either to (i) deliver
an Offer to Purchase the Property and purchase the Property on the Expiration
Date upon payment of an amount equal to the Offer Purchase Price, in which case
the transfer of the Property shall be governed by the terms of paragraphs 14 and
15 (and in which case, this Lease (with the exception of paragraph 24(e) or any
other provision hereof under which the Lessee indemnifies the Lessor or others
from liability in connection with this Lease) shall terminate on the Closing
Date); or (ii) subject to the satisfaction of the conditions set forth in
paragraph 27(b) hereof, terminate this Lease, abandon the Property as of the
Expiration Date and pay to the Trustee, on behalf of the Lessor on the
Expiration Date, in addition to any Fixed Rent, Additional Rent and any other
amounts then due and payable to the Lessor hereunder, the Residual Guaranty; or
(iii) subject to the conditions set forth in paragraph 27(d) hereof, extend the
Lease for an Extended Term.
(b) Upon the election of the Lessee to terminate this Lease
pursuant to paragraph 27(a)(ii) hereof, Lessee shall provide, or cause to be
provided or accomplished, at the sole cost and expense of the Lessee, to or for
the benefit of the Lessor and the holders of the Instruments, at least thirty
(30) days but not more than sixty (60) days prior to the Expiration Date each of
the items set forth in Section 7.05 of the Participation Agreement.
(c) Upon the Lessee's election to terminate this Lease
pursuant to and in compliance with paragraph 27(a)(ii) hereof, the Trustee (on
behalf of the Lessor) shall have the sole and exclusive right to sell or dispose
of the Property and, as of the Expiration Date, the Lessee shall have no further
claim thereto. The proceeds of any sale or disposition of the Property pursuant
to this paragraph 27 (herein called a "Qualified Sale") shall be applied by the
Trustee on the Lessor's behalf as follows: first, to pay all Closing Costs in
connection with the Qualified Sale; and second, as provided in the Declaration.
38
<PAGE> 42
(d) By written notice given to the Agent at least 10 months
prior to the Expiration Date (or the expiration of any Extended Term ending on a
date less than 5 years after the Expiration Date, as the case may be) the Lessee
may request, in its sole discretion and if there exists no Default, Event of
Default, Environmental Trigger or Unwind Event, an extension of this Lease for a
maximum of 5 successive one-year terms (each an "Extended Term"). The Lessor and
the Lessee shall determine the Applicable Rate for each Extended Term,
consistent with the terms outlined below in this paragraph 27(d), and the Lessee
shall undertake to enter into all amendments and supplements to the Operative
Documents and such other agreements as the Lessor in its sole discretion
determines to be necessary and appropriate in connection therewith. If the Lease
is extended for an Extended Term, the Lessee shall pay the Agent a remarketing
fee the amount of which shall be determined prior to the commencement of each
Extended Term. Fixed Rent during each Extended Term shall be paid monthly in
advance, and include an annual amount to be applied in a manner acceptable to
each Purchaser, to the outstanding principal amount of the Notes, such annual
amount to be equal to 20% (or such lower percentage as the Purchasers in their
sole discretion may agree to) of the outstanding principal amount of the Notes
at the Expiration Date. Within ten (10) days of receipt of Lessee's request to
extend this Lease pursuant to this paragraph 27, the Agent shall, after
consultation with the Purchasers, notify the Lessee of the Applicable Rate
agreed upon by the Purchasers for such Extended Term. Within 5 days of such
notice, the Lessee shall notify the Agent of whether the Lessee wishes to extend
the Lease on the proposed terms. If a Purchaser fails to agree to extend this
Lease on terms acceptable to the Lessee, the Agent shall use all reasonable
efforts to locate a replacement lender or investor, as the case may be,
provided, however, that if the Agent fails to locate a replacement lender or
investor within fifteen (15) days of the aforesaid notice, the Lessee shall
either (i) give notice of its election pursuant to paragraph 27(a) (i) hereof or
(ii) agree to extend the Lease at the highest Applicable Rate enforceable at
law.
28. Limitations on Amounts Payable. Notwithstanding anything
to the contrary contained in this Lease or any of the other Operative Documents,
the amounts which the Lessee is obliged to pay pursuant to this Lease and the
other Operative Documents, and the amounts which Lessor, the Trustee, Agent and
the Note and Certificate Purchasers are entitled to receive pursuant to this
Lease and other Operative Documents, are subject to limitations pursuant to
Section 9.18 of the Participation Agreement.
29. Waiver of Trial by Jury. IN ANY ACTION OR
PROCEEDING UNDER OR RELATED TO THIS AGREEMENT, THE OPERATIVE
39
<PAGE> 43
DOCUMENTS OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, THE LESSOR AND
THE LESSEE HEREBY AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE
A COURT AND NOT BEFORE A JURY, IRRESPECTIVE OF WHICH PARTY COMMENCES SUCH ACTION
OR PROCEEDING.
30. No Merger of Title. There shall be no merger of this Lease
nor of the leasehold estate created by this Lease with the fee ownership of the
Parcel by reason of the fact that the same Person may acquire, own or hold,
directly or indirectly, this Lease or the leasehold estate created by this Lease
or any interest in this Lease or interest in the fee or leasehold ownership of
the Parcel, and no such merger shall occur unless and until all Persons having
any interest in (x) the leasehold estate created by this Lease and the Ground
Lease and (y) the indefeasible fee ownership of the Parcel or any part thereof
shall join in a written instrument effecting such merger and shall duly record
the same.
31. Payments to the Trustee. The Lessee hereby acknowledges,
and the Lessor hereby directs, that all payments of Fixed Rent, Additional Rent
and other sums due to the Lessor hereunder shall be made to the Trustee, on
behalf of the Lessor, to the account specified for the Trustee in Schedule I to
the Participation Agreement.
40
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be duly
executed by their respective Officers thereunto duly authorized as of the date
hereof.
LESSOR:
1994 VCM INC.
Attest:A.M. HORN By:\S\MARK A. FERRUCCI
Name:Mark A. Ferrucci
[Seal] Title:President
LESSEE:
THE GEON COMPANY
Attest:Joe. A. Powell By:\S\JEAN M. MIKLOSKO
Name:Jean M. Miklosko
Title:Assistant Treasurer
[Seal]
41
<PAGE> 45
SCHEDULE A
Description of the Parcel
LAND IN THE CITY OF LAPORTE, HARRIS COUNTY, TEXAS, legally described as follows:
A-1
<PAGE> 46
SCHEDULE A-1
Description of the Chlorine Facility Easement
A-2
<PAGE> 47
SCHEDULE A-2
Description of the HCL Parcel
A-3
<PAGE> 48
SCHEDULE B
Fixed Rent and Additional Rent Schedule
Capitalized terms used herein and not defined herein shall
have the meanings assigned to them in the Lease (including terms defined by
reference in the Lease to the other Operative Documents).
I. Fixed Rent
A. Fixed Rent
"Fixed Rent" shall be an amount equal to the sum of Variable
Rent and Basic Rent. Fixed Rent shall be due and payable in
arrears on each Payment Date.
B. Variable Rent
1. The "Original Capitalized Cost" of the Property at
any time is equal to the sum of the then outstanding
aggregate principal amounts of the A-Notes and the
B-Notes plus the then outstanding aggregate stated
amount of the Certificates.
The "Series A Portion" of the Original Capitalized
Cost at any time is equal to the then outstanding
aggregate principal amount of the A-Notes.
The "Series B Portion" of the Original Capitalized
Cost at any time is equal to the then outstanding
aggregate principal amount of the B-Notes.
The "Series C Portion" of the Original Capitalized
Cost at any time is equal to the then outstanding
aggregate stated amount of the Certificates.
2. Variable Rent.
Variable Rent shall be due and payable in arrears on
each Payment Date in the amounts set forth below.
B-1
<PAGE> 49
(a) Construction Period:
For the portion of the Construction Period
during which interest on the Interim Notes
(HCL Series) can be paid from HCL Advances
under Section 1.04(c) of the Participation
Agreement, "Variable Rent" calculated with
regard to the Interim Notes (HCL Series)
shall be $0.00.
For the balance of the Construction Period,
Variable Rent calculated with regard to the
Interim Notes (HCL Series) shall be equal to
the product of the aggregate principal
amount of the Interim Notes (HCL Series)
times the Applicable Rate, all calculated on
the basis of a 360-day year and prorated for
the actual number of days of such period.
If the Interim Notes (HCL Series) are
refinanced on a day which is not a regular
Payment Date, Fixed Rent shall be
proportionately adjusted to such date of
exchange, and any additional costs incurred
by the Lessor in connection with such
refinancing shall also be payable on such
date as Additional Rent under this Lease, a
certificate as to the amount of such costs
submitted to the Lessee by the Lessor shall
be conclusive and binding for all purposes,
absent manifest error.
(b) Primary Term and Extended Term:
"Variable Rent" for each Payment Date during
the Primary Term and Extended Term, if any,
shall equal the sum of (A) an amount equal
to the product of the Series A Portion of
the Original Capitalized Cost of the
Property times the Applicable Rate,
calculated on the basis of a 360-day year
and prorated for the actual number of days
of such period, and (B) an amount equal to
the product of the Series B Portion of the
Original Capitalized Cost of the Property
times the Applicable Rate, calculated on the
basis of a 360-day year and prorated for the
actual number of days of such period.
B-2
<PAGE> 50
C. Basic Rent.
Basic Rent shall accrue on a daily basis and shall be due and
payable in arrears on each Payment Date to the extent, in the
manner and in the amounts set forth below.
(a) Construction Period:
For the portion of the Construction Period during
which Distributions on the Certificates (HCL Series)
can be paid from HCL Investments under Section
1.04(c) of the Participation Agreement, "Basic Rent"
shall be $0.00.
For the balance of the Construction Period, Basic
Rent shall be equal to the product of the aggregate
stated amount of the Certificates (HCL Series) times
the Applicable Rate, all calculated on the basis of a
360-day year and prorated for the actual number of
days of such period.
(b) Primary Term and Extended Term:
(1) "Basic Rent" for each Payment Date shall be equal
to the product of (a) the aggregate stated amount of
the Certificates (excluding the Certificates (HCL
Series) during the Construction Period) times (b) the
Applicable Rate, calculated on the basis of a 360-day
year and prorated for the actual number of days of
such period.
II. Additional Rent
In addition to such Additional Rent as may otherwise be payable under
the Lease, Lessee shall pay within thirty (30) days of a demand
therefor but subject in all cases to Lessee's rights under the
Operative Documents, as Additional Rent, without duplication, all Break
Costs, Funding Costs, Reserve Costs, Increased Costs and Illegality
Costs (collectively, "Additional Costs").
Promptly after Lessor receives notice from any holder of Instruments of
any Additional Costs to be payable as Additional Rent Lessor shall
supply (i) a copy of the same to the Lessee; provided, however, that
the failure to provide such notice of any Additional Costs shall not
affect the Lessor's right to recover Additional Rent for the same but
shall merely affect the timing of such recovery; and (ii) a certificate
in reasonable detail
B-3
<PAGE> 51
setting forth the basis for and the amount of such Additional Costs
submitted by the Lessor (on behalf of a holder) to the Lessee which
notice shall be conclusive and binding for all purposes, absent
manifest error.
B-4
<PAGE> 52
SCHEDULE C
Termination Value and Allocated Termination Value
A. Termination Value.
The "Termination Value" of the Property as of any date shall
be an amount equal to the Adjusted Capitalized Cost of the Property and any
Closing Costs incurred in connection with the payment of such Adjusted
Capitalized Cost and/or the sale of the Property.
B. Adjusted Capitalized Cost:
The "Adjusted Capitalized Cost" of the Property, at any time,
as a whole is the sum of the Series A Portion, Series B Portion and Certificate
Portion of the Adjusted Capitalized Cost, plus, if determined prior to the
consummation of the refinancing of the Interim Notes (HCL Series) contemplated
by Article III of the Participation Agreement, the sum of the then outstanding
aggregate principal amount of the Interim Notes (HCL Series), together with
interest accrued and unpaid and all other amounts due thereon or with respect
thereto.
The "Series A Portion" of the Adjusted Capitalized Cost at any
time shall be equal to the then outstanding aggregate principal amount of the
A-Notes together with interest accrued and unpaid and all other amounts due
thereon or with respect thereto;
The "Series B Portion" of the Adjusted Capitalized Cost at any
time shall be equal to the then outstanding aggregate principal amount of the
B-Notes, together with interest accrued and unpaid and all other amounts due
thereon or with respect thereto; and
The "Certificate Portion" of the Adjusted Capitalized Cost at
any time shall be equal to the then outstanding aggregate stated amount of the
Certificates together with Distributions and all other amounts due thereon or
with respect thereto.
C. Allocated Termination Value:
The "Allocated Termination Value" of the Property, at any
time, as a whole is the sum of the Series A (HCL) Portion, Series B (HCL)
Portion and Certificate (HCL) Portion of the Adjusted Capitalized Cost, or, if
determined prior to the consummation of the refinancing of the Interim Notes
(HCL Series) contemplated by Article III of the Participation Agreement, the sum
of the then outstanding
C-1
<PAGE> 53
aggregate principal amount of the Interim Notes (HCL Series), together with
interest accrued and unpaid and all other amounts due thereon or with respect
thereto.
The "Series A (HCL) Portion" of the Adjusted Capitalized Cost
at any time shall be equal to the then outstanding aggregate principal amount of
the A-Notes (HCL Series) together with interest accrued and unpaid and all other
amounts due thereon or with respect thereto;
The "Series B (HCL) Portion" of the Adjusted Capitalized Cost
at any time shall be equal to the then outstanding aggregate principal amount of
the B-Notes (HCL Series), together with interest accrued and unpaid and all
other amounts due thereon or with respect thereto; and
The "Certificate (HCL) Portion" of the Adjusted Capitalized
Cost at any time shall be equal to the then outstanding aggregate stated amount
of the Certificates (HCL Series) together with Distributions and all other
amounts due thereon or with respect thereto.
Capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Lease (and the other Schedules
thereto) to which this Schedule C is attached, including terms defined by
reference in the Lease to the other Operative Documents.
C-2
<PAGE> 1
EXHIBIT 10.11
SECOND AMENDED AND RESTATED PARTICIPATION AGREEMENT
dated as of December 19, 1996
among
THE GEON COMPANY,
1994 VCM INC.,
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity except as
expressly stated herein, but solely as Trustee,
THE FINANCIAL INSTITUTIONS NAMED HEREIN
AS PURCHASERS
and
CITIBANK, N.A.,
as Agent
<PAGE> 2
TABLE OF CONTENTS
Page
----
PRELIMINARY STATEMENT .................................................1
ARTICLE I. FINANCING ...........................................5
SECTION 1.01. Agreement to Issue and Purchase....................5
SECTION 1.02. Closing Dates......................................5
SECTION 1.03. Simultaneous Closing Transactions..................6
SECTION 1.03A. Simultaneous Refinancing Transactions..............7
SECTION 1.04. Procedures for HCL Fundings;
Requisitions..................................7
ARTICLE II. CONDITIONS PRECEDENT..............................11
SECTION 2.01. Conditions Precedent to the Second
Refinancing.................................11
SECTION 2.02. Conditions Precedent to Fundings
Subsequent to the Second Refinancing
Date........................................17
ARTICLE III. REFINANCING OF INTERIM NOTES (HCL SERIES).........19
SECTION 3.01. Refinancing of Interim Notes (HCL Series).........19
SECTION 3.02. Conditions Precedent to Final Completion
Date........................................20
ARTICLE IV. REPRESENTATIONS AND WARRANTIES....................21
SECTION 4.01. Company Representations and Warranties............21
SECTION 4.02. SSBTC Financing Closing Date
Representations and Warranties..............29
SECTION 4.03. Second Refinancing Date SSBTC
Representations and Warranties..............31
ARTICLE V. COVENANTS.........................................32
SECTION 5.01. Company's Covenants...............................32
ARTICLE VI. THE NOTES AND THE CERTIFICATES....................37
SECTION 6.01. Determination of Rates............................37
SECTION 6.02. Assignments and Participations....................40
SECTION 6.03. Taxes.............................................45
SECTION 6.04. Substitution of Purchaser.........................48
SECTION 6.05. Sharing of Payments, Etc..........................49
i
<PAGE> 3
Page
----
SECTION 6.06. Tax Treatment.....................................50
ARTICLE VII. EVENTS OF DEFAULT AND UNWIND EVENTS...............51
SECTION 7.01. Events of Default.................................51
SECTION 7.02. Remedies upon an Event of Default.................54
SECTION 7.03. Unwind Events.....................................55
SECTION 7.04. Remedies upon an Unwind Event.....................55
SECTION 7.05. Residual Guaranty and Return Conditions...........55
ARTICLE VIII. THE AGENT.........................................58
SECTION 8.01. Authorization and Action..........................58
SECTION 8.02. Agent's Reliance, Etc.............................58
SECTION 8.03. Citicorp and Affiliates...........................59
SECTION 8.04. Purchaser Credit Decision.........................59
SECTION 8.05. Indemnification...................................60
SECTION 8.06. Successor Agent...................................60
ARTICLE IX. MISCELLANEOUS.....................................61
SECTION 9.01. Survival..........................................61
SECTION 9.02. Notices...........................................61
SECTION 9.03. Severability......................................62
SECTION 9.04. Amendments, Etc...................................62
SECTION 9.05. Headings..........................................63
SECTION 9.06. Compliance Responsibility.........................63
SECTION 9.07. Definitions.......................................63
SECTION 9.08. Benefit...........................................63
SECTION 9.09. Place of Payment..................................63
SECTION 9.10. Counterparts......................................64
SECTION 9.11. Governing Law and Jurisdiction....................64
SECTION 9.12. Time; Business Day................................65
SECTION 9.13. The Trustee.......................................65
SECTION 9.14. Transaction Costs; Facility Fees..................65
SECTION 9.15. INDEMNIFICATION...................................67
SECTION 9.16. Operative Documents; Further Assurances...........70
SECTION 9.17. Confidentiality...................................71
SECTION 9.18. Interest..........................................71
SECTION 9.19. Waiver of Trial by Jury...........................74
SECTION 9.20. Options...........................................74
SECTION 9.21. Financial Advisor.................................75
SECTION 9.22. Securities Representation.........................75
SECTION 9.23. UNENFORCEABILITY OF ORAL AGREEMENTS;
(TEXAS STATUTORY LANGUAGE)..................75
SECTION 9.24. Amendment and Restatement.........................76
ii
<PAGE> 4
Schedule I - Manner of Payment and Communications to
Parties
Schedule II - Rating Level Pricing Grid
Schedule
4.01(e) - Litigation
Schedule
4.01(l) - Existing Encumbrances
Appendix A - Definitions
Exhibit A - Form of Requisition
Exhibit B - Form of Final Completion Certificate
Exhibit C - Form of Independent Engineer's Certificate
Exhibit D - Approved Construction Budget
Exhibit E - Construction Schedule
Exhibit F - Feedstock Pipeline Agreement
iii
<PAGE> 5
SECOND AMENDED AND RESTATED PARTICIPATION AGREEMENT dated as
of December 19, 1996 (as it may be further amended from time to time, this
"Agreement"), by and among The Geon Company, a Delaware corporation (the
"Company"); 1994 VCM Inc., a corporation organized under the laws of Texas
("VCMI"); State Street Bank and Trust Company of Connecticut, National
Association, a national banking association ("SSBTC") and the wholly-owned
subsidiary of State Street Bank and Trust Company ("State Street"), not in its
individual capacity except as expressly stated herein, but solely as Trustee
under the Declaration (herein, together with any successor trustee under the
Declaration, the "Trustee"); the financial institutions named as purchasers on
Schedule I hereto, and/or any assignee thereof who may, from time to time,
become a party to this Agreement pursuant to the terms hereof (collectively, the
"Purchasers"); and Citibank, N.A. ("Citibank"), in its capacity as agent for the
Purchasers hereunder. Capitalized terms used but not otherwise defined in this
Agreement shall have the meanings set forth in Appendix A hereto.
Preliminary Statement
A. The Company, VCMI, SSBTC, the Purchasers and Citibank are
parties to the Participation Agreement (the "Original Agreement") dated as of
August 16, 1994, which was amended and restated as of November 9, 1995 (the
"First Restated Agreement").
B. The Company is the record owner of certain parcels of land
(collectively, the "Parcel") described on Schedule A to the Ground Lease as
hereinafter defined located in LaPorte, Texas. On the Financing Closing Date and
the First Refinancing Date, VCMI acquired from the Company certain
work-in-process and thereafter constructed improvements (i) to a vinyl chloride
monomer plant and related facilities (collectively, the "Plant") and (ii) to a
chlorine unloading facility (the "Chlorine Facility") and certain other
improvements, in each case located primarily on the Parcel, which improvements
are more fully described in the Bills of Sale referred to below (the "Initial
Improvements"). The Initial Improvements together with all structures,
buildings, fixtures and other improvements located on the Parcel on or after the
Financing Closing Date, all integral equipment located thereon or therein on or
after the Financing Closing Date, and certain other improvements located on
adjacent parcels owned by the Company, all as more fully described on Exhibit A
to the Agency Agreement dated as of August 16, 1994, as amended and restated as
of November 9, 1995 (the "Original Agency
<PAGE> 6
Agreement"), are collectively defined as the "Original Improvements". On the
Financing Closing Date and on the First Refinancing Date, respectively, VCMI
acquired from the Company title to the Initial Improvements pursuant to several
deeds and bills of sale (the "Bills of Sale"). VCMI and the Company entered into
a ground lease dated as of August 16, 1994, which was amended and restated as of
November 9, 1995 (the "Original Ground Lease"), pursuant to which the Company
leased certain portions of the Parcel to VCMI for a term expiring on August 15,
2034 and granted VCMI certain easements necessary for the operation of the
Property, and VCMI granted the Company certain easements necessary for the
operation of the Company Plant. VCMI's rights and interests in the Parcel (the
"Ground Lease Property") and in the easements granted under the Ground Lease and
the ownership interest in the Improvements (as hereinafter defined) are
sometimes collectively referred to herein as the "Property". VCMI subleased
certain portions of the Ground Lease Property and leased the Improvements
(including the Initial Improvements) to the Company pursuant to a lease dated as
of August 16, 1994, as amended as of December 1, 1994 and as amended and
restated as of November 9, 1995 (the "Original Lease").
C. The Company, acting as VCMI's Construction Agent under the
Original Agency Agreement, completed the construction of the Original
Improvements on June 10, 1996.
D. To finance VCMI's acquisition of the Property and the
completion of the construction of the Improvements, the Trustee has issued to
the Certificate Purchasers the Original Certificates and issued to the Note
Purchasers the Original Interim Notes pursuant to a declaration of trust dated
as of August 16, 1994, as amended and restated as of November 9, 1995 (the
"Original Declaration of Trust"). On June 10, 1996, the Original Interim Notes
were refinanced by the issuance of A-Notes (the "Original A-Notes") and B-Notes
(the "Original B-Notes") in an aggregate principal amount equal to the then
outstanding principal balance of the Original Interim Notes.
E. On (i) the Financing Closing Date, the Trustee loaned to
VCMI the aggregate proceeds of the Initial Advance and the Initial Investment
and (ii) the date of each subsequent Advance and Investment, the Trustee loaned
or, from and after the date hereof, shall loan to VCMI the aggregate proceeds of
such Advance and Investment pursuant to a credit agreement dated as of August
16, 1994, as amended and restated as of November 9, 1995, between the Trustee
and VCMI (the "Original VCMI Loan Agreement" and, as
2
<PAGE> 7
amended and restated, the "VCMI Loan Agreement"). In consideration therefor,
VCMI executed and delivered to the Trustee on the First Refinancing Date
promissory notes evidencing such indebtedness dated as of November 9, 1995
(collectively, the "Original VCMI Note") and, as security for the Original VCMI
Note, mortgages, deeds of trust, security agreements, financing statements and
assignments of rents (collectively, the "Original VCMI Mortgage").
F. The Company also entered into a guaranty agreement dated as
of August 16, 1994, which was confirmed by the Company as of November 9, 1995
(the "Instrument Guaranty") pursuant to which the Company guarantees repayment
by the Trustee of the Instruments to the extent provided therein.
G. In addition, the Company entered into a services agreement
(the "Original Services Agreement") dated as of August 16, 1994 (as the same may
be amended from time to time, the "Services Agreement") pursuant to which it
will be obligated to provide certain services to VCMI and with respect to the
Property in the event the Company does not purchase the Property at the
expiration or other termination of the Lease.
H. In connection with SSBTC's performance of its obligations
under the Original Agreement and under the other Original Operative Documents,
State Street executed a guaranty dated as of August 16, 1994, which was
confirmed by State Street as of November 9, 1995 (as the same may be amended
from time to time, the "State Street Guaranty").
I. On the Second Refinancing Date (as defined below), VCMI
will acquire title to the work-in-process for the construction of a hydrogen
chloride reactor (the "HCL Facility") and associated support systems (together
with the HCL Facility, the "HCL Improvements") pursuant to a deed and bill of
sale dated as of the date hereof (the "HCL Bill of Sale"). The HCL Improvements
together with the Original Improvements are collectively referred to herein and
in the other Operative Documents as the "Improvements". Simultaneously
therewith, VCMI and the Company will enter into an amended and restated ground
lease dated as of the date hereof (as the same may be further amended from time
to time, the "Ground Lease") pursuant to which, inter alia, the Company will
grant VCMI (i) a leasehold estate in an additional portion of the Parcel as
described on Schedule D to the Ground Lease (the "HCL Parcel") and (ii) certain
easements necessary for the construction and operation of the HCL Facility.
3
<PAGE> 8
J. The Company will also amend and restate the Original Lease
to (i) include the HCL Improvements and the HCL Parcel in the Property leased
pursuant thereto and (ii) extend the term thereof to December 19, 2001 (as the
same may be further amended from time to time, the "Lease").
K. To finance (i) VCMI's acquisition of the HCL Facility and
(ii) the construction of the HCL Improvements, the Trustee will issue on the
Second Refinancing Date a Certificate (HCL Series) to each of the Certificate
Purchasers and an Interim Note (HCL Series) to each of the Note Holders pursuant
to an Amended and Restated Declaration of Trust dated as of the date hereof (as
the same may be further amended from time to time, the "Declaration" or
"Declaration of Trust"). In exchange for the Original A-Notes and Original
B-Notes, the Trustee will issue A-Notes and B-Notes reflecting the extension of
the Maturity Date to December 19, 2001.
L. Subject to the terms and conditions hereof and pursuant to
Requisitions, the Note Purchasers shall make HCL Advances, and the Certificate
Purchasers shall make HCL Investments, from time to time, for all amounts paid
or payable as Ground Lease Rent and as costs for the acquisition of the HCL
Improvements and the design, engineering, construction, operation, testing and
licensing of the HCL Improvements, as well as interest, distributions, fees and
expenses paid or payable on or with respect to the Interim Notes (HCL Series)
and Certificates (HCL Series), the Operative Documents (as they relate to the
HCL Improvements, the Interim Notes (HCL Series) or the Certificates (HCL
Series)) or otherwise related to the transactions contemplated hereby with
respect to the HCL Improvements (collectively, the "Actual HCL Project Costs").
Upon the Interim Note (HCL) Maturity Date, the Trustee shall refinance the
Interim Notes (HCL Series) through the issuance of a specified proportion of the
A-Notes and B-Notes, to be issued pursuant to the Declaration in the same
aggregate principal amount as the Interim Notes (HCL Series). The Instruments
will be issued, dated and will mature and be payable as provided in the
Declaration. The Instruments shall be entitled to the benefit of the Trust
Estate held pursuant to the Declaration.
M. To implement the transactions described above, the parties
have agreed to amend and restate the Original Agreement as provided herein, and
amend and restate certain of the other Original Operative Documents. VCMI and
the Company will enter into an agency agreement to provide for the construction
of the HCL Improvements (as the same
4
<PAGE> 9
may be amended from time to time, the "Agency Agreement"). In addition, on the
Second Refinancing Date State Street will execute a confirmation of its guaranty
and the Company will execute and deliver an amended and restated instrument
guaranty (as amended, the "Instrument Guaranty"). In connection with the Second
Refinancing, VCMI will execute and deliver additional notes (collectively, with
the Original VCMI Note, as amended, the "VCMI Note") and a mortgage, deed of
trust, security agreement, financing statement and assignment of rents
(collectively, with the Original VCMI Mortgage, as amended, the "VCMI
Mortgage").
NOW, THEREFORE, in consideration of the agreements herein and
in the other Operative Documents and in reliance upon the representations and
warranties set forth herein and therein, the parties agree as follows:
ARTICLE I.
FINANCING
SECTION 1.01. Agreement to Issue and Purchase. (a) Subject to
the terms and conditions of this Article I and of Article II hereof, each of the
Note Purchasers hereby agrees to advance (which obligation to advance is several
and not joint and several) to the Agent in the manner provided in Section 1.04
below, from time to time, its Percentage of Actual HCL Project Costs, up to in
the aggregate, and in no case exceeding, its Interim Note (HCL) Commitment, and
the Trustee shall issue to each of the Note Purchasers on the Second Refinancing
Date, in consideration therefor, Interim Notes (HCL Series) in an aggregate
principal amount equal to the Interim Note (HCL) Commitment of such Note
Purchaser; and
(b) Subject to the terms and conditions of this Article I and
of Article II hereof, each Certificate Purchaser hereby agrees to make an
investment from time to time (the "HCL Investment") in the 1994 VCM Plant Trust
by paying to the Trustee an amount, up to in the aggregate, and in no case
exceeding, its Certificate (HCL) Commitment, and the Trustee shall issue to each
Certificate Purchaser, in consideration therefor, a Certificate (HCL Series) in
an aggregate stated amount equal to the Certificate (HCL) Commitment of such
Certificate Purchaser.
SECTION 1.02. Closing Dates. (a) The closing of the
transactions specified in Section 1.03 of this Agreement took place either on
August 16, 1994 (the "Financing Closing Date") or on November 9, 1995 (the
"First Refinancing Date")
5
<PAGE> 10
at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, New
York.
(b) The closing of the transactions specified in Section 1.03A
of this Agreement (the "Second Refinancing") shall take place on December 19,
1996 (or such earlier or later date to which the Company and the Agent may
agree), at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza, New
York, New York (the "Second Refinancing Date").
SECTION 1.03. Simultaneous Closing Transactions. On the
Financing Closing Date or on the First Refinancing Date, as applicable, the
following transactions were consummated simultaneously:
(a) The Original Agreement, the Original Ground Lease, the
Original Agency Agreement, the Original Declaration of Trust, the Original
Lease, the Original Certificates, the Original Interim Notes, the Original
A-Notes, the Original B-Notes, the State Street Guaranty, the State Street
Guaranty Confirmation, the Original Instrument Guaranty, the Instrument Guaranty
Confirmation, the Bills of Sale, the Original Services Agreement, the Original
VCMI Note, the Original VCMI Loan Agreement and the Original VCMI Mortgage were
executed and delivered by the parties thereto.
(b) On the Financing Closing Date, each of the Note Purchasers
made an initial advance (each, an "Initial Advance") equal to its Percentage of
the difference of: Actual Project Costs incurred by the Trustee on or before the
Financing Closing Date in its acquisition of the Property minus the amount of
the Initial Investments and each of the Certificate Purchasers made an initial
investment (each, an "Initial Investment") each in accordance with the
applicable provisions of Section 1.04.
(c) On the Financing Closing Date, the Trustee loaned to VCMI
the aggregate proceeds of the Initial Investments and the Initial Advances. Such
loan was made under the Original VCMI Loan Agreement pursuant to which (i) the
Trustee directed the Agent to transfer all moneys received by the Agent from the
Advances and the Investment to an account held by the Agent in the name of VCMI
and (ii) VCMI directed the Agent to disburse such funds in accordance with the
Requisitions and the other Operative Documents.
(d) On the Financing Closing Date, the Agent, on behalf of
VCMI, paid or disbursed the aggregate sum of the Initial Investment and the
Initial Advance to the Company,
6
<PAGE> 11
or as otherwise directed by the Construction Agent, by transfer of immediately
available funds in accordance with the Requisition for the Initial Investment
and the Initial Advance.
SECTION 1.03A. Simultaneous Refinancing Transactions. On the
Second Refinancing Date, subject to the satisfaction of the conditions set forth
in Section 2.03, the following transactions shall be consummated simultaneously:
(a) This Agreement, the Ground Lease, the Agency Agreement,
the Declaration, the Lease, the Certificates (HCL Series), the Interim Notes
(HCL Series), the A-Notes, the B-Notes, the Certificates, the State Street
Guaranty Confirmation, the Instrument Guaranty, the HCL Bill of Sale, the VCMI
Note, the VCMI Loan Agreement and the VCMI Mortgage shall be duly executed and
delivered by the parties thereto.
(b) Each of the Note Purchasers shall make a HCL Advance (the
"Initial HCL Advance") and each of the Certificate Purchasers shall make a HCL
Investment (the "Initial HCL Investment"), each in accordance with the
applicable provisions of Section 1.04.
(c) The Trustee shall loan to VCMI the aggregate proceeds of
the HCL Investments and the HCL Advances made on the Second Refinancing Date.
Such loan shall be made by means of the VCMI Loan Agreement pursuant to which
(i) the Trustee shall direct the Agent to transfer all moneys received by the
Agent from such HCL Advances and such HCL Investment to an account held by the
Agent in the name of VCMI and (ii) VCMI shall direct the Agent to disburse such
funds in accordance with the Requisitions and the other Operative Documents.
(d) The Agent, on behalf of VCMI, shall pay or disburse, or
cause to be paid or disbursed, the aggregate sum of the HCL Investments and the
HCL Advances made on the Refinancing Date to the Company, or as otherwise
directed by the Construction Agent by transfer of immediately available funds in
accordance with the Requisition for the Second Refinancing.
SECTION 1.04. Procedures for HCL Fundings; Requisitions.
(a) Advances and Related Matters. (i) Subject to the
satisfaction of the conditions set forth in Section 2.01, with respect to the
Initial HCL Funding, Section 2.02,
7
<PAGE> 12
with respect to each HCL Funding subsequent to the Initial HCL Funding (except
in the case of HCL Fundings made from time to time pursuant to Section 1.04(c)
hereof), (A) each Note Purchaser agrees to make an advance (each together with
the Initial HCL Advance, a "HCL Advance"), from time to time but not more
frequently than once per calendar month, in an amount equal to its Percentage of
Actual HCL Project Costs specified in any Requisition, up to an aggregate
principal amount equal to its Interim Note (HCL) Commitment; and (B) each
Certificate Purchaser agrees to make, in addition to its Initial HCL Investment,
a HCL Investment on or prior to the applicable Payment Date during the
Construction Period in an amount equal to, (i) in the case of the Initial HCL
Investment, its Initial Certificate (HCL) Commitment and (ii) in the case of
each other HCL Investment, its pro rata share of the Distributions payable on
the Certificates. Each Purchaser shall record the HCL Advances or HCL
Investments made by it on the payment schedule attached to its Interim Note (HCL
Series) or Certificate (HCL Series), as the case may be.
(ii) On the date specified for any HCL Funding, each Note and
Certificate Purchaser shall, before 10:00 A.M. (New York City time) make
available, or cause to be made available, to the Agent, on behalf of the
Trustee, an amount equal to the HCL Advance or HCL Investment, as the case may
be, to be made by it, at the Agent's address referred to in Schedule I hereto,
in immediately available funds. Upon the Agent's receipt of funds from the Note
and Certificate Purchasers for such HCL Funding and upon fulfillment of the
applicable conditions set forth in Article II, the Agent, pursuant to the VCMI
Loan Agreement, will make distributions and payments of interest due hereunder
and will make the remaining funds representing such HCL Funding available for
credit to and upon the instructions of the Construction Agent (or the Company,
or as otherwise directed by the Construction Agent, in the case of the Initial
HCL Funding) in immediately available funds in accordance with the Requisition
for such HCL Funding.
(iii) No Note Purchaser shall have any obligation to make any
HCL Advance for any amount in excess of the lesser of (A) its aggregate Interim
Note (HCL) Commitment or (B) its Percentage of the difference between (1) the
aggregate of the Actual HCL Project Costs (less the amount of the HCL
Investment) set forth in the Approved Construction Budget and (2) the aggregate
of all prior HCL Advances made by the Note Purchasers. No Certificate Purchaser
shall have any obligation to make a HCL Investment in excess of its Certificate
(HCL) Commitment.
8
<PAGE> 13
(iv) The Company acknowledges that if it, as the Construction
Agent, does not provide to the Agent all necessary documentation required
hereunder on a timely basis, delays may result in the making of the HCL Advances
and the HCL Investment. The Agent shall have no duty to verify the authenticity
of any signature appearing on any Requisition other than to compare it with
incumbency certificates provided by the Company listing Officers of the Company
authorized to execute Requisitions.
(v) Unless the Agent shall have received notice from a Note
Purchaser prior to the date of any HCL Advance that such Note Purchaser will not
make available to the Agent its HCL Advance, the Agent may assume that such Note
Purchaser has made its funds available to the Agent on such date in accordance
with this Section 1.04(a) and the Agent may, in reliance upon such assumption,
make available to the Construction Agent (or in the case of the Initial HCL
Advance, the Company or as otherwise directed by the Construction Agent) on such
date a corresponding amount. If and to the extent that such Note Purchaser shall
not have so made such HCL Advance available to the Agent on such date, such Note
Purchaser agrees to repay the Agent forthwith on demand by the Agent such
corresponding amount, together with interest thereon, for each day from the date
such amount is made available to the Construction Agent (or in the case of the
Initial HCL Advance, the Company or as otherwise directed by the Construction
Agent), until the date such amount is repaid to the Agent, at the Federal Funds
Rate. If such Note Purchaser shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Note Purchaser's funding of its HCL
Advance for purposes of this Agreement.
(vi) The failure of any Purchaser to make the HCL Advance or
HCL Investment, as the case may be, to be made by it shall not relieve any other
Purchaser of its obligation, if any, hereunder to make its HCL Advance or HCL
Investment, but no Purchaser shall be responsible for the failure of any other
Purchaser to make the HCL Advance or HCL Investment to be made by such other
Purchaser on the date of any HCL Funding.
(b) Requisitions. Not less than five (5) Business Days (or three (3)
Business Days in the case of the Second Refinancing) prior to the day on which a
HCL Funding is desired, the Construction Agent must submit to the Agent, with a
copy to the Trustee, a requisition (each, a "Requisition") substantially in the
form attached as Exhibit A hereto. The Agent will give notice of such
9
<PAGE> 14
Requisition to the Note Purchasers, the Trustee and, if such Requisition is for
the Second Refinancing, to the Certificate Purchasers not less than five (5)
Business Days (or three (3) Business Days in the case of the Second Refinancing)
prior to the date of the HCL Funding requested therein. Such notice by the Agent
shall specify the amount of the HCL Advance or HCL Investment, as the case may
be, to be made by each Purchaser. Each Requisition (i) shall be irrevocable,
(ii) must request a HCL Funding of at least $200,000 or such lesser amount as
shall be equal to the total aggregate principal and stated amount of the unused
Total HCL Commitment available at such time, and (iii) shall request that the
Purchasers make HCL Advances and/or the HCL Investment, as the case may be, for
Actual HCL Project Costs incurred as specified in the Requisition. Each
Requisition shall constitute a representation and warranty by the Company that
all the conditions precedent to such HCL Funding have been satisfied (except as
specifically identified in such Requisition).
(c) Certain HCL Advances and HCL Investments. It is intended
that all interest on the Interim Notes (HCL Series), commitment fees and other
fees and expenses of the Note Purchasers due hereunder in connection with the
acquisition, construction and installation of the HCL Improvements prior to the
Interim Note (HCL) Maturity Date shall be paid from HCL Advances and that all
Distributions on the Certificates (HCL Series) due hereunder prior to the
Interim Note (HCL) Maturity Date shall be paid from HCL Investments. No
Requisition shall be necessary to permit the Agent to request the Note
Purchasers to make HCL Advances for the account of any or all Note Purchasers,
to pay amounts for interest on the Interim Notes (HCL Series) or Facility Fees
due to such Note Purchasers hereunder on or prior to the Interim Note (HCL)
Maturity Date, or to request the Certificate Purchasers to make HCL Investments
for the account of any or all Certificate Purchasers, to pay amounts for
distributions on the Certificates (HCL Series) prior to the Interim Note (HCL)
Maturity Date provided, however, that the Purchasers shall make such HCL
Advances or HCL Investments, as the case may be, only (i) after the Agent has
notified the Purchasers and the Company of the date and the Applicable Rate set
for such HCL Funding and the amounts thereof due and owing and unpaid to be made
by each such Purchaser and (ii) on a Payment Date. Notwithstanding anything to
the contrary contained in this Agreement, HCL Advances and HCL Investments shall
be limited in the aggregate to the Actual HCL Project Costs, up to each Note
Purchaser's Interim Note (HCL) Commitment plus each Certificate Purchaser's
Certificate (HCL) Commitment.
10
<PAGE> 15
ARTICLE II.
CONDITIONS PRECEDENT
SECTION 2.01. Conditions Precedent to the Second Refinancing.
The obligations set forth in Article I (excluding Section 1.03) shall be subject
to the fulfillment, to the satisfaction of the Agent, on or before the Second
Refinancing Date, of the following conditions precedent:
(a) Due Authorization, Execution and Delivery. The Operative
Documents shall have been duly authorized, executed and delivered by all parties
thereto and shall be in full force and effect. No condition or event shall exist
or have occurred which would constitute a Default or Event of Default under any
of the Operative Documents or the Original Operative Documents by any party
thereto and the Trustee and the Company shall each have delivered an Officer's
Certificate to such effect dated the Second Refinancing Date.
(b) Representations. The representations and warranties of
each of the Company and SSBTC, respectively, set forth in the Operative
Documents shall be true and correct on and as of the Second Refinancing Date or,
as applicable, on and as of the date specified in such representation or
warranty, and the Company and SSBTC shall each have delivered an Officer's
Certificate dated the Second Refinancing Date to such effect as to their
respective representations and warranties.
(c) Opinions. The following opinions, dated the Second
Refinancing Date and addressed to the parties indicated below, shall have been
delivered:
(i) an opinion of the General Counsel to the Company,
addressed to the Agent, the Note and Certificate Purchasers, VCMI and
the Trustee, and in form and substance satisfactory to the Agent and
Special Counsel;
(ii) an opinion of Chadbourne & Parke LLP, special
counsel to the Agent and the Note and Certificate Purchasers, addressed
to the Agent, the Note and Certificate Purchasers, VCMI and the
Trustee, as to matters of New York law and in form and substance
satisfactory to the Agent and Special Counsel;
11
<PAGE> 16
(iii) an opinion of Hughes & Luce, special counsel to
the Agent and the Note and Certificate Purchasers, addressed to the
Agent, the Note and Certificate Purchasers, VCMI and the Trustee, as to
matters of Texas law, and in form and substance satisfactory to the
Agent and Special Counsel;
(iv) an opinion of Bingham, Dana & Gould, special
counsel to the Trustee ("Trustee's Counsel"), addressed to the Agent,
the Note and Certificate Purchasers, VCMI and the Company, and in form
and substance reasonably satisfactory to the Agent, the Company and
Special Counsel; and
(v) such other opinions of counsel as the Agent and
the Special Counsel may reasonably request, addressed to the Agent, the
Note and Certificate Purchasers, VCMI and the Trustee, and in form and
substance reasonably satisfactory to the Agent and Special Counsel, and
directions from the Company regarding the opinions referred to in
clause (i) above.
(d) Proceedings Satisfactory and Other Evidence. All corporate
and other proceedings taken or to be taken in connection with the transactions
contemplated by the Operative Documents and all documents, papers and
authorizations relating thereto shall be reasonably satisfactory to the Agent,
the Company and their respective counsel. The Agent and the Company, and their
respective counsel, shall have received copies of such documents and papers as
they have reasonably requested, in form and substance reasonably satisfactory to
them, including but not limited to the Operative Documents.
(e) Legality. The execution, delivery and issuance of the
Notes and the Certificates by the Trustee and the purchase thereof by the Note
and Certificate Purchasers shall not be subject to the registration requirements
of the Act or any state securities or blue sky Laws, and shall not be prohibited
by any applicable Law (including, without limitation, Regulation G, Regulation
T, Regulation U or Regulation X and any applicable usury Laws) and shall not
subject any Note or Certificate Purchaser to any Tax (other than Excluded
Charges or a Tax paid by the Company pursuant to Sections 6.03 and 9.14),
penalty, liability or other onerous condition under or pursuant to any
applicable Law and the Agent and the Note and Certificate Purchasers shall
receive such evidence as the Agent and the Note and Certificate Purchasers
(through the
12
<PAGE> 17
Agent) may reasonably request to establish compliance with this condition.
(f) Closing Fees. The Trustee shall have paid, or caused to be
paid to CSI, from the proceeds of the Second Refinancing, the applicable
advisory fee referred to in the engagement letter dated as of November 8, 1996
(the "Advisory Fee") and such other amounts as the Company may be required to
pay on or before the Second Refinancing Date in accordance with the terms of the
Operative Documents.
(g) Title and Survey. (i) The Company shall have good and
marketable title to an indefeasible fee estate in the Parcel and the Chlorine
Facility Parcel, and shall have conveyed to VCMI (x) good title to the
Improvements and (y) a leasehold estate in the Parcel, in each case free and
clear of all Liens except Permitted Encumbrances. The Company shall have
delivered, or caused to be delivered, to the Agent, the Trustee, VCMI, the
Purchasers and Special Counsel (a) a Texas Standard Form T-1 form of extended
coverage policy of owner's title insurance for the Parcel, the Ground Lease
Property and the Improvements with the Texas Standard Leasehold Owner Policy
Endorsement and naming VCMI as the insured (the "Owner Title Policy") in the
aggregate amount of $17,250,000, issued by the Title Company and showing and
insuring the record title or leasehold interest of VCMI in the Parcel, (b) the
Standard Form T-2 Mortgagee Policy of Title Insurance for the Ground Lease
Property and the Improvements, with the Texas Standard Leasehold Mortgagee
Policy Endorsement, and naming Trustee as the insured, in the aggregate amount
of $17,250,000, issued by the Title Company, showing VCMI as the record owner of
the Ground Lease Property and Improvements and insuring the VCMI Mortgage as a
valid first lien against the Ground Lease Property and Improvements (the
"Mortgagee Title Policy"), (c) a Texas Standard Form T-1 form of extended
coverage policy of owner's title insurance for the Chlorine Facility Easement
and naming VCMI as the insured (the "Easement Owner Policy") in the aggregate
amount of $750,000 issued by the Title Company and showing and insuring the
record title of VCMI in the Chlorine Facility Easement, (d) the Standard Form
T-2 Mortgagee Policy of Title Insurance for the Chlorine Facility Easement
naming the Trustee as the insured, in the aggregate amount of $750,000, issued
by the Title Company showing VCMI as the record owner of the Chlorine Facility
Easement and insuring the VCMI Easement Mortgage as a valid first lien against
the Chlorine Facility Easement (the "Easement Mortgagee Policy"), (e) a Texas
Standard Form T-1 form of extended coverage policy of owner's title insurance
for the HCL Parcel and naming VCMI
13
<PAGE> 18
as the insured (the "HCL Owner Policy") in the aggregate amount of $7,500,000,
issued by the Title Company and showing and insuring the record title or
leasehold interest of VCMI in the HCL Improvements and HCL Parcel, (f) the
Standard Form T-2 Mortgagee Policy of Title Insurance for the Parcel and the
Chlorine Facility Easement naming the Trustee as the insured, in the aggregate
amount of $7,500,000, issued by the Title Company showing VCMI as the record
owner of the Improvements and holder of a leasehold interest in the Parcel and
the Chlorine Facility Easement and insuring the Mortgage D (as defined in the
VCMI Loan Agreement) as a valid first lien against the HCL Improvements and the
HCL Parcel (the "HCL Mortgagee Policy"), and (g) a P9b3 endorsement covering any
amendment to the Original VCMI Mortgage. (The Owner Title Policy, the Mortgagee
Title Policy, the Easement Owner Policy and the Easement Mortgagee Policy are
collectively referred to herein as the "Title Policy"). The Title Policy shall
be issued subject only to Permitted Encumbrances and containing such affirmative
insurance as Agent or Special Counsel shall require as may be available under
Texas law.
(ii) The Agent and the Trustee shall have received a
current, accurate survey of the Parcel and the HCL Parcel showing the location
of all improvements, easements, encroachments and other survey matters, dated a
recent date, in form and substance satisfactory to the Agent, the Trustee and
the Title Company, prepared by a licensed surveyor acceptable to the Agent,
which survey is certified to the Company, the Trustee, the Agent, VCMI and the
Note and Certificate Purchasers.
(h) Compliance with Law. The Parcel, the Original
Improvements, the HCL Improvements and the construction thereof and the
Construction Agent shall be in material compliance with all Laws, including,
without limitation, all building, construction and zoning Laws and Environmental
Laws applicable to the Property.
(i) Permits and Certain Property Matters. (i) All Permits that
are or will become Applicable Permits shall have been obtained, except
Applicable Permits customarily obtained or which are permitted by Law to be
obtained after the Second Refinancing Date (in which case the Company, having
completed all appropriate diligence in connection therewith, shall have no
reason to believe that such Permits will not be granted in the usual course of
business prior to the date that such Permits are required by Law). All such
obtained Permits shall be in proper form, shall be in full force and effect and
not subject to any
14
<PAGE> 19
further appeal, consent or further contest or to any unsatisfied condition
(other than conditions relating to completion in the future) that may allow
modification or revocation; and
(ii) The Property shall not have suffered a Condemnation
or a Casualty, or any other damage or destruction which renders the Property
unusable in whole or in material part and, under applicable Law, the Property
may be used for the purposes contemplated by the Company in accordance with the
Lease.
(j) Documents Relating to the Property. The Company shall have
delivered, or caused to be delivered, to the Trustee, the Agent, VCMI and the
Note and Certificate Purchasers documentation with respect to the condition of
the Property or any part thereof, the real estate Taxes applicable to the Parcel
and the Property and such other documents and agreements (including but not
limited to a copy of the HCL Construction Contract, and any other necessary
Facility Agreements or assignments thereof) relating to the operation of the
Property or any part thereof as the Agent or any of the Note and Certificate
Purchasers (through the Agent) may reasonably request, in form and substance
reasonably acceptable to the Agent and the Note and Certificate Purchasers.
(k) Environmental Matters. The Phase I environmental audit of
the Parcel and the Property by the Environmental Consultant dated as of July 28,
1994 shall have been updated, and a Phase I environmental audit of the portions
of the Parcel subjected to the Ground Lease in connection with the HCL
Improvements shall be conducted by the Environmental Consultant, at the sole
cost and expense of the Company, and the Agent, the Trustee, VCMI and the Note
and Certificate Purchasers shall have received a copy of the Environmental
Consultant's report with regard thereto, which shall conclude that (i) no
environmental hazards exist on the Parcel or the Property that are unacceptable
to the Agent, the Trustee, VCMI or any of the Note and Certificate Purchasers,
(ii) the Company is employing reasonable environmental practices relative to
industry standards, and (iii) the Property is not likely to create any
environmental hazards based upon anticipated and permitted practices which are
unacceptable to VCMI, the Trustee, the Agent, or any of the Note and Certificate
Purchasers.
(l) No Event of Default. No event shall have occurred and no
condition shall exist which, assuming that
15
<PAGE> 20
all Operative Documents had been signed prior to the Second Refinancing Date,
would constitute an Event of Default as of the Second Refinancing Date.
(m) Appraisal Update. The Company shall have caused an updated
appraisal of the Property (the "Appraisal Update"), satisfactory in form and
substance to the Agent and the Note and Certificate Purchasers, to be delivered
to the Agent and the Note and Certificate Purchasers. Such Appraisal Update
shall be prepared by the Appraiser and shall be at the expense of the Company.
(n) No Material Adverse Event. There shall exist no action,
suit, investigation, litigation or proceeding affecting the Company or any of
its Subsidiaries pending or threatened before any court, governmental agency or
arbitrator that (i) could be reasonably likely to have a Material Adverse Effect
or (ii) purports to affect the legality, validity or enforceability of this
Agreement or any Instrument or any other Operative Document or the consummation
of the transactions contemplated hereby, and there shall have been no adverse
change in the status, or financial effect on the Company or any of its
Subsidiaries, of the Disclosed Litigation that could reasonably be expected to
have a Material Adverse Effect.
(o) Requisition. The Construction Agent shall have delivered
to the Agent, the Trustee, each Note Purchaser and the Certificate Purchasers at
least three Business Days prior to the Second Refinancing Date a Requisition,
which Requisition shall request the Certificate Purchasers and each Note
Purchaser to make all necessary arrangements to fund its HCL Investment or HCL
Advance, as the case may be, on the Second Refinancing Date.
(p) Recording and Filing. Each of the Ground Lease and the
Lease (or a memorandum of each thereof), the HCL Bill of Sale, the VCMI Mortgage
and all financing statements under the UCC shall have been duly recorded,
published, registered and filed by the Company, in such manner and in such
places as the Company, the Company's counsel, the Agent and Special Counsel
shall determine to be necessary or appropriate to publish notice thereof and
protect the validity and effectiveness thereof and to establish, create,
perfect, preserve and protect the rights of the parties thereto and their
respective successors and assigns, and all Taxes, fees and other charges in
connection with such recording, publishing, registration and filing of the
Operative Documents or any memoranda thereof and any financing statements shall
have been paid by the Company.
16
<PAGE> 21
(q) Feedstock Pipeline Agreement. The Company shall have
entered into an agreement with Bayer Corporation substantially in form and
substance as set forth in Exhibit F hereto, for the supply of hydrogen chloride
feedstock to the HCL Facility (the "Feedstock Pipeline Agreement").
(r) Offering Memo. Nothing shall have come to the attention of
the Purchasers during the course of their due diligence investigation to lead
them to believe that the Offering Memo was or has become misleading, incorrect
or incomplete in any material respect; without limiting the generality of the
foregoing, the Purchasers shall have been given such access to the management,
records, books of account, contracts and properties of the Company and its
Subsidiaries as they shall have reasonably requested.
(s) Additional Documents. The Agent shall have received such
other approvals, certificates or documents as the Agent may reasonably request
to evidence satisfaction of the conditions set forth in this Section 2.01.
SECTION 2.02. Conditions Precedent to Fundings Subsequent to
the Second Refinancing Date. The several (and not joint and several) obligations
of each of the Note Purchasers to make HCL Advances, and each of the Certificate
Purchasers to make HCL Investments, subsequent to the Second Refinancing Date as
set forth in Article I shall be subject to the fulfillment, to the satisfaction
of the Agent, by, on or as of the date of such HCL Funding, of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in the Operative Documents shall be true and
correct as if made on and as of the date of such HCL Funding or, as applicable,
on and as of the date specified in such representation or warranty.
(b) Compliance; No Default, etc. The Company shall be in
compliance with its obligations under the Operative Documents on such date and
there shall exist no Default, Event of Default, Unwind Event or Environmental
Trigger and no Termination Notice shall have been delivered or been deemed to
have been delivered.
(c) Requisition; Use of Investment Proceeds. Except with
respect to HCL Advances and HCL Investments made by the Purchasers pursuant to
Section 1.04(c), the Agent shall have received a timely and complete Requisition
pursuant to and in compliance with Section 1.04(b). All
17
<PAGE> 22
proceeds of the HCL Fundings expended by or on behalf of the Company shall have
been or will be applied solely to Actual HCL Project Costs, and the Company, in
its individual capacity and not as Construction Agent, shall certify the same in
each Requisition and provide such other evidence with respect to the use of such
proceeds as may be reasonably requested by the Agent. The final Requisition may
request HCL Advances to provide for payment of amounts previously withheld from
contractors' invoices ("Contractors' Holdbacks"). Such Contractors' Holdbacks
shall be held by the Construction Agent pending evaluation of the contractor's
services and then either disbursed to such contractor or returned to the Agent
for distribution to the Purchasers.
(d) Compliance with Law. The Parcel, the Improvements and the
construction thereof and the Construction Agent shall be in material compliance
with all Laws, including, without limitation, all building, construction and
zoning Laws and Environmental Laws applicable to the Property.
(e) No Material Adverse Event. There shall exist no action,
suit, investigation, litigation or proceeding affecting the Company or any of
its Subsidiaries pending or threatened before any court, governmental agency or
arbitrator that (i) could be reasonably likely to have a Material Adverse Effect
other than the matters described on Schedule 4.01(e) hereto (the "Disclosed
Litigation") or (ii) purports to affect the legality, validity or enforceability
of this Agreement or any Instrument or the consummation of the transactions
contemplated hereby, and there shall have been no adverse change in the status,
or the financial effect on the Company or any of its Subsidiaries, of the
Disclosed Litigation from that described on Schedule 4.01(e) hereto that could
reasonably be expected to have a Material Adverse Effect, and the Company, in
its individual capacity and not as Construction Agent, shall certify the same in
each Requisition.
(f) Legality. The making of any HCL Advance or HCL Investment,
and maintenance of any Advance or Investment, by any Purchaser shall not be
prohibited by any applicable Law (including, without limitation, Regulation G,
Regulation T, Regulation U or Regulation X and any applicable usury Laws) and
shall not subject any Purchaser to any Tax (other than Excluded Charges and any
Tax paid by the Company pursuant to Sections 6.03 and 9.14), penalty, liability
or other onerous condition under or pursuant to any applicable Law.
18
<PAGE> 23
(g) Permits. All Permits that are or will become Applicable
Permits shall have been obtained, except Applicable Permits customarily obtained
or which are permitted by Law to be obtained after the date of the requested
Advance (in which case the Company, having completed all appropriate diligence
in connection therewith, shall have no reason to believe that such Permits will
not be granted in the usual course of business prior to the date that such
Permits are required by Law). All such obtained Permits shall be in proper form,
in full force and effect and not subject to any appeal, consent or further
contest or to any unsatisfied condition (other than conditions relating to
completion in the future) that may allow modification or revocation.
(h) Closings. The Financing Closing, the First Refinancing
and, from and after the date hereof, the Second Refinancing shall have been
consummated and all conditions precedent thereto shall have been satisfied or
waived in accordance with the terms of this Agreement.
(i) Taxes. All Taxes payable by the Company pursuant to
paragraph 6 of the Lease shall have been paid by the Company, subject to the
Company's rights of contest pursuant to the Lease.
(j) Additional Documents. The Agent shall have received such
other approvals, certificates or documents (including without limitation an
updated title report) as the Agent may reasonably request to evidence
satisfaction of the conditions set forth in this Section 2.02.
ARTICLE III.
REFINANCING OF INTERIM NOTES (HCL SERIES)
SECTION 3.01. Refinancing of Interim Notes (HCL Series).
Subject to Section 3.02, on the Interim Note (HCL) Maturity Date the remaining
unused Interim Note (HCL) Commitments of the Note Purchasers, if any, will
automatically be canceled and the Interim Notes (HCL Series) will be refinanced
through the issuance by the Trustee of A-Notes and B-Notes. Each of the Holders
of the Interim Notes (HCL Series) on the Interim Note (HCL) Maturity Date shall
receive as payment in full of the aggregate principal amount thereof A-Notes
(HCL Series) and B-Notes (HCL Series) in aggregate principal amounts determined
pursuant to the Interim Note (HCL) Maturity Formula.
19
<PAGE> 24
SECTION 3.02. Conditions Precedent to Final Completion Date.
The following conditions shall be fulfilled to the reasonable satisfaction of
each of the Purchasers on or as of the Final Completion Date:
(a) Lien Releases and Waivers. The Construction Agent shall
have secured final lien releases or waivers by all contractors and all
subcontractors and by materialmen and other parties who have supplied labor,
materials or services for the design and construction, testing, start-up or
operation of the HCL Improvements, or who otherwise might be entitled to claim a
contractual or statutory lien against the Property or any part thereof (other
than liens arising from Contractors' Holdbacks, liens being contested in good
faith or liens which the Company expects to be released or waived within 6
months of the Final Completion Date; provided that no enforcement, execution, or
levy proceeding shall have been commenced that is not being contested in good
faith).
(b) Certificate of Final Completion; Legal Compliance. The
Company shall deliver to the Agent and the Trustee an Officer's Certificate of
Final Completion, approved by the Independent Engineer in the form of Exhibit B
hereto, to the effect that final completion of the HCL Improvements, as
described therein, has occurred and further certifying to the effect that:
(i) The Property and the construction and operation
of the HCL Improvements are in compliance in all material respects with
all applicable Laws; and
(ii) All Permits (including without limitation a
permanent certificate of occupancy) that are or will become Applicable
Permits have been obtained, except Applicable Permits customarily
obtained or which are permitted by Law to be obtained after the Final
Completion Date (in which case the Company, having completed all
appropriate diligence, shall have no reason to believe that such
Permits will not be granted in the usual course of business prior to
the date that such Permits are required by Law and the Company shall
have applied for such Permits and satisfied all legal requirements
necessary to authorize continued operation while the Permit application
is pending). All such obtained Permits shall be in proper form, in full
force and effect and not subject to any appeal or contest or to any
unsatisfied conditions (other than conditions relating to completion in
the future) that may allow modification or revocation.
20
<PAGE> 25
(c) Independent Engineer's Certification. The Company shall
deliver a Certificate in the form of Exhibit C hereto executed by the
Independent Engineer (the "Independent Engineer's Certificate") certifying that
(i) the installation of the HCL Improvements has been mechanically completed and
electrically checked, and piping and equipment have been pressure tested,
mechanically checked, and placed in service or standby; and (ii) the HCL
Facility is capable of converting during a continuous 72 hour period, 720 short
tons per day of hydrogen chloride to Crude Ethylene Dichloride. In making such
certification, the Independent Engineer, in his sole discretion, either may rely
on production records provided by the Company or require a performance test.
(d) Insurance. The Company shall be in compliance with all
Insurance Requirements and all insurance policies required thereunder shall be
in full force and effect. To the extent not previously delivered pursuant
hereto, the Company shall deliver, or cause to be delivered, to the Trustee and
the Agent certificates of insurance or applicable reinsurance cover notes
evidencing the coverage of such policies.
(e) Representations and Warranties. The representations and
warranties of the Company as set forth in the Operative Documents shall be true
and correct as if made on and as of the Final Completion Date or, as applicable,
on and as of the date specified in such representation or warranty.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Company Representations and Warranties. The
Company hereby represents and warrants to the Trustee, the Agent, VCMI and the
Note and Certificate Purchasers that the following shall be true and correct on
and as of the Second Refinancing Date:
(a) Corporate Existence. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified and authorized to do business in the State of
Texas.
(b) Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Company of this
Agreement and the other Operative
21
<PAGE> 26
Documents to which it is a party are within the Company's corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable Law
or of the certificate of incorporation or by-laws of the Company or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Company or result in the creation or imposition of any lien on any asset of
the Company (except as contemplated by the Operative Documents) or its
Subsidiaries.
(c) Binding Effect. This Agreement and the other Operative
Documents to which the Company is a party are legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms.
(d) Financial Information. (i) The consolidated balance sheet
of the Company and its Consolidated Subsidiaries as of December 31, 1995, and
the related consolidated statements of income and cash flows for the fiscal year
then ended, reported on by Ernst & Young and set forth in the Company's annual
report for the fiscal year ended December 31, 1995 as filed with the Securities
and Exchange Commission (the "Commission") on Form 10-K and the consolidated
balance sheet of the Company and its Consolidated Subsidiaries as at September
30, 1996 and the related consolidated statements of income and cash flows of the
Company and its Consolidated Subsidiaries for the nine months then ended, duly
certified by a financial officer of the Company, copies of which have been
delivered to each of the Note and Certificate Purchasers, fairly present, in
conformity with GAAP, the consolidated financial position of the Company and its
Consolidated Subsidiaries as of such dates and their consolidated results of
operations and changes in financial position for such periods.
(ii) Since December 31, 1995, (except as set forth in
the financial statements referenced in subsection (i) above) there has been no
Material Adverse Change.
(e) Litigation. To the best of the Company's knowledge, there
is no pending or threatened action, suit, investigation, litigation or
proceeding, including, without limitation, any Environmental Action, affecting
the Company or any of its Subsidiaries before any court, governmental agency or
arbitrator that (i) could be reasonably likely to have a Material Adverse Effect
(other than the Disclosed
22
<PAGE> 27
Litigation) or (ii) purports to affect the legality, validity or enforceability
of this Agreement or any of the Operative Documents or the consummation of the
transactions contemplated hereby, and there has been no adverse change in the
status, or financial effect on the Company or any of its Subsidiaries, of the
Disclosed Litigation from that described on Schedule 4.01(e) hereto.
(f) Compliance with ERISA, etc.
(i) No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan.
(ii) Neither the Company nor any ERISA Affiliate has
incurred or is reasonably expected to incur any Withdrawal Liability to any
Multiemployer Plan.
(iii) Neither the Company nor any ERISA Affiliate has
been notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or has been terminated, within the meaning of Title IV
of ERISA, and no such Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated, within the meaning of Title IV of ERISA.
(iv) Except as set forth in the financial statements
referred to in Section 4.01(d), the Company and its Subsidiaries have no
material liability with respect to "expected post retirement benefit
obligations" within the meaning of Statement of Financial Accounting Standards
No. 106.
(g) Subsidiaries. Each of the Company's Subsidiaries is a
corporation duly incorporated, validly existing and in good standing, in each
case under the laws of its jurisdiction of incorporation.
(h) Status. The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, nor is it subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Interstate Commerce Act, or under any other state or Federal
Law limiting its ability to execute and deliver any Operative Document or
perform its obligations thereunder.
(i) Compliance with Margin Regulations. No proceeds of any
Advance or Investment have been used in violation of any applicable Law
(including, without
23
<PAGE> 28
limitation, Regulation G, Regulation T, Regulation U and Regulation X).
(j) No Default. No event has occurred and no condition exists
which constitutes a Default or an Event of Default.
(k) Consents. The execution and delivery by the Company of
each Operative Document to which it is a party and any other agreement which it
has entered into in connection with the transactions contemplated thereby, the
consummation of the transactions contemplated thereby and its compliance with
the terms thereof does not require the consent or the approval or authorization
of, or filing, registration or qualification with, any Federal, state or local
government on the part of the Company as a condition to such execution, delivery
and compliance.
(l) Title to the Parcel.
(i) The Company has good and marketable title to an
indefeasible fee estate in the Parcel and the Ground Lessor Parcel, subject to
no Liens other than Permitted Encumbrances and those set forth on Schedule
4.01(l) attached hereto.
(ii) As of the Second Refinancing Date, VCMI will
have good title to the Improvements, a good and valid leasehold interest in the
Ground Lease Property, and a good and valid easement over the Chlorine Facility
Parcel subject only to Permitted Encumbrances.
(iii) Neither the Parcel, the Chlorine Facility
Parcel nor the Property contains any defect or feature making it unsuitable for
the proper operation of the Improvements.
(m) Compliance with Law. The Company is in material compliance
with all Laws (including all Environmental Laws) with respect to the Parcel or
the Property or with respect to its leasing and operation of the Property, the
construction of the Improvements or the conduct of its business on the Property.
The Company has not received any notice of, or citation for, any violation of
any Law which has not been resolved or which the Company reasonably believes can
not be resolved in the ordinary course of business, which notice or citation
relates to the ownership or operation of the Parcel or the Property.
24
<PAGE> 29
(n) Recordation. The Ground Lease (or a memorandum thereof),
the HCL Bill of Sale, the Lease (or a memorandum thereof), the VCMI Mortgage and
all financing statements under the UCC, to be recorded or filed pursuant to
Section 2.01(p) hereof, are in a form sufficient to create or publish notice of,
as the case may be, the interests in the Ground Lease Property, the Property and
the Improvements purported to be created thereby. Upon the recordation of the
Ground Lease (or a memorandum thereof), the HCL Bill of Sale, the VCMI Mortgage
and the Lease (or a memorandum thereof) and the filing of such financing
statements, each to be recorded or filed pursuant to Section 2.03(q) hereof in
such places as the Company shall notify the Trustee prior to the Second
Refinancing Date, such documents will have been recorded or filed in each place
in which recording or filing is required to publish notice, under Texas Law, of
the interests created thereby and to protect the validity and effectiveness
thereof, and all Taxes, fees and other public charges payable in connection with
the publishing and filing of the Ground Lease (or a memorandum thereof), the HCL
Bill of Sale, the VCMI Mortgage and the Lease (or a memorandum thereof), shall
be contemporaneously paid in full by the Company.
(o) Approved HCL Construction Budget and Related Matters. The
Approved HCL Construction Budget has been prepared in good faith on the basis of
reasonable assumptions and accurately includes all Actual HCL Project Costs
currently anticipated to be incurred or estimated to be incurred and all
reserves expected to be established and maintained in connection with achieving
completion of the HCL Improvements by the Final Completion Date. The HCL
Construction Schedule accurately describes estimated dates of completion of the
stages of construction of the HCL Improvements.
(p) Rights to Property; Etc. (i) The Company has all
rights-of-way, easements and real property licenses, environmental allowances,
rights in real property (including, without limitation, fixtures and
appurtenances), utilities and other services necessary for the day-to-day
operation of the Property and (A) such rights-of-way, easements, licenses,
environmental allowances, utilities and other services are valid and in full
force and effect in accordance with their terms, (B) there is presently no
material default with respect to any such rights-of-way, easements, licenses,
utilities and other services, and (C) all utility services necessary for the
construction of the HCL Improvements and operation of the Property for its
25
<PAGE> 30
intended purposes are or will be available at the boundaries of the Parcel.
(ii) None of the Permitted Encumbrances will
interfere with the use or possession of the Property or any other material asset
used in connection therewith or the use of or the exercise by VCMI of its rights
either under any Operative Document or to the Property.
(iii) The Company has given any and all notices
required to be given in connection with the construction of the HCL Improvements
pursuant to any easements, rights-of-way, licenses or other agreements affecting
the Parcel or the Property, or any part thereof.
(iv) The Improvements do not encroach upon any
contiguous or adjoining property other than property owned by the Company; the
Improvements do not encroach on any easements or rights-of-way affecting the
Property except as set forth in the Operative Documents, or violate any rights
granted thereunder or any covenants or restrictions affecting the Property, or
any part thereof, and any future violation will not result in a reversion or
forfeiture of title, right of re-entry or power of termination; and the
easements, rights-of-way, covenants and restrictions affecting the Ground Lease
Property, except as set forth in the Operative Documents, will not interfere
with the use or occupancy of the Ground Lease Property or the Property, or any
part thereof, or any asset owned or used in connection therewith, nor will the
exercise of rights or remedies thereunder result in any damage to the
Improvements or diminution of value of the Property, or any part thereof.
(v) The Liens described in Section 5.01(h) (i)(I),
singly or in the aggregate, (A) do not directly or indirectly encumber or
otherwise affect the Parcel or the Property or (B) could not have a Material
Adverse Effect.
(vi) The Chlorine Facility Easement is sufficient for
the proper installation and operation of the Chlorine Facility.
(q) Trade Secrets and Patents. (i) The ownership of the
Property by VCMI and the leasing or subleasing and operation of the Property by
the Company, including the construction and proposed operation of the
Improvements, do not and will not conflict with, infringe on, or otherwise
violate any copyright, trade secret or patent rights of any other Person.
26
<PAGE> 31
(ii) The Company has all rights to all patents,
patent applications, proprietary computer software, "know-how" and copyrights
used or to be used in the ordinary course of the construction and operation of
the Improvements (the "Intellectual Property Rights") that are necessary for the
operation thereof, including the right to assign the Intellectual Property
Rights. To the best of the Company's knowledge, there is no judicial proceeding
pending or threatened involving any claim of any infringement, misuse or
misappropriation by the Company or any Affiliate thereof of any patent,
copyright, license or similar intellectual property right owned by any third
party related to the Intellectual Property Rights.
(r) Environmental Compliance. (i) The operations and
properties of the Company and each of its Subsidiaries comply in all material
respects with all Environmental Laws, all necessary Environmental Permits have
been obtained and are in effect for the operations and properties of the Company
and its Subsidiaries, the Company and its Subsidiaries are in compliance in all
material respects with all such Environmental Permits, and no circumstances
exist that could be reasonably likely to (A) except as described on Schedule
4.01(e) hereto, form the basis of an Environmental Action against the Company or
any of its Subsidiaries or any of their properties that could have a Material
Adverse Effect or (B) cause any such property to be subject to any restrictions
on ownership, occupancy, use or transferability under any Environmental Law that
could have a Material Adverse Effect.
(ii) None of the properties currently or formerly
owned or operated by the Company or any of its Subsidiaries is listed or
proposed for listing on the National Priorities List under the CERCLA ("NPL") or
on CERCLIS or any analogous state list of sites requiring investigation or
cleanup, the listing, or proposed listing of which would be reasonably likely to
have a Material Adverse Effect, except as described in the registration
statement, Registration No. 33-70998, as declared effective by the Securities
and Exchange Commission on November 23, 1993 or, to the best knowledge of the
Company, is adjacent to any such property.
(iii) Except where noncompliance would not
individually or in the aggregate have a Material Adverse Effect, (A) neither the
Company nor any of its Subsidiaries has transported or arranged for the
transportation of any Hazardous Materials to any location that is listed or
proposed for listing on the NPL or on the CERCLIS or any
27
<PAGE> 32
analogous state list, and (B) all Hazardous Materials generated, used, treated,
handled or stored at or transported to or from any property currently or
formerly owned or operated by the Company or any of its Subsidiaries have been
disposed of in compliance with all Environmental Laws and Environmental Permits.
(s) No Condemnation or Casualty. The Property has not suffered
a Condemnation or a Casualty or any other damage or destruction which renders
the Property unusable in whole or in material part, and, under applicable Law,
the Property may be used for the purposes contemplated by the Company in
accordance with the Lease.
(t) Permits. All Permits that are or will become Applicable
Permits have been obtained, except Applicable Permits customarily obtained or
which are permitted by Law to be obtained after the Second Refinancing Date (in
which case the Company, having completed all appropriate diligence in connection
therewith, has no reason to believe that such Permits will not be granted in the
usual course of business prior to the date that such Permits are required by
Law). All such obtained Permits are in proper form, are in full force and effect
and are not subject to any further appeal or further contest or to any
unsatisfied condition (other than conditions relating to completion in the
future) that may allow modification or revocation.
(u) Insurance. The Company is in compliance with all Insurance
Requirements, and all insurance policies required by paragraph 16 of the Lease
are in full force and effect.
(v) Taxes. All Taxes, fees and other charges which have become
due and payable in connection with the execution and delivery of the Operative
Documents or any memorandum thereof have been paid, unless such Taxes are being
contested in good faith and by proper proceedings as to which appropriate
reserves are being maintained and no lien resulting therefrom has attached to
the Company's property and become enforceable against its other creditors.
(w) Compliance. The Property is in material compliance with
all existing applicable Laws.
(x) No Material Adverse Event. No applicable Law prohibits,
and no litigation, governmental investigation or other proceeding is pending or
overtly threatened in which there is a reasonable possibility of an unfavorable
judgment, decree, order or other determination which could
28
<PAGE> 33
prevent or make unlawful, or impose any material adverse condition upon, the
Property or the acquisition, construction, use, ownership, operation or leasing
thereof, or VCMI's ownership thereof.
(y) Full Disclosure. No statement or material furnished by or
on behalf of the Company to the Agent, any Note and/or Certificate Purchasers,
VCMI, the Trustee or Special Counsel, in connection with any Operative Document,
any transaction contemplated thereby or the Offering Memo contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained therein or herein not misleading in light of the
circumstances in which such statement or material was furnished.
(z) Prior Representations and Warranties. The representations
and warranties of the Company as set forth in the Original Operative Documents
are true and correct on and as of the Second Refinancing Date or, as applicable,
on and as of the date specified in such representation or warranty.
SECTION 4.02. SSBTC Financing Closing Date Representations and
Warranties. SSBTC, in its individual capacity and not as Trustee, represents and
warrants to the Company, VCMI, the Agent and the Note and Certificate Purchasers
that the following statements were true and correct as of the Financing Closing
Date:
(a) Organization and Authority. (i) SSBTC is a national
banking association duly organized, validly existing and in good standing under
the laws of the United States of America.
(ii) SSBTC has all requisite power and authority to
execute and deliver each Operative Document to which it is a party and to comply
with the terms thereof and perform its obligations thereunder.
(b) Pending Litigation. There are no actions, suits or
Proceedings pending or threatened against or affecting SSBTC in any court or
before any governmental body or arbitration tribunal which, if adversely
determined, would adversely affect VCMI's ownership of the Property or the
business, condition (financial or otherwise), performance, properties, prospects
or results of operation of SSBTC or the Trustee's ability to perform its
obligations as Trustee under any Operative Document to which it is a party or
any other agreement which it has entered into in
29
<PAGE> 34
connection with any transaction contemplated by any Operative Document.
(c) Authorization; No Conflict. The execution and delivery by
SSBTC of, and compliance by SSBTC with all of the provisions of, each Operative
Document to which it is a party and any other agreement entered into in
connection with any transaction contemplated by the Operative Documents are
within the powers of SSBTC and are authorized by SSBTC and will not conflict
with, result in any breach of any of the provisions of, or constitute a default
under, SSBTC's articles of association or by-laws or any agreement or other
instrument to which SSBTC is a party or by which SSBTC may be bound or which is
applicable to any of SSBTC's property or result in a violation of any applicable
Connecticut or Federal Law.
(d) Enforceability. Each of the Operative Documents to which
SSBTC is a party, and any other agreement entered into by SSBTC in connection
with any transaction contemplated by any Operative Document, has been duly
authorized by all necessary action on the part of SSBTC, and is the legal, valid
and binding obligation of SSBTC enforceable against SSBTC in accordance with its
terms, except as enforceability thereof may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity.
(e) No Default. No event has occurred and no condition exists
which, upon consummation of the transactions contemplated by any Operative
Document, would constitute a default by SSBTC. SSBTC is not in violation in any
respect of any agreement or any other instrument, nor is SSBTC in violation of
its articles of association or any other instrument to which it is a party or by
which it or any of its property may be bound or affected which would have a
material adverse effect on either the business, financial position or results of
operations of SSBTC or SSBTC's ability to perform its obligations as Trustee
under the Operative Documents.
(f) Consents. The nature of SSBTC, its execution and delivery
of each Operative Document to which it is a party, its consummation of the
transactions contemplated thereby, its compliance with the terms thereof or any
circumstance in connection with the transactions contemplated thereby does not
require the consent of any Person or the approval or authorization of, or
filing,
30
<PAGE> 35
registration or qualification with, any Connecticut or Federal governmental
authority governing the banking or trust powers of SSBTC on the part of SSBTC
(other than such as have been obtained) as a condition to such execution,
delivery and compliance.
(g) Enforceability Against Trustee. As of the Financing
Closing Date the Original Instruments were duly authorized by all necessary
corporate action on the part of the Trustee and the Original Instruments
constituted the legal, valid and binding obligations of the Trustee (acting
solely as Trustee under the Declaration, and not in its individual capacity).
SECTION 4.03. Second Refinancing Date SSBTC Representations
and Warranties. SSBTC, in its individual capacity and not as Trustee, hereby
represents to the Company, VCMI, the Agent and the Note and Certificate
Purchasers that the following statements are true and correct as of the Second
Refinancing Date:
(a) Second Refinancing Date Representations and Warranties.
The representations and warranties of SSBTC as set forth in the Original
Operative Documents are true and correct as if made on and as of the Second
Refinancing Date or, as applicable, on and as of the date specified in such
representation or warranty.
(b) Enforceability Against Trustee. As of the Second
Refinancing Date, the Instruments have been duly authorized by all necessary
corporate action on the part of the Trustee and the Instruments (other than the
A-Notes and B-Notes issuable upon refinancing of the Interim Notes (HCL Series))
constitute, and (upon issuance) the A-Notes and B-Notes issuable upon
refinancing of the Interim Notes (HCL Series) will constitute, the legal, valid
and binding obligations of the Trustee (acting solely as Trustee under the
Declaration, and not in its individual capacity) and are, or (as applicable)
will be, enforceable against the Trustee in accordance with their terms and the
terms of the Declaration.
31
<PAGE> 36
ARTICLE V.
COVENANTS
SECTION 5.01. Company's Covenants.
(a) Information. The Company will deliver to the Agent for
distribution to the Note and Certificate Purchasers:
(i) as soon as available and in any event within 60 days
after the end of each of the first three quarters of each fiscal year
of the Company, Consolidated balance sheets of the Company and its
Subsidiaries as of the end of such quarter and Consolidated statements
of income and cash flows of the Company and its Subsidiaries for the
period commencing at the end of the previous fiscal year and ending
with the end of such quarter, duly certified (subject to year-end audit
adjustments) by a financial Officer of the Company as having been
prepared in accordance with GAAP, it being agreed that delivery of the
Company's Quarterly Report on Form 10-Q will satisfy this requirement,
together with a certificate of said Officer certifying compliance with
the covenants set forth in Section 5.01(i) as of the end of such
quarter;
(ii) as soon as available and in any event within 120
days after the end of each fiscal year of the Company, a copy of the
annual audit report for such year for the Company and its Subsidiaries,
containing Consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year and Consolidated
statements of income and cash flows of the Company and its Subsidiaries
for such fiscal year, in each case accompanied by an opinion acceptable
to the Majority Purchasers by Ernst & Young or other independent public
accountants acceptable to the Majority Purchasers, together with a
certificate of the chief financial officer of the Company certifying
compliance with the covenants set forth in Section 5.01(i) as of the
end of such fiscal year;
(iii) as soon as possible and in any event within five
Business Days after the occurrence of each Default continuing on the
date of such statement, a statement of an Officer of the Company having
knowledge of or responsibility for such matters setting forth details
of such Default and the action that the Company has taken and proposes
to take with respect thereto;
32
<PAGE> 37
(iv) promptly after the sending or filing thereof, copies of
all reports that the Company sends to any of its securityholders;
(v) promptly after the commencement thereof, notice of the
commencement and nature of all actions and proceedings before any
court, governmental agency or arbitrator affecting the Company or any
of its Subsidiaries of the type described in Section 4.01(e);
(vi) promptly and in any event within 10 days after the
Company or any of its ERISA Affiliates knows or has reason to know that
any ERISA Event has occurred, a statement of an officer of the Company
having knowledge of or responsibility for such matters describing such
ERISA Event and the action, if any, that the Company or such ERISA
Affiliate has taken and proposes to take with respect thereto;
(vii) promptly and in any event within seven Business Days
after receipt thereof by the Company or any of its ERISA Affiliates,
copies of each notice from the PBGC stating its intention to terminate
any Plan or to have a trustee appointed to administer any such Plan;
(viii) promptly and in any event within 30 days after the
receipt thereof by the Company or any of its ERISA Affiliates, a copy
of the latest annual actuarial report for each Plan if the ratio of the
fair market value of the assets of such Plan to its current liability
(as defined in Section 412 of the Code) is less than 60%;
(ix) promptly and in any event within five Business Days after
receipt thereof by the Company or any of its ERISA Affiliates from the
sponsor of a Multiemployer Plan, copies of each notice concerning (A)
the imposition of Withdrawal Liability by any such Multiemployer Plan,
(B) the reorganization or termination, within the meaning of Title IV
of ERISA, of any such Multiemployer Plan or (C) the amount of liability
incurred, or that may be incurred, by the Company or any of its ERISA
Affiliates in connection with any event described in clause (A) or (B);
and
(x) such other information respecting the condition or
operations, financial or otherwise, of the Company or any of its
Subsidiaries as any Purchaser or
33
<PAGE> 38
the Trustee through the Agent may from time to time reasonably request.
(b) Compliance with Environmental Laws. Comply, and cause each
of its Subsidiaries and all lessees and other Persons operating or occupying its
properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew and cause each of
its Subsidiaries to obtain and renew all Environmental Permits necessary for its
operations and properties; and conduct, and cause each of its Subsidiaries to
conduct, any investigation, study, sampling and testing, and undertake any
cleanup, removal, remedial or other action necessary to remove and clean up all
Hazardous Materials from any of its properties pursuant to the order of any
regulatory authority and generally in accordance with the requirements of all
Environmental Laws; provided, however, that neither the Company nor any of its
Subsidiaries shall be required to undertake any such cleanup, removal, remedial
or other action to the extent that its obligation to do so is being contested in
good faith and by proper proceedings and appropriate reserves are being
maintained with respect to such circumstances.
(c) Maintenance of Property; Insurance; As-Built Survey. (i)
The Company will keep, and will cause each of its Subsidiaries to keep, all
property used or useful in its business in good working order and condition,
ordinary wear and tear excepted, except where the failure to do so would not
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole.
(ii) The Company will, and will cause each of its
Subsidiaries to, maintain (either in the name of the Company or in such
Subsidiary's own name) with financially sound and responsible insurance
companies, insurance on all of its properties in at least such amounts and
against at least such risks (and with such risk retention) as the Company in
good faith determines is necessary or appropriate for the prudent management of
its business; and will furnish to the Purchasers, upon request from the Agent,
information presented in reasonable detail as to the insurance so carried.
(iii) The Company will deliver to the Agent promptly
after the occurrence of the Final Completion Date, the final as-built plans and
specifications of the HCL Improvements (which plans may include the Original
Improvements and which in any event shall be provided to
34
<PAGE> 39
Agent within one hundred twenty (120) days after the Final Completion Date).
(d) Conduct of Business and Maintenance of Existence. The
Company will continue to engage in business of the same general type as now
conducted by the Company and its Subsidiaries, and will preserve, renew and keep
in full force and effect its corporate existence and its rights, privileges and
franchises necessary or desirable in the normal conduct of its business to the
extent permitted by Law.
(e) Compliance with Laws. The Company will comply, and cause
each of its Subsidiaries to comply, in all material respects with all applicable
Laws, including without limitation, ERISA and Environmental Laws.
(f) Books and Records. The Company will keep, and cause each
of its Subsidiaries to keep, proper books of record and account in which entries
in conformity with GAAP shall be made of all financial transactions and the
assets and business of the Company and each such Subsidiary.
(g) Use of Proceeds; Application of Proceeds to Actual Project
Costs. The Company, as the Construction Agent, will use proceeds of the HCL
Advances and the HCL Investments solely to pay Actual HCL Project Costs, and
none of such proceeds will be used in violation of any applicable Law,
including, without limitation, Regulation G, Regulation T, Regulation U and
Regulation X. The Company shall apply the proceeds of all HCL Advances and HCL
Investments solely to Actual HCL Project Costs.
(h) Negative Pledge. The Company will not create, assume or
suffer to exist, and will not cause, suffer or permit any Subsidiary to create,
assume or suffer to exist, any Lien of or upon any assets of the Company or
additions thereto or shares of capital stock of any Subsidiary, whether owned at
the Financing Closing Date or thereafter acquired, other than:
(A) Permitted Encumbrances;
(B) purchase money Liens upon or in any property acquired or
held by the Company or any Subsidiary in the ordinary course of
business to secure the purchase price of such property or to secure
Debt incurred solely for the purpose of financing the acquisition of
such property, or Liens existing on such property at the time of its
acquisition (other than any such Lien
35
<PAGE> 40
created in contemplation of such acquisition) or extensions, renewals
or replacements of any of the foregoing for the same or a lesser
amount, provided, however, that no such Lien shall extend to or cover
any property other than the property being acquired, and no such
extension, renewal or replacement shall extend to or cover any property
not theretofore subject to the Lien being extended, renewed or
replaced, provided further that the aggregate principal amount of the
indebtedness secured by the Liens referred to in this clause (B) shall
not exceed $10,000,000 at any time outstanding;
(C) the Liens existing on August 16, 1994 and described on
Schedule 5.01(h) to the Original Agreement;
(D) other Liens securing Debt in an aggregate principal amount
not to exceed $20,000,000 at any time outstanding;
(E) the replacement, extension or renewal of any Lien
permitted by clauses (B) and (C) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or contingent
obligor) of the Debt secured thereby;
(F) Liens, if any, resulting from the documents evidencing the
Receivables Financing; and
(G) Liens, if any, resulting from the transactions
contemplated by the Participation Agreement dated as of December 22,
1995 among the Company, the Trustee, the Agent and the Purchasers named
therein, as the same may be amended from time to time.
(i) Financial Covenants. During the term of this Agreement,
the Company will:
(A) Interest Coverage Ratio. Maintain an Interest Coverage
Ratio of at least 6:1.
(B) Borrowed Debt/EBITDAR Ratio. Maintain a Borrowed
Debt/EBITDAR Ratio of not more than 3.5:1.
(C) Minimum Retained Earnings. Either (i) for each fiscal
quarter maintain retained earnings equal to or exceeding $150,000,000
or (ii) for any period of
36
<PAGE> 41
four consecutive fiscal quarters, not incur net losses in excess of
$50,000,000.
(j) Mergers, Etc. The Company shall not merge or consolidate
with or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to, any Person, or permit any
of its Subsidiaries to do so, except that any Subsidiary of the Company may
merge or consolidate with or into, or dispose of assets to, any other Subsidiary
of the Company, and except that any Subsidiary of the Company may merge into or
dispose of assets to the Company and the Company may merge with any other Person
so long as the Company is the surviving corporation, provided, in each case,
that no Default or Event of Default shall have occurred and be continuing at the
time of such proposed transaction or would result therefrom.
(k) Accounting Changes. The Company shall not make or permit,
or permit any of its Subsidiaries to make or permit, any change in accounting
policies or reporting practices, except as required or permitted by generally
accepted accounting principles.
(l) Performance. The Company shall observe and perform all
provisions to be observed or performed by it contained in each Operative
Document to which it is a party, in accordance with the terms thereof and within
the times permitted thereby (including any grace or cure periods provided
thereby) so as to prevent the occurrence of an Event of Default, and will
maintain, or cause to be maintained, the validity and effectiveness as to the
Company of each such Operative Document to which it is a party.
(m) Intellectual Property Rights. The Company shall preserve,
protect and maintain its rights in and to the Intellectual Property Rights in
accordance with prudent industry practice.
ARTICLE VI.
THE NOTES AND THE CERTIFICATES
SECTION 6.01. Determination of Rates.
(a) The Company shall select whether the Applicable Rate will
be determined by reference to the LIBO Rate or the Base Rate by giving written
notice of that determination to the Trustee and the Agent three Business
37
<PAGE> 42
Days (or one Business Day if the Company selects the Base Rate) before each
Interest Setting Date. If the Applicable Rate is to be determined by reference
to the LIBO Rate, such notice shall also specify the Interest Period or Periods
elected by the Company as to which the LIBO Rate shall apply. As to any portion
of the principal of the Instruments which bears interest determined by reference
to the LIBO Rate, the Company may elect to Convert the Applicable Rate with
respect thereto to the Base Rate, or elect a different LIBO Interest Period or
Periods with respect thereto, only on the last day of the then current Interest
Period applicable thereto. As to any portion of the principal of the Instruments
which bears interest determined by reference to the Base Rate, the Company may
elect to Convert the Applicable Rate with respect thereto to the LIBO Rate on
any Business Day, subject to the aforesaid notice requirement. Any Conversion of
Base Rate Fundings into LIBO Rate Fundings shall be in an amount not less than
$10,000,000. In the case of any Conversion of Base Rate Fundings into LIBO Rate
Fundings, the Company shall indemnify each Purchaser against any loss, cost or
expense incurred by such Purchaser as a result of any revocation of such notice
of Conversion, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Purchaser to fund the
Funding to be Converted by such Purchaser as a result of such revocation.
(b) All computations of interest and of any fee payable
hereunder or under any other Operative Document (other than computations made
for purposes of determining the Maximum Rate) shall be made by the Agent on the
basis of a year of 360 days (365 days in the case of the computation of interest
if the Applicable Rate is determined by reference to the Base Rate), for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest or fee is payable. Each
determination by the Agent of an interest rate hereunder or under any other
Operative Document shall be conclusive and binding for all purposes, absent
manifest error, but no such interest rate shall ever exceed the Maximum Rate.
(c) Each Reference Bank agrees to furnish to the Agent timely
information for the purpose of determining each LIBO Rate. If any one or more of
the Reference Banks shall not furnish such timely information to the Agent for
the purpose of determining any such interest rate, the Agent shall determine
such interest rate on the basis of timely
38
<PAGE> 43
information furnished by the remaining Reference Banks. The Agent shall give
prompt notice to the Company and the Purchasers of the Applicable Rate.
(d) If, with respect to any LIBO Rate Fundings, the Majority
Purchasers notify the Agent that the LIBO Rate for any Interest Period for such
Funding will not adequately reflect the cost to such Majority Purchasers of
making, funding or maintaining their respective LIBO Rate Fundings for such
Interest Period, the Agent shall forthwith so notify the Company and the
Purchasers, whereupon (i) each LIBO Rate Funding will automatically, on the last
day of the then existing Interest Period therefor, Convert into a Base Rate
Funding, and (ii) the obligation of the Purchasers to make, or to Convert
Fundings into, LIBO Rate Fundings shall be suspended until the Agent shall
notify the Company and the Purchasers that the circumstances causing such
suspension no longer exist.
(e) If the Company shall fail to select the duration of any
Interest Period for any LIBO Rate Funding the Agent will forthwith so notify the
Company and the Purchasers and such Fundings will automatically, on the last day
of the then existing Interest Period therefor, Convert into Base Rate Fundings.
(f) On the date on which the aggregate unpaid principal amount
of LIBO Rate Fundings comprising any Funding shall be reduced, by payment or
prepayment or otherwise, to less than $10,000,000, such Fundings shall
automatically convert into Base Rate Fundings.
(g) If fewer than two Reference Banks furnish timely
information to the Agent for determining the LIBO Rate for any LIBO Rate
Fundings,
(i) the Agent shall forthwith notify the Company and
the Purchasers that the interest rate cannot be determined for
such LIBO Rate Fundings,
(ii) each such Funding will automatically, on the
last day of the then existing Interest Period therefor,
convert into a Base Rate Funding (or if such Funding is then a
Base Rate Funding, will continue as a Base Rate Funding), and
(iii) the obligation of the Purchasers to make, or to
convert Base Rate Fundings into, LIBO Rate Fundings shall be
suspended until the Agent shall
39
<PAGE> 44
notify the Company and the Purchasers that the circumstances causing
such suspension no longer exist.
(h) In the event, and on each occasion, that on the Interest
Setting Date the Agent shall have determined (which determination shall be
conclusive and binding upon the Company absent manifest error) that reasonable
means do not exist for ascertaining the LIBO Rate for purposes of determining
the Applicable Rate, then the Agent shall, as soon as practicable thereafter,
give written, telex or facsimile notice of such determination to the Company,
the Purchasers and the Trustee, and thereafter the Applicable Rate on the
Instruments shall be determined by reference to the Base Rate (rather than the
LIBO Rate), but in no event to exceed the Maximum Rate, until the circumstances
giving rise to such notice no longer exist.
(i) In the event that, subsequent to the Financing Closing
Date, the introduction of or any change in any United States or foreign Law, or
the interpretation or application thereof, makes it unlawful, or any central
bank or other governmental authority having jurisdiction asserts that it is
unlawful, for any Purchaser (including any branch, subsidiary or Affiliate
office of such Purchaser from which the Instruments are actually funded or at
which the Instruments are actually maintained or held) to fund or maintain
and/or to continue to hold the Instruments if the Applicable Rate thereon is
determined with respect to the LIBO Rate, then the Applicable Rate on such
Instruments shall be converted automatically to the Base Rate plus the
Applicable Margin (but in no event to exceed the Maximum Rate) on and after the
last day of the applicable Interest Period or on and after such earlier date as
may be required by such Law.
(j) Upon the occurrence and during the continuance of an Event
of Default arising from the nonpayment of the Company's obligations hereunder,
the Applicable Rate on the Instruments shall automatically be converted to the
Base Rate.
SECTION 6.02. Assignments and Participations. (a) The Company
may not assign its rights or delegate its obligations under this Agreement
without the prior written consent of the Agent and all of the Purchasers. Upon
an assignment to and assumption by a Person of the rights and obligations of the
Company under and in compliance with this Agreement, the representations,
warranties and covenants of the Company and the conditions applicable to the
Company
40
<PAGE> 45
hereunder shall thereafter apply to such Person and not to the Company.
(b) In addition to the assignments permitted under Section
6.02(h), each Note Purchaser and each Certificate Purchaser may assign to one or
more Eligible Assignees all or a portion of the Instruments then held by it and
its rights and obligations thereunder and under this Agreement (including,
without limitation, all or a portion of its Interim Note (HCL) Commitment and
Certificate (HCL) Commitment and/or the HCL Advances under its Interim Notes
(HCL Series) and/or its HCL Investment under its Certificates (HCL Series)) and
the other Operative Documents; provided, however, that (i) each assignment shall
be of a constant, and not a varying, percentage of all such rights and
obligations; (ii) each such assignment of Notes shall be of a pro rata share of
each series of Notes then held by such Note Purchaser; (iii) the aggregate
principal amount of the Notes being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $5 million in original principal
amount and in integral multiples of $1 million in excess thereof; (iv) no such
assignment shall be made if as a result thereof any Purchaser's aggregate
Interim Note (HCL) Commitment, after giving effect to such assignment, is less
than $5 million (determined as of the date of the Assignment and Acceptance with
respect to such assignment); provided, however, that this Section
6.02(b)(iii)-(iv) shall not prohibit an assignment of the entire outstanding
principal amount of the Notes then held by a Purchaser; and (v) the parties to
each such assignment shall execute and deliver to each of the Agent, with (if
requested by the Agent) an administrative fee to be paid by the Assignor (as
defined below) of $3,000, and the Trustee for its acceptance and recording in
the Record or the Register as the case may be, an Assignment and Acceptance;
provided, however, the requirements of Sections 6.02(b)(i)-(iv) shall not apply
with respect to assignments to such Purchaser's Affiliates or to any financial
institutions to which the Note Purchaser is assigning Notes as collateral
security pursuant to Regulation A of the Federal Reserve Board and any operating
circular issued by the Federal Reserve System and/or the Federal Reserve Bank or
otherwise. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance (which
effective date shall be at least five Business Days after the execution of such
Assignment and Acceptance, or with respect to an Assignment and Acceptance for
Certificates, such earlier date as the Assignor and Assignee
41
<PAGE> 46
shall agree), (x) the assignee thereunder (the "Assignee") shall be a party
hereto and to the other Operative Documents to which the Purchasers are parties
and, to the extent that rights and obligations hereunder have been assigned to
and assumed by it, have the rights and obligations of a Purchaser hereunder and
a Holder of Instruments under the Operative Documents (including the obligation
of confidentiality set forth in Section 9.17) and (y) the assignor thereunder
(the "Assignor") shall, to the extent that rights and obligations hereunder have
been assigned by it, relinquish its rights (other than any rights to
indemnification it may have hereunder or under the Operative Documents) and be
released from its obligations under this Agreement (other than the
confidentiality obligations set forth in Section 9.17) and the other Operative
Documents with respect to all or such portion, as the case may be, of its
Interim Note (HCL) and/or Certificate (HCL) Commitments (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of Assignor's
rights and obligations under the Agreement and the other Operative Documents,
such Assignor shall, except as set forth above, cease to be a party hereto). To
the extent that the Certificate Purchaser is an Assignor, the term "Certificate
Purchaser," as used in the Operative Documents, shall refer to each Holder of
the Certificates and the obligations of each Certificate Purchaser hereunder
shall be several and not joint and several.
(c) By executing and delivering an Assignment and Acceptance,
the Assignor thereunder and the Assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such Assignor makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement and
the other Operative Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, the other
Operative Documents or any other instrument or document furnished pursuant
hereto; (ii) such Assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Company or the
Construction Agent or the performance or observance by the Company or the
Construction Agent of any of their respective obligations under this Agreement
or any other Operative Document, or any other instrument or document furnished
pursuant hereto; (iii) such Assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Sections 4.01(d) and 5.01(a) and such other
42
<PAGE> 47
documents and information as it has deemed appropriate to make its own credit
analysis and decision with respect to entering into such Assignment and
Acceptance; (iv) such Assignee will, independently and without reliance upon the
Agent, the Company, the Trustee, VCMI, such Assignor or any other Note or
Certificate Purchaser and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such Assignee confirms
that it is an Eligible Assignee; (vi) such Assignee appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement and the other Operative Documents as are delegated to the
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vii) such Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Note and/or
Certificate Purchaser.
(d) The Agent shall maintain at its address listed on Schedule
I hereto a copy of each Assignment and Acceptance delivered to and accepted by
it and a register for the recordation of the names and addresses of the Note and
Certificate Purchasers and the Commitment of, and principal amount of the
Advances and stated amount of the Investment owing to, each Note and Certificate
Purchaser from time to time (the "Record"). The entries in the Record shall be
conclusive and binding for all purposes, absent manifest error, and the Company,
the Agent, the Trustee and the Note and Certificate Purchasers may treat each
Person whose name is recorded in the Record as a Note and/or Certificate
Purchaser hereunder for all purposes of this Agreement. The Record shall be
available for inspection by the Company or any Note or Certificate Purchaser at
any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an Assignor and an Assignee representing that it is an Eligible Assignee, the
Agent shall, if such Assignment and Acceptance has been completed give prompt
oral or written notice to the Company and the Trustee and (i) accept such
Assignment and Acceptance, and (ii) record the information contained therein in
the Record. The Agent shall provide the Company with a current list of all
Purchasers no less frequently than quarterly.
(f) Each Note and Certificate Purchaser may sell
participations to one or more banks or other entities in or
43
<PAGE> 48
to all or a portion of the Instruments then held by it and its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and the Instrument or Instruments held by it) and the
other Operative Documents; provided, however, that (i) such Purchaser's
obligations under this Agreement and the other Operative Documents (including
without limitation all or a portion of its Interim Note (HCL) Commitment to make
HCL Advances) shall remain unchanged; (ii) such Note or Certificate Purchaser
shall remain the Holder of any such Instrument for all purposes under this
Agreement and the other Operative Documents and the Company, the Agent, the
Trustee, and the other Note and Certificate Purchasers shall continue to deal
solely and directly with such Purchaser in connection with such Purchaser's
rights and obligations under this Agreement; (iii) no such participant shall be
entitled to receive any greater payment than such Purchaser would have been
entitled to receive with respect to the rights participated (including, without
limitation, payments for Taxes, Other Charges or Increased Costs) except as a
result of circumstances arising after the date of such participation to the
extent that such circumstances affect other Note or Certificate Purchasers and
participants generally; and (iv) no Note or Certificate Purchaser shall assign
or grant a participation that conveys to the participant the right to vote or
consent under this Agreement, other than the right to vote upon or consent to
any reduction of the principal or stated amount of or the interest or
Distributions to be paid on such Purchaser's Instrument(s) or any postponement
of any date for the payment of any amount payable in respect of such Purchaser's
Instruments.
(g) Any Note or Certificate Purchaser may, in connection with
any assignment or participation or proposed assignment or participation pursuant
to this Section 6.02, disclose to the assignee or participant or proposed
assignee or participant, any information relating to the Company furnished to
such Note or Certificate Purchaser by or on behalf of the Company; provided,
that prior to any such disclosure, the assignee or participant or proposed
assignee or participant shall agree in writing with the Company and the Agent to
preserve the confidentiality of any confidential information relating to the
Company or the transactions contemplated by this Agreement (including, without
limitation, the general structure of this transaction) received by it from such
Note or Certificate Purchaser in a manner consistent with that set forth in
Section 9.17 hereof.
44
<PAGE> 49
(h) Anything in this Section 6.02 to the contrary
notwithstanding (except that at all times the requirements of Section 6.02(g)
shall be satisfied), any Note Purchaser may assign and pledge, as collateral or
otherwise, and without notice to or consent of the Company, all or any of the
Notes held by it and any of its rights (including, without limitation, rights to
payment of the principal of and interest on the Notes) under this Agreement to
(i) any of its Affiliates and (ii) any Federal Reserve Bank, the United States
Treasury or to any other financial institution as collateral security pursuant
to Regulation A of the Federal Reserve Board and any operating circular issued
by the Federal Reserve System and/or the Federal Reserve Bank or otherwise;
provided, that any payment made by the Company to the Trustee or VCMI for the
benefit of such assigning and/or pledging Purchaser in accordance with the terms
of the Operative Documents shall satisfy the Company's obligations under the
Operative Documents in respect thereof to the extent of such payment. No such
assignment and/or pledge set forth in (ii) above shall release the assigning
and/or pledging Note Purchaser from its obligations hereunder.
SECTION 6.03. Taxes. (a) Any and all payments by the Company,
the Trustee, the Agent or VCMI hereunder or under any of the other Facility
Documents (including, without limitation, payments of Fixed Rent, Additional
Rent, interest, Distributions, fees and principal and stated amounts of the
Instruments and payments by VCMI under the VCMI Note) shall be made free and
clear of and without deduction for any and all present or future Impositions and
all liabilities with respect thereto, excluding, in the case of payments made to
each Purchaser, the Agent, the Trustee or VCMI, as the case may be, Excluded
Charges. Deduction may be made, if required to be made by Law, in the case of
payments made to each Purchaser, the Agent, the Trustee or VCMI, as the case may
be, for each of the Excluded Charges.
If the Company, the Agent, the Trustee or VCMI shall be
required by Law to deduct any Charges from or in respect of any sum payable
hereunder or under any of the Facility Documents to the Trustee, the Agent, VCMI
or any Purchaser, (i) the sum payable by such deducting party shall be increased
as may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 6.03) the
Trustee, the Agent, VCMI or such Purchaser, as the case may be, receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Company, the Agent, the Trustee or VCMI, as the case may be, shall
45
<PAGE> 50
make such deductions, and (iii) the Company, the Agent, the Trustee or VCMI, as
the case may be, shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable Law. The Company will
indemnify the Agent, the Trustee and VCMI for the full amount of any sums paid
by the Agent, the Trustee and VCMI pursuant to the preceding sentence.
(b) Notwithstanding anything to the contrary contained in this
Agreement, each of the Company, the Agent, the Trustee and VCMI shall be
entitled, to the extent it is required to do so by Law, to deduct or withhold
income or other similar Taxes imposed by the United States of America or any
other jurisdiction on Fixed Rent, Additional Rent, interest, Distributions,
fees, principal and stated amounts of the Instruments or other amounts payable
hereunder or under the other Facility Documents for the account of the Trustee,
VCMI, the Agent or any Purchaser (without the payment of increased amounts to
such Purchaser, the Agent, the Trustee or VCMI pursuant to clause (a) of this
Section 6.03 in the case of Excluded Charges) unless the Trustee (or any
successor thereto) or a Purchaser, as the case may be, has timely filed with the
Agent (who shall then promptly forward the same to the Company and the Trustee)
the Prescribed Forms for the applicable year to the extent deduction or
withholding of such Taxes is not required or reduced as a result of the filing
of such Prescribed Forms. If the Agent, the Trustee or VCMI shall so deduct or
withhold any such Taxes, it shall provide a statement to such Purchaser, and if
the Company shall so deduct or withhold any such Taxes, it shall provide a
statement to the Trustee, in each case setting forth the amount of such Taxes so
deducted or withheld, the applicable rate and any other information or
documentation which such Purchaser or the Trustee may reasonably request for
assisting such Purchaser or the Trustee to obtain any allowable credits or
deductions for the Taxes so deducted or withheld in the jurisdiction or
jurisdictions in which such Purchaser is subject to Taxes.
(c) In addition, the Company agrees to pay any present or
future stamp or documentary Taxes or any other excise or property Taxes payable
by or on behalf of VCMI, the Agent, the Trustee or any Purchaser, including any
transfer Taxes with respect to VCMI's acquisition of the Ground Lease Property
or the Chlorine Facility Easement pursuant to the Ground Lease or other property
transfer, transfer gains or mortgage recording Taxes, charges or similar levies
which arise from the acquisition, ownership, operation, occupancy, possession,
use, non-use, financing, leasing, subleasing, or disposition or condition of the
46
<PAGE> 51
Property or any part thereof by VCMI or from any payment made to VCMI, the
Agent, the Trustee or any Purchaser hereunder or under the other Facility
Documents or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any of the other Operative Documents and arising
directly or indirectly out of the transactions contemplated by this Agreement or
any of the Facility Documents (hereinafter referred to as "Other Taxes").
(d) The Company will indemnify the Trustee, VCMI, the Agent
and each Note and Certificate Purchaser for the full amount of any Charges
(including, without limitation, any Other Taxes imposed by any jurisdiction on
amounts payable under this Section 6.03) paid by the Trustee, VCMI, the Agent or
such Purchaser as the case may be, and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Charges were correctly or legally asserted (it being the intent to
indemnify the Trustee, VCMI, the Agent and the Purchasers with respect to
Charges resulting from such Person's own negligence). Payments under this
indemnification shall be made within 30 days from the date such Purchaser, VCMI,
the Agent or the Trustee, as the case may be, makes written demand therefor,
which demand shall include a receipt or a reasonably detailed statement of such
Charges. In no event shall the Company, in connection with this indemnity or for
any other purpose whatsoever under any Facility Document, have any right to
examine any tax return or related books and records of the Trustee, VCMI, the
Agent or of any Note or Certificate Purchaser.
(e) As soon as practicable but in any event within 15 days
after the date of the payment of Charges by the Company, the Company will
furnish to the Trustee the original or a certified copy of a receipt or other
similar instrument (if available) evidencing payment thereof. Should any
Purchaser, VCMI, the Agent or the Trustee receive any refund, credit or
deduction from any taxing authority (whether before or after payment in full of
the principal and stated amount of, and interest on and Distributions with
respect to, the Instruments) to which such Purchaser, VCMI, the Agent or the
Trustee, as the case may be, would not be entitled but for the payment by the
Company of Charges as required by this Section 6.03 (it being understood that
the decision whether to make a claim, and if claimed, as to the amount of any
such refund, credit or deduction shall be made by such Purchaser, VCMI, the
Agent or the Trustee in its sole discretion; such Purchaser, VCMI, the Agent or
the Trustee, as the case may be, thereupon shall repay, together
47
<PAGE> 52
with any interest paid or allowed by the refunding, crediting or deducting
taxing authority in connection with such refund, credit or deduction, to the
Company an amount with respect to such refund, credit or reduction equal to any
net reduction in Taxes actually obtained by such Purchaser, VCMI, the Agent or
the Trustee, as the case may be, and determined by such Purchaser, VCMI, the
Agent or the Trustee, as the case may be, in its sole discretion to be
attributable to such refund, credit or deduction.
(f) Each Note Purchaser organized under the laws of a
jurisdiction outside the United States, on or prior to the date of its execution
and delivery of this Agreement in the case of each initial Note Purchaser and on
the date of the Assignment and Acceptance pursuant to which it becomes a Note
Purchaser in the case of each other Note Purchaser, and from time to time
thereafter if requested in writing by the Company (but only so long as such Note
Purchaser remains lawfully able to do so), shall provide the Company with
Internal Revenue Service form 1001 or 4224, as appropriate, or any successor or
other form prescribed by the Internal Revenue Service, certifying that such Note
Purchaser is exempt from or entitled to a reduced rate of United States
withholding tax on payments of interest pursuant to this Agreement or the Notes.
If the form provided by a Note Purchaser at the time such Note Purchaser first
becomes a party to this Agreement indicates a United States interest withholding
tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes. If any form or document referred to in this subsection (e)
requires the disclosure of information, other than information necessary to
compute the tax payable and information required on the date hereof by Internal
Revenue Service form 1001 or 4224, that the Note Purchaser reasonably considers
to be confidential, the Note Purchaser shall give notice thereof to the Company
and shall not be obligated to include in such form or document such confidential
information.
(g) Without prejudice to the survival of any other agreement
of the Company, the Trustee, VCMI, the Agent or the Purchasers hereunder, the
agreements and obligations of the Company, the Trustee, VCMI, the Agent and the
Purchasers contained in this Section 6.03 shall survive the payment in full of
both the principal of and interest on the Notes and the Certificate Liquidation
Amount of the Certificates.
SECTION 6.04. Substitution of Purchaser. If (i) any Note
Purchaser shall have converted the basis for determining the Applicable Rate on
its Instruments from the
48
<PAGE> 53
LIBO Rate to Base Rate pursuant to Section 6.01(d) or (e) or shall have required
the payment of Reserve Costs or Increased Costs, or (ii) any Note or Certificate
Purchaser shall have required the payment of Charges or Other Taxes, the Company
shall have the right, after consultation and discussion with the Agent, to seek
a substitute purchaser or purchasers satisfactory to the Company (which may be
one or more of the other Note or Certificate Purchasers) to assume the Note
and/or Certificate Commitments of such Purchaser and to purchase the Instruments
held by such Purchaser (without recourse to or warranty by such Purchaser and
subject to all amounts owing to such Purchaser under this Agreement having been
paid in full).
SECTION 6.05. Sharing of Payments, Etc. If any Note or
Certificate Purchaser shall obtain any payment (whether voluntary or
involuntary), on account of the Instruments held by it (other than on account of
Reserve Costs, Funding Costs, Break Costs, Illegality Costs or Increased Costs
and other than pursuant to Section 6.03 or any indemnification provision of the
Facility Documents) in excess of its ratable share of payments on account of the
Instruments obtained by all the Note and Certificate Purchasers, such Purchaser
shall forthwith purchase from the other Note and Certificate Purchasers such
participations in the Instruments held by them as shall be necessary to cause
such purchasing Purchaser to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Purchaser, such purchase from each
Note and Certificate Purchaser shall be rescinded and each Note and Certificate
Purchaser shall repay to the purchasing Purchaser the purchase price to the
extent of such Purchaser's ratable share (according to the proportion of (i) the
amount of the participation purchased from such Purchaser as a result of such
excess payment to (ii) the total amount of the participations purchased in
respect of such excess payment) of such recovery together with an amount equal
to such Purchaser's ratable share (according to the proportion of (i) the amount
of such Purchaser's required repayment to (ii) the total amount so recovered
from the purchasing Purchaser) of any interest or other amounts paid or payable
by the purchasing Purchaser in respect of the total amount so recovered.
Notwithstanding that the Purchaser shall have purchased a participation in such
Instruments, the purchasing Purchaser shall be deemed to have acquired the
voting rights under such Instruments to the extent of, and for the duration of,
such participation, as if such Purchaser shall have been an Assignee thereof.
49
<PAGE> 54
SECTION 6.06. Tax Treatment. (a) The parties hereto agree that
it is the Company's intention that for Federal, state and local income Tax
purposes (i) the Lease be treated as the repayment and security provisions of a
loan by VCMI to the Company, (ii) the Lessee be treated as the legal and
beneficial owner entitled to any and all benefits of ownership of the Property
or any part thereof and (iii) all payments of Fixed Rent during the Term be
treated as payments of interest and principal, as the case may be.
(b) The Company agrees that neither it nor any member of any
affiliated group of which it is or may become a member (whether or not
consolidated or combined returns are filed for such affiliated group for
Federal, state or local income Tax purposes) will at any time take any action,
directly or indirectly, or file any return or other document inconsistent with
the intended income Tax treatment set forth in Section 6.06(a) hereof, and the
Company agrees that the Company and any such Affiliates will file such returns,
maintain such records, take such actions and execute such documents as may be
appropriate to facilitate the realization of such intended income Tax treatment.
(c) Each of the Trustee, the Agent, VCMI and the Note and
Certificate Purchasers agrees that neither it nor any member of any affiliated
group of which it is or may become a member (whether or not consolidated or
combined returns are filed for such affiliated group for Federal, state or local
income Tax purposes) will at any time take any action, directly or indirectly,
or file any return or other document claiming, or asserting that it is entitled
to the income Tax benefits, deductions and/or credits which, pursuant to the
intended income Tax treatment set forth in Section 6.06(a) hereof, would
otherwise be claimed or claimable by the Company, and that it and any such
Affiliates will file such returns, maintain such records, take such actions, and
execute such documents (as reasonably requested by the Company from time to
time) as may be appropriate to facilitate the realization of, and as shall be
consistent with, such intended income Tax treatment, other than engaging in any
contest of such treatment with any taxing authority, and if any such filing,
maintenance, action or execution requested by the Company would result in any
additional income Tax liability payable by it or any Affiliate, or could
reasonably be expected to result in liability payable by it or any Affiliate,
other than any liability related to or arising as a result of the intended
income Tax treatment set forth in Section 6.06(a) hereof, then the Company will
provide an indemnity against such
50
<PAGE> 55
unrelated income Tax liability or other liability satisfactory to the Trustee,
the Agent, VCMI or the Note and Certificate Purchaser, as the case may be, in
its sole opinion.
ARTICLE VII.
EVENTS OF DEFAULT AND UNWIND EVENTS
SECTION 7.01. Events of Default. If any of the following
events shall occur and be continuing, it shall constitute an "Event of Default"
hereunder:
(a) The Company (i) shall fail to observe or perform any
covenant contained in Section 5.01(a)(iii), 5.01(d), 5.01(h), 5.01(i), 5.01(j)
or 5.01(k) or (ii) shall not comply with any of its payment obligations under
Section 9.15(c) within five Business Days after its receipt of a written demand
by an Indemnified Party or shall not comply with any of its other obligations
under Section 9.15 in a timely manner.
(b) Other than as is set forth in Section 7.01(a), the Company
shall fail to observe or perform any covenant or agreement contained in this
Agreement and such failure shall continue for 30 days after written notice
thereof has been given to the Company by the Trustee or the Agent of such
failure.
(c) The Company or any of its Subsidiaries shall fail to pay
any principal of or premium or interest on any Debt that is outstanding in a
principal or notional amount of at least $10,000,000 in the aggregate (but
excluding Debt outstanding hereunder) of the Company or such Subsidiary (as the
case may be), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Debt; or any such Debt shall be declared to be due and payable, or required
to be prepaid or redeemed (other than by a regularly scheduled required
prepayment or redemption), purchased or defeased, or an offer to prepay, redeem,
51
<PAGE> 56
purchase or defease such Debt shall be required to be made, in each case prior
to the stated maturity thereof; or
(d) The Company or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the Company or
any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 30 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or the Company or any
of its Subsidiaries shall take any corporate action to authorize any of the
actions set forth above in this subsection (d); or
(e) Any judgment or order for the payment of money in excess
of $10,000,000 shall be rendered against the Company or any of its Subsidiaries
and either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(f) Any non-monetary judgment or order shall be rendered
against the Company or any of its Subsidiaries that could be reasonably expected
to have a Material Adverse Effect, and there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; or
(g) Any ERISA Event shall have occurred and the sum
(determined as of the date of occurrence of such ERISA Event) of the
Insufficiency of the Plan with respect to which such ERISA Event shall have
occurred and the Insufficiency of any and all other Plans with respect to
52
<PAGE> 57
which an ERISA Event shall have occurred and then exist (or the liability of the
Company and its ERISA Affiliates related to any such ERISA Event) has, or is
reasonably likely to have, a Material Adverse Effect; or
(h) The Company or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount that, when aggregated with all
other amounts required to be paid to Multiemployer Plans by the Company and its
ERISA Affiliates as Withdrawal Liability (determined as of the date of such
notification), exceeds $25,000,000 or requires payments exceeding $5,000,000 per
annum; or
(i) The Company or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is
in reorganization or is being terminated, within the meaning of Title IV of
ERISA, and as a result of such reorganization or termination the aggregate
annual contributions of the Company and its ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated have
been or will be increased over the amounts contributed to such Multiemployer
Plans for the plan years of such Multiemployer Plans immediately preceding the
plan year in which such reorganization or termination occurs by an amount
exceeding $10,000,000;
(j) Any certification or any representation or warranty of the
Company set forth herein or in any Operative Document or certificate, notice,
demand, request or other document delivered by or on behalf of the Company to
the Trustee, the Note and/or Certificate Purchasers, VCMI or the Agent hereunder
or under any Operative Document shall be inaccurate in any material respect as
of the time when the same shall have been made.
(k) An "Event of Default" (as defined in any such other
Operative Document but excluding an Unwind Event) under any such other Operative
Document shall have occurred.
(l) Any Operative Document or any obligation of the Company
thereunder shall be revoked or repudiated or attempted to be revoked or
repudiated by the Company, or shall cease to be in full force and effect, by
operation of Law or by any other means.
(m) (i) Any Person or two or more Persons acting in concert
shall have acquired beneficial ownership (within
53
<PAGE> 58
the meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of the
Company (or other securities convertible into such Voting Stock) representing
33-1/3% or more of the combined voting power of all Voting Stock of the Company,
or (ii) during any period of up to 24 consecutive months, commencing after the
date of this Agreement, individuals who at the beginning of such 24-month period
were directors of the Company shall cease for any reason (other than due to
death or disability) to constitute a majority of the board of directors of the
Company (except to the extent that individuals who at the beginning of such
24-month period were replaced by individuals (x) elected by 50% of the remaining
members of the nominating committee of the board of directors of the Company or
(y) nominated for election by a majority of the remaining members of the
nominating committee of the board of directors of the Company and thereafter
elected as directors by the shareholders of the Company); or (iii) any Person or
two or more Persons acting in concert shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement that, upon
consummation prior to the Maturity Date, will result in its or their acquisition
of the power to exercise, directly or indirectly, a controlling influence over
the management or policies of the Company.
(n) Any Applicable Permit shall fail to be in full force and
effect.
SECTION 7.02. Remedies upon an Event of Default. (a) If an
Event of Default has occurred and is continuing, VCMI and the Trustee may
exercise any of the rights or remedies granted to VCMI or the Trustee under the
Lease or any of the other Operative Documents, in addition to any rights or
remedies of such parties set forth in this Participation Agreement.
(b) If an Event of Default has occurred and is continuing then
each of the Trustee, VCMI, the Agent and the Purchasers may take all steps
necessary or advisable to protect and enforce its rights hereunder, whether by
action, suit or proceeding at law or in equity, for the specific performance of
any covenant, condition or agreement contained herein, or in aid of the
execution of any power herein granted, or for the enforcement of any other
appropriate legal or equitable remedy or otherwise as such party shall deem
necessary or advisable.
54
<PAGE> 59
(c) No right or remedy hereunder shall be exclusive of any
other right, power or remedy, but shall be cumulative and in addition to any
other right or remedy hereunder or now or hereafter existing by law or in
equity, and the exercise by a party hereto of any one or more of such rights,
power or remedies shall not preclude the simultaneous exercise of any or all of
such other rights, powers or remedies. Any failure to insist upon the strict
performance of any provision hereof or to exercise any option, right, power or
remedy contained herein shall not constitute a waiver or relinquishment thereof
for the future. The Trustee, VCMI and the Holders from time to time of the
Instruments shall be entitled to injunctive relief in case of the violation or
attempted or threatened violation of any of the provisions hereof by any other
party hereto, a decree compelling performance of any of the provisions hereof or
any other remedy allowed by Law or in equity.
SECTION 7.03. Unwind Events. Any Event of Default (as defined
in the Agency Agreement) arising from the failure of the Construction Agent to
comply with the provisions of Sections 3(a), 3(b) or 3(c) of the Agency
Agreement shall not be deemed an Event of Default hereunder but shall constitute
an "Unwind Event".
SECTION 7.04. Remedies upon an Unwind Event. If an Unwind
Event shall have occurred, the Company either shall (i)(A) pay to the Trustee
within five (5) days of the occurrence of such Unwind Event an amount (the
"Unwind Fee") equal to 89.9% of the Termination Value, plus all Fixed Rent,
Additional Rent and all costs and expenses incidental to the unwinding of the
transactions, including, without limitation, reasonable fees of Special Counsel
and Trustee's counsel and (B) satisfy each of the Return Conditions other than
the condition set forth in Section 7.05(b)(ii), or (ii) deliver an Offer to
Purchase the Property and purchase the Property upon payment of the Offer
Purchase Price pursuant to paragraphs 14 and 15 of the Lease. Upon satisfaction
of the conditions set forth in (i) or (ii) above, this Agreement shall terminate
as set forth in Section 9.01.
SECTION 7.05. Residual Guaranty and Return Conditions. (a)
Upon the expiration of the Lease, if the Company does not purchase the Property
pursuant to the Lease, the Company shall pay to the Trustee on the Expiration
Date (or on the expiration date of the final Extended Term if the Lease has been
extended pursuant to paragraph 27(d) of the Lease), an advance residual guaranty
payment equal to the Series A Portion of the Original Capitalized Cost of the
Property (the "Residual Guaranty").
55
<PAGE> 60
(b) Upon the election of the Company to surrender the Property
to VCMI pursuant to paragraph 27(a)(ii) of the Lease or Section 7.04(i) hereof,
the Company shall provide, or cause to be provided or accomplished, at the sole
cost and expense of the Company, to or for the benefit of VCMI and the holders
of the Instruments, at least thirty (30) days but not more than sixty (60) days
prior to the Expiration Date or date of such other termination of the Lease each
of the following (collectively, the "Return Conditions"):
(i) an environmental audit of the Property, together
with a copy of the Environmental Consultant's report on its audit,
satisfactory, in form and substance, to the Agent, the Trustee, VCMI
and the B-Note and Certificate Purchasers, to the effect that (A) the
Property is in compliance with all Environmental Laws then enacted or
then proposed, as determined by the Environmental Consultant and
special counsel selected by the Agent; (B) the environmental condition
of the Property on the date the Property is surrendered is no worse
than the environmental condition of the Property on the Financing
Closing Date and (C) there is no pending or overtly threatened
litigation, investigation or other legal proceeding of any kind that
could result in any liability to any Purchaser, the Agent, the Trustee
or VCMI or in the imposition of any Lien on the Property;
(ii) a report of the Appraiser and/or the Independent
Engineer, satisfactory in form and substance to VCMI, the Trustee, the
Agent and the B-Note and Certificate Purchasers, to the effect that the
Property has been maintained in accordance with the terms and
conditions of the Lease and that (based on inspection) the Property (x)
meets or exceeds the original design specifications and (y) is capable
of operating as a vinyl chloride monomer production facility with
associated chlorine unloading facilities and (unless earlier purchased
by the Company pursuant to the Lease) hydrogen chloride reactor systems
at design capacity, and at an efficiency and reliability typical of
then-current market standards for similar plants located in the United
States and owned and operated by major chemical or petrochemical
companies and with the useful life contemplated by and in accordance
with the Construction Plans and applicable Laws, and VCMI, the Trustee,
the Agent and the B-Note and Certificate Purchasers are satisfied,
based on such report, that the Property is capable of operating as
56
<PAGE> 61
herein provided in conformity with the Guiding Principles of the
Chemical Manufacturers Association then in effect;
(iii) evidence satisfactory to the Agent, VCMI, the
Trustee and the Purchasers of the B-Notes and Certificates that the
Company is, and (as of the Expiration Date or date of such other
termination of the Lease) will be, in full compliance with the Services
Agreement and has made arrangements satisfactory to VCMI and the Agent
for the provision of services required thereunder for the remainder of
the term of the Ground Lease;
(iv) the Company shall have arranged for a Texas
Standard Form T-1 form of extended coverage owner's title insurance
policy, or a commitment therefor, issued by the Title Company, marked
"premium paid" (the "Expiration Title Policy") in an aggregate amount
equal to the Original Capitalized Cost of the Property and in form and
substance satisfactory to the Purchasers of the B-Notes and
Certificates and Special Counsel, to be delivered to the Purchasers of
the B-Notes and Certificates and Special Counsel, together with copies
of all documents relating to title exceptions referred to therein,
showing record title in VCMI. The Expiration Title Policy shall insure
that VCMI has a valid leasehold interest in the Ground Lease Property
and fee title to the Improvements, subject only to Permitted
Encumbrances, and shall contain such endorsements as any Purchaser
(through the Trustee) or Special Counsel may request;
(v) the Company may and, if directed to do so by VCMI
or the Trustee, the Company shall remove, or cause the removal of, at
the Company's sole expense, any inventory, fixtures, machinery,
equipment or other property belonging to the Company or third parties
in compliance with paragraph 10(b) of the Lease;
(vi) the Company shall have conveyed to VCMI and its
successors and assigns all rights of access to the Property necessary
to facilitate (in the judgment of the Trustee) VCMI's and its
successors' and assigns' permitted use of the Property or any part
thereof pursuant to the Ground Lease;
(vii) the Independent Engineer has certified that the
Plant is capable of producing and/or the Company has entered into
supply agreements to provide
57
<PAGE> 62
the Company with sufficient hydrogen chloride to enable the Company to
operate the HCL Facility at a rate of 720 short tons per day during
routine operations; and
(viii) if directed to do so by VCMI, the Agent and the
Trustee, the Company shall execute and deliver any and all further
instruments, agreements and documents as may, in the reasonable opinion
of the VCMI, the Agent and the Trustee, be necessary to confirm the
termination and expiration of the Lease and to acknowledge that the
Company, from the date of termination and expiration, ceases to have
any interest in the Property under the Lease.
ARTICLE VIII.
THE AGENT
SECTION 8.01. Authorization and Action. Each Purchaser hereby
appoints and authorizes the Agent to take such action as the Agent on such
Purchaser's behalf and to exercise such powers under this Agreement and the
other Facility Documents as are delegated to the Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto. As to
any matters not expressly provided for by this Agreement or the other Facility
Documents, the Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Purchasers, and such instructions shall be binding upon all
Purchasers; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to
this Agreement or applicable Law. The Agent agrees to give to each Note and
Certificate Purchaser prompt notice of each notice given to it by the Company
and the Trustee pursuant to the terms of the Operative Documents.
SECTION 8.02. Agent's Reliance, Etc. NEITHER THE AGENT NOR ANY
OF ITS DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES SHALL BE LIABLE FOR ANY ACTION
TAKEN OR OMITTED TO BE TAKEN BY IT OR THEM UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE OTHER FACILITY DOCUMENTS, EXCEPT FOR ITS OR THEIR OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, IT BEING THE INTENT THAT SUCH PERSONS SHALL
NOT BE LIABLE FOR ANY SUCH ACTION OR INACTION THAT CONSTITUTES ORDINARY
NEGLIGENCE. Without limiting the generality of the foregoing, the Agent: (i) may
consult with legal counsel,
58
<PAGE> 63
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (ii) makes
no warranty or representation to any Note or Certificate Purchaser and shall not
be responsible to any Note or Certificate Purchaser for any statements,
warranties or representations made in or in connection with this Agreement or
the other Facility Documents; (iii) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Facility Documents on the part of the
Company or to inspect the property (including the books and records) of the
Company; (iv) shall not be responsible to any Note or Certificate Purchaser for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or the other Facility Documents or any other
instrument or document furnished pursuant hereto; and (v) shall incur no
liability under or in respect of this Agreement or the other Facility Documents
by acting upon any notice, consent, certificate or other instrument or writing
in accordance with the terms hereof believed by it to be genuine and signed or
sent by the proper party or parties.
SECTION 8.03. Citicorp and Affiliates. With respect to the
Fundings made by it and the Instruments issued to it, Citibank U.S.A. shall have
the same rights and powers under any Instrument and this Agreement as any other
Purchaser and may exercise the same as though Citibank were not the Agent; and
the terms (x) "Purchaser" or "Purchasers" and (y) "Note Purchaser" or "Note
Purchasers" shall, unless otherwise expressly indicated, include Citibank U.S.A.
in its individual capacity, and Citicorp and its Affiliates may accept deposits
from, lend money to, act as trustee under indentures of, and generally engage in
any kind of business with, the Company and any Subsidiary and any Person who may
do business with or own securities of the Company or any Subsidiary, all as if
Citibank were not the Agent and without any duty to account therefor to the
Purchasers.
SECTION 8.04. Purchaser Credit Decision. Each Purchaser
acknowledges that it has, independently and without reliance upon the Agent, the
Trustee, VCMI or any other Purchaser and based on the financial statements
referred to in Section 4.01(d) and such other documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Purchaser also acknowledges that it will, independently and
without reliance upon the Agent, the Trustee, VCMI or
59
<PAGE> 64
any other Note or Certificate Purchaser or Holder from time to time of the
Instruments and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions with respect
to this Agreement or any of the other Operative Documents.
SECTION 8.05. Indemnification. The Note and Certificate
Purchasers agree to indemnify the Agent, ratably according to the respective
aggregate principal and stated amounts of the Instruments then held by each of
them (or if the Instruments have been fully repaid and retired or if any
Instruments are held by Persons which are not Note or Certificate Purchasers,
ratably according to either (i) the respective aggregate amounts of their Note
and Certificate Commitments, or (ii) if all such Commitments have terminated,
the respective amounts of the Note and Certificate Commitments immediately prior
to the time the Note and Certificate Commitments were terminated), from and
against any and all Losses which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this Agreement or any
other Facility Document or any action taken or omitted by the Agent under this
Agreement or any other Facility Document; provided, that no Note or Certificate
Purchaser shall be liable to the Agent for any portion of such Losses resulting
from the Agent's gross negligence or willful misconduct. Without limitation of
the foregoing, each Note or Certificate Purchaser agrees to reimburse the Agent
promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
or any other Operative Document to the extent that the Agent is not reimbursed
for such expenses by the Company.
SECTION 8.06. Successor Agent. The Agent may resign at any
time as Agent under this Agreement by giving written notice thereof to the Note
and Certificate Purchasers, the Trustee and the Company and may be removed at
any time with or without cause by the Majority Purchasers. Upon any such
resignation or removal, the Majority Purchasers, subject to the consent of the
Company (which consent shall not be unreasonably withheld), shall have the right
to appoint a successor Agent which shall be a commercial bank or trust company
organized or licensed to conduct banking business under the Laws of the United
States or any state thereof. If no successor Agent shall have been
60
<PAGE> 65
so appointed by the Majority Purchasers, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation or the Majority Purchasers' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Note and Certificate Purchasers, appoint a
successor Agent, which shall be a Note or Certificate Purchaser which is a
commercial bank organized under the laws of the United States of America or of
any state thereof and having a combined capital and surplus of at least $500
million. Upon the acceptance of any appointment as Agent under this Agreement by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent
and shall function as the Agent under this Agreement, and the retiring Agent
shall be discharged from its duties and obligations as Agent under this
Agreement. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement,
irrespective of any amendments hereto subsequent to such resignation or removal.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. Survival. Except as otherwise expressly
provided, the parties' obligations under this Agreement and in any certificate
or other instrument delivered by any party or on such party's behalf pursuant to
this Agreement shall terminate upon the payment in full of all amounts then and
thereafter due on the Notes and the Certificates and under any of the Operative
Documents. The confidentiality provisions contained in this Agreement and the
provisions of Sections 6.03, 9.14, 9.15, 9.17 and 9.20 hereof shall each survive
the payment in full of all amounts then and thereafter due on the Instruments
and due under any of the Operative Documents. Such rights and obligations shall
survive the execution and delivery of any Facility Document, any issuance or
disposition of any of the Instruments, any disposition of any interest in the
Property or the termination of any Facility Document and shall continue in
effect regardless of any investigation made by or on behalf of any party hereto
and notwithstanding that any party may waive compliance with any other provision
of any Facility Document.
SECTION 9.02. Notices. Unless otherwise specifically provided
in any Operative Document, all
61
<PAGE> 66
notices, consents, directions, approvals, instructions, requests and other
communications given to any party hereto under any Operative Document shall be
in writing to such party at the address set forth in Schedule I hereto or at
such other address as such party shall designate by notice to each of the other
parties hereto and may be personally delivered (including delivery by private
courier services) or by telecopy (with a copy of such notice sent by private
courier service for overnight delivery or by registered or certified mail), to
the party entitled thereto, and shall be deemed to be duly given or made when
delivered by hand unless such day is not a Business Day, in which case such
delivery shall be deemed to be made as of the next succeeding Business Day or in
the case of telecopy (with a copy of such notice sent by private courier service
for overnight delivery or by registered or certified mail), when sent, so long
as it was received during normal business hours of the receiving party on a
Business Day and otherwise such delivery shall be deemed to be made as of the
next succeeding Business Day.
SECTION 9.03. Severability. If any provision hereof or the
application thereof to any Person or circumstance shall be invalid, illegal or
unenforceable, the remaining provisions or the application of such provision to
Persons or circumstances other than those as to which it is invalid or
enforceable, shall continue to be valid and enforceable.
SECTION 9.04. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Purchasers (unless the Agent is authorized hereunder
or under any Operative Document to act without joinder of the Majority
Purchasers, in which case the Agent may take such action), the Company, VCMI and
the Trustee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that, in addition to the requirements above, no amendment, waiver or
consent shall, unless in writing and signed by all of the Note and Certificate
Purchasers, do any of the following: (a) increase the Commitments of the
Purchasers or subject the Note or Certificate Purchasers to any additional
obligations, (b) reduce the Applicable Rate or any fees or other amounts payable
hereunder or under any other Operative Document, (c) take action which requires
the signing of all the Note and Certificate Purchasers pursuant to the terms of
this Agreement, (d) postpone any date fixed for any payment
62
<PAGE> 67
of principal or stated amount of, or interest or Distributions on the
Instruments or any fees or other amounts payable under the Declaration or (e)
amend this Section 9.04; provided, further, that, in addition to the
requirements above, no amendment, waiver or consent shall, unless in writing and
signed by the Agent in addition to the Purchasers required above to take such
action, affect the rights or duties of the Agent under this Agreement or any of
the Operative Documents. Notwithstanding the foregoing, a waiver of any or all
of the conditions set forth in Section 3.02 hereof shall be effective if in
writing and signed by the Agent, the Majority Purchasers, VCMI and the Trustee.
SECTION 9.05. Headings. The table of contents and headings of
the Articles, Sections and subsections of this Agreement are for convenience
only and shall not affect the meaning of this Agreement.
SECTION 9.06. Compliance Responsibility. None of the Trustee
(notwithstanding the representations and warranties of SSBTC in Sections 4.02
and 4.03 hereof), the Agent, VCMI or any Purchaser shall have any responsibility
for compliance by the Property or by the Company with any Law, architectural or
engineering standards or practices or other matters. The Company expressly
assumes such responsibilities and shall indemnify and hold harmless the Trustee,
the Agent, VCMI and the Note and Certificate Purchasers with respect thereto in
the manner provided in the Lease.
SECTION 9.07. Definitions. Except as otherwise expressly
provided herein, capitalized terms used in this Agreement and all schedules and
exhibits hereto shall have the respective meanings given in Appendix A hereto.
SECTION 9.08. Benefit. The parties hereto and their permitted
successors and assigns, but no others, shall be bound hereby and entitled to the
benefit hereof.
SECTION 9.09. Place of Payment. So long as a Purchaser or an
Affiliate of a Purchaser or a bank or institutional investor is the owner of any
beneficial interest in the Instruments, the Trustee will cause all amounts to be
paid by the Trustee which become due and payable or owing on such beneficial
interest in the Instruments to be paid by bank wire transfer of immediately
available funds or, at the option of such Purchaser, such Affiliate, bank or
institutional investor, by check of the Agent, duly mailed, delivered or made at
the address or account referenced in Schedule I hereto or provided in
63
<PAGE> 68
writing by such Person to the Trustee, in all cases without presentation of the
underlying Instrument, provided, that upon receipt of payment in full the
underlying Instruments shall be returned by the respective Holders thereof to
the Trustee marked "cancelled."
SECTION 9.10. Counterparts. The parties may sign this
Agreement in any number of counterparts and on separate counterparts, each of
which shall be an original but all of which together shall constitute one and
the same instrument.
SECTION 9.11. Governing Law and Jurisdiction. (a) THIS
AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW (OR ANY SIMILAR SUCCESSOR PROVISION THERETO) BUT EXCLUDING ALL
OTHER CONFLICT-OF-LAWS RULES.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
other Facility Document, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Agreement or
the Notes in the courts of any jurisdiction.
(c) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Facility Document in any New York State or federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
64
<PAGE> 69
SECTION 9.12. Time; Business Day. (a) TIME IS OF THE ESSENCE
IN THIS AGREEMENT, AND THE TERMS HEREIN SHALL BE SO CONSTRUED.
(b) If the date scheduled for any payment or action under any
Operative Document shall not be a Business Day, then (unless such Operative
Document provides otherwise) such payment shall be made or such action shall be
taken on the next succeeding Business Day.
SECTION 9.13. The Trustee. Except for SSBTC's liability for
SSBTC's representations and warranties in Section 4.02 and Section 4.03, and for
its own gross negligence and willful misconduct and as otherwise provided in the
Operative Documents, it is expressly understood and agreed by the parties hereto
that (a) this Agreement is executed and delivered by SSBTC, not in its
individual capacity but solely as Trustee, under the Declaration, in the
exercise of the powers and authority conferred and vested in it as the Trustee ,
(b) each of the undertakings and agreements herein made on the part of the
Trustee is made and intended not as a personal representation, undertaking and
agreement by SSBTC but is made and intended for the purpose for binding only the
Trust Estate created by the Declaration, (c) nothing herein contained shall be
construed as creating any liability on SSBTC, individually or personally, to
perform any obligation of the Trustee or VCMI either expressed or implied
contained herein or in the Operative Documents, all such liability, if any,
being expressly waived by the parties to this Agreement and by any Person
claiming by, through or under the parties to this Agreement and (d) under no
circumstances shall SSBTC be personally liable for the payment of any
indebtedness or expenses of the Trustee or VCMI or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Trustee or VCMI under this Agreement or the other Operative
Documents.
SECTION 9.14. Transaction Costs; Facility Fees.
(a) Transaction Costs. Whether or not the transactions
contemplated by this Agreement are consummated, the Company shall pay and hold
the Trustee, the Agent, VCMI and the Note and Certificate Purchasers harmless
against any liability for the payment of all reasonable fees, expenses,
disbursements and out-of-pocket costs incurred before, on or after the date
hereof in connection with the preparation, execution and delivery of any
Facility Document, or any other agreement, arrangement, document or paper
relating to the transactions contemplated hereby or any amendment or
65
<PAGE> 70
supplement thereto or any waivers or enforcement thereof, including, but not
limited to:
(i) the reasonable fees, expenses and disbursements of each of
the Agent, the Trustee, VCMI, Trustee's Counsel, Certificate
Purchaser's Counsel, Special Counsel and Special Environmental Counsel
for services rendered to such parties in connection with such
transactions;
(ii) the out-of-pocket expenses of each of the Trustee, VCMI
and the Agent incurred in connection with such transactions;
(iii) all fees and expenses in connection with any appraisal,
environmental report, engineering study, survey or inspection of the
Property, or any printing and other document reproduction and
distribution expenses, stamp or other similar Taxes, fees or excises,
including interest and penalties, and all filing fees and Taxes in
connection with the recording or filing of instruments and financing
statements in connection with the transactions described in this
Agreement;
(iv) the out-of-pocket expenses of the Trustee, VCMI and the
Agent in connection with the placement of the Instruments as
contemplated hereby; and
(v) the fees, expenses and disbursements of the Agent, the
Trustee, VCMI and the Purchasers, including the fees, expenses and
disbursements of their respective counsel, in connection with the
enforcement of any rights of the Purchasers under any of the Operative
Documents.
(b) Facility Fees. From and after the Second Refinancing Date,
to and including the Interim Note (HCL) Maturity Date, the Company shall pay to
the Agent for the account of each Note Purchaser, on the last day of each March,
June, September and December in each year and on the Interim Note (HCL) Maturity
Date, a facility fee at the applicable rate per annum set forth on the
applicable pricing grids attached hereto as Schedules II and III on its
respective Interim Note (HCL) Commitment ("Facility Fee"). The Facility Fee
shall be computed on the basis of the actual number of days elapsed over a year
of 360 days on the total amount of the Interim Note (HCL) Commitment of such
Note Purchaser as of the Second Refinancing Date, without
66
<PAGE> 71
deduction for the amount of distributions paid to the Certificate Purchasers.
SECTION 9.15. INDEMNIFICATION. (a) THE COMPANY SHALL PAY,
PROTECT, INDEMNIFY AND HOLD HARMLESS EACH INDEMNIFIED PARTY FROM AND AGAINST,
AND SHALL DEFEND ALL ACTIONS AGAINST ANY INDEMNIFIED PARTY WITH RESPECT TO, ANY
AND ALL LIABILITIES (INCLUDING BUT NOT LIMITED TO LIABILITY FOR PATENT OR
TRADEMARK INFRINGEMENT OR MISUSE OR MISAPPROPRIATION OF ANY INTELLECTUAL
PROPERTY RIGHTS, LIABILITY IN TORT (STRICT OR OTHERWISE)), LOSSES, DAMAGES,
COSTS, EXPENSES (INCLUDING BUT NOT LIMITED TO REASONABLE ATTORNEY'S FEES AND
EXPENSES OF COUNSEL), CAUSES OF ACTION, SUITS, CLAIMS, DEMANDS OR JUDGMENTS OF
ANY NATURE WHATSOEVER (COLLECTIVELY, "LOSSES") ARISING FROM (i) ANY INJURY TO,
OR DEATH OF, ANY NATURAL PERSON, OR DAMAGE TO OR LOSS OF PROPERTY, OR ANY
MATTERS OCCURRING ON OR RESULTING FROM ACTIVITIES ON THE PROPERTY OR ANY PART
THEREOF; (ii) THE OWNERSHIP, CONSTRUCTION, LEASING (INCLUDING, WITHOUT
LIMITATION, THE FAILURE OF EITHER THE TRUSTEE OR VCMI TO HAVE A MORTGAGE ON THE
GROUND LEASE PROPERTY, THE IMPROVEMENTS OR THE PROPERTY UNDER THE CIRCUMSTANCES
SET FORTH IN PARAGRAPH 20(D) OF THE LEASE), SUBLEASING, OPERATION, OCCUPANCY,
POSSESSION, USE, NON-USE OR CONDITION OF THE PROPERTY OR ANY PART THEREOF; (iii)
ANY VIOLATION BY THE COMPANY OF ANY OF THE TERMS OR CONDITIONS OF THIS
AGREEMENT, THE LEASE OR ANY OF THE OTHER FACILITY DOCUMENTS; (iv) ANY EXERCISE
OF RIGHTS OR REMEDIES UPON THE OCCURRENCE OF ANY DEFAULT OR EVENT OF DEFAULT;
(v) ANY ACT OR OMISSION OF THE COMPANY OR ANY OF ITS AGENTS, CONTRACTORS,
LICENSEES, SUBLESSEES, INVITEES, REPRESENTATIVES OR ANY PERSON FOR WHOSE CONDUCT
THE COMPANY IS LEGALLY RESPONSIBLE ON OR RELATING TO OR IN CONNECTION WITH THE
OWNERSHIP, CONSTRUCTION, LEASING, SUBLEASING, OPERATION, MANAGEMENT,
MAINTENANCE, OCCUPANCY, POSSESSION, USE, NON-USE OR CONDITION OF THE PARCEL, THE
IMPROVEMENTS OR THE PROPERTY OR ANY PART THEREOF; (vi) ANY LIENS (INCLUDING,
WITHOUT LIMITATION, ANY PERMITTED ENCUMBRANCES) ON OR WITH RESPECT OF AND TO THE
PARCEL OR THE PROPERTY OR ANY PART THEREOF; (vii) ANY PERMITTED CONTEST REFERRED
TO IN PARAGRAPH 11 OR 18 OF THE LEASE; (viii) ANY VIOLATION BY THE COMPANY OF
ANY FACILITY AGREEMENT OR ANY CONTRACT OR AGREEMENT RELATING TO THE PROPERTY OR
THE TRANSACTIONS TO BE CONSUMMATED PURSUANT TO THE FACILITY DOCUMENTS TO WHICH
THE COMPANY IS A PARTY OR OF ANY LEGAL REQUIREMENT OR INSURANCE REQUIREMENT;
(ix) ANY TERMINATION OR INVALIDITY OF THE BILLS OF SALE, THE HCL BILL OF SALE OR
THE GROUND LEASE OR VCMI'S INTEREST IN THE GROUND LEASE PROPERTY OR THE
IMPROVEMENTS (OTHER THAN AS A RESULT OF THE PURCHASE OF THE PROPERTY BY THE
COMPANY OR THE EXPIRATION OF THE GROUND LEASE IN ACCORDANCE WITH ITS TERMS)
67
<PAGE> 72
IN EACH CASE AFFECTING ANY INDEMNIFIED PARTY, THE PARCEL OR THE PROPERTY OR ANY
PART THEREOF OR THE OWNERSHIP, OPERATION, OCCUPANCY, POSSESSION, USE, NON-USE OR
CONDITION THEREOF AND IN EACH CASE REGARDLESS OF THE ACTS, OMISSIONS OR
NEGLIGENCE OF ANY INDEMNIFIED PARTY (IT BEING THE INTENT TO INDEMNIFY EACH
INDEMNIFIED PARTY FROM SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE EXCEPT AS
OTHERWISE SET FORTH IN THE FOLLOWING PROVISO); PROVIDED, HOWEVER, THAT THE
COMPANY SHALL NOT BE REQUIRED TO INDEMNIFY OR HOLD HARMLESS ANY INDEMNIFIED
PARTY HEREUNDER AGAINST ANY SUCH CLAIMS TO THE EXTENT ARISING SOLELY AS A RESULT
OF THE FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY.
FOR PURPOSES OF THIS SECTION 9.15, "INDEMNIFIED PARTY" MEANS EACH OF THE TRUSTEE
(IN BOTH ITS INDIVIDUAL AND FIDUCIARY CAPACITIES), THE AGENT, VCMI AND THE
HOLDERS FROM TIME TO TIME OF THE INSTRUMENTS, THEIR AFFILIATES, SUCCESSORS AND
ASSIGNS AND ANY OFFICER, DIRECTOR, EMPLOYEE OR AGENT OF ANY OF THE ABOVE.
(b) THE OBLIGATIONS OF THE COMPANY UNDER THIS SECTION 9.15
SHALL SURVIVE THE EXPIRATION OR ANY TERMINATION OF THE LEASE (WHETHER BY
OPERATION OF LAW OR OTHERWISE) FOR ALL MATTERS DESCRIBED IN THIS SECTION 9.15
WHICH OCCUR OR ARISE PRIOR TO SUCH EXPIRATION OR TERMINATION OR ARISE OUT OF OR
RESULT FROM FACTS, EVENTS, CLAIMS, LIABILITIES, ACTIONS OR CONDITIONS OCCURRING,
ARISING OR EXISTING ON OR BEFORE SUCH EXPIRATION OR TERMINATION. IN CASE ANY
ACTION SHALL BE BROUGHT AGAINST ANY INDEMNIFIED PARTY IN RESPECT OF WHICH
INDEMNITY MAY BE SOUGHT AGAINST THE COMPANY, SUCH INDEMNIFIED PARTY SHALL
PROMPTLY NOTIFY THE COMPANY IN WRITING, BUT FAILURE TO GIVE SUCH PROMPT NOTICE
SHALL NOT RELIEVE THE COMPANY FROM ANY LIABILITY HEREUNDER, UNLESS THE COMPANY
IS PREJUDICED BY THE FAILURE TO RECEIVE SUCH NOTICE. IF NO DEFAULT OR EVENT OF
DEFAULT HAS OCCURRED AND IS CONTINUING HEREUNDER, THE COMPANY, AT ITS OWN
EXPENSE, MAY ELECT TO ASSUME THE DEFENSE OF ANY ACTION BROUGHT AGAINST AN
INDEMNIFIED PARTY, INCLUDING THE EMPLOYMENT OF COUNSEL REASONABLY SATISFACTORY
TO SUCH INDEMNIFIED PARTY AND THE PAYMENT BY THE COMPANY OF ALL EXPENSES
THEREOF. ANY INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO EMPLOY SEPARATE COUNSEL
AT ITS EXPENSE IN ANY SUCH ACTION AND TO CONSULT WITH THE COMPANY REGARDING THE
DEFENSE THEREOF; PROVIDED, HOWEVER, THAT, EXCEPT AS OTHERWISE PROVIDED BELOW,
THE COMPANY SHALL AT ALL TIMES CONTROL SUCH DEFENSE. IF THE COMPANY SHALL HAVE
FAILED TO EMPLOY COUNSEL REASONABLY SATISFACTORY TO SUCH INDEMNIFIED PARTY, THE
FEES AND EXPENSES OF COUNSEL TO EACH INDEMNIFIED PARTY SHALL BE PAID BY THE
COMPANY. IF THE COMPANY SHALL ELECT IN WRITING NOT TO ASSUME THE DEFENSE OR
SHALL FAIL TO PROSECUTE DILIGENTLY SUCH DEFENSE THEREOF, AN INDEMNIFIED PARTY
MAY, AFTER
68
<PAGE> 73
WRITTEN NOTICE TO THE COMPANY AND THE COMPANY'S FAILURE TO REMEDY PROMPTLY THE
SAME, ASSUME THE DEFENSE THEREOF, INCLUDING THE EMPLOYMENT OF COUNSEL, IN WHICH
CASE THE COMPANY SHALL PAY ALL OF THE LOSSES OF SUCH INDEMNIFIED PARTY INCURRED
IN RESPECT OF SUCH DEFENSE. IF ANY INDEMNIFIED PARTY SHALL HAVE BEEN ADVISED BY
COUNSEL CHOSEN BY IT THAT THERE MAY BE ONE OR MORE LEGAL DEFENSES AVAILABLE TO
SUCH INDEMNIFIED PARTY THAT ARE DIFFERENT FROM OR ADDITIONAL TO THOSE AVAILABLE
TO THE COMPANY OR IT WOULD BE INAPPROPRIATE FOR SUCH COUNSEL TO CONTINUE TO
REPRESENT IN RESPECT OF A PARTICULAR LEGAL OR FACTUAL ISSUE OR OTHERWISE, EACH
OF THE INDEMNIFIED PARTY AND THE COMPANY MAY RETAIN ADDITIONAL AND SEPARATE
COUNSEL TO REPRESENT IT OR, AT ITS OPTION, ASSUME THE DEFENSE OF SUCH ACTION AND
THE COMPANY WILL REIMBURSE SUCH INDEMNIFIED PARTY FOR THE REASONABLE FEES AND
EXPENSES OF ANY COUNSEL RETAINED BY THE INDEMNIFIED PARTY. THE COMPANY SHALL NOT
BE LIABLE FOR ANY SETTLEMENT OF ANY ACTION WITHOUT ITS WRITTEN CONSENT. NO
SETTLEMENT OF ANY SUCH ACTION MAY BE MADE BY THE COMPANY WITHOUT THE INDEMNIFIED
PARTY'S WRITTEN CONSENT; PROVIDED, HOWEVER, SUCH CONSENT SHALL NOT BE NECESSARY
IF THE SETTLEMENT RESULTS IN AN UNCONDITIONAL RELEASE OF THE INDEMNIFIED PARTY
WITHOUT (1) THE ADMISSION BY THE INDEMNIFIED PARTY OF GUILT, COMPLICITY OR
CULPABILITY OR (2) THE INCURRENCE OF ANY PAYMENT OBLIGATION ON THE PART OF SUCH
INDEMNIFIED PARTY WHICH IS NOT PAID AT THE TIME OF SUCH SETTLEMENT BY THE
COMPANY HEREUNDER.
(c) UPON DEMAND FOR PAYMENT BY ANY INDEMNIFIED PARTY OF ANY
LOSSES INCURRED BY IT FOR WHICH INDEMNIFICATION IS SOUGHT, ALONG WITH A BRIEF
DESCRIPTION IN REASONABLE DETAIL OF THE NATURE AND EXTENT OF THE LOSSES AS WELL
AS THE CIRCUMSTANCES UNDER WHICH INDEMNIFICATION IS SOUGHT, THE COMPANY SHALL
PAY WHEN DUE AND PAYABLE THE FULL AMOUNT OF SUCH LOSSES TO THE APPROPRIATE
PARTY, UNLESS AND SO LONG AS (I) THE COMPANY SHALL HAVE ASSUMED THE DEFENSE OF
SUCH ACTION OR IS CONTESTING SUCH LIABILITY, LOSS, DAMAGE, COST, EXPENSE, CAUSE
OF ACTION, SUIT, CLAIM, DEMAND OR JUDGMENT FOR WHICH INDEMNITY IS SOUGHT
HEREUNDER AND (II) IS DILIGENTLY PROSECUTING THE SAME AND THE COMPANY HAS TAKEN
ALL ACTION AS MAY BE NECESSARY TO PREVENT (A) THE COLLECTION OF SUCH LOSSES FROM
THE INDEMNIFIED PARTY; (B) THE SALE, FORFEITURE OR LOSS OF THE PROPERTY OR ANY
PART THEREOF DURING SUCH DEFENSE OF THE SAME ACTION; AND (C) THE IMPOSITION OF
ANY CIVIL OR CRIMINAL LIABILITY FOR FAILURE TO PAY SUCH LOSSES WHEN DUE AND
PAYABLE.
(d) THE COMPANY ACKNOWLEDGES AND AGREES THAT (I) ITS
OBLIGATIONS UNDER THIS SECTION 9.15 ARE INTENDED TO INCLUDE AND EXTEND TO ANY
AND ALL LIABILITIES, SUMS PAID IN
69
<PAGE> 74
SETTLEMENT OF CLAIMS, OBLIGATIONS, CHARGES, ACTIONS, CLAIMS, LIENS, TAXES AND
DAMAGES (INCLUDING, WITHOUT LIMITATION, PUNITIVE DAMAGES, PENALTIES, FINES,
COURT COSTS, ADMINISTRATIVE SERVICE FEES, RESPONSE AND REMEDIATION COSTS,
STABILIZATION COSTS, ENCAPSULATION COSTS, TREATMENT, STORAGE OR DISPOSAL COSTS
AND LEGAL FEES INCURRED IN NEGOTIATING WITH GOVERNMENTAL AGENCIES AND OTHER
POTENTIALLY RESPONSIBLE PARTIES AND IN ENFORCING INDEMNITIES) IMPOSED UPON OR
INCURRED BY OR ASSERTED AT ANY TIME AGAINST ANY INDEMNIFIED PARTY (WHETHER OR
NOT INDEMNIFIED AGAINST BY ANY OTHER PARTY) ARISING DIRECTLY OR INDIRECTLY OUT
OF: (A) THE TREATMENT, STORAGE, DISPOSAL, GENERATION, USE, TRANSPORT, MOVEMENT,
PRESENCE, RELEASE, THREATENED RELEASE, SPILL, INSTALLATION, SALE, EMISSION,
INJECTION, LEACHING, DUMPING, ESCAPING OR SEEPING OF ANY HAZARDOUS MATERIALS OR
MATERIAL CONTAINING OR ALLEGED TO CONTAIN HAZARDOUS MATERIALS AT, ON, UNDER,
ONTO, THROUGH OR FROM THE PARCEL OR THE PROPERTY OR ANY PART THEREOF; (B) THE
VIOLATION OR ALLEGED VIOLATION OF ANY ENVIRONMENTAL LAWS RELATING TO OR IN
CONNECTION WITH THE PARCEL, THE EASEMENTS OR THE PROPERTY OR ANY PART THEREOF OR
ANY ACTS OR OMISSIONS THEREON OR RELATING THERETO; (C) ALL OTHER FEDERAL, STATE
AND LOCAL LAWS DESIGNED TO PROTECT THE ENVIRONMENT OR PERSONS OR PROPERTY
THEREIN, WHETHER NOW EXISTING OR HEREINAFTER ENACTED, PROMULGATED OR ISSUED BY
ANY FEDERAL, STATE, COUNTY, MUNICIPAL OR OTHER GOVERNMENTAL AUTHORITY; AND (D)
THE COMPANY'S FAILURE TO COMPLY WITH ITS OBLIGATIONS UNDER PARAGRAPH 2(E) OF THE
LEASE AND (II) THE INDEMNIFICATION PROVIDED FOR UNDER THIS SECTION 9.15(D) SHALL
BE GOVERNED BY THE PROCEDURES SET FORTH IN SECTIONS 9.15(b)-(c) HEREOF.
SECTION 9.16. Operative Documents; Further Assurances. Each of
the parties hereto does hereby covenant and agree to perform and be governed and
restricted by the Operative Documents to which it is a party and, subject to the
terms and conditions thereof, to take or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable in connection
therewith. Each of the parties hereto shall have the rights and obligations set
forth in the Declaration with respect to such party notwithstanding that not all
of such parties are signatories thereto. The Company, the Trustee, the Agent,
VCMI and the Note and Certificate Purchasers will, at the expense of the
Company, execute and deliver such further instruments and do such further acts
as may be necessary or proper to carry out more effectively the purposes of the
Operative
70
<PAGE> 75
Documents and the transactions contemplated thereby. The Company, the Trustee,
the Agent, VCMI and the Note and Certificate Purchasers may at any time, subject
to the conditions and restrictions contained in the Operative Documents, enter
into supplements which shall form a part hereof, when required or permitted by
any of the provisions of the Operative Documents or to cure any ambiguity, or to
cure, correct or supplement any defective or inconsistent provision contained
herein or in any other Operative Document.
SECTION 9.17. Confidentiality. (a) Each of the parties hereto,
other than Citibank and, as applicable, its Affiliates, agrees that, subject to
Section 6.02, it will maintain the confidentiality of the general structure of
this transaction.
(b) Each of the parties hereto agrees that unless otherwise
required by Law or by any governmental authority or body or consented to by the
Company and Citibank, it will maintain the confidentiality of all non-public
information (i) regarding the financial terms of this transaction or (ii)
regarding the Company or the Property which shall be furnished to it by or on
behalf of the Company in connection with the transactions contemplated by the
Operative Documents, including, without limitation, the as-built plans and
specifications delivered pursuant to Section 5.01(c), in accordance with the
procedures it generally applies to confidential material for a period of three
years after all of the Instruments have been repaid in full, but in no event
less than seven years from the date hereof; provided, however, that if the Lease
has been terminated and the Company has not purchased the Property, then none of
the Purchasers, the Agent, VCMI nor the Trustee shall be bound by the
confidentiality provisions of this Section 9.17(b).
(c) The parties hereto agree not to publish tombstones or
other public announcements in connection with the transactions contemplated
hereby without the consent of the Company, the Agent and the Purchasers.
SECTION 9.18. Interest. It is the intention of the parties
hereto to conform strictly to all usury Laws that are applicable to each such
party, Purchaser, Note or Certificate or to the transactions contemplated by the
Operative Documents (collectively, the "Transactions"). Accordingly,
notwithstanding anything to the contrary in the Instruments, this Agreement or
any other Operative Document or agreement entered into in connection with the
Transactions (collectively, the "Transaction Documents"), it is agreed as
follows: (i) the aggregate of all consideration which constitutes interest under
Applicable Law (hereinafter defined) that is contracted for, taken, reserved,
charged or received by any party under the
71
<PAGE> 76
Transaction Documents or otherwise in connection with the Transactions shall
under no circumstances exceed the maximum amount of interest that could lawfully
be charged by such party under Applicable Law, (ii) in the event that the
maturity of any indebtedness evidenced by or payable pursuant to the Transaction
Documents is accelerated for any reason, or in the event of any required or
permitted payment or prepayment of all or any part of such indebtedness
(including, without limitation and if applicable, any required or permitted
purchase of the Property, or any required or permitted payment of the Offer
Purchase Price, the Residual Guaranty or Termination Value), then such
consideration that constitutes interest as to any such indebtedness under
Applicable Law may never include more than the maximum amount allowed by such
Applicable Law, and (iii) if under any circumstances the aggregate amounts paid
on any Instruments prior to or incident to the final payment thereof include any
amounts which by Applicable Law would be deemed interest in excess of the
maximum amount of interest permitted by Applicable Law, such excess amounts, if
theretofore paid, shall be credited by the recipient on the principal or stated
amount of the affected indebtedness (or, to the extent that the principal or
stated amount of such indebtedness shall have been or would thereby be paid in
full, refunded by such recipient to the party entitled thereto). If at any time
the rate of interest (denominated as such) or Distributions, as applicable,
contractually called for in any Transaction Document (as the same may vary from
time to time pursuant to the terms of such Transaction Document, the "Stated
Rate"), exceeds the maximum non-usurious rate of interest permitted by
Applicable Law (the "Maximum Rate") in respect of the indebtedness evidenced by
such Transaction Document, taking into account all other amounts paid or payable
pursuant to the Transaction Documents which constitute interest with respect to
such indebtedness under Applicable Law regardless of whether denominated as
interest or Distributions (collectively, the "Other Charges"), then the rate of
interest to accrue or Distributions owing on such indebtedness shall be limited
to such Maximum Rate (taking into account the Other Charges), but any subsequent
reduction in the Stated Rate applicable to such indebtedness shall not reduce
the rate of interest or Distributions to accrue on such indebtedness below such
Maximum Rate (taking into account the Other Charges) until such time as the
total amount of interest or Distributions on such indebtedness equals the amount
of interest or Distributions which would have accrued if the Stated Rate
applicable to such indebtedness had at all times been in effect. If at the
maturity or final payment of any indebtedness the total amount of interest or
Distributions
72
<PAGE> 77
paid or accrued on such indebtedness under the preceding sentence is less than
the total amount of interest or Distributions which would have accrued if the
Stated Rate applicable to such indebtedness had at all times been in effect,
then to the fullest extent permitted by Applicable Law there shall be due and
payable or owing with respect to such indebtedness an amount equal to the
excess, if any, of (a) the lesser of (i) the amount of interest or Distributions
(as applicable) which would have accrued on such indebtedness if such Maximum
Rate in respect of such indebtedness had at all times been in effect and been
chosen as the rate of interest or Distributions to be applicable throughout the
term of such indebtedness (taking into account the Other Charges) and (ii) the
amount of interest or Distributions (as applicable) which would have accrued on
such indebtedness if the Stated Rate applicable to such indebtedness had at all
times been in effect, above (b) the amount of interest or Distributions (as
applicable) accrued in accordance with the provisions of the Transaction
Document evidencing such indebtedness after giving effect to the preceding
sentence. All amounts paid or agreed to be paid for the use, forbearance or
detention of sums pursuant to or in connection with the Transaction Documents
shall, to the extent permitted by Applicable Law, be amortized, prorated,
allocated and spread throughout the full term thereof so that the rate or amount
of interest paid or payable with respect to any amount of indebtedness evidenced
by or payable pursuant to the Transaction Documents does not exceed the
applicable usury ceiling, if any. As used herein, the term "Applicable Law"
means that law, if any, that is applicable to any particular Transaction and
that limits the maximum non-usurious rate of interest that may be taken,
contracted for, charged, reserved or received with respect to such Transaction,
including the law of the State of New York, the law of the State of Texas, the
law of any other jurisdiction that may be mandatorily applicable to such
Transaction notwithstanding other provisions of this Agreement and the other
Transaction Documents, and the Federal law of the United States of America. As
used herein, the term "interest" means interest as determined under Applicable
Law, regardless of whether denominated as interest in the Transaction Documents
(except to the extent that this Section 9.18 specifically refers to interest
denominated as interest). The right to accelerate maturity of any indebtedness
evidenced by any Instrument or other Transaction Document, and the right to
demand payment of the Offer Purchase Price, the Residual Guaranty or Termination
Value does not include the right to accelerate any interest, or to receive any
other amounts, which would cause the Transactions to be usurious under
Applicable Law. All
73
<PAGE> 78
computations of the maximum amount allowed under Applicable Law, as well as all
computations of interest at the Maximum Rate, will be made on the basis of the
actual number of days elapsed over a 365 or 366 day year, whichever is
applicable pursuant to such Applicable Law. The provisions of this Section 9.18
shall prevail over any contrary provisions in this Agreement, the Instruments or
any of the other Transaction Documents.
SECTION 9.19. WAIVER OF TRIAL BY JURY. IN ANY ACTION OR
PROCEEDING UNDER OR RELATED TO THIS AGREEMENT, THE FACILITY DOCUMENTS OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, THE COMPANY, THE AGENT,
THE TRUSTEE, VCMI AND EACH NOTE AND CERTIFICATE PURCHASER HEREBY AGREE THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY,
IRRESPECTIVE OF WHICH PARTY COMMENCES SUCH ACTION OR PROCEEDING.
SECTION 9.20. Options. (a) At any time prior to the expiration
or termination of the Lease upon the occurrence of an Environmental Event and at
the direction of the Majority Holders of the B-Notes and Certificates, (i) VCMI
shall have the right, upon five Business Days' written notice, to require the
Company to purchase all of its right, title and interest in and to the Property
from VCMI for a purchase price of $1 in which case VCMI will convey its right,
title and interest in and to the Property to the Company free and clear of any
Lien or other adverse interest of any kind created by VCMI or any person
claiming by, through or under VCMI (except as consented to by the Company and
except as to any interest created upon the exercise of any right under any
Operative Document upon any Event of Default) and (ii) the Trustee shall have
the right, upon five Business Days' written notice, to require the Company to
purchase all of its right, title and interest in and to the shares of capital
stock of VCMI from the Trustee for a purchase price of $1.
(b) Upon the purchase of the Property by the Company pursuant
to the Lease, the Company shall have the right to purchase all of the Trustees's
right, title and interest in and to the shares of the capital stock of VCMI for
a purchase price of $1. If the Company does not exercise its right to purchase
the VCMI stock in connection with the Company's purchase of the Property
pursuant to the Lease, the Trustee shall have the right, upon five Business
Days' written notice, to require the Company to purchase all of its right, title
and interest in and to the shares of
74
<PAGE> 79
capital stock of VCMI from the Trustee for a purchase price of $1.
(c) The exercise by VCMI and the Trustee of their respective
rights under this Section 9.20 shall not limit VCMI's or the Trustee's other
rights under any Operative Document.
SECTION 9.21. Financial Advisor. The parties hereto
acknowledge and agree that neither CSI, the Company's exclusive financial
advisor for the transactions contemplated by the Operative Documents, nor any of
Citicorp's Affiliates, is making any representation or warranty, or is required
to make any disclosure, now or in the future, with respect to the parties' tax
or accounting treatment of the transactions contemplated by the Operative
Documents. Each of the parties hereto further acknowledges and agrees that
neither Citicorp nor any of its Affiliates is responsible, or will be
responsible in the future, for tax and accounting advice with respect to the
transactions contemplated by the Operative Documents, and that it (i) has,
independently and without reliance on Citicorp or its Affiliates, made its own
analysis and decisions with respect to such matters and has had the benefit of
the advice of its own independent tax and accounting advisers with respect to
such matters to the extent it has deemed appropriate and (ii) will,
independently and without reliance on Citicorp or its Affiliates, continue to
make its own analyses and decisions with respect to such matters based on such
information and advice as it deems appropriate for such purposes.
SECTION 9.22. Securities Representation. Each Purchaser hereby
represents that it is acquiring its Instruments for investment for its own
account, and not with a view to or for sale in connection with a distribution of
any Instrument, except in compliance with all applicable securities laws;
provided, however, that, subject to Section 6.02 hereof, the disposition of any
Instrument held by that Purchaser shall at all times be within its exclusive
control.
SECTION 9.23. UNENFORCEABILITY OF ORAL AGREEMENTS; (TEXAS
STATUTORY LANGUAGE). THE OPERATIVE DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AS TO ITS SUBJECT MATTER AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THE PARTIES AGREE THAT THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
75
<PAGE> 80
SECTION 9.24. Amendment and Restatement. This Agreement and
the other Operative Documents are given in amendment, restatement, renewal and
extension (and not in extinguishment or satisfaction) of the Original Operative
Documents. With respect to matters relating to the period prior to the date
hereof, all provisions of the Original Operative Documents are hereby ratified
and confirmed and shall remain in full force and effect.
IN WITNESS WHEREOF the parties have caused this Participation
Agreement to be duly executed by their
76
<PAGE> 81
officers thereunto duly authorized as of the day and year first above
written.
THE GEON COMPANY
By:/S/WOODROW W. BAN
---------------------------------------
Name: Woodrow W. Ban
Title: Assistant Secretary
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, not
in its individual capacity, except as
expressly stated herein, but solely as
Trustee
By:\S\DONALD E. SMITH
---------------------
Name:Donald E. Smith
Title:Vice President
CITIBANK, N.A., as Agent
By:__________________________________
Name:
Title:
1994 VCM INC.
By: MARK FERRUCCI_______________________
Name:Mark Ferrucci
Title:President
77
<PAGE> 82
SIGNATURE PAGE FOR SECOND AMENDED AND RESTATED
PARTICIPATION AGREEMENT
CITICORP, U.S.A., as Note Purchaser
By: \S\CANDY A. KEE
Name: Candy A. Kee
Title: Attorney in Fact
A-Note $20,655,000.00
B-Note $ 2,874,045.45
Interim Note (HCL) Commitment $ 9,720,000.00
<PAGE> 83
SIGNATURE PAGE FOR SECOND AMENDED AND RESTATED
PARTICIPATION AGREEMENT
THE BANK OF NEW YORK, as Note Purchaser
By:______________________________________________
Name:
Title:
A-Note $14,688,000.00
B-Note $ 2,043,765.65
Interim Note (HCL) Commitment $ 6,912,000.00
<PAGE> 84
SIGNATURE PAGE FOR SECOND AMENDED AND RESTATED
PARTICIPATION AGREEMENT
NATIONAL CITY BANK, as Note Purchaser
By:_______________________________________
Name:
Title:
A-Note $8,619,000.00
B-Note $1,199,293.04
Interim Note (HCL) Commitment $4,056,000.00
<PAGE> 85
SIGNATURE PAGE FOR SECOND AMENDED AND RESTATED
PARTICIPATION AGREEMENT
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Note Purchaser
By:_________________________________
Name:
Title:
A-Note $14,688,000.00
B-Note $ 2,043,765.65
Interim Note (HCL) Commitment $ 6,912,000.00
<PAGE> 86
SIGNATURE PAGE FOR SECOND AMENDED AND RESTATED
PARTICIPATION AGREEMENT
NATIONSBANK N.A., as Note Purchaser
By:_________________________________
Name:
Title:
A-Note $20,043,000.00
B-Note $ 2,788,888.55
Interim Note (HCL) Commitment $ 9,432,000.00
<PAGE> 87
SIGNATURE PAGE FOR SECOND AMENDED AND RESTATED
PARTICIPATION AGREEMENT
NBD BANK, as Note Purchaser
By:_________________________________
Name:
Title:
A-Note $8,619,000.00
B-Note $1,199,293.04
Interim Note (HCL) Commitment $4,056,000.00
<PAGE> 88
SIGNATURE PAGE FOR SECOND AMENDED AND RESTATED
PARTICIPATION AGREEMENT
CIBC INC., as Note Purchaser
By:_________________________________
Name:
Title:
A-Note $14,688,000.00
B-Note $ 2,043,765.65
Interim Note (HCL) Commitment $ 6,912,000.00
<PAGE> 89
SIGNATURE PAGE FOR SECOND AMENDED AND RESTATED
PARTICIPATION AGREEMENT
CITICORP U.S.A., as Certificate
Purchaser
By:_________________________________
Name:
Title:
Outstanding Certificate $1,903,591.49
Initial Certificate (HCL) Commitment $837,500.00
Total Certificate (HCL) Commitment $1,000,000.00
<PAGE> 90
SIGNATURE PAGE FOR SECOND AMENDED AND RESTATED
PARTICIPATION AGREEMENT
NATIONAL CITY BANK, as Certificate
Purchaser
By:_________________________________
Name:
Title:
Outstanding Certificate $1,903,591.49
Initial Certificate (HCL) Commitment $837,500.00
Total Certificate (HCL) Commitment $1,000,000.00
<PAGE> 91
SCHEDULE I
MANNER OF PAYMENT
AND COMMUNICATIONS TO PARTIES
This Schedule I shows the names and addresses of the parties
to the foregoing Participation Agreement and the respective principal and stated
amounts of the Instruments to be purchased by each Note and Certificate
Purchaser.
Company and Construction Agent:
Address for all notices:
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Attention: Secretary
Facsimile: (216) 930-3830
Trustee and VCMI:
(l) Address for all notices:
State Street Bank and Trust Company
of Connecticut, National Association
750 Main Street
Hartford, Connecticut 06103
Facsimile: (203) 244-1899
(2) All payments to the Trustee and VCMI with respect to the Operative
Documents shall be made by wire transfer of immediately available funds
to Account No. 40652134 at Citibank, N.A., ABA# 021000089, Attention:
Ed Vowinkel, with a reference to "1994 Geon VCM Plant Trust" and with
sufficient information to identify the source and application of such
funds.
1
<PAGE> 92
Agent:
(1) Address for all notices:
Citibank, N.A., as Agent
Bank Loan Syndications
One Court Square
7th Floor
Long Island City, NY. 11120
Attention: Ed Vowinkel
Phone: (718) 248-4523
Facsimile: (718) 248-4844
(2) All payments and transfers of funds to the Agent with respect to the
Operative Documents shall be made by wire transfer of immediately
available funds to Account No. 36852248 at Citibank, N.A., New York,
ABA# 021000089, with a reference to "The Geon Company" and with
sufficient information to identify the source and application of such
funds.
2
<PAGE> 93
Purchasers:
CITICORP, U.S.A., INC.
A-Note $20,655,000.00
B-Note $ 2,874,045.45
Interim Note (HCL) Commitment $ 9,720,000.00
(l) All payments with respect to the Operative Documents shall be made by
wire transfer of immediately available funds to Credit Account No.
40548046 (Account Name: Loan Paydown Account) at Citibank, N.A., ABA#
021000089, New York, New York, with a reference to "1994 VCM Plant
Trust" and with sufficient information to identify the source and
application of such funds.
(2) Address for all notices in respect of payment:
Citibank, N.A.
1 Court Square 7/1
Long Island City, NY 11120
Attention: Demetra Doscas
Facsimile: (718) 248-4844
(3) Address for all other communications:
Citibank, N.A.
Chemical Department
399 Park Avenue
New York, NY 10043
Attention: Carolyn Sheridan
Facsimile: (212) 559-3318
Telex: NYAAC
3
<PAGE> 94
THE BANK OF NEW YORK
A-Note $14,688,000.00
B-Note $ 2,043,765.65
Interim Note (HCL) Commitment $ 6,912,000.00
(1) All payments with respect to the Operative Documents shall be made by
wire transfer of immediately available funds to Credit Account No.
111556 (Account Name: Geon) at The Bank of New York, ABA# 021000018,
New York, NY 10286, Attention: Madlyn Myrick and with sufficient
information to identify the source and application of such funds.
(2) Address for all notices in respect of payment:
The Bank of New York
One Wall Street, 22nd Floor
New York, NY 10286
Attention: Madlyn Myrick
Loan Administrator
Facsimile: (212) 635-6397
(3) Address for all other communications:
The Bank of New York
One Wall Street, 22nd Floor
New York, NY 10286
Attention: Ed Dougherty III
Assistant Vice President
Facsimile: (212) 635-6434
4
<PAGE> 95
NATIONAL CITY BANK
A-Note $8,619,000.00
B-Note $1,199,293.04
Interim Note (HCL) Commitment $4,056,000.00
(1) All payments with respect to the Operative Documents shall be made by
wire transfer of immediately available funds to National City Bank,
ABA# 041000124, Cleveland, Ohio 44114, Attention: Rebecca R. Chaski,
with a reference to "Commercial Loan Operations" and with sufficient
information to identify the source and application of such funds.
(2) Address for all notices in respect of payment:
National City Bank
1900 East 9th Street
M/O-3032
Cleveland, Ohio 44114
Attention: Rebecca S. Chaski
Loan Processor III
C&C Loan Operations
Facsimile: (216) 575-3207
(3) Address for all other communications:
National City Bank
1900 East 9th Street
M/O-2104
Cleveland, Ohio 44114
Attention: David Evans
Vice President
Facsimile: (216) 575-9396
5
<PAGE> 96
NATIONSBANK, N.A.
A-Note $20,043,000.00
B-Note $ 2,788,888.55
Interim Note (HCL) Commitment $ 9,432,000.00
(1) All payments with respect to the Operative Documents shall be made by
wire transfer of immediately available funds to Credit Account No.
13662122506 (Account Name: Corporate Credit Services) at NationsBank,
N.A., ABA# 053000196, Charlotte, NC 28255, Attention: Gary Spivey, with
a reference to "Geon", and with sufficient information to identify the
source and application of such funds.
(2) Address for all notices in respect of payment:
NationsBank, N.A.
101 S. Tryon Street, 16th Floor
Charlotte, NC 28255
Attention: Gary Spivey
Credit and Services Representative
Facsimile: (704) 386-8694
(3) Address for all other communications:
NationsBank, N.A.
100 N. Tryon Street, 8th Floor
Charlotte, NC 28255
Attention: Jay Johnston
Vice President
Facsimile: (704) 386-3271
6
<PAGE> 97
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
A-Note $14,688,000.00
B-Note $ 2,043,765.65
Interim Note (HCL) Commitment $ 6,912,000.00
(1) All payments with respect to the Operative Documents shall be made by
wire transfer of immediately available funds to Loan Department, Credit
Account No. 999-99-090, Attention: CF21, at Morgan Guaranty Trust
Company of New York, ABA# 021000238, New York, NY, with a reference to
"Geon Co." and with sufficient information to identify the source and
application of such funds.
(2) Address for all notices in respect of payment:
Morgan Guaranty Trust Company of New York
c/o J.P. Morgan Services, Inc.
500 Stanton Christina Road
P.O. Box 6070
Newark, DE 19713-2107
Attention: Multi-Option Unit - Loan Department
Facsimile: (302) 634-1091
Telex: 177615 MGT UT
(3) Address for all other communications:
Morgan Guaranty Trust Company of New York
60 Wall Street, Floor 22
New York, NY 10260-0060
Attention: Patricia P. Lunka
Vice President
Facsimile: (212) 648-5336
Telex: 177615 MGT UT or 620106 MGT UW
7
<PAGE> 98
NBD BANK
A-Note $8,619,000.00
B-Note $1,199,293.04
Interim Note (HCL) Commitment $4,056,000.00
(1) All payments with respect to the Operative Documents shall be made by
wire transfer of immediately available funds to Account Name Geon Co.
at NBD Bank ABA# 072000326, Detroit, Michigan 48226, Attention
"Commercial Loans Department" and with sufficient information to
identify the source and application of such funds.
(2) Address for all notices in respect of payment:
NBD Bank
611 Woodward
Detroit, MI 48226
Attention: Patti Dueneke
Administrative Assistant
Facsimile: (313) 225-3269
(3) Address for all other communications:
NBD Bank
611 Woodward
Detroit, MI 48226
Attention: Lisa A. Ferris
Vice President
Facsimile: (313) 225-3269
8
<PAGE> 99
CIBC INC.
A-Note $14,688,000.00
B-Note $ 2,043,765.65
Interim Note (HCL) Commitment $ 6,912,000.00
(1) All payments with respect to the Operative Documents shall be made by
wire transfer of immediately available funds to Credit Account No.
630-00-480 (Account Name: CIBC - (NY) Agency) at Morgan Guaranty Trust
Company of New York, ABA# 021000238, New York, NY, for further credit
to the internal account CIBC Inc. (HO) Leases, Acct. NO. 855-0000000
and with sufficient information to identify the source and application
of such funds.
(2) Address for all notices in respect of payment:
CIBC Inc.
2 Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
Attention: Karen Swengross
Senior Associate
Facsimile: (404) 319-4853
Telex: 542413 (Answerback: CANBANKATL)
(4) Address for all other communications:
CIBC Inc.
200 West Madison, Suite 2300
Chicago, IL 60606
Attention: John Kunkle
Vice President
Facsimile: (312) 726-8884
with a copy to:
CIBC Leasing Inc.
425 Lexington Ave
New York, NY 10017
Attention: Debra Martucci
Facsimile: (212) 856-3688
9
<PAGE> 100
CITICORP, U.S.A., INC.
Outstanding Certificate $1,903,591.49
Initial Certificate (HCL) Commitment $837,500.00
Total Certificate (HCL) Commitment $1,000,000.00
(1) Address for all notices in respect of payment:
Citibank, N.A.
399 Park Avenue 8/5
New York, NY 10043
Attention: Stephanie T. James, SSO
Facsimile: (212) 826-2371
Telex: NYAAC
(2) Address for all other communications:
Citibank, N.A.
399 Park Avenue 8/5
New York, NY 10043
Attention: Carolyn Sheridan
Facsimile: (212) 826-2371
Telex: NYAAC
(3) All payments with respect to the Operative Documents shall be made in
accordance with such instructions as the Certificate Purchaser
may give from time to time.
10
<PAGE> 101
NATIONAL CITY BANK
Certificate Commitment
Outstanding Certificate $1,903,591.49
Initial Certificate (HCL) Commitment $837,500.00
Total Certificate (HCL) Commitment $1,000,000.00
(1) Address for all notices in respect of payment:
National City Bank
1900 East 9th
M/O-3032
Cleveland, Ohio 44114
Attention: Rebecca S. Chaski
Loan Processor III
C&C Loan Operations
Facsimile: (216) 575-3207
(2) Address for all other communications:
National City Bank
1900 East 9th Street
M/O-2104
Cleveland, Ohio 44114
Attention: David Evans
Vice President
Facsimile: (216) 575-9396
(3) All payments with respect to the Operative Documents shall be made in
accordance with such instructions as the Certificate Purchaser may give
from time to time.
11
<PAGE> 102
SCHEDULE II
RATING LEVEL PRICING GRID
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
BASIS FOR Company's Company's Company's Company's Company's
PRICING long term long term long term long term long term
senior senior senior senior senior
unsecured unsecured unsecured unsecured unsecured
debt is debt is debt is debt is debt is
rated at rated at rated at rated at rated at
least A- least BBB least BBB least BBB- least BB+
or the + or the or the or the or the
equivalent equivalent equivalent equivalent equivalent
FACILITY FEE 0.10% 0.125% 0.15% 0.225% 0.375%
CONSTRUCTION
PERIOD
INTERIM NOTES
(HCL)
APPLICABLE
MARGIN 0.20% 0.225% 0.30% 0.2875% 0.50%
APPLICABLE
MARGIN
A-NOTES 0.30% 0.35% 0.45% 0.5125% 0.875%
B-NOTES 0.40% 0.45% 0.55% 0.6125% .975%
12
<PAGE> 103
Schedule 4.01(l)
Existing Encumbrances
Liens identified on the Title Policy
APPENDIX A TO THE SECOND AMENDED AND RESTATED
PARTICIPATION AGREEMENT
This Appendix A to the Second Amended and Restated Participation
Agreement is a glossary of all or substantially all of the defined terms used in
the Operative Documents. Not all of the terms defined in this Appendix A are
used in the Second Amended and Restated Participation Agreement.
All references herein to one gender shall include the other and all
references to the singular shall include the plural and vice-versa.
"A-Notes" has the meaning set forth in Article I of the Declaration.
"Act" means the Securities Act of 1933, as amended, and the Laws
promulgated or issued from time to time thereunder.
"Actual Project Costs" means the costs of the acquisition,
construction and installation of the Original Improvements, as more specifically
described in the First Restated Agreement.
"Actual HCL Project Costs" has the meaning set forth in Recital L of
the Preliminary Statement to the Participation Agreement.
"Additional Costs" has the meaning set forth in item II of Schedule
B to the Lease.
"Additional Improvements" has the meaning set forth in paragraph
10(a) of the Lease.
"Additional Rent" has the meaning set forth in paragraph 4(b) of the
Lease.
"Advance" means a HCL Advance and any Advance made pursuant to the
Original Agreement or the First Restated Agreement.
13
<PAGE> 104
"Advisory Fee" has the meaning set forth in Section 2.03(f) of the
Participation Agreement.
"Affiliate" when used with respect to a Person, means any other
Person which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such Person. The term
"control" (including the correlative term "controlled") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of Voting
Stock, by contract or otherwise; provided, however, that under no circumstances
shall the Agent or the Purchasers be deemed to be Affiliates of the Trustee or
vice versa.
"Agency Agreement" has the meaning set forth in Recital M to the
Preliminary Statement to the Participation Agreement.
"Agent" means Citibank, N.A., or any successor selected pursuant to
the Participation Agreement, acting as agent for the Purchasers.
"Allocated Termination Value" has the meaning set forth in Schedule
C to the Lease.
"Applicable Law" has the meaning set forth in Section 9.18 of the
Participation Agreement.
"Applicable Margin" means with respect to the Notes,
(a) for any Applicable Rate determined by reference to the LIBO
Rate, the percentage per annum applicable to the Interest Period as shown on
Schedule III to the Participation Agreement based on the Rating Level in effect
on the first day of such Interest Period; and
(b) for any Applicable Rate determined by reference to the Base
Rate, 0%.
"Applicable Margin" means, with respect to the Certificates:
(a) for any Applicable Rate determined by reference to the LIBO
Rate, 3%; and
(b) for any Applicable Rate determined by reference to the Base
Rate, 2.25%.
"Applicable A Percentage" has the meaning set forth in Article I of
the Declaration.
14
<PAGE> 105
"Applicable B Percentage" has the meaning set forth in Article I of
the Declaration.
"Applicable Permit" means any Permit, including any Environmental
Permit, that is necessary to own, construct, start-up, test, maintain, operate,
lease or use all or any part of the Parcel or the Property or any part thereof
in accordance with the Operative Documents.
"Applicable Rate" means the Applicable Margin plus, subject to
Section 6.01 of the Participation Agreement, either (A) the applicable LIBO Rate
or (B) the Base Rate; provided, however, that the Applicable Rate shall never
exceed the Maximum Rate.
"Appraisal Update" has the meaning set forth in Section 2.01(m) of
the Participation Agreement.
"Appraiser" means Arthur Andersen & Co., LLP or another appraiser
satisfactory to the Agent and the Majority Holders.
"Approved HCL Construction Budget" means the budget prepared by the
Company, in form and substance satisfactory to the Agent, attached to the
Participation Agreement as Exhibit D, which budget specifies the estimated
Actual HCL Project Costs including: (a) all labor, materials and services
necessary for the design, engineering, construction (including any fees which
may be due to the Construction Agent), testing and start-up of the HCL
Improvements in accordance with the Construction Plans and (b) all interest and
Distribution expenses anticipated by the Company incident to the HCL Advances
made under the Interim Notes (HCL Series) and the HCL Investment made under the
Certificates (HCL Series) and the expenses to be incurred in connection with the
design, engineering, procurement, construction, testing and start-up of the HCL
Improvements, as the same may be further amended from time to time in accordance
with the provisions of the Participation Agreement and the Agency Agreement.
"Assignee" has the meaning set forth in Section 6.02(b) of the
Participation Agreement.
"Assignor" has the meaning set forth in Section 6.02(b) of the
Participation Agreement.
"Assignment and Acceptance" has the meaning set forth in Article I
of the Declaration.
"B-Notes" has the meaning set forth in Article I of the Declaration.
15
<PAGE> 106
"Bankruptcy Law" means Title 11 of the United States Code, and any
applicable Federal, state or local insolvency, reorganization, moratorium,
fraudulent conveyance or similar Law now or hereafter in effect for the relief
of debtors.
"Base Rate" means a fluctuating interest rate per annum as shall be
in effect from time to time which rate per annum shall at all times be equal to
the higher of:
l. the rate of interest announced publicly by Citibank in New York,
New York, from time to time, as its base rate; and
2. one-half of one percent (.5%) per annum above the Federal Funds
Rate.
"Base Rate Funding" means a Funding for which the Applicable Rate is
determined by the Base Rate.
"Basic Rent" has the meaning set forth in item I.C of Schedule B to
the Lease.
"Best's" means Best's Insurance Reports published by A.M. Best
Company, Inc. or any successor thereto which is a nationally recognized
statistical rating organization.
"Bills of Sale" has the meaning set forth in Recital B to the
Preliminary Statement to the Participation Agreement.
"Borrowed Debt" means Debt described in clauses (a) through (e) of
the definition of Debt, plus obligations under the Operative Documents minus the
obligations under the second catoxid reactor feedstock purchase and sale
arrangement.
"Borrowed Debt/EBITDAR Ratio" means, as of any date, the ratio
computed by dividing (a) Borrowed Debt of the Company and its Subsidiaries on a
Consolidated basis as of such date by (b) EBITDAR of the Company and its
Subsidiaries on a Consolidated basis for the four consecutive fiscal quarters of
the Company most recently ended as of such date.
"Break Costs" means an amount equal to the amount (if any) required
to compensate any Purchaser for any losses (including, without limitation, any
loss, cost or expense incurred by reason of the liquidation or redeployment of
deposits or funds acquired by such Purchaser (from third parties including
Affiliates) to fund or maintain such Notes or Certificates) it may incur as a
result of (i) the Company's payment of the Offer Purchase Price, the Residual
16
<PAGE> 107
Guaranty, Unwind Fee or Termination Value other than on the last day of an
Interest Period or (ii) any purchase of such Purchaser's Notes or Certificates
in connection with the substitution of such Purchaser pursuant to Section
6.04(b) of the Participation Agreement other than on the last day of an Interest
Period.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in New York, New York; Hartford,
Connecticut; or Boston, Massachusetts are required or authorized by Law to
suspend operations.
"Cash Interest Expense" means, for any fiscal period of the Company,
interest expense on all Debt of the Company and its Subsidiaries, net of
interest income, in accordance with GAAP and including, without limitation, to
the extent not otherwise included in accordance with GAAP, (a) interest expense
in respect of Debt resulting from the Revolving Credit Facility, (b) the
interest component of obligations under leases that have or should have been or
should be, in accordance with GAAP, recorded as capital leases, (c) commissions,
discounts and other fees and charges payable in connection with letters of
credit issued for the account of the Company or any of its Subsidiaries, (d) the
net payment, if any, payable in connection with any interest rate swap, cap or
collar agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts or any similar agreements and
(e) fees paid pursuant to Section 2.04(a) of the Revolving Credit Facility, but
excluding, in each case, (w) any amounts accrued or payable in connection with
the transactions contemplated under the Operative Documents or the Receivables
Financing (x) amortization of original issue discount, (y) the interest portion
of any deferred payment obligation and (2) other interest not payable in cash.
"Casualty" has the meaning set forth in paragraph 12(a) of the
Lease.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act, 42 U.S.C. Section 9601 et seq. and as further amended from
time to time.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Information System, which is a list maintained by the
United States Environmental Protection Agency of sites where there is a known or
suspected release or potential release of hazardous substances which may require
remediation.
17
<PAGE> 108
"Certificate (HCL) Commitment" of any Purchaser means the commitment
of such Person, if any, to make an HCL Investment pursuant to the Certificates
(HCL Series) up to the aggregate stated amount set forth below the name of such
Person on Schedule I to the Participation Agreement under the heading "Total
Certificate (HCL) Commitment," as the same may be adjusted from time to time
pursuant to any Assignment(s) and Acceptance(s) executed by such Purchaser or
reduced pursuant to the terms of the Participation Agreement.
"Certificate Liquidation Amount" has the meaning set forth in
Article I of the Declaration.
"Certificate Purchaser" means any Purchaser who has a Certificate
HCL Commitment or who is a Holder of Certificates.
"Certificate Purchaser's Counsel" means, collectively, such law
firms, or successors thereto, which from time to time represent the Certificate
Purchasers in connection with the Certificates.
"Certificates" has the meaning set forth in Article I of the
Declaration.
"Certificates (HCL Series)" has the meaning set forth in Article I
of the Declaration.
"Charges" means Impositions and all liabilities with respect
thereto, other than Excluded Charges.
"Chlorine Facility" has the meaning set forth in Recital B to the
Preliminary Statement to the Participation Agreement.
"Chlorine Facility Easement" has the meaning set forth in Section
25(b)(iii) of the Ground Lease.
"Chlorine Facility Parcel" has the meaning set forth in Section
25(b)(iii) of the Ground Lease.
"Citibank" has the meaning set forth in the first paragraph of the
Participation Agreement.
"Citicorp Investment" means Citibank International Limited.
"Closing Costs" means all charges incident to any sale of the
Property, including reasonable attorneys' fees of Special Counsel and Trustee's
Counsel and escrow fees, recording fees, broker's fees, any fees, costs
(including, without limitation, Break Costs) or expenses incurred by the
18
<PAGE> 109
Trustee or VCMI in connection with the same and with the release of the
Declaration, and all applicable transfer taxes which may be imposed by reason of
such sale and conveyance and the delivery of any and all instruments in
connection therewith.
"Closing Date" has the meaning set forth in paragraph 15(a) of the
Lease.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Laws promulgated or issued from time to time thereunder.
"Commission" has the meaning set forth in Section 5.01(a)(i) of the
Participation Agreement.
"Commitments" means the Certificate Commitments and the Note
Commitments of the respective Purchasers.
"Company" means The Geon Company, a Delaware corporation, and any
permitted successor or assignee pursuant to the terms of the Participation
Agreement.
"Company Plant" has the meaning set forth in Recital B to the
Preliminary Statement to the Services Agreement.
"Condemnation" has the meaning set forth in paragraph 12(a) of the
Lease.
"Consolidated" refers to the consolidation of the accounts of the
Company with its Subsidiaries in accordance with GAAP and with policies,
including principles of consolidation, consistent with those applied in the
preparation of the consolidated financial statements referred to in Section
4.01(d) of the Participation Agreement.
"Construction Agent" means the Company, as Construction Agent,
pursuant to the Agency Agreement.
"Construction Period" has the meaning set forth in paragraph 3(a) of
the Lease.
"Construction Plans" means the working drawings and specifications
for the construction of the Improvements under the Original Participation
Agreement.
"Contractor" means Brown & Root Industrial Services, Inc., a
Delaware corporation.
"Contractors' Holdbacks" has the meaning set forth in Section
2.02(c) of the Participation Agreement.
19
<PAGE> 110
"Conversion Date" means any date on which the basis for the
determination of the Applicable Rate with respect to any Instrument (or any
portion thereof) is converted pursuant to Article VI of the Participation
Agreement or for any other reason pursuant to the terms of the Operative
Documents from the LIBO Rate to the Base Rate or from the Base Rate to the LIBO
Rate, as the case may be.
"Convert," "Conversion" and "Converted" each refers to a conversion
of Base Rate Fundings into LIBO Rate Fundings or LIBO Rate Fundings into Base
Rate Fundings, as the case may be.
"Corporate Trust Office" has the meaning set forth in Article I of
the Declaration.
"Crude Ethylene Dichloride" means impure ethylene dichloride
(approximately 98% ethylene dichloride purity) comprising the exit stream from
an oxychlorination reactor during routine operations.
"CSI" means Citicorp Securities, Inc.
"CT Agreement" means the letter agreement dated as of July 27, 1994
between The Corporation Trust Company and the Trustee with respect to the
organization of VCMI.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (other than trade
payables not overdue by more than 60 days incurred in the ordinary course of
such Person's business), (c) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (d) all obligations of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (e) all
obligations of such Person as lessee under leases that have been or should be,
in accordance with GAAP, recorded as capital leases, (f) all obligations,
contingent or otherwise, of such Person in respect of acceptances, letters of
credit or similar extensions of credit and (g) obligations under direct or
indirect guaranties in respect of, and obligations (contingent or otherwise) to
in effect guaranty any Debt of others of the kinds referred to in clauses (a)
through (f) above through an agreement (1) to pay or purchase such Debt or to
advance or supply funds for the payment or purchase of such Debt, (2) to supply
funds to or in any other manner invest in the debtor (including any agreement to
pay for property or
20
<PAGE> 111
services irrespective of whether such property is received or such services are
rendered) primarily for the purpose of enabling the debtor to make payment of
such Debt or to assure the holder of such Debt against loss or (3) otherwise to
assure a creditor against loss; provided, that the term "Debt" shall not include
obligations under the Operative Documents or the Receivables Financing.
"Declaration" or "Declaration of Trust" has the meaning set forth in
Recital K of the Preliminary Statement to the Participation Agreement.
"Default" means an event which with the lapse of time, the giving of
notice or both would become an Event of Default.
"Default Rate" means the lesser of: (i) the Maximum Rate and (ii) 2%
percent in excess of the Applicable Rate then in effect.
"Disclosed Litigation" has the meaning set forth in Section 2.02(e)
of the Participation Agreement.
"Distribution" has the meaning set forth in Article I of the
Declaration.
"Easements" has the meaning set forth in paragraph 2 of the Ground
Lease.
"EBITDA" means, for any period, net income (or net loss) plus the
sum of (i) interest expense, (ii) income tax expense, (iii) depreciation expense
and (iv) amortization expense, in each case determined in accordance with GAAP
for such period.
"EBITDAR" means, for any period, net income (or net loss) plus the
sum of (a) interest expense, (b) income tax expense, (c) depreciation expense,
(d) amortization expense and (e) rental expense incurred in connection with the
Operative Documents in each determined in accordance with GAAP for such period.
"Eligible Assignee" means with respect to any assignment by a Note
Purchaser, any Person approved by the Agent and the Company, such approval not
to be unreasonably withheld or delayed, and with respect to any assignment by a
Certificate Purchaser, any Person, provided, however that such Person shall not
be an Eligible Assignee if the Company shall demonstrate to the reasonable
satisfaction of the Majority Holders of the Certificates that, notwithstanding
such Person's execution of a confidentiality agreement, the assignment of a
Certificate to such Person poses a material risk to the confidentiality of the
Company's non-public
21
<PAGE> 112
information and provided further, that if no Environmental Event shall have
occurred and be continuing, the Company shall have 30 days to locate a
replacement Certificate Purchaser, which Person shall, if acceptable to the
Agent, be an Eligible Assignee.
"Environmental Action" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of non-compliance or
violation, notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement arising under any Environmental
Law or Environmental Permit or relating to Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment,
including, without limitation, (a) by any governmental or regulatory authority
for enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or any third party
for damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Consultant" means ENSR Consulting and Engineering or
such other reputable environmental consulting firm satisfactory to the Agent and
the Purchasers.
"Environmental Event" has the meaning set forth in paragraph 13(a)
of the Lease.
"Environmental Laws" means any and all Federal, state and local Laws
(as well as obligations, duties and requirements relating thereto under common
law) relating to: (a) emissions, discharges, spills, releases or threatened
releases of pollutants, contaminants, Hazardous Materials, materials containing
Hazardous Materials, or hazardous or toxic materials or wastes into ambient air,
surface water, groundwater, watercourses, publicly or privately-owned treatment
works, drains, sewer systems, wetlands, septic systems or onto land; (b) the
use, treatment, storage, disposal, handling, manufacturing, transportation, or
shipment of Hazardous Materials, materials containing Hazardous Materials or
hazardous and/or toxic wastes, material, products or by-products (or of
equipment or apparatus containing Hazardous Materials); (c) pollution or the
protection of human health or the environment; or (d) land use laws.
"Environmental Permit" means any Permit, approval, identification
number, license or other authorization required under any Environmental Law.
"Environmental Trigger" has the meaning set forth in paragraph 13(b)
of the Lease.
22
<PAGE> 113
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the Laws promulgated or issued from time to
time thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the Company's controlled group, or under common control
with the Company, within the meaning of Section 414 of the Internal Revenue
Code.
"ERISA Event" means (a) the occurrence of a reportable event, within
the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day
notice requirement with respect to such event has been waived by the PBGC; (b)
the application for a minimum funding waiver with respect to a Plan; (c) the
provision by the administrator of any Plan of a notice of intent to terminate
such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice
with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d)
the cessation of operations at a facility of the Company or any of its ERISA
Affiliates in the circumstances described in Section 4062(e) of ERISA; (e) the
withdrawal by the Company or any of its ERISA Affiliates from a Multiple
Employer Plan during a plan year for which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA; (f) the failure by the Company or any of
its ERISA Affiliates to make a payment to a Plan if the conditions for the
imposition of a lien under Section 302(f)(1) of ERISA are satisfied; (g) the
adoption of an amendment to a Plan requiring the provision of security to such
Plan, pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA that
could reasonably be expected to constitute grounds for the termination of, or
the appointment of a trustee to administer, a Plan.
"Event of Default" has the meaning set forth in Section 7.01 of the
Participation Agreement.
"Excess Funds" has the meaning set forth in paragraph 12(c) of the
Lease.
"Excluded Charges" means (1) Taxes imposed on the Trustee's or
VCMI's net income, and franchise Taxes imposed on it, to the extent such Tax is
determined solely by reference to the fees received by the Trustee under the
Operative Documents; (2) United States federal income Taxes imposed on a
Purchaser to the extent that such Tax is determined solely on the basis that
such Purchaser is a creditor entitled to receive only payments of interest and
principal (without discount) for such Tax purposes; (3)
23
<PAGE> 114
Taxes imposed on a Purchaser's net income and franchise Taxes imposed on it, by
the jurisdiction under the Laws of which it is organized or by any jurisdiction
in which it is doing business or by any political subdivision of the foregoing,
to the extent that such Tax is determined solely on the basis that such
Purchaser is a creditor entitled to receive only payments of interest and
principal (without discount) for such Tax purposes; and (4) any Taxes imposed by
the United States of America by means of withholding at the source if and to the
extent that (a) such Taxes were in effect and were applicable on August 16, 1994
or the effective date of the Assignment and Acceptance pursuant to which such
Person became a Note and/or Certificate Purchaser and (b) such Taxes are
determined solely on the basis that such Purchaser is a creditor entitled to
receive only payments of interest and principal (without discount) for such Tax
purposes; provided, however, that any such Taxes are not incurred or increased
directly or indirectly by actions of the Company on or after the date of the
Original Participation Agreement (other than actions specifically required of
the Company thereunder or under another Operative Document).
"Expiration Date" has the meaning set forth in paragraph 3 of the
Lease.
"Expiration Title Policy" has the meaning set forth in Section
7.05(b) of the Participation Agreement.
"Extended Term" has the meaning set forth in paragraph 27(d) of the
Lease.
"Facility Agreements" has the meaning set forth in paragraph 3(d) of
the Agency Agreement.
"Facility Documents" means collectively, the Original Operative
Documents and the Operative Documents.
"Facility Fee" has the meaning set forth in Section 9.14(b) of the
Participation Agreement.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Citibank from three Federal funds brokers of recognized
standing selected by it.
24
<PAGE> 115
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Feedstock Pipeline Agreement" has the meaning set forth in Section
2.01(q) of the Participation Agreement.
"Final Completion Date" means the date on and as of which the
Company has delivered to the Agent and the Trustee (i) a fully executed
Officer's Certificate in the form of Exhibit B to the Participation Agreement
and (ii) a fully executed Independent Engineer's Certificate in the form of
Exhibit C to the Participation Agreement, together with all applicable
attachments, which date shall be no later than December 31, 1998.
"Financing Closing" means the closing of the transactions described
in Section 1.03 of the Original Agreement.
"Financing Closing Date" has the meaning set forth in Section 1.02
of the Participation Agreement.
"First Restated Agreement" has the meaning set forth in Recital A of
the Preliminary Statement to the Participation Agreement.
"First Refinancing Date" has the meaning set forth in Section
1.02(a) of the Participation Agreement.
"Fixed Rent" has the meaning set forth in item I.A of Schedule B to
the Lease.
"Funding" means a funding of Actual Project Costs specified in an
approved Requisition, which Funding shall consist of Advances and Investments
made by the Purchasers, pursuant to Section 1.04 of the Original Agreement.
"Funding Costs" means any loss, cost or expense incurred by any Note
or Certificate Purchaser as a result of any failure to fulfill on or before the
date specified in any Requisition the applicable conditions set forth in Article
II of the Participation Agreement, including, without limitation, any loss, cost
or expense incurred by reason of the liquidation or redeployment of deposits or
other funds acquired by such Purchaser (from third parties, including
Affiliates) to fund the Advance or make the Investment, as the case may be, to
be made by such Purchaser when such Funding, as a result of such failure, is not
made on such date.
25
<PAGE> 116
"GAAP" means generally accepted accounting principles (including
principles of consolidation), in effect from time to time, consistently applied.
"Ground Lease" has the meaning set forth in Recital I of the
Preliminary Statement to the Participation Agreement.
"Ground Lease Property" has the meaning set forth in Recital B of
the Preliminary Statement to the Participation Agreement.
"Ground Lease Rent" has the meaning set forth in paragraph 6(a) of
the Ground Lease.
"Ground Lessee" means VCMI, and its successors and assigns, as
ground lessee pursuant to the Ground Lease.
"Ground Lessor" means the Company, and its permitted successors and
assigns, as ground lessor pursuant to the Ground Lease.
"Ground Lessor Parcel" has the meaning set forth in paragraph 25 of
the Ground Lease.
"Guaranteed Instruments" has the meaning set forth in the Instrument
Guaranty.
"Hazardous Materials" means (1) hazardous materials, hazardous
wastes, and hazardous substances as those or similar terms are defined under any
Environmental Laws, including, but not limited to, the following: the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801 et seq., as amended from
time to time, the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901
et seq., as amended from time to time, CERCLA, the Clean Water Act, 33 U.S.C.
Section 1251 et seq., as amended from time to time, the Clean Air Act, 42 U.S.C.
Section 7401 et seq., as amended from time to time and/or the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., as amended from time to time; (2)
petroleum and petroleum products including crude oil and any fractions thereof;
(3) natural gas, synthetic gas, and any mixtures thereof; (4) asbestos and/or
any material which contains any hydrated mineral silicate, including, but not
limited to, chrysolite, amosite, crocidolite, tremolite, anthophylite and/or
actinolite, whether friable or non-friable; (5) polychlorinated biphenyls
("PCB's"), or PCB-containing materials, or fluids; (6) radon; (7) any other
hazardous radioactive, toxic or noxious substance, material, pollutant, or
solid, liquid or gaseous waste; and (8) any substance that, whether by its
nature or its use, is subject to regulation under any Environmental Law or with
respect to which any Federal, state or local Environmental Law or
26
<PAGE> 117
governmental agency requires environmental investigation, monitoring or
remediation.
"HCL Advance" has the meaning set forth in Section 1.04(a)(i) of the
Participation Agreement.
"HCL Bill of Sale" has the meaning set forth in Recital I to the
Preliminary Statement to the Participation Agreement.
"HCL Construction Contract" means any agreement by and between the
Company and the Contractor, pursuant to which the Contractor has agreed to
construct the HCL Improvements.
"HCL Construction Plans" means the working drawings and
specifications for the construction of the HCL Improvements including, without
limitation, the documentation provided by the Construction Agent, as the same
may be amended from time to time in accordance with the provisions of the Agency
Agreement.
"HCL Construction Schedule" means the amended construction schedule
for the HCL Improvements attached to the Participation Agreement as Exhibit E,
as the same may be further amended or supplemented from time to time in
accordance with the provisions of the Agency Agreement.
"HCL Facility" has the meaning set forth in Recital I to the
Preliminary Statement to the Participation Agreement.
"HCL Funding" means a funding of Actual HCL Project Costs specified
in an approved Requisition, which HCL Funding shall consist of HCL Advances and
HCL Investments made by the Purchasers, pursuant to Section 1.04 of the
Participation Agreement.
"HCL Improvements" has the meaning set forth in Recital I to the
Preliminary Statement to the Participation Agreement.
"HCL Investment" has the meaning set forth in Section 1.01(b) of the
Participation Agreement.
"HCL Mortgagee Policy" has the meaning set forth in Section 2.01(g)
of the Participation Agreement.
"HCL Owner Policy" has the meaning set forth in Section 2.01(g) of
the Participation Agreement.
27
<PAGE> 118
"HCL Parcel" has the meaning set forth in Recital I to the
Preliminary Statement to the Participation Agreement.
"HCL Purchase Price" has the meaning set forth in paragraph 15(b) of
the Lease.
"HCL Termination" has the meaning set forth in paragraph 14A(a) of
the Lease.
"HCL Termination Notice" has the meaning set forth in paragraph
14A(a) of the Lease.
"Holder" has meaning set forth in Article I of the Declaration.
"Illegality Costs" means any additional amounts as may be necessary
to compensate any Note Purchaser for any losses, costs, interest and fees
incurred by it in making any conversion of Applicable Rate in accordance with
Section 6.01(i) of the Participation Agreement.
"Impositions" means without limitation all Taxes, assessments,
levies, fees, water and sewer rents and charges, inspection fees and other
authorization fees and all other governmental charges, general and special,
ordinary and extraordinary, foreseen and unforeseen, of every character
(including all penalties, additions to tax, fines or interest thereon) arising
directly or indirectly out of the transactions contemplated by the Participation
Agreement and the other Operative Documents, including (i) those which, at any
time prior to or during the Term, may accrue with respect to, be imposed or
levied upon or assessed against or be a Lien upon (A) the Parcel, the Property
or any part thereof, or the Operative Documents, including the Instruments, (B)
the Lessor or the Trustee in connection with the transactions contemplated by
the Operative Documents, or (C) the Ground Lease, the Lease or the leasehold
estate thereby created, or which arise in respect of the acquisition, ownership,
construction, operation, occupancy, possession, disposition, use, non-use,
financing, leasing, sub-leasing or condition of the Parcel, the Property or any
part thereof or of the execution, delivery, expiration or termination of the
Lease, the Instruments or any other Operative Document; (ii) those which may be
imposed or levied upon, assessed against or measured by any Fixed Rent,
Additional Rent or other sum payable under the Lease, the Instruments, the
Participation Agreement or any other Operative Document; (iii) all sales, value
added, use and similar Taxes at any time levied, assessed or payable on account
of the ownership, operation, occupancy, use, leasing, or subleasing of the
Parcel, the Property or any part thereof; (iv) all charges, levies,
28
<PAGE> 119
fees, rents or assessments for or in respect of utilities, communications and
other services rendered or used on or about the Parcel, the Property or any part
thereof; and (v) payments in lieu of each of the foregoing.
"Improvements" has the meaning set forth in Recital I of the
Participation Agreement.
"Increased Costs" means any additional amounts, as set forth in a
reasonably detailed certificate submitted to the Company as to the amounts and
basis for such amounts, sufficient to compensate any Purchaser for any increased
costs or reduced return on capital as a result of funding or maintaining such
Purchaser's Notes or Certificates, as the case may be, (including, without
limitation, any such increased costs that are a result of the imposition of any
reserve, special deposit, capital adequacy or similar requirement against assets
of, or deposits with or for the account of, or credit extended by such
Purchaser) as a result of (i) the introduction or implementation after the
Financing Closing Date of any applicable Law or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or (ii) the compliance by any Purchaser (or its
purchasing office) with any guideline or request (whether or not having the
force of Law) of any such authority, central bank or comparable agency, which
becomes effective after the date hereof, has the effect of increasing the cost
or reducing the rate of return on capital to any Purchaser in respect of its
agreeing to make, making, funding or maintaining its Notes or Certificates.
Notwithstanding the foregoing, amounts that relate to periods prior to six
months before the Company's receipt of the certificate notifying it of such
amounts shall not constitute "Increased Costs" hereunder.
"Indemnified Party" has the meaning set forth in Section 9.15(a) of
the Participation Agreement.
"Independent Engineer" means Chem Systems Inc. or any other
construction engineering firm satisfactory to the Agent and the Majority
Purchasers.
"Independent Engineer's Certificate" has the meaning set forth in
Section 3.02(c) of the Participation Agreement.
"Initial Advance" has the meaning set forth in Section 1.03(b) of
the Participation Agreement.
"Initial Certificate (HCL) Commitment" of any Purchaser means the
commitment of such Person to make an HCL
29
<PAGE> 120
Investment pursuant to the Certificates (HCL Series) up to the aggregate stated
amount set forth below the name of such Person on Schedule I to the
Participation Agreement under the heading "Initial Certificate (HCL)
Commitment".
"Initial Funding" means the Funding consisting of the Initial
Advances and the Initial Investment.
"Initial HCL Advance" has the meaning set forth in Section 1.03(b)
of the Participation Agreement.
"Initial HCL Funding" means the HCL Funding consisting of the
Initial HCL Advances and the Initial HCL Investment.
"Initial HCL Investment" has the meaning set forth in Section
1.03(b) of the Participation Agreement
"Initial Improvements" has the meaning set forth in Recital B of the
Preliminary Statement to the Participation Agreement.
"Initial Investment" has the meaning set forth in Section 1.03(b) of
the Participation Agreement.
"Instrument Guaranty" has the meaning set forth in Recital G of the
Preliminary Statement to the Participation Agreement.
"Instrument Guaranty Confirmation" means the Confirmation of
Instrument Guaranty by the Company dated as of the First Refinancing Date.
"Instruments" has the meaning set forth in Article I of the
Declaration.
"Insufficiency" means, with respect to any Plan, the "unfunded
current liability" of the Plan, within the meaning of Section 412 (or any
successor provision thereto) of the Code.
"Insurance Requirements" has the meaning set forth in paragraph 1(a)
of the Lease.
"Intellectual Property Rights" has the meaning set forth in Section
4.01(q)(ii) of the Participation Agreement.
"Interest Coverage Ratio" means, with respect to any fiscal quarter,
the ratio of EBITDA of the Company and its Subsidiaries on a Consolidated basis
to Cash Interest Expense, in each case in the aggregate for the period of four
consecutive fiscal quarters ended at the end of such fiscal quarter.
30
<PAGE> 121
"Interest Period" means at any time that the Company has selected
the Applicable Rate by reference to the LIBO Rate,
(i) with respect to any A-Notes, B-Notes and Certificates
outstanding immediately prior to the Second Refinancing Date (as the same
may be amended and restated as contemplated by the Participation
Agreement), the period commencing on and including the first day of the
Interest Period in effect with respect to such Instruments on the Second
Refinancing Date (it being the intent of the parties that the Company
incur no Break Costs by virtue of the Second Refinancing occurring on a
date that does not constitute the first day of an Interest Period with
respect to such Instruments), and, in the case of each subsequent and
successive Interest Period applicable thereto, on the last day of the
immediately preceding Interest Period,
(ii) with respect to the Interim Notes (HCL Series and the
Certificates (HCL Series), and any A-Notes and B-Notes into which the
Interim Notes (HCL Series) are converted,
(A) prior to the Interim Note (HCL) Maturity Date in the first
instance the period commencing on and including the date of a
Funding (in respect of the Interim Notes (HCL Series) and
Certificates (HCL Series)), including the Second Refinancing Date,
and, in the case of each subsequent and successive Interest Period
applicable thereto, respectively, on the last day of the immediately
preceding Interest Period, and
(B) thereafter the period commencing on and including the
Interim Note (HCL) Maturity Date and, in the case of each subsequent
and successive Interest Period applicable thereto, on the last day
of the immediately preceding Interest Period,
and, in each case, ending on (x) with respect only to the Short-Term LIBO
Period, the Interim Note (HCL) Maturity Date or the Expiration Date, as
applicable, or (y) with respect to all periods other than the Short-Term LIBO
Period, the same numerical day in the first, second, third or sixth calendar
month thereafter, in each case to the extent available, as selected by the
Company by written notice (which may, prior to the Interim Note (HCL) Maturity
Date be contained in a Requisition) to the Agent given at least three (3)
Business Days before the Interest Setting Date with respect to such Interest
Period; provided that:
31
<PAGE> 122
(a)with respect to the Interim Notes (HCL Series), no Interest Period for
any Advance shall extend beyond the Interim Note Maturity Date, and with
respect to the Instruments, no Interest Period shall extend beyond the
Expiration Date;
(b)if any Interest Period would otherwise end on a day which is not a LIBO
Business Day, that Interest Period shall be extended to the next
succeeding LIBO Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the immediately preceding LIBO Business
Day;
(c)for purposes of calculating interest on the Instruments and/or Fixed
Rent for any Interest Period, such calculations shall include the first
day but exclude the last day of any such Interest Period;
(d)any Interest Period that begins on the last LIBO Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last LIBO Business Day of the calendar month at
the end of such Interest Period; and
The Company shall select each Interest Period by giving written
notice, whether by Requisition or otherwise, in accordance with Section 6.01(a)
of the Participation Agreement. If the Company fails to provide the written
notice as specified above, the Company shall be deemed to have selected the
Applicable Rate by reference to the Base Rate for the Instruments or the
applicable Advance(s), as the case may be.
"Interest Setting Date" means, (a) with respect to any Interest
Period for which the Applicable Rate is determined by reference to the LIBO
Rate, the date which is three LIBO Business Days before the first day of such
Interest Period or (b) with respect to any period for which the Applicable Rate
is determined by reference to the Base Rate, the date specified by the Company,
in the written notice delivered by the Company pursuant to Section 6.01(a) of
the Participation Agreement, as the first day that such Applicable Rate is to
apply.
"Interim Note (HCL) Commitment" of any Purchaser means the
commitment of such Person, if any, to make (HCL) Advances pursuant to the
Interim Notes (HCL Series) up to the aggregate principal amount set forth below
the name of such Person on Schedule I to the Participation Agreement under the
heading "Interim Note (HCL) Commitment", as the same may be adjusted from time
to time pursuant to any
32
<PAGE> 123
Assignment(s) and Acceptance(s) executed by such Purchaser or reduced pursuant
to the terms of the Participation Agreement.
"Interim Note (HCL) Maturity Date" means the earlier of (i) the
Final Completion Date and (ii) December 31, 1998.
"Interim Note (HCL) Maturity Formula" means that, on the Interim
Note (HCL) Maturity Date, (i) A-Notes shall be issued in an aggregate principal
amount equal to (x) the aggregate outstanding principal and stated amount of the
Interim Notes (HCL Series) and Certificates (HCL Series) times (y) .85; and (ii)
B-Notes shall be issued in an aggregate outstanding principal amount equal to
(x) the aggregate principal and stated amount of the Interim Notes (HCL Series)
and Certificates (HCL Series) minus (y) the aggregate outstanding principal and
stated amounts of the A-Notes (to be issued pursuant to clause (i) above) and
the Certificates (HCL Series).
"Interim Notes (HCL Series)" has the meaning set forth in Article I
of the Declaration.
"Interim Trust Estate" has the meaning set forth in Article I of the
Declaration.
"Investment" means a HCL Investment and any Investment made pursuant
to the Original Agreement or the First Restated Agreement.
"ISI" means Insurance Solvency International.
"Law" means any law (including, without limitation, any zoning law
or ordinance, ERISA, any Environmental Law, or Legal Requirements), treaty,
directive, statute, rule, regulation, ordinance, order, directive, code,
interpretation, judgment, decree, injunction, writ, determination, award,
Permit, license, authorization, direction, requirement or decision of or
agreement with or by any government or governmental department, commission,
board, court, authority, agency, official or officer having jurisdiction of the
matter in question.
"Lease" has the meaning set forth in Recital J to the Preliminary
Statement to the Participation Agreement.
"Legal Requirements" has the meaning set forth in paragraph 6(b) of
the Lease.
"Lessee" means the Company, as Lessee under the Lease.
33
<PAGE> 124
"Lessor" means VCMI, as Lessor under the Lease.
"Lessor Group" has the meaning set forth in paragraph 2(b) of the
Lease.
"Lessor Termination Notice" has the meaning set forth in paragraph
12(b)(ii) of the Lease.
"Leverage Percentage" means, for any fiscal period of the Company,
the ratio (expressed as a percentage) computed by dividing (a) Consolidated
Borrowed Debt by (ii) the sum of Consolidated Borrowed Debt plus shareholder's
equity of the Company.
"LIBO Business Day" means a day of the year on which dealings in
U.S. dollar deposits are carried on in the London interbank market and banks are
open for business in London and not required or authorized to close in New York
City.
"LIBO Rate" means, for any Interest Period for each LIBO Rate
Funding, an interest rate per annum equal to the rate per annum obtained by
dividing (a) the average (rounded upward to the nearest whole multiple of 1/16
of 1% per annum, if such average is not such a multiple) of the rate per annum
at which deposits in U.S. dollars are offered by the principal office of each of
the Reference Banks in London, England to prime banks in the London interbank
market at 11:00 A.M. (London time) two Business Days before the first day of
such Interest Period in an amount substantially equal to such Reference Bank's
LIBO Funding to be outstanding during such Interest Period and for a period
equal to such Interest Period by (b) a percentage equal to 100% minus the LIBO
Rate Reserve Percentage for such Interest Period. The LIBO Rate for any Interest
Period for each LIBO Rate Funding. Revolving Credit Borrowing shall be
determined by the Agent on the basis of applicable rates furnished to and
received by the Agent from the Reference Banks two Business Days before the
first day of such Interest Period, subject, however, to the provisions of
Section 6.01.
"LIBO Rate Funding" means a Funding for which the Applicable Rate is
determined pursuant to the LIBO Rate.
"LIBO Rate Reserve Percentage" for any Interest Period for all LIBO
Rate Fundings means the reserve percentage applicable two Business Days before
the first day of such Interest Period under regulations issued from time to time
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve
34
<PAGE> 125
requirement) for a member bank of the Federal Reserve System in New York City
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities as defined in Regulation D (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate on
LIBO Rate Funding is determined) having a term equal to such Interest Period.
"Lien" means any deed to secure debt, mortgage, deed of trust,
pledge, security interest, security title, encumbrance, lien, judgment lien,
writ of execution, attachment or charge of any kind, including without
limitation any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any lease in the nature thereof, and the filing
of or agreement to give, any security interest or financing statements under the
UCC or under any applicable personal property security act or any comparable Law
of any jurisdiction.
"Liquidation Event" has the meaning set forth in Article I of the
Declaration.
"Losses" has the meaning set forth in Section 9.15(a) of the
Participation Agreement.
"Majority Holders" has the meaning set forth in Article I of the
Declaration.
"Majority Purchasers" means, at any time, the Purchasers holding at
least 66-2/3% of the aggregate unpaid principal of the Notes and the aggregate
unpaid stated amount of the Certificates.
"Margin Stock" shall have the meaning assigned to that term in
Regulation G and Regulation U.
"Material Adverse Change" means any material change in the business,
condition (financial or otherwise), operations, performance or properties of the
Company or the Company and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on any of:
(a) the Company and its Subsidiaries, taken as a whole, or the Company's ability
to perform its obligations under the Operative Documents; (b) the value,
condition, marketability or operation of the Property or VCMI's ownership
thereof or (c) the validity or enforceability of any of the Operative Documents.
"Maturity Date" has the meaning set forth in Article I of the
Declaration.
35
<PAGE> 126
"Maximum Budget Amount" has the meaning set forth in paragraph 5(a)
of the Agency Agreement.
"Maximum Rate" has the meaning set forth in Section 9.18 of the
Participation Agreement.
"Moody's" means Moody's Investors Service, Inc. and any successor
thereto which is a nationally recognized credit rating organization.
"Mortgage" has the meaning set forth in paragraph 20(d) of the
Lease.
"Mortgagee Title Policy" has the meaning set forth in Section
2.03(g) of the Participation Agreement.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) (or any successor provision thereto) of ERISA, to which the
Company or any ERISA Affiliate is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Company or any of its ERISA Affiliates and at least one Person other than the
Company and its ERISA Affiliates or (b) was so maintained and in respect of
which the Company or any of its ERISA Affiliates could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"NPL" has the meaning set forth in Section 4.01(r)(ii) of the
Participation Agreement.
"Net Proceeds" has the meaning set forth in paragraph 12(a) of the
Lease.
"1994 VCM Plant Trust" has the meaning set forth in Section 2.01 of
the Declaration.
"Notes" has the meaning set forth in Article I of the Declaration.
"Note Commitment" of any Purchaser means such Purchaser's Interim
Note (HCL) Commitment.
"Noteholder" has the meaning set forth in Article I of the
Declaration.
"Note Purchaser" means any Purchaser who has a Note Commitment.
36
<PAGE> 127
"Offering Memo" means the offering memorandum dated June 1994, as
the same may be subsequently amended, prepared by CSI in connection with the
syndication of the Commitments.
"Offer Purchase Price" has the meaning set forth in paragraph 15(b)
of the Lease.
"Offer to Purchase" has the meaning set forth in paragraph 14 of the
Lease.
"Officer" of any Person means the president, any vice president or
any other duly authorized and responsible officer of such Person.
"Officer's Certificate" or "Officers' Certificate" of a Person means
a certificate signed by an Officer or Officers of such Person.
"Operative Documents" means the Participation Agreement, the Ground
Lease, the Agency Agreement, the Lease, the Declaration, the Instruments, the
Bill of Sale, the Bill of Sale II, the VCMI Note, the VCMI Loan Agreement, the
VCMI Mortgage, the Instrument Guaranty, the State Street Guaranty, the Services
Agreement, the CT Agreement, the Instrument Guaranty Confirmation and the State
Street Guaranty Confirmation.
"Original A-Notes" has the meaning set forth in Recital D to the
Preliminary Statement to the Participation Agreement.
"Original Agency Agreement" has the meaning set forth in Recital C
to the Preliminary Statement to the Participation Agreement.
"Original Agreement" has the meaning set forth in Recital A to the
Preliminary Statement to the Participation Agreement.
"Original B-Notes" has the meaning set forth in Recital D to the
Preliminary Statement to the Participation Agreement.
"Original Capitalized Cost" has the meaning set forth in item I.B of
Schedule B to the Lease.
"Original Certificates" means the Certificates issued pursuant to
the Original Declaration of Trust.
"Original Declaration of Trust" has the meaning set forth in Recital
D to the Preliminary Statement to the Participation Agreement.
37
<PAGE> 128
"Original Ground Lease" has the meaning set forth in Recital B to
the Preliminary Statement to the Participation Agreement.
"Original Improvements" has the meaning set forth in Recital B to
the Preliminary Statement to the Participation Agreement.
"Original Instrument Guaranty" has the meaning set forth in Recital
F to the Preliminary Statement to the Participation Agreement.
"Original Instruments" means the Original A-Notes, the Original
B-Notes and the Original Certificates.
"Original Interim Notes" means the Amended and Restated Interim
Trust Notes issued pursuant to the Original Declaration of Trust.
"Original Lease" has the meaning set forth in Recital B to the
Preliminary Statement to the Participation Agreement.
"Original Operative Documents" means the Original Agreement, the
First Restated Agreement, the Original Ground Lease, the Original Agency
Agreement, the Original Lease, the Original Declaration, the Original
Instruments, the Bill of Sale, the Original VCMI Note, the Original VCMI Loan
Agreement, the Original VCMI Mortgage, the Original Instrument Guaranty, the
Original Services Agreement, the State Street Guaranty and the CT Agreement.
"Original Services Agreements" has the meaning set forth in Recital
G to the Preliminary Statement to the Participation Agreement.
"Original VCMI Loan Agreement" has the meaning set forth in Recital
E to the Preliminary Statement to the Participation Agreement.
"Original VCMI Mortgage" has the meaning set forth in Recital E to
the Preliminary Statement to the Participation Agreement.
"Original VCMI Note" has the meaning set forth in Recital E to the
Preliminary Statement to the Participation Agreement.
"Other Charges" has the meaning set forth in Section 9.18 of the
Participation Agreement.
"Other Taxes" has the meaning set forth in Section 6.03(c) of the
Participation Agreement.
38
<PAGE> 129
"Outstanding" with respect to any Instrument, has the meaning set
forth in Article I of the Declaration.
"Owner Title Policy" has the meaning set forth in Section 2.03(g) of
the Participation Agreement.
"Parcel" means the real property described in Schedule A to the
Ground Lease.
"Participation Agreement" means the Participation Agreement dated as
of August 16, 1994 by and among the Trustee, Citibank, as Agent, the Company,
VCMI and the Purchasers, to which this Appendix is appended, as amended by the
Amended and Restated Participation Agreement dated as of November 9, 1995 and
the Second Amended and Restated Participation Agreement dated as of December 19,
1996 and as the same may be further amended, modified or supplemented from time
to time.
"Payment Date" means:
(a) With respect to the Interim Notes (HCL Series), (i) the Interim
Note (HCL) Maturity Date, (ii) each Conversion Date, (iii) the last day of
each Interest Period after the Second Refinancing Date through the Interim
Note (HCL) Maturity Date, but in no event less frequently than quarterly
and (iv) if the Applicable Rate is determined by reference to the Base
Rate, the last day of each March, June, September and December;
(b) With respect to the A-Notes and the B-Notes, (i) the Expiration
Date, (ii) each Conversion Date, (iii) the last day of each Interest
Period after the Financing Closing Date through the Expiration Date, but
in no event less frequently than quarterly and (iv) if the Applicable Rate
is determined by reference to the Base Rate, the last day of each March,
June, September and December;
(c) With respect to the Certificates, (i) the last Business Day of
each month during the Construction Period, (ii) the Interim Note Maturity
Date and (iii) during the Primary Term, each day that is a Payment Date
for the A-Notes and the B-Notes under clause (b) above;
(d) With respect to any Note, the maturity date thereof (whether by
acceleration or otherwise); and
(e) With respect to any Instrument, the date of any prepayment.
39
<PAGE> 130
In the event that the Lease is extended for an Extended Term,
"Payment Date" means the last Business Day of each month of such Extended Term.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Percentage" means, with respect to any Note Purchaser, the
percentage that its Note Commitment bears to the aggregate Total Note
Commitment, as such Percentage may be adjusted from time to time pursuant to any
Assignment(s) and Acceptance(s) executed by any such Purchaser.
"Permit" means any approval, certificate of occupancy, consent,
waiver, exemption, variance, franchise, order, permit, authorization, right or
license of or from any Federal, state or local government or agency or
subdivision thereof.
"Permitted Encumbrances" means, with respect to the Property, but
only to the extent applicable thereto, any of the following: (i) Liens for Taxes
to the extent not required to be paid under Section 4.01(v) of the Participation
Agreement or paragraph 18 of the Lease (including contracts entered into in
connection with major construction projects); (ii) Liens imposed by Law, such as
materialmen's, mechanics', carriers', workmens' and repairmens' Liens and other
similar Liens arising in the ordinary course of business; (iii) pledges or
deposits to secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; (iv) rights reserved
to or vested in any municipality or public authority to control or regulate the
use of the Property or to use the Property in any manner; (v) easements,
rights-of-way, servitudes, restrictions and other minor defects, encumbrances
and irregularities in title to the Property which do not, individually or in the
aggregate, materially and adversely affect the value, condition, marketability
or operation of the Property or VCMI's ownership or lease thereof; and (vi) the
Ground Lease, the Lease, the Bills of Sale, the HCL Bill of Sale, the VCMI
Mortgage and the Declaration, provided, that in each case, no enforcement,
execution, levy or foreclosure proceeding shall have been commenced that is not
being contested in good faith and by proper proceedings with appropriate
reserves being maintained.
"Permitted Investments" has the meaning set forth in Article I of
the Declaration.
"Permitted Remediation" has the meaning set forth in paragraph 13(b)
of the Lease.
40
<PAGE> 131
"Person" means any individual, corporation, limited liability
partnership, limited liability company, partnership, joint venture, association,
joint stock company, trust, unincorporated organization or government.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Plant" has the meaning set forth in Recital B of the Preliminary
Statement to the Participation Agreement.
"Prescribed Forms" means such duly executed form(s) or statement(s),
and in such number of copies, which may, from time to time, be prescribed by Law
and which, pursuant to applicable provisions of (a) an income tax treaty between
the United States and the country of residence of the Purchaser providing the
form(s) or statement(s), (b) the Code, or (c) any applicable rule or regulation
under the Code, permit the Company and/or the Trustee to make payments under the
Operative Documents for the account of the Trustee and/or such Purchaser free of
deduction or withholding of income or similar taxes.
"Primary Term" has the meaning set forth in paragraph 3(a) of the
Lease.
"Proceeding" has the meaning set forth in Article I of the
Declaration.
"Proceeds" has the meaning set forth in paragraph 12(a) of the
Lease.
"Proceeds Trustee" has the meaning set forth in paragraph 12(a) of
the Lease.
"Property" has the meaning set forth in Recital B of the Preliminary
Statement to the Participation Agreement.
"Property Charges" means all Impositions other than Excluded Charges
and any income, gross receipts, franchise or similar Taxes.
"Public Debt Rating" means, as of any date, the rating most recently
announced by each of S&P, Moody's or Duff & Phelps, as the case may be, for any
class of long-term senior unsecured debt issued by the Company. For purposes of
the foregoing, (a) if only one of S&P, Moody's and Duff & Phelps shall have in
effect a Public Debt Rating, the Applicable Margin and the Facility Fee shall
be determined by reference to the available rating or, if only two ratings are
then in effect, the lower rating; (b) if none of S&P, Moody's or Duff & Phelps
shall have in effect a Public Debt Rating, the Applicable Margin and the
Facility
41
<PAGE> 132
Fee will be set in accordance with Schedule II to the Participation Agreement;
(c) if the ratings established by S&P, Moody's and Duff & Phelps shall fall
within different levels, the Applicable Margin and the Facility Fee shall be
established by the rating remaining after disregarding the highest and the
lowest of the three available ratings; (d) if any rating established by S&P,
Moody's or Duff & Phelps shall be changed, such change shall be effective as of
the date on which such change is first announced publicly by the rating agency
making such change; and (e) if S&P, Moody's or Duff & Phelps shall change the
basis on which ratings are established, each reference to the Public Debt Rating
announced by S&P, Moody's or Duff & Phelps, as the case may be, shall refer to
the then equivalent rating by S&P, Moody's or Duff & Phelps, as the case may be.
"Purchasers" has the meaning set forth in the first paragraph of the
Participation Agreement.
"Qualified Sale" has the meaning set forth in paragraph 27(c) of the
Lease.
"Rating Level" means the applicable category of Public Debt Rating
level contained in Schedule III to the Participation Agreement.
"Receivables Financing" means, collectively, the transactions
contemplated by (i) the Trade Receivables Purchase and Sale Agreement dated as
of August 16, 1994 among the Company, Corporate Receivables Corporation and
Citicorp North America, Inc., as agent, and (ii) the Parallel Purchase
Commitment dated as of August 16, 1994 among the Company, the banks named
therein and Citicorp North America, Inc., as agent, as each may be amended from
time to time.
"Record" has the meaning set forth in Section 6.02(d) of the
Participation Agreement.
"Reference Banks" means Citibank, NationsBank, N.A. and NBD Bank,
N.A., provided, however, if any of these banks shall cease to be a Purchaser,
then such bank shall no longer be a Reference Bank and a new Reference Bank
shall be selected by the Company from among the Purchasers.
"Register" has the meaning set forth in Article I of the
Declaration.
"Regulation A" means Regulation A of the Federal Reserve Board, as
in effect from time to time.
"Regulation D" means Regulation D of the Federal Reserve Board, as
in effect from time to time.
42
<PAGE> 133
"Regulation G" means Regulation G of the Federal Reserve Board, as
in effect from time to time.
"Regulation T" means Regulation T of the Federal Reserve Board, as
in effect from time to time.
"Regulation U" means Regulation U of the Federal Reserve Board, as
in effect from time to time.
"Regulation X" means Regulation X of the Federal Reserve Board, as
in effect from time to time.
"Requisition" has the meaning set forth in Section 1.04(b) of the
Participation Agreement.
"Revolving Credit Facility" means the transactions contemplated by
the Credit Agreement dated as of August 16, 1994 among the Company, the initial
lenders named therein, Citibank, as administrative agent and NationsBank, N.A.
as co-agent, as the same may be amended from time to time.
"Reserve Costs" means, so long as a Note Purchaser shall be required
under regulations of the Federal Reserve Board to maintain reserves with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities (as
defined in Regulation D), additional amounts equal to the product of (l) the
aggregate principal amount of the Notes held by it, multiplied by (2) an
interest rate per annum equal, at all times during the period in which such
reserves were assessed, to the remainder obtained by subtracting (a) the LIBO
Rate for such Interest Period from (b) the rate obtained by dividing such LIBO
Rate for such Interest Period by a percentage equal to 100% minus the LIBO Rate
Reserve Percentage of such Holder, which amounts shall be payable on each
Payment Date.
"Residual Guaranty" has the meaning set forth in Section 7.05(a) of
the Participation Agreement.
"Return Conditions" has the meaning set forth in Section 7.05(b) of
the Participation Agreement.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill Companies and any successor thereto which is a nationally recognized
credit rating organization.
"Sales Proceeds" has the meaning set forth in Article I of the
Declaration.
"Second Refinancing" has the meaning set forth in Section 1.02(b) of
the Participation Agreement.
43
<PAGE> 134
"Second Refinancing Date" has the meaning set forth in Section
1.02(b) of the Participation Agreement.
"Secured Obligations" means:
(1) Payment when due of all obligations of the Company under
the Instrument Guaranty which accrue to the benefit (directly or
indirectly) of (a) the Holders of the Applicable B Percentage of the
Interim Notes (HCL Series), (b) the Holders of the B-Notes, and (c) the
Holders of the Certificates, and the performance and discharge of each and
every obligation of the Company set forth in the Instrument Guaranty which
accrue to the benefit (directly or indirectly) of (i) the Holders of the
Applicable B Percentage of the Interim Notes (HCL Series), (ii) the
Holders of the B-Notes, and (iii) the Holders of the Certificates;
(2) Payment of all Fixed Rent and Additional Rent, with
interest, if any, thereon, according to the terms of the Lease, and any
and all extensions, amendments, modifications, substitutions or renewals
thereof, and payment of the Unwind Fee, if any, pursuant to the
Participation Agreement, which accrue to the benefit (directly or
indirectly) of (a) the Holders of the Applicable B Percentage of the
Interim Notes (HCL Series), (b) the Holders of the B-Notes, and (c) the
Holders of the Certificates, and the performance and discharge of each and
every obligation of the Company set forth in the Lease which accrue to the
benefit (directly or indirectly) of (i) the Holders of the Applicable B
Percentage of the Interim Notes (HCL Series), (ii) the Holders of the
B-Notes, and (iii) the Holders of the Certificates.
(3) Payment of all other sums, with interest thereon, owing by
the Company and becoming due or payable under the provisions of any of the
Operative Documents which accrue to the benefit (directly or indirectly)
of (a) the Holders of the Applicable B Percentage of the Interim Notes
(HCL Series), (b) the Holders of the B-Notes, and (c) the Holders of the
Certificates;
(4) Due, prompt and complete observance and performance of
each and every obligation, covenant and agreement of the Company contained
in any of the Operative Documents which accrue to the benefit (directly or
indirectly) of (a) the Holders of the Applicable B Percentage of the
Interim Notes (HCL Series), (b) the Holders of the B-Notes, and (c) the
Holders of the Certificates.
44
<PAGE> 135
"Series A Maximum Amount" has the meaning set forth in Section 3.02
of the Declaration.
"Series A Portion" has the meaning set forth in item I.B of Schedule
B to the Lease.
"Series A Trust Estate" has the meaning set forth in Article I of
the Declaration.
"Series B Maximum Amount" has the meaning set forth in Section 3.02
of the Declaration.
"Series B Portion" has the meaning set forth in item I.B of Schedule
B to the Lease.
"Series B Trust Estate" has the meaning set forth in Article I of
the Declaration.
"Series C Maximum Amount" has the meaning set forth in Section
3.03(a)(i) of the Declaration.
"Series C Trust Estate" has the meaning set forth in Article I of
the Declaration.
"Series C Portion" has the meaning set forth in item I.B of Schedule
B to the Lease.
"Services Agreement" has the meaning set forth in Recital G of the
Preliminary Statement of the Participation Agreement.
"Short-Term LIBO Period" means any period ending on the Interim Note
Maturity Date or the Expiration Date and during which an Applicable Rate
determined by reference to the LIBO Rate for a minimum Interest Period of at
least one month is not available.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Company or any of its ERISA Affiliates and no Person other than the Company and
its ERISA Affiliates or (b) was so maintained and in respect of which the
Company or any of its ERISA Affiliates could have liability under Section 4069
of ERISA in the event such plan has been or were to be terminated.
"Special Counsel" has the meaning set forth in Article I of the
Declaration.
"Special Environmental Counsel" means Chadbourne & Parke LLP as to
matters of Federal law and Hughes & Luce as to matters of Texas law, or such
other counsel as shall be reasonably satisfactory to the Agent and the
Purchasers.
45
<PAGE> 136
"Specification Grade VCM" has the meaning set forth in Section 1.1
of the Services Agreement.
"SSBTC" has the meaning set forth in the first paragraph of the
Participation Agreement.
"Stated Rate" has the meaning set forth in Section 9.18 of the
Participation Agreement.
"State Street" has the meaning set forth in the first paragraph of
the Participation Agreement.
"State Street Guaranty" has the meaning set forth in Recital H of
the Preliminary Statement to the Participation Agreement.
"State Street Guaranty Confirmation" means the Confirmation of
Guaranty by SSBTC dated as of the Refinancing Date.
"Subsidiary" means any corporation, partnership, joint venture,
limited liability company, trust or estate of which (or in which) more than 50%
of (a) the issued and outstanding capital stock or the equivalent ownership or
controlling interest, in either case having ordinary voting power to elect a
majority of the board of directors, managers or trustees thereof (irrespective
of whether at the time capital stock (or other evidence of ownership) of any
other class or classes of such entity shall or might have the voting power upon
the occurrence of any contingency) or (b) the beneficial interest in such trust
or estate, is at the time owned or controlled, directly or indirectly, by the
Company, by the Company and one or more of its other Subsidiaries or by one or
more of the Company's other Subsidiaries.
"Tax" or "Taxes" means, without limitation, any fee (including
license, filing, recording, transfer and registration fees), foreign, Federal,
state or local tax (including any income, gross receipts, withholding,
franchise, excise, sales, use, value added, real, personal, tangible or
intangible property tax or any tax similar to any of the foregoing taxes),
interest equalization, recording, transfer or stamp tax, assessment (including
any maintenance charge, owner association dues or charges), levy, impost, duty,
charge or withholding of any kind or nature whatsoever, imposed or assessed by
any foreign, Federal, state or local government or agency, or governmental
authority, together with any addition to tax, penalty, fine or interest thereon.
"Term" has the meaning set forth in paragraph 3 of the Lease.
46
<PAGE> 137
"Termination Notice" has the meaning set forth in paragraph 12(b)(i)
of the Lease.
"Termination Value" has the meaning set forth in Schedule C to the
Lease.
"Title Company" means a title company acceptable to the Agent.
"Title Policy" has the meaning set forth in Section 2.01(g) of the
Participation Agreement.
"Total HCL Commitment" means the aggregate Note Commitments and
Certificate Commitments of all of the Purchasers, not to exceed $50,000,000.
"Total Note Commitment" means the aggregate Note Commitments of all
of the Note Purchasers, not to exceed $164,900,000.
"Transaction Documents" has the meaning set forth in Section 9.18 of
the Participation Agreement.
"Transactions" has the meaning set forth in Section 9.18 of the
Participation Agreement.
"Trust Estate" has the meaning set forth in Article I of the
Declaration.
"Trustee" has the meaning set forth in Article I of the Declaration.
"Trustee's Counsel" has the meaning set forth in Section 2.03(c)(iv)
of the Participation Agreement or such other counsel as shall be satisfactory to
the Trustee.
"UCC" means the Uniform Commercial Code as in effect from time to
time in any jurisdiction whose Law governs the document in which such term is
used and/or rights thereunder.
"Unwind Event" has the meaning set forth in Section 7.03 of the
Participation Agreement.
"Unwind Fee" has the meaning set forth in Section 7.04 of the
Participation Agreement.
"Variable Rent" has the meaning assigned to it in item I.B of
Schedule B to the Lease.
"VCMI" means 1994 VCM Inc., a Texas corporation.
47
<PAGE> 138
"VCMI Loan Agreement" has the meaning set forth in Recital E of the
Preliminary Statement to the Participation Agreement.
"VCMI Mortgage" has the meaning set forth in Recital M of the
Preliminary Statement to the Participation Agreement.
"VCMI Note" has the meaning set forth in Recital M of the
Preliminary Statement to the Participation Agreement.
"Voting Stock" means outstanding shares of stock having voting power
for the election of directors, whether at all times or only so long as no senior
class of stock has such voting power because of default in dividends or some
other default.
"Withdrawal Liability" has the meaning set forth under Part I of
Subtitle E of Title IV of ERISA.
48
<PAGE> 1
Execution Copy
EXHIBIT 10.12
THE GEON COMPANY
AMENDED AND RESTATED
INSTRUMENT GUARANTY
Dated as of December 19, 1996
<PAGE> 2
AMENDED AND RESTATED INSTRUMENT GUARANTY
AMENDED AND RESTATED INSTRUMENT GUARANTY, dated as of December 19,
1996 (this "Guaranty"), by THE GEON COMPANY, a Delaware corporation (the
"Guarantor"), to each of the Holders from time to time of the Guaranteed
Instruments. Capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Second Amended and Restated Participation
Agreement dated as of the date hereof among the Guarantor, the Trustee, 1994 VCM
Inc. ("VCMI"), Citibank, N.A., as Agent and the financial institutions and
Persons named therein, as the same may be amended from time to time (the
"Participation Agreement").
Preliminary Statement
As contemplated by the Participation Agreement, on the Financing
Closing Date and on the First Refinancing Date, VCMI acquired a leasehold
interest in, and certain easements on, the Parcel (excluding the HCL Parcel) and
title to the Initial Improvements from the Company and subsequent to such
acquisition, the Construction Agent completed the Original Improvements. VCMI
will, as contemplated by the Participation Agreement, acquire a leasehold
interest in the HCL Parcel and certain work in process relating to the HCL
Improvements, and the Construction Agent will construct the HCL Improvements
pursuant to the Agency Agreement. VCMI has leased the Property (which will
include the HCL Improvements and the HCL Parcel) to the Company pursuant to the
Lease.
The Trustee has financed VCMI's lease of the Parcel, the acquisition
of the Initial Improvements and construction of the Original Improvements, and
will finance the acquisition and construction of the HCL Improvements, through
the issuance of the Instruments to the Purchasers pursuant to the Declaration.
For the purposes of this Guaranty, the term "Guaranteed Instruments"
means, subject to the limitations set forth in paragraph 1(a) below, (a) at all
times on or prior to the Interim Note (HCL) Maturity Date (i) if no Event of
Default has occurred and is continuing at such time, the Notes in the amount of
the Unwind Fee and (ii) if an Event of Default has occurred and is continuing at
such time, the Notes and the Certificates and (b) at all times on or after the
Interim Note (HCL) Maturity Date (i) if no Event of Default has occurred and is
continuing at such
<PAGE> 3
time, the A-Notes and (ii) if an Event of Default has occurred and is continuing
at such time, the Instruments.
The Guarantor intends this Guaranty to be an inducement for the
Purchasers to purchase the Guaranteed Instruments, which the Purchasers would be
unwilling to do if the Guarantor did not execute and deliver this Guaranty.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound by this Guaranty, the Guarantor hereby agrees to be bound as
follows:
l. (a) The Guarantor unconditionally guarantees and agrees with the
Holders from time to time of the Guaranteed Instruments that all sums due in
respect of the Guaranteed Instruments (including all principal or stated amount
of, and interest or Distributions on, as the case may be, the Guaranteed
Instruments), together with any other sums which may become due pursuant to any
Operative Document with respect to the Guaranteed Instruments (including Break
Costs), but only to the extent provided in the Operative Documents, whether the
same shall accrue before or after the filing of a proceeding under the
Bankruptcy Law, will be promptly paid in full (i) when due, whether at stated
maturity, by acceleration or otherwise, in accordance with the provisions of
such Guaranteed Instruments and of the Operative Documents or (ii) upon the
occurrence of an Event of Default or an Unwind Event. Notwithstanding anything
to the contrary herein contained, it is expressly understood and agreed that
this Guaranty shall not constitute a guaranty of an amount in excess of the
Unwind Fee in the event that the Guarantor fails to purchase the Property upon
the occurrence of an Unwind Event. This Guaranty shall be irrevocable, and in
all events shall be continuing, unconditional and absolute, and if for any
reason any such sums, or any part thereof, shall not be paid promptly when due,
upon demand therefor by the Purchasers upon the Guarantor, the Guarantor shall
pay the same to the Person entitled thereto pursuant to and in accordance with
the provisions of the Guaranteed Instruments and the Operative Documents,
regardless of any defenses or rights of set-off or counterclaim, regardless of
whether any Holder of a Guaranteed Instrument shall have taken any steps to
enforce its rights against the Guarantor, the Trustee or any other Person, to
collect such sums, or any part thereof, and regardless of any other condition or
contingency. The Guarantor also agrees to pay to the Holders from time to time
of the Guaranteed Instruments such further amounts as shall be sufficient to
cover the costs and expense of
2
<PAGE> 4
collecting such sums, or part thereof, or of otherwise enforcing this Guaranty,
including, in any case, compensation to their respective attorneys for all
services rendered in that connection.
(b) Any and all payments by the Guarantor hereunder shall be made
free and clear of and without deduction for any and all present or future
Impositions and all liabilities with respect thereto excluding Excluded Charges.
If the Guarantor shall be required by Law to deduct any Charges from
or in respect of any sum payable hereunder to any Purchaser, (i) the sum payable
by the Guarantor shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this paragraph 1(b)) to Purchaser receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Guarantor shall
make such deductions, and (iii) the Guarantor shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable Law.
2. The Guarantor hereby unconditionally (a) waives any requirement
that the Holders from time to time of the Guaranteed Instruments first make
demand upon, or seek to enforce remedies against, any other Person or any of the
collateral or property of such other Person before demanding payment from, or
seeking to enforce this Guaranty against, the Guarantor; (b) covenants that this
Guaranty will not be discharged except by complete satisfaction by indefeasible
payment in cash in full of all payment obligations contained in the Guaranteed
Instruments and in the Operative Documents with respect to the Guaranteed
Instruments; (c) agrees that this Guaranty shall remain in full effect without
regard to, and shall not be affected or impaired by, any invalidity, illegality,
irregularity or unenforceability in whole or in part of the Guaranteed
Instruments, the Declaration, any other Operative Document (and the Guarantor
hereby waives any defense relating to the enforceability of the Operative
Documents or any provision contained therein), or any limitation of the
liability of the Guarantor thereunder, or any limitation on the method or terms
of payment thereunder which may now or hereafter be caused or imposed in any
manner whatsoever, (d) waives diligence, presentment and protest with respect
to, and any notice of default in, the payment of any amount at any time payable
under or in connection with the Guaranteed Instruments or any of the
3
<PAGE> 5
Operative Documents, and (e) agrees that each and every right, power and remedy
given under this Guaranty or any other Operative Document shall be cumulative
and not exclusive, and be in addition to all other rights, powers and remedies
now or hereafter granted or otherwise existing.
3. Notwithstanding any payment or payments made by the Guarantor
hereunder or any set-off or application of funds of the Guarantor by the Holders
of the Guaranteed Instruments, the Guarantor shall not (a) be entitled to be
subrogated to any of the rights of the Holders of the Guaranteed Instruments
against the Trustee or any other guarantor or in any collateral security or
guaranty or right of offset held by the Holders of the Guaranteed Instruments
for the payment of any sums due in respect of the Guaranteed Instruments, or (b)
seek any reimbursement or contribution from the Trustee or any other guarantor
in respect of any payment, set-off or application of funds made by the Guarantor
hereunder.
4. The obligations, undertakings and conditions to be performed or
observed by the Guarantor under this Guaranty shall not be affected or impaired
by reason of the happening from time to time of any of the following with
respect to the Guaranteed Instruments and the other Operative Documents, all
without notice to, or the further consent of, the Guarantor:
(a) the waiver by the Trustee, VCMI or any Holder of an Instrument
or any other Person of the observance or performance by the Guarantor of
any of the obligations, undertakings or conditions contained in any of
such Instruments, except to the extent of such waiver;
(b) the extension, in whole or in part, of the time for payment of
any amount owing or payable under any of the Instruments, the Declaration
or any other Operative Document or of any other sums or obligations under
or arising out of or on account of the Instruments, the Declaration or any
other Operative Document except to the extent of such extension;
(c) the modification or amendment (whether material or otherwise) of
any of the obligations of the Trustee under any of the Instruments or the
Declaration or of the Trustee or the Company or VCMI under any other
Operative Document, except to the extent of such modification or
amendment;
4
<PAGE> 6
(d) the taking or the omission of any of the actions referred to in
any Instrument or any other Operative Document (including, without
limitation, the giving of any consent referred to therein);
(e) any failure, omission, delay or lack on the part of the Trustee,
VCMI or any Holder of an Instrument, or any other Person to enforce,
assert or exercise any right, power or remedy conferred on the Trustee,
VCMI or any such Holder of an Instrument or any other Person in any of
such Instruments or any action on the part of the Trustee, VCMI or any
Holder of an Instrument, or any other Person granting indulgence or
extension in any form;
(f) the release or discharge of the Trustee, VCMI or the Company or
any other Person from the performance or observance of any obligation,
undertaking or condition to be performed by the Trustee, VCMI or the
Company under any Instrument or any other Operative Document by operation
of Law;
(g) the receipt and acceptance by the Trustee, VCMI or a Holder of
an Instrument, or any other Person of notes, checks or other instruments
for the payment of money and extensions and renewals thereof;
(h) any action, inaction or election of remedies by the Trustee,
VCMI or a Holder of an Instrument or any other Person which results in any
impairment or destruction of any subrogation rights of the Guarantor, or
any rights of the Guarantor to proceed against any other Person for
reimbursement;
(i) the surrender by the Trustee, VCMI or any Holder of an
Instrument or any other Person of any security at any time held for the
performance or observance of any of the agreements, covenants, terms or
conditions contained in the Instruments or any of the Operative Documents;
(j) any event or circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor, indemnitor or
surety under the laws of the State of New York or any other jurisdiction;
(k) any other circumstances whatsoever (with or without notice to or
knowledge of the Guarantor) which
5
<PAGE> 7
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Guarantor with respect to its obligations hereunder or
under the other Operative Documents, in bankruptcy or in any other
instance, except based on payment or performance;
(l) any change in circumstances, whether or not foreseen or
foreseeable, whether or not imputable to the Guarantor, VCMI or the
Trustee and whether or not such change in circumstances shall or might in
any manner and to any extent vary the risk of the Guarantor hereunder; or
(m) any other cause, whether similar or dissimilar to the foregoing;
it being the intention of the Guarantor that this Guaranty be
absolute and unconditional in any and all circumstances and that this Guaranty
shall be discharged only by the indefeasible payment in full of all sums with
respect to which this Guaranty relates.
5. An "Event of Default" hereunder shall mean:
(a) any default by the Guarantor in the payment of any amount due
under paragraph l hereof shall occur;
(b) any default by the Guarantor in the performance or observance of
any other covenant or agreement contained herein; or
(c) any "Event of Default" (as defined in any such other Operative
Document) under any other Operative Document (other than an Unwind Event
under the Agency Agreement).
6. Notice of acceptance of this Guaranty and notice of the execution
and delivery of any other instrument referred to in this Guaranty, are hereby
waived by the Guarantor.
7. This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time payment, or any part thereof, of any of the
obligations to be paid, is rescinded or must otherwise be restored or returned
by any Holder of a Guaranteed Instrument, upon the insolvency, bankruptcy or
reorganization of the Guarantor, or otherwise, all as though such payment had
not been made.
6
<PAGE> 8
The provisions of this paragraph shall survive the termination of this Guaranty.
8. This Guaranty shall remain in full force and effect until payment
in full of all sums payable under the Guaranteed Instruments, and all Operative
Documents with respect to the Guaranteed Instruments by the Guarantor hereunder
and the performance in full of all obligations of the Guarantor in accordance
with the provisions of this Guaranty. The Guarantor's payment obligations
hereunder shall be deemed satisfied upon receipt by the Trustee of all amounts
payable hereunder. This Guaranty is a guaranty of payment and not a guaranty of
collection.
9. In case any provision of this Guaranty or any application thereof
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions and any other application thereof
shall not in any way be affected or impaired thereby.
10. TIME IS OF THE ESSENCE IN THIS GUARANTY AND THE TERMS HEREIN
SHALL BE SO CONSTRUED. This Guaranty shall be binding upon the Guarantor and its
successors and shall inure to the benefit of, and be enforceable by, the Holders
of the Instruments and their respective successors and assigns as to the
obligations respectively owed them and guaranteed hereunder. This Guaranty may
not be changed, waived, discharged or terminated orally, but only by a statement
in writing signed by the Guarantor and the Holders of the Guaranteed
Instruments, in compliance with the requirements set forth in the Declaration.
This Guaranty may be enforced as to any one or more defaults either separately
or cumulatively. THIS GUARANTY SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW (OR ANY SIMILAR
SUCCESSOR PROVISION THERETO) BUT EXCLUDING ALL OTHER CONFLICT-OF-LAW RULES.
11. All notices, demands, requests, consents approvals and other
instruments hereunder shall be given in the manner and at the appropriate
address set forth in the Participation Agreement or at such other address as
such party shall designate by notice to each of the other parties hereto.
l2. Notwithstanding anything to the contrary contained in this
Guaranty or any of the other Operative
7
<PAGE> 9
Documents, the amounts which the Guarantor is obligated to pay pursuant to this
Guaranty and the other Operative Documents, and the amounts which the Trustee
and the Holders of the Guaranteed Instruments are entitled to receive pursuant
to this Guaranty and other Operative Documents, are subject to limitations
pursuant to Section 9.18 of the Participation Agreement.
13. The Guarantor waives any and all notice of the creation,
renewal, extension or accrual of any of the amounts which the Guarantor is
obligated to pay hereunder and notice of or proof of reliance by the Holders of
the Guaranteed Instruments upon this Guaranty or acceptance of this Guaranty.
The indebtedness evidenced by the Guaranteed Instruments shall conclusively be
deemed to have been created, contracted, incurred, renewed, extended, amended or
waived in reliance upon this Guaranty, and all dealings between the Guarantor
and the Holders of the Guaranteed Instruments shall likewise be conclusively
presumed to have been had or consummated in reliance upon this Guaranty.
IN WITNESS WHEREOF, the Guarantor has caused this Instrument
Guaranty to be duly executed as of the day and year first above written.
THE GEON COMPANY
By:\S\JEAN M. MIKLOSKO
Name:Jean M. Miklosko
Title:Assistant Treasurer
[INSTRUMENT GUARANTY]
8
<PAGE> 1
Exhibit 10.13
EXECUTION COPY
AMENDED AND RESTATED
PLANT SERVICES AGREEMENT
BETWEEN
THE GEON COMPANY
AND
THE B.F.GOODRICH COMPANY
(Relating to Manufacturing Facility Located in
Calvert City, Kentucky)
<PAGE> 2
EXECUTION COPY
TABLE OF CONTENTS
Page
Recitals
ARTICLE I: DEFINITIONS
1.1 General Definitions 2
1.1.1. Agreement Term 2
1.1.2. BFG Assets 2
1.1.3. BFG Services 2
1.1.4. Common Facility or Line 2
1.1.5. Dedicated Facility or Line 3
1.1.6. Delivery Point 3
1.1.7. Environmental Coordinator 3
1.1.8. Environmental Services 3
1.1.9. Exceedance 3
1.1.10. Geon Assets 4
1.1.11. Geon Services 4
1.1.12. Improvement 4
1.1.13. Laws 4
1.1.14. Line or Facility 4
1.1.15. Maintenance 5
1.1.16. Party or Parties 5
1.1.17. Plant Site 5
1.1.18. Price 6
1.1.19. Provider 6
1.1.20. Recipient 6
1.1.21. Representative 6
1.1.22. Service 6
1.1.23. Technical Committee 6
1.1.24. Term of Service 6
1.1.25. Utility 7
1.2 Other Definitions 7
1.3 General 7
ARTICLE II: GENERAL STRUCTURE AND PRINCIPLES
FOR PROVISION OF SERVICES
2.1 General Description 7
2.2 Term; Termination 8
2.2.1. Term 8
2.2.2. Early Termination 8
2.2.3. Procedures for Early Termination 9
<PAGE> 3
EXECUTION COPY
TABLE OF CONTENTS (Cont'd)
Page
----
2.3 Pricing 9
2.3.1. Pricing In General 10
2.3.2. Cost Indexing 10
2.4 Intentionally Omitted 10
2.5 Cooperative Conduct Between Parties 11
2.6 Performance 11
2.7 Maintenance 12
2.8 Improvements 13
2.8.1. Productivity and Cost Reduction Improvements 13
2.8.2. Expansion Activities 14
2.8.3. Prior Discussion 15
2.8.4. Cooperation 15
2.9 Allocation in Event of Shortage 15
2.10 Rules 16
2.11 Particular Rules Governing Environmental Services 16
2.11.1. Wastewater Quality 16
2.11.2. Disposal Sites 17
2.11.3. Changes in Influent 17
A. Permanent Changes 17
B. Decrease in Capacity 18
C. Payment for Changes 18
D. Temporary Changes 18
E. Stormwater Changes 19
2.11.4. Suspension of Wastewater Treatment and
Stormwater Management Services for Cause 19
2.11.5. Dispute Resolution in Connection with
Environmental Services 20
A. Resolution by Technical Committee 20
B. Resolution by Third Party 20
C. Resolution Factors 21
2.11.6. Notices Relating to Environmental Services 21
2.11.7. Environmental Records 21
2.12 Unforeseen Economic Conditions 22
2.13 Legal and Consultant Costs 22
2.14 Easements 23
2.15 Compliance With Laws 23
2.16 Change In Laws 23
2.17 Unique Equipment or Expertise 24
2.18 Independent Contractors 24
2.19 Shutdown Cooperation 25
2.20 Fences 26
<PAGE> 4
EXECUTION COPY
TABLE OF COMMENTS (Cont'd)
Page
----
ARTICLE III: SERVICE PROVIDED
3.1 [Intentionally Omitted] 26
3.2 [Intentionally Omitted] 26
3.3 Services to be provided at the Calvert City Plant 26
3.4 [Intentionally Omitted] 26
3.5 [Intentionally Omitted] 26
3.6 [Intentionally Omitted
ARTICLE IV: ALLOCATION OF RISK AND LIABILITIES
4.1 Foreign Matter 26
4.2 Limitation of Remedies Between Parties for
Non-Material Breach 27
4.3 Insurance 28
4.4 Exclusive Remedies as to Claims Between the Parties 30
4.5 Indemnification for Third Parties Claims 31
4.5.1. Arising out of Breach or Negligence 31
4.5.2. Arising out of Environmental Services 31
4.5.3. Survival 32
4.6 Time Period to Make Claims 32
4.7 Warranties 32
4.7.1. In General 32
4.7.2. Relief for Poor Quality Service 33
4.8 Confidentiality 34
4.9 Force Majeure 34
4.10 Use of Equipment 36
4.11 Acknowledgment 36
ARTICLE V: PAYMENT TERMS AND COVENANTS
5.1 Payment Terms 37
5.1.1. Terms 37
5.1.2. Invoices 37
5.1.3. Taxes 37
5.1.4. Disputes 38
5.1.5. U. S. Dollars 38
5.2 Right to Audit 38
5.3 Installation of Meters 38
ARTICLE VI: GENERAL PROVISIONS
6.1 Assignment 39
6.2 Amendment 41
6.3 Non-Waiver 41
<PAGE> 5
EXECUTION COPY
TABLE OF CONTENTS (Cont'd)
Page
----
6.4 Notices 41
6.5 Governing Law 44
6.6 Third Party Rights 44
6.7 Severability 44
6.8 Counterparts 44
6.9 Exhibits 44
6.10 Dispute Resolution 44
6.10.1. Mediation Between Parties 44
6.10.2. Arbitration 45
6.11 Material Omission 46
6.11.1. Negation of Partnership 46
EXHIBITS
Exhibit 1.1. Description of BFG Assets and Geon Assets
Exhibit 1.1.18. Financial Terms
Exhibit 3.3 (A) Calvert City Plant Services
<PAGE> 6
EXECUTION COPY
PLANT SERVICES AGREEMENT
------------------------
This AMENDED AND RESTATED PLANT SERVICES AGREEMENT (the
"Agreement") is entered into effective as of the date at which the Registration
Statement to be used for the Initial Public Offering by Geon is declared
effective by the Securities and Exchange Commission (the "Effective Date"). This
AMENDED AND RESTATED PLANT SERVICES AGREEMENT is between THE GEON COMPANY, a
corporation organized and existing under the laws of the State of Delaware
("Geon") and THE B.F.GOODRICH COMPANY, a corporation organized and existing
under the laws of the State of New York ("BFG").
WITNESSETH:
-----------
WHEREAS, Geon formerly operated, in part, as an unincorporated division
of BFG;
WHEREAS, with the incorporation of Geon as a separate company, Geon and
BFG have agreed that Geon will own and operate certain assets related to
environmental remediation measures being implemented at a manufacturing facility
located in Calvert City, Kentucky;
WHEREAS, by this Agreement, Geon and BFG wish to provide for the
delivery of certain services to each other at the Calvert City, Kentucky
manufacturing facility;
NOW, THEREFORE, the Parties hereto agree as follows:
<PAGE> 7
EXECUTION COPY
ARTICLE I: DEFINITIONS
1.1. GENERAL DEFINITIONS. As used in this Agreement, the following terms,
when used with initial capital letters, shall have the following respective
meanings:
1.1.1. "AGREEMENT TERM" means a period expiring at the end of
longest Term of Service provided in the Exhibits to this Agreement, unless, as
to one or more Services, the Term of Service and the term of this Agreement are
extended beyond such Term by mutual agreement of the parties hereto.
1.1.2. "BFG ASSETS" means those portions of the Plant Site,
including, without intent of delimitation, both real property and fixtures,
machinery and equipment, where BFG carries the book value on its property
records. The location of BFG Assets is generally as set forth in Exhibit 1.1,
with the understanding that real property conveyance documents, as recorded,
shall control over Exhibit 1.1.
1.1.3. "BFG SERVICES" means the Services to be provided by
BFG to Geon hereunder pursuant to the provisions of Article III herein.
1.1.4. "COMMON FACILITY OR LINE" means a Line or Facility that
is a part of a system providing a Service to the Plant Site and which portion
services both Geon Assets and the BFG Assets, regardless of whether such portion
is located on, under or immediately adjacent to real property or personal
property controlled by only one Party hereto. Incidental, occasional or
temporary use of a Facility or Line by more than one Party hereto shall not,
alone, cause such Facility or Line to be deemed to be a Common Facility or Line.
A Common Facility or Line shall be deemed to become a Dedicated Facility or
Line, for purposes of this Agreement, at the point when, after departing the
boundaries of the BFG Assets or the Geon Assets, as the case may be, while
remaining a part of an integrated system providing Services, it no longer serves
both the BFG Assets and the Geon Assets.
-2-
<PAGE> 8
EXECUTION COPY
1.1.5. "DEDICATED FACILITY OR LINE" means a Facility or Line
or portion thereof that is used exclusively for the benefit of one Party and any
Facility or Line specified as such. Temporary, occasional or incidental use of a
Facility or Line by the other Party hereto shall not change the nature of the
Facility or Line from a Dedicated Facility or Line to a Common Facility or Line
for purposes of this Agreement.
1.1.6. "DELIVERY POINT" means the point at which one Party
hereto shall deliver and the other Party shall receive a Service provided to it
under this Agreement, and shall generally be at the place where the Line
transmitting the Service crosses from the real property boundary of the
providing Party to the real property boundary of the receiving Party. "Delivery
Point" shall mean for purposes of wastewater treatment and stormwater the
locations identified in those Exhibits that specifically relate to wastewater
treatment and stormwater services.
1.1.7. "ENVIRONMENTAL COORDINATOR" shall mean the person
designated by a Party as a member of the Technical Committee, who will be the
initial contact for any environmental issues that arise and will receive any
environmental notices required under Section 2.11.6 of this Agreement.
1.1.8. "ENVIRONMENTAL SERVICES" shall mean those Services
supplied by a Provider to a Recipient that relate to compliance with applicable
environmental Laws, and/or those Services that provide treatment, storage or
disposal of Recipient's industrial wastes, including but not limited to
wastewater treatment, sludge disposal, or storage of solid waste. Particular
rules governing Environmental Services appear in Section 2.11.
1.1.9. "EXCEEDANCE" shall mean a failure to comply with
applicable environmental Laws. No knowledge, finding or action by any unit of
government shall be required for a finding of Exceedance.
-3-
<PAGE> 9
EXECUTION COPY
The determination of whether an Exceedance exists shall be subject to dispute
resolution.
1.1.10. "GEON ASSETS" means those portions of the Plant Site,
including, without intent of delimitation, both real property and fixtures,
machinery and equipment, which are owned and operated by Geon for the purpose of
implementing the environmental remediation measures which Geon is undertaking at
the Plant Site. The location of Geon Assets is generally as set forth in Exhibit
1.1, with the understanding that real property conveyance documents, as
recorded, shall control over Exhibit 1.1.
1.1.11. "GEON SERVICES" means the Services to be provided hereunder
by Geon to BFG pursuant to Article III of this Agreement.
1.1.12. "IMPROVEMENT" means the upgrading of, or the addition or making
of an improvement to, a Service system, or portion thereof, or any similar
enhancement of such Service system or portion thereof, but excludes any
Maintenance to such Service system.
1.1.13. "LAWS" means any law, rule, judgment, regulation, order, writ,
injunction, interpretation by a court or governmental judicial body, decree of
any court or governmental agency, bureau or division, and any decision or ruling
of any arbitrator to which a Party or its assets or property is bound or
affected, whether local, state or federal, foreign or domestic, and
specifically, but without limitation, includes air, water and simIlar emissions
permits, and any other similar authorizations, standards or limitations that
deal with health or the environment imposed by Law.
1.1.14. "LINE OR FACILITY" means one or a series of interconnected
pipelines, transmission lines, pole lines, high lines utility lines, sewer
lines, viaducts, drainage channels, meters, metering stations, or similar
Service carrying or Service transmitting instrumentalities servicing the Plant
Site or any portion thereof, as the context may require, whether on, above or
below ground, which comprise in whole or part a system for delivering a Service
and which specifically includes, without intent of delimitation, all
-4-
<PAGE> 10
EXECUTION COPY
generation and other equipment used principally in creating, conveying, or
providing one or more Services, as well as all roadways, entrances, tracks
and/or walkways servicing the Plant Site or any part or portion thereof as the
context may require.
1.1.15. "MAINTENANCE" means the routine and/or periodic
inspection, repair, overhauls, equipment replacements, servicing and prevention
of deterioration of equipment, facilities and building by performing preventive
and/or corrective maintenance, and those items which the Parties have
traditionally considered as maintenance capital. Such activities shall include,
without intent of delimitation: the visual or physical examination and
monitoring of equipment; equipment cleaning; maintaining lubrication levels;
lubricant changes-outs; alignment; adjustment; electrical repair;
instrumentation (including calibrations and resolutions of control problems);
vibration checks; tightening and/or adjustment of bolts; repair and/or
replacement of piping; fittings and valves; tuck pointing; painting; roof and
other leak repair; ground maintenance such as maintaining drains and general
housekeeping; sealing; replacement of broken parts or components and
miscellaneous parts such as gaskets, screws, filters, seals, nuts and bolts; and
replacement of wear or sacrificial parts, all in the context of keeping a system
providing a Service or a part or portion thereof, in "good" operating condition
and working order consistent with operating practices in the chemical industry.
1.1.16. "PARTY OR PARTIES" shall mean BFG and/or Geon, and
their respective employees, agents, successors and assigns.
1.1.17. "PLANT SITE" means the following facilities previously
owned entirely by BFG and now owned in part by BFG, and in part by Geon,
including all real and personal property associated therewith, tangible or
intangible:
-5-
<PAGE> 11
EXECUTION COPY
The "Calvert City Plant" located at
Highway 1523 Industrial Loop
P.O. Box 527
Calvert City, Kentucky 42029
1.1.18. "PRICE" means, with respect to a Service, the
particular amount provided herein to be paid with respect to such Service. The
Price for each Service is set forth in the Exhibits. The general guidelines for
the pricing of services is set forth in Exhibit 1.1.18 (the General Financial
Guidelines).
1.1.19. "PROVIDER" shall mean the Party who supplies
Services to Recipient.
1.1.20. "RECIPIENT" shall mean the Party who receives
Services from a Provider.
1.1.21. "REPRESENTATIVE" means the individual or individuals
to whom a Party hereto has delegated the authority to communicate or act with
respect to a particular matter or with respect to this Agreement or the subject
matter hereof in general, and, where authorized, such person's designees.
1.1.22. "SERVICE" means any Utility, commodity, service, work,
or other function heretofore supplied or performed as a part of the integrated
operations of the Plant Site, and to be provided by one Party to the other after
the Effective Date of this Agreement pursuant to Article In hereof.
1.1.23. "TECHNICAL COMMITTEE" shall mean a committee
established at the Plant Site to discuss and resolve Environmental Services
disputes pursuant to the environmental dispute resolution clause in Section
2.11.5.; Representatives who sit on the Technical Committee shall include the
Environmental Coordinator from the Plant Site, a person from each Party who has
authority to commit that Party to a solution or course of action, and other
persons designated by the Parties.
1.1.24. "TERM OF SERVICE" means, with respect to a
particular Service, the period of time during which such Service is to be
provided by one Party hereto to the other under
-6-
<PAGE> 12
EXECUTION COPY
this Agreement. The Term of Service for each Service is listed in the
appropriate Exhibit describing that Service at the Plant Site.
1.1.25. "UTILITY" means steam, cooling towers, city water,
well water, water treatment, wastewater treatment, fire water, fire alarm,
electricity factory air, plant air, instrument air and/or inert gas Services.
1.2. OTHER DEFINITIONS. All other capitalized terms used herein which are
defined in the recitals and in the following Articles of this Agreement shall
have the meanings therein provided Certain other terms may be defined in the
Exhibits attached hereto.
1.3. GENERAL. Words importing the singular number only shall include the plural,
and vice versa Words importing the masculine gender shall include the feminine
and neuter genders. Words importing persons shall include firms and corporations
and vice versa Words such as "hereunder," "hereto," "hereof," "herein," and
other words commencing with "here" shall, unless the context clearly indicates
to the contrary, refer to the whole of this Agreement (including the Exhibits
hereto) and not to any particular article or section hereof.
ARTICLE II: GENERAL STRUCTURE AND PRINCIPLES
--------------------------------------------
FOR PROVISION OF SERVICES
-------------------------
2.1. GENERAL DESCRIPTION. This Agreement governs the manner by which Services
used at the Plant Site and elsewhere shall be provided and obtained among the
Parties hereto. As to the nature of Services to be provided among the parties,
and the Prices, terms and conditions of the providing of such Services, this
Agreement and the Exhibits to this
-7-
<PAGE> 13
EXECUTION COPY
Agreement shall be controlling. This Agreement is intended to provide the
general terms and conditions governing the provision of Services. The Exhibits
are intended to provide specific terms and conditions governing each separate
Service at the Plant Site. Where there is a conflict between this Agreement and
the Exhibits, the Exhibits will prevail.
2.2. TERM: TERMINATION.
2.2.1. TERM. The Party obligated to supply each Service
hereunder shall continue to provide that Service for the Term of Service set
forth on the applicable Exhibit at the Prices set forth in the applicable
Exhibit.
2.2.2. EARLY TERMINATION. Except as otherwise provided in
Subsection 2.2.3. and in the Exhibits hereto, each of Geon and BFG may terminate
this Agreement as it relates to any particular Service PRIOR to the end of the
applicable Term of Service only in one or more of the following circumstances:
(a) if both BFG and Geon agree in writing; (b) subject to the obligation to
negotiate in good faith as set forth in Sections 2.15 and 2.16 ("Compliance With
Laws" and "Changes In Laws"), and subject to the procedures governing suspension
of wastewater treatment and stormwater management "for cause" as set forth in
Section 2.11.4., if a Party shall make in good faith a well-considered, knowing
and willful determination that the continued provision or receipt of a Service
in accordance with the terms hereof is contrary to any applicable Law; or (c) if
a Party shall commit a material breach of one or more of its obligations under
this Agreement which relate to a particular Service (including, without
limitation, a failure by one Party to maintain any of its Facilities or Lines in
good working order, and as a result thereof, the other Party reasonably
determines that the continued provision or receipt of a particular Service to
the first Party would materially disrupt one or more of the other Party's
ongoing operations), and such alleged material breach remains unremedied after a
reasonable period of time after
-8-
<PAGE> 14
EXECUTION COPY
the Party alleging the breach has given the other Party written notice of the
particular details of such alleged breach. In the event that a Service is
terminated under Section 2.2.2.(b) above, the Party making the decision that a
violation of Law exists (the Indemnitor) will indemnify, defend and hold
harmless the other Party (the Indemnitee) from all losses, costs, and expenses,
including lost profits, consequential damages and attorneys fees, which the
Indemnitee may suffer as a result if such determination of illegality is in
error. The burden of proof of demonstrating that a violation of Law exists is
upon the Indemnitor.
2.2.3. PROCEDURES FOR EARLY TERMINATION. Except with respect
to a termination under clause (a) or (b) of Subsection 2.2.2. hereof, a Party
desiring to terminate a particular Service under Subsection 2.2.2. shall give
written, commercially-reasonable advance notice of not less than ninety (90)
days to the other as specified in Article 6.4 ("Notices") hereof; provided that
any such Service which is necessary to the operations of the BFG Assets or the
Geon Assets, as the case may be, shall continue to be provided in accordance
herewith until an alternate Service is obtained No Party hereto shall have the
right to terminate or cause a discontinuance of a particular Service under
Subsection 2.2.2. in circumstances where to do so would cause a material
slowdown or stoppage of the production operations of the Party receiving the
Service (other than for necessary Maintenance, or as the result of Force Majeure
as defined in Section 4.9 or as the result of a determination of a violation of
Law as set forth in Section 2.2.2.(b)), if the Party receiving the Service has
used and continues to use its best efforts to arrange for an alternative to
receipt of such Service under this Agreement, in which case the Party supplying
the Service shall, on request, provide reasonable assistance in arranging such
alternative.
2.3. PRICING. The Prices set in the Exhibits for Services have been agreed
to by the Parties in the context of each Party's operations at the Plant Site
as of January 1, 1993. The
-9-
<PAGE> 15
EXECUTION COPY
Term of Service set in each Exhibit is a commitment from the Provider of
Services to provide, and the Recipient of Services to take, that Service for
that number of years.
2.3.1. PRICING IN GENERAL. In general, Pricing as reflected in
the various Exhibits has been determined by the Provider charging the Recipient
an appropriate portion of the Provider's "1993 Full Plant Cost," less any 1993
separation program head count reductions in effect on the Effective Date. The
general financial guidelines used by the Parties to establish this Pricing are
set forth in Exhibit 1.1.18. In all cases, the specific Exhibits control over
the General Financial Guidelines.
2.3.2. COST INDEXING. Where indicated in the Exhibits to this
Agreement, at the beginning of February of each calendar year, the Prices
charged for all Services (except as excluded below) will be adjusted based upon
the change in the Index for January to December (e.g., December 31, 1992 Index
divided by December 31, 1991 Index) of the prior calendar year. Prices and costs
excluded from indexing include all Services except as otherwise indicated in the
Exhibits hereto.
The Index is defined as the weighted average change in the
following two inflation indices:
(i) the Employment Cost Index for Private Industry weighted Thirty Three
Percent (33%); and
(ii) the Producers Price Index for Total Finished Goods Excluding
Consumer Foods weighted Sixty-Seven Percent (67%),
both as published (or a suitable replacement the Parties agree upon should
publishing of these indices cease).
In the Exhibits, all references to "an index," "indices
supplied by the home office," "indexed for inflation" or any other similar
references shall mean the Index as defined above.
2.4. BUSINESS DISCONTINUANCE. Intentionally Omitted.
-10-
<PAGE> 16
EXECUTION COPY
2.5. COOPERATIVE CONDUCT BETWEEN PARTIES. Each Party hereto shall conduct its
operations at the Plant Site in a safe and prudent manner, and, to the extent
such operations affect, or could foreseeably affect, the operations of the other
Party hereto, shall make use of the Services and the Common Lines and Facilities
and conduct its operations at the Plant Site in such a manner as to not
unreasonably interfere with the operations of the other Party hereto. If one
Party can reasonably foresee that its operations, or changes in operations, will
have an materially adverse effect on the other Party, the first Party shall be
obligated to inform the other Party, as far in advance as possible. Both parties
shall then negotiate in good faith to agree upon a course of conduct that will
minimize the impact upon the second Party.
2.6. PERFORMANCE. All Services shall be provided by personnel employed from time
to time by Geon or BFG as the case may be, in connection with the provision of
similar Services for each Party's own facilities or by contractors engaged
pursuant to contracts for provision of such Services. Such personnel shall be,
in the good faith judgment of the Party retaining or contracting with the
contractors, qualified and competent to perform the tasks for which they were
engaged. All Services supplied by Provider shall be provided in accordance
with good engineering and/or industry practices used by persons knowledgeable
about that particular Service or industry, with the understanding that the
quality of Service to the Recipient will be comparable to the quality of Service
provided prior to the separation of Geon from BFG. The Party who owns or is
operating the Geon Assets or the BFG Assets, as the case may be, or providing a
particular Service, has the responsibility to perform all health, safety,
environmental and other regulatory reporting requirements, and comply with all
applicable Laws, regulations and permits governing or relating to the operation
of each Party's respective Assets or the providing of such Services; the Party
receiving the Services shall not do or anything, or suffer the doing of anything
by third
-11-
<PAGE> 17
EXECUTION COPY
parties which would in any manner cause or contribute to the Provider failing to
conform to, or disabling the Provider from conforming to its duties and
responsibilities under this paragraph. Both parties endorse the principles of
The Chemical Manufacturers Association's Responsible Care(R) Codes.
2.7. MAINTENANCE.
2.7.1. Except as otherwise specifically stated herein, the
Provider of a Service shall have the obligation to maintain in good working
order and perform Maintenance (as defined in Section 1.1.) upon all Facilities,
lines and Service systems which are part of the Service system.
2.7.2. The Provider of the Services will maintain the
Common Lines and Facilities.
2.7.3. The cost of Maintenance to Dedicated Facilities or
Lines shall be borne solely by the Party owning or using the Dedicated line or
Facility.
2.7.4. In the event that a Party fails, after notice, to
complete in a timely manner any Maintenance to be performed by it on a Dedicated
or Common Facility or Line, which failure materially affects the operations of
the other Party or the other Party's ability to provide or consume any Service,
the other Party shall have the right to perform the necessary Maintenance. A
Party may enter the other Party's area of operations to the extent necessary to
cure any unfulfilled Maintenance obligations, at the defaulting Party's expense,
after reasonable advance notice of its need to enter. Less than 48 hour notice
shall be deemed unreasonable except in the case of emergency or urgent
Maintenance; the risk or fact of serious loss of materials or goods; the serious
risk of adverse material environmental contamination; or in other highly
dangerous or unusual circumstances. At the option of the Party who owns the
Assets, the entering Party and its contractors, employees and agents may be
required to be accompanied by the owner's Party's representative, who may
-12-
<PAGE> 18
EXECUTION COPY
designate a reasonable route of access to and from the repair site and enforce
compliance with the owner' s Party's safety rules and regulations.
2.7.5. Each Party hereto shall notify the other Party promptly of any
defect, damage, malfunction, state of disrepair, problem or other dysfunctional
characteristic of the Common Facilities or Lines controlled or operated by it if
the existence thereof could adversely affect the operation or functioning of the
entire Service system in question, or the portions thereof utilized by the other
Party. If the Party receiving the Services hereto believes that a defect,
damage, malfunction, state of disrepair, problem or other dysfunctional
characteristic exists in a Common Line or Facility controlled or operated by the
other Party hereto, it shall notify the other Party promptly.
2.7.6. When one Party performs Maintenance to a portion of a Common or
Dedicated Line or Facility, which Maintenance will or could require shutdown of
a Plant Site or portions thereof or could affect the operation or functioning of
an entire Service system, or the portions thereof utilized by the other Party,
the Party performing the Maintenance shall give the other Party reasonable
notice under the circumstances with respect to the nature and timing thereof.
The Parties will cooperate in good faith to minimize the impact on one another.
The Parties will try to schedule planned Maintenance as far in advance as
possible, and will coordinate turnarounds and planned maintenance to the maximum
extent possible.
2.7.7. The Parties shall cooperate with one another to assure that the
systems providing the Services for the BFG Assets and the Geon Assets are
maintained in good working order and continue to efficiently service the
operations of such Assets.
2.8. IMPROVEMENTS.
2.8.1. PRODUCTIVITY AND COST REDUCTION IMPROVEMENTS. For
productivity and cost reduction capital investment, the Provider of the
Services will propose capital
-13-
<PAGE> 19
EXECUTION COPY
investment opportunities to the Recipient, and will make the capital investment.
The Provider will, in appropriation request form, clearly and in detail identify
the source (base cost or variable cost efficiency) of the expected savings from
the project.
The Recipient will have two choices:
(i) Provide cash up front on a shared basis and receive its pro-rata
share of the benefits; or
(ii) Do not elect to provide cash on its pro-rata share, and do not
receive any of the benefits.
The Recipient will respond to any productivity or cost savings
proposals within three (3) weeks.
2.8.2. EXPANSION ACTIVITIES. The Provider of a Service is not
required to supply capacity beyond the Service system capacity existing at the
time of execution of this Agreement. Generally, capital required due to
expansion of activities, along with any additional operating costs, will be
borne by the expanding Party. When one Party's expansion activities require
additional Utility usage, the 1992 actual Utility usages will form the basis for
allocated Utility reserve capacity. The difference between system capacity for
the particular Utility in 1992 and the sum of each Party's actual 1992
consumption of that Utility comprises the reserve for that Utility. The Parties
will split the reserve into a BFG reserve and a Geon reserve proportional to
their respective actual 1992 usages. Each Party may use the Utility up to the
1992 system capacity so long as the sum of all usages for that utility do not
exceed the 1992 system capacity for that Utility. When the combined usages for
that Utility will exceed the 1992 system capacity for that Utility, each Party
shall determine the difference between its then-current usage and its 1992
usage, and to the extent that difference exceeds that Party's reserve, the Party
shall share the costs of procuring the required Utility in excess of the 1992
capacity for that Utility in a ratio of
-14-
<PAGE> 20
EXECUTION COPY
that Party's excess over its reserve to the other Party's excess over the other
Party's reserve. The Parties' will work cooperatively in their joint and
singular best interest in selecting the capacity option to be used. If only one
Party has exceeded its reserve, absent an agreement to the contrary, that Party
will bear all the additional costs of securing quantities of the Utility in
excess of the 1992 capacity.
2.8.3. PRIOR DISCUSSION. Before any Party decides to make
Improvements m any Utility or any Common Facility or Lines, the Party desiring
to make Improvements will inform the other Party of the reasons why the
Improvements are desirable, the cost of the Improvements, and how the
Improvements will affect and benefit the operations of both the parties. Both
Parties shall negotiate in good faith to reach agreement on how and when the
Improvements will be made, and whether, or how, the cost of the Improvements
will be shared.
2.8.4. COOPERATION. When one Party makes an Improvement to a
portion of a Common or Dedicated Line or Facility, which Improvement will
require shutdown of a Plant Site or portions thereof or could affect the
operation or functioning of an entire Service system, or the portions thereof
utilized by the other Party, the improving Party shall give the other Party
reasonable notice under the circumstances with respect to the nature and timing
thereof. The Parties will cooperate in good faith to minimize the impact on one
another.
2.9. ALLOCATION IN EVENT OF SHORTAGE. In the event that there are shortages
of particular Services such that all requirements of the BFG Assets and the Geon
Assets cannot be met, the Parties will allocate the affected Service(s) among
all users thereof as follows:
-15-
<PAGE> 21
EXECUTION COPY
(a) First, so as to avoid danger or injury to human health or safety
or the environment to the maximum extent possible under the
circumstances, then any excess of the Service(s) thereover;
(b) So as to avoid damage to tangible property, real or personal of
both parties to the maximum extent possible under the
circumstances, then any excess of the Service(s) thereover;
(c) As specifically stated in the Exhibit relating to a particular
Service; then any excess of the Service(s) thereover;
(d) In proportion to the then-current average annual anticipated
usage among ALL users for the Services affected; then any excess
thereover
(e) As mutually agreed.
Both Parties will work together in a cooperative manner to
shed or re-allocate the loads of the major Utilities in a manner that is
proportional to usage prior to the shortage.
2.10. RULES. Each Party hereto shall cause its employees, contractors or agents,
while on the premises of the other Party hereto, to observe all safety rules and
procedures, and all other procedures or policies of the Party owning the Assets.
Each Party shall enter onto the other's premises at its own risk, and shall be
responsible for damages to its property, or injury to its employees, contractors
or agents while on the other's premises, except to the extent that such damage
or injury is caused by the willful misconduct, recklessness or gross negligence
of the other Party or its employees, agents or contractors; provided, however,
that this sentence shall not apply to members of a responding fire brigade or
emergency response team.
2.11. PARTICULAR RULES GOVERNING ENVIRONMENTAL SERVICES.
2.11.1. WASTEWATER QUALITY. All wastewater sent by Recipient to
Provider for
-16-
<PAGE> 22
EXECUTION COPY
treatment shall be of a quality that Provider's facility is capable of treating
adequately to comply with all permit requirements.
2.11.2. DISPOSAL SITES. In the case of disposal of wastewater
treatment sludge, prior to the use by the Provider of a new or alternate
disposal site, both Parties must agree upon and approve the use of the disposal
site selected. The Environmental Coordinators after consulting with their
respective corporate or divisional environmental functional heads, or, if
necessary, the Technical Committee, shall give such approval.
2.11.3. CHANGES IN INFLUENT.
A. PERMANENT CHANGES. If Recipient intends to permanently
change the flow, loading or the kind of contaminants
discharged to any wastewater treatment system such that
the operation or permits for the wastewater treatment
system may be affected, Recipient shall first give
reasonable notice to Provider. Any such change shall be
consistent with Recipient's agreed percentage of use as
shown on the Exhibits relating to Wastewater Treatment.
If the change is acceptable to Provider, Recipient may
begin such discharge. If Provider refuses permission
(which permission shall not be unreasonably withheld),
Recipient may resort to dispute resolution. If
Recipient changes its flow, loading or contaminants
discharged and such change results in personal injury,
damage to or contamination of property, or violation of
Law, the Recipient shall be liable to Provider as set
out in paragraph 4.1 ("Foreign Matter").
-17-
<PAGE> 23
EXECUTION COPY
B. DECREASE IN CAPACITY. If Provider modifies the
wastewater treatment system resulting in a decrease in
the system's capacity, Recipient shall continue to have
the right to discharge to the treatment system the same
volume of flow and loading that was available to it on
the Effective Date of this agreement.
C. PAYMENT FOR CHANGES. In the event either Party
materially changes its flow, loading or kind of
contaminants discharged to the wastewater treatment
system such that the operation or permits for the
system may be affected, the change in cost associated
with such changes shall be reflected in the percentage
or ratio used to determine the amount paid by Recipient
to Provider for the Service.
D. TEMPORARY CHANGES. If Recipient causes a temporary
condition or change that could impact the operation of
a wastewater treatment system, Recipient shall give
prompt notice to Provider of such condition and shall
take all reasonable steps to minimize the impact of
such condition. If the condition is one that is planned
or likely to occur at a specific time, Recipient shall
give notice to Provider prior to instituting the
actions that will or are likely to create the condition
and will work with Provider to minimize the impact. In
the event the temporary condition or change entails
extraordinary Out-Of-Pocket expenses related to the
temporary change, Recipient shall reimburse Provider
for such extraordinary expenses.
-18-
<PAGE> 24
EXECUTION COPY
E. STORMWATER CHANGES. In the event a greater or lesser
portion of a shared facility becomes subject to
stormwater permitting, the relative percentages of each
Party for purposes of determining cost of Services for
stormwater shall be recalculated based on the acreage
of each Party subject to such permit.
2.11.4. SUSPENSION OF WASTEWATER TREATMENT AND STORMWATER
MANAGEMENT SERVICES FOR CAUSE. In case of actual or anticipated Exceedance of
any wastewater treatment permit, Provider has the right to suspend Service by
preventing Recipient's influent from entering the wastewater treatment system
and/or by ceasing operation of or discharge from the wastewater treatment
system. The suspension of Service will continue for so long as the circumstance
giving rise to the suspension continue to exist. The procedures to turn this
suspension into a permanent termination are set forth in Section 2.2.2.(b). Such
suspension of Service shall be taken only if Provider cannot reasonably prevent
damage to its system or exceedance of its permit by taking other actions,
including but not limited to diversion of flow, addition of chemicals or
adjustment of other process flows. Provider's action shall be deemed to be fully
in compliance with this Agreement if the discontinuance of Service is caused by:
1. Force Majeure
2. Routine Maintenance (after reasonable notice)
3. Installation of new equipment or repairs to existing
equipment (after reasonable notice).
4. Recipient's failure to provide wastewater of sufficient
quality to allow adequate treatment and/or prevent
exceedance of any permit limit.
-19-
<PAGE> 25
EXECUTION COPY
Discontinuation of Services for the above causes shall not
relieve Recipient from its obligation to make payment for such Services.
Provider's action shall not be deemed to be "for cause" unless discontinuance of
Service is caused by:
1. Provider's negligent or willful failure to properly
operate the wastewater treatment system.
2. Any Exceedance caused by discharge of Provider's
wastewater to the treatment system.
If Provider causes either of the above two events to happen,
Recipient is relieved from making payment.
2.11.5. DISPUTE RESOLUTION IN CONNECTION WITH ENVIRONMENTAL
SERVICES.
A. RESOLUTION BY TECHNICAL COMMITTEE. The Technical
Committee at the Plant Site will be convened upon
notice by either Party to the Environmental Coordinator
of the other and will meet to resolve any issues or
disputes concerning Environmental Services at the Plant
Site between the Parties. Each Party must be
represented at meetings of the Technical Committee and
each shall have one vote. Minutes and/or a report of
the proceedings of the Technical Committee will be
prepared and maintained. Disputes not resolved by the
Technical Committee will be elevated to each Party's
management for resolution as described in Section
6.10.1.
B. RESOLUTION BY THIRD PARTY. If within thirty (30) days
from the initial Technical Committee meeting, there is
still no resolution of the dispute, Section 6.10.2.
("Arbitration") shall govern its resolution.
-20-
<PAGE> 26
EXECUTION COPY
C. RESOLUTION FACTORS. In resolving issues or disputes
under this paragraph, the following considerations
shall apply, but number one shall be a threshold issue
that shall take precedence over all other
considerations:
1. Compliance with all applicable environmental Laws;
2. The continuing need for the Environmental Services
by the Recipient;
3. The technical feasibility of providing those
Environmental Services;
4. Modifications to the Environmental Services; and
5. The cost effectiveness of the Environmental
Services as opposed to any other alternatives
both from the perspective of the Provider and
the Recipient.
2.11.6. NOTICES RELATING TO ENVIRONMENTAL SERVICES. In the
event of any Exceedance, notice from any regulatory agency, suit, or inspection,
the Party receiving information concerning such event shall notify the
Environmental Coordinator for the non-recipient Party, unless such event only
involves the Party receiving such information. Copies of any such notices or
correspondence shall be furnished to the non-recipient Party.
To the extent the non-recipient Party is impacted by such
information, the receiving Party shall discuss and agree upon the appropriate
response with the non-recipient, subject to dispute resolution.
2.11.7. ENVIRONMENTAL RECORDS. All existing records
concerning any shared facilities that are required to be maintained by
applicable environmental Laws shall be the property of: 1) BFG if it is
required by law to maintain such records or 2) the Party continuing the
activity covered by such records. In the event both Parties are required to
-21-
<PAGE> 27
EXECUTION COPY
maintain records, BFG shall have custody and control of such records and shall
allow Geon access to them at reasonable times for review and copying. Other
records shall be the property of the Party having possession of them, subject to
the right of the other Party to access and copying.
2.12. UNFORESEEN ECONOMIC CONDITIONS. This Section 2.12 is intended to provide
relief to a Party where unforeseen economic events not addressed elsewhere in
this Agreement cause either Party to suffer undue, inequitable economic distress
under the then current Pricing arrangements for one or more Services. This
Section 2.12 does not apply to events of Force Majeure, changes in Laws,
business discontinuance, etc., since those events are handled elsewhere in this
Agreement. For a Party to invoke Section 2.12, two materiality triggers must
occur:
(1) A significant event occurs which causes the hardship question to be
raid.
(2) A 20% increase or decrease in the "Full Plant Cost" of the specific
Service contract under discussion. (This 20% threshold is tested
against the original Service contract Full Plant Cost +- cumulative
cost index adjustments up to the period when the event occurs.)
A Party that believes itself entitled to relief under Section
2.12 will give written notice to the other Party, detailing why it believes the
two materiality triggers have been met. If the Parties agree that the triggers
are satisfied, "Full Plant Cost" will be recalculated and used beginning at the
first day of the month following the significant event month.
If the Parties do not agree the triggers are met, the matter
will be submitted to audit or arbitration as set forth elsewhere in this
Agreement.
2.13. LEGAL AND CONSULTANT COSTS. In addition to the Prices set forth in
the Exhibits, part of the cost of providing a Service includes any costs of
outside consultants (such as legal,
<PAGE> 28
EXECUTION COPY
technical, etc.) needed to provide a Service in compliance with Laws. The
Provider of the Service will hire such legal or technical attorneys or
consultants. The costs associated with such outside attorneys or consultants
will be paid by each Party in proportion to each Party's use of the particular
Service.
2.14. EASEMENTS. Each Party is granted an easement to enter upon the land of the
other to do all things necessary to carry out the intent of this Agreement.
Prior to the execution of this Agreement, the Parties attempt to identify the
specific locations where permanent easements or rights of way are necessary.
Such easements or rights of way will be recorded in the appropriate real estate
records as soon as possible after execution of this Agreement. If other
necessary easements or rights of way are later identified, the Parties will take
all appropriate action to cause those easements or rights of way to also be
recorded.
2.15. COMPLIANCE WITH LAWS. Any Service or substance tendered by a Party to this
Agreement to the other Party hereto for use or treatment shall be of a quality
that enables the receiving Party, consistent with the intended use or treatment
and the other Party's normal operations at the Plant Sites, to be or remain in
compliance with all applicable Laws.
2.16. CHANGE IN LAWS. During the Agreement Term, Laws may change or a judicial
interpretation of existing Laws may change or emerge, which necessitate changes
in a Party's operations at a Plant Site, or in the manner, mechanism or
permissibility of the delivery of one or more of the Services, or changes to
Lines or Facilities, or in the discontinuance of a Service. Both Parties shall
have a duty to keep informed as to changes in Laws affecting their respective
operations and obligations under this Agreement, and how those changes may
impact the providing of Service over Dedicated and Common Lines and Facilities.
When a Party becomes aware of a proposed or actual change in Law which may
affect the cost, method or permissibility of delivery or receipt of a Service,
the
-23-
<PAGE> 29
EXECUTION COPY
Party will promptly inform the other Party. Both parties shall then negotiate in
good faith to reach a reasonable, equitable amendment to the Price or other
affected contractual clause in the Exhibit such that the Service can continue to
be provided or received in a cost effective manner and in conformance with the
new or revised Law. As a general principle, any increased costs will be borne by
the parties in proportion to the relationship the change in Law bears to each
Party's operations or products. For capital investment requirements due to
regulatory, legal or other mandatory obligations, the capital investment will be
made by the Provider, but will be funded (cash provided) based on the Party(s)
to which the regulation is directed, shared based on relative contribution, or
shared consistent with their utilization of asset, depending on circumstances.
2.17. UNIQUE EQUIPMENT OR EXPERTISE. Should at any time during the Term of this
Agreement, any Party hereto finds it necessary to obtain the use of any
equipment not readily obtainable under the circumstances, or should that Party
require the advice or assistance of an individual with unique or highly
specialized expertise, which equipment or person has, as a result of the
separate incorporation of Geon, come within the control of the other Party, then
upon request and reasonable advance notice, the Party controlling the person or
equipment shall use reasonable efforts to make such person or equipment
available to the requesting Party. Upon the providing of such person or
equipment, the requesting party shall reimburse the providing Party for the
reasonable rental value of any such equipment, or, in the case of an individual,
a reasonable consulting fee in accordance with the general principals of the
exchange of personal services at the Plant Site concerned pursuant to the
Exhibits to this Agreement.
2.18. INDEPENDENT CONTRACTORS. The Parties hereby engage each other, and
each Party hereby undertakes as an independent contractor and not as an agent
of the other, to provide to the other Party such Services as are identified on
the Exhibits attached hereto. The
-24-
<PAGE> 30
EXECUTION COPY
Recipient shall not have the power or authority to direct or control the
Provider in the means, methods, employee negotiations, manner of performance of
the Services to be provided hereunder. The Provider in carrying out the Terms of
this Agreement is acting independently and as an independent contractor with the
full power and authority and responsibility to select means, methods and manner
of performing the Services required hereunder, but the Provider shall use its
best efforts to cooperate with the Recipient and to coordinate its Services with
the desires of the Recipient. The Parties may develop and agree upon general
instructions to facilitate said cooperation and coordination.
2.19. SHUTDOWN COOPERATION. The Parties will cooperate to assure the efficient
utilization of shutdowns and minimal overall down time of manufacturing and/or
production facilities. Should a Party plan a shutdown that would have an impact
on the operations of another Party or user or Provider of a Service hereunder,
the Party planing such shutdown shall give the affected Parties, users and
Providers at least sixty (60) days' advance notice thereof and shall give
affected users and Providers an opportunity to participate in the planning
and/or timing of such shutdown. Should one Party suffer an involuntary shutdown
which results in a shutdown at another Party, such other Party shall use such
down time to complete any scheduled or planned Maintenance, or Improvement, the
making of which requires a shutdown or withdrawal from service, all to the
extent reasonably practicable. Should a Party suffer a voluntary or involuntary
shutdown that would have an impact on the operations of another Party hereto or
a user or provider of a Service, the Party suffering such shutdown shall consent
to reasonable extensions of such shutdown if required in order to complete
Maintenance or Improvements undertaken during such shutdown by another Party
hereto or user or Provider of Service, in order to minimize overall down time in
accordance with the first sentence of this paragraph.
-25-
<PAGE> 31
EXECUTION COPY
2.20. FENCES. At locations where the Parties occupy opposite sides of a road
which one Party owns and the other Party has a fight or easement to use,
placement of fences will occur on the owner's side of the road.
ARTICLE III: SERVICES PROVIDED
------------------------------
3.1. [Intentionally Omitted]
3.2. [Intentionally Omitted]
3.3. The Services to be provided at the Calvert City Plant shall be as set
forth in the Exhibits hereto, and any other Exhibits added by mutual
agreement after the Effective Date.
3.4. [Intentionally Omitted]
3.5. [Intentionally Omitted]
3.6. [Intentionally Omitted]
ARTICLE IV: ALLOCATION OF RISKS AND LIABILITIES
-----------------------------------------------
4.1. FOREIGN MATTER. In the event that one Party hereto introduces into a
Line or Facility or Service system, a substance or matter other than that which
such Line, Facility or Service system ordinarily accepts by design or common
occurrence, and, as a result, said property or any person (including one of the
Parties) suffers damage, cost, expenses or contamination & a violation of Law
occurs by reason of said presence, the introducing Party shall, promptly upon
notice, cease such practice and reimburse the affected Party for its
Out-Of-Pocket Costs arising as a result of the improper introduction.
"Out-Of-Pocket Costs" include, without limitation, the repair of damaged
equipment or buildings, the
-26-
<PAGE> 32
EXECUTION COPY
replacement of ruined raw materials, work-in-process or finished goods or
machinery, extra energy or labor costs, scrap disposal, clean-up of the released
material, and any fines or penalties assessed pursuant to Law caused by the
event, and reasonable outside lawyers' attorneys fees incident to handling these
matters. "Out-Of-Pocket Costs" do not include: lost profits; punitive, indirect,
consequential, or exemplary damages; and changes to premiums on insurance
policies.
NOTWITHSTANDING THE FOREGOING, NO PARTY HERETO SHALL BE RESPONSIBLE FOR
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES UNDER THIS SECTION 4.1., UNLESS ThE
ACT OF INTRODUCTION OF SUCH FOREIGN SUBSTANCE OR MATTER WAS THE RESULT OF THE
GROSS NEGLIGENCE, RECKLESSNESS, OR WILLFUL MISCONDUCT OF THE INTRODUCING PARTY
OR ITS AGENTS OR EMPLOYEES. In the event of such an introduction, each Party
shall use best efforts to take all steps feasible to mitigate the impact of any
such introduction, and particularly to prevent the Spread or worsening of any
damage or injury due to non-response or inaction by any Party.
4.2. LIMITATION OF REMEDY BETWEEN PARTIES FOR NON-MATERIAL BREACH. Except for
any reimbursement due under Sections 4.1. ("Foreign Matters") or 4.10. ("Use of
Equipment"), neither Party to this Agreement shall incur any obligation or
liability to the other Party arising out of any non-material breach of this
Agreement or non-material failure by such Party to discharge its obligations
hereunder, other than a breach or failure which relates to the payment of money.
For purposes of this Agreement, a breach or failure shall be considered material
only if (a) the resulting damages exceed $25,000 per occurrence or $25,000 in
the aggregate for similar breaches or failures which occur on a repeated basis;
or (b) it results in a violation of Law being attributed to the affected Party.
This Section 42.
-27-
<PAGE> 33
EXECUTION COPY
shall not limit or diminish the operation of Section 4.5. hereof, relating to
indemnification as to claims of third parties.
4.3. INSURANCE.
4.3.1. Each Party hereto shall maintain insurance as listed in
Section 4.3.4. below to include all risk property insurance, business
interruptions, boiler and machinery and extra expense to its own portions of the
Plant Site, and comprehensive general liability covering third party bodily
injury and property damage. Such insurance shall name the other Party hereto as
an additional insured to the extent of its interests under this Agreement. In
addition to any other limitations on remedies contained in this Article IV, to
the extent that any destruction, damage, liability, loss or expense to the BFG
Assets or the Geon Assets, as the case may be, is paid or reimbursed by
insurance proceeds, it shall be paid by the insurer, subrogation rights shall be
waived, and the other Party shall have no responsibility or liability with
respect thereto.
4.3.2. All insurance policies shall be issued by insurance
companies properly licensed to do business in the United States of America and
having a rating issued by A.M. Best of B+/12 or better, except where insured
through a captive insurance company. Certificates of Insurance evidencing such
insurance shall be submitted by each Party to this Agreement to the other. All
insurance contracts and Certificates of Insurance issued hereunder shall include
a clause providing the other Party hereto with not less than thirty (30) days
prior notice in the event of any cancellation of any policy or any material
change in the same.
4.3.3. Each Party hereto shall cooperate fully with the other
in performing insurance-related activities. Notice shall be provided immediately
of any event that may result in destruction, damage, liability, loss or expense
including, but not limited, to the introduction of foreign material. Each Party
shall release all necessary information to
-28-
<PAGE> 34
EXECUTION COPY
adjust the claim, permit issuance and other representatives of each Party on the
premisses to collect such information and perform periodic loss prevention
engineering inspections.
4.3.4. The following Insurance Coverage will be maintained by
both Parties, unless otherwise recommended by Risk International Services, Inc.,
the risk management advisor for both Parties, or by another recognized insurance
professional organization that regularly advises the chemical industry:
Type of Coverage Minimum Insured Limits
----------------- ----------------------
Comprehensive General Liability $200,000,000 (occurrence/aggregate)
Automobile Liability $200,000,000 (occurrence/aggregate)
Products Liability $150,000,000 (occurrence/aggregate)
Workers Compensation Statutory
Excess Workers Compensation $10,000,000 (occurrence)
Employers Liability $1,000,000 (occurrence)
Property Damage Repair and Replacement Value
(occurrence/aggregate
Business Interruption $150,000,000 (occurrence(aggregate)
Extra Expense $20,000,000 (occurrence/aggregate)
Boiler & Machinery $50,000,000 (occurrence/aggregate)
4.3.5. INCREASED INSURANCE RATES. There is a possibility the
separation of The Geon Company from BFG may result in higher insurance rates for
both Parties. To the extent that these higher insurance rates impact the costs
of operating long-term infrastructure asset Service contracts, the Parties agree
to discuss fair and equitable adjustments to the Service contracts covering
Services provided from these long-term infrastructure assets. Until December
31, 1996, either Party may raise this issue. After December 31, 1996, it will be
assumed that the insurance premiums are properly reflected in the rate structure
for these long-term infrastructure contracts, and this covenant will expire.
-29-
<PAGE> 35
EXECUTION COPY
4.4. EXCLUSIVE REMEDIES AS TO CLAIMS BETWEEN THE PARTIES: The Parties recognize
that the provision of Services under this Agreement may from time to time
suffer from interruptions which may or may not arise to the level of a Force
Majeure, or from defects in quality or some other specification pertaining to
the properties of the Service: Each Party promises to use diligent and
reasonable efforts to maintain the Service(s) it has an obligation to provide,
and the Recipient promises to cooperate in every reasonable manner in assisting
the Provider of a Service to work through such interruptions and
quality/out-of-specification situations with a minimum of interruptions, cost
and inconvenience to both Parties. In the event of a material breach of this
Agreement, the injured Party's sole remedies shall be (i) (a) re-performance or
re-delivery of a Service, in the case of a breach or failure which relates to
the provision of any Service, or (b) if a providing Party shall refuse or be
unable to perform its obligation to provide a Service hereunder following a
written demand by the Party to whom Service is to be provided, the reasonable
cost or expense in excess of the Price which would have been payable hereunder
which the obtaining Party incurs to obtain substitute provision of such Service
from a third person, subject to the limitations set forth in Section 4.2 above;
(ii) reimbursement for the injured Party's Out-Of-Pocket Costs, as defined in
Section 4.1; and (iii) if a Service is wrongfully terminated under Section
2.2.2.(b) ("wrongfully terminated" means that the terminating Party fails to
sustain its burden of proof that the continued provision or receipt of the
Service is contrary to Law), for indemnity as set forth in Section 2.2.2.(b).
EXCEPT AS SET FORTH IN THIS AGREEMENT AND THE EXHIBITS HERETO, NO PARTY HERETO
SHALL HAVE ANY OTHER LIABILITY TO THE OTHER PARTY HERETO WITH RESPECT TO ITS
PERFORMANCE OF OR FAILURE TO PERFORM ANY SERVICE UNDER THIS AGREEMENT,
INCLUDING BUT NOT LIMITED TO ANY LIABILITY FOR SPECIAL, CONSEQUENTIAL OR
PUNITIVE DAMAGES OR LOSS
-30-
<PAGE> 36
EXECUTION COPY
OF PROFITS, CAUSED BY OR ARISING OUT OF ANY MATERIAL BREACH OF THIS AGREEMENT.
4.5. INDEMNIFICATION FOR THIRD PARTY CLAIMS.
4.5.1. ARISING OUT OF BREACH OR NEGLIGENCE. Each Party hereto
(the "Indemnitor") shall indemnify and defend and hold harmless the other Party
hereto (the "Indemnitee") from and against, loss, damages, cost or expense
(except to the extent covered by insurance) suffered by the Indemnitee as a
result of (i) a claim of any third Party against the Indemnitee (including any
penalties or fines under applicable Law), which results from a wrongful act or
omission by the Indemnitor in Indemnitor's performance of an obligation or duty
under this Agreement, regardless of whether such claim resulted from
recklessness, willful misconduct, simple or gross negligence or other action; or
(ii) any damage to the property of the Indemnitee caused by the Indemnitor, its
agents or employees, while performing the Indemnitor's obligations or duties
pursuant to this Agreement. This Section 4.5.1. does not relate to indemnity
arising out of Environmental Services.
4.5.2. ARISING OUT OF ENVIRONMENTAL SERVICES.
A. Recipient shall defend, indemnify and hold harmless
Provider for any cost, damage, liability or loss,
arising from Recipient's use of the Environmental
Services, including but not limited to claims
(including reasonable attorneys' fees) for personal
injury or property damage, fines and penalties, and
contamination of the environment (including clean-ups),
to the extent such claims are not caused by Provider's
negligence or breach of the conditions under which
Environmental Services are provided. Recipient's
obligation to indemnify shall be proportionate to its
contribution to the events causing the claim.
-31-
<PAGE> 37
EXECUTION COPY
B. Provider shall defend, indemnify and hold harmless
Recipient for any cost, damage, liability or loss,
resulting from Provider's use or operation of the
Environmental Services, including but not limited to
claims (including reasonable attorneys' fees) for
personal injury or property damage, fines and
penalties, and contamination of the environment
(including clean-ups), to the extent such claims are
not caused by Recipient's negligence or breach of the
conditions under which Environmental Services are
provided. Provider's obligation to indemnify shall be
proportionate to its contribution to the events causing
the claim.
4.5.3. SURVIVAL The indemnifications contained in this
Section 4.5 shall survive termination of this Agreement.
4.6. TIME PERIOD TO MAKE CLAIMS. Any claim relating to, resulting from or
arising out of any dispute or disagreement concerning the amount, kind, scope,
quality or manner of performance of any of the Services to be provided hereunder
shall be waived by the obtaining Party, unless made in writing as soon as
possible but no longer than one (1) year after the date of discovery of the
performance, non-performance, delivery, non-delivery or breach of the Service to
which such claim relates. Any claims for indemnity arising out of any harm,
loss, cost, damage or expense suffered by third parties shall be made in writing
as soon as possible but no longer than one (1) year after the Indemnitee learns
of the significance of the event giving rise to the claim for indemnity and has
received a written demand from the third Party; provided however, that the
Indemnitor is only relieved of responsibility by the extent it has been harmed
by the lack of notice.
4.7. WARRANTIES.
4.7.1. IN GENERAL. The Services to be delivered under this
Agreement shall conform to all specifications set forth in the Exhibits hereto.
-32-
<PAGE> 38
EXECUTION COPY
Each Party acknowledges that the other Party is not in the business of providing
to the public the respective Services provided for in this Agreement.
4.7.2 RELIEF FOR POOR QUALITY SERVICE. The service Recipient
is generally entitled to a quality of service equal to that which was being
enjoyed prior to the Effective Date of this Agreement, unless specified
differently in the specific Service contract Exhibit. In the event of Service
quality deterioration, the Service Provider will make good faith efforts to
resolve the issue. If the problem is not corrected within a reasonable time, the
Recipient is entitled to cost relief as provided in this Agreement (generally,
Section 4.4).
If the Recipient feels they have a quality issue, Recipient
should follow the procedure set forth in Section 6.10.
4.7.3. It is understood that occasional transitory
perturbations typically occur in the industrial supply of certain utilities
(such as pressure, moisture, content, low voltage, etc.), and that the same do
not comprise an out-of-specification condition so long as the Services
substantially comply with the Services as experienced/provided prior to the
Effective Date of this Agreement.
4.7.4. Except as otherwise stated in this Agreement, NO
PARTY HERETO MAKES ANY WARRANTY TO THE OTHER THAT ANY OF THE PARTICULAR
SERVICES OF UTILITIES CONTEMPLATED FOR PURCHASE AND/OR SALE UNDER THIS
AGREEMENT SHALL BE MERCHANTABLE OR FIT FOR ANY PARTICULAR PURPOSE, NOR DOES ANY
PARTY MAKE ANY OTHER WARRANTY WITH RESPECT THERETO, EXPRESS OR IMPLIED. Each
Party acknowledges that the other Party is not in the business of providing to
the public the respective Services provided for in this Agreement.
-33-
<PAGE> 39
EXECUTION COPY
4.8 CONFIDENTIALITY. Each of BFG and Geon (including their respective employees,
agents and Representatives) shall maintain in confidence all proprietary and
confidential business information to which it might become privy as a result of
the transactions contemplated herein. No restrictions are placed upon a Party
hereto respecting the use or disclosure of any such information which: (i) is or
becomes through no fault of the disclosing Party within the public domain; (ii)
was legally acquired by the disclosing Party from an unaffiliated third Party
who had a fight to convey same without obligation of secrecy and who did not
obtain such information directly or indirectly from a Party affiliated with the
disclosing Party; or (iii) is required to be disclosed by binding court order or
other requirements of Law. Specific items of confidential information shall not
be deemed to fall within the foregoing exceptions merely because they may be
embraced within a body of generally available information within such exception,
nor shall any combination of features be deemed to fall within such exception
merely because the individual features are within such exception.
4.9. FORCE MAJEURE. Each Party shall be relieved from liability hereunder for
failure to perform any of the obligations herein imposed, except any obligations
to make payments for Services already rendered, for the time and to the extent
of such failure to perform, if the failure to supply, take, use or consume the
Service, or the failure to make delivery of the Service, is occasioned by: (a)
Acts of God, fire, explosion, flood, hurricanes; (b) strikes, lockouts or other
industrial disturbances or riots; (c) war, declared or undeclared; (d)
compliance with any applicable Law, including priority, rationing, allocation or
preemption orders or regulations, or non-voluntary cancellation of a Party's
license to operate its plant or equipment; (e) shortage or breakdown of a
Facility or Line or other failure of facilities used for manufacture or
transportation, or shortage of labor, power, fuel or raw materials; (f) total or
partial shutdown due to normal plant turnaround (which, to the extent possible,
-34-
<PAGE> 40
shall be scheduled in accordance with Section 2.7.6. above); or (g) any other
unanticipated cause beyond the control of the Party failing to perform, whether
similar to or dissimilar from the enumerated causes (any such cause herein
called "Force Majeure"). In the event of a Party being rendered unable by Force
Majeure to carry out its obligations under this Agreement, other than any
obligation 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 be suspended during the continuance of any inability so
caused (but for no longer period), and such cause shall be so far as possible
remedied with all reasonable dispatch. Upon the cessation of the cause or causes
for any such failure or delay, performance hereof shall be resumed, but such
delay shall not, except by mutual agreement. operate to extend the term of this
Agreement or obligate the Provider to make up deliveries or the Recipient to
purchase or receive quantities so missed. A Recipient shall continue to be
obligated for the fixed fee portion, if any, of the applicable Price during any
Force Majeure, regardless of whether the Force Majeure affects the Recipient or
the Provider. It is understood and agreed that the settlement of strikes or
lockouts involving the parties hereto shall be entirely within the discretion of
the Party having the difficulty, and that the above requirements that any Force
Majeure shall be remedied with all reasonable dispatch shall not require the
settlement of strikes or lockouts by acceding to the demands of the employees
involved, when such course is inadvisable in the discretion of the Party having
the difficulty. In no event shall a Provider be required to purchase Services
from third persons in the event it invokes one of the above mentioned Force
Majeure clauses, nor will it be liable for any cost increases suffered by the
Recipient in purchasing such Services from a third Party.
-35-
<PAGE> 41
EXECUTION COPY
4.10. USE OF EQUIPMENT. In the event that a Party hereto makes use of vehicles,
equipment, tools, the Fitness Center or other similar items of personal property
of the other Party hereto, other than Common Lines or Facilities (which are
provided for elsewhere in this Agreement), such use shall be at the sole risk of
the using Party. The using Party shall use due and reasonable care not to damage
or destroy such items, and shall return such items promptly and in the same
condition, ordinary wear and tear excepted. If a third Party or an employee of
the borrower of such equipment is injured by the borrower's use of such
equipment and makes a claim against the owner of the equipment, the borrower of
the equipment shall indemnify the owner of the equipment as set forth in Section
4.5 relating to Indemnification as to Claims of Third Parties.
4.11. ACKNOWLEDGMENT. Except as specifically stated herein, each Party hereto
assumes all risks and liability arising from receiving, unloading, discharging,
storing, handling, consuming and using of the Services contemplated for purchase
or sale under this Agreement.
4.11.1. Each Party agrees that it qualifies as a
"sophisticated user" of the same as the term "sophisticated user" has meaning
under the Laws.
4.11.2. Each Party hereto acknowledges that the other has
furnished to it Material Safety Data Sheets, including warnings and safety and
health information concerning the products and/or the containers for such
products provided to it hereunder. Each Party will disseminate such information
in a manner which will give warning of possible hazards to persons whom the
Party receiving the Service can reasonably foresee may have exposure to such
hazards, including, but not limited to, its employees, agents, contractors, and
customers, as appropriate.
-36-
<PAGE> 42
EXECUTION COPY
ARTICLE V: PAYMENT TERMS AND COVENANTS
--------------------------------------
5.1. PAYMENT TERMS.
5.1.1. TERMS. Variable Costs payment will be due on the 12th day
following receipt of the invoice; generally, Variable Costs will be invoiced on
the 1st day of the month following the month in which Service was received.
Fixed Plant Costs payment will be due on the 12th day following receipt of
invoice; generally, Variable Costs will be invoiced on the 1st day of the month
in which Services are received Payments which are made more than forty-five (45)
days after the date of invoice will bear interest at the prime rate in effect on
the first day of each calendar year.
5.1.2. INVOICES. The Recipient of a Service will turn in all required
meter readings on the first working day of the new month. The Recipient will
receive from the Provider, on the first or second work day, a single billing for
all Variable Costs for the prior month and Fixed Plant Costs for the current
month.
Variable Cost billings will be based on the prior month volume units
consumed priced at the actual cost from the month previous to the consumption
month.
Fixed Cost billings will include inflation for the prior calendar year
(will be applied to billings from February through January).
The Supplier will provide all Variable Cost pricing detail (utility
bills) with each month's bill. This should prevent any need to audit on the
Variable Cost areas.
5.1.3. TAXES. Any sales tax, use tax or similar tax which is incurred
by a Party as part of its costs of obtaining any Service which is provided
hereunder to the other Party shall be included in the costs to be reimbursed by
the Recipient, whether or not specifically included in the applicable exhibit.
If any sales tax, use tax or similar tax is imposed upon any Service provided
under this Agreement, the Recipient of such Service shall bear such tax in
proportion to its use of the Service.
-37-
<PAGE> 43
EXECUTION COPY
5.1.4. DISPUTES. A dispute concerning a portion of an
invoice will not relieve a Party of its obligation to pay the invoice timely as
to amounts not reasonably in dispute. The existence of a reasonable dispute will
not allow a Supplier to discontinue the provision of a Service to the Recipient.
The right to receive interest as set forth in Section 5.1.1. will be an
aggrieved Party's only remedy.
5.1.5. U.S. DOLLARS. All payments except as otherwise
provided will be in U.S. Dollars, deposited to the accounts designated by the
Parties.
5.2. RIGHT TO AUDIT. The Recipient of Services has the right annually, upon
request, to have an independent auditing firm having a nationwide operation (but
not Ernst & Young) review the books, records and other detailed supporting
information of the Party supplying the Services, for purposes of determining the
correctness of the Prices as to a particular Service. All such audits shall be
undertaken at reasonable times and in conformance with generally accepted
auditing standards. The information generated by such audit shall be
confidential information and treated as set forth in Section 4.8
("Confidentiality") hereof.
5.3. INSTALLATION OF METERS.
5.3.1. Each Plant Site shall arrange for installation of any
additional meters required for purposes of establishing the quantities consumed
needed to determine the Price under the Exhibits hereto, which shall be
installed at appropriate locations. The expense of such installation shall be
shared equally by Geon and BFG. The operation of such meters shall be consistent
with contemporary industry standards and practices for the accurate measurement
of the particular Service in question.
5.3.2. At reasonable intervals, the Parties shall calibrate
and test such meters and instruments. The expense of such calibration and
testing will be shared proportionally; except for the expense of such
calibration and testing on meters installed on Dedicated Lines and Facilities,
which will be for the expense of the owner.
-38-
<PAGE> 44
EXECUTION COPY
5.3.3. The Party not reading a meter shall have the right to
be present for such reading and a copy of such meter reading, shall be supplied.
5.3.4. Notwithstanding the foregoing, if for any reason the
meter is out of service, out of repair or is found registering inaccurately (off
by more than plus or minus two percent (2%)) and the duration of the error is
not determinable by ordinary tests, so that the quantity of the particular
Service in question delivered through such meter cannot be ascertained or
computed from the reading thereof, the quantity of the particular Service in
question delivered during the period the meter is out of service, out of repair
or is found to be registering inaccurately, shall be estimated and agreed upon
by the parties hereto upon the basis of the best available data, using the first
of the following methods which is feasible:
(a) By correcting the error if the percentage of error is ascertainable by
calibration, special test, or mathematical calculation; or
(B) By calculation based upon historical consumption and operating rates
(for example steam/#product); or
(c) By such other method as may be agreed by the parties hereto.
ARTICLE VI: GENERAL PROVISIONS
------------------------------
6.1. ASSIGNMENT. Except as permitted in this Section 6.1., neither this
Agreement nor any of the rights or duties under this Agreement may be assigned
or delegated by either Party hereto without the prior written consent of the
other Party. If one Party (the "Assignor") sells or transfers to any person or
entity (the "Assignee") all or substantially all of its assets within the Plant
Site, the other Party (the "Non-Assigning Party") agrees not to unreasonably
withhold its consent to the assignment of this Agreement to such Assignee,
-39-
<PAGE> 45
EXECUTION COPY
provided that such Assignee (i) continues to use such assets for substantially
the same purposes, (ii) covenants and agrees in writing with the Non-Assigning
Party that the Assignee is bound by, and will observe, perform and fulfill each
and every covenant, proviso, obligation, term and condition on the part of the
Assignor in this Agreement to the same extent as if the Assignee had been
originally named as a Party to this Agreement in the place and stead of the
Assignor, and (iii) assumes in writing each and every obligation and liability
of the Assignor under the Agreement and further undertakes and agrees to perform
and discharge all the obligations and liabilities of the Assignor arising under
the Agreement, all to the same extent as though the Assignee had been originally
named in the place and stead of the Assignor. If an Assignor sells or transfers
all or substantially all of its assets within the Plant Site, and if the
Assignee does not assume all the rights and perform all obligations under the
Service contracts between Assignor and the Non-Assigning Party under this Plant
Services Agreement related to the Plant Site, the Assignor will either continue
to perform those Service contracts for the benefit of the Non-Assigning Party,
or the Assignor will be liable to the Non-Assigning Party for all costs and
expenses, including Out-Of-Pocket Costs, incidental and consequential costs, and
lost profits, that the Non-Assigning Party incurs in replacing the Services.
A Party may withhold its consent, among other reasons, if the
proposed Assignee prior to assignment engages in material and direct competition
with the Non-Assigning Party, and the Non-Assigning Party can demonstrate direct
and substantial probable harm to its competitive position as a result of such
assignment and/or delegation.
The giving of consent to an assignment by the Non-Assigning
Party shall not be deemed to be a release of the Assignor, unless such release
shall be separately agreed to in writing by the Non-Assigning Party, nor shall
such consent be deemed to be a consent to or waiver with respect to any future
assignment by the Assignee.
-40-
<PAGE> 46
EXECUTION COPY
Notwithstanding any of the foregoing, BFG shall have the right
to assign this Agreement to a subsidiary of BFG without any consent from Geon In
such event, the term "BFG" as used herein shall include both BFG and such
subsidiary. Geon shall not have the right to assign to a subsidiary without
consent from BFG.
This Agreement shall be binding upon and insure to the benefit
of any authorized successor or assign, as set forth herein above.
6.2. AMENDMENT. This Agreement may be amended or modified only by an instrument
in writing duly executed by each of the parties hereto. No amendment or
modification shall be effected by acknowledgment or acceptance of any purchase
order or other forms at variance with this Agreement. The Parties agree that
from time to time the Parties and/or the Plant Site may agree upon a need to
modify, amend, supplement, or otherwise alter one or more of the Exhibits to
this Agreement. In such event, the Parties agree that each shall regard the
Exhibits as "living," in other words a substitute Exhibit agreed upon by both
Parties and bearing the signature of an authorized representative of each Party
can replace an Exhibit herein without need to republish this entire Agreement.
6.3. NON-WAIVER. Any waiver by either Party of any breach of, or failure to
comply with, any provision of this Agreement by the other Party shall not be
construed as, or constitute, a continuing waiver of such provision, or a waiver
of any other breach of, or failure to comply with, any other provision of this
Agreement.
6.4. NOTICES. Any notices or other communications required or permitted to be
given by any Party hereto to the other Party hereto pursuant to this Agreement
shall be in writing and shall be deemed to have been given when (i) delivered
personally to the Representative of such other Party designated below, (ii) when
deposited in the United States mail, certified or registered mail, postage
prepaid, return receipt requested, addressed to the
-41-
<PAGE> 47
EXECUTION COPY
Representative of such other Party designated below, or (iii) when transmitted
by facsimile to the other Party, with receipt by such Party confirmed by
telephone.
6.4.1. Notices or communications which relate to a request for
consent to assignment of all or a part of this Agreement, shall be given in
writing to the Representatives below:
If delivered to Geon, to:
President
The Geon Company
6100 Oak Tree Boulevard
Cleveland, Ohio 44131
Telephone: (216/447-6547)
Fax: (216/447-6146)
with a copy to:
Vice President, General Counsel
The Geon Company
6100 Oak Tree Boulevard
Cleveland, Ohio 44131
Telephone: (216/447-6001)
Fax: (216/447-6146)
If delivered to BFG, to:
President, Specialty Polymers & Chemicals Division
The B.F.Goodrich Company
9911 Brecksville Road
Cleveland, Ohio 44141-3247
Telephone: (216/447-5777)
Fax: (216/447-5730)
with a copy to:
Division Counsel, Specialty Polymers & Chemicals Division
The B.F.Goodrich Company
9911 Brecksville Road
Cleveland, Ohio 44141-3247
Telephone: (216/447-5798)
Fax: (216/447-5730)
-42-
<PAGE> 48
EXECUTION COPY
6.4.2. Notices or communications other than a request for
consent to assignment of this Agreement as it relates to the Plant Site shall be
given to the designated Plant Site Representative for the Plant Site, as
designated below, with copies to:
If delivered to Geon, to:
Vice President, Operations
The Geon Company
6100 Oak Tree Boulevard
Cleveland, Ohio 44131
Telephone: (216/447-6332)
Fax: (216/447-6146)
with a copy to the Vice President, General Counsel,
The Geon Company
If delivered to BFG, to:
Vice President, Finance
Specialty Polymers & Chemicals Division
The B.F. Goodrich Company
9911 Brecksville Road
Cleveland, Ohio 44141-3247
Telephone: (216/447-5888)
Fax: (216/447-5710)
with a copy to the Division Counsel, SP&C Division of BFG
6.4.3. CALVERT CITY PLANT SITE REPRESENTATIVES. Notices
which affect the Calvert City Plant shall be given to the following
Representatives:
If delivered to Geon, to: The Geon Company Plant Manager
with a copy to the Vice President, General Counsel, The Geon Company
If delivered to BFG, to: The B.F.Goodrich Company Plant Manager
with a copy to the Division Counsel, Specialty Polymers & Chemicals
Division
-43-
<PAGE> 49
EXECUTION COPY
6.5. GOVERNING LAW. This Agreement shall be construed and enforced in accordance
with and shall be governed by the Laws of the State of Ohio and of the United
States of America, without giving effect to the principles of conflict of Laws
thereof.
6.6. THIRD PARTY RIGHTS. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person other than the parties
hereto any rights or remedies under or by reason of this Agreement.
6.7. SEVERABILITY. If any term of this Agreement or the application thereof to
any person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such term to any other Party,
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by Law.
6.8. COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.9. EXHIBITS. The Exhibits to this Agreement which are attached hereto and
referred to herein shall be deemed to be part of this Agreement for all
purposes. It is contemplated that various Exhibits may need to be amended from
time to time. Such amendments will be in a writing executed by appropriate
Representatives of each Party.
6.10. DISPUTE RESOLUTION. AlI disputes arising in connection with this Agreement
will be settled as set forth below. The parties agree that no disputes will be
submitted to litigation in any court, unless a Party shall refuse or
unreasonably delay in going forward with the alternative dispute resolution
procedures set forth herein.
6.10.1. MEDIATION BETWEEN PARTIES. The Parties agree to use their best
efforts to resolve between themselves any controversy or dispute arising out of
or in connection with this Agreement, its interpretation, performance, or
termination. Disputes will be resolved by discussions at the Plant Site level,
appealing to the Plant Managers. If unresolved, then
-44-
<PAGE> 50
EXECUTION COPY
by discussions at the home office and appealing to the chief manufacturing
managers of each Party. If still unresolved, then by discussions between the
presidents of the respective Parties. If those efforts are unsuccessful, the
Parties will submit to binding arbitration before arbitrators chosen as set
forth below.
6.10.2. ARBITRATION. Any controversy or dispute arising out of or in
connection with this Agreement, its interpretation, performance, or termination,
which the Parties are unable to resolve within a reasonable time after written
notice by one Party to the other of the existence of such controversy or
dispute, may be submitted to arbitration by either Party and, if so submitted by
either Party, shall be finally settled by arbitration in accordance with the
rules of arbitration of the American Arbitration Association ("AAA") in effect
on the effective date of this Agreement. Such arbitration shall be conducted
before a single arbitrator selected as set forth herein. Any such arbitration
shall take place in the City of Cleveland, Ohio, United States of America. The
arbitrator shall apply the laws of the State of Ohio. The institution of any
arbitration proceeding hereunder shall not relieve the Parties of their
obligations hereunder during the continuance of such proceeding. The decision by
the arbitrator shall be binding and conclusive upon the Parties, their
successors, and assigns and they shall comply with such decision in good faith.
The award of the arbitrator may include compensatory damages as set forth in
this Agreement (generally, Article IV) against either Party, but under no
circumstances shall the arbitrator award punitive or multiple damages against
either Party. Each Party hereby submits itself to the jurisdiction of the courts
of the place where the arbitration is held, but only for the entry of judgment
with respect to the decision of the arbitrator hereunder. Notwithstanding the
foregoing, judgment upon the award may be entered in any court having
jurisdiction.
The Parties will choose an arbitrator who is knowledgeable in the
subject matter of the dispute. For example, if the dispute involves a pricing
issue, arbitrators with financial
-45-
<PAGE> 51
EXECUTION COPY
or accounting expertise will be chosen. If the dispute involves compliance with
environmental Laws, legal and/or technical experts knowledgeable about
environmental compliance will be chosen. The Parties will attempt to choose an
arbitrator by mutual agreement. If agreement cannot be reached within thirty
(30) days after written notice demanding arbitration is given, then each Party
within five (5) days will choose one arbitrator, and these two arbitrators
within five (5) days will choose a third arbitrator, who will be the sole
arbitrator to hear and decide the matter. If the two arbitrators cannot agree
upon the third arbitrator within five (5) days, then the Parties shall ask the
AAA to submit a listing of ten (10) potential arbitrators who the AAA shall have
preliminarily cleared of potential conflicts of interest as to either of the
parties. The parties shall flip a coin, winner proceeding first, and
alternatively strike potential arbitrators until only three remain, who shall
then hear the arbitration in Greater Cleveland, Ohio, unless the Parties shall
mutually agree upon an alternate site. The Parties will share the costs and
expenses of the arbitrators equally.
6.11. MATERIAL OMISSION. The Parties acknowledge that a possibility exists that
the Parties have neglected to address an aspect of the providing of Services, or
the possible need for a particular Service not enumerated or subject to an
Exhibit herein. Should such an eventuality come to pass, the Parties will, upon
request of either Party, meet and negotiate in good faith to arrive at an
arrangement which would substantially correct the omission on an equitable and
economically fair basis. No Party shall have an obligation to agree to provide
or receive any particular Service however, nor shall a Party have an obligation
to agree at all on a mechanism for addressing an omission.
6.11.1. NEGATION OF PARTNERSHIP. Nothing contained herein
shall operate as creating an agency, partnership, co-partnership or joint
venture relationship between the Parties to this Agreement.
-46-
<PAGE> 52
EXECUTION COPY
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their behalf by their duly authorized officers as of the date and year first
written above.
THE GEON COMPANY
By: /S/ Gregory L. Rutman
--------------------------
Name: Gregory L. Rutman
Title: Vice President and General Counsel
THE B.F. GOODRICH COMPANY
By: /S/ Jon V. Heider
---------------------
Name: Jon V. Heider
Title: Senior Vice President and
General Counsel
28 April 93
-47-
<PAGE> 53
EXHIBIT 1.1.
Exhibit 1.1., which generally describes the real property boundaries of
the BFG Assets and the Geon Assets, will be attached at a later date.
<PAGE> 54
March 15, 1993
FINAL VERSION
GVD/SP&C SERVICE CONTRACT FINANCIAL TERMS
-----------------------------------------
LONG TERM CONTRACTS: (GENERALLY UTILITY & INFRASTRUCTURE)
SHORT TERM & TRANSITIONAL:
Provider charges recipient their portion of "1993 Full plant Cost
Less: any Early 1993 Separation Program Headcount Reductions"
FULL PLANT COST DEFINED:
o All traditional costs captured in the operating Department statements
of GVD & SP&C including Base Cost categories of Labor, Benefits,
Maintenance, Overheads, Insurance (both premium & self insurance
reserves), Taxes, Rent, & Depreciation. (Excludes any variable inputs
that are noted in the specific service contract to be billed
separately)
o A reasonable proportion of Plant Administration, HR, Accounting, MIS
etc. which legitimately support the area of service being provided but
have been direct charged to the manufacturing departments in the
plant. (It is intended that neither Division will be negatively
impacted by this re-allocation.)
o Excludes any allocations from Cleveland for costs such as Benefit
Administration, MRO Purchasing Support, Lights Out Computer Support,
etc. that have not been allocated to the Plant in the past.
o Asbestos removal expenses at Utility/Service facilities will be shared
in the same proportion as cost is shared. Will be billed as incurred.
o Calvert City - Calvert will include a 10% return on net capital
employed. Calvert's depreciation will be adjusted annually to actual
with generally no price level adjustment applied to Calvert Costs.
GENERAL FINANCIAL GUIDELINES EXHIBIT 1.1.18 Pp 1 of 6
<PAGE> 55
COST INDEXING OVER TIME:
All costs, except those specifically excluded below, will be adjusted
annually in February based on the change in agreed upon indices for the
prior December 31 to December 31 period. (Data is available in mid-January
and will be calculated by Provider home office, reviewed by recipient home
office, then communicated to the Plants - all Plants will use the same
index)
Indices to be used:
- 33% Employment Cost Index - Private Industry
- 67% Producer Price Index -Total Finished Goods Excluding Consumer
Foods.
Historical Impact:
Emp Cost PPI Weighted Average
1983 5.7 1.8 3.1
1984 4.9 1.4 2.6
1985 3.9 1.4 2.2
1986 3.2 (2.6) ( .7)
1987 3.3 2.1 2.5
1988 4.8 2.4 3.2
1989 4.8 5.0 4.9
1990 4.6 5.0 4.9
1991 4.4 3.0 3.5
1992 3.1 1.7 2.1
Costs Excluded From Indexing:
- Transitional Contracts with terms of 2 years or less.
- Variable Costs - based on actual such as electric,
coal, gas, purchased steam, etc. (Detail provided with billings)
- Henry - Boiler Depreciation
- Waste Treating - All Costs Based on Actual
- Calvert City - Most costs will be based on actual.
VARIABLE COSTS - Utility & Certain Other Variable Inputs
The variable portion of utility charges will be based on the
estimated/actual metered consumption for each unit summed up and
proportioned to the overall consumption at the site multiplied by the total
actual costs of the energy source provided to the site by the service
provider. (The intent is to fairly allocate any line losses, internally
consumed steam, transformer step down losses, etc.) This adjustment factor
that rolls up from metered to billed consumption will be established at the
beginning of the contract period and then will be adjusted as better
information becomes available and to the extent the recipient chooses to
GENERAL FINANCIAL GUIDELINES EXHIBIT 1.1.18 Pp 2 of 6
<PAGE> 56
participate in efficiency capital projects.
BUSINESS DISCONTINUANCE:
"Full Plant Cost" - to be incurred by either party over the contract term
will continue to be incurred by that party even if its operational
activity declines or ceases. The declining or closed business is entitled
to cost relief to the extent that the service can be operated at less
cost by the supplier because of the reducing parties reduced activity or
closure. Should the continuing party increase its utilization of the
assets in question, the ongoing cost to the reduced or closure party will
be reduced by the amount absorbed by the increased activity.
Variable Cost Penalties - The party that causes increases in the per unit
variable cost of an energy source due to the discontinuance of an
operation at the site will bear the cost of this increased unit amount
for the balance of the applicable contract period. (Remaining parties
should not see cost increases due to reduced energy source take.) If the
continuing party or parties increase their utility consumption at the
site the ongoing cost being absorbed by the discontinued party will be
reduced by the amount absorbed by the increased activity.
Required Investment - Should a reduction or closure of activity at a site
create investment requirements on the part of the continuing party to
maintain compliance with regulatory requirements, the cost of that
investment will be borne by the reducing party.
CAPITAL EXPENDITURES:
Maintenance Capital will be borne by the provider.
Expansion of Activities - Provider is not required to supply capacity
beyond existing system capability. Generally capital required due to
expansion of activities will be borne by the expanding party subject to
certain rules on the sharing of excess capacity prior to required
expansion. Capacity expansion will require negotiation at the time the
need is identified.
Regulatory Requirements - For capital investments required due to
Regulatory, legal, or other mandatory obligations the capital investment
will be made by the provider but will be funded (cash provided) based on
the party to which the regulation is directed, shared based on relative
contribution, or shared consistent with their utilization of the asset
depending on circumstances.
GENERAL FINANCIAL GUIDELINES EXHIBIT 1.1.18 Pp 3 of 6
<PAGE> 57
Productivity & Cost Reduction Capital - The provider of the services
will propose the investment opportunities to the recipient and will make
the capital investment. The provider will, in appropriation request form,
clearly and in detail identify the source (base cost or variable cost
efficiency) of the expected savings from the project.
The recipient will have two choices:
o Provide cash up front on a shared basis and receive its pro-rata
share of the benefits.
o Don't elect to provide cash on its pro-rata share and don't
receive any of the benefits.
The recipient will respond to any productivity or cost savings
proposals in a timely manner. (3 weeks)
HARDSHIP - Defined as Unforeseen Economic Conditions not addressed under
previous terms listed above in the Financial Terms and not covered
elsewhere in the agreement (such as force majeure, law changes, etc.).
Hardship can be invoked by provider or recipient of the services.
Materiality Triggers:
1) A significant event occurs which causes the hardship question to
be raised.
2) A 20% increase or decrease in the "Full Plant Cost" of the
specific service contract under discussion. (This 20% threshold
is tested against the original service contract Full Plant Cost
+- cumulative cost index adjustments up to the period when the
event occurs)
When the triggers are satisfied "Full Plant Cost" will be recalculated
and used beginning at the first day of the month following the significant
event month.
The audit provision, discussed later, could be invoked here. In the
event of disagreements that cannot be resolved internally a third party
arbitrator may be used.
GENERAL FINANCIAL GUIDELINES EXHIBIT 1.1.18 Pp 4 of 6
<PAGE> 58
RELIEF FOR POOR QUALITY SERVICE - The service recipient is generally entitled to
a quality of service equal to that which was being enjoyed prior to the
separation unless specified differently in the specific service contract
language. In the event of service quality deterioration the service
supplier must make good faith efforts to resolve the issue. If the problem
is not corrected within a reasonable time, the recipient is entitled to
cost relief. (The scope of cost relief is covered in the omnibus but
generally limits relief to out of pocket costs with no punitive damages.)
If the recipient feels they have a quality issue they should follow
the following procedure:
o Try to resolve it with the manager offering the service. If this
fails -
o Raise the issue between the Plant Managers at the site. If this
fails -
o Raise the issue to Home Office level manufacturing management
(Higby, LaCosse, Fletcher, etc)
o Home Office Level Management will raise the issue
jointly to the President level if required.
o Arbitration
Both GVD & SP&C management desire good working relationships between
GVD & SP&C employees at the plants. We expect the plant personnel to work
out most of these issues without raising them to Home Office.
PAYMENT TERMS:
VARIABLE COSTS - 12 calendar days following the end of the month.
FIXED PLANT COSTS - 12th calendar day of the month being billed.
The recipient of service will turn in all required meter readings on
the first working day of the new month.
The recipient will receive on the first or second work day a single
billing for all variable costs for the prior month and fixed costs for the
current month.
Variable Cost billings will be based on the prior month volume units
consumed priced at the actual cost from the month previous to the
consumption month.
Fixed Cost billings (Inflation for the prior calendar year will be
applied to billings from February through January)
GENERAL FINANCIAL GUIDELINES EXHIBIT 1.1.18 Pp 5 of 6
<PAGE> 59
AUDIT -
Supplier will provide all variable cost pricing detail (utility bills)
with each months bill. This should prevent any need to audit on the
variable cost areas.
For Fixed Costs the recipient of service has the right upon request to
have a third party audit of cost for any particular contract. (Generally to
be invoked as part of the hardship clause)
GENERAL FINANCIAL GUIDELINES EXHIBIT 1.1.18 Pp 6 of 6
<PAGE> 60
FOLLOWING ARE THE
CALVERT CITY PLANT EXHIBITS
TO THE
PLANT SERVICES AGREEMENT
BETWEEN
THE GEON COMPANY
AND
THE B.F.GOODRICH COMPANY
EXHIBIT 3.3
<PAGE> 61
ENVIRONMENTAL SERVICES AGREEMENT
--------------------------------
CALVERT CITY
------------
I. WASTEWATER TREATMENT SERVICES
-----------------------------
A. BACKGROUND
The Wastewater discharge to the Tennessee River is covered by
The BFGoodrich Company Permit KY0003848 issued by Kentucky on
October 1, 1992 (hereafter the "Permit"). The Permit contains
numerous prohibitions and specific discharge limitations.
B. PERMITTEE
BFG shall be the permittee.
C. DELIVERY POINT
The Delivery Point for the "C" stripper shall be the internal
discharge point 002.
D. SPECIFIC SERVICES
1. The following Services shall be provided to Geon by
BFG:
a. Wastewater collection and conveyance from
the Delivery Point, including:
i. Sampling of the 002 discharge and
the final discharge
ii. Discharge to the Tennessee River
b. Analytical data as required by the Permit
c. Administration of the Permit
2. Geon shall provide technical input and information
relative to Geon activities and Wastewaters as may be
necessary for BFG to provide the above-specified
Services or for BFG to conform to any provisions,
conditions or limitations of the Permit or any other
regulatory requirement.
3. BFG shall provide Geon technical information relative
to the Treatment System's performance and operation
in order to allow Geon to meet its obligations
hereunder.
CALVERT CITY
EXHIBIT 3.3(A) Page 1 of 4
<PAGE> 62
E. WASTEWATER SPECIFICATIONS
Geon shall cause the aquifer stripper to be operated in a
manner that will assure compliance with the discharge limits
at internal outfall 002.111 order to achieve this result, the
effluent from the "C" stripper to outfall 002 shall meet the
OCPSF (Organic Chemicals, Plastics, Synthetic Fibers) effluent
guidelines.
F. COST
TO BE DETERMINED BY THE FINANCIAL PEOPLE. MAY BE NO COST - OR
AN EVEN TRADE.
G. DURATION OF SERVICE
BFG shall provide the above-specified Services to Geon for an
initial term ending February 29, 2000. If either party intends
to terminate this Service at the end of the initial term, it
shall provide 36 months notice to the other Party. Otherwise,
this agreement shall continue from year to year until either
Party provides written notice to the other of its intent to
terminate in which case the agreement will terminate 36 months
from such notice.
II. RCRA, SUPERFUND AND OTHER REMEDIAL ACTIVITIES
---------------------------------------------
A. Geon shall be the permittee of the RCRA and HSWA ("Hazardous
and Solid Waste Amendments") permits.
B. Geon shall have a person assigned to the facility who is
responsible for the direction and control of all activities
conducted in connection with Geon's ownership and operation of
environmental equipment and other activities for which Geon is
responsible at Calvert City, including but not limited to:
1. The RCRA and HSWA post-closure permits, including but
not limited to the closed disposal area across
Highway 1523, the closed wastewater ponds, and the
aquifer stripper (including all groundwater
withdrawal wells and header systems)
2. The Superfund site
3. Any other environmental issues arising on Geon's
property or under the amended and restated Assumption
of Liabilities and Indemnification Agreement relating
to the Goodrich PVC business.
C. To the extent that BFG has utilities and properly-trained
manpower available at the Plant Site, BFG will make available
to Geon at Geon's expense the following services:
1. Utilities necessary to maintain and operate the
equipment and activities described in II B. above,
to the extent there is capacity to provide same.
2. Manpower as requested by Geon to maintain and operate
the equipment and activities described in II B.
above. Geon shall be responsible for
-2-
CALVERT CITY
EXHIBIT 3.3(A) Page 2 of 4
<PAGE> 63
determining what kind of training is appropriate to
be given to "properly-trained" workers, and Geon
shall reimburse BFG for the cost of delivering such
training.
D. DURATION
With the exception of the operation of the aquifer stripper,
the parties shall provide the above-specified Services to Geon
for an initial term ending February 29, 2000. If either party
intends to terminate this Service at the end of the initial
term, it shall provide 36 months notice to the other Party.
Otherwise, this agreement shall continue from year to year
until either Party provides written notice to the other of its
intent to terminate in which case the agreement will terminate
36 months from such notice. Geon shall not terminate the
operation of the aquifer stripper without first obtaining
consent from BFG, which consent will be given when BFG
determines that the RCRA and HSWA permits or other applicable
laws do not require further groundwater remediation. Provided,
however, that if there is a subsequent legal requirement to
recommence operation of the aquifer stripper to remediate the
current contaminants, Geon will restart the aquifer stripper
and continue to operate the aquifer stripper at Geon's cost as
if a cessation had not occurred.
E. COST - TO BE DETERMINED BY THE FINANCIAL PEOPLE. HOW WILL
MANPOWER AND UTILITY COSTS BE REIMBURSED?
III. STORMWATER MANAGEMENT SERVICES
------------------------------
A. BACKGROUND
Stormwater, non contact cooling water and other non
contaminated waters are discharged to the Tennessee River
through outfalls 004, 005 and 006 in accordance with KYPDES
permit KY003848. The permit establishes discharge quality
limits and requires periodic sampling, analysis and reporting.
The following provisions were drafted based on the assumption
that there would be a facility-wide permit and that each Party
would not need an individual stormwater permit.
B. FACILITY-WIDE PERMIT
1. Permitee. BFG shall be the permittee for all
stormwater discharges.
2. Delivery Point. The Delivery Point for Geon's
stormwater shall be its property boundary.
3. Specific Services. BFG shall administer the permit
and any modifications including but not limited to
preparation of applications for modification and
renewal, sampling, analysis, reporting and agency
interface.
-3-
CALVERT CITY
EXHBIT 3.3(A) Page 3 of 4
<PAGE> 64
4. Cost Mechanism.
5. Duration of Service. BFG shall continue to provide
this Service to Geon for an Initial term ending
February 29, 2000. if either party intends to
terminate this Service at the end of the initial
term, it shall provide 36 months notice to the other
Party. Otherwise, this agreement shall continue from
year to year until either Party provides written
notice to the other of its intent to terminate in
which case the agreement will terminate 36 months
from such notice.
C. FACILITY-WIDE OR INDIVIDUAL PERMIT
1. Geon shall provide BFG technical input and
information relative to the Geon's stormwater as may
be necessary for BFG to maintain its permit for
stormwater or for BFG to conform to any provisions,
conditions or limitations of its stormwater permit or
any other regulatory requirement. if each Party
requires a permit, BFG shall have the same obligation
to Geon.
2. At the request of BFG, Geon shall each develop and
implement a written stormwater protection plan based
on best management practices.
IV. OTHER ENVIRONMENTAL SERVICES
----------------------------
A. To the extent combined reports are required for calendar year
1992 and 1993, BFG shall prepare and submit the following
reports at no charge to Geon.
1. SARA Title III annual reports
2. Annual RCRA hazardous waste generator report
3. CMA annual solid waste survey
4. Kentucky air emission inventory
B. Geon shall provide technical input and information as
necessary for BFG to prepare the above-specified reports.
-4-
CALVERT CITY
EXHIBIT 3.3(A) Page 4 of 4
<PAGE> 1
Exhibit 10.14
AMENDED AND RESTATED
ASSUMPTION OF LIABILITIES AND INDEMNIFICATION AGREEMENT
RELATING TO THE
GOODRICH PVC BUSINESS
This Amended and Restated Assumption of Liabilities and Indemnification
Agreement, dated and effective as of March 1, 1993 as amended and restated on
April 27, 1993, is by and between:
THE GEON COMPANY, a corporation organized and existing under the laws
of the State of Delaware (hereinafter referred to as "Geon"), and
THE B.F.GOODRICH COMPANY, a corporation organized and existing under
the laws of the State of New York (The B.F.Goodrich Company and each of its
present and former divisions and each of its subsidiaries, whether owned
directly or indirectly, partially or wholly, are collectively referred to
herein as "Goodrich").
For good and valuable consideration to Geon, the receipt of which Geon
hereby acknowledges, Geon does hereby assume and agree to pay, perform and
discharge:
Each and every obligation and liability of Goodrich, and Geon further
agrees to defend and indemnify Goodrich, from every claim, demand,
obligation, liability, cost and expense, whether absolute, accrued or
contingent, whether disclosed or undisclosed, and whether in existence on
or arising after the effective date hereof, of every kind and description,
including without limitation compensatory, punitive and exemplary damages,
and to pay and perform on behalf of Goodrich all sums and obligations which
Goodrich may become obligated to pay or perform,
Relating to or arising out of the Goodrich PVC Business (this and other
capitalized terms used herein which are without definition shall have the
meaning given to such term in the Amended and Restated Separation Agreement
dated as of March 1, 1993, between Goodrich and Geon (the "Separation
Agreement")), and/or
Relating to or arising out of any operations of the Goodrich PVC
Business heretofore conducted and discontinued by Goodrich (hereafter
referred to as the "Discontinued Operations", which includes without
limitation any Discontinued Operations conducted at the plants and
facilities listed on Schedule I hereto or pursuant to any agreements
relating to the disposition or closing of any such plants and facilities,
whether or not traditionally considered part of the business conducted by
the Goodrich Geon Vinyl Division or any predecessor), and/or
Relating to or arising out of any activity or event in support of the
Goodrich PVC Business, and
Each and every obligation and liability of Goodrich specifically
described below, whether or not such obligation or liability relates to or
arises out of the Goodrich PVC Business:
-2-
<PAGE> 2
(a) All obligations and liabilities under all leases, agreements,
purchase orders, sales orders and other arrangements (including express or
implied warranties, claims and other rights) assigned to Geon by Goodrich,
or with respect to which Goodrich has agreed to give the benefits to Geon,
under the Amended and Restated General Assignment and Bill of Sale Relating
to the Goodrich PVC Business, dated as of March 1, 1993 (the "Bill of
Sale");
(b) All obligations and liabilities associated with
(i) All former employees of Goodrich whose names are listed on
Schedule II hereto (and their beneficiaries and surviving spouses),
regardless of the capacity in which such employees may have been
employed by Goodrich (referred to collectively as the "Goodrich
Inactives"); and
(ii) Those employees of Goodrich who are or who become
employees of Geon on or before October 1, 1994 (and their beneficiaries
and surviving spouses) (referred to collectively as "Goodrich
Actives"), whether or not their names are in Schedule II; and
(iii) All former employees of Goodrich (other than Goodrich
Inactives) who were at the time of their retirement or termination
employed in connection with the Goodrich PVC Business (other than at
the Facilities) or in a department from which employees were considered
(as between Goodrich and Geon) as obligations of Geon in preparing
Schedule II hereto (and their beneficiaries and surviving spouses)
(referred to collectively as the "Goodrich Historical Employees") (the
Goodrich Inactives, plus the Goodrich Actives, plus the Goodrich
Historical Employees, are for ease of reference hereafter collectively
referred to as "Goodrich Employees"); and
(iv) Including without limitation those obligations and
liabilities which arise under any collective bargaining agreement
covering any Goodrich Employee or under any pension, post-retirement,
health, accident, disability, compensation, incentive, bonus, deferred
compensation, benefit restoration, defined benefit, defined
contribution, interim or long-term incentive, supplemental executive
retirement, vacation, leave of absence (with or without pay), life or
other insurance, consulting, management continuity, survivor and other
welfare benefit plans or programs, whether or not such plans or
programs have been terminated, and all other employment-related claims
of the Goodrich Employees, or former employees of the Goodrich PVC
Business with respect to their employment, including without limitation
all obligations related to contracts or agreements or claims relating
to separation, severance, employment discrimination,
-3-
<PAGE> 3
age discrimination, equal employment opportunity, sexual harassment,
affirmative action, workers' compensation, employee safety and health,
personal injury, sickness or death arising out of or associated with
employment by Goodrich in any capacity, and collective bargaining and
other aspects of labor-management relations governed by the National
Labor Relations Act, any other Federal, State, local or foreign laws or
regulations relating to employment; and
(c) All obligations and liabilities resulting from claims for losses or
for personal injury or property damage, regardless of the theory of
liability upon which such claims are based, including without limitation
strict liability, inherently dangerous product, negligence, failure to
warn, compensatory, punitive and exemplary damages, and to pay on behalf of
Goodrich all sums which Goodrich should become legally obligated to pay as
damages because of bodily injury, property damage, or injury to the
environment relating to or arising out of the manufacture, sale, purchase,
handling, distribution or use of any product (including without limitation
intermediate products, co-products, by-products, wastes, precursors or raw
materials) currently or formerly manufactured, sold, purchased, handled,
distributed, used or otherwise dealt with, or any service directly or
indirectly provided, by Goodrich in connection with the Goodrich PVC
Business or any of the assets or obligations described in any Schedule to
this Agreement (i) whether or not such product or service may also have
been used or otherwise dealt with by Goodrich in other than the Goodrich
PVC Business, (ii) whether or not Goodrich manufactured the product or
provided the service or purchased the product or service in a business
other than the Goodrich PVC Business, (iii) whether or not the product or
service is traditionally considered part of the business conducted by the
Goodrich Geon Vinyl Division or any predecessor and (iv) whether or not the
assets for the manufacture of the product or the provision of the service
is part of the assets transferred by Goodrich to Geon pursuant to the
Separation Agreement; and
(d) All obligations and liabilities relating to outstanding bonds,
letters of credit, reimbursement agreements and indemnification and similar
agreements of every kind and description entered into, or hereafter entered
into, by Goodrich in connection with the Goodrich PVC Business or for the
benefit of Geon, including, in the case of bonds, without limitation surety
and appeal bonds, performance and return-of-money bonds, bonds entered into
in connection with workers' compensation, unemployment insurance and other
types of social security, and bonds entered into to secure the performance
of tenders, statutory obligations, bids, leases and other similar
obligations, including without limitation the bonds and other obligations
listed on Schedule III hereto or reflected in the Geon Financial Statements;
and
(e) All obligations and liabilities associated with every plant or
facility, whether currently operating (including without limitation those
listed on Schedule IV hereto; provided, however, (i) with respect to the
Shared
-3-
<PAGE> 4
Facilities, except as otherwise provided herein or in any Schedule hereto,
only those obligations and liabilities associated with the assets
transferred to Geon and (ii) with respect to the Facilities (and without
limitation, the obligations and liabilities included in subparagraph (p)
hereof), only those obligations and liabilities arising on or before the
IPO Date regardless whether the claim is first asserted before or after the
IPO Date), whether idle or sold, whether used at any time by Goodrich in
connection with the Goodrich PVC Business, and whether or not such plant or
facility may have also been used in a Goodrich business other than the
Goodrich PVC Business, including without limitation the plants and
facilities listed on Schedule I hereto; and
(f) All obligations and liabilities associated with every contractor
and/or facility used, or alleged to have been used, at any time by Goodrich
for the off-site treatment, storage, disposal, recycling, reuse,
reclamation, handling, and/or transportation of waste generated in
connection with the operations of the Goodrich PVC Business, including
without limitation those facilities and/or contractors listed on Schedule V
hereto; and
(g) The Environmental liabilities as set forth in Schedule VI; and
(h) All obligations and liabilities of every kind and description
relating to or arising out of any existing joint ventures, subsidiaries or
affiliates that in any way relate to the Goodrich PVC Business, including
without limitation those listed on Schedule VII hereto; and
(i) All obligations and liabilities of every kind and description
relating to or arising out of the joint ventures, subsidiaries or
affiliates that have been sold, dissolved or otherwise divested that in any
way relate to the Goodrich PVC Business, including without limitation those
listed on Schedule VIII hereto; and
(j) Except as may specifically be provided to the contrary in the Tax
Allocation Agreement, all obligations and liabilities for Taxes (including
those not yet due and payable) imposed upon or asserted against Goodrich by
any federal, state, local or foreign government or other taxing authority
in connection with or relating to the assets or operations of the Goodrich
PVC Business and in connection with the transactions contemplated by the
Separation Agreement; and
(k) All obligations and liabilities listed on Schedule IX hereto; to
the extent that Goodrich may have paid any such obligations or liabilities,
such payment shall be deemed to have been advanced on behalf of Geon, and
promptly following the completion of the Initial Public Offering Geon shall
pay to Goodrich such sums as Goodrich may have previously paid or advanced
on behalf of Geon; and
-4-
<PAGE> 5
(l) All past, present and future obligations and liabilities arising
out of or associated with the operation of the Facilities and the assets
and business conveyed by BFG Intermediates Company Inc. ("BFGI") to
Westlake Monomers Corporation ("Westlake") pursuant to the Master
Conveyance Agreement dated March 1, 1990 (the "Westlake Business") located
in Calvert City, Kentucky, including without limitation, all past, present
and future environmental, health and safety obligations and liabilities
heretofore or hereafter arising out of or associated with the operations of
the Facilities and the Westlake Business now or in the future, and all
Conditions (as that term is defined in Schedule VI hereto) now or in the
future existing in, on, under or above, or migrating from, the land and/or
groundwater of the Facilities or the Westlake Business; it being the
intention of the parties that Geon shall pay and indemnify Goodrich against
all past, present and future liabilities associated with the conduct of the
Goodrich PVC Business at the Facilities or the Westlake Business or any
Conditions in, on, under or above, or migrating from, the land and
groundwater of the Facilities or the Westlake Business, notwithstanding
that Goodrich or Westlake hold title thereto; and
(m) All obligations and liabilities of Goodrich accrued on or before
the IPO Date under the Master Conveyance Agreement and related documents
dated March 1, 1990 among Goodrich, BFGI and Westlake other than the Right
of First Refusal Agreement and the Option Agreement between such parties;
and
(n) All obligations and liabilities of Goodrich under the Resource
Conservation and Recovery Act ("RCRA") Corrective Action program with
respect to the Shared Facilities at Calvert City, Kentucky, as that program
currently exists or may be amended, modified, or expanded in the future;
and
(o) All obligations and liabilities of Goodrich under
(i) The RCRA and HSWA post-closure permits, including but not
limited to the closed disposal area across Highway 1523, the closed
wastewater ponds, and the aquifer stripper (including all groundwater
withdrawal wells and header Systems); and
(ii) The Superfund site at Calvert City, Kentucky; and
(p) All obligations and liabilities of (i) BFGI under a Sale of Gas
Agreement ("Gas Agreement") dated July 1, 1989, as amended, between BFGI
and Air Products and Chemicals, Inc. (" Air Products") and (ii) Goodrich
pursuant to an Indemnification Agreement ("Air Products Indemnification
Agreement") made March 1, 1990 from Goodrich to Air Products relating to
the Gas Agreement; and
(q) Except in the case of any obligation or liability specifically
assumed hereunder by being listed or described on any Schedule hereto, with
-5-
<PAGE> 6
respect to any obligation or liability that relates to the Goodrich PVC
Business as well as any business of Goodrich other than the Goodrich PVC
Business, the equitable portion of such obligation or liability that
relates to the Goodrich PVC Business; and
(r) All obligations and liabilities of whatever nature relating to or arising
out of the Goodrich PVC Business and not described specifically in
paragraphs (a) through (q) above.
Geon does hereby assume and agree to pay, perform and discharge the additional
obligations and liabilities of Goodrich specifically listed or described on any
of Schedules I through IX hereto or reflected in the Geon Financial Statements,
whether or not such additional obligations and liabilities relate to the
Goodrich PVC Business or traditionally are considered part of the business
conducted by the Goodrich Geon Vinyl Division or any predecessor.
PROVIDED THAT the obligations and liabilities assumed hereby are assumed by
Geon only (i) to the extent such obligations and liabilities are not covered
under any insurance policy or policies insuring Goodrich (whether or not Geon
is also insured thereunder) at any time in effect or (ii) if covered under any
such insurance policy or policies, (A) to the extent such obligations and
liabilities are subject to deductibles to, or self-insured retentions in
respect of, or are beyond the policy limits of, any such insurance policy or
policies, (B) to the extent that, although covered by such a policy or
policies, such obligations and liabilities are not paid or reimbursed by the
insurer, or (C) if such obligations and liabilities are paid or reimbursed by
such insurer, to the extent that such payments or reimbursements are
subsequently rescinded or required to be made to any third party in connection
with such insurance policy for any reason whatsoever, including as a result of
any claim under any indemnification or similar agreement, any drawing under a
letter of credit or any insolvency, bankruptcy, reorganization or similar
status or proceeding affecting such insurer;
PROVIDED FURTHER THAT in the event any insurer under any such insurance policy
or policies insuring Goodrich denies or refuses to acknowledge coverage with
respect to any such obligation or liability, or refuses to pay or reimburse
Goodrich in respect of any such obligation or liability as to which coverage
exists when due under the terms of such policy or policies, Geon (i) shall pay
and discharge such obligation and liability when due on Goodrich's behalf and
shall be subrogated to Goodrich's rights against its insurers under such
insurance policy or policies in respect of such obligation or liability to the
extent of any payment made or cost incurred in so paying and discharging any
such obligation or liability and (ii) may take such action as it deems
necessary or appropriate to challenge or contest such denial of or refusal to
acknowledge coverage or such refusal to pay or reimburse and to obtain the
benefits of such insurance for Goodrich, including instituting and maintaining
suit or other proceedings against such insurer in Goodrich's name; Goodrich
shall cooperate with Geon, at Geon's request and expense, in taking any such
action (or, if Geon may not institute or maintain suit or other proceedings
against such insurer in Goodrich's name, Goodrich shall, at Geon's request and
expense, institute and maintain any such suit or other
-6-
<PAGE> 7
proceedings), and if Goodrich recovers any amount from such insurer in respect
of which Geon is subrogated hereunder, Goodrich shall promptly pay such amount
over to Geon;
PROVIDED FURTHER THAT, to the extent that Geon receives the benefit of
any insurance policy insuring Goodrich with respect to any Loss (as hereinafter
defined), Geon shall promptly reimburse Goodrich, upon written demand by
Goodrich accompanied by documentation of the circumstances set forth in this
paragraph, for such amount as Goodrich is required to pay and does pay by way
of retrospective premiums adjustment in respect of such insurance policy on
account of any payment by the insurer thereunder in respect of such Loss;
PROVIDED FURTHER THAT, to the extent that Geon receives the benefit of
any insurance policy insuring Goodrich with respect to any Loss, if Goodrich
thereafter is required to pay any amount that would have been paid under such
insurance policy but for the exhaustion of the insurance available under the
terms of such insurance policy on account of (among other factors) the payment
by the insurer thereunder to or on behalf of Geon in respect of such Loss, Geon
shall promptly pay to Goodrich, upon written demand by Goodrich accompanied by
documentation of the circumstances set forth in this paragraph, the full amount
of such payment to or on behalf of Geon in respect of such Loss; and
PROVIDED FURTHER THAT Goodrich shall make available to Geon to the
extent it can (but without the obligation for Goodrich to incur any costs or
assume any liabilities) the benefit of any assumption of liability or
indemnification provision in any agreement with third parties with respect to
liabilities assumed by Geon hereby; provided however that, to the extent that
Geon receives the benefit of any such provision, if Goodrich thereafter is
required to pay any amount that would have been paid under such provision but
for the exhaustion of benefits under such provision on account of (among other
factors) the payment thereunder to or on behalf of Geon, Geon shall promptly
pay to Goodrich, upon written demand by Goodrich accompanied by documentation
of the circumstances set forth in this paragraph, the full amount of such
payment to or on behalf of Geon; and
PROVIDED FURTHER THAT the obligations and liabilities assumed hereunder
by Geon shall not include any of the following obligations and liabilities, all
of which shall be Goodrich Retained Liabilities:
(i) Except in the case of any obligation or liability specifically
assumed hereunder and/or by being listed or described on any Schedule
hereto or reflected on the Geon Financial Statements, the equitable portion
of any obligation or liability that relates to any business of Goodrich
other than the Goodrich PVC Business;
(ii) All obligations and liabilities (A) associated with active
employees of Goodrich (other than employees whose employment by Goodrich
terminates on, or is terminated prior to, the IPO Date) whose names are
listed on Schedule II hereto but who do not become employees of Geon before
October 1, 1994 and remain active employees of Goodrich, and (B) for
pension benefits associated with Goodrich Historical Employees;
-7-
<PAGE> 8
(iii) All obligations and liabilities (including those not yet due and
payable) for federal, state and local taxes on, or based on, income or
capital (including without limitation income, profits, franchise, doing
business and gross receipts taxes) occurring prior to the date of this
Agreement but only to the extent reflected in the Tax Allocation Agreement;
and
(iv) Except with respect to the Gas Agreement and the Air Products
Indemnification Agreement, all obligations and liabilities arising out of
the operations of the Facilities after the IPO Date; provided, however, a
claim which is first made after the IPO Date which relates to acts or
omissions occurring on or before the IPO Date, shall be deemed to involve a
claim arising on or before the IPO Date; and
(v) Except with respect to claims (A) relating to the PVC content (or
any raw material, ingredient, precursor of or any chemical breakdown,
decomposition, oxidation or byproducts of the PVC content), or (B)
specifically assumed by Geon in this Agreement or any Schedule attached
hereto, finished products containing PVC manufactured by Goodrich in a
business unit that has not traditionally been considered part of the
Goodrich Geon Vinyl Division or Goodrich PVC Business.
IN FURTHERANCE OF THE PURPOSES OF THIS ASSUMPTION, Geon hereby agrees
to indemnify and hold harmless Goodrich, its successors and assigns (each, an
"Indemnitee") from and against any and all losses, liabilities, claims,
damages, costs and expenses (including reasonable attorneys' fees and any and
all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever or in invoking or obtaining the benefits of insurance covering
Goodrich against any liabilities and obligations which would otherwise be
assumed by Geon hereunder and any compensatory, punitive or exemplary damages,
and to pay on behalf of Goodrich all sums which Goodrich shall become legally
obligated to pay as damages because of bodily injury or property damage
(collectively, "Loss") arising out of or related, or purporting to be related,
in any manner to the obligations and liabilities hereby assumed by Geon.
1. If any action is brought or any claim is made against any Indemnitee
and such Indemnitee determines that indemnification with respect to such action
or claim, in whole or in part, may be sought hereunder, such Indemnitee shall,
reasonably promptly following the receipt of notice of such action, and may,
following receipt of information indicating that an action is likely to be
instituted or a claim is likely to be made, notify Geon in writing of such
action or claim, and Geon shall assume the defense of such action or claim,
including the employment of counsel, unless such Indemnitee reasonably
determines that (w) a conflict of interest exists between Geon and such
Indemnitee with respect to the defense of such action or claim, (x) where any
Indemnitee believes a similar claim or action could be brought against it for a
Loss not assumed by Geon, (y) such assumption of defense is objected to by the
insurer under or is prohibited under any applicable insurance policy covering
such Indemnitee or (z) such action or claim relates in part to matters as to
which such Indemnitee is entitled to be indemnified hereunder (without regard
to the existence or non-existence of insurance covering Goodrich against Loss
arising out of or relating to
-8-
<PAGE> 9
such action or claim) and in part as to matters as to which such Indemnitee is
not entitled to be indemnified hereunder (without regard to the existence or
non-existence of insurance covering Goodrich against Loss arising out of or
relating to such action or claim) and such Indemnitee desires to assume the
defense of such action or claim. If the Indemnitee fails to give such notice of
an action in a timely manner and Geon is materially prejudiced in its defense
by such failure, Geon's liability in respect of such action shall be reduced to
the extent of such prejudice, provided, however, Geon's liability shall not be
reduced if Geon is not materially prejudiced in its defense of such action by
failure of such notice.
2. If such Indemnitee so determines that the matters specified in
clause (w), (x) or (y) of paragraph 1 above apply or if Geon shall not have
employed counsel and taken charge of the defense of such action at a reasonable
time, except, in the latter circumstance, where such Indemnitee shall have so
determined that the matters specified in clause (z) of paragraph 1 above apply
and therefore proceeds in accordance with paragraph 3 below, such Indemnitee
shall be entitled, upon notice to Geon, to employ its own counsel and retain
control of its own defense, but at the expense of Geon.
3. If such Indemnitee so determines that the matters specified in
clause (z) of paragraph 1 apply to any such action or claim, such Indemnitee
shall be entitled, upon notice to Geon, to undertake, conduct and control,
through counsel of its own choosing, the settlement or defense of such action
or claim, and Geon shall cooperate with such Indemnitee in connection
therewith; provided that such Indemnitee (i) shall permit Geon to participate
in such settlement or defense through counsel chosen by Geon whose fees and
expenses shall be borne by Geon and (ii) shall conduct the settlement or
defense of any such action or claim with due regard for the business interests
and potential related liabilities of Geon. Provided that if such Indemnitee
contests or settles such action or claim in good faith, such Indemnitee shall
be entitled to be paid or reimbursed by Geon for the portion of any loss
resulting from such action or claim and any expenses incurred by such
Indemnitee in defending or settling such action or claim to which the indemnity
under this Assumption applies. The provisions of this Assumption shall survive
and shall be enforceable by Goodrich's successors and assigns. In addition,
actual prior knowledge by any Indemnitee with respect to any matter as to which
indemnification may be sought hereunder shall not constitute a defense to Geon
or otherwise affect such Indemnitee's rights to indemnification pursuant to the
provisions of this Assumption.
NOTWITHSTANDING ANY OTHER PROVISION OF THIS ASSUMPTION OF LIABILITIES
AND INDEMNIFICATION AGREEMENT, this Assumption of liabilities and
Indemnification Agreement is not intended to expand the scope of any
liabilities assumed hereunder or to create any liabilities for Geon that
Goodrich did not previously have, and Geon does not intend hereby to undertake
any liability or obligations of any Person other than Goodrich.
THIS ASSUMPTION OF LIABILITIES AND INDEMNIFICATION AGREEMENT shall be
construed and enforced in accordance with the laws of the State of Ohio
applicable to agreements to be made and performed entirely within such State.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the Patties have caused this Amended and Restated
Assumption of Liabilities and Indemnification Agreement to be executed in their
behalf by their duly authorized officers as of the date and year noted above.
THE GEON COMPANY
By: /s/ Nicholas J. Calise
-----------------------------
Nicholas J. Calise
Secretary
Accepted and agreed on the
date set forth above.
THE B.F. GOODRICH COMPANY
By: /s/ Jon V. Heider
-------------------------------------
Jon V. Heider
Senior Vice President and General Counsel
-10-
<PAGE> 11
Schedule I Assumption of Liabilities
DISCONTINUED OPERATIONS; PLANTS AND FACILITIES
Note: Foreign locations may have been owned or operated through subsidiaries or
affiliated corporations, and may be included in Schedule VII or Schedule
VIII.
All aspects of the entire contractual relationship between Goodrich and Epton
Industries, and between Goodrich and lenders to Epton Industries,
notwithstanding that substitution of Geon for Goodrich may have occurred
respecting performance of some or all of such contracts. All aspects of the
business acquired by Epton Industries from Goodrich.
Abadan, Iran Administrative Offices:
Altamire, Mexico -----------------------
Auckland, New Zealand Atlanta, Georgia
Barry, Wales, United Kingdom Boston, Massachusetts
Calvert City, Kentucky++ Carson, California
Convent, Louisiana Chicago, Illinois
El Tablaso, Venezuela Cleveland, Ohio (Chester Avenue)
Henry, Illinois++ Cleveland, Ohio (Euclid Avenue)
Ireland Englewood Cliffs, New Jersey
Long Beach, California Houston, Texas (Milan)
Madras, India Houston, Texas (NASA One)
Metterdam, India Los Angeles, California
Mexico City, Mexico Middleburg Heights, Ohio
Niagara Falls, New York Tehran, Iran
Ocumare, Venezuela Waterloo, Ontario, Canada
Plaquemine, Louisiana
Rosario, Philippines
San Paulo, Brazil
Santa Jose, Costa Rica
Shawinigan, Quebec, Canada
Valencia, Venezuela
++ Shared Facility - Except as may be reflected otherwise in the Assumption of
liabilities and Indemnification Agreement or any Schedule thereto, only with
respect to the property transferred or relating to the Goodrich PVC Business
-11-
<PAGE> 12
Assumption of Liabilities
Schedule II
Goodrich Inactives
[Separate Computer Printout]
-12-
<PAGE> 13
Assumption of Liabilities
SCHEDULE III
Bonds and Other Obligations
Balance as of
March 1, 1993
Long Term Debt (Domestic)
IDRB - Salem, NJ 1980 10.75% $ 2,200,000
IDRB - Gulf Coast (Laporte 77) 6.0% 11,730,000
IDRB - Gulf Coast (Laporte 79) 6.75% 499,625
Lincoln & Southern Railroad 3.0% 991,107
-----------
Subtotal - Domestic Debt $15,420,732
Long Term Debt (Foreign)
Province of Quebec Int. Free Loan 1,416,240
-----------
Subtotal - Foreign Debt $ 1,416,240
-----------
Total - Domestic & Foreign Debt $16,836,972
Capital Leases
Independence Building 8.875% 4,224,560
IDRB - Ohio Air, 1975 825% 485,000
IDRB - Lorain, OH 1973 5.8% 1,000,000
IDRB - Salem "A", NJ 1975 8.25% 900,000
IDRB - Salem "B", NJ 1975 8.25% 220,000
-----------
Total Capital Leases $ 6,829,560
-----------
Total $23,666,532
===========
-13-
<PAGE> 14
Assumption of Liabilities
Schedule IV
Current Plants and Facilities
Principal Nature
Location of Property
- -------- ----------------
Independence, Ohio+ Administrative
Headquarters
Altona, Victoria, Australia x Manufacturing
Avon Lake, Ohio++ Manufacturing; Research
and Development
Calvert City, Kentucky * Manufacturing
Deer Park, Texas x Manufacturing
Henry, Illinois++ Manufacturing
Houston, Texas+ Administrative
LaPorte, Texas x Manufacturing
Long Beach, California Manufacturing
Louisville, Kentucky++ Manufacturing
Melbourne, Victoria, Australia x Administrative
Mentone, Victoria, Australia x Manufacturing
Niagara Falls, Ontario, Canada x Manufacturing
Pedricktown, New Jersey++ Manufacturing
Plaquemine, Louisiana Manufacturing
Scotford, Alberta, Canada x Manufacturing
Shawinigan, Quebec, Canada x Manufacturing
Terre Haute, Indiana Manufacturing
Waterloo, Ontario, Canada x Administrative
+ Leased
x Owned or leased by subsidiaries
++ Shared Facility - Except as may be reflected otherwise in the
Assumption of liabilities and Indemnification Agreement or any Schedule
thereto, only with respect to the property transferred or relating to the
Goodrich PVC Business
* Including all liabilities of the Goodrich PVC Business related to (i) the
Facilities prior to the IPO Date, and (ii) the Westlake Business, even though
such assets are not conveyed to Geon pursuant to the Bill of Sale.
-14-
<PAGE> 15
Assumption of Liabilities
SCHEDULE V
OFF-SITE WASTE CONTRACTORS AND FACILITIES
Brio Refining
Chem Dyne
Industrial Solvents
Kramer Landfill
Lee's Lane
Silresim
Spaadra Landfill
Turtle Bayou
-15-
<PAGE> 16
Assumption of Liabilities
Schedule VI
Environmental Liabilities
I. General Principles
A. "Environmental liabilities" shall mean a) fines and penalties b)
administrative or judicial orders c) judgments d) other legal
obligations to conduct "response" activities as that term is defined
at 42 USC Sec. 9601(25) and e) claims for contribution to or
participation in response activities conducted by others f) claims for
natural resource damages, imposed under or arising out of any federal,
state, local or foreign provisions that have been enacted, adopted or
promulgated regulating the discharge of materials into the
environment, including but not limited to the Clean Air Act, the
Federal Water Pollution Control Act, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response and Liability
Act, the Safe Drinking Water Act, the Emergency Planning and Community
Right to Know Act, the Oil Pollution Act of 1990, the Pollution
Prevention Act of 1990, and the Toxic Substances Control Act all as
may be amended, regardless of whether such Environmental Liabilities
occur on or arise from the use of property currently or formerly owned
or operated by the Parties or on property owned by third parties.
B. With regard to the property belonging to each party at the conclusion
of the transaction contemplated hereby, each party shall be
responsible for Conditions on its own property, except as specified in
Section II hereof.
C. For purposes of this Schedule the term "Conditions" shall mean the
presence of any substance or contamination contained on, released to,
or placed on or in the property.
D. The following guidelines shall apply to any joint onsite Environmental
Liabilities at Shared Facilities:
1. The parties will seek to avoid governmental involvement in
any onsite response actions to the extent possible.
2. The parties will consult with each other in order to determine the
timing and scope of any response actions.
3. In the case of Pedricktown, Avon Lake Technical Center, Louisville
and Calvert City, Geon shall have the right to make the final
decision on the timing and scope of how to address joint
Environmental Liabilities; at Henry and Avon Lake General Chemical,
Goodrich shall have such right.
-16-
<PAGE> 17
4. Each party will provide reasonable access to its property to the
other party for purposes of addressing joint Environmental
Liabilities.
5. To the extent that addressing a separate onsite Environmental
Liability might impact the operations or obligations of the other
party, the parties shall consult and attempt to reach agreement as
to the appropriate course of action.
II. Onsite Environmental Liabilities arising out of Conditions that existed
prior to March 1, 1993 at Shared Facilities
A. Henry
All known and unknown Environmental Liabilities arising out of
Conditions that existed on or before March 1, 1993, resulting
from the onsite landfills or ponds, or any groundwater contamination
shall be shared fifty percent (50%) Goodrich and fifty percent (50%)
Geon.
B. Calvert City
Geon assumes all known and unknown Environmental Liabilities arising
out of (i) Conditions that existed on or before the IPO Date
including those existing on Geon's property, those existing on
Westlake Monomer Corporation's property, those existing on Goodrich's
property (except for non-groundwater contamination caused clearly and
solely by the Carbopol plant and not covered by the existing RCRA
Corrective Action program), (ii) those conditions that existed prior
to, on or after the IPO Date arising out of or associated with the
Environmental Liabilities retained by Goodrich or of BFGI under the
Master Conveyance Agreement dated March 1, 1990 among Goodrich, BFGI
and Westlake; and (iii) Goodrich's obligation under the RCRA
Corrective Action program, as that program may be amended, modified or
expanded in the future.
C. Pedricktown
Specific onsite Environmental Liabilities, known or unknown, arising
out of Conditions which existed on or before March 1, 1993 shall be
shared as follows:
1. Closure of the final effluent pond--25% Goodrich and 75% Geon
2. Closure of the stormwater pond--10% Goodrich and 90% Geon
3. Except as provided in Paragraph II.C. 1. and 2. above and the
following sentence, all ECRA investigation, procedural, and
remediation costs shall be paid for 100% by Geon and shall be
-17-
<PAGE> 18
commenced after the initial public offering and completed in a
timely manner. Soil remediation, if any, on Goodrich's
property caused by the operations conducted by the Specialty
Polymers and Chemicals Division of Goodrich shall be performed and
paid for by Goodrich. All groundwater remediation, regardless of
source, shall be paid for one hundred percent (100%) by Geon.
D. Louisville
Specific onsite Environmental Liabilities arising out of Conditions
that existed on or before March 1, 1993 shall be shared as follows:
1. The costs for any groundwater remediation (except for the
creosote area and any contamination from it) shall be shared fifty
percent (50%) Goodrich and fifty percent (50%) Geon until
chloroform under or released from Goodrich's property has been
remediated to agreed concentrations. If the parties cannot agree
on the appropriate level of concentration, the question may be
submitted to binding dispute resolution in accordance with
provisions of the Plant Services Agreement. Thereafter, all costs
shall be borne by Geon. Geon shall perform all activities
associated with groundwater remediation.
2. Any additional costs associated with the closure of the mineral
spirits tank (other than groundwater) will be shared fifty
percent (50%) Goodrich and fifty percent (50%) Geon.
3. Geon shall have one hundred percent (100%) of any liability
associated with the "creosote area" or any contamination from it,
both surface and groundwater.
E. Avon Lake
Specific onsite Environmental Liabilities arising out of Conditions
that existed on or before March 1, 1993 shall be shared as follows:
If there is a groundwater study, and if the groundwater is found to be
contaminated, and any contamination requiring remediation can be
determined to have been caused by one party, that party shall have one
hundred percent (100%) of the responsibility for any remediation. If
both parties caused any contamination requiring remediation, they will
share the costs for remediation of the groundwater fifty percent (50%)
Goodrich and fifty percent (50%) Geon. Contamination caused by one
party but not at a level requiring remediation shall not cause that
party to contribute to the cost of groundwater remediation.
-18-
<PAGE> 19
III. Offsite Environmental Liabilities
A. For known and unknown offsite Environmental Liabilities arising out of
Conditions that were caused by Geon's past or future operation of
facilities now owned or operated and/or formerly operated
exclusively by it (or the Goodrich PVC Business) Geon shall be 100%
responsible. Currently identified sites in this category include:
Brio Refining
Chem Dyne
Industrial Solvents
Kramer Landfill
Lee's Lake
Silresim
Spaadra Landfill
Turtle Bayou
B. For known and unknown offsite Environmental Liabilities arising out of
Conditions that existed on or before March 1, 1993 due to the
operation of Shared Facilities, the initial apportionment of
liability shall be thirty percent (30%) Goodrich's and seventy percent
(70%) Geon's (subject to adjustment as set out in IV.B. below).
Notwithstanding the foregoing, liability for the following identified
sites shall be shared in the proportions shown:
Kin Buc (40% Geon/60% Goodrich)
Maxey flats (70% Geon/30% Goodrich)
Mobile Tank Service (30% Geon/70% Goodrich)
O'Bryan Site (75% Geon/25% Goodrich)
C. For known and unknown offsite Environmental Liabilities arising out of
Conditions that existed on or before March 1, 1993 due to the
operation of one or more facilities owned or operated by
Goodrich and one or more facilities owned or operated by Geon (or the
Goodrich PVC Business), the nodule apportionment of liability shall be
fifty percent (50%) Geon's and fifty percent (50%) Goodrich's (subject
to adjustment as set out in IV.B. below).
D. For known and unknown offsite Environmental Liabilities (other than
those covered by Paragraph III.B. and C. above) arising out of
contractual arrangements or other business dealings entered into by or
on behalf of and for the benefit of the Goodrich PVC Business or Geon
prior to or after March 1, 1993, or assigned to Geon in this
agreement, Geon shall have one hundred percent (100%) of such
liability.
IV. Response to Claims Concerning Environmental Liabilities
A. If either patty receives an Environmental Liability claim, including
but not limited to governmental information requests, notices of
potential
-19-
<PAGE> 20
responsibility under CERCLA or any state counterparts, governmental
orders or suits, third-party demands or suits or any other claim,
demand or action involving an Environmental Liability covered by
Section III (hereafter "Claims") and such claim involves or may
involve the other party, the following procedures shall be followed:
1. The recipient party shall notify and provide a copy of the
Claim to the other party within a reasonable time of receipt or
knowledge of such Claim and the non-recipient party shall
immediately assume responsibility for its portion of such Claim as
if it had received the Claim itself
2. if the Claim involves shared responsibility between Goodrich and
Geon, the parties shall enter into discussions to facilitate a
response to such Claim.
3. In general, each party is responsible for representing itself as
to its portion of any Claim.
4. Notwithstanding Paragraph IV.A.3. above, if the Claim is one
requiring greater involvement of one or both parties than merely
preparing a response to third-party correspondence, the parties
will endeavor to work cooperatively to determine a strategy for
addressing such Claim; such strategy might include hiring common
outside counsel or consultants, having one party act on the other
party's behalf as to one or more aspects of the Claim, sharing
information, or formulating a joint negotiating strategy.
5. To the extent one party is authorized by the other to act on its
behalf, the party authorizing such action shall indemnify and hold
the other party harmless for the implementation of such actions.
B. In the case of an Environmental Liability arising out of Paragraphs
III.B. and C. above, the nodule percentage of each party's liability
may be adjusted based on records or other information concerning the
amount or kind of materials or hazardous substances disposed at that
site. The parties may agree upon an interim adjusted allocation that
will not be final or binding on either party if dispute resolution
will be invoked. if no final agreement is reached, the allocation
shall be submitted to binding dispute resolution in accordance with
the provisions of the Plant Services Agreement. The burden shall be
on the party seeking the adjustment to demonstrate the appropriate
amount of any adjustment and the arbitrator shall resolve any dispute
by adopting the allocation that is most reasonable in view of the
nodule percentages and the burden on the party seeking change.
Credit shall be given for any interim payments made by either party in
calculating the final allocated amount.
-20-
<PAGE> 21
Assumption of Liabilities
Schedule VII
Existing Joint Ventures, Subsidiaries and Affiliates
Lincoln & Southern Railroad Company
Geon Canada Inc.
BFGoodrich Australia Limited
BFGoodrich Chemical Limited
HydroGeon (formerly HydroGoodrich)
LaPorte Chemicals Corp.
The Geon Technology Company
Resintech, S.A.
BFGoodrich Chemical de Venezuela CA
150730 Canada Inc.
Goodrich Engineering Vinyls Limited
-21-
<PAGE> 22
Assumption of Liabilities
Schedule VIII
Corporations, Joint Ventures and Affiliates that
Goodrich has Sold, Dissolved or Otherwise Divested, wholly or partly
ABADAN Petrochemical Company Limited
BFG Intermediates Company Inc. (formerly Convent Chemical Corporation)
B.F.Goodrich Canada Limited
B.F.Goodrich Canada Inc.
138711 Canada Inc.
B.F.Goodrich Chemical (N.Z.) Limited
B.F.Goodrich Ireland Limited
B.F.Goodrich Quimica De Costa Rica
BFGoodrich Precision Plastics Pty Ltd.
BFGoodrich Trading Pty. Limited
British Geon, Ltd
Chemicals and Plastics India Limited
The Japanese Geon Co., LTD
Phillipine Vinyl Consortium, Inc.
Policyd, SA (formerly Geon de Mexico SA)
Plasticos Petroquimica, CA
Quimica Organica de Mexico, SA
S/A Geon Do Brasil
-22-
<PAGE> 23
Assumption of Liabilities
Schedule IX
-----------
Specific Obligations to be Assumed by Geon
1. New York Stock Exchange Listing Fee - estimated to be $112,125
2. Engraving expenses for Geon stock certificates
3. All fees and expenses including but not limited to: counsel fees (both bank
and Geon); commitment fees; structuring fees; syndication fees; termination
fees; agency fees, administration and audit fees; investor fees; facility
fees; and market fees in connection with any interim or permanent financing
facility, including with a group of banks with Citicorp USA Inc. or its
affiliate as agent.
4. All fees, costs and expenses in connection with the qualification of Geon to
do business in various states, including the fees and expenses of agents for
the service of process.
-23-
<PAGE> 1
Exhibit 10.15
EXECUTION DOCUMENT
INTERMEDIATES SUPPLY AGREEMENT
between
THE B.F.GOODRICH COMPANY
and
THE GEON COMPANY
<PAGE> 2
EXECUTION DOCUMENT
TABLE OF CONTENTS
Page
----
Article 1 Product and Quality 1
Article 2 Term of Agreement 2
Article 3 Quantities 4
Article 4 VCM Exchanges 6
Article 5 Measurements and Tests 6
Article 6 Destinations and Shipping Terms 7
Article 7 Prices 8
Article 8 Terms of Payment 16
Article 9 Warranties, Claims and Limitations 17
Article 10 Force Majeure 18
Article 11 Fees, Taxes and Governmental Charges 19
Article 12 Assignments 20
Article 13 Indemnification 21
Article 14 Arbitration/Dispute Resolution 22
Article 15 General Provisions 24
2
<PAGE> 3
EXECUTION DOCUMENT
INTERMEDIATES SUPPLY AGREEMENT
THIS INTERMEDIATES SUPPLY AGREEMENT (this "Agreement") is entered
into as of ___________,1993, by and between THE B. F. GOODRICH COMPANY, a New
York corporation ("BFG"), and THE GEON COMPANY, a Delaware corporation ("Geon").
W I T N E S S E T H:
--------------------
WHEREAS, BFG wishes to sell and deliver certain chemical products to Geon
in accordance with the terms and provisions hereof; and
WHEREAS, Geon wishes to purchase and receive such chemical products from
BFG in accordance with the terms and provisions hereof;
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE 1
---------
PRODUCT AND QUALITY
-------------------
BFG shall sell and deliver to Geon and Geon shall purchase and receive from
BFG ethylene, chlorine, vinyl chloride monomer, and ethylene dichloride meeting
the specifications set forth in Exhibit 1, which is attached hereto and
incorporated by reference herein (such products being hereinafter individually
referred to as "Ethylene," "Chlorine," VCM," and "EDC," respectively, and
collectively as the "Products"). With respect to EDC, BFG shall be obligated to
sell and deliver, and Geon shall be obligated to purchase and receive EDC only
if and at such time as BFG builds or acquires an EDC manufacturing facility at
or near BFG's Calvert City, Kentucky manufacturing plant (the "Calvert City
Plant").
<PAGE> 4
ARTICLE 2
---------
TERM OF AGREEMENT
-----------------
A. TERM GENERALLY. This Agreement shall be effective as of the date at
which the registration statement to be used for the Initial Public Offering by
Geon is declared effective by the Securities and Exchange Commission, and shall
terminate as follows: As to Ethylene and Chlorine this Agreement shall terminate
on March 1, 2000 (except as provided in Paragraph C of this Article 2); as to
VCM, this Agreement shall terminate on February 29, 1996 (except as provided in
Paragraph C of this Article 2), unless Westlake Monomers Corporation
("Westlake") terminates, as of January 1, 1996, its deliveries of VCM to BFG
under the Conversion Agreement, between BFG Intermediates Company Inc. ("BFGI")
and Westlake, dated March 1, 1990 (the "Conversion Agreement"), in which case
this Agreement shall terminate as to VCM as of January 1, 1996 (except as
provided in Paragraph C of this Article 2); as to EDC, this Agreement shall
terminate on March 31, 2003. The Conversion Agreement is hereby incorporated by
reference herein.
B. EARLY TERMINATION OF WESTLAKE AGREEMENTS. Except as provided in
Paragraph C of this Article 2, in the event that the Conversion Agreement is
terminated before January 1, 1996, for any reason, this Agreement shall
terminate as to VCM as of the date of such termination of the Conversion
Agreement. Except as provided in Paragraph C of this Article 2, in the event
that the Ethylene Supply Agreement, between BFGI and Westlake, dated as of March
1, 1990 (the "Ethylene Supply Agreement") is terminated before March 1, 2000,
for any reason, this Agreement shall terminate as to Ethylene as of the date of
termination of the Ethylene Agreement. Except as provided in Paragraph C of this
Article 2, in the event that the Chlorine Supply Agreement, between BFGI and
Westlake, dated as of March 1, 1990 (the "Chlorine Supply Agreement") is
terminated before March 1, 2000, for any reason, this Agreement shall terminate
as to Chlorine as of the date of termination of the Chlorine Supply Agreement.
The Ethylene Supply Agreement and the Chlorine Supply Agreement are hereby
incorporated by reference herein.
C. EXTENSIONS. Notwithstanding any provision of this Agreement to the
-2-
<PAGE> 5
contrary, m the event that the exchange rights of Westlake under the Ethylene
Supply Agreement and/or the Chlorine Supply Agreement are extended beyond March
1, 2000, as evidenced by a written document to that effect between BFG and
Westlake, this Agreement shall be extended as to Ethylene and/or Chlorine, as
the case may be, for the term of such extension(s) of the Ethylene Supply
Agreement and/or the Chlorine Supply Agreement. provided that this Agreement
shall not be so extended beyond September 1, 2000 without the prior written
consent of Geon.
D. TERMINATION ON SALE OF FACILITIES. This Agreement may be terminated, as
to Ethylene or Chlorine only, by either party upon (1) the sale of BFG's
Ethylene and/or Chlorine manufacturing facilities located at the Calvert City
Plant. as the case may be, plus (2) twelve (12) months prior written notice, or
such longer or shorter notice as may be mutually agreeable to BFG and Geon. In
such event. this Agreement shall continue as to the manufacturing facilities
which are not sold. This Agreement shall also continue as to VCM purchases and
VCM exchanges in accordance with the terms and conditions hereof and of the
Conversion Agreement.
E. TERMINATION ON SALE OF BFG SUBSIDIARY. In the event that BFG exercises
its right. under Article 12 hereof, to assign this Agreement to a subsidiary of
BFG, which subsidiary operates the Ethylene and/or Chlorine manufacturing
facilities located at the Calvert City Plant and/or EDC manufacturing facilities
hereafter built or acquired by BFG at or near the Calvert City Plant. and BFG
subsequently decides to sell, transfer, convey, or otherwise dispose of all or a
controlling portion of the common stock of such subsidiary, then this Agreement
may be terminated, as to Ethylene, Chlorine, and/or EDC, as the case may be, by
either party, at or after the closing of such sale, transfer, conveyance, or
disposition.
F. EARLY TERMINATION BY BFG. This Agreement may also be terminated, in
whole or in part. by BFG for any reason upon twelve (12) months prior written
notice to Geon, or longer if mutually agreed.
-3-
<PAGE> 6
ARTICLE 3
---------
QUANTITIES
----------
A. ETHYLENE AND CHLORINE. BFG agrees to sell and deliver, or cause to be
delivered, pursuant to the Ethylene Supply Agreement or the Chlorine Supply
Agreement, and Geon agrees to purchase from BFG and to receive from or on behalf
of BFG, at Geon's LaPorte, Texas manufacturing plant (the "LaPorte Plant"),
Ethylene and Chlorine m amounts equal to all amounts of Ethylene and Chlorine
that BFG is obligated to accept on an exchange basis from Westlake under the
terms and provisions of the Ethylene Supply Agreement. the Chlorine Supply
Agreement and the Conversion Agreement.
B. VCM. BFG agrees to sell and deliver, or cause to be delivered, and Geon
agrees to purchase from BFG and to receive from or on behalf of BFG, pursuant to
the terms and conditions of the Conversion Agreement. VCM in amounts equal to
the entire amount of the VCM received by BFG from Westlake at or near the
Calvert City Plant under the terms of the Conversion Agreement (less any amounts
needed for BFG's own internal needs), regardless of whether received by BFG from
Westlake on a contract manufacturing basis or on a direct sale basis. Geon shall
provide BFG with forecasts of its estimated VCM needs hereunder at least thirty
(30) days prior to the beginning of each quarter. Geon shall participate with
BFG in annual production forecast reviews with Westlake, as contemplated by
Section 2.4 of the Conversion Agreement.
C. EDC. In the event that BFG builds or acquires an EDC manufacturing
facility at or near the Calvert City Plant. BFG shall sell and deliver and Geon
shall purchase and receive from BFG, for shipment to such locations as Geon
shall designate, EDC in amounts equal to the entire output of such EDC
manufacturing facility, estimated to be up to a maximum of eight hundred and
fifty million pounds per year of EDC (or such other amount which in BFG's
opinion represents the maximum turndown rate of the Ethylene Plant). The parties
will agree to an increase in the capacity of the EDC plant and the maximum
annual quantity of EDC to be purchased by Geon pursuant to this Agreement if
they mutually determine that such increases may result in significant economic
benefits for each of them.
-4-
<PAGE> 7
If BFG decides to build an EDC manufacturing facility at or near Calvert City,
Kentucky, BFG will consult with Geon with respect to that decision. Geon will
have the opportunity to supply the process design for the EDC unit. BFG will
further consult with Geon regarding the size of the facility and the
construction design, engineering, procurement and installation of the EDC unit.
facilities for the receipt. storage and handling of additional Chlorine and the
storage, loading and transportation of EDC; and the permits that might be
required. Geon will be given an opportunity to participate in the supervision of
purchasing and construction and in the negotiation of any purchase contracts for
additional Chlorine that might be necessary to supply Chlorine to such facility.
D. NOTICES RE EXCHANGES WITH WESTLAKE Geon shall provide BFG with written
notice of the termination and expiration dates and quantities of each of its
Ethylene and Chlorine supply contracts for supply of Ethylene or Chlorine to the
LaPorte Plant and to one or more converters for conversion into EDC for
consumption by Geon at the LaPorte Plant. Such notices shall be provided as
required by and in accordance with the terms and provisions of the Ethylene
Supply Agreement or the Chlorine Supply Agreement. as the case may be, provided,
however, that any such notice shall be delivered by Geon to BFG at least ten
(10) days in advance of the date on which identical notice must be given to
Westlake under the terms of the Ethylene Supply Agreement or the Chlorine Supply
Agreement. as the case may be. Within 10 days after receipt of written notice
from Westlake of Westlake's intention to exercise its exchange rights to
exchange Ethylene or Chlorine under the Ethylene Supply Agreement or the
Chlorine Supply Agreement. BFG shall give written notice to Geon regarding BFG's
intention to sell and deliver such quantities of Ethylene or Chlorine to Geon
pursuant to the terms of this Agreement. Such notice shall specify, to the
extent communicated by Westlake, the commencement date of such sales and
deliveries and the quantities and expiration dates of such sales and deliveries.
-5-
<PAGE> 8
ARTICLE 4
---------
VCM EXCHANGES
-------------
Geon shall perform, on behalf of BFG, all obligations that BFG may have
under Section 7.13 ("VCM Exchanges") of the Conversion Agreement. Accordingly,
BFG (or Westlake as BFG's designee) shall have the right to receive from Geon,
in exchange (on a pound-for-pound basis with no differential payment by either
party) for deliveries of VCM to Geon at the Calvert City Plant. like quantities
of VCM (meeting the specifications for VCM set forth in Exhibit 1 hereto)
delivered by Geon to BFG (or such designee) at the LaPorte Plant sufficient to
enable BFG to satisfy such obligations.
Within ten (10) days alter receipt of written notice from Westlake of
Westlake's intention to exercise its exchange rights for VCM under the
Conversion Agreement. BFG shall give written notice to Geon regarding BFG's
needs for VCM to satisfy its exchange obligations to Westlake under the
Conversion Agreement. Such notice shall specify the commencement date of such
deliveries, the quantities and expiration date of such deliveries, and the
method of delivery. All terms and conditions of the Conversion Agreement that
are applicable to such VCM exchanges shall be deemed incorporated herein by
reference. BFG shall request of Westlake that annual exchange quantities be
scheduled equitably among the four calendar quarters.
ARTICLE 5
---------
MEASUREMENTS AND TESTS
----------------------
A. Geon shall be responsible for measuring the quantities of the Products
delivered to or at the LaPorte Plant by or on behalf of either party hereunder
and for sampling, testing, analyzing, and evaluating the quality (i.e.,
conformance to the specifications set forth in Exhibit 1 hereto) of all Products
delivered to or at the LaPorte Plant hereunder. Geon shall retain, for a period
of at least one (1) year, complete records of such measurements, samples, tests,
analyses, and evaluations and shall make the same
-6-
<PAGE> 9
available to BFG upon reasonable notice during normal business hours. BFG shall
have the right to obtain copies of such measurements, samples, tests, analyses,
and evaluations.
B. Geon shall provide reasonable assistance to BFG in the event of any
Product warranty claims by Geon for which BFG decides to make an analogous claim
with Westlake
C. BFG shall obtain certificates of analysis from Westlake for all
shipments of Product (to the extent BFG is entitled to receive such certificates
under the Ethylene Supply Agreement. the Chlorine Supply Agreement. and the
Conversion Agreement). BFG shall provide Geon at the time of shipment with
copies of all such certificates of analysis provided by Westlake.
ARTICLE 6
---------
DESTINATIONS AND SHIPPING TERMS
-------------------------------
A. ETHYLENE AND CHLORINE. Ethylene and Chlorine may be delivered to Geon
and shall be accepted by Geon on behalf of BFG at Geon's LaPorte Plant. in
accordance with the exchange provisions of the Ethylene Supply Agreement and the
Chlorine Supply Agreement. All shipments will be F.O.B. Geon's LaPorte Plant.
The parties agree to use their best efforts to cooperate with each other in
arranging exchanges of Ethylene and Chlorine so as to fulfill the parties'
obligations under this Agreement and under the Ethylene Supply Agreement and the
Chlorine Supply Agreement in the most expeditious and cost-effective manner for
both parties. BFG shall request of Westlake that Westlake provide to Goodrich
and to Geon by October 1 of each calendar year, a schedule of the chlorine
shipments to Geon for the following year.
B. VCM AND EDC. VCM and EDC (if any) shall be delivered to Geon F. O. B.
the Calvert City Plant. Tide to and risk of loss for all VCM (whether purchased
or exchanged) shall pass to Geon at the Point of Product Delivery (as defined in
the Conversion Agreement). Tide to and risk of loss for all EDC shall pass to
Geon at a point of EDC delivery at Calvert city to be established by BFG. Geon
shall provide railcars
-7-
<PAGE> 10
and/or barges necessary to move the VCM and EDC to Geon's desired destinations.
Geon shall bear all loading, freight and insurance costs associated with the
movement of VCM and EDC from the Calvert City Plant to Geon's desired
destinations.
C. DELIVERY OF VCM BY GEON FOR EXCHANGE TO WESTLAKE. Geon shall deliver VCM
(referred to in Article 4 hereof) to Westlake, as BFG's designee, at the LaPorte
Plant. for exchange by BFG with Westlake, pursuant to the terms and provisions
of the Conversion Agreement.
ARTICLE 7
---------
PRICES
------
A. ETHYLENE. The purchase price to be paid by Geon to BFG for Ethylene
delivered to Geon pursuant to this Agreement shall be determined on a monthly
basis and shall be equal to the "Ethylene Market Price" during such month.
1. For purposes of this Agreement. the term "Ethylene Market Price" shall
mean Geon's weighted average cost for Ethylene (which meets or exceeds
the specification for that Ethylene which is delivered to Geon
pursuant hereto) delivered during the relevant month or for use at
Geon's LaPorte, Texas VCM plant (the "LaPorte Plant") for EDC/VCM
production under purchase contracts between Geon and Ethylene
suppliers, which contracts have been negotiated and administered on an
arm's length basis.
(a) Except as provided in subsection (b) of this Section 7.A.1, there
shall be included in the computation of such weighted average
cost all costs that Geon incurs for transportation and insurance
for Ethylene purchased from such suppliers, and the delivered
costs of Ethylene which Geon purchases and delivers or causes to
be delivered to EDC producers for conversion into EDC on behalf
of Geon, which EDC is intended by Geon
-8-
<PAGE> 11
to be delivered at the LaPorte Plant and used there to produce
VCM or to be delivered elsewhere under an exchange agreement.
(b) There shall be excluded from the computation of such weighted
average cost
(i) Ethylene purchased or otherwise acquired by Geon from a
joint venture or other joint enterprise to which Geon or a
subsidiary of Geon is a party, and Ethylene purchased or
acquired by Geon from a party (or from an affiliate of such
party) to such joint venture or other joint enterprise;
(ii) The quantities and costs of Ethylene purchased other than
pursuant to a contract having an initial term of at least
twelve (12) months;
(iii) Ethylene purchased by a third party other than Geon and
delivered to the LaPorte Plant for toil conversion into EDC,
VCM or PVC, and Ethylene purchased by Geon from such third
party or from an affiliate thereof for such toll conversion;
and
(iv) Ethylene delivered pursuant to this Agreement.
(c) Rebates and discounts which are accrued but not earned' and which
if earned would be included in such weighted average cost. may be
used to compute an initial weighted average cost. When such
accrued rebates or discounts are earned' or in the alternative if
they are not earned' appropriate adjustments will
-9-
<PAGE> 12
be made in order to determine the actual weighted average cost of
Ethylene for the relevant period. Any monies so determined to be
owing by Geon to BFG or by BFG to Geon shall be paid or credited
promptly.
2. In the event that during any period of time exceeding a calendar
quarter the quantity of Ethylene that would be used to determine
Geon's weighted average cost of Ethylene is twenty-five percent or
less of such total Ethylene purchase requirements, then at BFG's
request, the purchase price to be paid to BFG by Geon for Ethylene
delivered pursuant to this Agreement during such quarter shall be the
"Alternate Market Price." The Alternate Market Price shall be the sum
of:
(a) BFG's actual per pound cash cost to produce Ethylene from propane
at the Calvert City Plant (which actual cash cost shall be
determined pursuant to the methodology which is currency employed
by Chem Data Inc. to compute and publish the cash costs of
manufacturers to produce ethylene from propane, but using instead
for purposes of this Agreement BFG's actual cash costs as
reported in its internal accounting Systems); plus
(b) 1.5 cents per pound for each pound of Ethylene delivered to Geon
pursuant to this Agreement during such period; plus
(c) An additional amount which shall be a "percentage of the margin
share." For such purposes the "margin share" will be the
difference between (i) the benchmark price per pound of Ethylene,
F.O.B. Gulf Coast, as reported in CMAI, less (ii) the per pound
cash cost as determined pursuant to subparagraph (a) above. The
"percentage of margin share" to
- 10 -
<PAGE> 13
be used in the computation of Alternate Market Price shall equal:
0% of the first 5cts. of any "margin share"; plus 50% of the next
5cts. of any "margin share"; plus 75% of any "margin share" that
is greater than 10cents.
(d) If during the term of this Agreement, Geon is able to secure a
contract for ethylene supply which (i) qualifies for inclusion in
the requirements of Section 7.A.1 and (ii) the volume is in
excess of 200 million pounds per year and (iii) the term of the
contract is three (3) years or longer, then the pricing
provisions, including any and all considerations which affect the
price of Ethylene, may be substituted in this Section 7-A.2 as an
Alternate Market Price for the term of said contract.
3. Notwithstanding anything in this Article 7.A to the contrary, in no
event will the price paid by Geon to BFG be less than BFG's actual per
pound cash cost to produce Ethylene from propane at the Calvert City
Plant (which actual cash cost shall be determined pursuant to the
methodology which is currency employed by Chem Data Inc. to compute
and publish the cash costs of manufacturers to produce ethylene from
propane, but using instead for purposes of this Agreement BFG's actual
cash costs as reported in its internal accounting systems) for such
period, plus 1.5 cents per pound for each pound of Ethylene delivered
to Geon pursuant to this Agreement during such period (hereinafter
referred to as the "Price Floor").
4. In the event that during any calendar month the Ethylene Market Price
(determined pursuant to Section 7.A.1 hereof), or the Alternate Market
Price (determined pursuant to Section 7.A.2(d) hereof) if then
applicable,
-11 -
<PAGE> 14
is less than the Price Floor (determined pursuant to Section 7.A.3
hereof), the difference between the Price Floor and either the
Ethylene Market Price or such Alternate Market Price (as then
applicable according to the terms of this Agreement) shall be
multiplied by the number of pounds of Ethylene delivered to Geon
pursuant to this Agreement during such month. The product of such
multiplication shall be a dollar value which for purposes of this
Agreement shall be referred to as the 'banked ethylene credit." The
value of the banked ethylene credit will be applied as a credit
against, and reduction of, the amounts owing by Geon pursuant to
Section 7.A.1 or Section 7.A.2 of this Agreement until the balance of
such banked ethylene credit is zero. In no event. however, will the
banked ethylene credit reduce the price to be paid by Geon to BFG in
any month pursuant to either Section 7.A.1 or Section 7.A.2 to an
amount which is less than the Floor Price for that month. In the event
that the Ethylene portion of this Agreement is terminated, any banked
ethylene credits which then exist may be added to and used as negative
values for Chlorine pursuant to Section 7.B.4 of this Agreement. Any
banked ethylene credit which might exist at the complete termination
of this Agreement will not be paid in cash to Geon or otherwise
credited to Geon or applied against other monies that may then be
owing by Geon to BFG.
B. Chlorine. The purchase price to be paid by Geon to BFG for Chlorine
delivered to Geon pursuant to this Agreement shall be determined on a monthly
basis and shall be equal to "Chlorine Market Price" during such month. For
purposes of this Agreement, the term "Chlorine Market Price" shall mean Geon's
weighted average cost for Chlorine (which meets or exceeds the specification for
Chlorine delivered to Geon pursuant hereto) delivered during the relevant month
to or for use at the LaPorte Plant for EDC/VCM production under contracts with
Chlorine suppliers, which contracts have been negotiated and administered on an
arm's length basis.
- 12 -
<PAGE> 15
1. Except as provided in Section 7.B.2 hereof, there shall be included in
the computation of such weighted average cost:
(a) AU costs that Geon incurs for transportation and insurance for
Chlorine purchased from such suppliers and delivered to the
LaPorte Plant; and
(b) The cost of the Chlorine content of EDC acquired by Geon for the
production of VCM at the LaPorte Plant during such monthly period
from one or more toll converters to which Geon has supplied all
the required Ethylene. The cost of such Chlorine content shall be
equal to Geon's total delivered cost of such EDC, less the actual
cost of Ethylene delivered to such converter or converters for
the period of delivery of EDC and less the actual conversion fee
paid by Geon to such toll converter or converters.
2. There shall be excluded from the computation of such weighted average
cost (a) Chlorine purchased or otherwise acquired by Geon from a joint
venture or other joint enterprise to which Geon or a subsidiary of
Geon is a party, and Chlorine purchased or acquired by Geon from a
party (or from an affiliate of such party) to such joint venture or
other joint enterprise; (b) the quantities and costs of any Chlorine
derived from Chlorine-containing materials, such as, for example, by a
catoxid process or from hydrochloric acid; (c) the quantities and
costs of any Chlorine purchased other than pursuant to a contract
having an initial term of at least twelve (12) months; (d) Chlorine
purchased by third parties other than Geon or BFG and delivered to the
LaPorte Plant for toll conversion into EDC or VCM, and Chlorine
purchased by Geon from such third party or an affiliate thereof for
such toil conversion; and (e) Chlorine delivered pursuant to this
Agreement.
- 13 -
<PAGE> 16
3. Rebates and discounts which are accrued but not earned, and which if
earned would be included in such weighted average cost. may be used to
compute an initial weighted average cost. When such accrued rebates or
discounts are earned, or in the alternative if they are not earned,
appropriate adjustments will be made in order to determine the actual
weighted average cost of Chlorine for the relevant period. Any monies
so determined to be owing by Geon to BFG or by BFG to Geon shall be
paid or credited promptly.
4. The parties acknowledge that from time to time Geon's weighted average
cost of Chlorine may be a negative monetary number. if Geon's weighted
average cost for Chlorine for any month is less than zero, then such
negative value and the quantities of Chlorine to which such negative
value is applicable will be banked and applied against subsequent
positive values in the computation of Geon's weighted average cost of
Chlorine. In the event that the Chlorine portion of this Agreement is
terminated, any negative values for Chlorine which then exist may be
added to and used as banked ethylene credit pursuant to Section 7.A.4
of this Agreement. Any negative values which may be banked at the time
of complete termination of this Agreement will not be paid in cash to
Geon or otherwise credited to Geon or applied against other monies
that may then be owing by Geon to BFG.
C. VCM. The price to be paid by Geon to BFG for VCM purchased by Geon
pursuant to this Agreement shall be determined on a monthly basis and shall be
based on the VCM Market Price." For purposes of this Agreement the term VCM
Market Price" shall mean the prevailing market price to large buyers for
comparable domestic arm's length sales of VCM made by sellers unrelated to VCM
purchasers, F.O.B. Gulf Coast, net of any rebates, discounts, credit memos or
special allowances.
- 14 -
<PAGE> 17
For VCM delivered from the inception of this Agreement through February
28, 1994, the parties hereto shall in good faith mutually determine the VCM
Market Price on a monthly basis from publicly available information. In the
event that they are not able to mutually agree on such price, the VCM Market
Price shall be determined according to the arbitration provisions of this
Agreement.
After February 28, 1994 to the termination of this Agreement, the term
"VCM Market Price" shall be the same price that is referred to in Section 4.3 of
the Conversion Agreement as the "Market Price." BFG will inform Geon of the
substance of BFG's decisions and negotiations with Westlake with respect to the
determination of such Market Price, including any discussions and negotiations
with respect to any adjustments to such Market Price. Geon shall have the right
to participate with BFG in discussions and negotiations with Westlake regarding
VCM prices for transactions between BFG and Westlake pursuant to the Conversion
Agreement. A determination of the price pursuant to Section 4.3 of the
Conversion Agreement will be determinative of the VCM Market Price pursuant to
this Agreement.
In the event of a dispute between BFG and Geon with respect to VCM
pricing, BFG shall invoice Geon at the prices applicable for the month prior to
the month in which such dispute arose and Geon shall pay such amount. When such
dispute is resolved (whether through agreement between the parties or through
arbitration under Article 14 hereof), an appropriate adjustment will be made,
with interest accruing on the underpaid or overpaid amount from the date that
payment of such amount would have been due hereunder until the date that the
adjustment payment is received. Such interest shall accrue at the prime rate of
interest established from time to time during such period by Citibank, N.A., and
shall be paid to BFG or Geon, as the case may be, along with the adjustment
amount, as soon as possible following resolution of the dispute.
D. EDC. The purchase price to be paid by Geon to BFG for EDC delivered to
Geon pursuant to this Agreement shall be determined on a monthly basis and shall
equal the sum of the following:
-15-
<PAGE> 18
1. A price for the Ethylene component of such EDC which is produced by
BFG at Calvert City, which price shall be determined pursuant to
Article 7.A of this Agreement; and
2. A price for the Chlorine component of such EDC which is produced by
BFG at Calvert City, which price shall be determined pursuant to
Article 7.B of this Agreement; and
3. The delivered price for the purchased quantity of Chlorine which is
required for such EDC production, plus an appropriate fee for
purchasing services; provided, however, that on reasonable notice,
Geon may undertake to supply on a timely basis such purchased Chlorine
in such quantities as are required by BFG, and to the extent that Geon
does deliver such purchased Chlorine, no cost therefor shall be
included in the price to be paid to BFG; and
4. An amount which will enable BFG to recover the fixed and variable
costs of any additional Chlorine off-loading, storage and handling
facilities that may be required for purchased Chlorine, plus a
reasonable return on such costs; and
5. An amount equal to a toll conversion fee which is customary for toll
conversion of Ethylene and/or Chlorine into EDC and which will enable
BFG to recover the fixed and variable costs of its EDC unit and a
reasonable return on such costs.
ARTICLE 8
---------
TERMS OF PAYMENT
----------------
Within ten days following the close of each month, Geon shall provide BFG
with such information as may be necessary for BFG to calculate the purchase
price for the
- 16 -
<PAGE> 19
Products delivered to Geon pursuant to this Agreement during the immediately
preceding month. Between the fifth and fifteenth day of each month, BFG shall
send Geon an invoice for such Products delivered in the immediately preceding
month. Such invoice shall specify the total price due for each such Product.
Geon shall make payment, by wire transfer to an account at a bank designated by
BFG, no later than thirty days after the date of the invoice. BFG shall have the
right to charge and bill Geon a finance charge on all overdue invoices at the
rate of 1.5% per month after the date such payments become due.
ARTICLE 9
---------
WARRANTIES, CLAIMS AND LIMITATIONS
----------------------------------
A. BFG warrants that, at the time of delivery, the Products sold to Geon
and purchased by Geon hereunder shall meet the specifications for such Products
set forth in Exhibit 1. BFG MAKES NO OTHER WARRANTY AND SPECIFICALLY DISCLAIMS
ANY WARRANTY OF PRODUCT MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND
NONE SHALL BE IMPLIED. All WARRANTIES, EXPRESS OR IMPLIED, EXCEPT THE WARRANTY
EXPRESSLY STATED ABOVE, ARE HEREBY EXCLUDED.
B. Geon warrants that, at the time of delivery, any VCM delivered
pursuant to Article 4 hereof shall meet the specifications set forth in Exhibit
1. GEON MAKES NO OTHER WARRANTY AND SPECIFICAllY DISCLAIMS ANY WARRANTY OF
PRODUCT MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND NONE SHALL BE
IMPLIED. All WARRANTIES, EXPRESS OR IMPLIED, EXCEPT THE WARRANTY EXPRESSLY
STATED ABOVE, ARE HEREBY EXCLUDED.
C. The receiving party assumes all risk, responsibility, and liability
for loss, damage, or injury to persons or property of the receiving party or
others, arising out of the possession, handling, storage, transportation, or
use, either singly or in combination with other substances, of (i) any Ethylene
or Chlorine upon delivery to Geon at the LaPorte
- 17 -
<PAGE> 20
Plant and (ii) any VCM or EDC sold or exchanged hereunder upon delivery at the
Calvert City Plant (in the case of VCM or EDC received by Geon) and at the
LaPorte Plant (in the case of VCM received by BFG or its designee pursuant to
Article 4).
D. No claim as to the quality of any Product delivered hereunder or for
shortage shall be greater m amount than the purchase price hereunder of the
Product delivered plus return delivery costs m respect of which the claim is
made. Failure by the receiving party to give notice of claim to the delivering
party within forty-five (45) days from the date of actual receipt of the Product
shall constitute a waiver by the receiving party of all claims for quality or
shortage arising as a result of such delivery. Each party hereto shall be
entitled to all remedies at law or in equity for nonperformance or breach of
this Agreement by the other party, unless waived as provided in the foregoing
sentence or limited by the following sentences. THE RECEIVING PARTY'S SOLE AND
EXCLUSIVE REMEDY IN THE EVENT THAT IT RECEIVES PRODUCT WHICH DOES NOT MEET THE
SPECIFICATIONS FOR SUCH PRODUCT SET FORTh IN EXHIBIT 1 SHAll BE TO RETURN FOR
CREDIT THE QUANTITY OF PRODUCT NOT IN CONFORMANCE WITH SUCH SPECIFICATIONS, AT
THE PROVIDING PARTY'S COST AND EXPENSE, AND RECEIVE A PROMPT REPLACEMENT OF SUCH
NON-CONFORMING PRODUCT FROM THE PROVIDING PARTY. IN NO EVENT SHAll EITHER PARTY
BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE
DAMAGES, OR 1-055 OF PROFITS.
ARTICLE 10
----------
FORCE MAJEURE
-------------
A. DEFINITION AND EFFECT Delay in performance or nonperformance by either
party shall be excused to the extent its ability to perform is prevented by an
event of force majeure affecting either party hereto or Westlake. An event of
force majeure is an event including, but not limited to, a breakdown of
pipeline, machinery or equipment, fire, flood, drought, sabotage, shipwreck,
embargo, strike, explosion, labor trouble, accident, riot, war,
- 18 -
<PAGE> 21
compliance with a change in law after the date hereof (including, without
limitation, a change in law relating to raw materials, Product allocation,
pollution control, occupational health and safety, or environmental matters),
acts of God or the public enemy, and delays or failures in obtaining raw
materials, supplies, equipment, or transportation, or any similar or dissimilar
event beyond the reasonable control of the party so affected. In no event shall
economic hardship be considered an event of force majeure. Force majeure shall
not be deemed to have occurred with respect to any party which falls to use
reasonable diligence to remedy the situation, if reasonably capable of being
remedied by that party. The requirement that an event of force majeure be
remedied with all reasonable dispatch shall not require settlement of strikes or
labor controversies by acceding to any demands of the opposing parties, without
regard to the reasonableness thereof. Force majeure includes the total or
partial failure of the usual means of transportation of Product and the
applicable quantities of Product to be delivered pursuant to Article 3 shall be
reduced accordingly. Force majeure shall in no way excuse Geon from mating
payment when due for any Products delivered hereunder.
B. NOTICE OF FORCE MAJEURE. The party unable to perform due to an event
of force majeure shall give prompt written notice of such inability explaining
the date such event commenced and the nature, details, and expected duration
thereof. The party unable to perform due to an event of force majeure shall take
all reasonable steps to terminate or remove promptly the cause of such
inability, and full performance of this Agreement shall be resumed as soon as
practicable. The affected party shall advise the other from time to time as to
progress in remedying the force majeure situation and as to the time when the
affected party expects to resume its obligations and shall notify the other as
to the expiration of any such event as soon as the affected party knows the date
thereof.
ARTICLE 11
----------
FEES, TAXES AND GOVERNMENTAL CHARGES
------------------------------------
All fees, taxes, and other governmental charges, including, without
'imitation, Superfund excise taxes and future changes and additions arising from
amendments to
- 19 -
<PAGE> 22
existing laws and regulations which are imposed on any of the Products or on the
transportation, delivery, sale, or use thereof shall be paid by the receiving
party. In the event that the providing party shall be required to pay any such
fee, tax' or governmental charge, or shall do so as a convenience to the
receiving party, and the receiving party shall reimburse the providing party
promptly for the amount of such fee, tax, or governmental charge. If the
providing party claims exemption from any such fee, tax, or governmental charge,
it shall furnish appropriate, completely executed exemption certificates in
accordance with the laws and regulations of the fee-charging or tax-levying
authority in effect at the time of sale or delivery. Should such exemption be
denied, the providing party will assume and pay all such fees, taxes, or
charges, together with all penalties and interest, but the receiving party shall
only be required to reimburse the providing party for the amount of such fees,
taxes, or charges and not any penalties or interest thereon.
ARTICLE 12
----------
ASSIGNMENTS
-----------
A. This Agreement and the rights and duties hereunder may only be
assigned with the prior written consent of the other party hereto, which consent
may be withheld for any reason. Any such assignment shall not release the
assignor of any of its obligations or liabilities hereunder unless and until
released in writing by the other party. Any assignment made or attempted in
violation of this Article 12 shall be void and of no effect. Notwithstanding any
of the foregoing to the contrary, BFG shall have the right to assign this
Agreement to a subsidiary of BFG without any consent from Geon. In such event,
the term "BFG" as used herein shall include both BFG and such subsidiary.
B. The terms of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and permitted assignees.
- 20 -
<PAGE> 23
ARTICLE 13
----------
INDEMNIFICATION
---------------
A. BY GEON. To the maximum extent permitted by law and subject to the
limitations with respect to Product warranty claims set forth in Article 9
hereof, Geon shall indemnify, defend, and hold harmless BFG and its officers,
directors, employees, representatives, and agents (the "BFG Indemnified
Parties"), from and against any and all suits, actions, liabilities, legal
proceedings, claims, demands, losses, costs, and expenses of whatsoever kind or
character, including without limitation, reasonable attorneys' fees and
expenses, for injury or death of third parties (including, without limitation,
employees of Geon or BFG) or loss of or damage to property of Goodrich or third
parties arising as a result of or in connection with (i) any material failure on
the part of Geon to perform its obligations under this Agreement, (ii) any
negligent act or omission or wilful misconduct by Geon or anyone acting on
Geon's behalf (other than a BFG Indemnified Party) in the performance of this
Agreement, or (iii) any violation of any law or regulation (including any
environmental law or regulation) with respect to the manufacture and/or delivery
of VCM for exchange delivery at the LaPorte Plant under Article 4 hereof.
B. BY BFG. To the maximum extent permitted by law, and subject to the
limitations with respect to Product warranty claims set forth in Article 9, BFG
shall indemnity, defend, and hold harmless Geon and its officers, directors,
employees, agents, and representatives (the "Geon Indemnified Parties"), from
and against any and all suits, actions, liabilities, legal proceedings, claims,
demands, losses, costs, and expenses of whatsoever kind or character, including
without limitation, reasonable attorneys' fees and expenses, for injury to or
death of third parties (including, without limitation, employees of Geon or BFG)
or loss of or damage to property of Geon or third parties arising as a result of
or in connection with (i) any material failure on the part of BFG to perform its
obligations under this Agreement, (il) any negligent act or omission or willful
misconduct of BFG or anyone acting on BFG's behalf (other than Geon or a Geon
Indemnified Party) in the performance of this Agreement, or (ill) any violation
of any law or regulation (including any environmental law or regulation) with
respect to the manufacture and/or
- 21 -
<PAGE> 24
delivery of Products hereunder (including deliveries of Ethylene and Chlorine by
Westlake at the LaPorte Plant).
ARTICLE 14
----------
ARBITRATION/DISPUTE RESOLUTION
------------------------------
A. ARBITRATION GENERALLY. If there is a dispute arising under, out of or
in connection with the making, the performance or the execution of this
Agreement, then the dispute shall be submitted to the American Arbitration
Association in Cleveland, Ohio unless otherwise agreed by the parties, for
arbitration. Any such arbitration shall be conducted in accordance with the
principles set forth in this Article 14 and the rules of the American
Arbitration Association or such other principles as to which the parties may
then mutually agree.
B. DEMAND FOR ARBITRATION. Upon written demand of either party, the
parties shall meet and attempt to appoint a single arbitrator. If the parties
are unable to agree on a single arbitrator, or if one of the parties fails to
meet within ten (10) days of a written demand being forwarded, then either party
may apply to have the arbitrator appointed by the American Arbitration
Association.
C. QUALIFICATIONS. The arbitrator selected to act hereunder shall be
qualified by education or training to pass upon the particular question or
questions in dispute. No arbitrator shall be an officer, director, employee,
agent or consultant of either party or any of its respective affiliates.
D. DECISIONS FINAL. The decision of the arbitrator shall be in writing
and signed by the arbitrator and shall be final and binding upon the parties as
to any question or questions so submitted to arbitration and the parties shall
be bound by such decision and perform the terms and conditions thereof Any such
decision shall be enforceable as a final judgment in any court of competent
jurisdiction.
-22-
<PAGE> 25
E. COMPENSATION OF ARBITRATOR. The compensation and expenses of the
arbitrator (unless determined by the arbitrator to be payable by the
non-prevailing party or in some other manner) shall be paid in equal proportions
by Geon and Goodrich. Further more, any out of pocket expenses incurred by
either party to obtain the appointment of an arbitrator pursuant to Paragraph
14.B hereof shall be shared equally by Goodrich and Geon.
F. PERFORMANCE TO CONTINUE. All performance of the terms and provisions
of this Agreement required by either party under this Agreement shall continue
during arbitration proceedings.
G. AGREEMENT CONTROLLING. In all respects not provided for elsewhere in
this Article 14, the rules of the American Arbitration Association shall govern
any dispute hereunder submitted to arbitration. If there is a conflict between
the provisions of this Agreement and such rules, the provisions of this
Agreement shall prevail.
H. ARBITRATION WITH WESTLAKE. In the event that BFG enters into an
arbitration proceeding (or other non-judicial third party dispute resolution
proceeding) with Westlake pursuant to the terms of the Conversion Agreement, the
Ethylene Supply Agreement, or the Chlorine Supply Agreement, and such dispute
relates to (i) Ethylene, Chlorine, or VCM pricing, (il) Ethylene, Chlorine, or
VCM exchanges, or (iii) the quality or quantity of any Ethylene, Chlorine, or
VCM delivered to or by Geon under this Agreement, Geon shall have the right and
obligation to participate fully with BFG in such proceeding. BFG and Geon agree
to cooperate fully with each other to advance a strong common position versus
Westlake in any such proceeding. Unless otherwise agreed by BFG and Geon, Geon
shall pay one-half of BFG's share of any fees, costs, or expenses arising out of
or relating to such proceeding.
I. BFG/WESTLAKE DISPUTES. If there arises a dispute (not involving an
arbitration proceeding as described in Paragraph H above) between BFG and
Westlake under the terms or provisions of (a) the Amended and Restated Master
Conveyance
-23-
<PAGE> 26
Agreement, dated as of March 1, 1990, by and between BFG, BFGI, and Westlake
(the "Master Conveyance Agreement"), or (b) any other Agreement between or among
BFG, BFGI, and Westlake contemplated by the Master Conveyance Agreement, and
such dispute affects the interests of Geon, Geon shall have the right and
obligation to participate fully with BFG in the resolution of such dispute. BFG
and Geon agree to cooperate fully with each other to advance a strong common
position versus Westlake in any such dispute. Unless otherwise agreed by BFG and
Geon, Geon shall pay one-half of BFG's share of any fees, costs, or expenses
arising out of or relating to such dispute. Notwithstanding the foregoing, the
parties agree, with respect to the current litigation by and among Westlake,
BFG, and Geon (styled WESTLAKE MONOMERS CORPORATION V. THE B.F.GOODRICH COMPANY
AND THE GEON COMPANY. INDIVIDUALLY AND AS SUCCESSOR IN INTEREST TO BFG
INTERMEDIATES COMPANY INC., Case No. 93-012205, in the District Court Harris
County, Texas), which litigation relates to a Right of First Refusal Agreement
on the Ethylene and Chlorine Assets and the Plant Utilities, dated as of March
1, 1990, between BFGI and Westlake, Geon shall not be required to pay its share
of any fees, costs, or expenses arising out of or relating to such litigation
(BFG having separately agreed to indemnify Geon therefor); Geon shall, however,
be required to cooperate fully with BFG in the defense of such litigation, as
set forth above.
ARTICLE 15
----------
GENERAL PROVISIONS
------------------
A. Notices. Notices or other communications required or permitted by this
Agreement are to be given in writing and shall be deemed to have been
sufficiently given when deposited in the United States mall properly stamped,
when delivered in person, or when transmitted by telegram and addressed to the
respective parties as follows:
- 24 -
<PAGE> 27
1. If to BFG:
The B.F.Goodrich Company
700 Rockmead Drive, Suite 250
Houston, Texas 77339-2111
Attention: General Manager
Telecopy No.: (713) 348-8001
with copies to:
The B.F.Goodrich Company
Highway 1523 Industrial Loop
P.O. Box 527
Calvert City, Kentucky 42029
Attention: Plant Manager
Telecopy No.: (502) 395-3208
and
The B.F.Goodrich Company
3925 Embassy Parkway
Akron, Ohio 44333-1799
Attention: Secretary
Telecopy No.: (216) 374-3456
2. If to Geon:
The Geon Company
700 Rockmead Drive, Suite 250
Houston, Texas 77339-2111
Attention: Vice President/General Manager
Telecopy No.: (713) 348-9001
with a copy to:
The Geon Company
6100 Oak Tree Boulevard
Independence, Ohio 44131
Attention: Secretary
Telecopy No.: (216) 447-6146
Either party may change any address to which a notice maybe sent at anytime by
giving written notice of the change to the other party.
-25-
<PAGE> 28
B. FAIR LABOR STANDARDS ACT. Each party represents and warrants that all
Products delivered under this Agreement will have been produced in compliance
with the requirements of the Fair Labor Standards Act of 1938, as amended.
C. GOVERNING LAW. The construction of this Agreement and the rights and
obligations of the parties hereunder shall be governed by the laws of the State
of Kentucky, without regard to choice of law principles.
D. WAIVER. Waiver by either party of any breach or failure to enforce any
of the terms and conditions of this Agreement at any time shall not in any way
affect, limit, or waive the right of that party thereafter to enforce the
Agreement and compel strict compliance with every term and condition thereof.
E. PRODUCT WARNINGS., The parties each acknowledge that they have been
furnished with Material Safety Data Sheets for the Products to be sold or
exchanged hereunder, containing warnings and safety and health information
concerning the Products and/or the containers for such Products sold or
exchanged hereunder., The receiving party agrees to disseminate such information
so as to give warning of possible hazards to persons whom the receiving party
can reasonably foresee may be exposed to such hazards, including, but not
limited to, the receiving party's employees, agents, contractors, and
customers.
F. AMENDMENT. No conditions, understandings, or agreements purporting to
modify or vary the terms of this Agreement shall be binding unless hereafter
made in writing and signed by an authorized representative of each party. No
requirement stated herein that an item be in writing may be waived except by
means of a written instrument issued by the party making the waiver. The
acknowledgment or acceptance by a party of the purchase orders, shipping
instructions, or sales acknowledgment forms containing terms or conditions at
variance with or in addition to those set forth herein shall not in any event be
deemed to modify or vary the terms of this Agreement.
- 26 -
<PAGE> 29
G. SEVERABILITY. If all or any part of any provision or provisions of
this Agreement or the application of this Agreement to any particular fact or
circumstance is illegal, invalid, or unenforceable by reason of any statute or
rule of law, the remaining provisions or parts of provisions of this Agreement
or the application of all or part of the particular provision or provisions to
the other facts or circumstances is or are not to be affected and is or are to
remain in full force and effect.
H. RIGHT TO AUDIT. BFG and Geon shall each have the right annually, upon
request, to have an independent auditing firm having a nationwide operation (but
not Ernst & Young) review the books, records, and other detailed supporting
information of Geon, or BFG (as the case may be), for purposes of determining
the correctness of the purchase prices for the Products hereunder. All such
audits shall be undertaken at reasonable times and in conformance with generally
accepted auditing standards. The information generated by such audit shall be
kept confidential by the parties and shall not be disclosed to third parties or
used by the party requesting the audit for any other purpose.
I. COMPLIANCE WITH LAWS. Each party shall comply fully with all
applicable governmental laws and regulations, including, without limitation, all
environmental and pollution control laws and regulations, in the performance of
its obligations under this Agreement.
J. FURTHER ASSURANCES. If either party reasonably determines or is
reasonably advised that any further instruments, actions, or things are
necessary or desirable to carry out the terms of this Agreement, the other party
shall execute and deliver all such instruments, perform all such actions, and
provide all such things reasonably necessary and proper to carry out the terms
of this Agreement.
K. DEFAULT. Except where failure to perform is occasioned by an event of
force majeure affecting BFG or Westlake, if BFG shall fail to perform any
obligation to be fulfilled by it pursuant to the terms hereof and such default
shall not have been remedied within sixty (60) days after receipt by BFG of
written notice from Geon specifying such
- 27 -
<PAGE> 30
default, Geon may, at its option, cancel this Agreement forthwith by notice in
writing to BFG, and, subject to the other provisions of this Agreement, BFG
shall remain liable to Geon for all loss and damage sustained by reason of such
default. Except where failure to perform is occasioned by force majeure
affecting Geon, if Geon shall fall to perform any obligation to be fullfilled by
it pursuant to the terms hereof and such default shall not have been remedied
within fifteen (15) days after receipt by Geon of written notice from BFG
specifying such default, BFG may, at its option, cancel this Agreement forthwith
by notice in writing to Geon, and, subject to the other provisions of this
Agreement, Geon shall remain liable to BFG for all loss and damage sustained by
reason of such default.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date and year
first written above.
THE B.F.GOODRICH COMPANY
By: /s/ John N. Lauer
------------------------------------
Name: John N. Lauer
------------------------------------
Title: President
------------------------------------
THE GEON COMPANY
By: /s/ William F. Patient
------------------------------------
Name: William F. Patient
------------------------------------
Title: Chairman of the Board, President
and Chief Executive Officer
------------------------------------
- 28 -
<PAGE> 31
EXHIBIT 1
---------
VCM Specification
-----------------
(Analysis PPM WT.)
<TABLE>
<CAPTION>
Parameter Specification
--------- -------------
<S> <C> <C>
Purity% 99.96
Water 200.00
Acidity (HC1) 0.50
Caustic (NaOH) 0.30
Iron (Fe) 0.25
Nonvolatiles (NV) 50.00
Color Colorless
Appearance Clear
Suspended Matter Free
Methyl Chloride 150.00
Acetylene 0.20
Low Boiling Hydrocarbons 7.00
Ethylene --
Propylene --
Unsaturated C4's 30.00
Mono-Vinyl Acetylene (MVA) --
Butadiene (BD) 26.00
Butene-1 --
Butene-2 --
High Boiling Point Chlorohydrocarbons 30.00
EDC --
Dichloro Compound --
Trichlorethane 0.60
Total Unsaturates --
Acetaldehyde --
Hydroquinone (HQ) --
02 in Vapor Space 200.00
Before Loading
(ppm mole)
</TABLE>
<PAGE> 32
EXHIBIT 1
---------
ETHYLENE SPECIFICATION
----------------------
<TABLE>
<CAPTION>
A. Higher Purity Stream
--------------------
Normal Range
------ -----
<S> <C> <C> <C>
Purity, mole % 99.6 98.0 to 99.9
Methane, mole ppm 200 100 to 300
Acetylene, mole ppm 40 40 to 3000
Ethane, mole ppm 3000 1000 to 10000
B. Lower Purity Stream consisting of a combination of the
------------------------------------------------------
following:
----------
Normal Range
------ -----
1. J.T.Recovery;
Rate - 0 to 10,000 lbs/hr
Purity, mole % 88.0 86.0 to 90.0
Methane, mole % 7.0 5.0 to 9.0
Ethane, mole % 5.0 4.0 to 6.0
Acetylene, mole ppm 100 100 to 1000.0
C4's and higher, mole ppm 1000 1000 max.
2. Secondary Demethanizer Overhead;
Rate - 0 to 8,000 lbs/hr
Purity, mole % 74.5 73.0 to 76.0
Hydrogen, mole % 0.25 0.01 to 0.5
Methane, mole % 23.0 22.0 to 24.0
Acetylene, mole ppm 40 40 to 1000
Ethane, mole % 2.25 2.0 to 2.5
3. Higher Purity Stream;
Rate - Balance
</TABLE>
<PAGE> 33
EXHIBIT 1
CHLORINE SPECIFICATION
<TABLE>
<CAPTION>
Analysis
- --------
Cell Gas Vapor Chlorine
- -----------------------
<S> <C> <C> <C>
Chlorine 88.0 to 92.0 Wt. %
Inerts (Oxygen, Nitrogen, Carbon
Dioxide, Hydrogen) ** 8.0 to 12.0 Wt. %
Water 50 ppm Max. Wt. %
Chlorinated Organics* 100 Max. Wt. %
Non-Volatile Residue 40 Max. Wt. %
Bromine 100 Max. Wt. %
Carbon Tetrachloride 75 Max. Wt. %
Liquid Chlorine
- ---------------
Chlorine 99.5 Min. Wt. %
Oxygen, Nitrogen, Carbon Dioxide
and Hydrogen .5 Max. Wt. %
Water 50 Max. Wt. ppm
Chlorinated Organics 100 Max. Wt. ppm
Non-Volatile Residue 40 Max. Wt. ppm
Bromine 100 Max. Wt. ppm
Carbon Tetrachloride 75 Max. Wt. ppm
Anhydrous HCI PPM***
- ------------- ------
Component
---------
HCI Minimum 99.8%
Acetylene 50
Ethylene 100
Methane 100
VCM 200
Propylene 50
Methyl Chloride trace
Butadiene trace
Hydrogen (1,000)
Total C1-Hydrocarbons 10
Oxygenated Compounds 20
Solvents (CC14, C2HC13, etc.) 10
Chlorine (100)
Total Fluoriode (as HF) (10)
Bromine (30)
Iodine (30)
Sulfur (as S02) (20)
Water (50)
Arsenic (1)
Total Silicon (as Si) (2)
Sulfur (as S02) (2)
Oil free
Heavies (50)
NOx (5)
<FN>
* Other than Carbon Tetrachloride
** During Cell Room start-up, inerts will exceed this range for
up to 12 hours. During liquification at BFG's Calvert City,
Ky. chlorine plant, inerts will exceed these levels in
accordance with historical practice.
*** PPM: volume or (weight)
</TABLE>
<PAGE> 34
EXHIBIT 1
ETHYLENE DICHLORIDE SPECIFICATION
(BFG Code No. H-19)
Property Specification
-------- -------------
Purity, percent 99.9 min.
Total Chlorinated Hydrocarbon, ppm 200 max.
(low boiling other than EDC)
Ethylene Chloride, ppm 10 max.
Total Chlorinated Hydrocarbon, ppm 200 max.
(high boiling)
1,1,2 Trichloroethane, ppm 100 max.
Total Oxygenated Compounds, ppm 50 max.
C3 and higher, ppm 50 max.
Color (APHA) 10 max.
Acidity, as HC1, ppm 5 max.
Alkalinity, as NaOH, ppm 2 max.
Water, ppm 20 max. (1)
Free Chlorine None
Non-volatile Residue 50 max.
Total Iron (soluble), ppm 0.5 max.
(1) This specification applicable to product contained and tested
at the delivery point to Geon.
<PAGE> 1
Exhibit 10.16
PUT AGREEMENT
-------------
THIS PUT AGREEMENT dated and effective as of the 27th day of April
1993, between The B.F.Goodrich Company, a corporation organized and existing
under the laws of the State of New York ("Goodrich") and The Geon Company, a
corporation organized and existing under the laws of the State of Delaware
("Geon").
WHEREAS, Goodrich has conveyed to Geon substantially all of the assets
(other than the Excluded Assets) and Geon has assumed substantially all of the
liabilities of the Goodrich PVC Business, all as were particularly described in
the Amended and Restated Separation Agreement dated and effective as of March
1, 1993 and executed contemporaneously herewith between the parties hereto (the
"Separation Agreement") and in the Ancillary Agreements referred to therein;
and
WHEREAS, the Facilities are subject, in part, to a Right of First
Refusal Agreement (the "RFR Agreement") dated as of March 1, 1990 between BFG
Intermediates Company Inc. ("BFGI") and Westlake Monomers Corporation
("Westlake"), and, in part, to an Option Agreement (the "Option Agreement")
relating to approximately 58 acres of land in Calvert City, Kentucky, between
BFGI and Westlake dated March 1, 1990; and
WHEREAS, the District Court for Harris County, Texas in the case of
Westlake v. Goodrich, et al, has issued a Temporary Injunction Order (the
"Court Order") prohibiting Goodrich and Geon from transferring or conveying to
a third party or encumbering in any way that portion of the Facilities which
are subject to the RFR Agreement until final judgment is entered in such case;
NOW THEREFORE, the parties agree as follows:
1. DEFINITIONS.
a) The term "Excluded Assets" shall mean those assets
which are listed in Schedule III to the Amended and Restated General
Assignment and Bill of Sale Relating to the Goodrich PVC Business dated
and effective as of March 1, 1993 and executed contemporaneously
herewith (the "Bill of Sale").
b) The term the "Goodrich PVC Business" shall have the
meaning assigned to such term by virtue of Section 17.E of the
Separation Agreement.
c) The term "Facilities" shall mean those facilities which
are defined in Section 17.D of the Separation Agreement, including the
58 acres of land referred to in such Section 17.D.
d) The term "Fair Market Value" shall mean the price at
which property would change hands between a willing buyer under no
compulsion to buy and a willing seller under no compulsion to sell at
the time of such determination and where both parties have reasonable
knowledge of the chemical industry and of the
<PAGE> 2
facts. Fair Market Value shall exclude consideration of any obligations
or liabilities which Geon may have assumed pursuant to the Amended
and Restated Assumption of liabilities and Indemnification Agreement
dated as of March 1, 1993 between Goodrich and Geon ("Assumption of
liabilities Agreement"), but shall include any additional liabilities
to be assumed by Geon pursuant to this Agreement.
e) The term "Property" shall mean all assets, real and
personal, located at or near Calvert City, Kentucky, which are owned or
leased by Goodrich or any Affiliate of Goodrich at the time the Put
Option is exercised and which relate to the Goodrich PVC Business,
including but not limited to: (i) the Excluded Assets (ii) any ethylene
dichloride or vinyl chloride monomer facility built or acquired by
Goodrich in Calvert City, Kentucky vicinity; and (iii) any additions,
substitutions or modifications of any of the foregoing.
f) The term "Put Period" shall mean the three year period
commencing April 1, 2000 and ending March 31, 2003.
g) Any other capitalized term used herein for which a
definition is not provided in this Agreement shall have the meaning
given to such term in the Separation Agreement or in any Ancillary
Agreement thereto.
2. GRANT OF PUT. Geon hereby grants Goodrich the right (the "Put
Option"), which shall be exercisable at any time during the Put Period, to
require Geon to purchase all of the Property during the Put Period at the
Property's Fair Market Value. If any or all of the Property is held by an
Affiliate of Goodrich and such Affiliate does not own a significant amount of
assets other than the Property or any portion thereof, Goodrich may require
Geon to acquire the Property or any portion thereof by acquiring, in whole or
in part, all the stock of such Affiliate.
3. REQUEST FOR APPRAISAL. Goodrich shall have the right any time
during the Put Period to request in writing an appraisal of the Fair Market
Value of the Property. In the event that Goodrich makes such a request, a
determination of the Fair Market Value of the Property shall be made in
accordance with the terms of this Agreement.
4. DETERMINATION OF FAIR MARKET VALUE. Whenever the Fair Market Value
of the Property is required to be made under this Agreement, it shall be
determined by appraisal (the "Appraisal") in accordance with standards set
forth in this Agreement by a qualified appraiser knowledgeable and experienced
in establishing values in the chemical industry, mutually selected by Goodrich
and Geon. If Goodrich and Geon cannot reach an agreement as to the appraiser
within 30 days of Goodrich's request for the Appraisal, each party shall select
an appraiser meeting the standards set forth herein, and those appraisers shall
jointly select a third appraiser within 30 days, which third appraiser shall
make the determination of Fair Market Value of the Property, applying the
criteria set forth herein. The person or entity selected to do the Appraisal
shall be referred to as the "Appraiser".
5. EXERCISE OF PUT OPTION. For a period of 90 days following the
receipt of the Appraisal, subject to the Court Order or any modification
thereof, Goodrich shall have the
-2-
<PAGE> 3
right to exercise the Put Option for the Property for the Fair Market Value of
the Property as determined by the Appraiser.
6. CLOSING. If Goodrich exercises its Put Option, the closing of
the transfer of the Property (the "Closing") shall take place within 90 days of
Goodrich's exercise of the Put Option, provided, however, if any required
governmental approval shall not have been obtained or expiration of any
applicable waiting period shall not have occurred within such period, the
Closing may be delayed until not more than 30 days following receipt of any
such required approval or expiration of any applicable waiting period. At the
Closing Geon shall deliver the Fair Market Value of the Property to be
transferred by federal funds wire transfer into an account designated by
Goodrich. If Goodrich makes a request for Appraisal during the Put Period, it
shall have the right to exercise the Put Option for the 90 days (or any
extension thereof as provided herein) following the receipt of the Appraisal
notwithstanding such period or the Closing may be after the Put Period.
7. TRANSFER DOCUMENTS. The parties agree that the terms of any
transfer documents relating to the Property shall be substantially similar to
the Ancillary Agreements and other documents delivered in connection with the
Separation Agreement. The transfer documents shall be made without
representations or warranties of any kind. All assets, including but not
limited to all fixtures, buildings, machinery and equipment shall be
transferred on an "AS IS, WHERE IS" basis. Furthermore, all real estate
transfers shall be effected by quit claim deed or assignment of leasehold
interests without representations or warranties of any kind by the transferor.
Transfer of title to stock shall be by execution of a stock power. The
assumption of liabilities shall be by documentation substantially similar to
the Assumption of liabilities Agreement.
8. TRANSFER OF LIABILITIES. In the event Goodrich elects to
exercise its Put Option, Goodrich shall transfer to Geon and Geon shall assume
and indemnify Goodrich against any and all liabilities relating to the Property
of the type set forth in the Assumption of liabilities Agreement, including but
not limited to all past, present and future obligations of Goodrich relating to
(i) employees (active and former); (il) environmental liabilities; (iii)
product liabilities of any kind and nature; (iv) the Master Conveyance
Agreement dated March 1, 1990 between BFGI and Westlake and all documents and
agreements related thereto; (v) operation of the Property since the IPO Date;
and (vi) any debt relating to the Property.
9. RIGHTS OF GOODRICH. Nothing in this Agreement shall affect
Goodrich's right to sell, transfer or otherwise dispose of all or any portion
of the Property in any manner it deems appropriate.
10. COST OF APPRAISAL. Each party promptly shall pay one half of
the cost of the Appraisal.
11. NOTICES. Any notice required or permitted to be given under
this Agreement shall be in writing, and shall be deemed sufficiently given when
delivered in person, or by courier delivery, or transmitted by telegram, or
when deposited in the United States mail (first class, registered or
certified), postage prepaid, to the addresses given below or sent by
-3-
<PAGE> 4
facsimile to the facsimile number of the addressees provided that the facsimile
shall reflect the answer back of the addressee:
If to Goodrich: The B.F.Goodrich Company
3925 Embassy Parkway
Akron, Ohio 44333-1799
Attention: Secretary
If to Geon: The Geon Company
6100 Oak Tree Boulevard
Independence, Ohio 44131
Attention: Secretary
Any party, by notice given in accordance with this Section to the
other party, may designate another address or person for receipt of notice
hereunder.
12. SPECIFIC PERFORMANCE. In addition to all other rights and
remedies that Goodrich may have in law or in equity, Goodrich shall have the
right to enforce specific performance of Geon's obligations hereunder, in the
event of default in the performance of same.
13. MISCELLANEOUS.
13.1 HEADINGS. Headings as to the contents of particular
articles and sections are for convenience only and are in no way to be
construed as part of this Agreement or as a limitation of the scope of
the particular articles or sections to which they refer.
13.2 ASSIGNABILITY. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors
and permitted assigns. This Agreement is not assignable except by
consent of each of the parties hereto or by operation of law;
provided, however, that either party may, without consent of the other
party, assign its rights under this Agreement to any of its
Affiliates, provided, further, however, that no such assignment shall
relieve the assigning party of its obligations hereunder.
13.3 CONTROLLING LAW. The validity, interpretation and
performance of this Agreement and any dispute connected herewith shall
be governed and construed in accordance with the laws of the State of
Kentucky without regard to choice-of-law principles.
13.4 SEVERABILITY. If any provision of this Agreement shall,
for any reason, be held violative of any applicable law, and so much
of said Agreement is held to be unenforceable, then the invalidity of
such specific provision shall not be held to
-4-
<PAGE> 5
invalidate any other provision herein, which other provision(s) shall
remain in full force and effect.
Executed as of the date set forth above.
THE B.F. GOODRICH COMPANY
By /s/ Jon V. Heider
----------------------------------
Jon V. Heider
Senior Vice President and General Counsel
THE GEON COMPANY
By /s/ Nicholas J. Calise
----------------------------------
Nicholas J. Calise
Secretary
-5-
<PAGE> 1
EXHIBIT 11
THE GEON COMPANY AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
PRIMARY EARNINGS PER SHARE:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Number of Shares:
Average shares outstanding 24.2 25.4 27.6
Net effect of dilutive stock options - based on the
treasury method using average market price .4 .5 .5
------ ------ ------
Total common and common equivalent shares
outstanding 24.6 25.9 28.1
====== ====== ======
Earnings per share:
Before extraordinary item and cumulative effect of
change in method of accounting $ .50 $ 1.24 $ 2.06
Extraordinary loss -- -- (.05)
------ ------ ------
Net income $ .50 $ 1.24 $ 2.01
====== ====== ======
</TABLE>
Earnings per share for the years ended December 31, 1996, 1995 and 1994
were computed based on the weighted average number of shares of common stock
outstanding and common stock equivalents. The dilutive effect of options is
based on the treasury stock method using average market price for the period.
The market price of common stock on December 31, 1996 was below the
average for the year then ended. Therefore, a fully diluted earnings per share
calculation is not presented.
<PAGE> 1
Exhibit 13
The Geon Company
1996 Annual Report
[PHOTO - LA PORTE, TEXAS MANUFACTURING FACILITY]
[LOGO - THE GEON COMPANY]
<PAGE> 2
ABOUT THE COMPANY
The Geon Company, headquartered in Avon Lake, Ohio, is a leading North American
producer of polyvinyl chloride (PVC) resins and the world's largest producer of
PVC compounds. The Company has 13 manufacturing plants in the United States,
Canada and Australia, and joint ventures in Europe and Southeast Asia. Since
spinning off from The BFGoodrich Company in 1993, Geon, through its leadership
and approximately 1,700 dedicated employees, has been striving to create the
benchmark company in the polymer and chemical industry.
ABOUT THE COVER
Quality, efficiency and safety in manufacturing are central to Geon's
leadership in the vinyl industry. This year's annual report focuses on some of
the people and facilities of Geon, their accomplishments and their importance to
the Company's long-term objectives.
GEON AT A GLANCE
<TABLE>
<CAPTION>
PRODUCTS VINYL CHLORIDE MONOMER (VCM) POLYVINYL CHLORIDE (PVC) COMPOUNDS
- -------- ---------------------------- ------------------------ ---------
<S> <C> <C> <C>
MANUFACTURING LOCATIONS LaPorte, Texas Altona, Victoria, Australia Avon Lake, Ohio
Deer Park, Texas Long Beach, California
Henry, Illinois Louisville, Kentucky
Louisville, Kentucky Mentone, Victoria, Australia
Niagara Falls, Ontario, Canada Niagara Falls, Ontario, Canada
Pedricktown, New Jersey Plaquemine, Louisiana
Scotford, Alberta, Canada Terre Haute, Indiana
Newton Aycliffe, England (J.V.)
Singapore (J.V.)
CAPACITIES 2.4 billion pounds per year 2.6 billion pounds per year 800 million pounds per year
APPLICATIONS AND MARKETS Feedstock for PVC polymerization Water and drainage piping Appliance housings and components
House siding Computer enclosures
Flooring/Medical tubing/bags Electrical enclosures
Packaging Pipe fittings
Coatings Vertical blinds
Windows
Wire and cable insulation and
jacketing
Weatherstripping
Automotive components
PERCENT OF TOTAL SALES 3% 57% 39%
</TABLE>
<PAGE> 3
The Geon Company
Financial Highlights
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in Millions Except Per Share Data) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $1,144.4 $1,267.8 $1,208.6
Employee separation and plant phase-out - 63.9 -
Operating income 29.9 63.3 102.1
Net income 12.2 32.2 56.6
Capital expenditures 73.4 70.0 61.5
Depreciation and amortization 54.1 56.6 58.2
Total debt 156.8 147.2 104.0
Average equity market value 580.2 680.9 765.7
Stockholders' equity 222.4 208.9 240.2
Earnings per share .50 1.24 2.01
Common shares outstanding (in millions) 23.3 24.7 26.3
Number of employees (year-end) 1,683 1,725 1,808
Employee and Management Stock Ownership 12% 8% 4%
Shareholders (estimated as of December 31) 7,000 7,000 13,500
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS AND REPURCHASE OF COMMON STOCK
$ Millions
----------------------------------------
<S> <C>
96
95
94
93
</TABLE>
[PIE CHART]
<TABLE>
<CAPTION>
1996 SALES BY PRODUCT
---------------------
$ Millions
----------
<S> <C> <C>
Resin $645.8 57%
Compound $452.0 39%
VCM $33.5
Other $13.1
</TABLE>
[PIE CHART]
<TABLE>
<CAPTION>
1996 SALES BY GEOGRAPHIC REGION
-------------------------------
$ Millions
----------
<S> <C> <C>
US $784.0 69%
Canada $199.9 17%
NA Export $85.7 7%
Australia $74.8 7%
</TABLE>
1
<PAGE> 4
The Geon Company
To Our Stockholders
[PHOTO]
From left to right: William F. Patient, Thomas A. Waltermire, Donald P.
Knechtges, Louis M. Maresca, Edward C. Martinelli, Gregory L. Rutman.
For several years now, the people of Geon have been saying that they are
determined to be the best. In everything we do, our sole focus has been to set
the benchmark for excellence in the chemical and polymer industry, creating a
company that serves customers, rewards stockholders and fosters employee pride.
With this as our standard, all of us are dissatisfied with the results of
1996. Market forces, along with operating problems caused by our own mistakes,
combined for a disappointing year in earnings.
When Geon was created through its initial public offering, we talked about
the cyclical nature of our business. In fact, we made a commitment that by
re-engineering processes, reducing costs, improving productivity and shutting
down older, inefficient operations, we would put a financial floor under Geon at
the bottom of the earnings cycle. We believe we have done just that, creating an
earnings base that on a comparable basis is more than $100 million better than
in 1992.
Without that improvement, Geon would have suffered serious operating losses
in 1996. The competitive nature of the industry drove polyvinyl chloride (PVC)
cash margins to historic lows, more than $0.02 per pound below the last trough
in 1992-1993. Each $0.01 in cash margins represents about $0.50 per share in
earnings. Although the causes of these lower margins are clear, we believe we
must still reward our stockholders even in these tough conditions. That is our
commitment to you, our stockholders, and it is one that every Geon employee
takes seriously.
The operating problems in 1996, which now have been resolved, occurred
during start-up of our expanded vinyl chloride monomer (VCM) facility and at
certain PVC plants. Together, these resulted in an estimated negative impact on
earnings of $0.30 per share for the year. While the absence of these losses
would not have been enough to turn the year into a satisfactory one, these
problems certainly do not reflect the kind of operating excellence we need in
this very competitive business.
For Geon, net income in 1996 was $12.2 million, or $0.50 per share, on
sales of $1.1 billion. In 1995, net income was $71.3 million, or $2.75 per
share, before special charges, on sales of $1.3 billion.
2
<PAGE> 5
The good news for 1996 is that the business grew well. We learned some
lessons, solved some problems and achieved further cost improvements while doing
business in a highly competitive marketplace. As we head into 1997, we remain
confident in our quest for Geon to become the most profitable producer in the
vinyl industry.
LOW MARGINS IMPACT 1996 RESULTS
After a tight supply-demand balance in early 1995, PVC prices and cash
margins eroded as ethylene and chlorine costs rose. Vinyl prices rose in early
1996 in response to increased demand. However, during the second half, industry
margins shrank again because of rising raw material costs and a drop in prices
at year-end. Additional North American industry capacity, as well as soft export
prices because of sluggish economies in Europe and Japan, exerted downward
pressure on North American resin prices during most of 1996. Consequently, PVC
industry cash margins for the year were approximately $0.065 per pound less than
in 1995 and $0.02 per pound less than in the down-cycle period of 1992-1993.
World vinyl production is estimated to have reached 49 billion pounds in
1996, growing nearly 5 percent per year over the past five years. Geon expects
global demand will rise by about 6 percent per year through 2000, driven by
growth in the Asia/Pacific and other developing regions, along with continued
strength in North America.
Industry shipments rebounded by 11 percent in North America in 1996 after a
relatively flat 1995. The rejuvenated Canadian economy was an important
contributor to the rise in demand, along with low interest rates and healthy
industrial production in the United States. Demand was especially strong in the
pipe, siding and window markets.
People throughout the world continue to request vinyl because of its
durability and cost-effective performance.
VALUE CREATED THROUGH GEON INITIATIVES
For 1996, we established some tough, challenging and important goals.
Following is a report on our progress:
CONTINUING COST AND PRODUCTIVITY IMPROVEMENTS
- - In our efforts to improve earnings through cost reductions, productivity
gains, quality enhancements and growth, we established goals totaling $55
million for the year. We achieved $32 million of that goal, with most of
the shortfall resulting from the aforementioned problems with our VCM
expansion and PVC manufacturing early in the year. Nevertheless, by
year-end, resin productivity, measured in pounds of resin per employee, was
up 16 percent, and we reduced cash conversion costs by 5 percent. Since
1992, resin productivity has more than doubled, and we have decreased
production costs per pound by more than 40 percent.
- - We continue to achieve impressive productivity gains in compound, with
pounds per capacity hour up 11 percent. Today, we are running half as many
production lines as we did in 1992, even though unit sales have grown 18
percent. We have achieved significant savings by redesigning and
streamlining our product line to require fewer raw materials, by reducing
down times and by increasing run rates. The consolidation of rigid compound
manufacturing at Avon Lake, Ohio, is almost complete, and we started up the
new line in the first quarter of 1997. We completed the shutdown of our New
Jersey compound line during 1996.
REDUCING RAW MATERIAL COSTS
- - We completed the 800-million-pound expansion of our LaPorte, Texas, VCM
facility, bringing the plant's total capacity to 2.4 billion pounds. Our
LaPorte facility is the largest and clearly one of the lowest-cost VCM
plants in the world. The additional capacity reduces cost by eliminating
most of our need to purchase VCM at market prices. In 1996, the expansion
resulted in $8 million in raw material savings and is anticipated to save
$8 million in 1997, if VCM cash margins remain unchanged. The start-up
issues are now behind us and the plant is achieving planned production and
cost targets.
- - Our joint venture agreement with Olin Corporation to jointly build a
250,000-ton chlor-alkali plant in McIntosh, Alabama, was finalized during
the third quarter, and construction has begun. Known as Sunbelt
Chlor-Alkali, the joint venture will supply one-third of LaPorte's current
chlorine needs and will be one of the lowest-cost plants
3
<PAGE> 6
The Geon Company
To Our Stockholders continued
in the industry. Construction should be completed by the end of 1997, with
full operation in early 1998. Industry conditions in 1996 demonstrated the
need for Geon to explore additional opportunities beyond the Sunbelt
project to reduce raw material costs. We are continuing to look for
creative, high-return opportunities that offer a competitive advantage.
- - Consolidation of compounding raw materials resulted in the elimination of
nearly 140 products and approximately $1.5 million in savings.
PURSUING PROFITABLE GROWTH
- - Compound shipments grew well, up 11 percent for the year. Sales reached
$452 million. Aggressive cost and productivity gains, plus solid growth,
have significantly improved the contribution of compounds to shareholder
economic value.
- - Specialty resins are playing an increasingly important role as we focus on
areas to improve our profitability and growth for the future. As a result
of rising customer demand, we are expanding our dispersion resin production
facility in Pedricktown, New Jersey. Dispersion resins are used in a wide
variety of flooring, automotive, coating and consumer products.
ENHANCING THE WAY WE SERVE CUSTOMERS
- - We have a team of very dedicated individuals bringing our new Geon 2000
information system closer to completion. The system, which uses SAP
computer software technology, was put into operation in late 1996 for our
resin business. When completed companywide in 1997, it will reduce our
operating and working capital costs, improve our service to customers and
tie our organization together on a real-time basis for faster response.
- - We also accomplished our objective for all of our plants to earn ISO 9002
certification. This means our customers can be sure that all of our
facilities operate according to world-class standards of quality and
consistency.
REWARDING OUR STOCKHOLDERS
- - In July, the Company completed its 1995 authorization to repurchase 10
percent of Geon common stock. Subsequently, the Board of Directors
authorized an additional repurchase of up to 2.5 million shares, of which
600,000 shares have been purchased to date. Since 1993, the Company has
repurchased 4.5 million shares and returned more than 110 percent of our
net income to stockholders through dividends and share repurchases.
DRIVING RESULTS WITH INCENTIVE PLANS
- - We recognize our employees' contributions and accomplishments through our
gain-sharing and Success-Sharing programs, which link employee
compensation directly to stockholder value. The gain-sharing program is
based on specific improvement and performance targets for our manufacturing
employees. In addition, all employees are eligible for Geon stock awards
under our Success-Sharing plan, which follows the same criteria as our
management incentive plan, so that everyone is focused on the same Company
goals. In 1996, as a result of our performance, payouts were down
substantially from 1995 and totaled $7.5 million. Geon employees and
directors now hold 12 percent of all outstanding shares, up from 8 percent
last year.
SETTING RECORDS IN SAFETY AND ENVIRONMENT
- - Once again, we were very proud of our safety and environmental performance
this year. Many sites set new record-lows for accidents and environmental
releases. In North America, we have now completed more than three years, or
12 million employee hours, without a lost-time accident. We believe this is
an unprecedented achievement in the chemical industry.
1997 AND BEYOND
As we look forward to 1997, we once again see challenges for Geon. Just as
in 1996, we are beginning the year at very low margins in our commodity resin
business. While we have announced price increases of $0.06 per pound for resins
[PHOTO - WILLIAM F. PATIENT]
WILLIAM F. PATIENT
Chairman of the Board, President and Chief Executive Officer
/S/ W. F. Patient
4
<PAGE> 7
and $0.03 per pound for compounds, our major raw materials (ethylene and
chlorine) are also starting the year with announced price increases.
We estimate additional vinyl industry capacity in 1997 to be comparable to
the trend line for industry growth. On the demand side, we anticipate returning
to a more normal growth rate of approximately 2 times real gross domestic
product. As a result, industry capacity utilization rates in 1997 are projected
to be similar to those in 1996. Certain risk factors that may affect these
forward-looking comments are discussed on page 33.
At Geon, we are proceeding with our strategy of creating new ways to
generate an acceptable level of earnings even at the bottom of the cycle. Our
belief is that to run the business right, we must focus on driving costs even
lower, improving efficiencies and achieving operational excellence in every
aspect of our business. We need to innovate the best and lowest-cost systems,
processes and products to provide more value to our customers than the
competition. Simply, we must achieve the industry's best quality, reliability,
productivity and cost.
In resins, we remain highly focused on becoming the low-cost provider. We
have set clear cost-reduction targets for 1997 and 1998 to improve earnings,
even if the industry persists at current record-low margins. Also, we will
continue to leverage our existing assets to grow with our customers, while
minimizing additions to capital.
We intend to strengthen compounds by being the low-cost provider and the
industry leader in quality and service. As in resins, the effort to reduce costs
is relentless. We will provide better service by improving product consistency
and on-time delivery. Also, by penetrating new markets, participating in
international joint ventures and targeting customers who are growing faster than
the rest of their industry, we will enhance compound growth.
Our accomplishments have proved that our people are a primary key to our
success. The people of Geon understand that our industry and our competitors are
not standing still. Continuous improvement will be necessary if we are to set
the benchmark for excellence in our industry and create new value for our
stockholders.
Through productivity improvement, business simplification, overhead
reduction, wise investment in technology and -- most importantly -- cost
efficiency, we will create customer satisfaction and the kind of profitability
you, our stockholders, expect.
The management and employees of Geon are committed to that goal!
March 3, 1997
[PHOTO - DONALD P. KNECHTGES]
DONALD P. KNECHTGES
Senior Vice President, Technology/Engineering
/S/ D. P. Knechtges
[PHOTO - LOUIS M. MARESCA]
LOUIS M. MARESCA
Vice President, Operations
/S/ L. M. Maresca
[PHOTO - EDWARD C. MARTINELLI]
EDWARD C. MARTINELLI
Senior Vice President, Commercial
/S/ E. C. Martinelli
[PHOTO - GREGORY L. RUTMAN]
GREGORY L. RUTMAN
Vice President, General Counsel and Secretary
/S/ G. L. Rutman
[PHOTO - THOMAS A. WALTERMIRE]
THOMAS A. WALTERMIRE
Chief Financial Officer
and Senior Vice President, Human Resources
/S/ T. A. Waltermire
5
<PAGE> 8
The Geon Company
40 Years of Excellence in Serving North America
Niagara Falls Plant
[PHOTO - MARK MESAROS & DAVE DUNSEITH]
/S/ Mark Mesaros
/S/ Dave Dunseith
[PHOTO - CLIFF MORRIS]
/S/ Cliff Morris
[PHOTO - B. MARSHALL]
/S/ B. Marshall
Geon's Niagara Falls plant, the largest producer of vinyl resins and compounds
in Canada, is marking its 40th anniversary in 1997. The plant and its 160
employees serve primarily the siding, rigid profile, general flexible and
automotive markets in eastern Canada. Its current capacity of nearly 600 million
pounds of resin and compound per year is more than 50 times its capacity when it
opened as a BFGoodrich facility in 1957 with 50 employees.
Niagara Falls employees take a cross-functional team approach to address
strategic issues such as product quality, process uptime, product change time,
unit operations and gain-sharing. As a result of these efforts, the resin and
compound units set six new monthly production records during 1996, and resin
maintenance downtime and costs were the lowest in the Company in the fourth
quarter.
As noted in the Safety and Environmental Performance section of this
report, the plant has achieved more than three years without an environmental
exceedance, thanks largely to the efforts of its wastewater treatment team,
which totally revamped the plant's treatment operating procedures. Each day, the
plant treats 3.5 million to 4 million liters of wastewater.
Niagara Falls employees reached the milestone of 1 million hours worked
without a lost-time injury on September 21, 1996. In honor of this achievement,
the plant received an award from the Ontario Industrial Accident Prevention
Association. The plant has experienced only one recordable injury since August
1994.
Operational excellence and responsible care are the foundations for
benchmark performance at the Niagara Falls plant, where employees are satisfied
with nothing less than being the best.
6
<PAGE> 9
[PHOTO - KATHY BRIEN & LILI L. PILLITTERI
/S/ Kathy Brien
/S/ Lili L. PILLITTERI
[PHOTO - RANDY REEB]
/S/ Randy Reeb
[PHOTO - DENNIS J. REYNOLDS AND DAN POWELL]
/S/ Dennis J. Reynolds
/S/ Dan Powell
NIAGARA FALLS EMPLOYEES:
WILLIAM T. ABBOTT - TRACY L. AIELLO - DOMENIC J. ANELLO - DANIEL H. ARSENEAULT -
MICHAEL N. BABIN - ROBERT B. BABIN - ROGER BARTHE - DARREN M. BAYES - ARTHUR R.
BENVENUTI - ANTHONY F. BORG - CAMERON A. BOTTING - JOHN J. BOUDREAU - MARK R.
BRAIN - CHAD R. BRAUNECKER - KATHLEEN R. BRIEN - PAUL R. BRUNET - LEE A.
BUCKBOROUGH - BRIAN BURLEY - DENNIS L. BUSH - LEO BUSSI - JOHN E. CAESAR - BRIAN
A. CAIN - JOHN L. CAIN - DIANE E. CAMPBELL - ANTHONY T. CANHAM - DOMENIC
CARCHIDI - GIOVANNI P. CARDINALE - MARK C. CLENDENNIN - GAVIN D. COCKMAN -
DONALD L. COTTER - SCOTT W. CRAIN - JAMES E. CULP - ANNA M. CUPOLA - DONALD J.
DAVIDSON - RUSSELL K. DEKKER - DOUGLAS DEROCHIE - ARTHUR S. DICK - HERMAN G.
DIEPOLD - MICHAEL D. DIETRICH - FRANK P. DIODATI - LAURENT A. DUCHESNE - WARREN
A. DUNN - DAVID G. DUNSEITH - DANIEL E. ELLIS - ARTHUR P. FEDEROW - GREGORY G.
FINKBEINER - JOHN M. FRANIC - DANIEL FROUDE - ROBERT J. GARTNER - CHRISTOPHER S.
GAUTHIER - TIMOTHY C. GORDON - HERB GRAF - GREGORY A. GREEN - A. TERRY HALLIGAN
- - JOHN A. HALLIGAN - JURGEN J. HAMM - RALF G. HAMM - STEPHEN A. HARRIGAN -
ROBERT D. HAWKEN - LAYN C. HAYES - GERALD R. HEDGE - ROBERT J. HEENEY - DAVID
HILL - NORMAN L. HOLMES - RAYMOND J. HORTH - KITCHENER S. HOWARD - RICHARD J.
HUNTER - JAMES F. IRWIN - WILLIAM P. IRWIN - GEORGE D. JACKSON - DAVID J.
JARRETT - RONALD S. JOHNSTON - W.R. GLEN JOHNSTON - CHARLES T. KELLY - JAROSLAW
O. KIT - PATRICK F. KORTE - STEPHEN KVAS - CHRISTOPHER D. KYLE - GERALD E.
LALONDE - DONALD G. LASLO - PETER LITNEWSKI - JEFFREY W. LITTLE - CHRIS H.
LOCOCO - NORMAN J. LUMSDEN - EDWARD E. LUTZ - SCOTT L. MAC INNES - DIANE S.
MACLEAN - P. MICHAEL MACLEAN - PATTI-ANNE MACLEAN - PAUL C. MACLEAN - DONALD N.
MAJOR - THOMAS M. MARALDO - ANTHONY MARRARA - BERTRAM MARSHALL - PHILIP W.
MARSHALL - FIONA H. MCCABE - JAMES MCCANN - WILLIAM J. MCDONALD - MARTIN E.
MCRAE - BYRON E. MCWHIRTER - MARK S. MESAROS - BRIAN B. METHVEN - FRANK MOLNAR -
HAROLD J. MOLNAR - RENATO A. MORETTIN - CLIFFORD E. MORRIS - EDWARD A. MORRIS -
ROSE MURPHY - FREDERICK M. MURRAY - KENNETH J. NIVEN - PAUL R. OWENS - CHRIS A.
PALMER - TIMOTHY H. PARKES - STEPHEN J. PARKINSON - JOHN F. PELLEGRINO - JAMES
F. PERRY - DALE A. PIDGEON - BRADLEY J. PIFIEFER - LILI L. PILLITTERI - DANNY M.
POTTER - THOMAS J. POUPORE - DANIEL W. POWELL - BRIAN C. PREECE - JOHN M. PUN -
CRAIG RAE - DOUGLAS D. REEB - RANDY D. REEB - BRIAN J. REES - CHRISTOPHER G.
REID - DAVID A. REID - DENNIS J. REYNOLDS - JOAN R. RICHARDSON - COLIN ROHRMOSER
- - CHRIS A. RUDDY - STEVE G. RUSKOFF - EDWARD D. RYAN - MAURICE D. SAUVE -
SUZANNE M. SAWATSKY - MELVIN C. SCHABEL - BLAIR C. SCHIEBEL - RAJENDRA N. SHAH -
DAVID A. SHELLEY - BRIAN J. SIMS - FIORINDO F. SINIBALDI - JAMES C. SMITH -
THOMAS W. SMITH - DANNY D. SNIDER - ROBERT M. SOYKA - SAVIOUR SPITERI - DAVID J.
STEWART - LARRY J. STRADER - JAN STRYJSKI - LEONARD SUTTON - BRUNO TANASI - PAUL
TANASI - LOUISE M. TAYLOR - STEPHEN A. THOMPSON - JAMES THOMS - JACK TOFFOLO -
MARGARET A. VERES - JOHN E. VOOGT - PETER J. VOOGT - MIHKEL U. WAHER - GEORGE A.
WALLACE - JEFF D. WARRELL - MARK J. WHITWELL - LINDA S. WIDDIFIELD - WILLIAM H.
WILKIE, JR. - ERWIN J. WILLAMS - WALTER WIRA - KAREN M. WOODRUFF - R. MATTHEW M.
WOODRUFF - ROBERT F. WOODRUFF
7
<PAGE> 10
The Geon Company
Creating Value through Profitable Expansion
LaPorte Plant
[PHOTO - JERRY R. DIAL & ALEX JONES]
/S/ Jerry R. Dial
/S/ Alex Jones
[PHOTO - BRUCE ? GRABILL]
/S/ Bruce ??. Grabill
[PHOTO - DOUGLAS ??. ???]
/S/ Douglas ??. ???
When the expansion of Geon's LaPorte, Texas, vinyl chloride monomer (VCM)
manufacturing plant was completed in 1996, the facility became the largest of
its kind in the world. But size isn't the only thing that makes the LaPorte
plant unique. It is the only VCM plant in the United States to receive ISO 9002
certification, recognized worldwide as the standard of quality processes.
The facility is also one of the most efficient VCM manufacturing plants in
the world. Since 1991, its people have achieved $8 million in annual savings
through efficiency and productivity improvements.
For The Geon Company, the expansion of the LaPorte plant's capacity by 60
percent, to 2.4 billion pounds per year, was one of the most significant
developments of 1996. VCM is the building-block material in the manufacture of
polyvinyl chloride resin. The process combines ethylene and chlorine into
ethylene dichloride, which is purified and fed to cracking furnaces where VCM is
produced. The VCM is then shipped to Geon's resin plants or sold on the open
market.
Geon's increased self-sufficiency in VCM reduces its raw material costs
because the Company can produce the material at the LaPorte plant for less than
market prices. By lowering the cost of the VCM supplied to the Company's resin
manufacturing facilities, Geon advances a step further toward its objective of
being a low-cost leader in the world vinyl industry.
Safety and the environment also are high priorities at the LaPorte plant,
and its performance consistently ranks as the best in the industry. The plant
was named the Texas Chemical Council's "Best in Texas" in 1993 and is currently
pursuing "STAR" recognition by the Occupational Safety and Health
Administration. Since 1989, approximately $10 million has been spent to improve
the plant's safety and environmental systems.
The plant employs about 175 full-time workers in operations, maintenance,
engineering and support functions, along with 50 contract employees to
supplement maintenance. The people of LaPorte are committed to the mission of
reliably achieving high-quality, low-cost monomer manufacturing in a safe and
environmentally sound manner.
8
<PAGE> 11
[PHOTO - GINA L. ENSMANN & WALLACE GABRIEL]
/S/ Gina L. Ensmann
/S/ Wallace Gabriel
[PHOTO - GLENN HUDSON]
/S/ Glenn Hudson
[PHOTO - DEAN McGEE]
/S/ Dean McGee
LAPORTE EMPLOYEES:
David W. Abbott - Dennis C. Ayers - Gary D. Bass - Patrick S. Bearb - Max A.
Bennett - Shane Bilbrey - Robert E. Blythe - Lynn R. Boedecker - Preston K.
Bonner - Dennis D. Brown - Mary L. Brownfield - Phillip H. Buck - Clayton D.
Burrell - Christopher Burrell - Michael A. Butler - Kathleen K. Cameron - Juan
A. Canizales - Norman J. Carlegis - William H. Carraway - Gerald S. Carrier -
Rickey D. Caruso - Ernest R. Chance - David F. Charba - Eddie L. Childs - Dan R.
Clark - Douglas A. Conner - Doswell A. Conner, Jr. - Richard Contreras -
Christopher A. Crandall - Richard A. Crandall, Jr. - Calvin D. Crew - Steven J.
Crowson - Constance J. Dattilo - William L. Davis, Jr. - Lee E. Dearman -
Kathleen M. Deitz - Kenneth R. Delaney - Stephen A. Delasbour - Dennis J. Demel
- - Jerry R. Dial - Eduardo L. Diaz-Sandi - James G. Dominy, Jr. - Ronald J.
Dupree - Wilmer E. Easter - Gina L. Ensmann - John P. Estrella - Edward G.
Flores - Bruce D. Foley - Jonathan P. Fried - D. Andrew A. Furnas - Wallace E.
Gabriel, Jr. - Ryan P. Garnett - Gary L. Glover - Albert P. Golt - Johnny D.
Gonzalez - Milton J. Goudeau - Lloyd R. Goyer - Katherine M. Grabill - Bruce W.
Grabill - Bruce A. Graham - James G. Greer - Gerald E. Griffin - David A.
Hamilton - Beverly J. Hancock - Jack W. Hanel - James R. Harper - Donald L.
Harrison, Jr. - Jerry W. Heintschel - Lujuna J. Henley - David J. Hinson -
Thurman Hively - Mark C. Hoffman - John D. Hollaway - Ben A. Holliday - Troy F.
Hollin - Owen R. Huckabay - Glenn R. Hudson - Rogers M. Jackson, Jr. - James D.
Jaster - Barry H. Johnson - Victor J. Johnston - Bryan D. Jones - Craig E. Jordy
- - Kathleen A. Kapsiak - Patrick H. Kelly - Carl A. Kemp - Ronald P. Klein -
Kenneth L. Lacy - Charles A. Lambard - James T. Lancelin - David L. Laubacher -
Paul E. Leadon - Jerry L. Leos - William P. Lesko - Joel H. Lindahl - Troy D.
Lindsey - Larry J. Logan - Jeffrey D. Logan - Juan G. Lopez - Timothy C. Lowell
- - Sammy D. Lozano - Kevin W. Machemehl - Franklin J. Manahan - Timothy G.
Manning - William G. Marin - Harold I. Maris - John O. Marshall - Mark P.
Mascorro - Donald C. Maughn - Victor L. McClure - Alfred D. McGee - Shawn P.
McGlynn - David S. McNair - Lloyd L. Mercer - Nick W. Mitchell, Jr. - Martha H.
Moreno - Epifanio Moreno, Jr. - Scott D. Morgan - Robert L. Morgan - Joe R.
Morris - Michael W. Mounts - Billy V. Munselle - Randy C. Nalley - Robert A.
Neibert - James P. Nolan - Lester V. Olive - James C. O'Sullivan - Ronald A.
Paige - Paul D. Pawlowski - Curtis R. Peery - Abel R. Perez - David W. Peterson
- - David A. Pierce - Lawrence Popiel - Carroll C. Potts - Istvan Potyondy - Larry
I. Probst - Roger A. Ratisseau, Jr. - Sylvia J. Ray - Dennis G. Roberts, Jr. -
James S. Robinson - Johnny B. Rowell - Alan T. Sakach - John E. Sanders o
Stephen Schultz - Anne L. Selcer - Oren T. Sheppard - Gary D. Shields - Donald
R. Shrum - David L. Simmons - Gary L. Smotherman - Carol A. Spencer - Alan K.
Spriggs - Peter K. St. Julian - Arthur R. Starnes - Joseph M. Steele - Joseph B.
Stilwell - Mark A. Stroderd - John T. Sullivan - Betty A. Swearingen - Cecil V.
Tanner - John L. Taylor, Jr. - Reggie E. Threlkeld - Chris B. Timmins -
Alejandro Torres - Terry E. Townsend - Samuel O. Tuck - Pamela M. Vaughn -
Ronald J. Vaught - Ronnie L. Venable - William A. Wagner - Mark E. Wilkins -
Leslie E. Williams - Tadarell L. Woods - Robert L. Wronko
9
<PAGE> 12
The Geon Company
Working Together for Benchmark Performance
Louisville Plant
[PHOTO - CARL FRANK]
/S/ Carl Frank
[PHOTO - PETE CASTELLA]
/S/ Pete Castella
[PHOTO - PAUL E. SUMPTER]
/S/ Paul E. Sumpter
The people of Geon's Louisville, Kentucky, plant have worked so far this decade
without a lost-time injury, accumulating more than 3.4 million safe working
hours during that span. Such exemplary performance is standard operating
procedure at the Louisville plant. The facility, which was opened by BFGoodrich
in 1942, today employs 137 people and produces 700 million pounds of resins and
compounds per year.
Since 1992, productivity improvements have increased the plant's resin
production capability by nearly 50 percent. Debottlenecking efforts during 1996
increased resin capacity by 120 million pounds per year, or 20 percent, at a
cost of $4 million.
Self-directed teams have achieved significant improvements in several
important areas. In compounds, for example, Louisville employees set a new
production record in 1996. Another self-directed team has increased the cost
efficiency of utility usage and eliminated steam outages, leading to more
consistent production.
In an intensive employee involvement program, department committees
generate ideas to make their departments more competitive. The committees
conduct pilot programs to test their ideas. Successful programs are submitted to
a vote of the department's employees. If the employees vote to implement a
program, it is sent to a joint steering committee -- consisting of five
union-designated representatives and five company-designated representatives --
for final approval. In this way, management, the union's leadership and its
membership are working together to make the Louisville plant a world-class
facility.
10
<PAGE> 13
[PHOTO - JOSEPH E. MORRIS JR.]
/S/ Joseph E. Morris Jr.
[PHOTO - ROY E. TITUS]
/S/ Roy E. Titus
[PHOTO - LATASCA D. SMITH & GEORGE A. HAYSLEY]
/S/ Latasca D. Smith
/S/ George A. Haysley
LOUISVILLE EMPLOYEES:
Edward R. Adams - Joseph W. Arnold - Edward L. Ballard - Anthony W. Barker -
Patrick E. Barnes - Gerald Bartz - Charles A. Beck - John M. Bell - Edwin J.
Blake, Jr. - Robert L. Boehnlein - Thomas D. Boisvert - Michael J. Booth - Mark
S. Bradley - Stephen T. Brown - Donald L. Bunch - Lloyd B. Byrd - Mickey J.
Carmack - Pete Castella - Wallace P. Cawthon - Richard H. Charles - Paul T.
Clagett - Gerald T. Clark - Herman Cornett - Charles R. Darst - Jerry T.
Davenport - William L. Davis - Stephen A. Deetsch - Carl E. Denner, Jr. -
Richard A. Doebler - Michael T. Dove - Kathy L. Eads - John E. Eddleman -
Richard W. Exton - Harold R. Finley, Sr. - Karen C. Finn - Larry M. Foreman -
Phillip L. Fortwengler, Sr. - Carl W. Frank - Richard L. French - Robert J.
Fritz - David A. Gahafer - William L. Gant - Gordon B. Garrett, Jr. - Michael G.
Goebel - Russell G. Gregory - Darrell R. Gresham - Thomas D. Guelda - James C.
Hafling - Stephen E. Hale - David A. Hale, Jr. - Elmer R. Hall - Michael L.
Harmon - George A. Haysley - Ronald W. Herink - David C. Hicks - Ronald L. Hill
- - Jerry D. Hooper - Joseph D. Hughes - Glyn W. Humphrey - William K. Jarrett -
Lester R. Jewell - James R. Johnson - Michael E. Johnson - Mark D. Johnson -
Stephen E. Kannapel - James A. Kennedy - Richard W. Kern - William H. Kirksey -
Gary L. Lantz - Merrill G. Law - James B. Ledford III - Francis J. Levy, Jr. -
David A. Lile - Holly L. Livermore - Albert J. Lorey, Jr. - Carl A. Manion -
James S. Martin - David L. Mask - Paul D. May - Ted J. Michalik - Michael V.
Mindel - William T. Minor - Jason L. Moore - Franklin D. Moore - Joseph E.
Morris, Jr. - William T. Mullins - John O. Nacke - James S. Nelson - Morris J.
Newhouse - Merrille Noe - Larry F. Norfleet - John J. O'Bryan - Ben F. Owens -
Isaac A. Owens - Robert L. Patton - Randal B. Paul - Gerald R. Payne - John E.
Peay - Bradley R. Perkins - Ernie E. Phelps - Sarah O. Puckett - Darrell L.
Purvis - Gary L. Rapp - John H. Rayburn - Paul H. Reger - Edwin P. Reyling -
Robert J. Richardson - Vickie L. Sabel - Karl V. Sanders - John C. Schaap -
Fredric M. Schuler - David R. Scoggin - Miriam D. Shelburne - Thomas L. Shields
III - Robert G. Short - Ronald Shuffitt - Dave L. Sibley - La'Tasca D. Smith -
James A. Smith, Jr. - Nelson E. Snider - Charles B. Spencer - Larry W. Stivers -
Paul E. Sumpter - Michael J. Thompson - Roy E. Titus - Bruce H. Todd, Jr. -
Charles Torain, Jr. - Rex A. Turner - Terry D. Vincent - James K. Walsh - Jerry
E. Walston - Robert E. White - Thomas E. Willett - Winfrey Williams - Larry Wise
- - Victor L. York
11
<PAGE> 14
The Geon Company
Safety and Environmental Performance Report
Geon's excellent safety and environmental record reflects the high priority our
people place on preventing accidents, eliminating chemical emissions and
reducing waste. In the past year, the people of Geon continued their already
stellar performance in each of these areas.
On January 11, 1997, our North American employees completed a third full
year without a lost-time injury, defined as an on-the-job injury which requires
an employee to be away from the workplace for at least one day. This is
equivalent to 12.2 million employee working hours without a lost-time injury.
Worldwide, Geon facilities have not experienced a lost-time injury since October
1995, or 5.1 million working hours.
OPERATING INJURY-FREE
Many of our plants have operated for extraordinary lengths of time without
a lost-time injury. Deer Park has experienced no lost-time injuries in the past
11 years, or 2.2 million working hours. The Henry and Terre Haute plants have
recorded 8 1/2 years each, or 3.4 million and 1.5 million working hours,
respectively, and the Louisville plant has operated 7 1/2 years, or 3.7 million
working hours, without a lost-time injury.
Five of our plants -- Altona, Avon Lake Compounding, Long Beach, Plaquemine
and Scotford -- completed 1996 without a recordable injury of any kind. Of
these, Plaquemine has operated more than four years, and Scotford more than
three years, without a recordable injury, defined as one which requires more
than first-aid treatment.
Geon's injury prevention success is having a significant positive impact on
workers' compensation claims, resulting in cost reductions for the Company. For
the three-year period of 1994 through 1996, workers' compensation claims, both
in dollar terms and the actual number of claims, were reduced by approximately
75 percent compared with the period of 1991 through 1993.
REDUCING EMISSIONS AND WASTE
The Company also continued its progress in reducing chemical emissions and
other waste materials in 1996. We matched our previous best-ever performance of
1995 in reportable chemical releases and permit exceedances, with six of our
plants exhibiting 100 percent compliance during 1996. Such performance
[GRAPH]
1996 GEON EMPLOYEE SAFETY PERFORMANCE
<TABLE>
<CAPTION>
INCIDENCE RATE (1)
------------------------------
TOTAL RECORDABLES LOST TIME
----------------- ---------
<S> <C> <C>
CMA COMPANIES OVER
2 MILLION HOURS/YEAR
GEON(2) 0
<FN>
(1) Injuries per 200,000 hours (or 100 employees/year)
(2) Full-year 1996 Geon statistics
Source: CMA 1st-half 1996 Injury & Illness Report
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
GEON LANDFILL DISPOSAL
Index 1993 = 100
----------------------
<S> <C>
93
94
95
96
</TABLE>
12
<PAGE> 15
represents a truly exceptional team effort by all employees at each of our
plants. Noteworthy is the Niagara Falls plant, which has completed three years
without a wastewater exceedance, and the LaPorte plant, which maintained
excellent environmental and safety performance while undergoing a major capacity
expansion and the subsequent start-up of new process equipment.
A combination of process improvements and recycling efforts at all Geon
plants has reduced the Company's overall generation of wastes disposed at
landfills and through other means. At most of our plants, employees are rewarded
for meeting waste reduction goals as part of their overall gain-sharing
programs.
Just as a focus on safety can translate into cost savings, an effective
recycling program can also provide monetary returns for the Company. Overall,
Geon recycled 7.6 million pounds of materials in 1996, resulting in a net
savings of approximately $500,000.
For example, the Pedricktown plant recycled a variety of materials,
including drums, paper, cardboard, wood, used oil and solvents, for a net return
of $49,000 in 1996. The Avon Lake site program recycled 1.4 million pounds of
various materials during the year.
AWARDS RECOGNIZE OUTSTANDING PERFORMANCE
In recognition of our employees' personal diligence, teamwork and
outstanding safety record, the Chemical Manufacturers Association (CMA) honored
Geon with its Lammot du Pont Safety Award in June 1996. The award was
established in 1951 to encourage member companies to improve their industrial
safety programs. Geon won the award in the category of companies with 2 million
to 20 million employee hours per year. Geon achieved the greatest reduction in
injury and illness incidence rates among all CMA companies in the category for
the five-year period ended December 31, 1995.
[GRAPH]
GEON PLANT EMISSIONS(1)
Base Year 1987=100
<TABLE>
<CAPTION>
87 88 89 90 91 92 93 94 95 96e
-- -- -- -- -- -- -- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AIR
WATER
OFF-SITE(2) 100
<FN>
(1) SARA Title III Emissions
(2) Landfill and other
</TABLE>
[PHOTO - GARY SMOTHERMAN]
/S/ Gary Smotherman
[PHOTO - GERALD GRIFFIN]
/S/ Gerald Griffin
[PHOTO - SAMMY D. LOZANO]
/S/ Sammy D. Lozano
[PHOTO] In June 1996, the people of Geon received the Chemical Manufacturers
Association's Lammot du Pont Safety Award, one of the highest honors a chemical
company can earn. The award recognizes Geon's stellar performance in preventing
injuries and accidents.
13
<PAGE> 16
The Geon Company
Safety and Environmental... continued
[PHOTO]
Geon once again received the Conrail Diamond Drop Award for flawless
shipping, based on performance in 1995. The award recognizes companies that ship
at least 1,000 rail cars of hazardous material during the year without a
shipper-caused release. Of the 26 chemical producers that earned the award last
year, Geon is the only company that has received the award in each of the eight
years since the award's inception.
In April 1996, the Vinyl Institute presented awards to five Geon plants for
their achievements to improve worker safety and protect the environment. Deer
Park received the Environmental Excellence Award for its nine consecutive years
of perfect compliance with national standards for vinyl chloride emissions.
Niagara Falls, Pedricktown, Scotford and LaPorte each received the Environmental
Achievement Award for minimizing air pollutant emissions, and the Safety
Performance Award for improving worker safety.
ENVIRONMENTAL SCIENCE SUPPORTS VINYL
Scientific research is providing additional evidence that vinyl is not a
significant source of dioxins in the environment, as some environmental groups
have claimed.
In the largest independent study ever conducted on the potential
relationship between chlorine and dioxin emissions from waste combustors, no
statistically significant relationship between waste feedstock containing
chlorine and dioxin output concentrations was found. Of 90 facilities with
sufficient data to analyze the effect of chlorine on dioxin concentrations, 80
percent showed no relationship, while 11 percent displayed an increase in dioxin
emissions and 9 percent showed a decrease.
These results indicate that factors other than chlorine, such as combustor
equipment and operating conditions, are what influence dioxin concentrations.
The study, which was directed by the American Society of Mechanical Engineers,
confirms the findings of an earlier study by the New York State Energy Research
and Development Authority, which concluded that the presence or absence of vinyl
has no effect on the amount of dioxin emitted during the incineration process.
The vinyl industry recently established an independent review panel of
experts who will participate in a multi-year testing program designed to measure
potential dioxin emissions from various points in the vinyl production process.
Results of this "characterization" program, of which Geon is a key participant,
are being shared with the U.S. Environmental Protection Agency as they become
available.
In this and other environmental and safety matters, Geon and its people are
dedicated to setting high standards and acting responsibly as the benchmark for
the rest of the industry. We are determined to continue leading the way through
outstanding performance in the coming years.
14
<PAGE> 17
The Geon Company and Subsidiaries
Financial Summary
TABLE OF CONTENTS
Management's Analysis..................................................16
Consolidated Statements of Income......................................17
Consolidated Balance Sheets............................................19
Consolidated Statements of Cash Flows..................................21
Consolidated Statements of Stockholders' Equity........................22
Notes to Consolidated Financial Statements.............................23
Quarterly Data.........................................................31
Selected Five-Year Financial Data......................................32
Report of Independent Auditors.........................................33
Corporate Information..................................................34
Board of Directors.....................................................35
[GRAPH]
<TABLE>
GEON SALES AND SHIPMENTS
$ Millions
Index, 1992=100
<CAPTION>
92 93 94 95 96
-- -- -- -- --
<S> <C> <C> <C> <C> <C>
Dollars, Total
Shipments, Resins & Compounds
North America
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
GEON SALES PER EMPLOYEE
Pounds per Employee
Index, 1992=100
-----------------------
<S> <C>
92
93
94
95
96
</TABLE>
[GRAPH]
<TABLE>
CAPITAL EXPENDITURES AND DEPRECIATION
$ Millions
<CAPTION>
92 93 94 95 96
-- -- -- -- --
<S> <C> <C> <C> <C> <C>
Capital Expenditures
Depreciation
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
EARNINGS BEFORE INTEREST, TAX,
DEPRECIATION AND AMORTIZATION
$ Millions
-----------------------------
<S> <C>
92
93
94
95
96
</TABLE>
[GRAPH]
<TABLE>
INDUSTRY PVC SHIPMENTS AND MARGINS
Billions of Pounds
Cents per Pound
<CAPTION>
90 91 92 93 94 95 96
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
PVC Shipments
Margin Over Feedstock(1)
<FN>
(1) Based on contract ethylene and chlorine prices, and pipe resin price as
reported by CMAI and Chem Data Inc.
</TABLE>
15
<PAGE> 18
The Geon Company and Subsidiaries
Management's Analysis - Statements of Income
In 1996, the Company achieved record resin and compound shipments. Income
fell, due to a lower spread between selling prices and the cost of key raw
materials. New production capacity throughout the industry depressed the
capacity utiliza-tion rate and undermined attempts to pass on rising raw
material costs. The spread over raw materials averaged 2 cents per pound below
the last industry cycle trough of 1992-1993. Despite the lower margins, Geon's
operating income of $29.9 million was an improvement of $52.8 million over 1992.
This improvement is the result of Company efforts to increase unit sales
volumes, higher productivity and reduced costs.
INDUSTRY CONDITIONS - The Company believes that, based on the Society of
Plastics Industry's December 1996 data, North American (U.S. and Canada)
producer shipments (including ex-ports) of PVC resins are estimated to have
increased 11% over 1995. In 1996, based on U.S. government data, export
shipments (8% of total shipments) are estimated to have decreased 22% from 1995.
Total 1995 shipments were flat with 1994.
Capacity utilization (shipments/capacity) for North America is estimated at
95% of effective capacity (89% of nameplate) in 1996. North American capacity
increased 9% over 1995. Effective capacity utilization rates in 1995 and 1994
were 94% and 101%, respectively.
The Company believes that average industry operating margins (price less
raw material costs) for the largest PVC resin market applications decreased
approximately 6.5 cents per pound in 1996 as compared with 1995. This decrease
was the result of lower average selling prices of nearly 20%, only partially
offset by lower average feedstock costs. Average chlorine costs approximated
1995 levels. While ethylene costs increased continually during 1996, they
averaged slightly below 1995 levels. The 1995 average operating margins were
approximately 1.5 cents per pound above 1994.
1996 RESULTS OF OPERATIONS - The Company had sales of $1.144 billion for 1996, a
decrease of 10% from 1995. The Company's unit shipment growth exceeded the
industry with increases in resin and compound of 14% and 11%, respectively. This
unit sales volume growth was more than offset by decreases in resin selling
prices. Also, the VCM volume being exported substantially decreased from 1995.
In 1996, the Company had operating income of $29.9 million, down from
$127.2 million in 1995, excluding the special charge primarily associated with
the compound manufacturing reconfiguration. This decline in operating income
primarily resulted from the severe drop in industry operating margins. The lower
1996 operating margins, as compared with 1995, decreased resin operating income
by approximately $110 million. The Company continues to focus on cost reductions
and productivity improvements. In April 1996, the 800-million-pound VCM
expansion commenced production. Construction is proceeding on a jointly owned
250,000-ton chlor-alkali plant. The plant's start-up is expected in late 1997.
During the year, the Company further improved its resin production per unit of
capacity and compound manufacturing output per line hour. Also in 1996,
employment declined by 2%.
1995 RESULTS OF OPERATIONS - Sales revenue for 1995 increased 5% over 1994. The
increase resulted primarily from higher selling prices. Resin and compound
volumes decreased 2% and 8%, respectively. The Company had 1995 operating income
of $127.2 million, which was an improvement of 25% over 1994, excluding special
charges. During 1995, the Company decided to reconfigure its compound
manufacturing and recorded a before-tax charge of $63.9 million ($39.1 million
after tax) principally for employee separation and plant phase-out costs. Of
this charge, $49.1 million was for write-downs of surplus equipment and
property. The improved 1995 earnings resulted from improved productivity, cost
reductions and improved operating margins. During 1995, employment decreased 5%.
16
<PAGE> 19
The Geon Company and Subsidiaries
Consolidated Statements of Income
(In Millions, Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
SALES ............................................. $1,144.4 $1,267.8 $1,208.6
OPERATING COSTS AND EXPENSES:
Cost of sales ...................................... 1,061.8 1,090.2 1,055.4
Selling and administrative ......................... 52.7 50.4 51.1
Employee separation and plant phase-out ............ - 63.9 -
-----------------------------------
1,114.5 1,204.5 1,106.5
-----------------------------------
OPERATING INCOME ..................................... 29.9 63.3 102.1
Interest expense ..................................... (10.8) (6.2) (7.8)
Interest income ...................................... 1.4 1.8 .7
Other income (expense), net .......................... .2 (6.5) (.2)
-----------------------------------
INCOME BEFORE INCOME TAXES ........................... 20.7 52.4 94.8
Income tax expense ................................... (8.5) (20.2) (36.9)
-----------------------------------
INCOME BEFORE EXTRAORDINARY ITEM ..................... 12.2 32.2 57.9
Extraordinary loss on early extinguishment of debt - - (1.3)
-----------------------------------
NET INCOME ....................................... $ 12.2 $ 32.2 $ 56.6
===================================
EARNINGS PER SHARE:
Before extraordinary item .......................... $ .50 $ 1.24 $ 2.06
Extraordinary loss ................................. - - (.05)
-----------------------------------
NET INCOME ....................................... $ .50 $ 1.24 $ 2.01
===================================
Number of shares used to compute earnings per share .. 24.6 25.9 28.1
</TABLE>
See Notes to Consolidated Financial Statements
17
<PAGE> 20
The GEON Company and Subsidiaries
Management's Analysis - Balance Sheets
The consolidated balance sheet at December 31, 1996, reflects the solid
financial position of The Geon Company.
ASSETS - Total assets of $736.9 million at year-end 1996 were 2% lower than
year-end 1995. Decreases in cash and accounts receivable were nearly offset by
the increases in all remaining asset categories, with other assets having the
largest change. The decrease in receivables is due to a $37.5 million increase
in the level of receivables sold versus last year. Other assets include the
Company's investment in equity affiliates.
LIABILITIES AND EQUITY - The Company has outstanding $125 million in debentures
issued in 1995 and maturing in 10 years and 20 years from issuance. The
debentures have received investment-grade credit ratings. In addition, at the
end of 1996, the Company had available unsecured lines of credit and overdraft
facilities totaling $180 million. The improved funded status of the Company's
pension plan at year-end 1996 as compared with last year resulted in the accrued
pension liability decreasing by $27.8 million. During 1996, the Company returned
$44.5 million to stockholders in the form of dividends and the repurchase of 1.5
million shares or 6% of the shares outstanding at the beginning of the year.
ENVIRONMENTAL MATTERS - The Company generates both hazardous and non-hazardous
wastes - the treatment, storage, transportation and disposal of which are
regulated by various governmental agencies. The Company has been designated a
potentially responsible party by the U.S. Environmental Protection Agency in
connection with one plant and various other sites. The Company has accrued $27
million to cover future environmental remediation expenditures and does not
believe any of the matters either individually or in the aggregate will have a
material adverse effect on its capital expenditures, earnings, cash flow or
liquidity. Capital expenditures related to the limiting and monitoring of
hazardous and non-hazardous wastes amounted to $3 million, $7 million and $1
million for 1996, 1995 and 1994, respectively. The Company estimates capital
expenditures during 1997 of approximately $2 million to $4 million. Expenditures
related to the remediation of previously contaminated sites are projected to be
$19 million over the next five years. The risk of additional costs and
liabilities is inherent in certain plant operations and certain products
produced at the Company's plants, as is the case with other companies involved
in the PVC industry. For additional discussion of environmental matters, refer
to Note J of the Notes to Consolidated Financial Statements.
PUT AGREEMENT - The BFGoodrich Company (BFG) has the right (Put Option) to
require the Company to purchase its Calvert Facilities (and certain associated
liabilities) located principally at Calvert City, Kentucky, between April 1,
2000, and March 31, 2003, at the then fair value determined by an independent
appraisal. The Put Option also extends to any ethylene dichloride (EDC) or VCM
facility that BFG may build or acquire at or adjacent to the Calvert Facilities.
BFG in its Form 10-K, filed February 1996 with the Securities and Exchange
Commission for the year 1995, reported that Westlake Monomers Corporation
(Westlake) had stated it intended to purchase the Calvert Facilities at an
appraised value of approximately $170 million, including working capital. BFG's
10-K further stated that Westlake had previously asserted a value for the
Calvert Facilities as low as $40 million. Subsequently during 1996, Westlake
elected not to purchase the Calvert Facilities.
The Company believes there are too many variables to be able to predict
with any certainty what the market conditions and fair value might be between
the years 2000 and 2003. The Company believes the above noted appraised value is
overstated due to the location and age of the assets and less favorable current
industry conditions.
18
<PAGE> 21
The Geon Company and Subsidiaries
Consolidated Balance Sheets
(In Millions, Except Per Share Data)
<TABLE>
December 31,
- ---------------------------------------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................................................... $ 17.9 $ 61.1
Accounts receivable ............................................................ 72.7 102.3
Inventories .................................................................... 105.1 92.2
Deferred income tax assets ..................................................... 18.1 14.0
Prepaid expenses ............................................................... 20.0 13.4
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS ......................................................... 233.8 283.0
Property ......................................................................... 457.2 444.7
Deferred charges and other assets ................................................ 45.9 24.3
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................................... $736.9 $752.0
=========================================================================================================
LIABILITIES
CURRENT LIABILITIES:
Short-term bank debt ........................................................... $ 18.9 $ 8.6
Accounts payable ............................................................... 126.4 125.8
Accrued expenses ............................................................... 57.6 58.0
Current portion of long-term debt .............................................. .7 .7
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES .................................................... 203.6 193.1
Long-term debt ................................................................... 137.2 137.9
Deferred income tax liabilities .................................................. 33.0 37.3
Postretirement benefits other than pensions ...................................... 86.7 86.7
Other non-current liabilities .................................................... 54.0 88.1
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES .......................................................... $514.5 $543.1
- ---------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, 10.0 shares authorized; no shares issued ........................ - -
Common stock, $.10 par, 100.0 shares authorized; 27.9 issued ..................... 2.8 2.8
Additional paid-in capital ....................................................... 296.1 273.9
Retained earnings ................................................................ 62.4 62.3
Common stock held in treasury, 4.6 shares in 1996 and 3.2 shares in 1995 ......... (115.7) (86.6)
Other ............................................................................ (23.2) (43.5)
- ---------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY ..................................................... 222.4 208.9
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................... $736.9 $752.0
=========================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
19
<PAGE> 22
The Geon Company and Subsidiaries
Management's Analysis - Cash Flows
Net cash used by net operating and investing activities was $8.6 million in
1996, or a change of $42.9 million from 1995. The change was primarily due to
lower earnings before non-cash charges (employee separation and plant phase-out,
depreciation and amortization, and deferred income taxes) partially offset by a
decrease in operating working capital (accounts receivable plus inventory less
accounts payable). At December 31, 1996, operating working capital was $18.7
million lower than a year ago.
Net cash provided by net operating and investing activities decreased $46.7
million in 1995 as compared with 1994. The change was primarily due to an
increase in operating working capital and other payments partially offset by a
$21.3 million increase in earnings before non-cash charges. The 1995 year-end
inventories anticipated some manufacturing outages due to the start-up of plant
expansions in early 1996. Other uses in 1995 included higher pension
contributions which totaled $23.6 million.
Financing activities in 1996 primarily reflect repurchase of common stock
and payment of dividends. During 1995, the Company issued debentures and prepaid
the long-term bank debt.
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. Certain factors that may affect these forward-looking
comments are discussed on page 33. Under an August 1996 Board of Directors
resolution, the Company is authorized to repurchase an additional 1.9 million
shares of Geon common stock. The timing of any purchases depends on the
Company's cash flow and market price of the stock.
INFLATION - The Company employs a number of strategies to mitigate the impact of
inflation on financial results. A considerable amount of capital spending is
directed toward cost-reduction and productivity-improvement projects. Moreover,
through its research and development efforts, the Company is continually
exploring ways to reduce the cost of existing products and to develop new
products with improved performance characteristics that will command premium
prices. The Company is also reviewing and re-engineering its administrative
activities on an ongoing basis in order to streamline operations and reduce
costs.
20
<PAGE> 23
The Geon Company and Subsidiaries
Consolidated Statements of Cash Flows
(In Millions)
<TABLE>
<CAPTION>
Year Ended December 31,
- --------------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ............................................................ $12.2 $32.2 $56.6
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary loss on early extinguishment of debt ................. - - 1.3
Employee separation and plant phase-out ............................ - 63.9 -
Depreciation and amortization ...................................... 54.1 56.6 58.2
Provision for deferred income taxes ................................ 8.8 1.5 16.8
Changes in assets and liabilities:
Accounts receivable .............................................. 30.1 43.1 (48.1)
Inventories ...................................................... (12.0) (18.1) 1.2
Accounts payable ................................................. .6 (43.3) 52.3
Accrued expenses ................................................. (2.5) (3.9) 3.0
Income taxes payable ............................................. 2.1 (11.1) 11.6
Other ............................................................ (8.8) (16.5) (10.4)
- --------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES .......................... 84.6 104.4 142.5
INVESTING ACTIVITIES
Purchases of property ................................................. (73.4) (70.0) (61.5)
Investment in equity affiliates ....................................... (19.8) (.1) -
- --------------------------------------------------------------------------------------------------------
NET CASH (USED) PROVIDED BY OPERATING AND INVESTING ACTIVITIES ..... (8.6) 34.3 81.0
- --------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase (decrease) in short-term debt ................................ 9.8 (1.4) 10.4
Proceeds from long-term debt .......................................... - 125.0 79.4
Repayment of long-term debt ........................................... (.7) (80.0) (92.6)
Net proceeds from issuance of common stock ............................ .4 1.6 3.6
Repurchase of common stock ............................................ (32.4) (48.9) (40.3)
Dividends ............................................................. (12.1) (12.7) (13.8)
Other ................................................................. - (5.0) -
- --------------------------------------------------------------------------------------------------------
NET CASH USED BY FINANCING ACTIVITIES .............................. (35.0) (21.4) (53.3)
Effect of exchange rate changes on cash ............................... .4 .7 (.2)
- --------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ...................... (43.2) 13.6 27.5
Cash and cash equivalents at beginning of year ........................ 61.1 47.5 20.0
- --------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR .............................. $17.9 $61.1 $47.5
========================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
21
<PAGE> 24
The Geon Company and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Dollars in Millions, Shares in Thousands)
<TABLE>
<CAPTION>
Common
Shares Additional Common
Common Held in Common Paid-In Retained Stock Held
Shares Treasury Total Stock Capital Earnings in Treasury Other
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1993 ... 27,619 33 $230.0 $2.8 $262.3 $ - $ (.8) $(34.3)
Net income .................. 56.6 56.6
Stock-based compensation and
exercise of options ... 213 48 5.9 4.4 (1.1) 2.6
Repurchase of common stock .. 1,432 (40.3) (40.3)
Adjustment of minimum
pension liability ........ 3.8 3.8
Translation adjustment ...... (2.0) (2.0)
Cash dividends .............. (13.8) (13.8)
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994 ... 27,832 1,513 $240.2 $2.8 $266.7 $42.8 $(42.2) $(29.9)
Net income .................. 32.2 32.2
Stock-based compensation and
exercise of options ... 45 (160) 9.0 7.2 4.5 (2.7)
Repurchase of common stock .. 1,844 (48.9) (48.9)
Adjustment of minimum
pension liability ........ (13.5) (13.5)
Translation adjustment ...... 2.6 2.6
Cash dividends .............. (12.7) (12.7)
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1995 ... 27,877 3,197 $208.9 $2.8 $273.9 $62.3 $(86.6) $ (43.5)
Net income .................. 12.2 12.2
Stock-based compensation and
exercise of options ... (107) 3.0 (3.7) 3.3 3.4
Repurchase of common stock .. 1,469 (32.4) (32.4)
Adjustment of minimum
pension liability ........ 16.4 16.4
Adjustment related to step-up
in tax basis ............. 25.9 25.9
Translation adjustment ...... .5 .5
Cash dividends .............. (12.1) (12.1)
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1996 ... 27,877 4,559 $222.4 $2.8 $296.1 $62.4 $(115.7) $(23.2)
=============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
22
<PAGE> 25
The Geon Company and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A. THE COMPANY
The Geon Company (Company or Geon), together with its subsidiaries, is one
of the leading North American producers and marketers of polyvinyl chloride
(PVC) resins and the largest producer and marketer of PVC compounds. The Company
also produces and markets vinyl chloride monomer (VCM), an intermediate
precursor to PVC. The Company operates primarily in the United States and Canada
in one business segment. Sales include exports from North America of $85.7
million, $183.0 million and $136.1 million in 1996, 1995 and 1994, respectively.
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions are eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of less than three months to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Most domestic
inventories are valued by the last-in, first-out (LIFO) cost method. Inventories
not valued by the LIFO method are valued principally by the average cost method.
PROPERTY AND DEPRECIATION
Property, plant and equipment is recorded at cost, net of depreciation and
amortization computed principally by the straight-line method. Property, plant
and equipment is generally depreciated on accelerated methods for income tax
purposes. Repairs and maintenance costs are expensed as incurred, except for
plant turnaround costs which are deferred and amortized over the period
benefited. At December 31, 1996 and 1995, unamortized turnaround costs were $6.4
million and $0.7 million, respectively.
FINANCIAL INSTRUMENTS
The fair values of cash equivalents and short-term bank debt approximate
their carrying amount because of the short maturity of those instruments. The
fair values of long-term debt and debentures are estimated based on the
present-value of the underlying cash flows discounted at the Company's estimated
borrowing rate. At December 31, 1996 and 1995, the fair value of long-term debt
approximates its carrying value.
REVENUE RECOGNITION
The Company recognizes revenues at the point of passage of title, which is
generally at the time of shipment.
ENVIRONMENTAL COSTS
The Company expenses, on a current basis, recurring costs associated with
managing hazardous substances and pollution in ongoing operations. Costs
associated with the remediation of environmental contamination are accrued when
it becomes probable that a liability has been incurred and the Company's
proportionate share of the amount can be reasonably estimated.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development costs, which were $17.5 million, $18.0 million and
$16.8 million in 1996, 1995 and 1994, respectively, are charged to expense as
incurred.
FOREIGN CURRENCY TRANSLATION
Income statement items are translated at average currency exchange rates.
Transaction gains and losses are included in determining net income. All balance
sheet accounts of foreign subsidiaries are translated at the current exchange
rate as of the end of the period. The resulting translation adjustment is
recorded as part of the other component of stockholders' equity. The cumulative
unrecognized translation adjustment loss was $18.6 million, $19.1 million and
$21.7 million at December 31, 1996, 1995 and 1994, respectively.
EARNINGS PER COMMON SHARE
Earnings per share for 1996, 1995 and 1994 are based on the weighted
average number of shares of common stock, including common stock equivalents,
outstanding.
STOCK OPTIONS
The Company accounts for stock options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
CHANGES IN ACCOUNTING METHODS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The effect of
adopting SFAS No. 121 was not material.
23
<PAGE> 26
The Geon Company and Subsidiaries
Notes to Consolidated Financial Statements continued
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," which establishes, among other things, new criteria for
determining whether a transfer of financial assets in exchange for cash or other
consideration should be accounted for as a sale or as a pledge of collateral in
a secured borrowing. The Company will adopt SFAS No. 125 effective January 1,
1997, and there will be no effect on income from the adoption.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATION
Certain amounts for 1995 and 1994 have been reclassified to conform to the
1996 presentation.
NOTE C. FINANCING ARRANGEMENTS
Aggregate maturities of long-term debt during the five years subsequent to
December 31, 1996, are as follows: 1997-$0.7 million; 1998-$0.8 million;
1999-$0.8 million; 2000-$1.8 million; and 2001-$0.3 million. Interest paid
amounted to $10.9 million, $7.6 million and $6.2 million during 1996, 1995 and
1994, respectively. At December 31, long-term debt consisted of the following:
<TABLE>
<CAPTION>
(In Millions) 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
6.875% Debentures
(maturing 2005) .................... $ 75.0 $ 75.0
7.500% Debentures
(maturing 2015) .................... 50.0 50.0
6.660% Industrial revenue
bonds (maturing to 2009) ........... 9.9 10.3
Other ................................. 3.0 3.3
- --------------------------------------------------------------
137.9 138.6
Less current portion .................. .7 .7
- --------------------------------------------------------------
$137.2 $137.9
==============================================================
</TABLE>
The Company had the following short-term unsecured lines of credit and
overdraft facilities, all of which are short-term except for the revolving
credit facility which expires in the year 2000.
<TABLE>
<CAPTION>
Number of Permitted
(Dollars in Millions) Lines Borrowings
- --------------------------------------------------------------
<S> <C> <C>
U.S. (including the $100
revolving credit facility) 7 $153.0
Canada 2 18.0
Australia 3 9.4
- --------------------------------------------------------------
$180.4
==============================================================
</TABLE>
At December 31, 1996, $163.9 million of the credit and overdraft facilities
was available. The weighted average interest rate on short-term borrowings was
5.8% at December 31, 1996. The Company's bank agreements contain restrictive
covenants and require the maintenance of financial ratios. No specific
restrictions have been placed on dividends or share repurchases.
In 1994, the Company recognized an extraordinary loss on early
extinguishment of debt of $1.3 million ($2.2 million before tax) comprising the
unamortized fees from previous financing.
NOTE D. LEASING ARRANGEMENTS
The Company leases warehouse space, machinery and equipment, automobiles
and railcars under operating leases with remaining terms up to 12 years. Rent
expense amounted to $23.8 million, $16.4 million and $15.1 million during 1996,
1995 and 1994, respectively. The future minimum lease payments under
non-cancelable operating leases with initial lease terms in excess of one year
at December 31, 1996, are as follows: 1997-$26.7 million; 1998-$26.3 million;
1999-$23.3 million; 2000-$20.2 million; 2001-$178.6 million; thereafter-$17.6
million.
In June 1996, the Company began making lease payments under an operating
lease for a VCM production facility. During the year, the Company amended the
lease agreement to include additional equipment for which the Company has also
assumed a $45 million construction performance obligation.
24
<PAGE> 27
The Geon Company and Subsidiaries
Notes to Consolidated Financial Statements continued
The accumulated construction in process was $3.1 million at December 31, 1996.
Under the terms of the lease, the Company has options to renew the lease for
five one-year periods and may purchase the VCM facility and additional equipment
at the then fair value at anytime during the lease term. The lease provides for
a substantial residual value guarantee by the Company at the termination of the
lease.
NOTE E. SALE OF ACCOUNTS RECEIVABLE
The Company has an agreement with a syndicate of banks to sell an undivided
interest in certain trade accounts receivable under which, on an ongoing basis,
a maximum of $85.0 million can be sold from a designated pool subject to limited
recourse. Payments are collected from the sold accounts receivable; the
collections are reinvested in new accounts receivable for the buyers; and a
yield based on defined short-term market rates is transferred to the buyers.
Buyers have collection rights to recover payments from the receivables in the
designated pool. Sales of accounts receivable averaged $40.5 million, $68.7
million and $54.6 million in 1996, 1995 and 1994, respectively. Accounts
receivable at December 31, 1996 and 1995, are net of $68.1 million and $30.6
million, respectively, representing the interests in receivables sold under
these agreements. The discount from the Company's sale of receivables is
included in "Other expense, net" in the Consolidated Statements of Income.
NOTE F. INVENTORIES
<TABLE>
<CAPTION>
December 31,
(In Millions) 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
At FIFO or average cost, which
approximates current costs:
Finished products and
in process $102.2 $ 94.4
Raw materials and supplies 36.3 27.4
- ----------------------------------------------------------------
138.5 121.8
Reserve to reduce certain
inventories to LIFO basis (33.4) (29.6)
- ----------------------------------------------------------------
$105.1 $ 92.2
================================================================
</TABLE>
Approximately 67% and 72% of the pre-LIFO inventory amounts have been
valued by the LIFO method at December 31, 1996 and 1995, respectively.
NOTE G. PROPERTY
<TABLE>
<CAPTION>
December 31,
(In Millions) 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
Land $ 7.9 $ 7.5
Buildings 146.4 151.5
Machinery and equipment 1,025.6 972.9
- ----------------------------------------------------------------
1,179.9 1,131.9
Less allowances for depreciation
and amortization 722.7 687.2
- ----------------------------------------------------------------
$ 457.2 $ 444.7
================================================================
</TABLE>
Capital expenditures for 1996, 1995 and 1994 include $1.1 million, $1.6
million and $0.4 million, respectively, of capitalized interest costs.
NOTE H. OTHER BALANCE SHEET LIABILITIES
<TABLE>
<CAPTION>
Accrued Non-current
(In Millions) Expenses Liabilities
- -----------------------------------------------------------------------
December 31, December 31,
1996 1995 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employment costs .......... $21.0 $22.2 $ 5.9 $ 7.9
Environmental ............. 6.0 8.2 21.2 20.9
Plant utilities ........... 1.4 1.4 4.6 6.0
Taxes, other than
income .................. 10.8 9.2 - -
Postretirement benefits ... 7.7 7.7 - -
Pension ................... - - 16.5 44.3
Other ..................... 10.7 9.3 5.8 9.0
- -----------------------------------------------------------------------
$57.6 $58.0 $54.0 $88.1
=======================================================================
</TABLE>
25
<PAGE> 28
The Geon Company and Subsidiaries
Notes to Consolidated Financial Statements continued
NOTE I. EMPLOYEE BENEFIT PLANS
PENSION BENEFIT PLANS
The Company has two defined benefit pension plans covering substantially
all domestic employees. The plan covering salaried employees generally provides
benefit payments using a formula that is based on employees' compensation and
length of service. The plan covering union wage employees generally provides
benefit payments of stated amounts for each year of service. Annual
contributions to the plans are sufficient to satisfy legal requirements. Plan
assets consist principally of corporate and government obligations and funds
invested in equities. Annual pension expense included the following components:
<TABLE>
<CAPTION>
(In Millions) 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Service cost for benefits
earned .................. $ 4.0 $ 2.8 $ 3.3
Interest cost ............. 18.8 18.0 16.5
(Income) loss on
plan assets ............. (33.4) (33.4) 7.2
Net amortization and
deferral ................ 22.3 22.7 (15.9)
- ----------------------------------------------------------------
Pension expense, net ...... $11.7 $10.1 $11.1
================================================================
</TABLE>
The following table sets forth as of December 31, 1996 and 1995, the status
of the Company's funded defined benefit pension plans. This table excludes
accrued pension costs of $2.9 million and $1.8 million for unfunded,
non-qualified pension plans and the related projected benefit obligations (PBO)
of $4.1 million and $3.1 million at December 31, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Change
(In Millions) 1996 1995 1996 vs. 1995
- ----------------------------------------------------------------
<S> <C> <C> <C>
Plan assets at
fair value .......... $212.2 $189.2 $ 23.0
Accumulated benefit
obligation (ABO) .... 234.2 239.0 4.8
- ----------------------------------------------------------------
Plan assets less
than ABO ............ $ 22.0 $ 49.8 $ 27.8
================================================================
</TABLE>
At December 31, 1996, the plan assets were $212.2 million, which represents
an increase of $23.0 million over year-end 1995. The growth in these assets was
the result of actions taken by the Company and favorable security markets.
Income earned on these assets was $31.4 million, which represents a return of
16% in 1996. The Company also made contributions in 1996 of $12.0 million. Over
the last three years, the Company's contributions have totaled $57.1 million, or
$24.2 million above normal pension expense recognized during this period. From
plan assets, benefit payments of $19.7 million were made in 1996.
<TABLE>
<CAPTION>
Change
(In Millions) 1996 1995 1996 vs. 1995
- ----------------------------------------------------------------
<S> <C> <C> <C>
ABO ....................... $234.2 $239.0 $ 4.8
Effect of projected
salary increases ........ 27.6 27.8 .2
- ----------------------------------------------------------------
PBO ....................... $261.8 $266.8 $ 5.0
================================================================
Plan assets less
than PBO ................ $ 49.6 $ 77.6 $ 28.0
Unamortized balances:
Transitional liability .. (6.9) (8.1) (1.2)
Prior service cost ...... (5.7) (5.5) .2
Net actuarial loss ...... (38.0) (63.9) (25.9)
Adjustments required
to recognize
minimum liability ..... 14.6 42.4 27.8
- ----------------------------------------------------------------
Accrued pension cost $ 13.6 $ 42.5 $ 28.9
================================================================
</TABLE>
Major assumptions used in accounting for the Company's defined benefit
pension plans are as follows:
<TABLE>
<CAPTION>
(In Millions) 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Discount rate for
obligations ............. 7.5% 7.1% 8.9%
Rate of increase in
compensation
levels .................. 4.0%-7.0% 4.0%-7.0% 4.0%-7.0%
Expected long-term
rate of return on
plan assets ............. 9.5% 9.0% 9.8%
</TABLE>
26
<PAGE> 29
The GEON Company and Subsidiaries
Notes to Consolidated Financial Statements continued
At December 31, 1996 and 1995, $3.3 million and $19.7 million,
respectively, was recorded as the cumulative additional minimum pension
liability and included in the other component of stockholders' equity as a
reduction.
Retirement Savings Plan
The Company maintains a voluntary retirement savings plan (RSP) for all
U.S. and Canadian employees. Under provisions of the RSP, eligible employees can
receive Company matching contributions up to the first 6% of their eligible
earnings. For 1996, 1995 and 1994, Company contributions amounted to $4.7
million, $4.7 million and $4.5 million, respectively. In addition, the Company
makes profit-sharing payments to the RSP for those employees not covered by
management incentive compensation plans. The 1996, 1995 and 1994 profit-sharing
cost was $1.0 million, $2.5 million and $4.1 million, respectively.
POSTRETIREMENT BENEFIT PLANS
The Company sponsors several unfunded defined benefit postretirement plans
that provide certain health care and life insurance benefits to eligible
employees. The health care plans are contributory, with retiree contributions
adjusted periodically, and contain other cost-sharing features such as
deductibles and coinsurance. The life insurance plans are generally
non-contributory. Below are the plans' combined status at December 31:
<TABLE>
<CAPTION>
(In Millions) 1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation (APBO):
Retirees ................................. $ 81.4 $ 88.8
Fully eligible active plan participants .. 3.5 3.8
Other active plan participants ........... 6.6 7.4
Unrecognized gain (loss) ................. 2.9 (5.6)
- ------------------------------------------------------------------
$ 94.4 $ 94.4
==================================================================
</TABLE>
The annual postretirement benefit expense for each of the years ended
December 31 included the following components:
<TABLE>
<CAPTION>
(In Millions) 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Service cost for
benefits earned .......... $ .4 $ .3 $ .4
Interest cost on APBO ...... 6.5 7.1 6.7
- ----------------------------------------------------------------
Postretirement
expense net ............. $ 6.9 $ 7.4 $ 7.1
================================================================
Payment of claims .......... $ 7.1 $ 7.4 $ 6.7
================================================================
</TABLE>
At December 31, 1996, the average assumed rate of increase in the per
capita cost of covered benefits is 9% for 1997 and is assumed to decrease
gradually to 5% in 2005 and thereafter. An increase in the assumed health care
cost trend rates by 1% in each year would increase the APBO as of December 31,
1996, by $4.5 million and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1996 by $0.3 million.
The discount rates used in determining the APBO at December 31, 1996 and
1995, were 7.5% and 7.1%, respectively. The increase in the discount rate in
1996 from 1995 decreased the APBO at December 31, 1996, by $2.4 million.
NOTE J. COMMITMENTS
ENVIRONMENTAL
The Company has been notified by the U.S. Environmental Protection Agency,
a state environmental agency or a private party that it may be a potentially
responsible party (PRP) in connection with seven active and inactive non-Company
owned sites. While government agencies frequently claim PRPs are jointly and
severally liable at these sites, in the Company's experience interim and final
allocation of liability costs are generally made based on the relative
contribution of waste. The Company believes that it has potential continuing
liability with respect to only four such sites. In addition, the Company
initiates corrective and preventive environmental projects of its own to ensure
safe and lawful activities at its operations. The Company believes that
compliance with current governmental regulations at all levels will not have a
material adverse effect on its financial condition. Based on estimates prepared
by the Company's environmental engineers and consultants, the Company at
December 31, 1996, had accruals totaling
27
<PAGE> 30
The Geon Company and Subsidiaries
Notes to Consolidated Financial Statements continued
$27.2 million to cover future environmental expenditures related to previously
contaminated sites. Of this accrued amount, $16 million is attributable to
future remediation expenditures at the Calvert City, Kentucky, site and less
than $0.2 million is attributable to off-site environmental remediation
liabilities, including the four sites mentioned above. The remaining amount is
primarily attributable to other environmental remediation projects at nine
Company-owned facilities. At Calvert City, consent orders have been signed with
both the U.S. Environmental Protection Agency and the Commonwealth of Kentucky
Department of Environmental Protection, which pro-vide for a site wide
remediation program primarily to remove EDC from groundwater, the cost of which
is included in the $27.2 million accrual. The Company expended $6.1 million,
$3.0 million and $2.9 million during 1996, 1995 and 1994, respectively, on the
remediation of such sites.
PUT AGREEMENT
BFG has the right (Put Option) to require the Company to purchase all or a
portion of the Calvert Facilities (BFG chlor-alkali, ethylene and utility
operations located at Calvert City, Kentucky) between April 1, 2000, and March
31, 2003, at fair value as determined by an independent appraisal. The Put
Option also extends to any EDC or VCM facility that BFG may build or acquire at
or adjacent to the Calvert Facilities.
PARTICIPATION AGREEMENT
The Company has a 50% participation in a joint venture to construct and
operate a chlor-alkali plant. In the initial phase, the plant will have an
annual capacity of 250,000 tons of chlorine and 275,000 tons of caustic soda.
Mechanical completion is expected in late 1997. The plant's construction is
being financed by the venture partners as the venture pursues its own
non-recourse financing.
GUARANTEES
At December 31, 1996, the Company, through an indemnification agreement
with BFG, is contingently liable through December 31, 2001, with respect to
guarantees of securities of other issuers in the amount of $47.5 million, for
which the Company would be reimbursed by Occidental Chemical Holding Corporation
for any amounts paid under the guarantees.
OTHER
The Company and its subsidiaries have commitments for a substantial portion
of key raw material feedstocks and energy incidental to the ordinary course of
business. The Company is also from time to time subject to routine litigation
incidental to its business. The Company believes that any liability that may
finally be determined would not have a material adverse effect on its financial
condition.
NOTE K. OTHER INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
(In Millions) 1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
Currency exchange
(loss) gain .................. $ 1.6 $ (.9) $ 2.1
Income from equity affiliates .. 1.0 .1 .2
Discount on sale of trade
receivables ................. (2.4) (4.5) (2.3)
Other expense, net ............. - (1.2) (.2)
- ----------------------------------------------------------------
$ .2 $(6.5) $ (.2)
================================================================
</TABLE>
NOTE L. INCOME TAXES
Income (loss) before income taxes consists of the following:
<TABLE>
<CAPTION>
(In Millions) 1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
Domestic ....................... $ (8.9) $ 40.1 $ 62.9
Foreign ........................ 29.6 12.3 31.9
- -----------------------------------------------------------------
$ 20.7 $ 52.4 $ 94.8
=================================================================
</TABLE>
A summary of income tax (expense) benefit is as follows:
<TABLE>
<CAPTION>
(In Millions) 1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal .................. $ 10.4 $(10.0) $(10.0)
State .................... - (2.0) (.9)
Foreign .................. (10.1) (6.7) (9.2)
- -----------------------------------------------------------------
Total current .......... .3 (18.7) (20.1)
- -----------------------------------------------------------------
Deferred:
Federal .................. (8.8) (4.0) (11.6)
State .................... .4 (.5) (2.9)
Foreign .................. (.4) 3.0 (2.3)
- -----------------------------------------------------------------
Total deferred ......... (8.8) (1.5) (16.8)
- -----------------------------------------------------------------
Total tax expense ...... $ (8.5) $(20.2) $(36.9)
=================================================================
</TABLE>
28
<PAGE> 31
The Geon Company and Subsidiaries
Notes to Consolidated Financial Statements continued
The income tax rate for financial reporting purposes varied from the
federal statutory rate as follows:
<TABLE>
<CAPTION>
(In Millions) 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory
income tax rate ............ 35.0% 35.0% 35.0%
- ---------------------------------------------------------------
Increase (decrease):
State tax net of
federal benefit .......... (1.5) 3.1 2.6
Differences in rates of
foreign operations ....... .8 (1.1) .3
Foreign withholding accrued
on unremitted earnings ... 4.7 2.0 .5
Other, net ................. 2.1 (.5) .5
- ---------------------------------------------------------------
Effective income tax rate .. 41.1% 38.5% 38.9%
===============================================================
</TABLE>
Significant components of the Company's deferred tax liabilities and assets
at December 31 are as follows:
<TABLE>
<CAPTION>
(In Millions) 1996 1995
- -------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 84.0 $ 74.9
State taxes (2.3) 3.4
Other, net 19.1 22.8
- -------------------------------------------------------------
Total deferred tax liabilities 100.8 101.1
- -------------------------------------------------------------
Deferred tax assets:
Postretirement benefits other
than pensions 33.1 33.1
Employment cost and pension 5.9 13.8
Environmental 9.5 10.3
Net operating loss carryforward 8.1 -
LIFO inventory 3.3 (.8)
Intangibles 5.8 .4
Alternative minimum tax
credit carryforward 5.9 4.7
Foreign tax credit carryforward 4.3 -
Foreign tax valuation allowance (4.3) -
Other, net 14.3 16.3
- -------------------------------------------------------------
Total deferred tax assets 85.9 77.8
- -------------------------------------------------------------
Net deferred tax liabilities $ 14.9 $ 23.3
=============================================================
</TABLE>
SFAS No. 109, "Accounting for Income Taxes," requires that deferred tax
assets be reduced by a valuation allowance if it is more likely than not that
some portion or all of the deferred tax assets will not be realized. As
realization of the foreign tax credit carryforwards is considered uncertain, a
valuation allow-ance has been recorded. The Company believes that the timing of
the reversal of its deferred tax liabilities, principally relating to
accelerated depreciation, will be sufficient to fully recognize its remaining
deferred tax assets. In particular, the turnaround of the largest deferred tax
asset, related to accounting for postretirement benefits other than pensions,
will occur over an extended period of time and, as a result, will be realizable
for tax purposes over those future periods.
During 1996, the Company finalized the effects of the step-up in the tax
basis of its assets as a result of formation and recorded adjustments to
deferred taxes and equity of $25.9 million.
The Company has provided for U.S. federal and foreign withholding tax on
$53.6 million or 28% of foreign subsidiaries' undistributed earnings as of
December 31, 1996. Regarding the undistributed earnings on which no federal and
foreign withholding has been provided, earnings are intended to be reinvested
indefinitely. It is not practical to determine the amount of income tax
liability that would result had such earnings been actually repatriated. On
repatriation, certain foreign countries impose withholding taxes. The amount of
foreign withholding taxes that would be payable on remittance of the entire
amount of undistributed earnings would approximate $8.3 million.
During 1996, 1995 and 1994, the Company paid income taxes net of refunds of
$2.2 million, $37.9 million and $6.1 million, respectively. The Company has a
net operating loss carryforward of approximately $23.2 million, which will
expire in 2011. In addition, the Company has foreign tax carryforwards of $4.3
million, which will expire from 1998 through 2001, and an alternative minimum
tax credit carryforward of $5.9 million.
29
<PAGE> 32
The Geon Company and Subsidiaries
Notes to Consolidated Financial Statements continued
NOTE M. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company shares certain facilities
with BFG. The cost of these facilities is allocated at cost to the Company or
BFG under the provisions of formal agreements, primarily based on usage. Sales
of products to BFG were $26.8 million, $30.2 million and $34.3 million, and
purchases of products from BFG were $75.8 million, $150.8 million and $133.6
million in 1996, 1995 and 1994, respectively. At December 31, 1996 and 1995, the
receivable balances from BFG were $5.8 million and $3.9 million, respectively,
and the payable balances to BFG were $10.4 million and $21.4 million,
respectively. An officer of BFG currently serves as an outside director of the
Company.
NOTE N. EMPLOYEE SEPARATION AND PLANT PHASE-OUT CHARGES
In 1995, the Company recorded a $63.9 million before-tax charge, primarily
related to the reconfiguration of the manufacturing of vinyl compound products.
Of this charge, $49.1 million related to the write-down of property, $8.7
million related to enhanced retirement pension benefits, and the balance for
employee separation and other associated costs.
NOTE O. STOCK OPTION AND STOCK INCENTIVE PLANS
The 1995 Incentive Stock Plan provides for the awarding or granting of
options to purchase common stock of the Company. Generally, options granted
become exercisable at the rate of 35% after one year, 70% after two years and
100% after three years. Certain options are fully exercisable after grant. The
term of each option cannot extend beyond 10 years from the date of grant.
Certain options carry with them limited stock appreciation rights exercisable in
the event of a change in control. All options under the plans have been granted
at 100% of market (as defined) on the date of the grant. In addition, certain
senior level executives received special awards in connection with the formation
of the Company and the initial public offering (IPO) of stock on April 29, 1993,
which included stock options with rights to purchase 1.2 million shares. These
awards become exercisable four years after grant date. The Company also has a
stock plan for non-employee directors under which options are granted.
<TABLE>
<CAPTION>
(In Thousands Except
Per Share Data) Number Option Price Per Share
- ----------------------------------------------------------------
<S> <C> <C>
Outstanding at
January 1, 1996 2,055 $14.92 to $30.13
Issued 284 19.25 to 28.13
Exercised 21 16.31 to 26.75
Canceled 3 26.31 to 27.75
- ---------------------------------------------------------------
Outstanding at
December 31, 1996 2,315 14.92 to 30.13
===============================================================
Exercisable at
December 31, 1996 854 $14.92 to $30.13
===============================================================
</TABLE>
Under the Company's incentive programs, senior executives and other key
employees are also eligible annually to receive bonus awards, consisting of
stock or a combination of both stock and cash. Under these plans, performance
measures are established and used to determine the payout, if any.
At December 31, 1996, restricted shares totaling 0.4 million were
outstanding. The restrictions generally lapse over one to four years with some
subject to acceleration based on the Company's stock price performance. The
unamortized portion of compensation expense related to these stock awards
included in other component of stockholders' equity was $1.3 million and $4.7
million at December 31, 1996 and 1995, respectively.
The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its incentive plans.
Accordingly, no compensation cost has been recognized for its fixed option plans
because the exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant. The compensation cost
related to the stock portion of the annual incentive plans, the three-year
incentive plan, and amortization of restricted stock awarded at the IPO amounted
to $3.0 million, $4.2 million and $5.5 million in 1996, 1995 and 1994,
respectively. The effect of applying the fair value method of accounting for the
Company's stock-based awards in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation," results in net income and earnings per share that are
not materially different from amounts reported.
At December 31, 1996, 3.4 million shares were reserved for future issuance
upon exercise of stock options granted or were available for future grants under
the Company's incentive plans.
30
<PAGE> 33
The Geon Company and Subsidiaries
Quarterly Data (Unaudited)
(In Millions, Except Per Share Data)
<TABLE>
<CAPTION>
1996 Quarters 1995 Quarters
- ----------------------------------------------------------------------------------- ---------------------------------------
Fourth Third Second First Fourth Third Second First
- ----------------------------------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales ................................. $279.1 $307.8 $311.8 $245.7 $263.8 $310.2 $357.6 $336.2
Operating income (loss) ............... 4.6 13.4 18.4 (6.5) 8.4 26.6 (10.9) 39.2
Net income (loss) ..................... 1.6 6.1 10.1 (5.6) 4.4 14.4 (8.0) 21.4
- --------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share:
Net income (loss) .................. $ .07 $ .25 $ .40 $ (.22) $ .18 $ .56 $ (.31) $ .80
Dividend paid per common share ..... .125 .125 .125 .125 .125 .125 .125 .125
Common stock price
High ............................... $ 23 1/2 $ 25 1/8 $ 28 3/4 $ 28 3/8 $ 26 3/4 $ 31 3/8 $ 29 3/4 $ 30
Low ................................ 18 1/8 18 1/8 22 1/2 24 3/8 23 3/8 25 1/8 23 1/2 26
</TABLE>
1995: Second- and fourth-quarter results include the after-tax charges of $34.5
million ($56.5 million before tax) and $4.6 million ($7.4 million before tax)
for employee separation and plant phase-out costs, respectively.
31
<PAGE> 34
The Geon Company and Subsidiaries
Selected Five-Year Financial Data
(In Millions, Except Per Share Data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATING DATA Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------
(1)Pro Forma
(Unaudited) Historical
1996 1995 1994 1993 1992 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SALES ........................ $1,144.4 $1,267.8 $1,208.6 $972.5 $894.3 $982.8 $969.9
Employee separation and
plant phase-out ............ - 63.9 - 9.7 14.4 9.7 16.0
Operating income (loss) ...... 29.9 63.3 102.1 14.5 (22.9) 18.6 (19.3)
Income (loss) before
extraordinary item and
cumulative effect of
change in method of
accounting ................. 12.2 32.2 57.9 2.2 (22.1) 6.0 (15.0)
Extraordinary loss on early
extinguishment of debt ..... - - (1.3) - - - -
Cumulative effect of change
method of accounting ....... - - - (1.1) (57.5) (1.1) (70.4)
NET INCOME (LOSS) ............ 12.2 32.2 56.6 1.1 (79.6) 4.9 (85.4)
- ------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE:
BEFORE EXTRAORDINARY ITEM
AND CHANGE IN METHOD OF
ACCOUNTING ................. $ .50 $ 1.24 $ 2.06 $ .08 $ (.84)
Extraordinary loss on early
extinguishment of debt ... - - (.05) - -
Cumulative effect of change
in method of accounting .. - - - (.04) (2.18)
NET INCOME (LOSS) .......... .50 1.24 2.01 .04 (3.02)
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
BALANCE SHEET DATA At December 31,
- --------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $ 736.9 $ 752.0 $ 791.7 $ 721.2 $686.9
Long-term debt and capital
lease obligations 137.2 137.9 93.0 88.3 18.7
<FN>
(1)On February 11, 1993, the Company was formed as a wholly owned subsidiary of
BFG in preparation for the IPO of its common stock on April 29, 1993. BFG
transferred to the Company substantially all of the operating assets and
liabilities of its Geon Vinyl Division, other than the net assets of the
chlor-alkali, ethylene and utility operations of BFG located principally at
Calvert City, Kentucky (Calvert Facilities), in exchange for the Company's
common stock.
The historical results for 1993 and 1992 include the results of operations
associated with the Calvert Facilities through February 28, 1993. The cost of
VCM consumed from the Calvert Facilities was recorded at historical intercompany
cost through April 29, 1993.
The pro forma results for 1993 and 1992 exclude the results of operations
associated with the Calvert Facilities. The data is also presented as if the
Company purchased the VCM associated with the Calvert Facilities at market
prices rather than historical intercompany costs. Subsequent to the initial
public offering of the Company's common stock on April 29, 1993, the Company
through December 31, 1995, purchased VCM from BFG at market prices. The pro
forma results also include the cost associated with certain May 1993 bank
arrangements, as if they had occurred at the beginning of 1993.
</TABLE>
32
<PAGE> 35
The GEON Company and Subsidiaries
Report of Independent Auditors
To the Stockholders and Board of Directors
of The Geon Company:
We have audited the accompanying consolidated balance sheets of The Geon
Company and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements, which appear on pages 17, 19, and 21 through 30, are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Geon
Company and subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/S/ Ernst & Young LLP
Cleveland, Ohio
January 29, 1997
================================================================================
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
This report contains statements concerning certain trends and other
forward-looking information affecting or relating to the Company and its
industry that are intended to qualify for the protections afforded
"forward-looking statements" under the Private Securities Litigations Reform Act
of 1995. Actual results could differ materially from those projected in such
forward-looking statements contained in this report for a variety of factors,
including but not limited to: (1) unanticipated changes in world, regional, or
U.S. growth rates affecting the Company's markets; (2) unanticipated changes in
industry capacity or in the rate at which anticipated changes in industry
capacity come on line; (3) fluctuations in raw materials prices and supply, in
particular fluctuations outside the range of normal industry cycles; (4)
unanticipated delays in achieving or inability to achieve cost-reduction and
employee-productivity goals; (5) unanticipated production outages; and (6)
delays in realizing or inability to realize anticipated profitability
improvements attributable to the chlor-alkali joint venture.
33
<PAGE> 36
The Geon Company
Corporate Information
EXECUTIVE OFFICERS
WILLIAM F. PATIENT
Chairman of the Board, President and Chief Executive Officer
DONALD P. KNECHTGES
Senior Vice President, Technology/Engineering
LOUIS M. MARESCA
Vice President, Operations
EDWARD C. MARTINELLI
Senior Vice President, Commercial
GREGORY L. RUTMAN
Vice President, General Counsel and Secretary
THOMAS A. WALTERMIRE
Chief Financial Officer and Senior Vice President, Human Resources
FACILITIES
ALTONA, VICTORIA, AUSTRALIA
Resins
AVON LAKE, OHIO
Headquarters
Research & Development
Compounds
DEER PARK, TEXAS
Resins
HENRY, ILLINOIS
Resins
LAPORTE, TEXAS
VCM
LONG BEACH, CALIFORNIA
Compounds
LOUISVILLE, KENTUCKY
Resins and Compounds
MENTONE, VICTORIA, AUSTRALIA
Compounds
NIAGARA FALLS, ONTARIO, CANADA
Resins and Compounds
PEDRICKTOWN, NEW JERSEY
Resins
PLAQUEMINE, LOUISIANA
Compounds
SCOTFORD, ALBERTA, CANADA
Resins
TERRE HAUTE, INDIANA
Compounds
STOCK EXCHANGE LISTING
The Geon Company Common Stock is listed on the New York Stock Exchange.
Symbol: GON.
STOCKHOLDER INQUIRIES
If you have any questions concerning your account
as a stockholder, such as name or address changes, inquiries regarding dividend
checks or stock certificates, or if you need tax information regarding your
account, please contact our transfer agent:
The Bank of New York
P.O. Box 11258
Church Street Station
New York, New York 10286-1258
Phone: (800) 524-4458
Complimentary copies of Form 10-K and other reports filed with the Securities
and Exchange Commission as well as The 1996 Geon Fact Book are available from:
Investor Relations
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Phone: (216) 930-1221
ANNUAL MEETING
The annual meeting of stockholders of The Geon Company will be held May 1, 1997,
at 9:00 a.m. at The Forum Conference and Education Center, One Cleveland Center,
1375 East 9th Street, Cleveland, Ohio.
The meeting notice and proxy materials were mailed to stockholders with this
report. The Geon Company urges all stockholders to vote their proxies so that
they can participate in the decisions at the annual meeting.
FINANCIAL INFORMATION
Security analysts and representatives of financial institutions are invited to
contact:
Thomas A. Waltermire
Chief Financial Officer and Senior Vice President
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Phone: (216) 930-1222
Fax: (216) 930-1002
and
Dennis A. Cocco
Director of Corporate and Investor Affairs
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Phone: (216) 930-1538
Fax: (216) 930-1428
AUDITORS
Ernst & Young LLP
1300 Huntington Building
925 Euclid Avenue
Cleveland, Ohio 44115-1405
MEDIA CONTACT
Dennis A. Cocco
Director of Corporate and Investor Affairs
Phone: (216) 930-1538
Fax: (216) 930-1428
INTERNET ACCESS
Information on The Geon Company's products and services is available on the
Internet at: http://www.geon.com
Company news releases also are available on line via PR Newswire's Web site at:
http://www.prnewswire.com
(C)Copyright The Geon Company 1997
[LOGO] This entire annual report was printed on recycled paper.
34
<PAGE> 37
The Geon Company
Board of Directors
STANDING FROM LEFT TO RIGHT: JOHN D. ONG, J. A. FRED BROTHERS, R. GEOFFREY P.
STYLES, D. LARRY MOORE, JAMES K. BAKER, J. DOUGLAS CAMPBELL, AND SITTING: GALE
DUFF-BLOOM, HARRY A. HAMMERLY, AND WILLIAM F. PATIENT.
WILLIAM F. PATIENT, 62
Chairman of the Board, President and Chief Executive Officer
JAMES K. BAKER, 65
Executive Vice President and Group Operating Officer, Arvin Industries, a
worldwide supplier of original equipment and replacement automotive parts.
(1),(4),(5)*
GALE DUFF-BLOOM, 57
President of Marketing and Company Communications, J.C. Penney Company, Inc., a
major retailer of apparel, jewelry, home furnishings and services through
department stores and catalogs. (1),(2),(5)
J. A. FRED BROTHERS, 56
Senior Vice President and Group Operating Officer, Ashland Inc., a worldwide
energy and chemical company with operations in refining, retail gasoline
marketing, motor oils, chemicals, highway construction, oil and gas, and coal.
(2)*,(3),(5)
J. DOUGLAS CAMPBELL, 55
President and Chief Executive Officer, Arcadian Corporation, the leading Western
Hemisphere producer and marketer of nitrogen chemicals and fertilizers.
(2),(3)*,(5)
HARRY A. HAMMERLY, 63
Retired Executive Vice President, 3M Company, a worldwide diversified
manufacturer of industrial, commercial, consumer and health care products.
(1),(2),(4)*
D. LARRY MOORE, 60
President and Chief Operating Officer, Honeywell Inc., a global enterprise
providing electronic automation and control systems for homes, buildings,
process control industries and aerospace. (1),(2),(3)
JOHN D. ONG, 63
Chairman of the Board, The BFGoodrich Company, a provider of aircraft
components, systems and services, as well as specialty chemical products such as
plastics, additives, sealants and adhesives. (3),(4)
R. GEOFFREY P. STYLES, 66
Retired Vice Chairman, Royal Bank of Canada, Canada's largest bank. (1)*,(3),(4)
(1) Audit Committee
(2) Compensation Committee
(3) Environmental, Health & Safety Committee
(4) Financial Policy Committee
(5) Nominating Committee
* Denotes Chairman
35
<PAGE> 38
[LOGO - THE GEON COMPANY]
One Geon Center - Avon Lake, Ohio 44012
<PAGE> 1
EXHIBIT 21
THE GEON COMPANY
SUBSIDIARIES
Jurisdiction of
Name Incorporation
- ---- -------------
1997 Chloralkali Venture Inc. Alabama
The Geon Company Australia Limited Australia
Auseon Limited Australia
Geon Canada Inc. Canada
LP Holdings, Inc. Canada
Geon Engineering Vinyls Limited England
Hydro Geon (1) England(2)
La Porte Chemicals Corp. Delaware
Lincoln & Southern Railroad Company Delaware
Sunbelt Chlor Alkali Partnership (1) Delaware(2)
SPC Geon PTE LTD. (1) Singapore(2)
Inversiones The Geon Company de Venezuela C.A. Venezuela
Notes:
(1) Owned 50% by the Company.
(2) Partnership
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of The Geon Company of our report dated January 29, 1997, included in the 1996
Annual Report to the Stockholders of The Geon Company.
Our audit also included the financial statement schedule of The Geon Company
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 33-80522) of The Geon Company and in the related prospectus, in
the Registration Statement (Form S-8 No. 33-92398) pertaining to The Geon
Retirement Savings Plan, in the Registration Statement (Form S-8 No. 33-80262)
pertaining to The Geon Company Deferred Compensation Plan for Non-Employee
Directors, in the Registration Statement (Form S-8 No. 33-62112) pertaining to
The Geon Company Incentive Stock Plan, in the Registration Statement (Form S-8
No. 33-65520) pertaining to The Geon Company Retirement Plus Savings Plan, and
in the Registration Statement (Form S-8 No. 33-65518) pertaining to The Geon
Company Retirement Plus Savings Plan for Wage Employees of our report dated
January 29, 1997, with respect to the consolidated financial statements
incorporated herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedule included in this
Annual Report (Form 10-K) of The Geon Company.
ERNST & YOUNG LLP
Cleveland, Ohio
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 14
<SECURITIES> 4
<RECEIVABLES> 73
<ALLOWANCES> 3
<INVENTORY> 105
<CURRENT-ASSETS> 234
<PP&E> 1,180
<DEPRECIATION> 723
<TOTAL-ASSETS> 737
<CURRENT-LIABILITIES> 204
<BONDS> 137
<COMMON> 3
0
0
<OTHER-SE> 219
<TOTAL-LIABILITY-AND-EQUITY> 737
<SALES> 1144
<TOTAL-REVENUES> 1144
<CGS> 1114
<TOTAL-COSTS> 1114
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 21
<INCOME-TAX> 9
<INCOME-CONTINUING> 12
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
