-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Y+iZ+VoMYsv4SZeDAppicUWRt+CTfGV796VD6Hg8orsaVBgjRWNIIGZMCeASp/WL BUbe+TkJ0JJGA6bGL294Mg== 0000950123-94-000580.txt : 19940325 0000950123-94-000580.hdr.sgml : 19940325 ACCESSION NUMBER: 0000950123-94-000580 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS RESOURCES INC CENTRAL INDEX KEY: 0000810020 STANDARD INDUSTRIAL CLASSIFICATION: 2810 IRS NUMBER: 362729497 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 033-11634 FILM NUMBER: 94517584 BUSINESS ADDRESS: STREET 1: 9 WEST 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2128883044 10-K 1 FORM 10-K 1 ================================================================================ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K { X } ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 or { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 33-11634 TRANS-RESOURCES, INC. (Exact name of registrant as specified in its charter) Delaware 36-2729497 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9 West 57th Street, New York, NY 10019 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 888-3044 ____________________ Securities registered pursuant to Section 12 (b) of the Act: NONE ____________________ Securities registered pursuant to Section 12 (g) of the Act: NONE ____________________ Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. {X} State the aggregate market value of the voting stock held by non-affiliates of registrant. None held by non-affiliates Indicate the number of shares outstanding of each of registrant's classes of common stock, as of the latest practicable date.
Class Outstanding at March 23, 1994 ----- ----------------------------- Common Stock, par value $.01 per share 3,000 shares (Owned by TPR Investment Associates, Inc.)
Documents incorporated by reference. None ================================================================================ ================================================================================ 2 TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 13 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 15 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . 18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . 18 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . 19 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . 23 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . 23 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . 24 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3 PART I ITEM 1. Business Trans-Resources, Inc., a privately owned Delaware corporation ("the Company"), is a multinational manufacturer of specialty plant nutrients, organic chemicals, industrial chemicals and potash and distributes its products in over 80 countries. The Company is the world's largest producer of potassium nitrate, which is marketed by the Company principally under the brand names K-Power domestically and Multi-K internationally (collectively, referred to as K-Power). The Company is also the world's largest producer of propanil, the leading rice herbicide. In addition, the Company is the largest United States producer of potash. During 1993, specialty plant nutrients, organic chemicals, industrial chemicals and potash contributed approximately 45%, 12%, 26% and 17%, respectively, of the Company's total revenues. The following table sets forth the primary markets and applications for each of the Company's principal products:
Principal Products Primary Markets Applications - ------------------ --------------- ------------ SPECIALTY PLANT NUTRIENTS - ------------------------- K-Power -- Fresh fruits and vegetables, -- Fertigation and foliar sprays flowers, cotton and tobacco (fully soluble, readily absorbed, Polyfeed Horticulture no harmful residues) Multi-MAP Horticulture Multi-MKP Horticulture Magnisal Vegetables, citrus, tropical fruits and flowers Multicote -- Vegetables, turf, fruit trees and -- Time release of nutrients (to potted plants optimize plant feeding and minimize labor requirements) ORGANIC CHEMICALS - ----------------- Propanil -- Rice -- Broad spectrum weed control Dichloroaniline -- Organic chemical manufacturers -- Intermediate propanil product Butoxone -- Peanuts -- Weed control Custom Manufacturing -- Various industrial companies -- Various organic synthesis INDUSTRIAL CHEMICALS - -------------------- Technical Grade Potassium -- Glass, ceramics, food, explosives, -- Oxidation and ion exchange Nitrate metal, petrochemical and heat treatment industries Phosphoric Acid -- Industrial production, food and -- Metal treatment, industrial fertilizer industries cleaning and fermentation Sodium Tripolyphosphate -- Soaps and detergents -- Cleansing ingredient Monoammonium Phosphate -- Chemical manufacturers -- Fire extinguishing powders Diammonium Phosphate Chemical manufacturers and fire retardant formulations Monopotassium Phosphate -- Food processing companies -- Fermentation process Sodium Acid Pyrophosphate -- Food processing companies -- Baking powders and potato processing Chlorine -- Chemical companies -- Water purification, production of paper pulp and PVC pipe Nitrogen Tetroxide -- United States Government -- Aerospace fuel additive POTASH - ------ Agricultural Grade -- Corn, wheat, rice, soybeans -- Fertilizer Industrial Grade -- Various industrial companies -- Intermediate production of chemicals and lubricants
1 4 Of the Company's total revenues for the year ended December 31, 1993, approximately 37% and 36% were derived from sales in the United States and Europe, respectively, with the remainder derived from sales in many other countries. On February 7, 1994, the smaller of the two potassium nitrate production units of the Company's Israeli subsidiary, Haifa Chemicals Limited ("HCL"), was damaged by a fire, causing a temporary reduction of the Company's potassium nitrate production capacity. The Company is currently reviewing various alternatives concerning the most effective and timely replacement of the damaged production unit and expects to replace the damaged unit within approximately twelve months. The Company believes that the impact of the loss of the facility, including the effect of business interruption, will be substantially covered by insurance. While the ultimate amount of the insurance recovery has not yet been determined, the Company expects that the insurance proceeds relating to the property damage will be for replacement value, which substantially exceeds the recorded carrying value of the damaged assets. Management is not aware of any independent, authoritative source of information about sizes, growth rates or shares for the Company's markets. The market size, market growth rate and market share estimates contained herein have been developed by the Company from internal sources and reflect the Company's current estimates. However, no assurance can be given regarding the accuracy of such estimates. The Company's operations are conducted through its direct and indirect wholly-owned subsidiaries which include HCL, and HCL's wholly- owned subsidiary, Haifa Chemicals South, Ltd., an Israeli corporation; Cedar Chemical Corporation, a Delaware corporation ("Cedar"), and Cedar's wholly-owned subsidiaries, Vicksburg Chemical Company, a Delaware corporation ("Vicksburg"), and New Mexico Potash Corporation, a New Mexico corporation ("NMPC"); and Eddy Potash, Inc., a Delaware corporation ("Eddy"). The Company was incorporated in Delaware in 1971 under the name Trans-Pacific Resources, Inc. ("Trans-Pacific"). SPECIALTY PLANT NUTRIENTS The Company is a multinational manufacturer of a range of specialty plant nutrients, which contributed approximately $146,000,000 to the Company's revenues for the fiscal year ended December 31, 1993, of which K-Power contributed a substantial portion. Products and Markets. K-Power, Polyfeed (a fully soluble plant nutrient containing nitrogen, phosphate and potassium), Magnisal (magnesium nitrate), Multi-MAP (monoammonium phosphate) and Multi-MKP (monopotassium phosphate) are suitable for intensive high value crops such as fresh fruit and vegetables, flowers, cotton and tobacco, since they are fully soluble, easily absorbed and leave no harmful residues such as chloride, sodium or sulfate. Because of their solubility, these products can be used with modern drip irrigation systems, which are increasingly being employed to conserve water. The Company produces several grades of agricultural potassium nitrate, including standard and prilled. The Company is the world's largest producer of potassium nitrate. Worldwide demand for potassium nitrate has been growing steadily since potassium nitrate was introduced in the 1960s. The market for K-Power has enjoyed steady volume growth because it increases plant yields, improves crop quality and shortens growing cycles. As a result, potassium nitrate commands a price premium over other potassic plant nutrients such as potassium sulfate and sulfate of potash magnesia, used in combination with ammonium nitrate. After a multi-year research and development effort, the Company developed a technology for the coating of potassium nitrate and other specialty plant nutrients which promotes the controlled release of 2 5 nutrients over time. These products increase nutrient uptake by plants while minimizing fertilizer runoff into the soil, thus satisfying growing environmental concerns, and reducing labor requirements. The Company is marketing these controlled release plant nutrients products under the Multicote brand name. Marketing and Sales. As part of the Company's market development and sales efforts, resident agronomists are located in the United States, Italy, France, the United Kingdom, Greece, Mexico, South Africa, Japan and the Benelux countries. The steady growth in demand for the Company's specialty plant nutrients has been supported by agronomic activities in many countries which have demonstrated the benefits of using K-Power. Horticultural and agricultural growers generally require substantial testing under their own specific climatic, soil and growing conditions before they will adopt a new plant nutrient. The Company has developed application expertise which has produced a growing number of applications and users. To market its specialty plant nutrients, the Company has established a worldwide network of agents and distributors and uses storage facilities in certain countries to provide prompt and responsive customer service. However, depending on the conditions prevailing in the particular market, certain large users are serviced directly and certain products are covered by product managers who have worldwide responsibility for such products. In order to further improve service to its customers in Western Europe, the Company has established subsidiaries in the United Kingdom, Belgium, Spain and Italy. A French subsidiary engaged in the fertilizer business and having its own sales and distribution network also markets the Company's specialty plant nutrients. For United States sales, the Company utilizes its own sales force and also works in selected areas through brokers. In general, in the United States, the Company sells K-Power to blenders who produce mixed fertilizers containing potassium nitrate, which is then sold to growers. Internationally, the Company's distributors usually sell directly to growers. Manufacturing. The Company believes it accounts for approximately 65% of the world's production of potassium nitrate and its current annual potassium nitrate production capacity is approximately 410,000 metric tons. This capacity has been temporarily reduced by the February 1994 fire at HCL, but is scheduled to be restored within approximately twelve months. To meet the anticipated continued growing demand of the market, the Company is expanding its production capacity by constructing a new facility (the "K3 Plant") in Israel, with capacity to produce by 1995 approximately 100,000 metric tons of potassium nitrate annually. Capacity of the K3 Plant may be expanded in subsequent years. See "Facilities and Suppliers" below. Competition. The Company's only significant competitor in the production and sale of potassium nitrate is Sociedad Quimica Y Minera De Chile, S.A., a Chilean company. The principal methods of competition are product quality, customer service, agronomic expertise and price. ORGANIC CHEMICALS The Company's organic chemicals business has grown by building upon its capabilities in specialized areas of complex organic synthesis. Its sales have grown from approximately $20,000,000 in 1989 to approximately $38,000,000 in 1993, with sales of propanil representing approximately 70% of 1993 sales. Products and Markets. The Company's organic chemicals products include propanil (the leading rice herbicide, which Cedar markets principally under the Cedar label and the brand name "Wham! EZ"), dichloroanaline ("DCA," the principal raw material for the production of propanil), Butoxone (a peanut herbicide) and Diuron (a broad use herbicide used on food crops, alfalfa and cotton). The Company is also the exclusive United States distributor for Tough (a corn and peanut herbicide). The Company estimates that it currently produces approximately 95% of the propanil sold in the United States. The Company has also 3 6 developed several new propanil formulations which offer various advantages in terms of ease of application and improved environmental impact in an effort to expand the propanil market. Although the United States is currently the largest propanil market, representing approximately 35% of the world market, the United States contains only a small proportion of the world's rice acreage. Accordingly, the Company believes there is significant potential for propanil growth internationally. The Company has established an international market development program to introduce propanil to additional markets around the world. As the largest propanil producer in the world and a low cost producer, the Company believes it is positioned to benefit from growth in the international propanil market. The Company also produces other organic chemicals as a contract manufacturer for various chemical companies. Through this contract manufacturing, the Company has developed certain techniques for the synthesis of complex organic chemicals which has been beneficial to it in both its contract manufacturing activities as well as its own developmental efforts for proprietary products. Marketing and Sales. The Company produces and sells propanil under its own brand name and supplies propanil to other agrichemical companies under long-term supply contracts. Sales by the Company of propanil and DCA under a long-term supply contract with the company that, prior to 1992, was the world's largest producer of propanil, represented approximately 17% of the Company's sales of organic chemicals in 1993. The Company sells propanil and its other organic chemical products through its own sales force and a network of distributors, regional dealers, cooperatives and international brokers. Manufacturing. The Company is a low cost producer of propanil as a result of its 1991 acquisition, relocation and upgrading of a DCA manufacturing plant. The Company intends to continue to expand its organic chemicals business by developing and/or distributing new products that draw upon its skills in organic chemical synthesis and/or its sales organization. In particular, the Company is pursuing new manufacturing opportunities which capitalize on its capabilities in chloronitrobenzene technology. Competition. In the United States market, the Company primarily competes with one other propanil supplier while in international markets the Company competes with several producers. Propanil competes with several other rice herbicides, but is currently the most commonly used rice herbicide. Diuron and Tough compete with other products supplied by several multi-national companies. In contract manufacturing, the Company competes with various other producers and the basis of competition is generally the quality and range of production capabilities, service and price. INDUSTRIAL CHEMICALS The Company's industrial chemical products include technical grade potassium nitrate, technical and food grade sodium tripolyphosphate ("STPP"), technical and food grade phosphoric acid, technical grade monoammonium phosphate and diammonium phosphate ("MAP" and "DAP"), technical and food grade monopotassium phosphate ("MKP"), food grade sodium acid pyrophosphate ("SAPP"), chlorine, nitrogen tetroxide and food grade salts. Industrial chemicals contributed approximately $84,000,000 to the Company's revenues for the fiscal year ended December 31, 1993. The Company intends to begin production of potassium carbonate by the end of 1994 at a new plant being constructed for this purpose by Vicksburg. Products and Markets. Technical grade potassium nitrate is used in the glass industry for making fine tableware glass, TV tubes and crystal glass; in the metal industry for heat treatment; in the ceramics industry 4 7 for the glazing process; for making explosives and for the production of heat transfer salts in the petrochemical industry; and for solar energy systems. Phosphoric acid is used in metal treatment, industrial cleaning solutions, fermentation processes and for carbonated drinks in the food industry. STPP is used primarily in the manufacturing of detergents and specialty cleaning compounds and in the textile and ceramic clay industry; MAP and DAP are used for fire extinguishing powders and fire retardant functions; MKP is used for the fermentation process; and SAPP is an ingredient in baking powders and is used for potato processing. Chlorine is used in the pulp and paper industry and as a swimming pool disinfectant. Nitrogen tetroxide is an aerospace fuel additive. Food grade salts are used in food processing. Potassium carbonate produced at Vicksburg's new plant will be used primarily in the glass industry. Marketing and Sales. The Company sells its industrial chemicals through its own sales force and brokers in the United States and internationally through a worldwide network of agents and distributors. Nitrogen tetroxide is primarily sold under a long-term contract to the United States Government. The Company utilizes storage facilities in certain countries. Production. Many of these industrial products are co-products of the Company's potassium nitrate manufacturing process. Given its production flexibility, the Company can vary the relative proportion of the various phosphate chemicals (STPP, MAP, MKP, DAP and SAPP) to optimize its product mix in light of then prevailing market conditions. Competition. Certain of the Company's industrial chemicals products, such as STPP and phosphoric acid, compete in large industrial chemical markets in which the Company has a small position. Others, such as technical grade potassium nitrate, MAP, MKP and nitrogen tetroxide have relatively significant competitive positions in their respective niche markets. The nature of competition for the various industrial chemicals sold by the Company varies by product. However, in general, the principal methods of competition are product quality, customer service and price. POTASH The Company is the largest United States producer of potash, producing approximately 900,000 short tons in 1993, primarily for agricultural use as fertilizer. During 1993, the Company's share of total potash production in the United States was approximately 47% and its share of total North American potash production was approximately 6%. Potash provides potassium, an essential nutrient for a wide range of crops, including wheat, soybeans and corn. The Company, through Eddy and NMPC, mines, refines and distributes potash from two mines and related refineries located in New Mexico. Potash sales in 1993, excluding intercompany sales to Vicksburg, amounted to approximately $57,000,000. Products and Markets. During 1993, approximately 78% of the Company's potash production was sold as fertilizer and the balance was sold for industrial uses or used by Vicksburg as a raw material in the production of potassium nitrate. The Company does not view these operations as a source of growth. Marketing and Sales. In the United States, the Company's sales force sells potash to blenders for fertilizer material and to industrial customers. Export sales are handled by a sales subsidiary of Potash Corporation of Saskatchewan. During 1993, the Company sold approximately 77% of its potash production domestically and 23% internationally. Although average selling prices for potash in the United States have declined over the last year, they continue to be above the 1987 price levels, at least in part as a result of the United States Government's preliminary findings in a Canadian potash antidumping investigation and the subsequent Canadian potash 5 8 antidumping agreement. If such agreement is terminated or violated by the Canadian producers, then depending on the actions taken by the United States Government, the production and pricing decisions of Canadian producers, and other market factors, it is possible that the current price levels for potash could decline substantially, which would adversely affect the Company's results of operations. See Item 3 - "Legal Proceedings" below. Production. The Company's potash is mined from approximately 89,000 acres which are under long-term lease, principally from the United States Government and the State of New Mexico. Such leases cover estimated ore reserves, as of December 31 1993, of approximately 70,000,000 short tons of recoverable ore, at thicknesses ranging from four to eight feet. At average recovery rates these ore reserves are estimated to be sufficient to yield approximately 15,000,000 short tons of potash concentrate with an average grade of 60% to 62% "K2O" (a common standard of measurement established by the industry by defining a product's potassium content in terms of equivalent percentages of potassium oxide). As of December 31, 1993 and based on current rates of production (aggregating approximately 940,000 short tons annually), these ore reserves are estimated to be sufficient to support the mining operations of NMPC for approximately 31 years and of Eddy, depending on market conditions, for approximately two to three years. By the time Eddy suspends operations, which the Company currently expects will be during 1996, depending on market conditions, the Company may expand production at NMPC from its present level of approximately 420,000 short tons per year. Competition. Potash is available from several sources, both domestic and foreign, including very large Canadian sources of supply. As a result, the market is highly competitive. Since potash is a commodity product, the most significant competitive factor affecting sales is price. FACILITIES AND SUPPLIERS Vicksburg owns the property, plant and equipment located at its Vicksburg, Mississippi site and Cedar owns the property, plant and equipment located at its West Helena, Arkansas site. The Vicksburg plant consists of two adjacent manufacturing plants situated on 600 contiguous acres. Vicksburg is constructing a third manufacturing plant on its property, to be completed during 1994, which will be used for the production of potassium carbonate. The West Helena plant is located on a 60 acre site. The plants are encumbered by first mortgages and security interests securing long-term indebtedness. Cedar's corporate offices are located in leased premises in Memphis, Tennessee. The major raw materials required by Vicksburg for production of potassium nitrate are potash supplied by NMPC and nitric acid which is produced at the Vicksburg plant. Ammonia, the principal raw material required for production of nitric acid, is supplied from two plants owned by a third party in close proximity to the Vicksburg facility. The major raw material for the production of propanil is DCA. The principal raw material for the production of DCA is provided to the Company under a supply contract. Such raw material is available from multiple sources. NMPC owns the property, plant and equipment located at its 320 acre site near Hobbs, New Mexico. The property, plant and equipment is encumbered by a first mortgage and security interest securing long-term bank indebtedness. Eddy owns the property, plant and equipment located at its 680 acre site in Eddy County, New Mexico. HCL owns its machinery and equipment and leases its land and buildings from Oil Refineries Ltd. ("ORL"), a corporation which is majority-owned by the Israeli Government. The leases expire at various dates, principally in 22 years. Substantially all of the assets of HCL are subject to security interests in favor 6 9 of the State of Israel or banks. HCL also has a contract with ORL for steam and processed water which expires on December 31, 1996 and a lease from ORL of a pipeline which transports ammonia from the port in Haifa to HCL's plant. HCL is expanding its production capacity by constructing the K3 Plant, with the capacity to produce annually approximately 100,000 metric tons of potassium nitrate and 15,000 metric tons of phosphoric acid. The K3 Plant is being built in the southern part of Israel, on land leased on a long-term basis from the Government of Israel, and is anticipated to cost approximately $88,000,000. HCL expects to receive from the Government of Israel an investment grant of approximately $32,000,000 (which is non-refundable unless the Company does not comply with the terms of the certificate of approval). In addition, it is expected that the Government of Israel will contribute approximately $5,000,000 for infrastructure, so that the net investment of HCL in the K3 Plant is anticipated to be approximately $51,000,000. Construction commenced in 1993 and production is planned to start in late 1994. Capacity of the K3 Plant may be expanded in subsequent years. Provided it completes the K3 Plant and complies with the conditions specified in the applicable certificate of approval, HCL will receive, with respect to taxable income derived from the K3 Plant, certain benefits accorded under Israel's Investments Law. On February 7, 1994, the smaller of HCL's two potassium nitrate production units was damaged by a fire, causing a temporary reduction of the Company's potassium nitrate production capacity. The Company is currently reviewing various alternatives concerning the most effective and timely replacement of the damaged production unit and expects to replace the damaged unit within approximately twelve months. The Company believes that the impact of the loss of the facility, including the effect of business interruption, will be substantially covered by insurance. While the ultimate amount of the insurance recovery has not yet been determined, the Company expects that the insurance proceeds relating to the property damage will be for replacement value, which substantially exceeds the recorded carrying value of the damaged assets. HCL obtains its major raw materials, potash and phosphate rock, in Israel. HCL purchases potash solely from Dead Sea Works, Ltd. ("DSW") in accordance with a supply contract expiring December 31, 1999. The contract provides for prices to be established quarterly, based on the weighted average of the FOB Israeli port prices paid to DSW by its overseas customers during the preceding quarter plus certain adjustments thereto. HCL purchases phosphate rock solely from Negev Phosphates, Ltd. ("Negev Phosphates") pursuant to a supply agreement expiring on June 30, 1994. Based on a letter of intent between Negev Phosphates and HCL, a long-term contract is currently being negotiated. DSW and Negev Phosphates are companies that are majority-owned by the Israeli Government and the sole suppliers in Israel of potash and phosphate rock, respectively. While HCL views its current relationships with both of its principal suppliers to be good, the loss of supply from either of these sources would have an adverse effect on the Company. Ammonia, which is used to produce nitric acid (which in turn is used to produce potassium nitrate), is manufactured in Israel as well as imported. The ammonia used by HCL is currently imported from a producer under supply agreements expiring on December 31, 1994. HCL owns ammonia terminal facilities located on leased property in the port of Haifa which have the capacity to store an amount of ammonia sufficient to meet HCL's requirements. Management believes that, except for the HCL unit damaged by the fire in February, 1994, its facilities are in good operating condition and adequate for its current needs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Expenditures" and Note P of Notes to Consolidated Financial Statements. 7 10 RESEARCH AND DEVELOPMENT The Company has developed and patented certain manufacturing processes and has submitted other applications for patents for additional processes. As of December 31, 1993, the Company employed 81 research and development scientists, engineers and technicians, who are involved in the development and evaluation of process technologies, efficiencies and quality control. For the years ended December 31, 1991, 1992, and 1993, the Company spent approximately $2,860,000, $2,945,000 and $3,206,000, respectively, on these efforts, which have been charged to current operations. PERSONNEL AND LABOR RELATIONS As of December 31, 1993 the Company employed approximately 1,500 people. Approximately 260 employees have advanced technical and academic qualifications. None of Cedar's, Vicksburg's or NMPC's employees are represented by any collective bargaining unit. Eddy's hourly work force is represented by three labor unions. Eddy's collective bargaining agreements covering the hourly work force expire in July 1995. Eddy has enjoyed good relations with its labor unions and has not had a significant work stoppage for many years. Technicians and engineers of HCL are members of the Union of Technicians and Engineers, which operates throughout Israel, and substantial terms of their employment (e.g. salaries and promotions) are governed by a general collective agreement which HCL does not negotiate directly with such employees. The other employees of HCL are members of the "Histadrut", the dominant labor union in Israel, and their terms of employment are governed by a Specific Collective Agreement ("SCA") negotiated by HCL with the Histadrut and the representatives of the employees. The contractual terms of the most recent labor agreements with both employee groups expired on December 31, 1992, with the result that they remain statutorily in effect until terminated by either party thereto at any time upon two months prior written notice. HCL is currently negotiating new labor agreements with the respective employee groups with the objective being to arrive at agreements for the three year period ending December 31, 1995. HCL's last major labor dispute took place in July 1991 and related to negotiations of the SCA for 1990 and 1991. As a result of this dispute, HCL's employees went on strike for approximately four weeks during the third quarter of 1991. Prior to that, the last major labor dispute took place in 1983, which resulted in a strike of approximately two weeks. ENVIRONMENTAL MATTERS Cedar and Vicksburg Vicksburg's plant located in Vicksburg, Mississippi and Cedar's West Helena, Arkansas plant discharge process waste water and storm water pursuant to permits issued in accordance with the Federal Clean Water Act and related state statutes. Air emissions at each plant are regulated by permits issued pursuant to the Federal Clean Air Act and related state statutes. While the plants have generated solid waste regulated by the Federal Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984 ("RCRA") and related state statutes, the Company believes that such waste is currently handled and disposed of in a manner which does not require the Company to have permits under RCRA or any related state statute. The Environmental Protection Agency's (the "EPA") Regional Office in Atlanta notified Cedar in 1989 that unspecified corrective action will be required to protect against the release of contaminants allegedly present at the Vicksburg plant as a result of previous pesticide manufacturing operations. As a result of the notice, Cedar reached agreement with the EPA and the Department of Justice on the terms of 8 11 a Consent Decree which was filed in the United States District Court at Jackson, Mississippi in January 1992. Pursuant to the Consent Decree, Cedar submitted a report of current conditions. Upon agency approval of this report and of the facility investigation work plan to be thereafter submitted for the Vicksburg plant, Vicksburg will undertake a site investigation and corrective measures study, followed by implementation of appropriate corrective action. Compliance with the Consent Decree is expected to occur over a five to six year period. Cedar's West Helena plant utilizes a surface impoundment for biological treatment of non-hazardous waste streams which was the subject of an enforcement proceeding initiated by the Arkansas Department of Pollution Control and Ecology (the "ADPCE") in 1986. The proceeding resulted in a Consent Administrative Order which required Cedar to carry out various studies, ultimately leading to the implementation of a groundwater monitoring system. Based in part on the results of groundwater monitoring and in part on the discovery of a drum burial area on the West Helena plant site, the ADPCE requested Cedar to initiate an expanded plant-wide investigation pursuant to a Consent Administrative Order. The Order was entered in the third quarter of 1991. Implementation is expected to occur over a five year period. Cedar removed the buried drums from the West Helena site in accordance with a work plan incorporated in the Consent Administrative Order and, shortly thereafter, filed a suit against a former operator of the plant site for contribution for the costs incurred. In July 1992, Cedar obtained partial summary judgment in the suit against the former operator in an amount equal to the cost Cedar incurred in removing the buried drums. The judgment, in the amount of $1,725,000 plus interest, has been appealed by the former operator. The Company believes that the future costs required to complete the site investigation and corrective measures studies at Vicksburg and the plant-wide investigation at West Helena will be between $500,000 and $1,000,000 and will be expended over two to three years. Until these investigations are completed, it is not possible to definitively determine the costs for any corrective actions which will be required. Any such corrective action costs will be expended over a period of years. There can be no assurance that such costs will not be material. In November 1992, Cedar entered into an agreement with the ADPCE to resolve alleged violations of Cedar's National Pollutant Discharge Elimination System permit (issued to its West Helena Plant in accordance with the Federal Clean Water Act and related state statutes) by agreeing to enter into an additional Consent Administrative Order which will require implementation of additional corrective measures (which could cost up to $500,000 over a period of two to three years) intended to assure future compliance with the requirements of the permit and which required the payment of a penalty of $80,000. In 1987, Cedar entered into a cost sharing agreement with 55 other companies to fund costs associated with the clean-up of an abandoned waste disposal site located near Bayou Sorrel, Louisiana. The sharing agreement was the basis for a consent decree to which Cedar and the other companies are parties, settling claims brought by the EPA pursuant to the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended. The sharing agreement allocates approximately 4% of the clean-up costs to Cedar. After credits and payments through December 31, 1993, Cedar's remaining share is not expected to exceed an aggregate of $480,000 over approximately the next 25 years. Appropriate provisions have been made in the consolidated financial statements with respect to the above matters. 9 12 Eddy and NMPC The Company's potash operations are subject to various Federal, state and local environmental laws. The Company does not believe significant expenditures will be required for the potash operations in the near future or that its ongoing environmental operating costs will be material. HCL As a result of the chemicals and processes used by HCL in the course of production, nitrous oxide ("NOX") gases, potassium nitrate and STPP dusts are emitted into the air. In 1986, the Israeli Ministry of Interior issued an order (the "Order") under the Law for the Prevention of Hazards of 1961 directing HCL to avoid unreasonable air pollution and to take certain remedial actions, including the installation of measuring devices. In response to the Order, HCL installed analyzers for the continuous measuring of the NOX content of the tail gases in its two nitric acid plants and opacity meters for the measurement of dust content in the air emitted from potassium nitrate dryers. An additional absorption tower for the recovery of NOX from the tail gases of the larger nitric acid plant was installed in 1989 as well as two ventury scrubber units for the reduction of the dust content in the air emitted from the dryers of both potassium nitrate plants. As a result of these actions, HCL complied with the Order. As part of a 1990 nitric acid capacity increase, an NOX abatement unit was installed in the smaller nitric acid plant. As a result of the production of phosphoric acid, HCL generates acid sludge and liquid acid effluent. HCL had previously disposed of its acid sludge in designated approved sites. In accordance with a permit issued by the Israeli Agency for Environmental Preservation of the Ministry of Interior pursuant to the Law for the Prevention of Sea Pollution (Disposing of Wastes) of 1983 and 1984, HCL is now disposing of the acid sludge in a designated site in the Mediterranean Sea, situated 20 nautical miles from the Israeli coast. The permit allows for the disposal of a quantity which is sufficient to satisfy HCL's needs. The permit is valid until December 31, 1994. HCL currently disposes of its liquid acid effluents in a local river. Local authorities have advised HCL that it must find an alternative site for such disposal. The present solution proposed by HCL is to dispose of the liquid acid waste four kilometers into Haifa Bay utilizing a marine pipeline. This proposal, accepted in principle by both the local authorities for environmental protection and the Haifa port authorities, was submitted for approval to the Ministry of Environmental Protection in Jerusalem. The Ministry gave HCL permission to proceed with the design of the marine pipeline, subject to HCL fulfilling certain requirements. Studies of sea conditions in the area for the proposed pipeline and of the effect of the acid waste on the sea environment were performed by the Israel Oceanographic & Lakes Research Institute. Based on these studies, an environmental impact statement of the proposed system is currently being prepared. The Company estimates that HCL will be required to invest approximately $8,000,000 over the next three years if this proposed solution is adopted and annual operating costs, after completion of the project, will be approximately $800,000. ITEM 2. Properties. Reference is made to "Facilities and Suppliers" in Item 1 above, "Business," for information concerning the Company's properties. See also Notes D and P of Notes to Consolidated Financial Statements for additional information. 10 13 ITEM 3. Legal Proceedings. 1. On or about December 20, 1991, Peter N. Zachary together with fifteen other persons, claiming to be shareholders of Sylvan Learning Centers, Inc., The Enstar Group, Inc. ("Enstar"), Kinder-Care, Inc. and Kinder-Care Learning Centers, Inc., filed a complaint in the Circuit Court for Montgomery County, Alabama against Richard J. Grassgreen ("Grassgreen") and Perry Mendel ("Mendel") (each a former indirect stockholder and director of the Company), another former indirect stockholder and director of the Company, TPR Investment Associates, Inc. ("Associates," which is a former parent corporation of the Company), Trans-Pacific (the former name of the Company) and various other named persons and entities and certain unnamed entities. The complaint alleges that in January 1986, Grassgreen and Mendel became part owners of Associates along with the other former indirect stockholder and director of the Company and certain employees of Drexel Burnham Lambert Incorporated. The complaint also alleges that in January 1986, Grassgreen caused Enstar, through its subsidiary, Care Investors, Inc., to purchase a one-third interest in Associates for $3,000,000 and to loan Associates $10,000,000 to permit it to acquire Trans-Pacific, which would substantially increase the profits Grassgreen and Mendel could make on their investments in Trans-Pacific. The complaint does not explain how these allegations are actionable against Associates or Trans-Pacific. The Company filed a motion to dismiss the complaint. On or about May 27, 1993, the Court entered an order dismissing substantially the entire complaint. Plaintiffs thereafter filed a second amended complaint, against which the Company also filed a motion to dismiss. On or about August 10, 1993 the Court entered an order dismissing four of the five Counts of the amended complaint. The Company has interposed an answer to the remaining Count in the complaint. 2. On or about December 3, 1993 an action was commenced in the United States Bankruptcy Court, Middle District of Florida, Jacksonville Division by Grassgreen (as debtor in his personal bankruptcy proceeding) against the Company, its current parent corporation, TPR Investment Associates, Inc. ("TPR"; which is a different corporation than Associates) and Arie Genger (see Item 10 - "Directors and Executive Officers of the Registrant" and Item 12 - - "Security Ownership of Certain Beneficial Owners and Management"). The complaint alleges that Grassgreen's November 1991 sale to TPR of his 250 shares of TPR common stock (1,000 shares were then outstanding) in exchange for a non- negotiable note constitutes a fraudulent conveyance voidable under state and bankruptcy law, fraud, a breach by TPR of a 1988 Shareholder Agreement among TPR and its then shareholders, and that TPR retains property owing to Grassgreen's bankruptcy estate. The complaint seeks recision of the sale, damages and costs, and that Mr. Genger be enjoined from issuing any new or treasury stock of TPR or changing the ownership of TPR or the Company. On or about February 14, 1994 the defendants filed an answer to the complaint, denying all of the allegations of the complaint, interposing additional defenses and asserting a counterclaim against Grassgreen pursuant to his indemnification obligations under the agreement governing his November 1991 sale of his TPR shares. On or about December 30, 1993 Enstar moved to intervene in the suit, contending that it, rather than Grassgreen, should prosecute it. On or about February 16, 1994, in connection with the then proposed settlement with Grassgreen, Enstar moved to continue indefinitely (i.e., defer) its intervention motion until it or one of the other parties requests otherwise. During March 1994 the parties entered into an agreement (the "Settlement"), which is subject to Bankruptcy Court approval and confirmation of Mr. Grassgreen's plan of reorganization, providing for dismissal with prejudice of the action and releases to the defendants. Pursuant to the Settlement, TPR will make certain payments in exchange for surrender to TPR of Grassgreen's non-negotiable note and the Company's outstanding $9,000,000, 9 1/2% junior subordinated debenture due 2005. In addition, the Settlement provides for the release of the current holder's liability under a $4,000,000 note due 2005 payable to the Company and secured by the $9,000,000 debenture. TPR will thereafter be the obligor on the $4,000,000 note. 11 14 3. On or about April 1, 1993 an action was commenced in the United State District Court for the District of Minnesota, Minneapolis Division, by Blomkest Fertilizer, Inc., Meadowland Farmers Corp., and Cobden Grain & Feed against the major Canadian and United States potash producers, including Eddy and NMPC. The action is purportedly a class action on behalf of all purchasers of potash from any of the defendants or their respective affiliates, at any time during the period April 1987 to the present, and alleges that the defendants conspired to fix, raise, maintain and stabilize the prices of potash in the United States purchased by the plaintiffs and the other member of the class in violation of the United States anti-trust laws. The complaint seeks unspecified damages together with injunctive relief against the defendants. A total of fourteen related actions (in ten of which Eddy and NMPC were named defendants) were subsequently filed in the United State District Courts for the District of Minnesota, the Northern District of Illinois and the Western District of Virginia, all containing allegations similar to those made by the plaintiffs in the Blomkest action. The actions pending in Federal court in Minnesota were consolidated and an amended and consolidated complaint was served; several of the plaintiffs named in the original complaints are no longer parties to the amended and consolidated complaint. On or about May 27, 1993 a purported class action was filed against the major potash producers, including Eddy and NMPC, in the Superior Court of the State of California for the County of Los Angeles on behalf of Angela Coleman and a class consisting of all California indirect purchasers of potash. The complaint in the Coleman action alleges a price fixing conspiracy in the potash industry between April 1987 and the present in violation of specified California statutes. On July 6, 1993 the defendants removed the Coleman case to the United States District Court for the Central District of California. Pursuant to an order of the Judicial Panel for Multidistrict Litigation, all of the pending Federal actions have been consolidated for pretrial purposes in the United States District Court for Minnesota. The defendants filed a joint motion to disqualify plaintiffs' counsel and dismiss their complaints ("Motion to Disqualify"). Additionally, certain of the defendants, including Eddy and NMPC, filed a Joint Motion, pursuant to stipulated Federal statutes, to dismiss ("Motion to Dismiss"). On December 8, 1993 the Court granted the Motion to Disqualify with respect to certain of the plaintiffs' counsel, including all of the plaintiffs' lead counsel, and ordered that the plaintiffs, using non-disqualified counsel who submit an affidavit attesting to facts establishing that they should not be disqualified, could file amended complaints within 30 days (subsequently extended to January 28, 1994), failing which the complaints would be dismissed without prejudice. The Court denied the Motion to Dismiss as moot. The Court also ruled that the Motion to Disqualify and the Motion to Dismiss and its rulings with respect thereto did not apply to the case transferred from the California Court. The plaintiffs filed a motion for reconsideration of the Court's December 8, 1993 decision on the Motion to Disqualify or, in the alternative, for certification ("Motion for Certification") allowing plaintiffs to appeal the Court's interlocutory decision to the Eighth Circuit Court of Appeals. On January 4, 1994 the Court ruled that two of the twelve disqualified law firms should not have been disqualified and granted plaintiffs' Motion for Certification. The Court also ruled that upon plaintiffs filing an application for appeal, all proceedings would be stayed pending further order of the Court or the Eighth Circuit. On February 4, 1994 the Eight Circuit Court of Appeals denied the plaintiffs' petitions for permission to appeal the District Court's interlocutory order. Accordingly, on February 14, 1994, the District Court vacated the stay and ordered that plaintiffs (using non-disqualified counsel) could file amended complaints on or before March 1, 1994. Certain of the plaintiffs filed amended complaints on or about March 1, 1994 and other plaintiffs obtained an extension from the District Court to file amended complaints until April 21, 1994. On March 14, 1994, the Court scheduled the trial to begin on or about January 1, 1996. On or about February 18, 1994 certain of the plaintiffs filed with the Eighth Circuit a petition for rehearing and suggestion for rehearing en banc of the Eighth Circuit's denial of plaintiffs' petition for permission to appeal the District Court's interlocutory decision. This petition has not yet been decided. Management has no knowledge of any conspiracy of the type alleged in these complaints. 12 15 There are several other legal proceedings pending against the Company and certain of its subsidiaries arising in the ordinary course of its business which management does not consider material. Management of the Company believes, based upon its assessment of the actions and claims outstanding against the Company and certain of its subsidiaries, and after discussion with counsel, that the eventual disposition of the matters described or referred to above should not have a material adverse effect on the financial position or future operations of the Company. On or about November 26, 1993 Eddy and NMPC (and other major United States potash producers) were served with subpoenas issued by the United States District Court for the Northern District of Ohio to produce documents to a grand jury authorized by the U.S. Department of Justice Antitrust Division ("DOJ") to investigate possible violations of the antitrust laws in connection with the allegations made in the civil actions describe above. Eddy and NMPC are cooperating with DOJ in connection with providing documents sought by the subpoena. For information relating to certain environmental proceedings affecting the Company, see "Environmental Matters" in Item 1 above, "Business." ITEM 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders during the quarter ended December 31, 1993. PART II ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters. All of the Company's equity securities are owned by TPR. See Item 12 - - "Security Ownership of Certain Beneficial Owners and Management." In addition, see Note H of Notes to Consolidated Financial Statements for information regarding certain restrictions on the Company's payment of dividends. During 1991, 1992 and 1993 the Company paid or declared dividends on its Common Stock in the amounts of $2,850,000, $13,136,000 and $7,508,000, respectively. 13 16 ITEM 6. Selected Financial Data. The following table presents selected consolidated financial data of the Company for the five year period ended December 31, 1993. This data has been derived from the consolidated financial statements of the Company and should be read in conjunction with the notes thereto.
Year Ended December 31, ----------------------- 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- (in thousands) Results of Operations: Revenues . . . . . . . . . . . . . . . . . . $ 269,311 $ 292,235 $ 309,068 $ 345,356 $326,315 Operating costs and expenses: Cost of goods sold . . . . . . . . . . . . 197,495 219,878 238,489 266,770 255,563 General and administrative . . . . . . . . 24,809 29,488 33,262 36,270 38,375 --------- --------- --------- --------- -------- Operating income . . . . . . . . . . . . . . 47,007 42,869 37,317 42,316 32,377 Interest expense . . . . . . . . . . . . . . (29,393) (32,153) (31,210) (27,542) (27,405) Interest and other income (expense) - net (1) . . . . . . . . . . . . 4,095 (4,647) 14,159 8,476 6,014 --------- --------- --------- --------- -------- Income before income taxes, extraordinary item and change in accounting principle . . . . . . . . . . 21,709 6,069 20,266 23,250 10,986 Income tax provision . . . . . . . . . . . . 12,283 11,037 2,582 11,231 7,920 --------- --------- --------- --------- -------- Income (loss) before extraordinary item and change in accounting principle . . . . 9,426 (4,968) 17,684 12,019 3,066 Extraordinary item - net . . . . . . . . . . -- 263 1,186 -- (8,830) Cumulative effect on prior years of change in accounting for income taxes . . . -- -- -- 1,130 -- --------- --------- --------- --------- -------- Net income (loss) . . . . . . . . . . . . . . $ 9,426 $ (4,705) $ 18,870 $ 13,149 $ (5,764) ========= ========= ========= ========= ======== Dividends: Preferred stock . . . . . . . . . . . . . . . $ 855 $ 855 $ 214 $ -- $ -- Common stock . . . . . . . . . . . . . . . . 2,000 2,175 2,850 13,136 7,508
_______________________ (1) Includes (a) security losses of $6,381,000 and $15,490,000 (which $15,490,000 relates principally to the Company's investment in Enstar) in the years ended December 31, 1989 and 1990, respectively, (b) a gain of $10,000,000 in the year ended December 31, 1991, representing the excess of insurance proceeds over the carrying value of certain HCL property destroyed in a fire, and (c) security gains of $2,865,000 and $2,261,000 in the years ended December 31, 1992 and 1993, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note L of Notes to Consolidated Financial Statements. 14 17
December 31, ------------ 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- (in thousands) Financial Position: Cash and cash equivalents . . . . . . . . . . $61,347 $ 54,999 $ 39,276 $ 54,745 $ 25,742 Working capital . . . . . . . . . . . . . . . 102,670 111,951 120,150 99,297 103,694 Total assets . . . . . . . . . . . . . . . . 318,343 373,083 381,841 341,055 365,865 Short-term debt, including current maturities of long-term debt . . . . . . . 25,394 29,383 50,105 42,666 47,282 Long-term debt, excluding current maturities and subordinated debt . . . . . 79,259 125,745 84,132 71,318 61,328 Senior subordinated debt - net . . . . . . . 120,747 120,309 110,716 103,689 140,133 Junior subordinated debt - net . . . . . . . 7,078 7,213 14,735 15,089 15,495 Redeemable preferred stock - net . . . . . . 7,078 7,213 -- -- -- Common stockholder's equity - net . . . . . . 23,236 15,824 28,772 28,882 15,794
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS The following table sets forth as a percentage of revenues and the percentage change of those items as compared to the prior period, certain items appearing in the Consolidated Financial Statements.
PERCENTAGE OF REVENUES YEAR-TO-YEAR CHANGES ---------------------- -------------------- YEAR ENDED DECEMBER 31, 1992 1993 ----------------------- VS. VS. 1991 1992 1993 1991 1992 ---- ---- ---- ---- ---- Revenues . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 11.7% (5.5)% ----- ----- ----- Cost and expenses: Cost of goods sold . . . . . . . . . . . . . . . 77.2 77.2 78.3 11.9 (4.2) General and administrative . . . . . . . . . . . 10.7 10.5 11.8 9.0 5.8 ----- ----- ----- Operating income . . . . . . . . . . . . . . . . . 12.1 12.3 9.9 13.4 (23.5) Interest expense . . . . . . . . . . . . . . . . (10.1) (8.0) (8.4) (11.8) (.5) Interest and other income - net . . . . . . . . 4.6 2.4 1.9 (40.1) (29.1) ----- ----- ----- Income before income taxes, extraordinary item and change in accounting principle . . . . 6.6 6.7 3.4 14.7 (52.8) Income tax provision . . . . . . . . . . . . . . . .9 3.2 2.5 335.0 (29.4) ----- ----- ----- Income before extraordinary item and change in accounting principle . . . . . . . . . 5.7 3.5 .9 (32.0) (74.5) Extraordinary item - net . . . . . . . . . . . . . .4 -- (2.7) (100.0) (100.0) Cumulative effect on prior years of change in accounting for income taxes . . . . . -- .3 -- 100.0 (100.0) ----- ----- ----- Net income (loss) . . . . . . . . . . . . . . . . . 6.1% 3.8% (1.8)% (30.3)% (143.8)% ===== ===== =====
1993 Compared with 1992 Revenues decreased by 5.5% to $326,315,000 in 1993 from $345,356,000 in 1992, a decrease of $19,041,000, resulting from decreased sales of potash and chlorine ($9,600,000), specialty plant nutrients and industrial chemicals ($2,600,000) and organic chemicals (primarily contract manufacturing activities) ($6,800,000). 15 18 Cost of goods sold as a percentage of revenues increased to 78.3% in 1993 compared with 77.2% in 1992 primarily due to higher costs associated with contract manufacturing activities in the Company's organic chemicals business and lower potash prices. During the 1993 period margins on specialty plant nutrients, industrial chemicals and the organic chemicals' pesticide business increased, but were offset by reduced margins in contract manufacturing activities and in the potash business. Gross profit was $70,752,000 in 1993 compared with $78,586,000 in 1992, a decrease of $7,834,000, principally the result of a decrease in potash gross profit. General and administrative expense increased to $38,375,000 in 1993 from $36,270,000 in 1992 (11.8% of revenues in 1993 compared with 10.5% in 1992), with the increase of $2,105,000 principally due to increased selling and marketing expenses for specialty plant nutrients and organic chemicals. As a result of the matters described above, the Company's operating income decreased by $9,939,000 to $32,377,000 in 1993 as compared with $42,316,000 in 1992. Interest expense decreased by $137,000 ($27,405,000 in 1993 compared with $27,542,000 in 1992). While the Company's outstanding debt at December 31, 1993 exceeded the outstanding debt at December 31, 1992 primarily as a result of the Company's issuance of its 11 7/8% Senior Subordinated Notes due 2002 (see Note H of Notes to Consolidated Financial Statements), interest expense declined as a result of scheduled debt repayments and lower interest rates in the 1993 period. Interest and other income - net decreased in 1993 by $2,462,000, principally as the result of reduced interest and dividend income and security gains in 1993 and other non-recurring income earned in 1992. As a result of the above factors, income before income taxes, extraordinary item and change in accounting principle decreased by $12,264,000 in 1993. The provision for income taxes increased to 72.1% of pre-tax income in 1993 from 48.3% of pre-tax income in 1992. The Company's provisions for income taxes are impacted by the mix between domestic and foreign earnings and vary from the U.S. Federal statutory rate principally due to the impact of foreign operations and certain losses for which there is no current tax benefit. See Note K of Notes to Consolidated Financial Statements for information regarding effective tax rates. In the 1993 period the Company acquired $65,497,000 principal amount of its 13 1/2% Senior Subordinated Debentures due 1997 (the "13 1/2% Debentures") and $21,500,000 principal amount of its Senior Subordinated Reset Notes due 1996 (the "Reset Notes"), which resulted in a loss of $8,830,000. Such loss (which has no current tax benefit) is classified as an extraordinary item in the accompanying Consolidated Statement of Operations. No debt was acquired in the 1992 period. See the Note H of Notes to Consolidated Financial Statements. 1992 Compared with 1991 Revenues increased by 11.7% to $345,356,000 in 1992 from $309,068,000 in 1991, an increase of $36,288,000, mainly the result of increased sales of specialty plant nutrients, organic chemicals and potash. Cost of goods sold as a percentage of revenues was 77.2% in both 1991 and 1992. During 1992 margins on specialty plant nutrients and industrial chemicals improved slightly, partially offset by higher volumes of propanil sold at lower margins pursuant to a supply agreement commencing in 1992. See "Business - Organic Chemicals - Marketing and Sales." Gross profit was $78,586,000 in 1992 compared with $70,579,000 in 1991, an increase of $8,007,000, with increases occurring in each of the Company's product lines. General and administrative expense increased to $36,270,000 in 1992 from $33,262,000 in 1991 (10.5% of revenues in 1992 compared with 10.7% in 1991) principally due to increased labor costs, selling and marketing expenses. As a result of the matters described above, the Company's operating income increased by $4,999,000 to $42,316,000 in 1992 as compared with $37,317,000 in 1991. 16 19 Interest expense decreased from $31,210,000 in 1991 to $27,542,000 in 1992, mainly resulting from scheduled debt repayments, lower interest rates and senior subordinated debt repurchased by the Company in 1991, partially offset by exchange rate differences on certain HCL long-term loans denominated in European currencies. Interest and other income - net decreased by $5,683,000 in 1992 principally as the result of the prior year including a gain of $10,000,000 relating to the excess of insurance proceeds over the carrying value of certain HCL property damaged in a fire, partially offset by increased security gains in 1992 (see Notes D and L of Notes to Consolidated Financial Statements). As a result of the above factors, income before income taxes, extraordinary item and change in accounting principle increased by $2,984,000 in 1992. The provision for income taxes increased to 48.3% of pre-tax income in 1992 from 12.7% of pre-tax income in 1991 since during 1991 HCL received an income tax refund relating to prior years of $7,100,000. These effective tax rates are impacted by the mix between domestic and foreign earnings and vary from the U.S. Federal statutory rate principally due to the impact of foreign operations and certain losses for which there is no current tax benefit. See Note K of Notes to Consolidated Financial Statements for information regarding effective tax rates. In 1991 the Company repurchased $10,153,000 principal amount of 13 1/2% Debentures and Reset Notes. Such repurchases resulted in a gain to the Company, net of income taxes, of $1,186,000, with this gain being classified as an extraordinary item. There were no repurchases of public indebtedness in 1992. Effective January 1, 1992, the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109 "Accounting For Income Taxes". In connection with such change in accounting, net income in 1992 was impacted by a net charge of $1,170,000. See Note A of Notes to Consolidated Financial Statements. CAPITAL RESOURCES AND LIQUIDITY The Company's consolidated working capital at December 31, 1993 and 1992 was $103,694,000 and $99,297,000, respectively. See "Other Matters" and Notes H and P of Notes to Consolidated Financial Statements. CAPITAL EXPENDITURES During 1993 (excluding the K3 Plant) the Company invested approximately $13,000,000 in capital expenditures. The Company currently anticipates that capital expenditures for the year ending December 31, 1994 (excluding the K3 Plant and the reconstruction of the production unit damaged by a fire in February 1994) will aggregate approximately $35,000,000, which will be used for increasing production capacity and product diversification. During 1993 the Company commenced construction of the K3 Plant, which is estimated to cost approximately $88,000,000, with $37,000,000 of such cost being provided by grants and other entitlements from the Israeli Government. Capital expenditures in connection with the K3 Plant (net of Israeli Government grants) amounted to approximately $16,000,000 in 1993. The Company anticipates completing the construction of the K3 Plant in late 1994. See "Business - Facilities and Suppliers" and Notes D and P of Notes to Consolidated Financial Statements. The Company expects to be able to finance its capital expenditures from internally generated funds, borrowings from traditional lending sources and, where applicable, Israeli Government grants and entitlements. EXCHANGE RATE INSURANCE In 1981, HCL joined a program of exchange rate insurance of the Israeli Government designed to protect participating Israeli exporters from losses resulting from the widening of the gap between the inflation rate in Israel and the rate of devaluation of the New Israeli Shekel ("NIS") against a weighted basket of currencies of Israel's major trading partners. The net benefits received by HCL for the years ended December 31, 1991, 1992 and 1993 were $4,599,000, $4,056,000 and $1,616,000, respectively, which benefits 17 20 have been included in revenues. As part of various economic measures adopted in Israel subsequent to December 31, 1988, the Israeli Government has gradually reduced the insurance proceeds granted under its program of exchange rate insurance, with the program having been fully eliminated on August 31, 1993. See Note A of Notes to Consolidated Financial Statements. INFLATION Inasmuch as only approximately $36,000,000 of HCL's annual operating costs are denominated in NIS, HCL is exposed to inflation in Israel to a limited extent. The combination of price increases coupled with devaluation of the NIS have in the past generally enabled HCL to avoid a material adverse impact from inflation in Israel. However, HCL's earnings could increase or decrease to the extent that the rate of future NIS devaluation differs from the rate of Israeli inflation. In December 1991, the Central Bank of Israel announced a program whereby the lag between the inflation rate in Israel and devaluation of the NIS, compared to the weighted average exchange rate of a "basket of currencies" (the currencies most commonly traded with Israel, including the U.S. Dollar), will not exceed the average inflation rate (about 3 to 4%) of the countries represented in the "basket of currencies". For the years ended December 31, 1992 and 1993, the devaluation rate of the NIS as compared to the U.S. Dollar exceeded (or was less than) the inflation rate in Israel by 11.7% and (3.2)%, respectively. OTHER MATTERS On January 27, 1994, HCL filed a registration statement with the Israeli Securities Authority (the "ISA") pursuant to which HCL would publicly offer in Israel, in an underwritten offering, units consisting of (i) shares of HCL common stock (the "HCL Shares") and (ii) options exercisable for HCL Shares. The terms of the proposed offering have not been finalized, and there can be no assurance that the ISA will declare the offering effective or that the offering will be consummated (considering, among other things, prevailing stock market conditions in Israel). If the proposed offering is consummated, the Company has determined that it would maintain beneficial ownership of not less than 90% of the HCL Shares upon issuance of the units and not less than 80% on a fully diluted basis. The Company anticipates that the net proceeds to be realized for the HCL Shares in the proposed offering, if consummated, would be substantially in excess of the Company's corresponding carrying value for the equity interest represented by such shares. The net proceeds of the proposed offering may be used for any purpose authorized by the Board of Directors of HCL, including, without limitation, internal growth or the acquisition of new businesses. HCL does not currently have any agreements, commitments or understandings for acquiring any particular businesses and does not anticipate using any of the net proceeds to finance the construction of the K3 Plant. ITEM 8. Financial Statements and Supplementary Data. See Index to Consolidated Financial Statements and Schedules on page F-1. ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. None. 18 21 PART III ITEM 10. Directors and Executive Officers of the Registrant. The directors and executive officers of the Company are as follows:
NAME AGE POSITION - ---- --- -------- Arie Genger . . . . . . . . . 48 Chairman of the Board and Chief Executive Officer Thomas G. Hardy . . . . . . . 48 President and Chief Operating Officer; Director Martin A. Coleman . . . . . . 63 Director Sash A. Spencer . . . . . . . 62 Director Lester W. Youner . . . . . . 48 Vice President, Treasurer and Chief Financial Officer Martin A. Eichen . . . . . . 49 Vice President Bernard J. Blaney . . . . . . 69 Vice President Kenneth H. Traub . . . . . . 32 Vice President FINANCIAL ADVISORY COMMITTEE - ---------------------------- Lawrence M. Small Thomas G. Hardy Sash A. Spencer
The By-laws of the Company provide for at least one director. Directors hold office until the next annual meeting of stockholders or until their successors are elected and qualified. There are no arrangements or understandings between any director or executive officer of the Company and any other person pursuant to which such person was elected as a director or executive officer. The executive officers serve at the discretion of the Board of Directors. There are no family relationships among any directors or executive officers of the Company. The following are descriptions of the directors and executive officers of the Company and the members of the Financial Advisory Committee. The Financial Advisory Committee advises the Board of Directors regarding financial matters and, when the Committee deems appropriate, make recommendations to the Board of Directors. Arie Genger has been a director and Chairman of the Board of Directors and Chief Executive Officer of the Company since 1986, the sole member of the Executive Committee since June 1988, and was President of the Company from 1986 to December 1993. Thomas G. Hardy has been President and Chief Operating Officer of the Company since December 1993, was Executive Vice President of the Company from June 1987 to December 1993 and has been a director and member of the Financial Advisory Committee since October 1992. He has been a director of Laser Industries Limited (a manufacturer and distributor of surgical lasers and other medical technology in which the Company has an ownership interest) since January 1990. 19 22 Martin A. Coleman has been a director since March 1993. Since January 1991 he has been a private investor and of counsel to the law firm of Rubin Baum Levin Constant & Friedman, general counsel to the Company. Prior to that, he was a member of such law firm for more than five years. Sash A. Spencer has been a director since October 1992 and a member of the Financial Advisory Committee since March 1993. He has been a private investor and Chairman of Holding Capital Management Corp., a private investment firm, for more than five years. He has been a director of Empire Gas Corp., a corporation engaged in the propane gas business, since 1983. Lester W. Youner has been Vice President, Treasurer and Chief Financial Officer of the Company since October 1987. From June 1979 until October 1987 he was a Partner of Deloitte & Touche, a public accounting firm. Martin A. Eichen has been a Vice President of the Company since June 1988. From June 1978 to June 1988 he was a Manager at Deloitte & Touche. Bernard J. Blaney has been a Vice President of the Company since January 1987. Kenneth H. Traub has been a Vice President of the Company since December 1993. Prior thereto, from July 1989, he was Assistant to the Chairman of the Board of the Company. Lawrence M. Small, 52, has been Chairman of the Financial Advisory Committee of the Board of Directors since October 1992. Mr. Small is President and Chief Operating Officer of Fannie Mae (Federal National Mortgage Association) headquartered in Washington, DC, which he joined in September 1991. Prior to that, he was Vice Chairman and Chairman of the Executive Committee of the Boards of Directors of Citicorp and Citibank, N.A., where he was employed for 27 years. He serves as a director of Fannie Mae and of the Chubb Corporation (an insurance company). 20 23 ITEM 11. Executive Compensation The following table sets forth the aggregate compensation paid or accrued by the Company for the past three fiscal years to its Chief Executive Officer and to other executive officers whose annual compensation exceeded $100,000 for the fiscal year ended December 31, 1993: SUMMARY COMPENSATION TABLE
Annual Compensation (1) All Other ----------------------- Compen- Name and Principal Position Year Salary (2) Bonus sation(2)(3) - --------------------------- ---- ---------- ----- ------------ Arie Genger . . . . . . . . . . . . . . . . . . 1993 $750,000 $ 92,000 $519,000 Chairman of the Board 1992 750,000 143,000 437,000 and Chief Executive Officer 1991 759,000 -- 14,000 Thomas G. Hardy . . . . . . . . . . . . . . . . 1993 350,000 50,000 8,000 President and Chief Operating Officer 1992 350,000 100,000 11,000 and Director 1991 278,000 125,000 10,000 Lester W. Youner . . . . . . . . . . . . . . . 1993 226,000 70,000 8,000 Vice President, Treasurer and 1992 206,000 70,000 11,000 Chief Financial Officer 1991 199,000 60,000 10,000 Martin A. Eichen . . . . . . . . . . . . . . . 1993 149,000 15,000 7,000 Vice President 1992 149,000 15,000 9,000 1991 142,000 13,000 8,000 Kenneth H. Traub . . . . . . . . . . . . . . . 1993 105,000 25,000 4,000 Vice President 1992 95,000 30,000 6,000 1991 80,000 20,000 5,000
____________________ (1) During the period covered by the table, the Company did not make any restricted stock awards, did not have in effect any stock option or stock appreciation rights plans, and did not make any payments under any long-term incentive plan. See "Compensation Agreement" for Mr. Hardy's bonus arrangement. (2) Does not include in the case of Messrs. Genger, Hardy and Youner $500,000, $275,000 and $20,000, respectively, of 1994 salary which was prepaid in 1993. (3) For 1993, consists of: (i) in the case of Mr. Genger, $250,000 for an annual premium on ordinary life insurance, $258,000 for related income tax gross-up, $6,000 for the Company's matching contribution to a profit sharing thrift plan, and $5,000 for the premium on term life insurance; (ii) in the case of Messrs. Hardy, Youner, Eichen and Traub $6,000, $6,000, $5,000 and $4,000, respectively, for the Company's matching contribution to a profit sharing thrift plan; and (iii) $2,000 each for Messrs. Hardy, Youner and Eichen for the premium on term life insurance. For 1992, consists of: (i) in the case of Mr. Genger, $241,000 for an annual premium on ordinary life insurance, $183,000 for related income tax gross-up, $9,000 for the Company's matching contribution to a profit sharing thrift plan, and $4,000 for the premium on term life insurance; (ii) in the case of Messrs. Hardy, Youner, Eichen and Traub $9,000, $9,000, $7,000 and $6,000, respectively, for the Company's matching contribution to a profit sharing thrift plan; and (iii) $2,000 each for Messrs. Hardy, Youner and Eichen for the premium on term life insurance. 21 24 COMPENSATION AGREEMENT Pursuant to an Agreement entered into in March 1994 (the "New Agreement"), the Company and Thomas G. Hardy modified and superseded a bonus arrangement entered into on January 15, 1988, as amended (the "Old Agreement"), under which no payments had been made. The Old Agreement provided for a payment upon termination of Mr. Hardy's employment in an amount equal to 2% of the Company's average annual after-tax consolidated net income (as defined) available to the common stockholders for the three years ending on December 31st of the year immediately prior to the termination of Mr. Hardy's employment, multiplied by either the multiple of the market price to such net income of the Company's common stock if it is publicly traded or, if the Company's common stock continues to be privately held at the time of such termination, by a multiple of eleven. Pursuant to the New Agreement, the Company is required to irrevocably deposit in trust for the benefit of Mr. Hardy an aggregate of $2,800,000, of which $1,400,000 was deposited upon execution of the New Agreement, with the remaining $1,400,000 to be deposited in 1996 (or under certain circumstances, including a change in control of the Company, earlier). The deposited funds are held by the trustees under a Trust Agreement (the "Trust Agreement"), which provides that the assets held thereunder are subject to the claims of the Company's general creditors in the event of insolvency of the Company. The Trust Agreement provides that the assets are payable in a lump sum to Mr. Hardy or his beneficiaries upon the earlier of December 1, 2001 or the termination of his employment with Company. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Board of Directors does not have a Compensation Committee. Executive officer compensation matters were determined by the Board of Directors, whose four members currently include Mr. Genger, Chairman of the Board and Chief Executive Officer of the Company, and Mr. Hardy, President and Chief Operating Officer of the Company. COMPENSATION OF DIRECTORS Officers of the Company who serve as directors do not receive any compensation for serving as directors. Martin A. Coleman and Sash A. Spencer each receive $15,000 annually for serving as directors. 22 25 ITEM 12. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth certain information as of March 23, 1994, as to the beneficial ownership of the Common Stock of the Company, which is the only outstanding class of voting security of the Company:
SHARES PERCENT BENEFICIALLY OF NAME AND ADDRESS OWNED CLASS ---------------- ----- ----- Common Stock, $.01 par value (1): TPR (2) 9 West 57th Street New York, NY 10019 . . . . . . . . . . . . 3,000 100% All executive officers and directors as a group (eight persons)(2) . . . . . . . . . . . . 3,000 100%
___________________ (1) All of the shares of the Common Stock of the Company are pledged to secure an outstanding TPR note of $7,000,000 issued to a former indirect stockholder and director of the Company. (2) Mr. Genger and members of his family own all of the capital stock of TPR. ITEM 13. Certain Relationships and Related Transactions. The Company is, for Federal income tax purposes, a member of a consolidated tax group of which TPR is the common parent. The Company, TPR, Eddy, Cedar and certain other subsidiaries are parties to a tax sharing agreement, dated as of December 30, 1991, under which, among other things, the Company and such other parties have each agreed to pay TPR amounts equal to the amounts of Federal income taxes that each such party would be required to pay if it filed a Federal income tax return on a separate return basis (or in the case of Cedar, a consolidated Federal income tax return for itself and its eligible subsidiaries), computed without regard to net operating loss carrybacks and carryforwards. However, TPR may, at its discretion, allow tax benefits for such losses. See Note A of Notes to Consolidated Financial Statements. See Item 3 - "Legal Proceedings" for a description of the proposed settlement of an action brought by Grassgreen as debtor in his personal bankruptcy proceeding, which will result in, among other things, TPR acquiring the Company's outstanding $9,000,000, 9 1/2% junior subordinated debenture due 2005 and becoming the obligor on an outstanding 8 3/4%, $4,000,000 note due 2005 (which is secured by the $9,000,000 debenture) payable to the Company. 23 26 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) (1)-(2) See Index to Consolidated Financial Statements and Schedules on Page F-1. (3) See Index to Exhibits on Page E-1. Management contracts or compensatory plans and arrangements required to be filed as exhibits are as follows: (i) Agreement between the Company and Thomas G. Hardy, dated March 22, 1994, concerning incentive bonus compensation, including, as Exhibit A thereto, the related Trust Agreement. (ii) Split Dollar Insurance Agreement, entered into as of August 26, 1988, between the Company and Arie Genger. (b) No reports on Form 8-K were filed during the last quarter of the year ended December 31, 1993. 24 27 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. Trans-Resources, Inc. (Registrant) By LESTER W. YOUNER Lester W. Youner Vice President, Treasurer and Chief Financial Officer Dated: March 23, 1994 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED: PRINCIPAL EXECUTIVE OFFICER: ARIE GENGER Chairman of the Board and Chief Executive Officer PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER: LESTER W. YOUNER Vice President, Treasurer and Chief Financial Officer By LESTER W. YOUNER Lester W. Youner For Himself and As Attorney-In-Fact Directors: Arie Genger Thomas G. Hardy Dated: March 23, 1994 Martin A. Coleman Sash A. Spencer ORIGINAL POWERS OF ATTORNEY AUTHORIZING LESTER W. YOUNER TO SIGN THIS REPORT AND ANY AMENDMENTS HERETO ON BEHALF OF THE PRINCIPAL EXECUTIVE OFFICER AND THE DIRECTORS ARE BEING FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITH THIS REPORT. SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT: No annual report or proxy materials have been sent to the Company's security holders. This Annual Report on Form 10-K will be furnished to the holders of the Company's 11 7/8% Notes and Reset Notes. 25 28 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
FINANCIAL STATEMENTS Page - -------------------- ---- Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . F-2 Report of Independent Accountants . . . . . . . . . . . . . . . . . . F-3 Consolidated Balance Sheets, December 31, 1992 and 1993 . . . . . . . F-4 Consolidated Statements of Operations, for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . F-5 Consolidated Statements of Common Stockholder's Equity, for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . F-6 Consolidated Statements of Cash Flows, for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . F-7 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-8 SCHEDULES - --------- Schedule III - Condensed Financial Information of Registrant, for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-1 Schedule V - Property, Plant and Equipment, for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-4 Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment, for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-5 Schedule X - Supplementary Income Statement Information, for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-6
Certain schedules, other than as listed above, are omitted because of the absence of the conditions under which they are required or because the information required therein is set forth in the financial statements or the notes thereto. F-1 29 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholder of Trans-Resources, Inc. New York, New York We have audited the accompanying consolidated financial statements and financial statement schedules of Trans-Resources, Inc. (a wholly-owned subsidiary of TPR Investment Associates, Inc.) and Subsidiaries listed in the foregoing Index. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We did not audit the consolidated financial statements of Cedar Chemical Corporation, a wholly-owned subsidiary, which statements reflect total assets constituting 26 percent and 27 percent of consolidated total assets as of December 31, 1993 and 1992, respectively, and total revenues constituting 35 percent, 35 percent and 32 percent of consolidated total revenues for the years ended December 31, 1993, 1992 and 1991, respectively. Such financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Cedar Chemical Corporation, is based solely on the report of such other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based upon our audits and the report of other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of Trans-Resources, Inc. and Subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, based on our audits and the report of other auditors, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note A to the Consolidated Financial Statements, the Company changed its method of accounting for income taxes during the year ended December 31, 1992. Deloitte & Touche New York, New York March 16, 1994 F-2 30 Report of Independent Accountants To the Board of Directors and Shareholder of Cedar Chemical Corporation: In our opinion, the consolidated balance sheets and the related consolidated statements of income and retained earnings and of cash flows (not presented separately herein) present fairly, in all material respects, the financial position of Cedar Chemical Corporation (a wholly-owned subsidiary of Trans-Resources, Inc.) and its subsidiaries ("Cedar") at December 31, 1992 and 1993, and the results of their operations and their cash flows for the years ended December 31, 1991, 1992 and 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Cedar's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse Memphis, Tennessee February 11, 1994 F-3 31 TRANS-RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------ 1992 1993 ---- ---- (IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,745 $ 25,742 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,373 55,681 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,057 60,929 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,061 56,090 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,298 17,485 ---------- ---------- Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . 196,534 215,927 PROPERTY, PLANT AND EQUIPMENT - net . . . . . . . . . . . . . . . . . . . . . 121,754 131,001 INVESTMENTS IN SECURITIES - net . . . . . . . . . . . . . . . . . . . . . . . 10,827 2,356 OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,940 16,581 ---------- ---------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 341,055 $ 365,865 ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . $ 29,911 $ 24,801 Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,755 22,481 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,082 34,924 Accrued expenses and other current liabilities . . . . . . . . . . . . . . 29,489 30,027 ---------- ---------- Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . 97,237 112,233 ---------- ---------- LONG-TERM DEBT - net: Senior indebtedness, notes payable and other obligations . . . . . . . . . 71,318 61,328 Senior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 103,689 140,133 Junior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 15,089 15,495 ---------- ---------- Long-Term Debt - net . . . . . . . . . . . . . . . . . . . . . . . . 190,096 216,956 ---------- ---------- OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,840 20,882 ---------- ---------- COMMON STOCKHOLDER'S EQUITY: Common stock, $.01 par value, 3,000 shares authorized, issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . -- -- Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 500 500 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,620 15,348 Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . (238) (54) ---------- ---------- Total Common Stockholder's Equity . . . . . . . . . . . . . . . . . 28,882 15,794 ---------- ---------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 341,055 $ 365,865 ========== ==========
See notes to consolidated financial statements. F-4 32 TRANS-RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 1991, 1992 and 1993
1991 1992 1993 ---- ---- ---- (IN THOUSANDS) REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 309,068 $ 345,356 $ 326,315 OPERATING COSTS AND EXPENSES: Cost of goods sold . . . . . . . . . . . . . . . . . . . . . 238,489 266,770 255,563 General and administrative . . . . . . . . . . . . . . . . . 33,262 36,270 38,375 --------- --------- --------- OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . 37,317 42,316 32,377 Interest expense . . . . . . . . . . . . . . . . . . . . . . (31,210) (27,542) (27,405) Interest and other income - net . . . . . . . . . . . . . . . 14,159 8,476 6,014 --------- --------- --------- INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . . . . . . . 20,266 23,250 10,986 INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . . . 2,582 11,231 7,920 --------- --------- --------- INCOME BEFORE EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . 17,684 12,019 3,066 EXTRAORDINARY ITEM - Gain (loss) on repurchase of debt, net of income tax of $296,000 in 1991 . . . . . . . . 1,186 -- (8,830) CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGE IN ACCOUNTING FOR INCOME TAXES . . . . . . . . . . . . -- 1,130 -- --------- --------- --------- NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764) ========= ========= =========
See notes to consolidated financial statements. F-5 33 TRANS-RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY For the Years Ended December 31, 1991, 1992 and 1993
ADDITIONAL CUMULATIVE COMMON PAID-IN RETAINED TRANSLATION STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL ------ ---------- -------- ----------- ----- (IN THOUSANDS) BALANCE, JANUARY 1, 1991 . . . . . . . . . . $ -- $ 500 $ 15,601 $ (277) $ 15,824 Net income . . . . . . . . . . . . . . . . 18,870 18,870 Payable to Parent under tax allocation agreement . . . . . . . . . . . . . . . . (2,800) (2,800) Dividends: Preferred stock . . . . . . . . . . . . . (214) (214) Common stock . . . . . . . . . . . . . . (2,850) (2,850) Exchange rate changes during year . . . . . (58) (58) -------- ------- -------- -------- --------- BALANCE, DECEMBER 31, 1991 . . . . . . . . . -- 500 28,607 (335) 28,772 Net income . . . . . . . . . . . . . . . . 13,149 13,149 Dividends - common stock . . . . . . . . . (13,136) (13,136) Exchange rate changes during year . . . . . 97 97 -------- ------- -------- -------- --------- BALANCE, DECEMBER 31, 1992 . . . . . . . . . -- 500 28,620 (238) 28,882 Net loss . . . . . . . . . . . . . . . . . (5,764) (5,764) Dividends - common stock . . . . . . . . . (7,508) (7,508) Exchange rate changes during year . . . . . 184 184 -------- ------- -------- -------- --------- BALANCE, DECEMBER 31, 1993 . . . . . . . . . $ -- $ 500 $ 15,348 $ (54) $ 15,794 ======== ======= ======== ======== =========
See notes to consolidated financial statements. F-6 34 TRANS-RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1991, 1992 and 1993
1991 1992 1993 ---- ---- ---- (IN THOUSANDS) OPERATING ACTIVITIES AND WORKING CAPITAL MANAGEMENT: Operations: Net income (loss) . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764) Items not requiring cash: Depreciation and amortization . . . . . . . . . . . 19,757 20,979 24,490 Increase in other liabilities . . . . . . . . . . . 1,730 265 725 Deferred taxes and other - net . . . . . . . . . . . 7,906 (1,694) (2,494) -------- --------- --------- Total . . . . . . . . . . . . . . . . . . . . . . 48,263 32,699 16,957 Working capital management: Accounts receivable and other current assets . . . . . (32,741) 45,416 (9,222) Inventories . . . . . . . . . . . . . . . . . . . . . . (9,483) (3,538) (9,872) Prepaid expenses . . . . . . . . . . . . . . . . . . . (2,012) 155 (2,187) Accounts payable . . . . . . . . . . . . . . . . . . . 9,460 (14,175) 9,842 Accrued expenses and other current liabilities . . . . 4,532 (1,297) 1,323 -------- --------- --------- Cash provided by operations and working capital management . . . . . . . . . . . . . 18,019 59,260 6,841 -------- --------- --------- INVESTMENT ACTIVITIES: Additions to property, plant and equipment . . . . . . . . (18,821) (26,143) (29,056) Sales of marketable securities and short-term investments . . . . . . . . . . . . . . . . 2,622 15,391 15,825 Purchases of marketable securities and short-term investments . . . . . . . . . . . . . . . . (2,108) (12,819) (34,118) Other - net . . . . . . . . . . . . . . . . . . . . . . . (2,127) 2,405 (6,087) -------- --------- --------- Cash used in investment activities . . . . . . . . . . (20,434) (21,166) (53,436) -------- --------- --------- FINANCING ACTIVITIES: Increase in long-term debt . . . . . . . . . . . . . . . . 9,188 10,850 124,660 Repurchases, payments and current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . (23,444) (18,314) (109,286) Increase (decrease) in short-term debt . . . . . . . . . . 4,012 (2,025) 9,726 Dividends to stockholders . . . . . . . . . . . . . . . . (3,064) (13,136) (7,508) -------- --------- --------- Cash provided by (used in) financing activities . . . . (13,308) (22,625) 17,592 -------- --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . (15,723) 15,469 (29,003) CASH AND CASH EQUIVALENTS: Beginning of year . . . . . . . . . . . . . . . . . . . . 54,999 39,276 54,745 -------- --------- --------- End of year . . . . . . . . . . . . . . . . . . . . . . . $ 39,276 $ 54,745 $ 25,742 ======== ========= =========
See notes to consolidated financial statements. F-7 35 TRANS-RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements of Trans-Resources, Inc. ("TRI" or the "Company"), include the Company and its subsidiaries, after elimination of intercompany accounts and transactions. The Company's principal subsidiaries are Cedar Chemical Corporation ("Cedar"), and Cedar's two wholly-owned subsidiaries -New Mexico Potash Corporation ("NMPC") and Vicksburg Chemical Company ("Vicksburg"); Eddy Potash, Inc. ("Eddy"); and Haifa Chemicals Ltd. ("HCL") and HCL's wholly-owned subsidiary, Haifa Chemicals South, Ltd. ("HCSL"). The Company is a wholly-owned subsidiary of TPR Investment Associates, Inc. ("TPR"). Substantially all of the companies' revenues, operating profits and identifiable assets are related to the chemical industry. The Company is a multinational manufacturer of specialty plant nutrients, organic chemicals, industrial chemicals and potash and distributes its products internationally. The Company is the world's largest producer of potassium nitrate, and the world's largest producer of propanil, the leading rice herbicide, and is the largest United States producer of potash. Operating Data The Company's revenues by region for the years ended December 31, 1991, 1992 and 1993 are set forth below:
1991 1992 1993 ---- ---- ---- (IN MILLIONS) Western Hemisphere: United States . . . . . . . . . . . . . . . . . $ 114 $ 133 $ 121 Other . . . . . . . . . . . . . . . . . . . . . 31 30 30 Europe . . . . . . . . . . . . . . . . . . . . . . 112 124 119 Asia and Australia . . . . . . . . . . . . . . . . 25 29 30 Israel . . . . . . . . . . . . . . . . . . . . . . 16 18 17 Africa and other . . . . . . . . . . . . . . . . . 11 11 9 ----- ------ ----- Total . . . . . . . . . . . . . . . . . . . . . $ 309 $ 345 $ 326 ===== ====== =====
As of December 31, 1992 and 1993, the Company's assets were located in the United States (44% and 49%, respectively) and abroad (principally Israel) (56% and 51%, respectively). The Company has no single customer accounting for more than 10% of its revenues. Contracts and Revenue Recognition Under the terms of a long-term U.S. Government contract for the manufacture of an industrial chemical, revenues are recognized ratably for the duration of the contract and billings are rendered as product is shipped. Current deferred revenue of $2,772,000 at December 31, 1992 and 1993 and non-current deferred revenue of $5,416,000 and $2,645,000 at December 31, 1992 and 1993, respectively, represent billings in excess of revenues recognized under the contract. Such current and non-current amounts are classified within "accrued expenses and other current liabilities" and "other liabilities", respectively, in the accompanying Consolidated Balance Sheets. F-8 36 Functional Currency and Transaction Gains and Losses Approximately 90% of HCL's sales are made outside of Israel in various currencies, of which approximately 35% are in U.S. dollars, with the remainder principally in Western European currencies. The Company has a policy of hedging contracted foreign sales denominated in Western European currencies against fluctuations in the U.S. dollar rates of exchange. Accordingly, the Company has entered into forward exchange contracts. At December 31, 1992 and 1993, there were outstanding contracts to purchase $166 million and $167 million, respectively, in various European currencies, principally Deutsche Marks. In addition, at December 31, 1993 there were outstanding contracts to sell $56 million in various Western European currencies, principally Deutsche Marks. Unrealized gains and losses arising from forward exchange contracts which qualify as hedges pursuant to Statement of Financial Accounting Standards No. 52 have been deferred and are accounted for in the subsequent year as part of sales. Gains of approximately $3,900,000 and $2,400,000 were deferred at December 31, 1992 and 1993, respectively, for forward exchange contracts which qualify as hedges. During the years ended December 31, 1991, 1992 and 1993, the Company recorded a gain of approximately $3,100,000, a loss of approximately $7,000,000 and a gain of approximately $6,100,000, respectively, relating to foreign currency transactions. Raw materials purchased in Israel are mainly quoted at prices linked to the U.S. dollar. The U.S. dollar is the functional currency and accordingly the financial statements of HCL are prepared, and the books and records of HCL (except for a subsidiary described below) are maintained, in U.S. dollars. The assets, liabilities and operations of one of HCL's foreign subsidiaries are measured using the currency of the primary economic environment in which the subsidiary operates. Assets and liabilities are translated at the exchange rate as of the balance sheet date. Revenues, expenses, gains and losses are translated at the weighted average exchange rate for the period. Translation adjustments, resulting from the process of translating such subsidiary's financial statements from its currency into U.S. dollars, are recorded directly as a separate component of stockholder's equity. Exchange Rate Insurance In 1981, HCL joined a program of exchange rate insurance of the Israeli Government designed to protect participating Israeli exporters from losses resulting from the widening of the gap between the inflation rate in Israel and the rate of devaluation of the New Israeli Shekel against a weighted basket of currencies of Israel's major trading partners. The net benefits received by HCL for the years ended December 31, 1991, 1992 and 1993 were $4,599,000, $4,056,000 and $1,616,000, respectively, which benefits have been included in revenues. As part of various economic measures adopted in Israel subsequent to December 31, 1988, the Israeli Government has gradually reduced the insurance proceeds granted under its program of exchange rate insurance, with the program having been fully eliminated on August 31, 1993. Inventories Inventories are carried at the lower of cost or market. Cost is determined on the first-in, first-out method. F-9 37 Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation is recorded under the straight-line method at generally the following annual rates: Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-8 % Machinery, plant and equipment . . . . . . . . . . . . . . . . 10-25 % Office furniture and equipment . . . . . . . . . . . . . . . . 6-20 %
Expenditures for maintenance and repairs are charged to expense as incurred. Investment grants from the Israeli Government are initially recorded as a reduction of the capitalized asset and are recognized in income over the estimated useful life of the respective asset. HCL recorded investment grants for the years ended December 31, 1991, 1992 and 1993 amounting to $4,029,000, $846,000 and $10,952,000, respectively. Effective January 1, 1992 and 1993, Eddy revised the estimate of depreciable lives of its property, plant and equipment to more closely approximate the economic lives of those assets. The effect of these changes in estimate was to decrease depreciation expense in 1992 and 1993 by approximately $960,000 and $630,000, respectively. Non-Current Investments In Marketable Securities The Company carries its investments in marketable equity securities at the lower of cost or market. To the extent that the quoted market value is less than cost, an unrealized loss on marketable equity securities would be recorded and classified as a reduction of common stockholder's equity. At December 31, 1992 and 1993 the aggregate quoted market value of the marketable equity securities owned by the Company exceeded the aggregate cost. The Company's other investments (principally short-term investments) are carried at cost. Should declines in the carrying value of any of these securities (as well as the marketable equity securities described above) be considered to be other than temporary, such declines are recognized by an appropriate charge in the Consolidated Statements of Operations. In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). The adoption of this Statement, which is not required until 1994, will require the Company to classify its equity and fixed maturity securities as available-for-sale and reported at fair value, with unrealized gains and losses included as a separate component of stockholder's equity. The adoption of SFAS No. 115 is not expected to have a material effect on the Company's consolidated financial position or results of operations. Income Taxes The Company is included in the consolidated Federal income tax return of TPR. Under the tax allocation agreement entered into with TPR in 1991, the annual current Federal income tax liability for the Company and each of its domestic subsidiaries reporting profits is determined as if such entity had filed a separate Federal income tax return; no tax benefits are given for companies reporting losses. However, TPR may, at its discretion, allow tax benefits for such losses. For purposes of the consolidated financial statements, taxes on income have been computed as if the Company and its domestic subsidiaries filed its own consolidated Federal income tax return without regard to the tax allocation agreement. Payments to TPR, if any, representing the excess of amounts determined under the tax allocation agreement over amounts determined for the purposes of consolidated financial statements have been charged to retained earnings. F-10 38 Effective January 1, 1992, the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which requires a change from the deferred method to the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Under SFAS 109, the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company has reported the cumulative effect on prior years of the change in the method of accounting for income taxes as of the beginning 1992 in the Consolidated Statement of Operations. The effect of adopting SFAS 109 in 1992 was to decrease net income by approximately $1,170,000, representing an increased income tax provision of $2,300,000 and an increase in income for the cumulative effect of the change in accounting principle of $1,130,000. Research and Development Costs Research and development costs are charged to expense as incurred and amounted to $2,860,000, $2,945,000 and $3,206,000 for the years ended December 31, 1991, 1992 and 1993, respectively. Statements of Cash Flows Investments with original maturities of three months or less are classified as cash equivalents by the Company. Reclassifications Certain prior year amounts have been reclassified to conform to the manner of presentation in the current year. B. OTHER CURRENT ASSETS Other current assets consist of the following at December 31, 1992 and 1993:
1992 1993 ---- ---- (IN THOUSANDS) Short-term investments, government securities, etc. (at cost, approximates market value) . . . . . . . . . . . . . . $ 7,504 $34,529 Miscellaneous receivables (value added tax, grants, insurance, etc.), deferred income taxes and other . . . . . . . . 20,557 21,561 ------- ------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,061 $56,090 ======= =======
C. INVENTORIES Inventories consist of the following at December 31, 1992 and 1993:
1992 1993 ---- ---- (IN THOUSANDS) Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,923 $10,602 Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,134 50,327 ------- ------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $51,057 $60,929 ======= =======
F-11 39 D. PROPERTY, PLANT AND EQUIPMENT - NET Property, plant and equipment at December 31, 1992 and 1993 consists of the following:
1992 1993 ---- ---- (IN THOUSANDS) Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,116 $ 2,116 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,760 19,994 Machinery, plant and equipment . . . . . . . . . . . . . . . . . . . 177,891 187,566 Office furniture, equipment and water rights . . . . . . . . . . . . 9,144 9,892 Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . 6,932 24,197 --------- --------- Total, at cost . . . . . . . . . . . . . . . . . . . . . . . . . 214,843 243,765 Less accumulated depreciation and amortization . . . . . . . . . . . 93,089 112,764 --------- --------- Property, plant and equipment - net . . . . . . . . . . . . . . . $ 121,754 $ 131,001 ========= =========
The Company, through HCSL, is in the process of expanding its production capacity by constructing a new facility in Israel to produce annually approximately 100,000 metric tons of potassium nitrate and 15,000 metric tons of phosphoric acid. The new plant is anticipated to cost approximately $88,000,000 and construction commenced in the second quarter of 1993. The Company expects to receive from the Government of Israel an aggregate investment grant of approximately $32,000,000 and contributions for infrastructure of approximately $5,000,000, so that the Company's net investment in the new plant is anticipated to be approximately $51,000,000. The Company incurred capital expenditures for the new plant during 1993 (net of investment grants) of approximately $16,000,000. Plant production is planned to start in late 1994. The capacity of the new plant may be expanded in subsequent years. The Company capitalized interest costs aggregating $144,000, $200,000 and $352,000 during the years ended December 31, 1991, 1992 and 1993, respectively, with respect to the financing of several construction projects. Certain property, plant and equipment has been pledged as collateral for long-term debt - see Note H. In September 1991, a unit within one of two production lines located in the Company's Israeli manufacturing facility was damaged by a fire. Such damage resulted in a temporary reduction of the Company's phosphoric acid production capacity. Costs of replacement of the damaged assets have been reimbursed by insurers. Insurance proceeds exceeded the recorded carrying value of the damaged assets by approximately $10 million. Accordingly, a gain has been recorded in that amount - see Note L. The effect of business interruption was likewise covered by insurers and the related compensation received has been reflected in the accompanying Consolidated Statements of Operations. See Note P to Consolidated Financial Statements. F-12 40 E. INVESTMENTS IN SECURITIES Investments in securities consist of the following at December 31, 1992 and 1993:
1992 1993 ---- ---- Carrying Market Carrying Market Value Value Value Value -------- ------ -------- ------ (in thousands) Marketable equity securities . . . . . . . . . . . . . . . . $ 4,383 $ 8,424 $ 2,274 $ 8,529 Corporate bonds, notes and other securities (carrying value net of allowance for unrealized loss of $2,351,000 in 1992 and $2,000,000 in 1993) . . . . 6,444 6,921 82 77 --------- -------- --------- -------- Investments in securities - net . . . . . . . . . . . $ 10,827 $ 15,345 $ 2,356 $ 8,606 ========= ======== ========= ========
During the years ended December 31, 1991, 1992 and 1993 the Company recorded net gains (losses) relating to investments in securities in the caption "interest and other income - net" in the Consolidated Statements of Operations (see Note L) in the amounts of $(30,000), $2,865,000 and $2,261,000, respectively. In March 1992, the Company purchased from a former indirect stockholder and director of the Company a 30% limited partnership interest in American Recreation Group, a New York limited partnership ("ARG"). The purchase price for the 30% limited partnership interest was $7,500,000. In March 1992, in open market purchases, the Company acquired approximately $11,000,000 principal amount of Riviera, Inc. ("Riviera") Floating Rate First Mortgage Notes (the "Riviera Notes"). The Riviera Notes were purchased at a cost of approximately $5,100,000. The above-mentioned former indirect stockholder and director of the Company was the sole owner of the capital stock of Riviera. In September 1992, the Company sold its investments in both ARG and the Riviera Notes for an aggregate of $14,500,000 (of which $10,000,000 was received in October, 1992, and the balance was received during January, 1993) and recognized a gain of approximately $1,900,000. Shortly after the receipt of the respective sale proceeds, the Company dividended these amounts to TPR. F. SHORT-TERM DEBT The weighted average interest rates and weighted average amounts of short-term debt outstanding during the years ended December 31, 1991, 1992 and 1993 were 10.6% and $7,921,000; 7.7% and $10,235,000; and 6.7% and $14,066,000, respectively. The highest amount owed during such years were $14,786,000, $15,163,000 and $22,481,000, respectively. The average amount outstanding was determined by the average of month-end balances. The weighted average interest rate was determined by dividing interest expense on short-term debt by the average amount outstanding during the year. Cedar has a revolving loan commitment from two banks aggregating $25,000,000 for 1993 (approximately $3,000,000 unused at December 31, 1993) and $28,000,000 and $33,000,000 for 1994 and 1995, respectively. HCSL has a $10,000,000 revolving loan commitment from two banks through December 31, 1997, which permits borrowings commencing January 1, 1995. F-13 41 G. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following at December 31, 1992 and 1993:
1992 1993 ---- ---- (in thousands) Compensation and payroll taxes . . . . . . . . . . . . . . . . . $ 9,210 $ 8,827 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,598 8,795 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 4,915 1,004 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,766 11,401 ----------- --------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,489 $ 30,027 =========== =========
H. LONG-TERM DEBT - NET Long-term debt consists of the following at December 31, 1992 and 1993:
Payable Description Interest Rate * Through 1992 1993 ----------- --------------- ------- ---- ---- (in thousands) TRI: Bank loan (1) . . . . . . . . . . . . . . . . . . . . . LIBOR 1995 $ 12,700 $ 12,700 Bank loans . . . . . . . . . . . . . . . . . . . . . . LIBOR + 2.25% 1997 17,300 13,840 13.5% Senior subordinated debentures, net of unamortized debt discount of $1,375,000 in 1992 (effective interest rate of 14.2%) (2) . . . . . . . 13.5% 1993 64,123 -- Senior subordinated reset notes, net of unamortized debt discount of $1,209,000 and $522,000 (effective interest rate of 15.4%) . . . 14.5% 1996 47,04 126,228 11.875% Senior subordinated notes, net of unamortized debt discount of $1,095,000 in 1993 (effective interest rate of 12.1%)(4) . . . . . . . . 11.875% 2002 -- 113,905 9.5% Junior subordinated debentures, net of unamortized debt discount of $2,911,000 and $2,505,000 (effective interest rate of 14.1%)(5). . . 9.5% 2005 15,089 15,495 Subsidiaries: Bank loans and Industrial Revenue Bond financing (6) . . . . . . . . . . . . . . . . . . . . Various 2005 62,389 59,589 Other . . . . . . . . . . . . . . . . . . . . . . . . . Various 1993 1,365 -- -------- ---------- Total . . . . . . . . . . . . . . . . . . . . . . 220,007 241,757 Less current portion . . . . . . . . . . . . . . . 29,911 24,801 -------- ---------- Long-term debt - net . . . . . . . . . . . . . . . $190,096 $ 216,956 ======== ==========
____________________ * As prevailing on respective balance sheet dates. Such rates (other than the subordinated debt) generally "float" according to changes in the Prime or LIBOR rates. At December 31, 1993 such rates were approximately 6.0% and 3.5%, respectively. 1. On February 26, 1988, the Company entered into a loan agreement with a bank, pursuant to which the Company borrowed $12,000,000. Subsequently, such agreement was amended and the Company borrowed an additional $700,000. One-half of the outstanding principal amount of the loans is due on February 28, 1994 and the balance is due on February 28, 1995. F-14 42 2. The senior subordinated debentures (the "Debentures") were redeemable at the option of the Company at any time after May 1, 1992 at stipulated redemption prices. As described below, on March 30, 1993, the Company privately placed $115,000,000 principal amount of 11 7/8% Senior Subordinated Notes due 2002, Series A (the "11 7/8% Notes"). The Company used a portion of the net proceeds from the issuance of the 11 7/8% Notes to acquire all of the Company's $60,997,000 then outstanding principal amount of the Debentures. 3. The Senior Subordinated Reset Notes (the "Reset Notes") bear interest at 14.5% and mature on September 30, 1996. The Reset Notes are not subject to any mandatory sinking fund requirement. 4. On March 30, 1993, the Company privately placed $115,000,000 principal amount of the 11 7/8% Notes at 99% of principal amount (the "Offering"). The net proceeds to the Company from the Offering were approximately $109,700,000. Approximately $24,200,000 of such proceeds were used to acquire $21,500,000 principal amount of the Company's Reset Notes. In addition, approximately $63,900,000 of the proceeds were used in May, 1993 to acquire all of the Company's $60,997,000 then outstanding principal amount of the Debentures through utilization of the applicable sinking fund and optional redemption provisions of the Debentures. As a result of the redemptions and purchases described above, as well as the Company's acquisition of $4,500,000 principal amount of the Debentures in January 1993, the Company has recorded an extraordinary loss of $8,830,000 during 1993, including the write-off of applicable deferred debt issuance costs. Such loss has no current tax benefit. On May 6, 1993, to satisfy its obligations with respect to the registration of the 11 7/8% Notes, the Company commenced an offer (the "Exchange Offer") to exchange up to $115,000,000 principal amount of its registered 11 7/8% Senior Subordinated Notes due 2002, Series B (the "New 11 7/8% Notes") for a like principal amount of the 11 7/8% Notes. The terms of the 11 7/8% Notes and the New 11 7/8% Notes were identical in all material respects. Pursuant to the Exchange Offer, which expired on June 9, 1993, all outstanding 11 7/8% Notes were tendered and exchanged for New 11 7/8% Notes. The New 11 7/8% Notes mature on July 1, 2002 and are redeemable at the option of the Company at any time after July 1, 1998 at stipulated redemption prices. There are no mandatory sinking fund requirements. 5. On November 28, 1986, the Company issued the junior subordinated debentures (the "9.5% Debentures") in the aggregate principal amount of $9,000,000, with interest payable from October 1, 1987 and quarterly thereafter. Such 9.5% Debentures were initially recorded at $6,700,000, the estimated value on the date of issue, and mature in 1998. During 1991, as described in Note M, the Company's redeemable preferred stock was converted into $9,000,000 principal amount of the Company's 9.5% Debentures. Subsequently, during 1991, the then holder of this $9,000,000 principal amount of 9.5% Debentures agreed to extend the maturity date of such principal amount by seven years to the year 2005. The carrying value of the 9.5% Debentures issued upon conversion of the redeemable preferred stock was equivalent to the previous carrying value of the preferred stock. 6. Industrial Revenue Bond financing permits an $11,250,000 term loan commitment in connection with the construction of a new plant in Vicksburg. As of December 31, 1993, $495,000 was outstanding relating to such facility. In addition, as of December 31, 1993 certain subsidiaries of the Company have unused bank credit lines of approximately $37,000,000. Such credit lines permit borrowings through December 31, 1995. Any amounts borrowed must be repaid over a ten year period ending in the year 2005. The Reset Notes are pari passu with the New 11 7/8% Notes and are subordinated in right of payment to all Senior Indebtedness (as defined) of the Company and senior to the 9.5% Debentures. Certain of the Company's and its subsidiaries' loan agreements and Indentures require the Company and/or the respective subsidiary to, among other things, maintain various financial ratios including minimum net worth, ratios of debt to net worth, interest and fixed charge coverage tests and current ratios. In addition, there are certain limitations on the Company's ability make certain Restricted Payments and Restricted F-15 43 Investments (each as defined), etc. The Company is also required to offer to purchase a portion of the New 11 7/8% Notes and the Reset Notes if it fails to maintain minimum amounts of Junior Subordinated Capital (as defined). In the event of a Change in Control (as defined), the Company is required to offer to purchase all the New 11 7/8% Notes and Reset Notes as well as to repay certain bank loans. Certain of the respective instruments also limit the payment of dividends, capital expenditures and the incurring of additional debt and liens. As of December 31, 1993, the Company and its subsidiaries are in compliance with the covenants of each of the respective loan agreements and Indentures. The aggregate maturities of long-term debt are set forth below.
Years Ending December 31, (in thousands) ------------ -------------- 1994 . . . . . . . . . . . . . . . . . . $ 24,801 1995 . . . . . . . . . . . . . . . . . . 23,355 1996 . . . . . . . . . . . . . . . . . . 36,296 1997 . . . . . . . . . . . . . . . . . . 9,546 1998 . . . . . . . . . . . . . . . . . . 15,086 Thereafter . . . . . . . . . . . . . . . 136,795 Unamortized debt discount . . . . . . . (4,122) -------- Total . . . . . . . . . . . . . $241,757 =========
Substantially all of the assets of HCL are subject to security interests in favor of the State of Israel and/or banks. In addition, substantially all of Cedar's, Vicksburg's and NMPC's assets are subject to security interests in favor of banks pursuant to loan agreements. The capital stock of HCL, Cedar, Vicksburg and NMPC has also been pledged to the banks pursuant to these agreements. The Company's common stock is pledged to secure the repayment obligations of TPR under a note issued by it to a former indirect shareholder of the Company. During 1991, the Company acquired $10,153,000 principal amount of Debentures and Reset Notes, at a cost of $8,127,000, resulting in a net gain (pre-tax) to the Company, after the elimination of certain deferred costs, of $1,482,000. Such gain is reported as an extraordinary item in the accompanying Consolidated Statement of Operations. Interest paid on the long-term debt obligations, net of capitalized interest, totaled $30,136,000, $26,386,000 and $21,852,000 for the years ended December 31, 1991, 1992 and 1993, respectively. I. OTHER LIABILITIES Under Israeli law and labor agreements, HCL is required to make severance and pension payments to dismissed employees and to employees leaving employment in certain other circumstances. These liabilities are covered by regular deposits to various severance pay funds and by payment of premiums to an insurance company for officers and non-factory personnel under approved plans. "Other liabilities" in the Consolidated Balance Sheets as of December 31, 1992 and 1993 include accruals of $2,097,000 and $2,116,000, respectively, for the estimated unfunded liability of complete severance of all HCL employees. Cost incurred was approximately $2,531,000, $1,673,000 and $1,857,000 for the years ended December 31, 1991, 1992 and 1993, respectively. No information is available regarding actuarial present value of HCL's pension plans and the plans' net assets available for benefits, as these plans are multi-employer, external and independent of HCL. F-16 44 Cedar has a defined benefit pension plan which covers all of the full-time employees of Cedar and Vicksburg. Funding of the plan is made through payment to various funds managed by a third party and is in accordance with the funding requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"). Cedar's net pension cost for the years ended December 31, 1991, 1992 and 1993 included the following benefit and cost components:
1991 1992 1993 ---- ---- ---- (in thousands) Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 481 $ 540 $ 552 Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 523 658 Amortization of unrecognized prior service cost . . . . . . . . . . 72 72 120 Actual return on plan assets . . . . . . . . . . . . . . . . . . . (403) (526) (592) Amortization of unrecognized net transition obligation . . . . . . 59 59 59 -------- ---------- --------- Net pension cost . . . . . . . . . . . . . . . . . . . . . . . . $ 654 $ 668 $ 797 ======== ========== =========
The funded status and the amounts recognized in the Company's December 31, 1992 and 1993 Consolidated Balance Sheets for Cedar's benefit plan is as follows:
1992 1993 ---- ---- (in thousands) Plan assets at market value . . . . . . . . . . . . . . . $ 6,332 $ 8,066 Actuarial present value of projected benefit obligation . 7,362 10,222 ------- ------- Funding status . . . . . . . . . . . . . . . . . . . . . (1,030) (2,156) Unrecognized net transition obligation . . . . . . . . . 527 468 Unrecognized prior service cost . . . . . . . . . . . . . 724 1,265 Unrecognized net (gain) loss . . . . . . . . . . . . . . (552) 762 ------- ------- Prepaid (accrued) pension cost . . . . . . . . . . . . . $ (331) $ 339 ======= =======
At December 31, 1992 and 1993 the actuarial present value of Cedar's vested benefit obligation was $6,036,000 and $7,115,000 and the accumulated benefit obligation was $6,329,000 and $7,533,000, respectively. Actuarial assumptions used at December 31, 1992 and 1993 were as follows:
1992 1993 ---- ---- Discount rate . . . . . . . . . . . . . . . . . . . . . . 8.25% 7.50% Rate of increase in compensation levels . . . . . . . . . 5.0% 5.0% Expected long-term rate of return on assets . . . . . . . 9.0% 9.0%
The unrecognized net transition obligation is being amortized on a straight-line basis over fifteen years beginning January 1, 1987. Cedar and its subsidiaries and Eddy have profit sharing thrift plans designed to conform to Internal Revenue Code Section 401(k) and to the requirements of ERISA. The plans, which cover all full-time employees (and one of which includes Company headquarters employees), allow participants to contribute as much as 15% of their annual compensation, up to a maximum permitted by law, through salary reductions. The companies' contributions to the plans are based on a percentage of the participant's contributions, and the companies may make additional contributions to the plans at the discretion of their respective Boards of Directors. The contribution expense relating to the profit sharing thrift plans totaled $631,000, $653,000 and $595,000 for the years ended December 31, 1991, 1992 and 1993, respectively. F-17 45 J. COMMITMENTS AND CONTINGENCIES Operating Leases The Company and its subsidiaries are obligated under non-cancelable operating leases covering principally land and office facilities. At December 31, 1993, minimum annual rental commitments under these leases are:
Years Ending December 31, (in thousands) ------------ -------------- 1994 . . . . . . . . . . . . . . . . . . $ 1,451 1995 . . . . . . . . . . . . . . . . . . 1,307 1996 . . . . . . . . . . . . . . . . . . 1,152 1997 . . . . . . . . . . . . . . . . . . 1,143 1998 . . . . . . . . . . . . . . . . . . 1,143 Thereafter . . . . . . . . . . . . . . . 7,394 ------- Total . . . . . . . . . . . $13,590 =======
Rent expense for 1991, 1992 and 1993 was $3,154,000, $3,637,000 and $3,835,000, respectively, covering land, office facilities and equipment. Purchase Commitment HCL has an agreement for the purchase of potash which expires in 1999. The terms of the agreement require HCL to purchase a minimum quantity at the weighted average of the FOB Israeli port prices received by the seller for the immediately preceding quarter plus certain adjustments thereto. Based upon current prices and at current capacity, the annual commitment is approximately $15,000,000. There are currently no purchase commitments in excess of market prices. K. INCOME TAXES The Company's income tax provision for the years ended December 31, 1991, 1992 and 1993 consist of the following:
1991 1992 1993 ---- ---- ---- (in thousands) Currently payable (refundable): Federal . . . . . . . . . . . . . . . . . . . . . . . . $ (530) $ -- $ -- Foreign . . . . . . . . . . . . . . . . . . . . . . . . (5,451) 11,276 7,939 State . . . . . . . . . . . . . . . . . . . . . . . . . 678 1,232 301 -------- --------- -------- Total . . . . . . . . . . . . . . . . . . . . . . . (5,303) 12,508 8,240 -------- --------- -------- Deferred (benefit): Federal . . . . . . . . . . . . . . . . . . . . . . . . 71 -- -- Foreign . . . . . . . . . . . . . . . . . . . . . . . . 7,840 (785) (472) State . . . . . . . . . . . . . . . . . . . . . . . . . (26) (492) 152 -------- ---------- -------- 7,885 (1,277 ) (320) -------- --------- --------- Total . . . . . . . . . . . . . . . . . . . . . . . $ 2,582 $ 11,231 $ 7,920 ======== ========= ========
F-18 46 Deferred income taxes (benefits) included in the Company's income tax provision consisted of the following:
1991 1992 1993 ---- ---- ---- (in thousands) Depreciation and property and equipment basis differences . . . . . . . . . . . . . . . . . . . . $ 8,181 $ 1,435 $ (1,110) Contract revenue recognition method . . . . . . . . . . (367) (1,843) 1,185 Net operating and capital loss carryforwards . . . . . . -- (1,239) (6,945) Valuation allowance . . . . . . . . . . . . . . . . . . -- 1,204 9,275 Other - net . . . . . . . . . . . . . . . . . . . . . . 71 (834) (2,725) -------- ---------- -------- Total . . . . . . . . . . . . . . . . . . . . . . . $ 7,885 $ (1,277) $ (320) ======== ========= =========
The provision for income taxes for the years ended December 31, 1991, 1992 and 1993 amounted to $2,582,000, $11,231,000 and $7,920,000, respectively, representing effective income tax rates of 12.7%, 48.3% and 72.1%, respectively. These amounts differ from the amounts of $6,890,000, $7,905,000 and $3,845,000, respectively, computed by applying the statutory Federal income tax rates to income before income taxes. The reasons for such variances from statutory rates were as follows:
1991 1992 1993 ---- ---- ---- Statutory Federal rates . . . . . . . . . . . . . . . . 34.0% 34.0% 35.0% Increase (decrease) in income tax rate resulting from: Israeli operations - net impact of Israeli statutory rate, effects of "inflation allowances", withholding taxes etc. . . . . . . . . . . . . . 13.1 3.3 (10.1) Refund of prior year Israeli taxes . . . . . . . . (35.0) -- -- Net losses for which there is no current tax benefit . . . . . . . . 4.7 15.5 47.4 Additional depletion expense . . . . . . . . . . . (6.2) (6.6) (2.9) State and local income taxes - net . . . . . . . . 2.1 2.1 2.7 ---- ---- ---- Effective income tax rates . . . . . . . . . . . . . . . 12.7% 48.3% 72.1% ==== ==== ====
F-19 47 At December 31, 1992 and 1993, deferred taxes (liabilities) consisted of the following:
1992 1993 ---- ---- (in thousands) Depreciation and property and equipment basis differences . . . . . . $ (16,173) $ (15,063) Contract revenue recognition method . . . . . . . . . . . . . . . . . 3,292 2,107 Nondeductible reserves . . . . . . . . . . . . . . . . . . . . . . . . 2,971 3,683 Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . 10,860 18,973 Capital loss and capital loss carryforwards . . . . . . . . . . . . . 6,742 5,574 Foreign tax credit carryovers . . . . . . . . . . . . . . . . . . . . 792 3,000 AMT credit carryovers . . . . . . . . . . . . . . . . . . . . . . . . 1,693 1,693 Investment tax credit carryovers . . . . . . . . . . . . . . . . . . . 200 200 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,355 1,160 ------------ ------------ Deferred taxes - net, exclusive of valuation allowance . . . . . . . . 11,732 21,327 Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . (23,228) (32,503) ------------ ------------ Deferred taxes - net . . . . . . . . . . . . . . . . . . . . . . . . . $ (11,496) $ (11,176) ============= ============
At December 31, 1992, deferred tax assets of $2,382,000 are classified as "other current assets" and deferred tax liabilities of $13,878,000 are classified as "other liabilities". At December 31, 1993, deferred tax assets of $2,100,000 are classified as "other current assets" and deferred tax liabilities of $13,276,000 are classified as "other liabilities". At December 31, 1993, the Company had various tax loss and credit carryovers which expire as follows:
Federal Net State Net Foreign Investment Operating Operating Capital Tax Tax Expiration Loss Loss Loss Credit Credit - ---------- ----------- --------- ------- ------- ---------- (in thousands) 1994 . . . . . . $ 800 1995 . . . . . . $ 1,000 1997 . . . . . . 13,000 1998 . . . . . . 2,200 2001 . . . . . . $ 200 2002 - 2005 . . . $ 19,000 2006 - 2008 . . . $41,000 33,000 ------- ---------- ---------- --------- --------- Total . . . . $41,000 $ 52,000 $ 14,000 $ 3,000 $ 200 ======= ========== ========== ========= =========
Income tax has not been provided on unrepatriated earnings of HCL as it is the intention of the Company to reinvest such foreign earnings for indefinite periods in HCL's operations. The cumulative amount of such unrepatriated earnings at December 31, 1993 approximates $38 million. Income taxes paid totalled approximately $3,300,000, $7,800,000 and $11,600,000, respectively, during the years ended December 31, 1991, 1992 and 1993. The amount paid for 1991 excludes an Israeli tax refund received by HCL relating to prior years amounting to $7,100,000. F-20 48 L. INTEREST AND OTHER INCOME - NET Interest and other income - net for the years ended December 31, 1991, 1992 and 1993 consists of the following:
1991 1992 1993 ---- ---- ---- (in thousands) Interest and dividend income . . . . . . . . . . . . . . $ 6,959 $ 3,735 $ 3,258 Security gains (losses) - net . . . . . . . . . . . . . (30 ) 2,865 2,261 Gain on involuntary conversion (see Note D) . . . . . . 10,000 -- -- Other . . . . . . . . . . . . . . . . . . . . . . . . . (2,770 ) 1,876 495 --------- --------- -------- Total . . . . . . . . . . . . . . . . . . . . . . . $ 14,159 $ 8,476 $ 6,014 ========= ========= ========
M. REDEEMABLE PREFERRED STOCK Redeemable preferred stock was issued to a then related party, Care Investors, Inc., on November 28, 1986. The dividend on the preferred stock was cumulative at the rate of $9.50 per share per annum and the preferred stock was convertible into 9.5% junior subordinated debentures due 1998, at the option of the Company or the holder. The preferred shares were initially recorded at $6,700,000, the estimated value on the date of issue. During January 1991 the preferred stock was converted into $9,000,000 principal amount of the Company's 9.5% junior subordinated debentures (see Note H). N. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments." The estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
December 31, 1992 December 31, 1993 ----------------- ----------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ------ ---------- ------ ---------- (in thousands) Assets: Short-term investments (included within "other current assets") . . . . . . . . . $ 7,504 $ 8,655 $ 34,529 $ 34,895 Investments in securities - net . . . . . . . 10,827 15,345 2,356 8,606 Liabilities: Long-term debt . . . . . . . . . . . . . . . 220,007 227,000 241,757 246,330 Off-balance sheet financial instruments: Foreign currency contracts . . . . . . . . . -- 3,900 -- 2,400
Cash and Cash Equivalents, Accounts Receivable, Short-Term Debt, and Accounts Payable - The carrying amounts of these items are a reasonable estimate of their fair value. F-21 49 Investments in Securities - The fair value of these securities (including short-term investments classified within "other current assets" in the accompanying Consolidated Balance Sheets) are estimated based on quoted market prices or recent sales for those or similar investments. Long-Term Debt - Interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities are used on a discounted cash flow basis to estimate fair value for debt issues for which no market quotes are available. Foreign Currency Contracts - The fair value of foreign currency contracts (used for hedging purposes) is estimated by obtaining quotes from brokers. The contractual amount of these contracts totals approximately $67,000,000 and $35,000,000 as of December 31, 1992 and 1993, respectively. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 1992 and 1993. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may differ significantly from the amounts presented herein. O. CONTINGENT LIABILITIES For a description of certain legal proceedings pending against the Company, see Item 3 - "Legal Proceedings", which is an integral part of these financial statements. The Company is vigorously defending against the allegations described therein. Management of the Company believes, based upon its assessment of the actions and claims outstanding against the Company and certain of its subsidiaries, and after discussion with counsel, that the eventual disposition of the matters referred to above should not have a material adverse effect on the financial position or future operations of the Company. Also see "Environmental Matters" in Item 1 - "Business". P. SUBSEQUENT EVENTS On January 27, 1994, HCL filed a registration statement with the Israeli Securities Authority (the "ISA") pursuant to which HCL would publicly offer in Israel, in an underwritten offering, units consisting of (i) shares of HCL common stock (the "HCL Shares") and (ii) options exercisable for HCL Shares. The terms of the proposed offering have not been finalized, and there can be no assurance that the ISA will declare the offering effective or that the offering will be consummated (considering, among other things, prevailing stock market conditions in Israel). If the proposed offering is consummated, the Company has determined that it would maintain beneficial ownership of not less than 90% of the HCL Shares upon issuance of the units and not less than 80% on a fully diluted basis. The Company anticipates that the net proceeds to be realized for the HCL Shares in the proposed offering, if consummated, would be substantially in excess of the Company's corresponding carrying value for the equity interest represented by such shares. The net proceeds of the proposed offering may be used for any purpose authorized by the Board of Directors of HCL, including, without limitation, internal growth or the acquisition of new businesses. HCL does not currently have any agreements, commitments or understandings for acquiring any particular businesses and does not anticipate using any of the net proceeds to finance the construction of the K3 Plant. On February 7, 1994, the smaller of the two potassium nitrate production units located in the Company's Haifa, Israel manufacturing facility was damaged by a fire, causing a temporary reduction of the Company's potassium nitrate production capacity. The Company is currently reviewing various alternatives concerning the most effective and timely replacement of the damaged production unit and expects to replace the damaged unit within approximately twelve months. The Company believes that the impact of the loss F-22 50 of the facility, including the effect of business interruption, will be substantially covered by insurance. While the ultimate amount of the insurance recovery has not yet been determined, the Company expects that the insurance proceeds relating to the property damage will be for replacement value, which substantially exceeds the recorded carrying value of the damaged assets. F-23 51 CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE III TRANS-RESOURCES, INC. BALANCE SHEETS
December 31, ------------ 1992 1993 ---- ---- (in thousands) ASSETS CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 5,918 $ 9,800 Receivables and other current assets . . . . . . . . . . . . . . . . . . . 13,285 35,474 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 891 ----------- ---------- Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . 19,939 46,165 INVESTMENTS IN SECURITIES - net . . . . . . . . . . . . . . . . . . . . . . . 5,081 -- INVESTMENTS IN SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . 144,151 131,861 DUE FROM SUBSIDIARIES - net . . . . . . . . . . . . . . . . . . . . . . . . . 15,453 19,402 OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,484 11,282 ----------- ---------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 192,108 $ 208,710 =========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . $ 10,935 $ 9,810 Accrued expenses and other current liabilities . . . . . . . . . . . . . . 4,774 7,805 ----------- ---------- Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . 15,709 17,615 ----------- ---------- LONG-TERM DEBT - net: Senior indebtedness, notes payable and other obligations . . . . . . . . . 26,540 16,730 Senior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 103,689 140,133 Junior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 15,089 15,495 ----------- ---------- Long-Term Debt - net (Note) . . . . . . . . . . . . . . . . . . . . 145,318 172,358 ----------- ---------- OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,199 2,943 ----------- ---------- COMMON STOCKHOLDER'S EQUITY: Common stock, $.01 par value, 3,000 shares authorized, issued and outstanding . . . . . . . . . . . . . . . . . . . . . . -- -- Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 500 500 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,620 15,348 Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . (238) (54) ----------- ---------- Total Common Stockholder's Equity . . . . . . . . . . . . . . . . . 28,882 15,794 ----------- ---------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 192,108 $ 208,710 =========== ==========
____________________ Note - The aggregate maturities of long-term debt during the next five years is approximately as follows: 1994 - $9,810,000; 1995 - $9,810,000; 1996 - $30,210,000; 1997 - $3,460,000 and 1998 - $9,000,000. Also, see Note H of Notes to Consolidated Financial Statements. S-1 52 CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE III (continued) TRANS-RESOURCES, INC. STATEMENTS OF OPERATIONS For the Years Ended December 31, 1991, 1992 and 1993
1991 1992 1993 ---- ---- ---- (in thousands) REVENUE - Equity in earnings of subsidiaries (including $167,000 credit representing the cumulative effect on prior years of the change in accounting for income taxes in 1992) . . . . . . . . . . $ 38,940 $ 30,345 $ 22,458 COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . (2,993) (4,527) (4,111) INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . (21,849) (20,682) (22,121) INTEREST AND OTHER INCOME - net . . . . . . . . . . . . . . . . 2,068 4,970 5,797 --------- --------- --------- INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . . . . . . . 16,166 10,106 2,023 INCOME TAX BENEFIT . . . . . . . . . . . . . . . . . . . . . . 1,518 2,080 1,043 --------- --------- --------- INCOME BEFORE EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . 17,684 12,186 3,066 EXTRAORDINARY ITEM - Gain (loss) on repurchase of debt, net of income tax of $296,000 in 1991 . . . . . . . 1,186 -- (8,830) CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGE IN ACCOUNTING FOR INCOME TAXES . . . . . . . . . . . -- 963 -- --------- --------- --------- NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764) ========= ========= =========
S-2 53 CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE III (concluded) TRANS-RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1991, 1992 and 1993
1991 1992 1993 ---- ---- ---- (in thousands) OPERATING ACTIVITIES AND WORKING CAPITAL MANAGEMENT: Operations: Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764) Non-cash items: Unremitted earnings of subsidiaries . . . . . . . . . (12,797) (25,213) 12,474 Depreciation and amortization . . . . . . . . . . . . 1,691 1,307 3,985 Increase in other liabilities . . . . . . . . . . . . 775 594 744 Deferred taxes and other - net . . . . . . . . . . . 43 1,125 (1,048) --------- --------- --------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . 8,582 (9,038) 10,391 Working capital management: Receivables and other current assets . . . . . . . . . . (19,077) 23,171 4,926 Prepaid expenses . . . . . . . . . . . . . . . . . . . . (86) (642) (155) Accrued expenses and other current liabilities . . . . . 5,909 (7,764) 3,816 --------- --------- --------- Cash provided by (used in) operations and working capital management . . . . . . . . . . . . . . . (4,672) 5,727 18,978 --------- --------- --------- INVESTMENT ACTIVITIES: Additions to property, plant and equipment . . . . . . . . . (945) (28) (75) Sales of marketable securities and short-term investments . . . . . . . . . . . . . . . . . 2,622 12,578 12,435 Purchases of marketable securities and short-term investments . . . . . . . . . . . . . . . . . (2,108) (12,819) (34,118) Other - net . . . . . . . . . . . . . . . . . . . . . . . . (10,278) (645) (4,539) --------- --------- --------- Cash used in investment activities . . . . . . . . . . . . . (10,709) (914) (26,297) --------- --------- --------- FINANCING ACTIVITIES: Increase in long-term debt . . . . . . . . . . . . . . . . . -- -- 109,166 Payments and current maturities of long-term debt . . . . . (3,803) (475) (90,457) Distribution to stockholders . . . . . . . . . . . . . . . . (3,064) (13,136) (7,508) --------- --------- --------- Cash provided by (used in) financing activities . . . . . . (6,867) (13,611) 11,201 --------- --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . (22,248) (8,798) 3,882 CASH AND CASH EQUIVALENTS: Beginning of year . . . . . . . . . . . . . . . . . . . . . 36,964 14,716 5,918 --------- --------- --------- End of year . . . . . . . . . . . . . . . . . . . . . . . . $ 14,716 $ 5,918 $ 9,800 ========= ========= ========= - ------------------ Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,992 $ 19,497 $ 16,557 ========= ========= ========= Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . $ 2,614 $ 506 $ 2,100 ========= ========= =========
S-3 54 TRANS-RESOURCES, INC. SCHEDULE V PROPERTY, PLANT AND EQUIPMENT YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993 (in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F -------- -------- -------- -------- -------- -------- BALANCE AT BALANCE AT BEGINNING ADDITIONS OTHER CHANGES END OF CLASSIFICATIONS OF PERIOD AT COST RETIREMENTS ADD (DEDUCT) PERIOD --------------- ---------- --------- ----------- ------------- ---------- Year Ended December 31, 1991: - ----------------------------- Land . . . . . . . . . . . . . . . $ 1,891 $ 225 $ 2,116 Buildings . . . . . . . . . . . . 15,222 3,908 $ (1,346) 17,784 Machinery, plant and equipment . . 131,047 39,784 (18,076) 152,755 Office furniture, equipment and water rights . . . . . . . . 7,113 2,246 (105) 9,254 Construction-in-progress . . . . . 34,400 (27,342) 7,058 --------- --------- --------- -------- --------- Total . . . . . . . . . . . . . $ 189,673 $ 18,821 $ (19,527) $ -- $ 188,967 ========= ========= ========= ======== ========= Year Ended December 31, 1992: - ----------------------------- Land . . . . . . . . . . . . . . . $ 2,116 $ 2,116 Buildings . . . . . . . . . . . . 17,784 $ 1,015 $ (39) 18,760 Machinery, plant and equipment . . 152,755 24,693 $ (231) 674 177,891 Office furniture, equipment and water rights . . . . . . . . 9,254 561 (236) (435) 9,144 Construction-in-progress . . . . . 7,058 (126) 6,932 --------- --------- --------- -------- --------- Total . . . . . . . . . . . . . $ 188,967 $ 26,143 $ (467) $ 200 $ 214,843 ========= ========= ========= ======== ========= Year Ended December 31, 1993: - ----------------------------- Land . . . . . . . . . . . . . . . $ 2,116 $ 2,116 Buildings . . . . . . . . . . . . 18,760 $ 1,234 19,994 Machinery, plant and equipment . . 177,891 9,685 $ (10) 187,566 Office furniture, equipment and water rights . . . . . . . . 9,144 872 (124) 9,892 Construction-in-progress . . . . . 6,932 17,265 24,197 --------- --------- --------- -------- Total . . . . . . . . . . . . . $ 214,843 $ 29,056 $ (134) $ -- $ 243,765 ========= ========= ========= ======== =========
S-4 55 TRANS-RESOURCES, INC. SCHEDULE VI ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993 (in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F -------- -------- -------- -------- -------- -------- ADDITIONS BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER CHANGES END OF DESCRIPTION OF PERIOD EXPENSES RETIREMENTS ADD (DEDUCT) PERIOD ----------- ---------- ---------- ----------- ------------- ---------- Year Ended December 31, 1991: - ----------------------------- Buildings . . . . . . . . . . . . $ 6,003 $ 1,615 $ (1,275) $ 6,343 Machinery, plant and equipment . . 55,419 15,851 (13,432) 57,838 Office furniture, equipment and water rights . . . . . . . . 2,582 1,035 (82) 3,535 Excess of net assets acquired over related costs . . . . . . . 8,528 (1,344) 7,184 --------- --------- --------- -------- --------- Total . . . . . . . . . . . . . $ 72,532 $ 17,157 $ (14,789) $ -- $ 74,900 ========= ========= ========= ======== ========= Year Ended December 31, 1992: - ----------------------------- Buildings . . . . . . . . . . . . $ 6,343 $ 1,325 $ 7,668 Machinery, plant and equipment . . 57,838 17,498 $ (84) 75,252 Office furniture, equipment and water rights . . . . . . . . 3,535 1,044 (172) $ (78) 4,329 Excess of net assets acquired over related costs . . . . . . . 7,184 (1,344) 5,840 --------- ------ --------- -------- --------- Total . . . . . . . . . . . . . $ 74,900 $ 18,523 $ (256) $ (78) $ 93,089 ========= ========= ========= ======== ========= Year Ended December 31, 1993: - ----------------------------- Buildings . . . . . . . . . . . . $ 7,668 $ 1,646 $ 9,314 Machinery, plant and equipment . . 75,252 18,405 $ (10) 93,647 Office furniture, equipment and water rights . . . . . . . . 4,329 1,074 (96) 5,307 Excess of net assets acquired over related costs . . . . . . . 5,840 (1,344) 4,496 --------- --------- --------- -------- --------- Total . . . . . . . . . . . . . $ 93,089 $ 19,781 $ (106) $ -- $ 112,764 ========= ========= ========= ======== =========
S-5 56 TRANS-RESOURCES, INC. SCHEDULE X SUPPLEMENTARY INCOME STATEMENT INFORMATION YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993 (in thousands)
COLUMN A COLUMN B -------- -------- ITEM CHARGED TO COSTS AND EXPENSES ---- ----------------------------- 1991 1992 1993 ---- ---- ---- Maintenance and repairs . . . . . . . . . . . . . . . . . . . . $ 27,648 $ 28,381 $ 25,582 ========= ========= ========= Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,361 $ 5,732 $ 4,360 ========= ========= =========
S-6 57 TRANS-RESOURCES, INC. INDEX TO EXHIBITS
Exhibit Description Page No. - ------- ----------- -------- 3.1 Certificate of Incorporation of the Company, as amended, filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987 (the "1987 Form 10-K"), which is incorporated herein by reference. * 3.2 By-laws of the Company, filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991 (the "1991 Form 10-K"), which is incorporated herein by reference. * 4.1 Indenture, dated as of March 1, 1989, between the Company and First Alabama Bank, as Trustee, relating to the Senior Subordinated Reset Notes due 1996, filed as Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1988 (the "1988 Form 10-K"), which is incorporated herein by reference. * 4.2 Indenture, dated as of March 30, 1993 between the Company and First Alabama Bank, as Trustee, relating to the 11 7/8% Senior Subordinated Notes due 2002, filed as Exhibit 4.1 to the Registration Statement of the Company on Form S-1, filed on April 16, 1993, as amended, Registration No. 33-61158 (the "1993 Form S-1"), which is incorporated herein by reference. * 10.1 Potash Sales Agreement between Haifa Chemicals Ltd. and Dead Sea Works Limited, dated January 1, 1980 (termination date extended to December 31, 1999), concerning the supply of potash, filed as Exhibit 10.2 to the Registration Statement of the Company on Form S-1, filed on January 30, 1987, as amended, Registration No. 33-11634 (the "1987 Form S-1"), which is incorporated herein by reference. * 10.2 Manufacturing Processes Agreement between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated December 28, 1981, concerning the supply of steam and water, filed as Exhibit 10.6 to the 1987 Form S-1, which is incorporated herein by reference. * 10.3 Agreement of Use of Ammonia Pipeline between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated August 7, 1977, as amended, concerning the use of an ammonia pipeline, filed as Exhibit 10.8 to the 1987 Form S-1, which is incorporated herein by reference. * 10.4 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated December 20, 1968, concerning real property, filed as Exhibit 10.9 to the 1987 Form S-1, which is incorporated herein by reference. * 10.5 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated March 31, 1974, concerning real property, filed as Exhibit 10.10 to the 1987 Form S-1, which is incorporated herein by reference. *
E-1 58
Exhibit Description Page No. - ------- ----------- -------- 10.6 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated April 5, 1978, concerning real property, filed as Exhibit 10.11 to the 1987 Form S-1, which is incorporated herein by reference. * 10.7 Lease between Haifa Chemical Ltd. and Oil Refineries Ltd., dated June 25, 1978, concerning real property, filed as Exhibit 10.12 to the 1987 Form S-1, which is incorporated herein by reference. * 10.8 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated September 25, 1986, concerning real property, filed as Exhibit 10.13 to the 1987 Form S-1, which is incorporated herein by reference. * 10.9 Agreement between Haifa Chemicals Ltd. and The Port Authorities, dated January 31, 1980 (termination date extended to June 1996), concerning real property, filed as Exhibit 10.15 to the 1987 Form S-1, which is incorporated herein by reference. * 10.10 Agreement between the Company and Thomas G. Hardy, dated March 22, 1994, concerning incentive bonus compensation, including, as Exhibit A thereto, the related Trust Agreement. E-4 10.11 Loan Agreement, dated as of February 26, 1988, and Amendment No. 1 to Loan Agreement, dated June 13, 1988, between the Company and Bank Hapoalim B.M. (certain exhibits omitted) (the "1988 Bank Hapoalim Agreement"), filed as Exhibit 28.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1988, which is incorporated herein by reference. * 10.12 Amendment No. 2, dated March 17, 1989, to the 1988 Bank Hapoalim Agreement, and Pledge Agreement, dated March 20, 1989, between the Company, Bank Hapoalim B.M. and Trust Company of Bank Hapoalim Ltd., filed as Exhibit 10.26 to the 1988 Form 10-K, which is incorporated herein by reference. * 10.13 Letter agreement, dated April 13, 1989, amending the 1988 Bank Hapoalim Agreement, between the Company and Bank Hapoalim B.M., filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (the "1989 Form 10-K") which is incorporated herein by reference. * 10.14 Sixth Amendment to Loan Agreement, dated as of April 25, 1991, amending the 1988 Bank Hapoalim Agreement, between the Company and Bank Hapoalim B.M., filed as Exhibit 10.14 to the 1991 Form 10-K, which is incorporated herein by reference. *
E-2 59
Exhibit Description Page No. - ------- ----------- -------- 10.15 Amended and Restated Credit Agreement, dated as of June 2, 1993 (The "Cedar/NMPC/Vicksburg Credit Agreement"), among Cedar Chemical Corporation, New Mexico Potash Corporation, the Banks parties thereto and The First National Bank of Boston, as Agent (exhibits and schedules omitted). E-5 10.16 Restated Amendment No. 1, dated as of November 10, 1993, to the Cedar/NMPC/Vicksburg Credit Agreement (exhibits and schedules omitted). E-6 10.17 Loan Agreement, dated as of December 24, 1990, between the Company and Bank Hapoalim (certain exhibits omitted) (the "1990 Bank Hapoalim Agreement"), filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990, which is incorporated herein by reference. * 10.18 Amendment No. 2, dated as of September 25, 1992, to the 1990 Bank Hapoalim Agreement, filed as Exhibit 10.23 to the Registration Statement of the Company on Form S-1, filed on October 20, 1992, as amended, Registration No. 33-53486 (the "1992 Form S-1"), which is incorporated herein by reference. * 10.19 Tax Sharing Agreement, dated as of December 30, 1991, among TPR Investment Associates, Inc., the Company, Eddy Potash, Inc., Nine West Corporation, TR Media Corporation and Cedar Chemical Corporation, filed as Exhibit 10.23 to the 1991 Form 10-K, which is incorporated herein by reference. * 10.20 Purchase Agreement, dated September 30, 1992, between the Company and Mardi Gras Food Court, Inc., filed as Exhibit 10.26 to the 1992 Form S-1, which is incorporated herein by reference. * 10.21 Split Dollar Insurance Agreement, entered into as of August 26, 1988, between the Company and Arie Genger, filed as Exhibit 10.27 to the 1992 Form S-1, which is incorporated herein by reference. * 10.22 Bond Purchase Agreement, dated November 10, 1993, among Mississippi Business Finance Corporation, Vicksburg Chemical Company and the banks named as Purchasers therein. E-7 21 Subsidiaries of the Company. E-8 24 Power of Attorney authorizing Lester W. Youner to sign this report and any amendments hereto on behalf of the principal executive officer and the directors. E-9
____________________ * Incorporated by reference E-3 EX-10.10 2 AGREEMENT BETWEEN THE COMPANY AND THOMAS G. HARDY 1 EXHIBIT 10.10 TRANS-RESOURCES, INC. 9 WEST 57TH STREET NEW YORK, NEW YORK 10019 March 22, 1994 Mr. Thomas G. Hardy 935 Park Avenue New York, New York 10028 Re: Incentive Bonus - Thomas G. Hardy ("Hardy") Dear Mr. Hardy: This will serve to set forth our understanding with regard to the matters contained herein. 1. Pursuant to Hardy's letter agreement with Trans-Resources, Inc. (the "Company"), dated January 15, 1988, as amended by a letter dated April 16, 1991 (the "1988 Agreement"), Hardy is entitled, by reason of having remained in the continuous employ of the Company through May 31, 1993, to receive an incentive bonus (the "1988 Bonus") determined as, and payable in the manner, set forth in the 1988 Agreement following the termination of his employment with Company. Hardy and the Company have agreed to modify the 1988 Agreement as set forth herein. 2. Notwithstanding the provisions of the 1988 Agreement, in lieu of the 1988 Bonus, Hardy, or those persons ("Designated Beneficiaries") designated by Hardy in a revocable writing delivered to the Company as entitled to the benefits hereof E-4 2 Mr. Thomas G. Hardy March 22, 1994 Page 2 in the event of his death, shall be entitled to receive an amount equal to the entire balance in the trust (the "Rabbi Trust") established pursuant to this Letter Agreement at the time the assets in the Rabbi Trust are required to be distributed to Hardy or his Designated Beneficiaries. The Rabbi Trust shall be in the form of Exhibit A hereto. The Company shall deposit the aggregate sum of $2.8 million (the "Initial Principal") with the trustees of the Rabbi Trust to be held by such trustees and paid as set forth therein. The Company shall deposit the Initial Principal with the trustees of the Rabbi Trust in two equal installments of $1.4 million each, without interest, the first of which is being paid contemporaneously with the execution of this Letter Agreement and the second of which shall be paid on March 22, 1996 (the "Second Payment Date"), provided, however, that if the entire assets of the Trust are paid to the Employee prior to the Second Payment Date without the occurrence of an Acceleration Event, the second installment shall be paid to Employee on the Second Payment Date. The amounts held under the Rabbi Trust shall at all times be subject to the claims of the Company's creditors as provided in the Rabbi Trust. Upon payment by the Company of the first installment of the Initial Principal to the Rabbi Trust, the 1988 Agreement shall be superseded in its entirety by this Letter Agreement and 3 Mr. Thomas G. Hardy March 22, 1994 Page 3 the Rabbi Trust and the 1988 Agreement shall be of no further force or effect. 3. If prior to the Second Payment Date, an Acceleration Event (as defined in Paragraph 5 below) shall occur, the Company shall as promptly as practicable pay to the trustees of the Rabbi Trust the remaining installment of the Initial Principal to be held and disposed of in accordance with the Rabbi Trust. 4. Immediately after the earlier of December 1, 2001 or the termination of Hardy's employment with the Company (but in each case before the Rabbi Trust shall have terminated), the Company shall pay to the trustees of the Rabbi Trust as an additional contribution thereto the aggregate amount (without interest) of all Tax Reimbursement Amounts (as defined in the Rabbi Trust) paid by the trustees to the Company during the existence of the Rabbi Trust. 5. The following terms used in this Agreement shall have the meanings set forth below. "ACCELERATION EVENT" means (a) Hardy's leaving the Company's employ due to Disability; (b) Hardy's death; (c) Hardy's 4 Mr. Thomas G. Hardy March 22, 1994 Page 4 discharge by the Company for any reason other than "For Cause;" or (d) a Change in Control occurs with respect to the Company. "CHANGE IN CONTROL" means any event or series of events by which Arie Genger and/or his spouse, children, children-in- law and grandchildren fail to maintain aggregate beneficial ownership, directly or indirectly, of more than 50% of the Company's stock on a fully diluted basis. "DISABILITY" means a permanent physical or mental disability which substantially prevents Hardy from performing his duties to the Company and such disability continues for at least six consecutive calendar months. "FOR CAUSE" means a discharge predicated upon any of the following events: (a) an act of dishonesty which involves loss or destruction of property of the Company or any of its subsidiaries or which results in incarceration following conviction; or (b) the continuing violation of any specific written direction of the Company's Chairman of the Board or Chief Executive Officer. 5 Mr. Thomas G. Hardy March 22, 1994 Page 5 6. Nothing contained herein is intended to create an employment contract. 7. Any notice, request, instruction, approval, consent or other communication to be given hereunder by a party hereto shall be deemed validly given, made or served if in writing and delivered personally (as of such delivery) or sent by certified mail (as of three days after deposit in a United States post office), postage prepaid, or by telex, facsimile or telegraph, charges prepaid to the addresses set forth at the outset hereof or to such other individual or address as a party hereto may designate for itself by notice given as herein provided. 8. This Letter Agreement, together with Exhibit A hereto, sets forth the entire agreement and understanding of the parties hereto in respect of the transactions contemplated hereby and supersedes all prior agreements, arrangements and understandings relating to the subject matter hereof. 9. Each party agrees to execute and deliver all such other instruments as any other party hereto may reasonably request in order to effectuate the intent of this Letter Agreement and the transactions provided for herein. 6 Mr. Thomas G. Hardy March 22, 1994 Page 6 10. The provisions of this Letter Agreement may be amended, supplemented or otherwise modified or waived only by a written agreement signed by the parties hereto. 11. This Letter Agreement shall be deemed a contract made under the laws of the State of New York and for all purposes shall be construed and interpreted in accordance with the laws and decisions of such State without reference to conflicts of laws principles. 12. Any provision of this Letter Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and, any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 13. This Letter Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, legal representatives and successors, but neither this Letter 7 Mr. Thomas G. Hardy March 22, 1994 Page 7 Agreement nor any rights arising hereunder may be assigned or pledged by either of the parties hereto. Very truly yours, TRANS-RESOURCES, INC. By: ------------------------ Arie Genger, Chairman of the Board AGREED AND ACCEPTED THIS ___ DAY OF MARCH, 1994: - ------------------------- Thomas G. Hardy 8 EXHIBIT A TRUST AGREEMENT This Agreement made this 22nd day of March, 1994, by and between TRANS-RESOURCES, INC., a Delaware corporation ("Company"), and Edward Klimerman and Charles E. Shaw (the "Trustees"). W I T N E S S E T H: WHEREAS, Company has entered into an agreement, dated as of the 22nd day March, 1994 (the "Agreement"), with Thomas G. Hardy ("Employee") which requires Company to establish a trust (the "Trust") to receive, hold and invest certain payments of deferred compensation, a copy of which is annexed hereto; WHEREAS, Company wishes to establish the Trust and to contribute to the Trust assets to be held therein subject to the claims of Company's creditors in the event of Company's Insolvency (as herein defined) until paid to Employee or his designated beneficiaries; WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Agreement as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; and 9 WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Agreement. NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: SECTION 1. ESTABLISHMENT OF TRUST. (a) Company hereby deposits with the Trustees in trust the sum of $1,400,000, which shall become the principal of the Trust to be held, administered and disposed of by the Trustees as provided in this Trust Agreement. The Trustees are authorized to accept additional contributions from Company. (b) The Trust hereby established shall be irrevocable. (c) The Trust is intended to be a grantor trust, of which Company is the grantor, within the meaning of subpart E, Part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust and any earnings thereon shall be held by the Trustees or under the Trustees' direction separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Employee and general creditors as herein set forth. Employee and his beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the -2- 10 Agreement and this Trust Agreement shall be mere unsecured contractual rights of Employee and his beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) hereof. SECTION 2. PAYMENTS TO EMPLOYEE AND HIS BENEFICIARIES. (a) Within 30 days after December 1, 2001, or, if earlier, the termination of Employee's employment with Company for any reason whatsoever, the entire assets of the Trust shall be paid to Employee, his estate or designated beneficiaries, in a lump sum, in cash or in kind, provided, however, that to the extent Trust assets consist of investments which cannot be assigned or can be liquidated only periodically or upon notice, the Trustees shall continue to hold such assets, subject to this Trust Agreement, until they can be liquidated. In addition, the Trust shall make payments out of the Trust assets to Employee in the event of an Unforeseeable Emergency as defined in subsection (d) below, provided, however, that the amount of such payment shall be limited to the amount necessary to meet such Unforeseeable Emergency. The Trustees shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to this Section and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by Company. -3- 11 (b) The entitlement of Employee, his estate or his designated beneficiaries to benefits under this Section shall be determined by Company. Company shall notify the Trustees of any event that would require payment to be made to Employee, his estate or designated beneficiaries. In the event that Employee requests payment or partial payment of the Trust assets due to an Unforeseeable Emergency, a claim therefor shall be made to Company, and Company shall instruct the Trustees of the amount of Trust assets to be paid to Employee. If Employee disputes Company's determination of the amount of Trust assets to be so paid, the dispute shall be referred to arbitration before three arbitrators, one chosen by Employee, one chosen by Company, and the third chosen by the other two. Such arbitration shall be conducted under the rules of the American Arbitration Association. The Trustees shall pay the Trust assets in accordance with Company's instructions or, if applicable, the arbitrators' decision. The costs of such arbitration shall be paid as determined by the arbitrators, and the decision of the arbitrators shall be final and unappealable. (c) Company may make payment of benefits directly to Employee or his designated beneficiaries as they become due under the terms of this Section. Company shall notify the Trustees of its decision to make payment of benefits directly prior to the time amounts are payable to Employee, his estate or his designated beneficiaries, and upon such payment the Trustees shall pay to Company amounts they otherwise would have paid to Employee. -4- 12 (d) The term "Unforeseeable Emergency" means severe financial hardship to Employee resulting from a sudden and unexpected illness or accident of Employee or a dependent (as defined in Section 152(a) of the Internal Revenue Code) of Employee, loss of Employee's property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of Employee. Notwithstanding Section 2(a) payments in respect of an Unforeseeable Emergency shall not be made to the extent that such hardship is or may be relieved (1) through reimbursement or compensation by insurance or otherwise, or (2) by liquidation of Employee's assets, to the extent that liquidation of such assets would not in itself cause severe financial hardship. (e) Employee may at any time by written notice to Company or the Trustees designate or change a prior designation of beneficiaries for payments to be made hereunder after Employee's death. In the absence of any such designation, such benefits shall be paid to Employee's estate. SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT. (a) The Trustees shall cease payment of benefits to Employee, his estate and his designated beneficiaries if Company is Insolvent. Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay its debts as -5- 13 they become due, or (ii) Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Company under federal and state law as set forth below: (1) The Board of Directors and the Chief Executive Officer of Company shall have the duty to inform the Trustees in writing of Company's Insolvency. If a person claiming to be a creditor of Company alleges in writing to the Trustees that Company has become Insolvent, the Trustees shall determine whether Company is Insolvent and, pending such determination, the Trustees shall discontinue payment of benefits to Employee or his beneficiaries. (2) Unless the Trustees have actual knowledge of Company's Insolvency or have received notice from Company or a person claiming to be a creditor alleging that Company is Insolvent, the Trustees shall have no duty to inquire whether Company is Insolvent. The Trustees may in all events rely on such evidence concerning Company's solvency as may be furnished to the Trustees and that provides Trustees with a reasonable basis for making a determination concerning Company's solvency. (3) If at any time the Trustees have determined that the Company is Insolvent, the Trustees shall discontinue payments to Employee, his estate or his designated beneficiaries -6- 14 and shall hold the assets of the Trust for the benefit of Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Employee, his estate or his designated beneficiaries to pursue their rights as general creditors of Company with respect to benefits due under this Trust Agreement or otherwise. (4) The Trustees shall resume the payment of benefits to Employee, his estate or his designated beneficiaries in accordance with Section 2 of this Trust Agreement only after the Trustees have determined that the Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if the Trustees discontinue the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resume such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Employee, his estate or his designated beneficiaries under the terms of the Agreement for the period of such discontinuance, less the aggregate amount of any payments made to Employee, his estate or his designated benefici-aries by Company in lieu of the payments provided for hereunder during any such period of discontinuance. SECTION 4. INVESTMENT AUTHORITY In no event may the Trustees invest in securities (including stock or rights to acquire stock) or obligations issued by Company other than a de minimis amount held in common investment -7- 15 vehicles in which the Trustees invest. All rights associated with assets of the Trust shall be exercised by the Trustees, or the person designated by the Trustees, and shall in no event be exercisable by or rest with Employee. The Trustees shall invest the assets of the Trust in one or more of the following: (a) securities issued by the United States government; (b) mutual funds sponsored or managed by Fidelity Investments or Vanguard Management Company, and (c) Conservation Securities, L.P., a Delaware limited partnership. The Trustees shall consult with Employee regarding the investment of the Trust's assets and shall endeavor to take into account the preferences expressed by the Employee for allocation of the Trust's assets among the foregoing permitted investments, provided, however, that the Trustees shall determine such allocation in their sole discretion. SECTION 5. DISPOSITION OF INCOME During the term of this Trust, all of the income received by the Trust, net of expenses, shall be accumulated and reinvested, provided, however that the Trustees shall pay to Company, at the time and in the manner herein provided, amounts ("Tax Reimbursement Amounts") in respect of federal, state and local income taxes ("Taxes") incurred by Company attributable to the taxable income of the Trust. Promptly after Company shall file its tax returns for each taxable year in or with which ends a taxable year of the Trust, Company shall compute the excess, if any, of the aggregate Taxes paid by Company for such taxable year over the Taxes Company would have paid if the taxable income of the Trust were not -8- 16 includible in Company's taxable income for such taxable year and other taxable years. For taxable years of Company in which the amount of a net operating or capital loss carryover ("Loss Carryover") is affected by the inclusion in Company's taxable income of the Trust's taxable income in a different year, the excess referred to in the previous sentence shall be computed with due regard to such reduction in the Loss Carryover. Promptly, but in any event within fifteen days after the receipt of a written notice from Company containing such computation, the Trustees shall pay the Tax Reimbursement Amount to Company in immediately available funds. In the event the tax liability of the Company for any taxable year shall be adjusted, due to an audit or otherwise, Company shall promptly recompute all Tax Adjustment Amounts affected by such adjustment, and deliver to the Trustees written notice containing such computation, and any increase or decrease in Tax Adjustment Amounts previously paid shall be paid by the Trustees to Company, or repaid by Company to the Trustees, as the case may be, within 15 days after delivery of such notice. Notwithstanding the foregoing, no payment of the Tax Adjustment Amount shall be required in respect of the last taxable year of the Trust. SECTION 6. ACCOUNTING BY THE TRUSTEES. The Trustees shall keep records of investments, receipts, disbursements and other transactions, including such specific records as shall be agreed upon in writing between Company and the Trustees. Within 60 days following the close of each calendar year -9- 17 and within 30 days after the removal or resignation of both Trustees, the Trustees shall deliver to Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by them, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. SECTION 7. RESPONSIBILITY OF THE TRUSTEES. (a) The Trustees shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, the Trustees shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Company which is contemplated by, and in conformity with, the terms of the Agreement or this Trust and is given in writing by Company. In the event of a dispute between Company and a party, including the Trustees, the Trustees may apply to a court of competent jurisdiction to resolve the dispute. -10- 18 (b) If the Trustees undertake or defend any litigation arising in connection with this Trust, the Trustees shall be indemnified out of the Trust's assets against their costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto. If the Trust's assets are insufficient to fully indemnify the Trustees, Company shall so indemnify the Trustees. (c) The Trustees may consult with legal counsel and other professional advisors (who may also be counsel and advisors for Company generally and may include one of the Trustees or a firm of which he is a member) with respect to any of their duties or obligations hereunder. The costs of all such legal and professional fees shall be paid by the Trust. (d) The Trustees shall have, without exclusion, all powers conferred on the Trustees by applicable law, unless expressly provided otherwise herein. (e) Notwithstanding any powers granted to the Trustees pursuant to this Trust Agreement or to applicable law, the Trustees shall not have any power that could give the Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. (f) The Trustees shall be indemnified against any and all claims, losses, damages, expenses (including reasonable -11- 19 attorneys' fees and disbursements) and liabilities arising from any action or failure to act in connection with the Trust, except when the same is judicially determined to be due to the bad faith or willful misconduct of the Trustees. In the absence of such a judicial determination, no Trustee hereunder shall be liable to the Trust or to any party or parties interested in the Trust or be surcharged for any transaction occurring during the administration of the Trust or for any loss or depreciation which may arise or occur by reason or on account of any act or failure to act including any mistake of judgment, fact or law in the management of the Trust. Such indemnity shall be paid out of the Trust assets, and the rights of the Employee and his designated beneficiaries and Company to receive any payment from the Trust shall be subordinated to the right of the Trustees hereunder to receive such indemnification payment. If such assets are insufficient to fully indemnify the Trustees, Company shall so indemnify the Trustees. No Trustee shall be accountable, liable or responsible for any act, default, negligence, or omission of any other Trustee. (g) Company does hereby expressly acknowledge that it is aware of the fact that EDWARD KLIMERMAN is a member of the law firm of Rubin Baum Levin Constant & Friedman ("RBLC&F"), which acts as counsel for Company, and Company hereby expressly acknowledges and agrees that neither the services of EDWARD KLIMERMAN as Trustee hereunder, nor any provision of this Trust Agreement, either express or implied, shall restrict or inhibit EDWARD KLIMERMAN or RBLC&F in any way from representing Company in any action, dispute, -12- 20 controversy, arbitration, suit or negotiation arising under this Trust Agreement, or under any other agreement or in any other manner or context whatsoever, whether or not directly or indirectly involving Company or the Employee, or the administration and/or disposition of the Trust created hereby. SECTION 8. COMPENSATION AND EXPENSES OF TRUSTEE. The Trustees agree to act as such hereunder without compensation; provided, however, the Trustees shall be entitled to reimbursement out of the Trust assets for all reasonable out-of-pocket expenses incurred by the Trustees in performing their duties under this agreement, including, without limitation, legal and accounting fees and disbursements. SECTION 9. RESIGNATION AND REMOVAL OF THE TRUSTEES. (a) Each Trustee may resign at any time by written notice to Company, which shall be effective 30 days after receipt of such notice unless Company and such Trustee otherwise agree. (b) Each Trustee may be removed by Company on 10 days notice or upon shorter notice accepted by such Trustee. (c) Upon resignation or removal of a Trustee, the remaining Trustee shall be the sole Trustee hereunder until a successor trustee shall be appointed in accordance with Section 10 hereof. In the event of the resignation of both Trustees, and appointment of a successor Trustee or Trustees, all assets shall subsequently be transferred to the successor Trustee or Trustees. -13- 21 The transfer shall be completed within 30 days after receipt of notice of resignation, removal or transfer, unless Company otherwise agrees. (d) If both Trustees resign or are removed, a successor or successors shall be appointed, in accordance with Section 10 hereof, by the effective date of resignation or removal under paragraphs (a) or (b) of this section. If no such appointment has been made, either of the Trustees may apply to a court of competent jurisdiction for appointment of a successor. All expenses of the Trustees in connection with the proceeding shall be allowed as administrative expenses of the Trust. SECTION 10. APPOINTMENT OF SUCCESSOR OR SUCCESSORS. (a) If either or both Trustees resign or are removed in accordance with Section 9(a) or 9(b) hereof, Company shall appoint a third party other than Employee or a member of his family as a successor or replacement Trustee for each such Trustee. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustees shall execute any instrument necessary or reasonably requested by Company or the successor Trustee to evidence the transfer. (b) A successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 6 and 7 hereof. A successor -14- 22 Trustee shall not be responsible for and the Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. SECTION 11. AMENDMENT OR TERMINATION (a) This Trust Agreement may be amended by a written instrument executed by the Trustees and Company. (b) The Trust shall not terminate until the date on which the Employee or his beneficiaries are no longer entitled to benefits pursuant to the terms of the Agreement and this Trust Agreement. Upon termination of the Trust any assets remaining in the Trust shall be returned to Company. (c) Upon written approval of Employee or designated beneficiaries entitled to payment of benefits pursuant to the terms of the Agreement, Company may terminate this Trust prior to the time all benefit payments under the Agreement and the Trust Agreement have been made. All assets in the Trust at termination shall be returned to Company. SECTION 12. MISCELLANEOUS. (a) Any provisions of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. -15- 23 (b) Benefits payable to Employee and his beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) All notices required to be given under this Trust Agreement shall be in writing. The Trustees may rely on any notice by Company which is signed by any person they believe is authorized to act on behalf of Company. The Trustees shall not be required to act if, pursuant to the terms of this Trust Agreement, notice is required to be given and such notice has not been received by the Trustees. [The remainder of this page has been intentionally left blank.] -16- 24 (d) This Trust Agreement shall be governed by and construed in accordance with the laws of New York. SECTION 13. EFFECTIVE DATE. The effective date of this Trust Agreement shall be March __, 1994. COMPANY: TRANS-RESOURCES, INC. By: ------------------------------ TRUSTEES: ---------------------------------- Edward Klimerman ----------------------------------- Charles E. Shaw -17- 25 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ____ day of March, 1994, before me personally came ________________________ to me known, and known to me to be the individual described in, and who executed the foregoing instrument on behalf of Trans-Resources, Inc., and he acknowledged to me that he executed the same. ------------------------------ Notary Public -18- 26 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ____ day of March, 1994, before me personally came Edward Klimerman, to me known, and known to me to be the individual described in foregoing instrument, and he acknowledged to me that he executed the same. -------------------------------- Notary Public STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ____ day of March, 1994, before me personally came Charles E. Shaw, to me known, and known to me to be the individual described in foregoing instrument, and he acknowledged to me that he executed the same. ------------------------------ Notary Public -19- EX-10.15 3 AMENDED AND RESTATED CREDIT AGREEMENT 1 EXHIBIT 10.15 [EXECUTION COPY] U.S. $43,000,000 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of June 2, 1993 Among CEDAR CHEMICAL CORPORATION, NEW MEXICO POTASH CORPORATION and VICKSBURG CHEMICAL COMPANY Each as a Borrower THE FIRST NATIONAL BANK OF BOSTON NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION and THE OTHER BANKS NAMED HEREIN FROM TIME TO TIME as Lenders and THE FIRST NATIONAL BANK OF BOSTON as Agent E-5 2 T A B L E O F C O N T E N T S ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms . . . . . . . . . . 1 SECTION 1.02 Computation of Time Periods . . . . . . . 21 SECTION 1.03 Accounting Terms . . . . . . . . . . . . 22 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Advances . . . . . . . . . . . . . . 23 SECTION 2.02. Making the Revolving Credit Advances . . 23 SECTION 2.03. Fees . . . . . . . . . . . . . . . . . . 26 SECTION 2.04. Reduction of the Commitments . . . . . . 26 SECTION 2.05. Repayment . . . . . . . . . . . . . . . . 26 SECTION 2.06. Interest . . . . . . . . . . . . . . . . 27 SECTION 2.07. Prepayments and Cash Collateral . . . . . 28 SECTION 2.08. Increased Costs . . . . . . . . . . . . . 29 SECTION 2.09. Payments and Computations . . . . . . . . 29 SECTION 2.10. Sharing of Payments, Etc . . . . . . . . 30 SECTION 2.11. Use of Proceeds . . . . . . . . . . . . . 31 SECTION 2.12. Letters of Credit . . . . . . . . . . . . 31 SECTION 2.13. Sale and Purchase of Participations . . . 34 ARTICLE III GUARANTEE SECTION 3.01. Unconditional Guarantee . . . . . . . . . 39 SECTION 3.02. Guarantee Absolute . . . . . . . . . . . 40 SECTION 3.03. Waivers . . . . . . . . . . . . . . . . . 41 SECTION 3.04. Waiver of Subrogation and Contribution of Cedar . . . . . . . . . . . . . . . . 41 SECTION 3.05. Right of Contribution of Potash and VCC . 42 SECTION 3.06. Survival . . . . . . . . . . . . . . . . 42 ARTICLE IV CONDITIONS OF EFFECTIVENESS SECTION 4.01. Conditions Precedent to Effectiveness . . 43 SECTION 4.02. Conditions Precedent to Each Borrowing . 46 ARTICLE V REPRESENTATIONS AND WARRANTIES SECTION 5.01. Representations and Warranties of the Borrowers . . . . . . . . . . . . . . . 47
-i- 3 ARTICLE VI COVENANTS OF THE BORROWERS SECTION 6.01. Affirmative Covenants . . . . . . . . . 53 SECTION 6.02. Negative Covenants . . . . . . . . . . 60 SECTION 6.03. Collection of Receivables . . . . . . . 64 ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default . . . . . . . . . . . 66 ARTICLE VIII THE AGENT SECTION 8.01. Appointment of Agent . . . . . . . . . 70 SECTION 8.02. Delegation of Duties . . . . . . . . . 70 SECTION 8.03. Exculpatory Provisions . . . . . . . . 70 SECTION 8.04. Reliance by Agent . . . . . . . . . . . 71 SECTION 8.05. Notice of Default . . . . . . . . . . . 71 SECTION 8.06. Non-Reliance on Agent and Other Lenders. 72 SECTION 8.07. Indemnification . . . . . . . . . . . . 72 SECTION 8.08. Agent in Its Individual Capacity . . . 73 SECTION 8.09. Successor Agent . . . . . . . . . . . . 73 SECTION 8.10. Notices from Agent to Lenders . . . . . 73 ARTICLE IX MISCELLANEOUS SECTION 9.01. Amendments, Etc. . . . . . . . . . . . 74 SECTION 9.02. Notices, Etc. . . . . . . . . . . . . . 74 SECTION 9.03. No Waiver; Remedies . . . . . . . . . . 75 SECTION 9.04. Costs, Expenses and Taxes . . . . . . . 76 SECTION 9.05. Right of Set-off . . . . . . . . . . . 76 SECTION 9.06. Binding Effect . . . . . . . . . . . . 77 SECTION 9.07. Assignments and Participations . . . . 77 SECTION 9.08. Governing Law; Consent to Jurisdiction . 80 SECTION 9.09. Execution in Counterparts . . . . . . . 80 SECTION 9.10. Indemnification . . . . . . . . . . . . 80 SECTION 9.11. Effect of Amendment and Restatement of Existing Credit Agreement . . . . . . 81 SECTION 9.12. Waiver of Jury Trial . . . . . . . . . 81
-ii- 4 Schedule I - Commitments and Lending Offices Schedule 1.1 - Existing Debt Schedule 1.1 - Existing Encumbrances Schedule 1.1 - Mortgages Schedule 5.01(h) - Disclosed Litigation Schedule 5.01(s) - Real Property Schedule 5.01(t) - Leases of Real Property Schedule 5.01(u) - Material Contracts Schedule 5.01(v) - Loans, Advances and Other Investments Schedule 5.01(w) - Patents, Trademarks, Trade Names, Etc. -iii- 5 Exhibit A-1 - Form of Amended and Restated Revolving Credit Note Exhibit A-2 - Form of Amended and Restated Term Loan Note Exhibit B - Form of Borrowing Base Certificate Exhibit C - Form of Notice of Borrowing Exhibit D - Form of Assignment and Acceptance Exhibit E-1 - Form of Amended and Restated Cedar Security Agreement Exhibit E-2 - Form of Amended and Restated Potash Security Agreement Exhibit E-3 - Form of Amended and Restated VCC Security Agreement Exhibit F-1 - Form of Mortgage Modification (Mississippi) Exhibit F-2 - Form of Mortgage Modification (New Mexico) Exhibit F-3 - Form of Mortgage Modification (Arkansas) Exhibit G - Form of Opinion of Counsel for the Borrowers (Apperson, Crump) Exhibit H-1 - Form of Opinion of Mississippi Local Counsel to the Lenders Exhibit H-2 - Form of Opinion of New Mexico Local Counsel to the Lenders Exhibit H-3 - Form of Opinion of Arkansas Local Counsel to the Lenders Exhibit H-4 - Form of Opinion of Rubin Baum Levin Constant & Friedman Counsel to Nine West [and TRI] Exhibit I - Form of Notice of Creation of Permitted Encumbrance Exhibit J - Form of Amended and Restated Pledge Agreement Exhibit K - Form of Settlement Report Exhibit L - Form of Compliance Certificate -iv- 6 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of June 2, 1993 CEDAR CHEMICAL CORPORATION, a Delaware corporation ("Cedar"), NEW MEXICO POTASH CORPORATION, a New Mexico corporation ("Potash"), VICKSBURG CHEMICAL COMPANY, a Delaware corporation ("VCC" and together with Cedar and Potash, the "Borrowers", and each individually a "Borrower"), THE FIRST NATIONAL BANK OF BOSTON ("Bank of Boston") and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION (together with any other financial institutions which may be parties hereto from time to time, the "Lenders"), and BANK OF BOSTON, as agent (in such capacity, together with any successor appointed pursuant to Article VIII, the "Agent") for the Lenders hereunder, agree as follows: Preliminary Statements The Borrowers, the Lenders (by assignment), and the Agent (as successor to Citibank, N.A. in such capacity), are parties to the Existing Credit Agreement (as hereinafter defined). The Borrowers have requested, among other things, that the Revolving Credit Commitments, under and as defined in the Existing Credit Agreement, be increased and that the Revolving Credit Termination Date, under and as defined in the Existing Credit Agreement, be extended, and the Lenders have agreed to such requests, upon and subject to all of the terms, conditions and provisions of this Agreement. In order to reflect such modifications, as well as certain other modifications to the Existing Credit Agreement agreed on by the Borrowers, the Lenders and the Agent, in a single document, the Borrowers, the Lenders and the Agent have agreed to amend and restate the Existing Credit Agreement in its entirety as hereinafter set forth but nothing herein is intended as, or shall be deemd to be a repayment of the indebtedness outstanding under the Existing Credit Agreement or a novation. ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): 7 "Adjusted Net Worth" has the meaning specified in SECTION 6.01(m). "Advance" means a Revolving Credit Advance or a Term Loan Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling," "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 5% or more of the securities having ordinary voting power for the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agency Account" means an account of a Borrower maintained by it with a Clearing Bank pursuant to an Agency Account Agreement. "Agency Account Agreement" means an agreement among a Borrower, the Agent and a Clearing Bank, in form and substance satisfactory to the Agent, concerning the collection of payments which represent the proceeds of Receivables or of any other Collateral. "Agent" has the meaning specified in the recital of parties to this Agreement. "Agent's Office" means the office of the Agent specified in or determined in accordance with the provisions of SECTION 9.02. "Aggregate Borrowing Base" means, at any time, the lesser of: (a) the aggregate Revolving Credit Commitments at such time, and (b) the sum of (i) the sum of the amounts determined pursuant to clause (a) of the definition "Borrowing Base" for all Borrowers at such time, PLUS (ii) the lesser of (x) $12,500,000 and (y) the sum of the amounts determined pursuant to clause (b) of the definition "Borrowing Base" for all Borrowers at such time, MINUS -2- 8 (iii) the Letter of Credit Reserve. "Applicable Margin" means 3/4 of 1% per annum for Revolving Credit Advances and 1-1/4% per annum for Term Loan Advances. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of EXHIBIT D hereto. "Authorized Officer" means the Executive Vice President or the Treasurer of Cedar or such other Person as may be designated by them in writing to the Agent. "Base Rate" means at any time the greater of (i) the rate of interest announced from time to time by Bank of Boston at its head office at 100 Federal Street, Boston, Massachusetts 02110 as its "base rate" at such time and (ii) the Federal Funds Rate at such time (rounded upwards, if necessary, to the next higher 1/8 of 1%), plus 1/2 of 1% per annum. "Borrower's Account" means, for Cedar, the account of Cedar maintained with Bank of Boston at its office at 100 Federal Street, Boston, Massachusetts 02110, Account No. 80-013-898; for Potash, the account of Potash maintained at such location, Account No. 80-013-900; and, for VCC, the account of VCC maintained at such location, Account No. 80-014-006. "Borrowing" means a borrowing consisting of Revolving Credit Advances made on the same day by the Lenders. "Borrowing Base" of any Borrower means, at any time, the sum of: (a) 85% (or such lesser percentage as the Agent in its reasonable discretion shall determine) of Eligible Receivables of such Borrower at such time, PLUS (b) 50% (or such lesser percentage as the Agent in its reasonable discretion shall determine) of the value of Eligible Inventory of such Borrower at such time, MINUS (c) the aggregate face amount of all Letters of Credit issued for the account of such Borrower and outstanding at such time. "Borrowing Base Certificate" means a certificate in the form attached hereto as EXHIBIT B. -3- 9 "Business Day" means a day of the year on which banks are not required or authorized to close in Boston, Massachusetts or Atlanta, Georgia. "Capital Expenditure Debt" means, at any time, the aggregate amount of all Debt (including Capital Lease Obligations), other than Debt outstanding under the Loan Documents, of any Borrower at such time, which Debt was assumed or incurred to finance Capital Expenditures, and Debt, other than Debt outstanding under the Loan Documents, the proceeds of which are used to repay Capital Expenditure Debt. "Capital Expenditure Lien" means any purchase money or other Lien confined exclusively to property acquired by a Borrower with the proceeds of Capital Expenditure Debt, securing only the repayment of such Capital Expenditure Debt. "Capital Expenditures" means, for any period, the aggregate of (a) all expenditures during such period for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, that have a useful life of more than one year PLUS (b) the entire principal amount of any Debt (including Capital Lease Obligations) assumed or incurred in connection with any such expenditures (which principal amounts are not already included as expenditures under clause (a) above). "Capital Lease Obligations" has the meaning specified in clause (v) of the definition of "Debt." "Cedar Security Agreement" means the Amended and Restated Security Agreement dated on or about the Effective Date between Cedar and the Agent in substantially the form of EXHIBIT E-1, as the same may be amended, modified, supplemented or restated from time to time. "Cedar Subordinated Debt" means the subordinated loan made to Cedar by TRI on September 15, 1988 pursuant to the Subordinated Debt Agreement. "Clearing Bank" means Bank of Boston and any other banking institution with which an Agency Account has been established pursuant to an Agency Account Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral" means all "Collateral" referred to in the Collateral Documents and all other property that is subject to any Lien in favor of the Agent or the Lenders. -4- 10 "Collateral Documents" means each Security Agreement, the Pledge Agreement and each Mortgage. "Commitment" has the same meaning as "Revolving Credit Commitment" and is used interchangeably with the term "Revolving Credit Commitment." "Compliance Certificate" has the meaning specified in SECTION 6.01(p)(iii). "Consolidated" refers to the consolidation of financial accounts in accordance with GAAP. "Consolidated Subsidiaries" means, as to Cedar, each of Potash and VCC and any other Subsidiaries of Cedar whose accounts are at the time in question, in accordance with GAAP and pursuant to the written consent of the Majority Lenders, which consent may be withheld in their absolute discretion conditioned upon, among other things, the execution and delivery of guaranties, security agreements, mortgages and other documents required by the Majority Lenders in their absolute discretion, Consolidated with those of Cedar. "Controlled Disbursement Account" means each of the Borrower's Accounts and each account maintained by and in the name of a Borrower with a United States commercial bank (each, a "Disbursing Bank") for the purposes of disbursing the proceeds of Revolving Credit Advances and any amounts deposited thereto pursuant to SECTION 6.03(b). "Current Assets" of any Person means all assets of such Person that would, in accordance with GAAP, be classified as current assets of a company conducting a business the same as or similar to that of such Person, after deducting adequate reserves in accordance with GAAP for a company conducting a business the same as or similar to that of such Person. "Current Liabilities" of any Person means (a) all Debt of such Person that by its terms is payable on demand or matures within one year from the date of its creation (excluding any Debt constituting any portion of any Revolving Credit Advances), (b) all amounts required to be paid or prepaid with respect to any Funded Debt of such Person (including the Debt in respect of the Term Loan Advances) within one year after such date and (c) all other items (including taxes accrued as estimated, but excluding the current portion of deferred revenue) that in accordance with GAAP for a company conducting a business the same as or similar to that of such Person would be classified as current liabilities of such Person. "Debt" of any Person means all (i) indebtedness of such Person, including for borrowed money, (ii) obligations of such -5- 11 Person for the deferred purchase price of property or services (other than trade payables of such Person incurred in the ordinary course of its business), (iii) obligations of such Person evidenced by any note, loan, bond, debenture or other similar instrument, (iv) obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) obligations of such Person as lessee under leases (whether in respect of land, machinery, equipment or otherwise, but excluding rentals under any operating leases) that have been or should be, in accordance with GAAP, recorded as capital leases ("Capital Lease Obligations"), (vi) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (vii) obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (viii) all obligations for production or royalty payments from property operated by or on behalf of such Person and other similar arrangements with respect to natural resources, (ix) obligations under direct or indirect guarantees (other than the Guarantee) in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others referred to in clauses (i) through (viii) above, and (x) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA. Debt of any Borrower includes but is not limited to any Debt owed to any other Borrower or to TRI. "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Determination Date" means, with respect to each of Potash and VCC, the earlier of (a) the date of commencement of a case under Title 11 of the United States Code in which such party is a debtor and (b) the date enforcement of the Guarantee is sought with respect to such party. "Disclosed Litigation" has the meaning specified in SECTION 4.01(b). "EBIT" of any Person for any period means, net income of such Person for such period, plus the amount of interest expense and income tax expense deducted in computing such net income. -6- 12 "EBITDA" of any Person for any period means, EBIT of such Person for such period, plus depreciation, depletion and amortization expense deducted in computing such EBIT. "EBIT Coverage" has the meaning specified in SECTION 6.01(k). "Effective Date" means the later of the date of this Agreement and the date on which all of the conditions set forth in ARTICLE IV are first satisfied. "Eligible Assignee" means (a) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $3,000,000,000 and a combined capital and surplus of at least $150,000,000; (b) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $3,000,000,000 and a combined capital and surplus of at least $150,000,000; (c) a commercial bank organized under the laws of any other country that is a member of the OECD, or a political subdivision of any such country, and having total assets in excess of $3,000,000,000 and a combined capital and surplus of at least $150,000,000, PROVIDED that such bank is acting through a branch or agency located in the country in which it is organized or another country that is also a member of the OECD; (d) the central bank of any country that is a member of the OECD; (e) a finance company, insurance company or other financial institution or fund engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, organized under the laws of the United States or any State thereof and having assets in excess of $500,000,000; (f) any other financial institution or fund which the Agent and Cedar agree may become an Eligible Assignee; and (g) any Affiliate of an assignor of an interest hereunder. "Eligible Inventory" means, as to each Borrower, Inventory of such Borrower which the Agent in its reasonable discretion determines to meet all of the following requirements: (a) such Inventory is owned by such Borrower, is stored at a location listed on Schedule III to such Borrower's Security Agreement, is subject to the Security Interest, which is perfected as to such Inventory, and is subject to no other Lien whatsoever other than a Permitted Lien, (b) such Inventory consists of raw materials or finished goods and not work-in-process, (c) such Inventory meets all standards imposed by any Governmental Authority having regulatory authority over such goods, their use or sale, -7- 13 (d) such Inventory is currently either usable or salable at prices approximating at least cost in the ordinary course of such Borrower's business, (e) such Inventory is not obsolete or returned or repossessed goods, (f) such Inventory is in the possession and control of such Borrower and not any third party, (g) if such Inventory is located on property leased by such Borrower (other than a public warehouse), the lessor of such property shall have entered into a consent and agreement providing the Agent with the right to receive notice of default, the right to repossess such Inventory at any time and such other rights as may be acceptable to the Agent, and (h) such Inventory is not determined by the Agent, on behalf of the Lenders, to be ineligible based on customary credit and collateral criteria utilized by asset based lenders. "Eligible Receivable" means, to each Borrower, a Receivable of such Borrower which the Agent in its reasonable discretion determines to meet all of the following requirements: (a) such Receivable is owned by such Borrower and represents a complete bona fide transaction in the ordinary course of such Borrower's business which requires no further act under any circumstances on the part of such Borrower to make such Receivable payable by the account debtor thereon, (b) such Receivable does not remain unpaid more than 30 days past the original due date nor, unless such Receivable is fully backed by an irrevocable letter of credit issued or confirmed by a U.S. commercial bank having combined capital and surplus of not less than $150,000,000, is the original due date of such Receivable more than 180 days past the date of the original invoice giving rise to such Receivable, (c) the goods the sale of which gave rise to such Receivable were shipped or delivered to the account debtor on an absolute sale basis and not on a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on the basis of any other similar understanding and no material part of such goods has been returned or rejected, PROVIDED that this clause (c) shall not apply to Receivables of VCC arising under the N-204 Contract nor to Receivables arising out of the sale of goods covered by one or more "inventory protection" programs -8- 14 maintained by such Borrower, of which such Borrower has notified the Agent (in a Borrowing Base Certificate or otherwise in writing), and in connection with which the Agent shall have established such reserves against the Borrowing Base of such Borrower as the Agent deems appropriate, (d) such Receivable is not evidenced by chattel paper or an instrument of any kind unless such chattel paper or instrument has been collaterally assigned to the Agent, for the benefit of itself as Agent and the Lenders, pursuant to an assignment in form and substance satisfactory to the Agent and is in the possession of the Agent, (e) the account debtor with respect to such Receivable is not insolvent or the subject of any bankruptcy or insolvency proceedings of any kind or of any other proceeding or action, threatened or pending, which might, in the Agent's reasonable judgment, have a materially adverse effect on such account debtor, (f) such Receivable is not owing by an account debtor having 25% or more in face value of its then-existing accounts owing to such Borrower past due more than 60 days from the due date of the original invoice, (g) such Receivable is not owing by an account debtor whose then-existing accounts owing to such Borrower exceed in face amount 20% of such Borrower's total Eligible Receivables, PROVIDED that for the purpose of this clause (g), only the Receivables of such account debtor in excess of 20% of such Borrower's total Eligible Receivables shall be deemed to be ineligible and, PROVIDED FURTHER, that this clause (g) shall not apply to Receivables arising under a Material Contract that has been assigned to the Agent as security, (h) if such Receivable arises from the performance of services, such services have been fully rendered and do not relate to any warranty claim or obligation, (i) such Receivable is not owing by an account debtor that is located outside of the United States of America, unless such Receivable is fully backed by an irrevocable letter of credit issued or confirmed by a U.S. commercial bank having combined capital and surplus of not less thatn $150,000,000, PROVIDED that this clause (i) shall not apply to Receivables of such Borrower in an aggregate amount equal to $750,000 or less, (j) such Receivable is a valid, legally enforceable obligation of the account debtor with respect thereto, -9- 15 (k) such Receivable is subject to the Security Interest, which is perfected as to such Receivable, and is subject to no other Lien whatsoever other than a Permitted Lien, (l) such Receivable is evidenced by an invoice or other documentation in form acceptable to the Agent, (m) the Receivable (including any Receivable arising under the N-204 Contract) is not subject to the Assignment of Claims Act of 1940, as amended from time to time, or any Applicable Law now or hereafter existing similar in effect thereto, or to any other prohibition (under Applicable Law, by contract or otherwise) against its assignment or requiring notice of or consent to such assignment, unless all such required notices have been given, all such required consents have been received and all other procedures have been complied with such that such Receivable shall have been duly and validly assigned to the Agent, for the benefit of the Lenders, (n) the goods giving rise to such Receivable were not, at the time of the sale thereof, subject to any Lien, except the Security Interest and Permitted Liens, (o) such Borrower is not in breach of any express or implied representation or warranty with respect to the goods the sale of which gave rise to such Receivable nor in breach of any representation or warranty, covenant or other agreement contained in the Loan Documents with respect to such Receivable, (p) such Receivable does not arise out of any transaction with any Subsidiary, Affiliate, creditor, tenant, lessor or supplier of such Borrower and is not subject to any present or contingent (and no facts exist which are the basis for any future) offset, deduction or counterclaim, dispute or other defense on the part of such account debtor, EXCEPT (i) if such Person has waived any right of set-off or defense in a manner acceptable to the Agent or (ii) to the extent that the value (as determined in the reasonable discretion of the Agent) of any such Receivable exceeds the potential amount (as determined in the reasonable discretion of the Agent) of any unwaived set-off or defense against such Receivable, (q) such Receivable does not arise out of finance or similar charges by such Borrower or other fees for the time value of money, (r) the account debtor with respect to such Receivable is not located in New Jersey or any other state denying -10- 16 creditors access to its courts in the absence of qualification to transact business in such state or the filing of a Notice of Business Activities Report or other similar filing, unless such Borrower has either qualified as a foreign corporation authorized to transact business in such state or has filed a Notice of Business Activities Report or similar filing with the applicable state agency for the then current year, and (s) neither the account debtor with respect to such Receivable, nor such Receivable, is determined by the Agent, on behalf of the Lenders, to be ineligible based on customary credit and collateral criteria utilized by asset based lenders. "Environmental Law" means any present or future law, statute, code, ordinance, rule, regulation, permit, consent, approval, license, judgment, order, writ, decree, injunction, award or other authorization or requirement, extraordinary as well as ordinary (including but not limited to any requirement to register underground storage tanks), of any Governmental Authority relating to treatment, storage, handling, transportation, disposal, manufacturing, sale, emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic materials or wastes into ambient air, surface water, ground water, publicly owned treatment works, septic systems or land, or otherwise relating to pollution or to the protection of health or the environment. "Equipment" means all Equipment described in Section 1 of each Security Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means, as to each Borrower, any Person that for purposes of Title IV of ERISA is a member of such Borrower's controlled group, or under common control with such Borrower, within the meaning of Section 414 of the Code and the regulations promulgated and rulings issued thereunder. "ERISA Event" means, as to each Borrower, (a) a reportable event, within the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto has been waived by the PBGC; (b) the provision by the administrator of any Plan of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (c) the cessation of operations at a facility in the circumstances described in Section 4068(f) of ERISA; (d) the withdrawal by such Borrower or an ERISA Affiliate of such -11- 17 Borrower from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (e) the failure by the Borrower or any ERISA Affiliate to make a payment to a plan required under Section 302(f)(1) of ERISA; (f) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA; or (g) the institution by the PBGC of proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the occurrence of any event or condition that might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, a Plan. "Events of Default" has the meaning specified in SECTION 7.01. "Existing Credit Agreement" means the Credit Agreement dated as of November 30, 1989, as amended by Amendment No. 1 dated as of August 15, 1990, by Amendment No. 2 dated as of August 15, 1991, and by Amendment No. 3 dated as of December 31, 1992, between the Borrowers, the Lenders as the "Lenders" (by assignment) thereunder, and Bank of Boston, as the agent for such "Lenders". "Existing Debt" means Debt of a Borrower outstanding as of the date of this Agreement to the extent set forth in SCHEDULE 1.1 - EXISTING DEBT hereto. "Existing Encumbrances" means all Liens affecting property of any kind of the Borrowers existing on the date hereof as set forth in SCHEDULE 1.1 - - EXISTING ENCUMBRANCES hereto. "Extension of Credit" means, as to each of Potash and VCC, (i) all Advances made to each other Borrower under any Loan Document, (ii) all Letters of Credit issued for the account of each other Borrower under any Loan Document, (iii) all bankers' acceptances created for the account of each other Borrower under any Loan Document and (iv) all other extensions of credit to or for the benefit of each other Borrower under any Loan Document. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve system arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by Bank of Boston from three federal funds brokers of recognized standing selected by it. -12- 18 "Fixed Charge Coverage" has the meaning specified in SECTION 6.01(1). "Funded Debt" of any Person means Debt of such Person that (i) matures more than one year from the date of its creation or (ii) matures within one year from such date but is renewable or extendible, at the option of the debtor, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including, without limitation, all amounts of Funded Debt required to be paid or prepaid within one year from the date of its creation and, when applied to a Borrower, all Debt in respect of the Advances to it. "GAAP" has the meaning specified in SECTION 1.03. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity, now existing or hereafter created, having jurisdiction over a Borrower or any of its property or any part thereof, exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee" has the meaning specified in SECTION 3.01. "Guaranteed Obligations" has the meaning specified in SECTION 3.01. "Hazardous Materials" means all materials subject to any Environmental Law, including, without limitation, materials listed and defined as hazardous or toxic pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section Section 9601, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section Section 1801, et seq.), the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section Section 6901, et seq.), and the regulations adopted and publications promulgated pursuant thereto, including flammable, explosive or radioactive materials, hazardous or toxic wastes or substances, petroleum or petroleum distillates or asbestos or material containing asbestos. "Insufficiency" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities within the meaning of Section 4001(a)(18) of ERISA. "Issuing Bank" means Bank of Boston as the issuer of Letters of Credit. "Inventory" means all Inventory described in Section 1 of each Security Agreement. -13- 19 "Leasehold" has the meaning specified in SECTION 5.01(t). "Lenders" means the Persons listed on the signature pages hereof under the caption "Lenders" and each Eligible Assignee that shall become a party hereto pursuant to SECTION 9.07. "Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Lending Office" opposite its name on SCHEDULE I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrowers and the Agent. "Letter of Credit" and "Letters of Credit" mean, respectively, any one or more than one of the letters of credit issued for the account of a Borrower pursuant to SECTION 2.12, whether issued by or through the actions of the Issuing Bank, as the same may be transferred, renewed, modified, amended or restated from time to time in the manner provided therein. "Letter of Credit Advance" has the meaning specified in SECTION 2.12(d). "Letter of Credit Reserve" means, at any time, an amount equal to 100% of the aggregate face amount of all Letters of Credit outstanding at such time. "Liabilities" of any Person means the total amount of all items that would be classified as liabilities on a balance sheet prepared of such Person in accordance with GAAP. "Lien" means any lien (including, without limitation, any lien imposed pursuant to Section 107(f) of the Superfund Amendments and Reauthorization Act of 1986 or any similar Environmental Law), security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Documents" means this Agreement, the Notes, the Letters of Credit, the Collateral Documents, and the Assignment (as defined in the Cedar Security Agreement or the VCC Security Agreement) of the N-204 Contract. "Majority Lenders" means at any time Lenders owed at least 75% of the then aggregate unpaid principal amount of the Advances owing to Lenders or, if no such principal amount is then outstanding, Lenders having at least 75% of the Commitments. -14- 20 "Material Contract" means, as to any Person, each contract to which such Person is a party involving aggregate consideration payable to or by such Person of $4,500,000 or more or otherwise material to the business, condition (financial or otherwise), operations, performance, properties or prospects of such Person. "Maturity Date" means November 30, 1995. "Maximum Guaranteed Amount" means, as to each of Potash and VCC as of the Determination Date for such party, the greatest of (i) an amount equal to the sum of each Extension of Credit (or portion thereof) the proceeds of which are used to make a Valuable Transfer to such party PLUS interest on such amount at the highest rate then applicable under this Agreement, (ii) 95% of the Net Worth, As Adjusted, of such party on the Effective Date before giving effect to any Extensions of Credit made on such date and (iii) 95% of the Net Worth, as Adjusted, of such party at the Determination Date for such party. For purposes hereof, the proceeds of an Extension of Credit (or portion thereof) are considered to be used to make a "Valuable Transfer" to either of Potash or VCC if such proceeds are used to (i) make a loan, advance or capital contribution to such party, (ii) acquire from such party debt securities or other obligations of such party, (iii) acquire property, any interest in which is transferred to either of Potash or VCC (but only to the extent of the economic benefit to such party of the interest so transferred), (iv) purchase equity securities of such party or (v) otherwise confer, directly or indirectly, an economic benefit on such party (but only to the extent of such benefit). "Modified Debt" means, at any time, the aggregate amount (but without duplication) of the Consolidated Funded Debt of Cedar and its Consolidated Subsidiaries (including current maturities thereof) at such time, the aggregate outstanding principal amount of all Advances at such time, the outstanding principal amount of the Cedar Subordinated Debt at such time, and the aggregate amount of all other obligations of any Borrower to TRI, but excluding any deferred dividend obligation owing to TRI at such time. "Mortgage" means each Mortgage, Leasehold Mortgage, Deed of Trust, Leasehold Deed of Trust, Assignment of Rents and Financing Statement described on SCHEDULE 1.1 - MORTGAGES, as further amended or modified from time to time in accordance with the terms thereof. "Mortgage Modification" means, as to each Mortgage, a modification or amendment substantially in the form of EXHIBIT F-1, F-2 or F-3, as appropriate. -15- 21 "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which a Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements. "Multiple Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of a Borrower or an ERISA Affiliate and at least one Person other than a Borrower and its ERISA Affiliates or (b) was so maintained and in respect of which a Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "N-204 Contract" means that certain contract dated November 30, 1990, between Cedar and the United States of America through the Department of the Air Force for a term of five years beginning November 30, 1990, as assigned by Cedar to VCC pursuant to a Novation Agreement dated as of January 1, 1993 (Contract No. F41608-90-D-2268). "Net Cash Proceeds" means, with respect to any sale, lease, transfer or other disposition of any asset by any Person, the aggregate amount of cash received or receivable by such Person in connection with such transaction after deducting therefrom only (i) reasonable and customary brokerage commissions, legal fees, finder's fees and other similar fees and commissions, (ii) amounts paid in respect of Debt permitted under SECTION 6.02(b), to the extent such Debt is secured by a Lien on such asset, which Lien is senior in priority to the Liens arising under the Loan Documents, and (iii) the amount of taxes payable in connection with or as a result of such transaction, but in each case to the extent, and only to the extent, that the amounts so deducted are, at the time of receipt of such cash or thereafter, paid to a Person that is not an Affiliate of such Person and are properly attributable to such transaction or to the asset that is the subject thereof. "Net Interest Expense" has the meaning specified in SECTION 6.01(k). "Net Outstandings" of any Lender means, at any time, the sum of (a) all amounts paid by such Lender (other than pursuant to SECTION 8.07) to the Agent in respect of Borrowing consisting of Revolving Credit Advances or otherwise under this Agreement, MINUS (b) all amounts paid by the Agent to such Lender which are received by the Agent and which, pursuant to this Agreement, are paid over to such Lender for application in -16- 22 reduction of the outstanding principal balance of the Revolving Credit Advances. "Net Worth, As Adjusted" of each of Potash and VCC means, as of any date, the excess of (i) the amount of the "present fair saleable value" of the assets of such party as of such date OVER (ii) the amount of all "liabilities of such party, contingent or otherwise", as of such date, as such quoted terms are defined or construed in accordance with applicable federal and state laws governing determinations of the insolvency of debtors. "Nine West" means Nine West Corporation, a Delaware corporation, its successors and assigns. "Note" means a Revolving Credit Note or a Term Loan Note. "Notice of Borrowing" has the meaning specified in SECTION 2.02(a). "Non-Ratable Loan" means Revolving Credit Advances made by Bank of Boston in accordance with the provisions of SECTION 2.14(b). "Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any obligation to make any payment for any reason, whether or not such obligation is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such obligation is discharged, stayed or otherwise affected by any proceeding of the type referred to in SECTION 7.01(e). Without limiting the generality of the foregoing, the Obligations of each Borrower under the Loan Documents include (a) all principal, interest, charges, expenses, fees, attorneys' fees and disbursements, indemnities and any other amounts payable by such Borrower under any Loan Document and (b) any amount in respect of any of the foregoing that the Agent or any Lender, in its sole discretion, may elect to pay or advance on behalf of such Borrower. "OECD" means the Organization for Economic Cooperation and Development. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor agency or entity performing substantially the same functions. "Permitted Encumbrances" has the meaning specified in the Mortgages. -17- 23 "Permitted Investments" means deposits in non-interest-bearing accounts maintained with commercial banks or savings banks organized under the laws of the United States or any state thereof (as listed on Schedule VI to each Borrower's Security Agreement) which in the aggregate for all Borrowers do not exceed $500,000 and investments, having a maturity not greater than 90 days after the date of acquisition thereof, in (a) obligations issued or unconditionally guaranteed by the United States or any agency thereof, (b) certificates of deposit of a Lender or any commercial bank organized under the laws of the United States or any State thereof and having combined capital and surplus of at least $1 billion, (c) commercial paper with a rating of at least "Prime-l" by Moody's Investors Service, Inc. or "A-l" by Standard & Poor's Corporation or (d) such other investments as the Agent may approve. "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies not yet due and payable (other than Liens in favor of the PBGC); (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; (d) purchase money Liens upon or in any property acquired by a Borrower in the ordinary course of its business to secure the purchase price of such property or to secure indebtedness incurred solely for the purpose of financing the acquisition of such property; (e) Liens existing on property described in (d) above at the time of its acquisition; (f) Liens in favor of issuers of surety and performance bonds arising thereunder in respect of the subject matter thereof; and (g) operating leases. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Pledge Agreement" means the Amended and Restated Pledge Agreement dated on or about the Effective Date between Nine West and the Agent in substantially the form of EXHIBIT J, as the same may be amended, modified, supplemented or restated from time to time. -18- 24 "Pledged Collateral" has the meaning specified in the Pledge Agreement. "Potash Security Agreement" means the Amended and Restated Security Agreement dated on or about the Effective Date between Potash and the Agent in substantially the form of EXHIBIT E-2, as the same may be amended, modified, supplemented or restated from time to time. "Receivables" means all Receivables described in Section 1 of each Security Agreement. "Register" has the meaning specified in SECTION 9.07(c). "Revolving Credit Advance" means each "Revolving Credit Advance" as defined in and outstanding under the Existing Credit Agreement on the Effective Date and each Advance made by a Lender pursuant to SECTION 2.01(a) (and includes Letter of Credit Advances). "Revolving Credit Commitment" means, as to each Lender, the amount set forth opposite such Lender's name on SCHEDULE I under the caption "Revolving Credit Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register maintained by the Agent pursuant to SECTION 9.07(c) as such Lender's "Revolving Credit Commitment," in each case as the same may be reduced pursuant to SECTION 2.04. "Revolving Credit Note" means a promissory note (including amendments, restatements and other modifications thereto) of a Borrower payable to the order of any Lender, in substantially the form of EXHIBIT A-1 hereto, evidencing the aggregate indebtedness of such Borrower to such Lender resulting from the Revolving Credit Advances owing to such Lender and any promissory note issued in exchange, replacement or substitution therefor. "Revolving Credit Termination Date" means (a) December 31, 1995 or (b) the earlier date of termination in whole of the Revolving Credit Commitments pursuant to SECTION 2.04 or 7.01. "Secured Obligations" has the meaning specified in the relevant Security Agreement. "Security Agreement" means each of the Cedar Security Agreement, the Potash Security Agreement and the VCC Security Agreement, and "Security Agreements" means more than one of said Agreements. -19- 25 "Security Interest" means the Liens of the Agent, for its benefit and the benefit of the Lenders, on and in the Collateral or the Real Property or the Leaseholds effected hereby or by any of the Collateral Documents or pursuant to the terms hereof or thereof. "Settlement Date" means each Business Day after the Effective Date selected by the Agent in its sole discretion subject to and in accordance with the provisions of SECTION 2.14(a) as of which a Settlement Report is delivered by the Agent and on which settlement is to be made among the Lenders in accordance with the provisions of SECTION 2.14. "Settlement Report" means each report, substantially in the form attached hereto as EXHIBIT K, prepared by the Agent and delivered to each Lender and setting forth, among other things, as of the Settlement Date indicated thereon and as of the next preceding Settlement Date, the aggregate principal balance of all Revolving Credit Advances outstanding, each Lender's ratable share thereof, each Lender's Net Outstandings and all Non-Ratable Loans made, and all payments of principal, interest and fees received by the Agent from the Borrower during the period beginning on such next preceding Settlement Date and ending on such Settlement Date. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of a Borrower or an ERISA Affiliate and no Person other than such Borrower and its ERISA Affiliates or (b) was so maintained and in respect of which a Borrower or an ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Solvent" and "Solvency" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. "Subordinated Debt" means Debt of Cedar outstanding from time to time under the Subordinated Debt Agreement and other Debt for borrowed money of any Borrower the repayment of which has been subordinated to the prior payment in full of the -20- 26 Obligations of the Borrowers to the Lenders on terms and conditions satisfactory to the Majority Lenders. "Subordinated Debt Agreement" means that certain Agreement to Make a Subordinated Loan, dated July 15, 1988, between Cedar and TRI, as amended, modified and supplemented from time to time in accordance with the terms hereof and thereof. "Subsidiary" means, as to any Person, any corporation of which more than 50% of the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries and when used without indication of ownership means a Subsidiary of Cedar. "Term Loan Advance" means each "Term Loan Advance" as defined in and outstanding under the Existing Credit Agreement on the Effective Date. "Term Loan Note" means a promissory note of Cedar payable to the order of any Lender, in substantially the form of EXHIBIT A-2 hereto, evidencing the aggregate indebtedness of Cedar to such Lender resulting from the Term Loan Advances owing to such Lender and any promissory note issued in exchange, substitution or replacement therefor. "TRI" means Trans-Resources, Inc., a Delaware corporation, its successors and assigns. "VCC Security Agreement" means the Amended and Restated Security Agreement dated on or about the Effective Date between VCC and the Agent in substantially the form of EXHIBIT E-3, as the same may be amended, modified, supplemented or restated from time to time. "Welfare Plan" means a welfare plan, as defined in Section 3(1) of ERISA. "Withdrawal Liability" has the meaning given such term under Part 1 of Subtitle E of Title IV of ERISA. SECTION 1.02 Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and each of the words "to" and "until" means "to but excluding". -21- 27 SECTION 1.03 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in SECTION 5.01(f) ("GAAP"). SECTION 1.04 Captions. Headings and captions are included in this Agreement for convenience of reference only and shall not affect the content or construction of any provision hereof. -22- 28 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Advances. (a) The Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances ("Revolving Credit Advances") to a Borrower on any Business Day during the period from the Effective Date until the Revolving Credit Termination Date in an aggregate amount not to exceed at any time outstanding such Lender's Revolving Credit Commitment, less such Lender's ratable share of the Letter of Credit Reserve; PROVIDED, HOWEVER, that (i) in no event shall the aggregate amount of all outstanding Revolving Credit Advances to any Borrower exceed such Borrower's Borrowing Base; and (ii) in no event shall the aggregate amount of all outstanding Revolving Credit Advances to all Borrowers exceed the Aggregate Borrowing Base. Within the limits of each Lender's Revolving Credit Commitment, a Borrower may borrow, repay pursuant to SECTION 2.07(a) and reborrow under this SECTION 2.01(a). (b) Reduction of Outstandings. Notwithstanding the provisions of SECTIONS 2.01(a) and 2.07: (i) in 1993 and in each calendar year thereafter Cedar shall choose a day (the "Initial Clean-up Day") occurring on or after July 1 and before October 1 of such year and shall notify the Agent thereof at least two Business Days in advance, (ii) on or before each such Initial Clean-up Day the Borrowers shall repay outstanding Revolving Credit Advances in accordance with SECTION 2.07(a) and provide cash collateral as contemplated by SECTION 2.07(c) for outstanding Letters of Credit, such that the aggregate principal amount of all outstanding Revolving Credit Advances, PLUS the aggregate face amount of outstanding Letters of Credit, LESS the amount of such cash collateral, does not exceed (A) in 1993, $2,000,000 and (B) in 1994 and each year thereafter, $4,000,000, and (iii) the Borrowers shall not borrow under SECTION 2.01(a) or SECTION 2.12 during the 31 consecutive days including and following each such Initial Clean-up Day to the extent that any such Borrowing would result in Revolving Credit Advances and Letters of Credit being outstanding in excess of the applicable limit set forth in clause (A) or (B) above. SECTION 2.02. Making the Revolving Credit Advances. Revolving Credit Advances shall be made as follows: (a) Requests for Borrowing. A request for a Borrowing shall be made, or shall be deemed to be made, in the following manner: (i) A Borrower may give the Agent written notice, which shall be irrevocable and shall be substantially in the form of EXHIBIT C hereto, of its intention to make a -23- 29 Borrowing specifying the amount of the proposed Borrowing and the proposed Borrowing date not later than 11:00 a.m. (Boston time), on the date (which shall be a Business Day) of a proposed Borrowing (each such notice, a "Notice of Borrowing"). A Borrower may give any such notice by telephone, telecopier or telex by an Authorized Officer, in which case such Borrower shall confirm the same by mailing a written Notice of Borrowing to the Agent within 48 hours thereafter. (ii) Whenever a check is presented for payment against a Controlled Disbursement Account in an amount greater than the then available balance in such account, the Disbursing Bank shall, and is hereby irrevocably authorized by each Borrower to, give the Agent notice thereof, which notice shall be deemed to be a request for a Borrowing by such Borrower on the date of such notice in an amount equal to the excess of such check over such available balance. (iii) Whenever a drawing occurs under a Letter of Credit, the Issuing Bank shall, and is hereby irrevocably authorized by each Borrower to, give the Agent notice thereof, which notice shall be deemed to be a request for a Borrowing by such Borrower on the date of such notice (or on the next succeeding Business Day if such notice is given after 11:00 a.m. (Boston time) on such date) in an amount equal to the amount of such drawing. (iv) Unless the Borrowers, or any of them, shall have otherwise notified the Agent, the becoming due of any amount required to be paid under this Agreement as interest shall be deemed to be a request for a Borrowing by the Borrower or Borrowers the primary obligors thereon on the due date in the amount required to pay such interest. (v) The becoming due of any other Obligation of the Borrowers, or any them, under this Agreement or any other Loan Document shall be deemed to be a request for a Borrowing of Revolving Credit Advances on the due date in the amount then so due, and such request shall be irrevocable. (vi) If and to the extent that the Borrower or Borrowers the primary obligors in respect of any Obligation referred to in CLAUSE (ii), (iii), (iv) OR (v) of this SECTION 2.02(a) may not, within the applicable limitations set forth in SECTION 2.01(a) or by reason of the conditions set forth in SECTION 4.02, borrow the amount deemed requested pursuant to such clause, each other Borrower, in its capacity as a guarantor hereunder, hereby irrevocably authorizes the Agent to deem such request for a Borrowing also to have been made by it and to apply the proceeds of -24- 30 any Revolving Credit Advances made to such other Borrower to the payment of the relevant Obligation of such first Borrower. The Agent shall notify the Borrowers promptly of any Revolving Credit Advances made to them pursuant to this SECTION 2.02(A)(VI), PROVIDED that the Agent's failure so to notify any Borrower shall not affect such Borrower's Obligations hereunder in respect of such Advances. (b) Disbursement. Subject to the provisions of SECTION 2.14, promptly following receipt of a Notice of Borrowing, the Agent shall notify each Lender by telephone, telecopier or telex of the date and amount of the Borrowing. Not later than 2:00 p.m. (Boston time) on the date specified for any Borrowing, each Lender shall make available its ratable portion of the Borrowing in immediately available funds to the Agent at the Agent's Office. Upon fulfillment of the applicable conditions set forth in ARTICLE IV, each Borrower hereby irrevocably authorizes the Agent on behalf of the Lenders to disburse the proceeds of the Revolving Credit Advances made upon each Borrowing requested, or deemed to be requested, pursuant to this SECTION 2.02 as follows: (i) the proceeds of each Borrowing requested under SECTIONS 2.02(a)(i) and (ii) shall be disbursed by the Agent in lawful money of the United States of America in immediately available funds, by wire transfer to the applicable Controlled Disbursement Account or, in the absence of a Controlled Disbursement Account, by credit or by wire transfer to such other account as may be agreed upon by such Borrower and the Agent from time to time, and (ii) the proceeds of each Borrowing requested under SECTION 2.02(a)(iii), (iv), (v) or (vi) shall be disbursed by the Agent on behalf of the Lenders by way of direct payment of the relevant Obligation of the Borrowers (or any Borrower). (c) Assumption by Agent. Subject to the provisions of SECTION 2.14 unless the Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Agent such Lender's ratable portion of such Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Borrowing in accordance with subsection (a) of this SECTION 2.02 and the Agent may, in reliance upon such assumption, make available to the appropriate Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Agent, such Lender and such Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Agent, at -25- 31 (i) in the case of a Borrower, the interest rate applicable at the time and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement. The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. Fees. (a) Commitment Fee. The Borrowers jointly and severally agree to pay to the Agent for the account of the Lenders a commitment fee on the average daily unused portion of each Lender's Revolving Credit Commitment, LESS such Lender's ratable share of the aggregate face amount of outstanding Letters of Credit, from the Effective Date (or, if applicable, from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender) until the Revolving Credit Termination Date at the rate of 3/8 of 1% per annum, payable quarterly in arrears on the first Business Day of each March, June, September and December commencing on September 1, 1993, and on the Revolving Credit Termination Date; PROVIDED, HOWEVER, that during the period from the Effective Date through December 31, 1994, such fee at the rate of 3/8 of 1% per annum shall apply only to the amount of such unused Commitment in excess of each Lender's ratable share of $5,000,000, and the Borrowers shall pay such fee at the rate of 1/8 of 1% per annum on such unused Commitment of each Lender up to such Lender's ratable share of $5,000,000. (b) Agent's Fees. Cedar agrees to pay to the Agent for its own account such fees as may from time to time be agreed between the Borrower and the Agent. (c) Closing Fee. Cedar agrees to pay to the Agent for the ratable account of the Lenders a closing fee in the amount of $50,000 on the Effective Date. SECTION 2.04. Reduction of the Commitments. The Borrowers shall have the right, upon at least ten Business Days' notice to the Agent, to terminate in whole or reduce ratably with respect to the Lenders in part the unused portions of the Revolving Credit Commitments, PROVIDED that each partial reduction of the Revolving Credit Commitments shall be in the aggregate amount of $500,000 or an integral multiple of $100,000 in excess thereof. SECTION 2.05. Repayment. (a) Revolving Credit Advances. Each Borrower shall repay to the Agent for the account -26- 32 of the Lenders the outstanding principal amount of the Revolving Credit Advances as follows: (i) whether or not any Default or Event of Default has occurred, the outstanding principal amount of all Revolving Credit Advances is due and payable, and shall be repaid by the Borrowers, on the Revolving Credit Termination Date; (ii) if at any time (A) the aggregate outstanding principal amount of all Revolving Credit Advances to any Borrower exceeds such Borrower's Borrowing Base or (B) the aggregate outstanding principal amount of all Revolving Credit Advances to all Borrowers exceeds the Aggregate Borrowing Base, in each case as in effect at such time, the applicable Borrower or Borrowers shall pay to the Agent, upon demand by the Agent, for the ratable account of the Lenders for application to the repayment of Revolving Credit Advances made by them, an amount equal to such excess; and (iii) each Borrower hereby irrevocably instructs the Agent to pay to the Lenders ratably (subject to the provisions of SECTION 2.14) for application to the repayment of the Revolving Credit Advances outstanding to it on any day, or if no such Advances are outstanding to it on such day, then the Revolving Credit Advances outstanding to any other Borrower on such day, an amount equal to the amount received by the Agent for the account of the Lenders on such day pursuant to SECTION 6.03. (b) Term Loan Advances. Cedar shall repay to the Agent for the account of the Lenders the outstanding principal amount of the Term Loan Advances in ten consecutive quarterly installments, the first seven of which shall be in the amount of $1,928,500 each, with the remaining three payments in the amount of $1,500,000 each, payable on the first Business Day of each March, June, September and December of each year, commencing on September 1, 1993 and ending on the Maturity Date; PROVIDED, HOWEVER, that the last such installment shall be in the amount necessary to repay in full the unpaid principal amount of all Term Loan Advances and shall be made on the Maturity Date. SECTION 2.06. Interest. (a) Interest on Unpaid Principal Amount. The Borrowers, or Cedar, as the case may be, shall pay interest on the unpaid principal amount of each Advance from the date of such Advance until such principal amount shall be due or paid in full prior to the due date therefor, at a rate per annum equal at all times to the sum of (i) the Base Rate in effect from time to time PLUS (ii) the Applicable Margin in effect from time to time, payable monthly in arrears on the first day of each month in the case of Revolving Credit Advances, and quarterly in arrears on the first day of each March, June, September and December during the term hereof in the case of the -27- 33 Term Loan Advances, commencing on the first such date after the Effective Date, and on the Maturity Date and the Revolving Credit Termination Date. (b) Default Interest. If any Borrower shall fail to pay any amount of principal of any Advance on the due date thereof or upon the occurrence and during the continuance of an Event of Default, each Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender, payable on demand, at a rate per annum equal at all times to three percent (3%) per annum above the rate per annum required to be paid on such Advance pursuant to CLAUSE (a) above. SECTION 2.07. Prepayments and Cash Collateral. (a) Optional. Each Borrower may, upon at least ten Business Days' notice to the Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrowers shall, prepay the outstanding principal amount of (i) the Term Loan Advances in whole or ratably in part, or (ii) the entire outstanding amount of all Revolving Credit Advances and the Term Loan Advances in whole, in each case together with accrued interest to the date of such prepayment on the principal amount prepaid; PROVIDED, HOWEVER, that each partial prepayment of Term Loan Advances shall be in an aggregate principal amount not less than $100,000 or an integral multiple of $100,000 in excess thereof, and shall be applied to the installments thereof in inverse order of maturity. (b) Mandatory. Each Borrower shall, on the date of receipt of the Net Cash Proceeds from the sale, lease, transfer or other disposition of any assets of such Borrower (other than sales of assets in the ordinary course of business), prepay an aggregate principal amount of the Advances owing by such Borrower (or to the extent of the excess of such Net Cash Proceeds over such aggregate amount of Advances, to Advances owing by any other Borrower) equal to such Net Cash Proceeds. Each such prepayment shall be applied first to the Term Loan Advances and to the installments thereof in inverse order of maturity and second to the Revolving Credit Advances. All prepayments under this SECTION 2.07(b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. (c) Cash Collateral. If, as of any Initial Clean-up Day, the aggregate principal amount of Revolving Credit Advances PLUS aggregate face amount of outstanding Letters of Credit exceeds the maximum amount of Revolving Credit Advances PLUS Letters of Credit permitted to be outstanding as of such day, the Borrowers shall deposit to an account maintained with the Agent, for the ratable benefit of the Lenders, an amount in cash equal to such excess. Each such deposit made by the Borrowers or any of them shall be held by the Agent as cash collateral for the Obligations of the Borrowers under this Agreement and the other -28- 34 Loan Documents for the period specified in SECTION 2.01(b) as the period during which no Borrowings and Letters of Credit may be outstanding in excess of such maximum amount and, PROVIDED, no Default has occurred and is continuing as of the first Business Day after the last day of such period, be returned, less any amounts thereof applied to reimburse the Issuing Bank for any drawings on any Letter of Credit made during such period or to satisfy any other Obligations of the Borrowers hereunder or under any other Loan Document becoming due during such period, to the party or parties that made such deposit. At the Borrowers' request, but subject to the Agent's reasonable approval, the Agent shall invest any cash collateral or proceeds thereof consisting of cash in Permitted Investments described in clauses (a) through (d) of the definition thereof. Any commissions, expenses or penalities incurred by the Agent in connection with any redemption, sale or other realization on any such Permitted Investments or in connection with making any investments of cash collateral or proceeds thereof consisting of cash or in connection with any re-transfer of cash collateral, shall be for the account of the Borrowers, shall be paid by the Borrowers on demand and shall constitute Obligations of the Borrowers. Any such amount that is not paid on demand may be charged against such cash collateral account. SECTION 2.08. Increased Costs, Etc. If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type (or similar contingent obligations), then, upon demand by such Lender (with a copy of such demand to the Agent), the Borrowers shall pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. A certificate as to such amounts submitted to the Borrowers by such Lender shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.09. Payments and Computations. (a) Each Borrower shall make each payment hereunder and under the Notes not later than 11:00 A.M. (Boston time) on the day when due in U.S. dollars to the Agent at the Agent's Office in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or commitment fees ratably (other than amounts payable pursuant to SECTION 2.08 and subject to the provisions of SECTION -29- 35 2.14) to the Lenders for the account of their Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to SECTION 9.07(d), from and after the effective date of such Assignment and Acceptance, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) If the Agent receives funds for application to the Advances in circumstances in which the Loan Documents do not specify the Advances to which, or the manner in which, such funds are to be applied, the Agent may elect to distribute such Advances to each Lender ratably in accordance with such Lender's proportionate share of all outstanding Advances, in repayment or prepayment of such of the outstanding Advances of such Lender, and for application to such principal installments, as the Agent shall direct. (c) Each Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or under any Note held by such Lender, to charge from time to time against any or all of such Borrower's accounts with such Lender any amount so due. (d) All computations of interest and fees shall be made by the Agent on the basis of a year of 360 days, as the case may be, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error. (e) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be. SECTION 2.10. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances owing to it (other than pursuant to SECTION 2.08 and subject to the provisions of SECTION 2.14) in excess of its ratable share of payments on account of the Advances obtained by -30- 36 all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this SECTION 2.10 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. SECTION 2.11. Use of Proceeds. The proceeds of the Revolving Credit Advances made to the Borrowers shall be available (and each Borrower agrees that it shall use such proceeds) solely for working capital and general corporate purposes. SECTION 2.12. Letters of Credit. (a) Upon the terms and provisions and subject to the conditions contained in this Agreement, in lieu of a cash advance under the Revolving Credit Commitments, the Issuing Bank in its discretion may issue or cause the issuance of Letters of Credit from time to time upon the request of any Borrower up to a cumulative maximum face amount (whether or not advanced) not to exceed $7,500,000; PROVIDED that the Issuing Bank's agreement to consider the issuance of Letters of Credit shall terminate on the Revolving Credit Termination Date; and, PROVIDED FURTHER, that the Issuing Bank shall not consider the issuance of any Letter of Credit if (i) the face amount of the Letter of Credit to be issued, when added to the aggregate principal balance of outstanding Revolving Credit Advances, would exceed the Aggregate Borrowing Base (or if, when added to the aggregate principal balance of Revolving Credit Advances outstanding to such Borrower, would exceed such Borrower's Borrowing Base) or (ii) such issuance would result in the Borrowers' non-compliance with the provisions of SECTION 2.01(b). (b) A Borrower may request that a Letter of Credit be issued pursuant to SECTION 2.12(a) by: (i) giving the Issuing Bank at least five Business Days' notice of the requested issuance, which notice shall specify (A) the requested date of issuance, face amount and expiration date of the desired Letter -31- 37 of Credit, (B) the Governmental Authority or other person for whose benefit it is to be issued, and (C) the purpose for which the Letter of Credit is being requested; and (ii) completing and delivering to the Issuing Bank an application for such Letter of Credit on its standard form and otherwise acceptable to the Issuing Bank. Each requested Letter of Credit shall be in a face amount of not less than $10,000 and shall terminate no later than December 15, 1995. The issuance of each Letter of Credit is subject to the compliance by the applicable Borrower with the conditions precedent to obtaining an Advance under this Agreement and subject always to the sole and absolute discretion of the Issuing Bank. Each Letter of Credit will be issued on a standard form of the Issuing Bank then in effect. The requested Letter of Credit may be delivered by the Issuing Bank to the designated beneficiary, to such Borrower or to such person as such Borrower may reasonably request. (c) Each of the Letters of Credit may be drawn upon by presentment to the Issuing Bank, at its office at 100 Federal Street, Boston, Massachusetts 02110 (or such other office as may be specified therein), of the original Letter of Credit, duly endorsed by the beneficiary (which presentment may be waived by the Issuing Bank with respect to Letters of Credit permitting multiple drawings), together with a draft payable to the beneficiary or its order and the beneficiary's certificate that it is entitled to the amount of the draft or such other documents as may be specified in such Letter of Credit, each in the form annexed to the relevant Letter of Credit. The Issuing Bank may accept any draft, certificate or other document reasonably conforming in form and substance to the requirements described in and forms annexed to the Letter of Credit, and may afford the beneficiary notice of and an opportunity to correct non-conforming items capable of cure, each in the sole and absolute discretion of the Issuing Bank and without any notice to or assent from the applicable Borrower. The Letters of Credit may not be transferred or assigned without (i) submission to the Issuing Bank of a notice of transfer in the form annexed to the Letter of Credit, and (ii) the payment of the Issuing Bank's normal transfer fee. (d) Each amount paid by the Issuing Bank or its designee pursuant to a Letter of Credit (a "Letter of Credit Advance") shall, in accordance with the provisions of SECTION 2.02, be deemed to be a Borrowing of additional Revolving Credit Advances by the applicable Borrower pursuant to this Agreement. (e) (i) The applicable Borrower shall pay to the Agent for the ratable benefit of the Lenders, on the date of issuance of each standby Letter of Credit and at 90-day intervals thereafter, in advance, a Letter of Credit fee at the rate of 1.5% per annum of the undrawn face amount thereof, for the 90-day period commencing on such date (or -32- 38 any shorter period commencing on such date and ending on the expiration date of such Letter of Credit), computed on the basis of a year of 360 days, such amount to be determined as of the Business Day immediately preceding such payment date. (ii) The applicable Borrower shall pay to the Issuing Bank, for its own account, such fees and charges, payable in advance on the date of issuance or extension (as the case may be) of each Letter of Credit, in amounts equal to those customarily charged by the Issuing Bank. (f) In addition to the payments of principal, interest and fees as stated above, if there shall be any increase in the direct or indirect costs to the Issuing Bank of issuing, causing the issuance of or maintaining a Letter of Credit, or any reduction in any amount received or to be received with respect to a Letter of Credit by the Issuing Bank hereunder, due to: (i) the introduction of or any change in any applicable law or the interpretation or administration thereof, including, without limitation, the imposition, modification or application of (A) any reserve, capital inadequacy, special deposit, assessment or similar requirement respecting Letters of Credit issued by, assets held by, or deposits in or for the account of the Issuing Bank or other issuer of a Letter of Credit, (B) any requirement to withhold or deduct from any amount payable to the Issuing Bank hereunder, or payable directly or indirectly to the issuer of a Letter of Credit, any taxes, levies, imposts, duties, fees, deductions, withholdings or charges of a similar nature, or any interest thereon or any penalties with respect thereto, imposed, levied, collected, assessed, withheld or deducted by any governmental authority, including subdivisions and taxing authorities thereof, or (C) any other restriction or condition affecting a Letter of Credit or this Agreement; or (ii) the compliance by the Issuing Bank or other issuer of a Letter of Credit with any regulation, guideline or request from any central bank or other authority (whether or not having the force of law); then the applicable Borrower shall from time to time, upon demand by the Issuing Bank, pay to the Issuing Bank for its own account, additional amounts sufficient to indemnify the Issuing Bank against and reimburse it for such increased costs and reduced receipts. A certificate as to the amount of such increased costs and reduced receipts submitted to the applicable Borrower by the Issuing Bank shall be conclusive as to the existence and amount thereof, absent manifest error. If the Issuing Bank has not received payment for such amounts by the time it receives from the applicable Borrower the next succeeding payment or prepayment -33- 39 of a portion of the Revolving Credit Advances, whether intended by such Borrower to be interest, principal or otherwise, the Agent may, and is hereby authorized by all Borrowers to remit to the Issuing Bank from such payment or prepayment an amount equal to such costs and receipts, notwithstanding anything to the contrary contained in this Agreement. (g) The Obligations on the Borrowers hereunder and under the other Loan Documents shall not otherwise be deemed to have been fully paid or satisfied until all of the outstanding Letters of Credit have been presented, have expired by their terms without presentment or have been surrendered to the Issuing Bank for return to and cancellation by the issuers thereof. SECTION 2.13. Sale and Purchase of Participations. (a) Each Lender hereby irrevocably and unconditionally purchases, and the Issuing Bank hereby sells and transfers to each Lender, an undivided percentage interest equal to such Lender's ratable share (based upon its Revolving Credit Commitment) in each Letter of Credit and each drawing thereunder (and all unsatisfied reimbursement obligations created in connection therewith) and the Obligations of the applicable Borrower (and each other Borrower) in respect of each such Letter of Credit. (b) Whenever a drawing is made under a Letter of Credit, the Issuing Bank will promptly notify, by telephone, telefax or telex, each Lender as of the date of such drawing, and the amount of such drawing. Upon receipt of such notice, each Lender shall cause to be transmitted to the account designated by the Issuing Bank an amount in immediately available funds equivalent to its ratable share of such drawing in such manner to ensure that such funds are received by the Issuing Bank and available to the Issuing Bank by 3:00 p.m. (Boston time), on the date demand therefor was made by the Issuing Bank (if demand was made by 11:00 a.m. (Boston time)) or by 10:00 a.m., (Boston time), on the Business Day following the date demand therefor was made (if demand was made after 11:00 a.m. (Boston time)), all without regard to whether the Borrowers (or such Borrower) have at such time satisfied the conditions to Advances set forth in ARTICLE IV. SECTION 2.14. Settlement Among Lenders as to Revolving Credit Advances. It is agreed that each Lender's Net Outstandings are intended by the Lenders to be equal at all times to such Lender's ratable share of the aggregate principal amount of all Revolving Credit Advances outstanding. Notwithstanding such agreement, the several and not joint obligation of each Lender to make Revolving Credit Advances in accordance with the terms of this Agreement ratably in accordance with such Lender's Revolving Credit Commitment and each Lender's right to receive its ratable share of principal payments on Revolving Credit Advances in accordance with its Revolving Credit Commitment, the -34- 40 Lenders agree that, in order to facilitate the administration of this Agreement and the Loan Documents, settlement among them may take place on a periodic basis in accordance with the provisions of this SECTION 2.14. To the extent and in the manner hereinafter provided in this SECTION 2.14, settlement among the Lenders as to Revolving Credit Advances may occur periodically on Settlement Dates determined from time to time by the Agent, which may occur before or after the occurrence or during the continuance of a Default and whether or not all of the conditions set forth in SECTION 4.02 have been met. On each Settlement Date, payments shall be made by or to Bank of Boston and the other Lenders in the manner provided in this SECTION 2.14 in accordance with the Settlement Report delivered by the Agent pursuant to the provisions of this SECTION 2.14 in respect of such Settlement Date so that as of each Settlement Date, and after giving effect to the transactions to take place on such Settlement Date, each Lender's Net Outstandings shall equal such Lender's ratable share of the Revolving Credit Advances outstanding to all Borrowers. (a) Selection of Settlement Dates. If the Agent elects, in its discretion, but subject to the consent of Bank of Boston, to settle accounts among the Lenders with respect to principal amounts of Revolving Credit Advances less frequently than each Business Day, then the Agent shall designate periodic Settlement Dates which may occur on any Business Day after the Effective Date; PROVIDED, HOWEVER, that the Agent shall designate as a Settlement Date any Business Day on which interest on any Advances is payable hereunder; and PROVIDED FURTHER, that a Settlement Date shall occur at least once during each seven-day period. The Agent shall designate a Settlement Date by delivering to each Lender a Settlement Report not later than 12:00 noon (Boston time) on the proposed Settlement Date, which Settlement Report will be in the form of EXHIBIT K hereto and shall be with respect to the period beginning on the next preceding Settlement Date and ending on such designated Settlement Date. (b) Non-Ratable Loans and Payments. Between Settlement Dates, the Agent shall request and Bank of Boston may (but shall not be obligated to) advance to any Borrower out of Bank of Boston's own funds, the entire principal amount of any Borrowing requested or deemed requested pursuant to SECTION 2.02(a) (any such Borrowing being referred to as a "Non-Ratable Loan"). The making of each Non-Ratable Loan by Bank of Boston shall be deemed to be a purchase by Bank of Boston of a 100% participation in each other Lender's ratable share of the amount of such Non-Ratable Loan. All payments of principal, interest and any other amount with respect to such Non-Ratable Loan shall be payable to and received by the Agent for the account of Bank of Boston. Upon demand by Bank of Boston, with notice thereof to the Agent, each other Lender shall pay to Bank of Boston, as the -35- 41 repurchase of such participation, an amount equal to 100% of such Lender's ratable share, based on its Revolving Credit Commitment, of the principal amount of such Non-Ratable Loan. Any payments received by the Agent between Settlement Dates which in accordance with the terms of this Agreement are to be applied to the reduction of the outstanding principal balance of Revolving Credit Advances, shall be paid over to and retained by Bank of Boston for such application, and such payment to and retention by Bank of Boston shall be deemed, to the extent of each other Lender's ratable share, based on such Lender's Revolving Credit Commitment, of such payment, to be a purchase by each such other Lender of a participation in the Revolving Credit Advances (including the repurchase of participations in Non-Ratable Loans) held by Bank of Boston. Upon demand by another Lender, with notice thereof to the Agent, Bank of Boston shall pay to the Agent, for the account of such other Lender, as a repurchase of such participation, an amount equal to such other Lender's ratable share of any such amounts (after application thereof to the repurchase of any participations of Bank of Boston in such other Lender's ratable share of any Non-Ratable Loans) paid only to Bank of Boston by the Agent. (c) Net Decrease in Outstandings. If on any Settlement Date the increase, if any, in the dollar amount of any Lender's Net Outstandings which is required to comply with the first sentence of this SECTION 2.14 is less than such Lender's ratable share of amounts received by the Agent but paid only to Bank of Boston since the next preceding Settlement Date, such Lender and the Agent, in their respective records, shall apply such Lender's ratable share of such amounts to the increase in such Lender's Net Outstandings, and Bank of Boston shall pay to the Agent, for the account of such Lender, the excess allocable to such Lender. (d) Net Increase in Outstandings. If on any Settlement Date the increase, if any, in the dollar amount of any Lender's Net Outstandings which is required to comply with the first sentence of this SECTION 2.14 exceeds such Lender's ratable share of amounts received by the Agent but paid only to Bank of Boston since the next preceding Settlement Date, such Lender and the Agent, in their respective records, shall apply such Lender's ratable share of such amounts to the increase in such Lender's Net Outstandings, and such Lender shall pay to the Agent, for the account of Bank of Boston, any excess. (e) No Change in Outstandings. If a Settlement Report indicates that no Revolving Credit Advances have been made during the period since the next preceding Settlement Date, then such Lender's ratable share of any amounts received by the Agent but paid only to Bank of Boston shall be paid by Bank of Boston to the Agent, for the account of such Lender. If a Settlement Report indicates that the increase in the dollar amount of a -36- 42 Lender's Net Outstandings which is required to comply with the first sentence of this SECTION 2.14 is exactly equal to such Lender's ratable share of amounts received by the Agent but paid only to Bank of Boston since the next preceding Settlement Date, such Lender and the Agent, in their respective records, shall apply such Lender's ratable share of such amounts to the increase in such Lender's Net Outstandings. (f) Return of Payments. If any amounts received by Bank of Boston in respect of the Obligations of the Borrowers are later required to be returned or repaid by Bank of Boston to any Borrower or any other obligor or their respective representatives or successors in interest, whether by court order, settlement or otherwise, in excess of Bank of Boston's ratable share of all such amounts required to be returned by all Lenders, each other Lender shall, upon demand by Bank of Boston with notice to the Agent, pay to the Agent for the account of Bank of Boston, an amount equal to the excess of such Lender's ratable share of all such amounts required to be returned by all Lenders over the amount, if any, returned directly by such Lender. (g) Payments to Agent, Lenders. (i) Payments under this SECTION 2.14 by any Lender to the Agent shall be made not later than 1:00 p.m. (Boston time) on the Business Day such payment is due, PROVIDED that if such payment is due on demand by another Lender, such demand is made on the paying Lender not later than 10:00 a.m. (Boston time) on such Business Day. Payment by the Agent to any Lender under this SECTION 2.14 shall be made by wire transfer promptly following the Agent's receipt of funds for the account of such Lender and in the type of funds received by the Agent, PROVIDED that if the Agent receives such funds at or prior to 1:00 p.m. (Boston time), the Agent shall pay such funds to such Lender by 2:00 p.m. (Boston time) on such Business Day. If a demand for payment is made after the applicable time set forth above, the payment due shall be made by 2:00 p.m. (Boston time) on the first Business Day following the date of such demand. (ii) If a Lender shall, at any time, fail to make any payment to the Agent required hereunder, the Agent may, but shall not be required to, retain payments that would otherwise be made to such Lender hereunder and apply such payments to such Lender's defaulted obligations hereunder, at such time, and in such order, as the Agent may elect in its sole discretion. (iii) With respect to the payment of any funds under this SECTION 2.14(g), whether from the Agent to a Lender or from a Lender to the Agent, the party failing to make full payment when due pursuant to the terms hereof shall, upon -37- 43 demand by the other party, pay such amount together with interest on such amount at the Federal Funds Effective Rate. -38- 44 ARTICLE III GUARANTEE SECTION 3.01. Unconditional Guarantee. (a) Each of Cedar, Potash and VCC hereby jointly and severally unconditionally and irrevocably guarantees (the undertakings of Cedar, Potash and VCC contained in this ARTICLE III being the "Guarantee") the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of each other Borrower now or hereafter existing under this Agreement, the Notes or any other Loan Document, whether for principal, interest, fees, expenses or otherwise (such obligations, as to each Borrower in respect of the other Borrowers, being the "Guaranteed Obligations"), and agrees to pay any and all expenses (including counsel fees and expenses) incurred by the Agent or the Lenders in enforcing any rights under this Guarantee. Without limiting the generality of the foregoing, the liability of the Guarantee shall extend to all amounts which constitute part of a Borrower's Guaranteed Obligations and would be owed by any other Borrower to the Agent or the Lenders under any Loan Document but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Borrower. In addition, each of Cedar, Potash and VCC hereby unconditionally and irrevocably agrees that upon default in the payment when due (whether at stated maturity, by acceleration or otherwise) of any principal of, or interest on, any Advance to any other Borrower or such other amounts payable by such other Borrower to any Lender or the Agent, it will forthwith pay the same, without further notice or demand; PROVIDED, HOWEVER, that, anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each of Potash and VCC under this Guarantee shall in no event exceed such party's Maximum Guaranteed Amount as determined at the Determination Date for such party; and, FURTHER PROVIDED, THAT the Maximum Guaranteed Amount for each of Potash and VCC under this Guarantee shall in no event exceed the respective amounts which could be incurred under this Guarantee without rendering this Guarantee, as it relates to such party, void or voidable under applicable law relating to fraudulent conveyance or fraudulent transfer (determined after giving effect to the rights of contribution provided in SECTION 3.05). (b) Each Borrower agrees that the Guaranteed Obligations of such Borrower may at any time and from time to time exceed the Maximum Guaranteed Amount, if any, of such Borrower (or of all of the Borrowers) without impairing this Guarantee as to such Borrower or affecting the rights and remedies of the Agent and the Lenders hereunder. -39- 45 (c) No payment or payments made by any of the Borrowers or any other Person or received or collected by the Agent or any Lender from any of the Borrowers or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Guaranteed Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of Potash or VCC under this Guarantee which shall, notwithstanding any such payment or payments other than payments made by such party in respect of the Guaranteed Obligations or payments received or collected from such party in respect of the Guaranteed Obligations, remain liable for the Guaranteed Obligations up to its respective Maximum Guaranteed Amount until the Guaranteed Obligations are paid in full and the Commitments are terminated. SECTION 3.02. Guarantee Absolute. Each of Cedar, Potash and VCC guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Lender or the Agent with respect thereto. This Guarantee is a continuing guaranty of payment and not of collection; all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. The liabilities under this Guarantee shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of any Loan Documents or any other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Guaranteed Obligations, or any other amendment or waiver thereof or any consent to departure therefrom, including but not limited to any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Borrower or otherwise; (c) any taking, exchange, release or non-perfection of any Collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) any manner of application of collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations or any other assets of any Borrower; (e) any change, restructuring or termination of the corporate structure or existence of any Borrower; or -40- 46 (f) any other circumstance which might otherwise constitute a defense available to, or a discharge of any Borrower or a guarantor. This Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any of the Lenders or the Agent upon the insolvency, bankruptcy or reorganization of any Borrower or otherwise, all as though such payment had not been made. SECTION 3.03. Waivers. Each of Cedar, Potash and VCC hereby expressly waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guarantee and any requirement that the Agent or any Lender protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Borrower or any other Person or any collateral, including any rights any Borrower may otherwise have under O.C.G.A. Section 10-7-24. SECTION 3.04. Waiver of Subrogation and Contribution of Cedar. Cedar hereby irrevocably waives any claims or other rights that it may now have or hereafter acquire against any other Borrower that arise from the existence, payment, performance or enforcement of Cedar's obligations under this Guarantee or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Lenders against any other Borrower or any collateral that the Lenders now have or hereafter acquire, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any other Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right. If any amount shall be paid to Cedar in violation of the preceding sentence at any time prior to the later of the payment in full of the Guaranteed Obligations and the Termination Date, such amount shall be deemed to have been paid to Cedar for the benefit of, and held in trust for the benefit of the Lenders and shall forthwith be paid to Agent, for the account of the Lenders, to be credited and applied to the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of this Agreement, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Guarantee thereafter arising. Cedar acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and that the waiver set forth in this SECTION 3.04 is knowingly made in contemplation of such benefits. -41- 47 SECTION 3.05. Right of Contribution of Potash and VCC. Each of Potash and VCC hereby agrees that to the extent that the other shall have paid more than its proportionate share of any amount paid made under this Guarantee, it shall be entitled to seek and receive contribution from and against Potash or VCC, as the case may be, which has paid less than its proportionate share of such payment. The provisions of this SECTION 3.05 shall not limit the obligations and liabilities of any Borrower to the Agent and the Lenders, and each Borrower shall remain liable to the Agent and the Lenders for the full amount guaranteed by such Borrower hereunder; PROVIDED, HOWEVER, that, anything here or in any other Loan Document to the contrary notwithstanding, the maximum liability of each of Potash and VCC hereunder shall in no event exceed such party's Maximum Guaranteed Amount as determined at the Determination Date for such party; and, FURTHER PROVIDED, HOWEVER, that the amounts payable under this SECTION 3.05 shall in no event exceed the respective amounts which could be incurred under this Guarantee without rendering this Guarantee, as it relates to such party, void or voidable under applicable law relating to fraudulent conveyance or fraudulent transfer (determined after giving effect to the rights of contribution provided in this SECTION 3.05). SECTION 3.06. Survival. This Guarantee is a continuing guaranty and shall (a) remain in full force and effect until indefeasible payment in full (after the Revolving Credit Termination Date) of the Guaranteed Obligations and all other amounts payable under this Guarantee, (b) be binding upon each of Cedar, Potash and VCC, their successors and assigns, and (c) inure to the benefit of and be enforceable by each Lender and the Agent and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), each Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Loan Documents (including but not limited to all or any portion of its Commitment, the Advances owing to it and any Note held by it) to any Eligible Assignee, and such Eligible Assignee shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject, however, to the provisions of SECTION 9.07 and of ARTICLE VIII (concerning the Agent). -42- 48 ARTICLE IV CONDITIONS OF EFFECTIVENESS SECTION 4.01. Conditions Precedent to Effectiveness. The effectiveness of this Agreement is subject to the following conditions precedent: (a) The Lenders shall be satisfied that all Existing Debt identified on SCHEDULE 1.1 - EXISTING DEBT as Debt that is to be prepaid, redeemed or defeased on or prior to the Effective Date (if any Debt is so identified) has been prepaid, redeemed or defeased in full or otherwise satisfied and extinguished or that appropriate arrangements have been made to immediately prepay or otherwise satisfy and extinguish such Existing Debt from the proceeds hereof as contemplated hereby. (b) There shall exist no action, suit, investigation, litigation or proceeding affecting any Borrower pending or threatened before any court, governmental agency or arbitrator that, if adversely determined, would have a material adverse effect on the business, condition (financial or otherwise), operations, performance, properties or prospects of any Borrower (other than the matters described on SCHEDULE 5.01(h) (the "Disclosed Litigation")) or that purports to affect the legality, validity or enforceability of this Agreement, any Note, any other Loan Document or the consummation of the transactions contemplated hereby. (c) The Agent shall have received on or before the Effective Date following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Agent (unless otherwise specified) and (except for the Notes) in sufficient copies for each Lender: (i) The Notes to the order of the Lenders. (ii) Certified copies of the resolutions of the Board of Directors of each Borrower approving this Agreement, the Notes and each other Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, and the Notes and each other Loan Document. (iii) A certificate of the Secretary or an Assistant Secretary of each Borrower certifying the names and true signatures of the officers of such Borrower authorized to sign this Agreement, the Notes and each other Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder. -43- 49 (iv) A Security Agreement made by each Borrower in substantially the form of the appropriate EXHIBIT E duly executed by the appropriate Borrower, together with (A) signed copies of proper financing statements, in appropriate form to be filed on or promptly after the Effective Date under the Uniform Commercial Code of all jurisdictions that the Agent may deem necessary or desirable in order to perfect and protect the Security Interest; (B) completed requests for information, dated on or before the Effective Date, listing all effective financing statements filed in the jurisdictions referred to in clause (A) above that name any Borrower as debtor, together with copies of such other financing statements; (C) a proper financing statement, assigning to the Agent the rights of the secured party named therein, as to each financing statement reflected in a request delivered pursuant to clause (B) above that names "Citibank, N.A., as Agent" as the secured party, duly signed by Citibank, N.A. as such agent; (D) evidence of the insurance required by the terms of the Security Agreements; (E) certificates representing the Pledged Shares (as defined in the Cedar Security Agreement) accompanied by undated stock powers executed in blank; and (F) evidence that all other action that the Agent may deem necessary or desirable in order to perfect and protect the Security Interest has been taken. (v) A Mortgage Modification with respect to each Mortgage in substantially the form of the appropriate EXHIBIT F duly executed by the applicable Borrower, together with (A) evidence that each Mortgage Modification has been duly recorded on or before the Effective Date (or acknowledgement by the representative of the title insurance issuer of receipt of such Mortgage Modifications in form for recording) in all filing or recording offices that the Agent may deem necessary or desirable in order to preserve the valid and enforceable first and subsisting Lien on the property described therein in favor of the Lenders; -44- 50 (B) American Land Title Association Lender's Extended Coverage title insurance policies, or endorsements thereto or unconditional commitments for the issuance of the same, in each case in form and in amounts acceptable to the Agent, issued and reinsured by title insurers acceptable to the Agent, insuring the Mortgages (other than the Mortgage made by Potash) as modified by the Mortgage Modifications to be valid and enforceable first Liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics' and materialmen's liens) and encumbrances, excepting only Permitted Encumbrances, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents and for mechanics' and materialmen's liens) and coinsurance and reinsurance with direct access as the Agent may deem necessary or desirable; (C) such consents and agreements of lessors and other third parties, and such estoppel letters and other confirmations, as the Agent may deem necessary or desirable; (D) evidence of the insurance required (including, without limitation, for any business or property) by the terms of the Mortgages as modified by the Mortgage Modifications; (E) certified copies of all authorizations and approvals of, evidence of action by, notices to, and filings with, all Governmental Authorities regarding the due execution, delivery or performance by each Borrower of the Mortgages as modified by the Mortgage Modification; and (F) evidence that all other action that the Agent may deem necessary or desirable in order to preserve valid first and subsisting Liens on the property described in the Mortgages has been taken. (vi) A favorable opinion of Apperson, Crump, Duzane & Maxwell, counsel for the Borrowers, in substantially the form of EXHIBIT G hereto and as to such other matters as any Lender through the Agent may reasonably request. (vii) Favorable opinions of Hilburn, Calhoon, Harper, Pruniski & Calhoun, Ltd.; McCormick, Forbes, Caraway & Tabor; and Gerald & Brand, local counsel to the Lenders in Arkansas, New Mexico, and Mississippi, respectively, in substantially the forms of EXHIBITS H-1, H-2 and H-3, respectively, and as to such other matters as any Lender through the Agent may reasonably request. -45- 51 (viii) A favorable opinion of Rubin Baum Levin Constant & Friedman, counsel for Nine West, in substantially the form of EXHIBIT H-4 and as to such other matters as any Lender through the Agent may reasonably request. (ix) Such financial, business and other information regarding each Borrower as the Lenders shall have requested. (x) Agency Account Agreements (as defined in the Security Agreements) with respect to each account required to be subject thereto by any Security Agreement, duly executed by each party thereto and duly agreed to and acknowledged by the Clearing Bank holding such account. (xi) The Pledge Agreement, duly executed by Nine West. SECTION 4.02. Conditions Precedent to Each Borrowing. The obligation of each Lender to make an Advance on the occasion of each Borrowing (including the initial Borrowing) shall be subject to the further conditions precedent that on the date of such Borrowing (a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing and the acceptance by any Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by such Borrower that on the date of such Borrowing such statements are true): (i) The representations and warranties contained in each Loan Document are correct on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, except for those representations and warranties made as of a specified date; (ii) No event has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom, that constitutes a Default; and (iii) The Aggregate Borrowing Base exceeds the aggregate principal amount of all Revolving Credit Advances that will be outstanding to all Borrowers after giving effect to such Borrowing and each Borrower's Borrowing Base exceeds the aggregate principal amount of all Revolving Credit Advances that will be outstanding to such Borrower after giving effect to such Borrowing; and (b) the Agent shall have received such other approvals, opinions or documents as any Lender through the Agent may reasonably request. -46- 52 ARTICLE V REPRESENTATIONS AND WARRANTIES SECTION 5.01. Representations and Warranties of the Borrowers. Each Borrower represents and warrants as follows: (a) Organization; Qualification; Powers. Each Borrower (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed (except where failure to qualify would not have a material adverse effect on any Borrower or its businesses) and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Ownership; Subsidiaries. Cedar owns 100% of the outstanding capital stock of Potash and VCC; Cedar has no Subsidiaries other than Potash and VCC; Potash has no Subsidiaries; VCC has no Subsidiaries. (c) Compliance with Laws, etc. The execution, delivery and performance by each Borrower of this Agreement, the Notes and each other Loan Document to which it is or is to be a party, and the consummation of the transactions contemplated hereby and thereby, are within such Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Borrower's charter or by-laws, (ii) violate any law (including, without limitation, the Securities Exchange Act of 1934), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting either Borrower or any of their properties or (iv) result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Borrower, except as contemplated hereby. No Borrower is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which would materially adversely affect the business, condition (financial or otherwise), operations, performance, properties or prospects of such Borrower. (d) Governmental Approvals; Execution and Delivery. No authorization or approval or other action by, and no notice to -47- 53 or filing with, any Governmental Authority or regulatory body or any other third party is required for the due execution, delivery and performance by any Borrower of this Agreement, the Notes or any other Loan Document to which it is or is to be a party, or for the consummation of the transactions contemplated hereby or thereby. This Agreement has been, and each of the Notes and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Borrower party thereto. (e) Enforceable Agreements. This Agreement is, and each of the Notes and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Borrower party thereto, enforceable against such Borrower in accordance with its terms. (f) Financial Statements. The Consolidated balance sheets of Cedar and its Consolidated Subsidiaries as at December 31, 1992, and the related Consolidated statements of income and retained earnings of Cedar and its Consolidated Subsidiaries for the fiscal year then ended, certified by Price Waterhouse, independent public accountants, and the Consolidated balance sheets of Cedar as at March 31, 1993, and the related Consolidated statements of income and retained earnings of Cedar for the three months then ended, duly certified by the chief financial officer of Cedar, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheets as at March 31, 1993, and said statements of income and retained earnings for the three months then ended, to year-end audit adjustments, the Consolidated financial condition of Cedar and its Consolidated Subsidiaries as at such dates and the Consolidated results of the operations of Cedar and its Consolidated Subsidiaries for the periods ended on such dates, all in accordance with GAAP, and since December 31, 1992, there has been no material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of any Borrower. (g) Information. No information, exhibit or report furnished by a Borrower to the Agent or any Lender in connection with the negotiation of the Loan Documents or pursuant to the terms of the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading. (h) Litigation. Except as set forth on SCHEDULE 5.01(h), there is no pending or threatened action, suit, investigation, litigation or proceeding affecting any Borrower before any court, governmental agency or arbitrator, which, if adversely determined, would materially adversely affect the business, condition (financial or otherwise), operations, performance, properties or prospects of any Borrower or that purports to affect the legality, validity or enforceability of -48- 54 this Agreement, any Note or any other Loan Document or the consummation of the transactions contemplated hereby or thereby. (i) Certain Uses of Proceeds. No proceeds of any Advance will be used to carry or acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 or to carry or acquire any item of the Permitted Portfolio. (j) Margin Stock. No Borrower is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. (k) ERISA. (i) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan. (ii) Schedule B (Actuarial Information) to the [1992] annual report (Form 5500 Series) for each Plan, copies of which have been filed with the Internal Revenue Service and furnished to the Lenders, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status. (iii) No Borrower or any ERISA Affiliate of any Borrower has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan. (iv) No Borrower or any ERISA Affiliate of any Borrower has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA. (v) The aggregate annualized cost (including, without limitation, the cost of insurance premiums) with respect to Welfare Plans for which any Borrower is liable does not exceed $2,000,000. (l) No Casualty. Neither the business nor the properties of any Borrower are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that materially adversely affects the business, condition (financial -49- 55 or otherwise), operations, performance, properties or prospects of any Borrower. (m) Environmental Matters. Except as set forth in SCHEDULE 5.01(h) the operations and properties of each Borrower comply in all material respects with all Environmental Laws and neither utilize nor contain nor are affected by any Hazardous Materials except as required in connection with the normal operation and maintenance of such operations and properties and in compliance with all Environmental Laws, and no Borrower has any material liability, contingent or otherwise, under any Environmental Law. Further, except as set forth in SCHEDULE 5.01(h), (i) the Real Property and the Leaseholds and the operations conducted thereon do not violate any applicable Environmental Law or any restrictive covenant or deed restriction (recorded or otherwise), the violation of which is likely to have a material adverse affect on the condition (financial or otherwise), operations, business, assets or prospects of any Borrower; (ii) without limitation of clause (i) above, but subject to the materiality standard set forth therein, the Real Property and the Leaseholds and the operations conducted thereon by each Borrower or any of its Subsidiaries or any current or prior owner, lessor or operator of such real property, leasehold or operation, are not in violation of any Environmental Law, or subject to any existing, pending or threatened investigation, inquiry or proceeding by any governmental authority or to any remedial obligations under any Environmental Law; (iii) all notices, permits, licenses or similar authorizations, if any, required to be obtained or filed in connection with the use of the Real Property or the Leaseholds, including, without limitation, past or present treatment, storage, disposal or release of any Hazardous Materials or solid waste into the environment, have been obtained or filed; (iv) all Hazardous Materials or solid waste generated at the Real Property or the Leaseholds have in the past been, and shall continue to be, transported, treated and disposed of only by carriers maintaining valid permits under all applicable Environmental Laws and only at treatment, storage and disposal facilities maintaining valid permits under applicable Environmental Laws, which carriers and facilities have been and are, to the best of each Borrower's knowledge, operating in compliance with such permits; (v) each Borrower has taken all reasonable steps necessary to determine, and has determined, that no Hazardous Materials or solid wastes have been disposed of or otherwise released on or to the Real Property or the Leaseholds except in compliance with Environmental Laws the failure to comply with which could have a material adverse effect on any Borrower, its businesses or on the interests of the Lenders under the Loan Documents; (vi) each Borrower and its Subsidiaries have no material contingent liability in connection with any release of any Hazardous Materials or solid waste into the environment; and (vii) the use which each Borrower or any of its Subsidiaries makes or intends -50- 56 to make of the Real Property and the Leaseholds will not result in the unlawful or unauthorized disposal or other release of any Hazardous Materials or solid waste on or to the Real Property or the Leaseholds which could have a material adverse effect on any Borrower, its businesses or on the interests of the Lenders under the Loan Documents. (n) Burdensome Agreements. No Borrower is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction that would materially adversely affect the business, condition (financial or otherwise), operations, performance, properties or prospects of any Borrower, or the ability of any Borrower to carry out its obligations under this Agreement, the Notes or any other Loan Document. (o) Tax Returns. Each Borrower has filed all tax returns (Federal, state and local) required to be filed and paid all taxes shown thereon to be due, including interest and penalties, or provided adequate reserves for payment thereof. (p) Investment Company. No Borrower is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Advances nor the application of the proceeds or repayment thereof by any Borrower, nor the consummation of the other transactions contemplated hereby, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (q) Solvency. Each Borrower is, individually and together with its Subsidiaries, Solvent. (r) Existing Debt. Set forth on SCHEDULE 1.1 - EXISTING DEBT is a complete and accurate list of all Debt of each Borrower outstanding on the date hereof, showing as of the date hereof the principal amount outstanding thereunder and the maturity date (or amortization schedule) with respect thereto. (s) Real Property. Set forth on SCHEDULE 5.01(s) hereto is a complete and accurate list of all real property owned by any Borrower (the "Real Property"), showing as of the date hereof the street address, county or other relevant jurisdiction, state, record owner and book value thereof. The Borrower indicated on SCHEDULE 5.01(s) has good, marketable and insurable fee simple title to such real property, free and clear of all Liens, other than Liens created or permitted by the Loan Documents. (t) Leaseholds. Set forth on SCHEDULE 5.01(t) hereto is a complete and accurate list of all leases of real property -51- 57 under which a Borrower is the lessee (the "Leaseholds"), showing as of the date hereof the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof. There is no default of any Borrower under any such lease, except as disclosed in SCHEDULE 5.01(t). Each such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms. (u) Material Contracts. Set forth on SCHEDULE 5.01(u) hereto is a complete and accurate list of all Material Contracts of each Borrower, showing as of the date hereof the parties, subject matter and term thereof. Each such Material Contract has been duly authorized, executed and delivered by all parties thereto, has not been amended or otherwise modified, is in full force and effect and is binding upon and enforceable against all parties thereto in accordance with its terms, and there exists no default under any Material Contract by any party thereto. (v) Investments. Set forth on SCHEDULE 5.01(v) hereto is a complete and accurate list of all loans, advances and other investments held by any Borrower, showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof. (w) Intellectual Property. Set forth on SCHEDULE 5.01(w) hereto is a complete and accurate list of all patents, trademarks, trade names, service marks and copyrights, and all applications therefor and licenses thereof, of each Borrower, showing as of the date hereof the jurisdiction in which registered, the registration number, the date of registration and the expiration date. (x) Environmental Monitoring. Each Borrower has established and maintains a system to assure and monitor continued compliance with all applicable Environmental Law, the non-compliance with which may materially adversely affect the value of any Real Property or any Leasehold or the value of the Collateral (taken as a whole), which systems include annual reviews of such compliance by employees or agents of the relevant Borrower who are familiar with the requirements of applicable Environmental Laws. (y) Subordinations of Cedar Subordinated Debt. The obligations of Cedar to pay any amount of the Cedar Subordinated Debt shall be subordinate and junior in right of payment, to the extent and in the manner provided in the Subordinated Debt Agreement, to all Obligations of Cedar under the Loan Documents, whether for principal, interest, fees, amounts payable under the Guarantee or otherwise. -52- 58 ARTICLE VI COVENANTS OF THE BORROWERS SECTION 6.01. Affirmative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, each Borrower agrees that it will (and Cedar agrees that it will cause each of Potash and VCC to), unless the Lenders shall otherwise consent in writing as provided in SECTION 9.01: (a) Compliance with Laws, Etc. Comply with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and all applicable Environmental Laws if the failure to so comply could have a material adverse effect on any Borrower, its businesses or on the interests of the Lenders under the Loan Documents. (b) Payment of Taxes, Etc. Pay and discharge before the same shall become delinquent (i) all taxes, assessments and governmental charges or levies imposed upon such Borrower or upon such Borrower's property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon such Borrower's property; PROVIDED, HOWEVER, that no Borrower shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained. (c) Maintenance of Insurance. Maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Borrower operates. (d) Preservation of Corporate Existence, Etc. Preserve and maintain its corporate existence, rights (charter and statutory) and franchises; PROVIDED, HOWEVER, that no Borrower shall be required to preserve any right or franchise if the Board of Directors of such Borrower shall determine that the preservation thereof is no longer desirable in the conduct of the business of such Borrower and that the loss thereof is not disadvantageous in any material respect to such Borrower or the Lenders. (e) Visitation Rights. At any reasonable time and from time to time, permit the Agent or any of the Lenders, or any agents or representatives thereof, to examine and make copies of and abstracts from the records (including copies of any leases, the costs of which copying shall be borne by the Borrowers) and books of account of, and visit the properties of, any Borrower, and to discuss the affairs, finances and accounts of such -53- 59 Borrower with any of their officers or directors and with their independent certified public accountants. (f) Keeping of Books. Keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of such Borrower in accordance with GAAP. (g) Maintenance of Properties, Etc. Maintain and preserve in good working order and condition, ordinary wear and tear excepted, all of its properties that are used or useful in the conduct of its business with respect to which failure to so maintain and preserve would have a material adverse effect on the business, condition (financial or otherwise), operations, performance or prospects of such Borrower or on the value or utility to such Borrower of any property. (h) Compliance with Terms of Leaseholds. Make all payments and otherwise perform all obligations in respect of all leases of real property, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled including, without limitation, leases that contain certain performance standards (such as an obligation of diligent development and continuous operations as a condition to the right to renew the same), EXCEPT where compliance with any of the above is no longer desirable in the conduct of such Borrower's business and failure to so comply is not disadvantageous in any material respect to any Borrower or to the Lenders; and notify the Agent of any default by any party with respect to such leases and cooperate with the Agent in all respects to cure any such default. (i) Performance of Material Contracts. Perform and observe all the terms and provisions of each Material Contract to be performed or observed by it, maintain each such Material Contract in full force and effect, enforce each such Material Contract in accordance with its terms, take all such action to such end as may be from time to time requested by the Agent and, upon request of the Agent, make to each other party to each such Material Contract such demands and requests for information and reports or for action as such Borrower is entitled to make under such Material Contract. (j) Transactions with Affiliates. Conduct all transactions otherwise permitted under the Loan Documents with any of such Borrower's Affiliates (other than the other Borrowers) on terms that are fair and reasonable and no less favorable to such Borrower than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate; PROVIDED, HOWEVER, that all Debt of any Borrower owing to any -54- 60 Affiliate of such Borrower (other than another Borrower) shall be on terms acceptable to the Majority Lenders. (k) Maintenance of EBIT Coverage. Maintain, as of the end of each fiscal quarter of the Borrowers for the period beginning on the first day of the fiscal year which includes such quarter and ending on the last day of such quarter, EBIT Coverage of Cedar and its Consolidated Subsidiaries greater than 3.50 to 1. "EBIT Coverage" means, for any period, the ratio of EBIT of Cedar and its Consolidated Subsidiaries on a Consolidated basis for such period divided by Net Interest Expense for such period. "Net Interest Expense" means, for any period, (i) the sum of interest payable on, PLUS amortization of debt discount in respect of, Debt of Cedar and its Consolidated Subsidiaries on a Consolidated basis during such period, MINUS (ii) interest income of Cedar and its Consolidated Subsidiaries on a Consolidated Basis for such period. (l) Maintenance of Fixed Charge Coverage. Maintain, as of the end of each fiscal quarter of the Borrowers for the period beginning on the first day of the fiscal year which includes such quarter and ending on the last day of such quarter, Fixed Charge Coverage of Cedar and its Consolidated Subsidiaries greater than 1.0 to 1. "Fixed Charge Coverage" means, for any period, the ratio of EBITDA of Cedar and its Consolidated Subsidiaries on a Consolidated basis, to the sum of (i) Net Interest Expense for such period, (ii) principal payments actually made on Funded Debt (other than Subordinated Debt and any Revolving Credit Advances) during such period, (iii) Capital Expenditures (except to the extent made from the proceeds of Capital Expenditure Debt) for such period, and (iv) cash dividends paid during such period, in each case of Cedar and its Consolidated Subsidiaries on a Consolidated basis. (m) Maintenance of Ratio of Modified Debt to Adjusted Net Worth. Maintain at all times the ratio of Consolidated Modified Debt of Cedar and its Consolidated Subsidiaries to Adjusted Net Worth at less than 1.75 to 1. "Adjusted Net Worth" means the sum of (i) the total amount of common and preferred stockholders' equity which would appear on a Consolidated balance sheet of Cedar and its Consolidated Subsidiaries, prepared in accordance with GAAP on a Consolidated basis, PLUS (ii) the aggregate outstanding principal amount of Subordinated Debt. (n) Maintenance of Current Ratio. Maintain at all times the ratio of Consolidated Current Assets to Consolidated Current Liabilities, in each case of Cedar and its Consolidated Subsidiaries, at greater than 1.20 to 1. (o) Adjusted Net Worth. Maintain Adjusted Net Worth greater than $25,000,000 at all times. -55- 61 (p) Reporting Requirements. Furnish to the Lenders: (i) as soon as possible and in any event within five days after the occurrence of each Default continuing on the date of such statement, a statement of the chief financial officer of Cedar setting forth details of such Default and the action that Cedar proposes to take with respect thereto; (ii) (A) as soon as available and in no event later than Wednesday of each week as of the close of business on the preceding Friday, a Borrowing Base Certificate in form and substance reasonably acceptable to the Agent, setting forth information regarding each Borrower's Borrowing Base and the Aggregate Borrowing Base, including a report of collections during such week and a detailed aging of all Receivables of all Borrowers, duly certified by the chief financial officer, the treasurer or the comptroller of Cedar, (B) as soon as available and in any event within 10 days after the end of each month, a detailed aging of all accounts payable of all Borrowers and a report setting forth each Receivable excluded from any Borrower's Borrowing Base, the name of the account debtor thereon and the status thereof, each certified by the chief financial officer, treasurer or controller of Cedar, and (C) as soon as available and in no event later than every second Wednesday, a certificate of the chief financial officer, treasurer or controller of Cedar as to the value (at the lower of cost (on a first-in-first-out basis) or fair market value) of Inventory of each Borrower, by location, as of the preceding Friday; (iii) as soon as available and in any event within 30 days after the end of each of the first 11 months (other than any such month which is the last month of a fiscal quarter in which case within 45 days after the end of the such month), of each fiscal year of the Borrowers, (A) an unaudited Consolidated balance sheet of Cedar and its Consolidated Subsidiaries as of the last day of such month and the related unaudited Consolidated statements of income, cash flow and shareholder's equity of Cedar and its Consolidated Subsidiaries for such month and for the fiscal year of the Borrowers through the end of such month, certified by the chief financial officer of Cedar as presenting fairly in accordance with GAAP (subject to normal audit adjustments and the absence of notes) the financial condition and results of operations of the Borrowers on a Consolidated basis as of such date and for the periods ended on such date and (B) if such month is the last month in any fiscal quarter of the Borrowers, (x) consolidating balance sheets of Cedar and its Consolidated Subsidiaries as of the last day of such fiscal quarter and the related consolidating statements of income, cash flow and -56- 62 shareholder's equity for the fiscal year of the Borrowers through the end of such fiscal quarter, (y) a comparison of operating performance for such fiscal quarter and for such fiscal year through the end of such fiscal quarter against comparable figures for the preceding fiscal year and against the operating budget for such fiscal year, and (z) a Compliance Certificate. "Compliance Certificate" means a certificate in substantially the form of EXHIBIT L, delivered by the chief financial officer of Cedar, containing a certification to the effect that the accompanying financial statements present fairly in accordance with GAAP (subject to normal audit adjustments and the absence of notes) the Consolidated financial position and results of operations of Cedar and its Consolidated Subsidiaries as of the dates and for the current periods ended on such dates of the accompanying financial statements, and a certification to the effect that the Borrowers were in compliance with the covenants set forth in SECTIONS 6.01(k), (l), (m), (n) and (o) as of the end of or for the relevant fiscal period, or if such was not the case, setting out in reasonable detail the nature of such non-compliance and what steps are proposed and are being taken to cure such non-compliance, accompanied by the computation in reasonable detail of the ratios included in such financial covenants; (iv) as soon as available and in any event within 90 days after the end of each fiscal year of Cedar, (A) a copy of the annual report for such year for Cedar and its Subsidiaries, containing the audited, Consolidated balance sheet of Cedar and its Consolidated subsidiaries as of the last day of such fiscal year and the related Consolidated statements of income, cashflow and shareholders equity for such fiscal year, certified in a manner acceptable to the Majority Lenders by Price Waterhouse & Co. or any other independent public accountants selected by Cedar and acceptable to the Majority Lenders, and (B) unaudited consolidating balance sheets and income statements of each of Cedar, Potash and VCC for such year, certified in a Compliance Certificate as for Cedar and its Consolidated Subsidiaries, described above; (v) as soon as available and in any event no later than the 31st day after the beginning of each fiscal year, an annual operating budget for such fiscal year for each Borrower including, on a Consolidated basis, monthly projected balance sheets, income statements, cash flow statements and projected Borrowing Base and usage of Revolving Credit Advances for and during such fiscal year prepared by management of such Borrower and Cedar, in form and substance satisfactory to the Lenders; -57- 63 (vi) promptly and in any event within 10 days after any Borrower or any ERISA Affiliate of any Borrower knows or has reason to know that any ERISA Event has occurred, a statement of the chief financial officer of such Borrower or such ERISA Affiliate describing such ERISA Event and the action, if any, that such Borrower or such ERISA Affiliate proposes to take with respect thereto; (vii) promptly and in any event within five Business Days after receipt thereof by any Borrower or any ERISA Affiliate of any Borrower, copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (viii) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan; (ix) promptly and in any event within five Business Days after receipt thereof by any Borrower or any ERISA Affiliate of any Borrower from the sponsor of a Multiemployer Plan, a copy of each notice received by such Borrower or ERISA Affiliate concerning (A) the imposition of Withdrawal Liability by any Multiemployer Plan, (B) the reorganization or termination, within the meaning of Title IV of ERISA, of any Multiemployer Plan or (C) the amount of liability incurred, or that may be incurred, by such Borrower or ERISA Affiliate in connection with any event described in clause (A) or (B); (x) promptly after the commencement thereof, notice of all material actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Borrower of the type described in SECTION 5.01(h); (xi) promptly after the furnishing thereof, copies of any statement or report furnished to any holder of the securities of any Borrower pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lenders pursuant to any other clause of this SECTION 6.01(p); (xii) promptly upon receipt thereof, copies of all significant notices, requests and other documents received by any Borrower under or pursuant to any Material Contract and, from time to time upon request by the Agent, such information and reports regarding the Material Contracts as the Agent may reasonably request; -58- 64 (xiii) promptly after the creation of any Permitted Encumbrance, a notice substantially in the form of EXHIBIT J hereto; (xiv) within thirty days after the end of each calendar month, a sales variance report analysis with respect to such month; and (xv) such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Borrower as any Lender may from time to time reasonably request. (q) Environmental Monitoring. Continue to maintain a system to assure and monitor continued compliance with all applicable Environmental Law, the non-compliance with which may materially adversely affect the value of any Real Property or any Leasehold or the value of the Collateral (taken as a whole), which system shall include annual reviews of such compliance by employees or agents of the relevant Borrower who are familiar with the requirements of applicable Environmental Laws. (r) Environmental Requirements. (i) In addition to, and not in derogation of, the requirements of SECTIONS 6.01(a) AND 6.01(p) and of the Collateral Documents, comply with all Environmental Laws and all other applicable laws relating to occupational health and safety (except for instances of noncompliance that, singly or in the aggregate, could not have a materially adverse effect on and Borrower) and promptly notify the Agent of its receipt of any notice of a violation of any such Environmental Laws or other applicable law and indemnify and hold the Agent and the Lenders harmless from all loss, cost, damage, liability, claim and expense incurred by or imposed upon the Agent or any Lender on account of any Borrower's failure to perform its obligations under this SECTION 6.01(r). (ii) Whenever a Borrower gives notice to the Agent pursuant to this SECTION 6.01(r) with respect to a matter that reasonably could be expected to result in liability to any Borrower in excess of $250,000 in the aggregate (other than in respect of any matter identified on SCHEDULE 5.01(h)), such Borrower shall, at the Agent's request and such Borrower's expense (i) cause an independent environmental engineer acceptable to the Agent to conduct an assessment, including tests where necessary, of the site where the noncompliance or alleged noncompliance with Environmental Laws has occurred and prepare and deliver to the Agent a report setting forth the results of such assessments or tests, a proposed plan to bring such Borrower into compliance with such Environmental Laws, if necessary, and an estimate of the costs thereof, and (ii) provide to the Agent a supplemental report of such engineer whenever the scope of the noncompliance, -59- 65 or the response thereto or the estimated costs thereof, shall materially adversely change. (s) As to the Leaseholds. Upon the request of the Agent, promptly deliver to the Agent a true and complete copy of each lease of any Leasehold and of each amendment or modification thereof, supplement thereto and waiver or consent with respect thereto, and, at the request of the Agent, allow the inspection and copying of such leases, amendments, modifications, supplements, waivers and consents by representatives of the Agent. (t) As to Real Property. Use its best efforts to cause all Real Property and Leaseholds of a Borrower, together with any goods located or to be located thereon which may constitute "fixtures" within the meaning of Article 9 of the UCC, to be subjected to duly recorded, valid, first-priority mortgage liens and security interests in favor of the Agent for the benefit of the Lenders, in each case as security for the payment of the Obligations of such Borrower to the Lenders and to the Agent under this Agreement, the Notes and the other Loan Documents, and in each case whether for principal, interest, fees, commission or otherwise. Such "best efforts" required hereunder shall, without limitation, include the payment of fees and premiums for the obtaining of title insurance (other than in respect of the Real Property and Leasehold covered by the Mortgage made by Potash) for the benefit of the Agent and the Lenders. (u) Location of Inventory. Locate all Inventory at Principal Locations (as defined in the Security Agreements), EXCEPT for Inventory with an aggregate fair market value for all Borrowers not to exceed $2,000,000 at any one time. SECTION 6.02. Negative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, each Borrower agrees that it will not (and Cedar agrees that it will not permit Potash or VCC to), without the written consent of the Lenders as provided in SECTION 9.01: (a) Liens, Etc. Create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file, under the Uniform Commercial Code of any jurisdiction, a financing statement that names Cedar, Potash or VCC, as the case may be, as debtor, or sign any security agreement authorizing any secured party thereunder to file such financing statement, or assign any accounts, EXCLUDING, HOWEVER, from the operation of the foregoing restrictions the following: -60- 66 (i) Liens created by or pursuant to the Loan Documents; (ii) Permitted Liens, Existing Encumbrances, Liens arising in connection with Capital Lease Obligations and Permitted Encumbrances; PROVIDED that the aggregate principal amount of the outstanding obligations secured by all Permitted Liens, Existing Encumbrances, Liens arising in connection with Capital Lease Obligations and Permitted Encumbrances from time to time shall not at any time exceed $2,000,000 for all Borrowers; (iii) Capital Expenditure Liens, but only to the extent that such Liens secure only Capital Expenditure Debt permitted pursuant to SECTION 6.02(b)(vi); and (iv) the replacement, extension or renewal of any Lien permitted by clauses (i) and (ii) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase of principal amount) of the obligations secured thereby. (b) Debt. Create, incur, assume or suffer to exist any Debt other than (without duplication): (i) Debt under the Loan Documents, (ii) the Cedar Subordinated Debt, (iii) Debt of a Borrower secured by Liens permitted by SECTION 6.02(a)(ii) not to exceed in the aggregate, on a Consolidated basis, $2,000,000 at any one time outstanding as and to the extent permitted to be secured by SECTION 6.02(a)(ii), (iv) the Existing Debt other than any such Debt that is to be repaid on the Effective Date, (v) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (vi) Capital Expenditure Debt incurred by a Borrower after the Effective Date and after the Lenders shall have declined to make additional financing available to such Borrower to acquire the property acquired by such Borrower with the proceeds of such Capital Expenditure Debt, to the extent that the aggregate outstanding principal amount of all such Capital Expenditure Debt of the Borrowers on a Consolidated Basis shall not exceed in any year listed below, the amount indicated opposite such year: -61- 67
Year Amount ---- ------ 1993 $3,000,000 1994 $6,000,000 1995 $9,000,000
(vii) Subordinated Debt owed to any Affiliate of a Borrower, which Debt is on terms approved by the Majority Lenders, (viii) Debt owing by the Borrowers or any of them to TRI during any period selected pursuant to SECTION 2.01(b), PROVIDED that the terms of such debt do not require repayment thereof (x) prior to the end of such period or (y) if any Default shall have occurred and be continuing on the last day of such period (or if such last day is not a Business Day, then on the next succeeding Business Day), and (ix) Debt owing by any Borrower to another Borrower, PROVIDED that all such Debt shall be reflected as such in the books and records of each Borrower that is, as to any other Borrower, a borrower or lender. (c) Lease Obligations. Create, incur, assume or suffer to exist any obligation as lessee (other than leases of Leaseholds consisting of potash mining property located in New Mexico under which Potash is the lessee) (i) for the rental or hire of real or personal property in connection with any sale and leaseback transaction, or (ii) for the rental or hire of other real or personal property of any kind under leases or agreements to lease having an original term of one year or more that would cause the direct or contingent liabilities of all Borrowers in respect of all such obligations to exceed $5,000,000 payable in any period of 12 consecutive months. (d) Mergers, Etc. Merge with or into or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets of, any Person. (e) Sales, Etc, of Assets. Sell, lease, transfer or otherwise dispose of any substantial part of its respective assets or property, including (without limitation) any manufacturing plant or substantially all assets or property constituting the business of a division, branch or other unit of operation, except (i) sales of inventory in the ordinary course of its business and (ii) sales of assets or property no longer used or useful in its business, and having a book value or fair market value (whichever is greater) in an aggregate amount not to -62- 68 exceed $300,000 in any year for all Borrowers, and not to exceed $750,000 in cumulative total. (f) Investments in Other Persons. Make any loan or advance to any Person exceeding at any one time outstanding an aggregate for all Borrowers together of $250,000 for all such loans and advances, or purchase or otherwise acquire any capital stock, warrants, rights, options, obligations or other securities of, or make any capital contribution to, or otherwise invest in, any Person; PROVIDED, HOWEVER, that nothing in this subsection shall prevent any Borrower from making loans or advances to any other Borrower in accordance with SECTION 6.02(b)(ix) or from acquiring and holding Permitted Investments in an aggregate principal amount of not more than $3,000,000 at any time outstanding or prevent Cedar from owning or holding the capital stock of Potash and VCC. (g) Dividends, Etc. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its capital stock or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding, return any capital to its stockholders as such, or make any distribution of assets, capital stock, warrants, rights, options, obligations or securities to its stockholders as such, except that each of Potash and VCC may declare and pay dividends or make other distributions to Cedar and Cedar may (i) declare and deliver dividends and distributions payable only in common stock of Cedar, (ii) purchase, redeem, retire, defease or otherwise acquire shares of its capital stock with the proceeds received from the issue of new shares of its capital stock with equal or inferior voting powers, designations, preferences and rights, and (iii) provided no Default shall have occurred and be continuing on the date of any such declaration or payment or would result from such payment, at any time after the Effective Date declare or pay cash dividends to its stockholders and purchase, redeem or otherwise acquire shares of its capital stock or warrants, rights or options to acquire any such shares for cash, to the extent that after giving effect thereto, the sum (without duplication) of all such declarations and payments made on or after the Effective Date does not exceed in total an amount equal to the sum of $1,000,000, plus 50% of the Consolidated net income of Cedar and its Consolidated Subsidiaries for the period beginning January 1, 1993 and ending on the date of declaration or payment. (h) Change in Fiscal Year. Change its fiscal year. (i) Change in Nature of Business. Make any material change in the nature of its business as carried on at the date hereof. (j) Charter Amendments. Amend its certificate of incorporation or bylaws. -63- 69 (k) Accounting Changes. Make or permit any change in accounting policies or reporting practices, except as required or permitted by GAAP. (l) Prepayments, Etc. of Debt. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Existing Debt (other than the Advances), or amend, modify or change in any manner any term or condition of any such Debt, EXCEPT that if on July 31 of 1993, 1994 or 1995 and on the date such amount (or any portion thereof) is paid, no Default has occurred and is continuing or would exist after giving effect to such payment, Cedar may repay outstanding principal of the Cedar Subordinated Debt in an amount not greater than $666,667 in respect of each such year, on a cumulative basis, and, at any time after receipt by the Lenders of audited financial statements for the fiscal year of Cedar ending December 31, 1994, as contemplated by the provisions of SECTION 6.01(p)(iv), demonstrating that no Default has occurred and is continuing or would result from such payment, Cedar may repay outstanding principal of Cedar Subordinated Debt in an additional amount not greater than $3,500,000, PROVIDED that on the date or dates of payment of such amount (or any portion thereof) no Default shall have occurred and be continuing or would result from such payment. (m) Amendment, Etc. of Material Contracts. Cancel or terminate any Material Contract or consent to or accept any cancellation or termination thereof, amend or otherwise modify any Material Contract or give any consent, waiver or approval thereunder, waive any default under or breach of any Material Contract, agree in any manner to any other amendment, modification or change of any term or condition of any Material Contract or take any other action in connection with any Material Contract that would impair the value of the interests or rights of any Borrower thereunder or that would impair the interests or rights of the Agent or any Lender. (n) Proceeds. Use any of the proceeds of any Advance to carry or acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 or to carry or acquire any item of the Permitted Portfolio. (o) Amendment of Subordinated Debt Agreement. Permit the Subordinated Debt Agreement to be amended, modified or supplemented (other than in accordance with the provisions of SECTION 6.02(l)). SECTION 6.03. Collection of Receivables. Until this Agreement has been terminated and all Borrowers' Obligations have -64- 70 been irrevocably paid in full, unless the Lenders shall otherwise consent as provided in SECTION 9.01(a): (a) Collection of Receivables. Each Borrower will cause all moneys, checks, notes, drafts and other payments relating to or constituting proceeds of Receivables of such Borrower, or of any other Collateral, to be forwarded to an Agency Account in accordance with the procedures set out in the corresponding Agency Account Agreement, and in particular each Borrower will: (i) advise each account debtor to address all remittances with respect to amounts payable on account of any Receivables to a specified Agency Account, and (ii) stamp all invoices relating to any such amounts with a legend satisfactory to the Agent indicating that payment is to be made to such Borrower via a specified Agency Account. (b) Each Agency Account Agreement shall provide that all deposits in each Agency Account be transmitted daily by wire transfer or depository transfer check or automated clearing house (ACH) transfer in accordance with procedures set forth in such Agency Account Agreement to the Agent at the Agent's Office: (i) for credit on account of the Obligations of such Borrower, whether direct or under the Guarantee, as provided in SECTION 2.05(a)(iii) such credits to be entered as of the Business Day after receipt and to be conditional upon final payment in cash or solvent credits of the items giving rise to them, and (ii) with respect to the balance, so long as no Default has occurred and is continuing, for transfer by wire transfer or depository transfer check or ACH transfer to a Controlled Disbursement Account or, in the absence of a Controlled Disbursement Account, to such other account as such Borrower and the Agent shall agree from time to time. (c) Any moneys, checks, notes, drafts or other payments referred to in SUBSECTION (a) of this SECTION 6.03 which are received by or on behalf of a Borrower will be held in trust for the Agent and will be delivered to a Clearing Bank, as promptly as possible, in the exact form received, together with any necessary endorsements for deposit in the Agency Account maintained with such Clearing Bank and processing in accordance with the terms of the corresponding Agency Account Agreement. -65- 71 ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) Any Borrower shall fail to pay any principal of any Advance when due (whether at stated maturity or by mandatory prepayment, acceleration or otherwise), or fail to pay any interest on any Advance within two Business Days after such interest shall be due, or fail to make any other payment (other than payments of principal) under any Loan Document within two Business Days after such payment shall be due; or (b) Any representation or warranty made by any Borrower (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) Any Borrower shall fail to perform or observe any term, covenant or agreement contained in SECTION 6.01(k), (l), (m), (n), (o), 6.01(p)(i), 6.02 or 6.03 for a period of five Business Days or shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 10 Business Days after written notice thereof shall have been given to such Borrower by the Agent or any Lender; or (d) Any Borrower shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Debt (but excluding Debt outstanding hereunder and unsecured Debt of a Borrower incurred in the ordinary course of such Borrower's business for the deferred purchase price of property or services, in an aggregate amount for all Borrowers not to exceed $1,000,000 at any time) of such Borrower, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or any such Debt shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or -66- 72 (e) Any Borrower shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Borrower seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property, and, in the case of such a proceeding instituted by a Person other than a Borrower, such proceeding shall not have been dismissed within 60 days of its filing; or any Borrower shall take any corporate action to authorize any of the actions set forth above in this SUBSECTION (e); or (f) Any judgment or order for the payment of money in excess of $250,000 shall be rendered against any Borrower and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) Any non-monetary judgment or order shall be rendered against any Borrower that would materially adversely affect (i) the business, condition (financial or otherwise), operations, performance, properties or prospects of any Borrower, (ii) the ability of any Borrower to perform its obligations under any Loan Document to which it is a party or (iii) the rights and remedies of the Agent or the Lenders under any Loan Document and, there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (h) Any provision of any Loan Document after delivery thereof pursuant to SECTION 4.01 shall for any reason cease to be valid and binding on or enforceable against any Borrower party to it, or any Borrower shall so state in writing; or (i) Any Collateral Document after delivery thereof pursuant to SECTION 4.01 shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected Lien on the Collateral purported to be covered thereby, which Lien shall be junior in priority only to Liens expressly permitted under SECTION 6.02(a); or (j) Arie Genger shall at any time for any reason other than his death cease to own and control the majority of the outstanding voting stock of TRI; or -67- 73 (k) TRI shall at any time for any reason cease to be the beneficial owner, directly or indirectly, of all of the capital stock of any Borrower or Cedar shall at any time for any reason cease to be the beneficial owner, directly or indirectly, of all of the capital stock of Potash or VCC; or (l) Any ERISA Event shall have occurred with respect to a Plan and, 30 days after notice thereof shall have been given to the Borrower by the Agent, (i) such ERISA Event shall still exist and (ii) the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or, in the case of a Plan with respect to which an ERISA Event described in clause (c) through (f) of the definition of ERISA Event shall have occurred and then exist, the liability related thereto) is equal to or greater than $3,000,000; or (m) Any Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Borrower or ERISA Affiliate has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Borrowers and their ERISA Affiliates in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $1,000,000 or requires payments exceeding $500,000 per annum; or (n) Any Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if, as a result of such reorganization or termination, the aggregate annual contributions of the Borrowers and their ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan year of each such Multiemployer Plan immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $500,000; or (o) Any Borrower or any ERISA Affiliate shall have committed a failure described in Section 302(f)(1) of ERISA and the amount determined under Section 302(f)(3) of ERISA is equal to or greater than $500,000; or (p) There shall occur in the reasonable judgment of the Majority Lenders any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of any Borrower; or -68- 74 (q) There shall have occurred and be continuing any Event of Default, as defined in the Mortgages; or (r) The Pledge Agreement, after delivery thereof pursuant to SECTION 4.01, shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority lien on the Pledged Collateral; then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrowers, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, (ii) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrowers, declare the Notes, all interest thereon and all other amounts payable under this Agreement, the Letters of Credit, and the other Loan Documents to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each Borrower and (iii) shall at the request, or may with the consent, of the Majority Lenders, demand the immediate deposit of cash collateral by the Borrowers in a non-interest-bearing demand deposit account with the Agent or such other institution as the Agent may designate in an amount equal to the aggregate undrawn face amount of the Letters of Credit then outstanding in order to further secure repayment of all advances under the Letters of Credit, which deposits shall remain collateral until all of the Letters of Credit have expired or been surrendered for payment or cancellation; PROVIDED, HOWEVER, that in the event of an actual or deemed entry of an order for relief with respect to any Borrower under the Federal Bankruptcy Code, (x) the obligation of each Lender to make Advances shall automatically be terminated, (y) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by each Borrower and (z) the Borrowers shall be required to make the deposit of cash collateral securing the Letters of Credit. -69- 75 ARTICLE VIII THE AGENT SECTION 8.01. Appointment of Agent. Each of the Lenders hereby irrevocably designates and appoints The First National Bank of Boston as the Agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes Agent, as the Agent for such Lender to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and such other Loan Documents, including, without limitation, to make determinations as to the eligibility of Inventory and Receivables and to adjust the advance ratios contained in the definition of "Borrowing Base" (so long as such advance ratios, as adjusted, do not exceed those set forth in the definition of "Borrowing Base"), together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or such other Loan Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Loan Documents or otherwise exist against the Agent. SECTION 8.02. Delegation of Duties. The Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 8.03. Exculpatory Provisions. Neither the Agent nor any of its trustees, officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable to any Lender (or any Lender's participants) for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Loan Documents (except for its or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any Lender (or any Lender's participants) for any recitals, statements, representations or warranties made by any Borrower or any officer thereof contained in this Agreement or the other Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or the other Loan Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan -70- 76 Documents or for any failure of any Borrower to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of any Borrower. SECTION 8.04. Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to a Borrower), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless such Note shall have been transferred in accordance with SECTION 9.07. The Agent shall be fully justified in failing or refusing to take any action under this Agreement and the other Loan Documents unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. SECTION 8.05. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender or a Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; PROVIDED that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) continue making Revolving Credit Advances to the Borrowers on behalf of the Lenders in reliance on the provisions of SECTION 2.02(c) and take such other action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. -71- 77 SECTION 8.06. Non-Reliance on Agent and Other Lenders. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of any Borrower, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of each Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of each Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder or by the other Loan Documents, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of any Borrower which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION 8.07. Indemnification. The Lenders agree to indemnify the Agent in its capacity as such (to the extent not reimbursed by a Borrower and without limiting the obligation of the Borrowers to do so), ratably according to their respective Revolving Credit Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or the other Loan Documents, or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; PROVIDED that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct or resulting solely from transactions or occurrences that occur at a time after such Lender has assigned -72- 78 all of its interests, rights and obligations under this Agreement pursuant to SECTION 9.07 or, in the case of a Lender to which an assignment is made hereunder pursuant to SECTION 9.07, at a time before such assignment. The agreements in this subsection shall survive the payment of the Notes, the Obligations of all Borrowers and all other amounts payable hereunder and the termination of this Agreement. SECTION 8.08. Agent in Its Individual Capacity. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrowers as if the Agent were not the Agent hereunder. With respect to its Revolving Credit Commitment, the Advances made or renewed by it and any Note issued to it and any Letter of Credit issued by it, the Agent shall have and may exercise the same rights and powers under this Agreement and the other Loan Documents and is subject to the same obligations and liabilities as and to the extent set forth herein and in the other Loan Documents for any other Lender. The terms "Lenders" or "Majority Lenders" or any other term shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity as a Lender or one of the Majority Lenders. SECTION 8.09. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and each Borrower and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this ARTICLE VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 8.10. Notices from Agent to Lenders. The Agent shall promptly, upon receipt thereof, forward to each Lender copies of any written notices, reports or other information supplied to it by a Borrower (but which no Borrower is required to supply directly to the Lenders). -73- 79 ARTICLE IX MISCELLANEOUS SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement, the Notes, or the other Loan Documents nor consent to any departure by any Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; PROVIDED, HOWEVER, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, do any of the following: (i) waive any of the conditions specified in SECTION 4.01 OR 4.02, (ii) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes or the number of Lenders that shall be required for the Lenders or any of them to take any action hereunder, (iii) release any Collateral or Pledged Collateral, (iv) amend this SECTION 9.01, (v) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (vi) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder or (vii) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder; PROVIDED, FURTHER, that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any Note. SECTION 9.02. Notices, Etc. (a) Notices. All notices and other communications provided for hereunder shall, except as expressly provided otherwise, be in writing (including telegraphic, telecopy, telex or cable communication) and mailed, telegraphed, telecopied, telexed, cabled or delivered, if to any Borrower, at Cedar Chemical Corporation 2414 Clark Tower 5100 Poplar Avenue Memphis, Tennessee 38137 Attention: John C. Bumpers and Trans-Resources, Inc. Nine West 57th Street New York, New York 10009 Attention: Lester W. Youner -74- 80 with a copy to: Apperson, Crump, Duzane & Maxwell One Commerce Square Suite 2110 Memphis, Tennessee 38103 Attention: Allen T. Malone, Esq. and Rubin Baum Levin Constant & Friedman 30 Rockefeller Center New York, New York 10112 Attention: Edward Klimerman, Esq. and if to any Lender, at its Lending Office specified opposite its name on SCHEDULE I hereto or at its Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; and if to the Agent, at its address at 400 Perimeter Center Terrace, Suite 745, Atlanta, Georgia 30346, Attention: John K. Hood; or, as to the Borrowers or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. All such notices and communications shall, when mailed, telegraphed, telecopied, telexed or cabled, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier, confirmed by telex answerback or delivered to the cable company, respectively, except that notices and communications to the Agent pursuant to ARTICLE II, IV or VIII shall not be effective until received by the Agent. A telephonic notice to the Agent, as understood by the Agent, will be deemed to be the controlling and proper notice in the event of a discrepancy with or failure to receive a confirming written notice. (b) Agent's Office. The Agent hereby designates its office located at 100 Federal Street, Boston, Massachusetts 02110, or any subsequent office which shall have been specified for such purpose by written notice to the Borrowers and the Lenders, as the office to which payments due are to be made and at which Advances will be disbursed. SECTION 9.03. No Waiver; Remedies. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note or other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein and in the other Loan Documents provided are cumulative and not exclusive of any remedies provided by law. -75- 81 SECTION 9.04. Costs, Expenses and Taxes. The Borrowers agree to pay on demand all costs and expenses in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (i) the reasonable fees and expenses of counsel for the Agent with respect thereto and with respect to advising the Agent and any Lender as to their respective rights and responsibilities, or perfection, protection or preservation of rights or interests, under the Loan Documents (including, without limitation, the costs of any environmental appraisal obtained in connection therewith or enforcement thereof, including, without limitation, in connection with any foreclosure under any Security Document) and the reasonable fees and expenses of counsel for each Lender in connection with the review and negotiation of this Agreement and the other Loan Documents on and prior to the Effective Date and the occurrence of the Effective Date and (ii) all costs and expenses (including, without limitation, reasonable fees and expenses of counsel for the Agent and each Lender) in connection with the enforcement of the Loan Documents (whether through negotiations before or after the occurrence of any Default, legal proceedings (including, without limitation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally) or otherwise), all out-of-pocket expenses and a per diem charge of $500 per examiner in connection with field examinations required or permitted under the Loan Documents and any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of the Loan Documents and agree to save the Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes). SECTION 9.05. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by SECTION 7.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of SECTION 7.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of any Borrower against any and all of the Obligations of the Borrowers, or any of them now or hereafter existing under this Agreement, the Notes or the other Loan Documents held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement, such Note or other Loan Document and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrowers, or any of them, after any such set-off and application made by such Lender; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each -76- 82 Lender under this SECTION 9.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. SECTION 9.06. Binding Effect. This Agreement shall be binding upon and inure to the benefit of Cedar, Potash, VCC, the Agent and each Lender and their respective successors and assigns, except that no Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 9.07. Assignments and Participations. (a) Each Lender may, with the prior written consent of the Borrowers and the Majority Lenders (other than such Lender), assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) each such assignment shall be of a uniform, and not a varying, percentage of all of the assigning Lender's rights and obligations under this Agreement, (ii) except in the case of an assignment to a Person that immediately prior to such assignment was a Lender, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 and shall be an integral multiple of $100,000, (iii) each such assignment shall be to an Eligible Assignee and (iv) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and a processing and recordation fee of $2,000. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the delivery thereof to the Agent or, if so specified in such Assignment and Acceptance, the date of acceptance thereof by the Agent, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee -77- 83 thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto or any collateral (including without limitation the Collateral); (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or the performance or observance by any Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in SECTION 5.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender. (c) The Agent shall maintain at the Agent's Office a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Borrower or Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of -78- 84 EXHIBIT D hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to Cedar. Within five Business Days after Cedar's receipt of such notice, the Borrowers, at their own expense, shall execute and deliver to the Agent in exchange for each surrendered Note a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes, shall be dated the effective date of such Assignment and Acceptance, and shall otherwise be in substantially the form of EXHIBIT A-1 or A-2 hereto, as the case may be. (e) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment to each Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrowers, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or release all or substantially all of the Collateral. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this SECTION 9.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the relevant Borrower furnished to such Lender by or on behalf of such Borrower; PROVIDED, HOWEVER, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any -79- 85 confidential information relating to such Borrower received by it from such Lender. SECTION 9.08. Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE NOTES, AND ALL CLAIMS AND DISPUTES ARISING OUT OF OR RELATING HERETO OR THERETO OR TO THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA, EXCEPT WHERE OTHERWISE SPECIFIED IN ANY LOAN DOCUMENT. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF GEORGIA AND OF ANY FEDERAL COURT SITTING IN THE NORTHERN DISTRICT OF GEORGIA AND ANY APPELLATE COURT FROM ANY THEREOF. Nothing in this Section shall affect the right of any Lender or the Agent to bring any action or proceeding against the Borrowers or their respective property in the courts of any other jurisdictions or to enforce in any other jurisdiction any judgment obtained in a court sitting in Georgia. SECTION 9.09. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.10. Indemnification. The Borrowers hereby jointly and severally indemnify and hold the Agent and each Lender harmless from and against any and all claims damages, losses, liabilities, costs or expenses which the Agent or such Lender may incur or which may be claimed against the Agent or such Lender by any person or entity: (a) by reason of any inaccuracy or alleged inaccuracy in any material respect, or any untrue statement or alleged untrue statement of any material fact, contained in the written information provided by or on behalf of any Borrower to any Lender in connection with this Agreement or any other Loan Documents or the transactions contemplated hereby or thereby, or by reason of the omission or alleged omission to state therein a material fact necessary to make such statements, in the light of the circumstances under which they were made, not misleading; (b) by reason of or in connection with the execution, delivery or performance of this Agreement or any other Loan Document, or any transaction contemplated hereby or by any thereof; PROVIDED, HOWEVER, that the Borrowers shall not be required to indemnify the Agent or such Lender pursuant to this SECTION 9.10(b) for any claims, damages, losses, liabilities, costs or expenses to the extent caused by the Agent's or such Lender's wilful misconduct or gross negligence; or -80- 86 (c) by reason of or in connection with the application of any Environmental Law to the operations or properties of any Borrower; PROVIDED, that such claims, damages, losses, liabilities, costs or expenses arise out of or relate to any of the Loan Documents or the transactions contemplated thereby. Nothing in this SECTION 9.10 is intended to limit the Borrowers' obligations contained in ARTICLE II. Without prejudice to the survival of any other obligation of any Borrower hereunder, the indemnities and obligations of all Borrowers contained in this SECTION 9.10 shall survive the payment in full of amounts payable pursuant to ARTICLE II. SECTION 9.11. Effect of Amendment and Restatement of Existing Credit Agreement. From and after the Effective Date, the Existing Credit Agreement is hereby amended and restated in its entirety. The Borrowers, the Lenders and the Agent acknowledge and agree that (i) this Agreement and the other Loan Documents executed and delivered in connection herewith do not constitute a novation, payment and reborrowing, or termination of the "Obligations" (as defined in the Existing Credit Agreement) under the Existing Credit Agreement as in effect prior to the Effective Date, (ii) such "Obligations" are in all respects continuing (as amended and restated hereby) with only the terms thereof being modified as provided in this Agreement, (iii) the Liens, assignments and security interests of the Agent, for its benefit and the benefit of the Lenders, created and granted under the Security Agreements, the Mortgages and the other Collateral Documents, securing the payment and performance of such "Obligations," are in all respects continuing and in full force and effect (as modified in connection with this Agreement) and secure the payment and performance of the Obligations (as defined in this Agreement), and (iv) from and after the Effective Date, all references in any Loan Document to "the Credit Agreement" and other words or phrases referring to the Existing Credit Agreement, shall mean and be references to this Agreement. SECTION 9.12. Waiver of Jury Trial. EACH OF CEDAR, POTASH, VCC, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. -81- 87 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CEDAR CHEMICAL CORPORATION By: /s/ John C. Bumpers ----------------------------------- Name: John C. Bumpers Title: Executive Vice President NEW MEXICO POTASH CORPORATION By: /s/ John C. Bumpers ----------------------------------- Name: John C. Bumpers Title: Vice President VICKSBURG CHEMICAL COMPANY By: /s/ John C. Bumpers ----------------------------------- Name: John C. Bumpers Title: Vice President THE FIRST NATIONAL BANK OF BOSTON, as Agent By: /s/ William C. Purinton ----------------------------------- William C. Purinton Vice President Lenders THE FIRST NATIONAL BANK OF BOSTON By: /s/ William C. Purinton ----------------------------------- William C. Purinton Vice President -82- 88 NATIONSBANK OF GEORGIA, N.A. By: /s/ Joe Hardesty ----------------------------------- Name: Joe Hardesty Title: Senior Vice President -83- EX-10.16 4 RESTATED AMENDMENT NO. 1 TO CREDIT AGREEMENT 1 EXHIBIT 10.16 [Execution Copy] RESTATED AMENDMENT NO. 1 to AMENDED AND RESTATED CREDIT AGREEMENT THIS RESTATED AMENDMENT NO. 1 dated as of November 10, 1993 is made among CEDAR CHEMICAL CORPORATION, NEW MEXICO POTASH CORPORATION, VICKSBURG CHEMICAL COMPANY, THE FIRST NATIONAL BANK OF BOSTON and NATIONSBANK OF GEORGIA, N.A. Preliminary Statements Cedar Chemical Corporation, a Delaware corporation ("Cedar"), New Mexico Potash Corporation ("Potash"), Vicksburg Chemical Company ("VCC"), The First National Bank of Boston ("Bank of Boston"), NationsBank of Georgia, N.A. (a "Lender") and Bank of Boston as agent for itself and the other Lenders, are parties to an Amended and Restated Credit Agreement dated as of June 2, 1993 (said Agreement, the "Credit Agreement," terms defined therein or by reference therein being used herein as therein defined), pursuant to which the Lenders have extended and may continue to extend loans and other financial accommodations to the Borrowers. VCC intends to construct a new potassium carbonate plant on VCC's property in Vicksburg, adjacent to VCC's existing plant. The Borrowers have determined that it is advantageous to VCC as the direct borrower and to Cedar and Potash as guarantors, that the financing for such plant be provided by the loan to VCC by the Mississippi Business Finance Corporation (the "Authority") of the proceeds of the issuance by the Authority of certain taxable industrial development revenue bonds. VCC and the other Borrowers have requested, and the Lenders and the Agent have agreed, upon and subject to all of the terms, conditions and provisions of this Restated Amendment and of the Bond Documents (as defined in Section 1(b) below), to purchase said bonds in an aggregate principal amount equal to up to 75% (or $11,250,000, if less) of the cost of said plant. This Restated Amendment corrects, supersedes and replaces, in its entirety, the document titled "Amendment No. 1 to Amended and Restated Credit Agreement" heretofore executed by the parties hereto but which did not become effective in accordance with its terms. NOW, THEREFORE, in consideration of the premises, the Loans outstanding under the Credit Agreement, the Credit Agreement, and the mutual promises contained therein and herein, the parties hereto hereby agree as follows: E-6 2 Section 1. Amendments to Credit Agreement. Subject to the provisions of Section 2, the Credit Agreement is amended by (a) amending Section 1.01 Certain Defined Terms by (i) amending the definition "Business Day" by inserting immediately prior to the period at the end thereof, the phrase "or, in connection with any Bond Advance or payment by the Authority or the Trustee, in Vicksburg, Mississippi"; (ii) amending the definition "Collateral Documents" by inserting immediately prior to the period at the end thereof, the phrase ", and the Indenture, the PCP Trust Deed and the PCP Security Agreement"; (iii) amending the definition "Loan Documents" by inserting after the phrase "the Collateral Documents," the phrase "at any time when all Lenders are also Bondholders (as defined in the PCP Indenture), the Bond Documents,"; (iv) amending the definition "Revolving Credit Commitment" in its entirety to read as follows: "Revolving Credit Commitment" means, as to each Lender, such Lender's Commitment Percentage of (i) $25,000,000 during calendar year 1993, (ii) $28,000,000 during calendar year 1994 and (iii) $33,000,000 during calendar year 1995, as the same may be reduced pursuant to SECTION 2.04. (v) amending the definition "Revolving Credit Note" by inserting after the reference "Exhibit A-1" appearing therein, the phrase "or Exhibit A-1b"; (b) further amending Section 1.01 Certain Defined Terms by adding thereto in correct alphabetical order the following additional definitions: "Authority" means the Mississippi Business Finance Corporation. "Authorized Officer" means the Chairman, President or Executive Vice President of any Borrower, or any other officer of a Borrower authorized by the Board of Directors of such Borrower to make requests for Advances or Bond Advances. "Bond Advance" means each payment by a Lender to the Authority to acquire Bonds or which results in an increase in the Authority's obligations under outstanding Bonds. -2- 3 "Bond Documents" means the Bond Purchase Agreement, the Bonds, the Indenture, the PCP Deed of Trust, the PCP Security Agreement, the PCP Loan Agreement, the PCP Notes and the other certificates, instruments, agreements and documents delivered by or on behalf of any Borrower in connection therewith. "Bond Financing" means the purchase of the Bonds on the Issuance Date and Bond Advances made after the Issuance Date, in each case by the Lenders, in accordance with the terms of the Bond Purchase Agreement, the Bond Documents and this Agreement. "Bond Financing Amount" means a principal amount equal to the least of (i) $11,250,000, (ii) the aggregate principal amount of all Bond Advances made by the Lenders on or before June 1, 1995, and (iii) an amount equal to 75% of PCP Construction Cost, as determined on June 1, 1995. "Bond Financing Commitment" means, as to each Lender, an amount equal to such Lender's Commitment Percentage of $11,250,000. "Bond Purchase Agreement" means the Bond Purchase Agreement, dated as of November 10, 1993, between the Authority, as issuer, VCC, and the Lenders, as purchasers, as the same may be amended, modified, supplemented or restated from time to time. "Bonds" means $11,250,000 Mississippi Business Finance Corporation Taxable Industrial Development Revenue Bonds, Series 1993 (Vicksburg Chemical Company) bearing interest and payable as to principal and interest in accordance with the terms set forth on SCHEDULE 1.1 - CERTAIN BOND TERMS hereto. "Commitment Percentage" means, as to each Lender, the percentage set forth opposite such Lender's name on SCHEDULE I under the caption "Commitment Percentage" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register maintained by the Agent pursuant to SECTION 9.07(c) as such Lender's "Commitment Percentage." "Issuance Date" means the first date on which all of the conditions specified in SECTIONS 4.02 AND 4.03 are satisfied and on which the Bonds are issued. "PCP" means the potassium carbonate plant conforming to the specifications attached hereto as SCHEDULE 1.1 -- PCP SPECIFICATIONS, to be owned by VCC and constructed by VCC on -3- 4 land subject to the Mortgage affecting VCC's real property in Mississippi. "PCP Construction Cost" means the total cost to VCC (less any portion of such cost allocated to land) of designing and building, or causing to be designed and built, the PCP. "PCP Deed of Trust" means the Deed of Trust dated as of December 1, 1993 made by VCC in favor of the Authority as security for VCC's obligations under the PCP Loan Agreement and the PCP Notes, as the same may be amended, modified, supplemented or restated from time to time and any substitute or replacement deed of trust securing said obligations, in each case in accordance with the provisions of this Agreement. "PCP Indenture" means the Trust Indenture dated as of December 1, 1993, between the Authority and First National Bank of Vicksburg, trustee, as the same may be amended, modified, supplemented or restated from time to time in accordance with the provisions of this Agreement. "PCP Loan Agreement" means the Loan Agreement dated as of December 1, 1993 between the Authority, as lender, and VCC, as borrower, with respect to the loan by the Authority to VCC of the proceeds of issuance of the Bonds, as the same may be amended, modified, supplemented or restated from time to time in accordance with the provisions of this Agreement. "PCP Note" means each promissory note of VCC substantially in the form thereof attached to the PCP Loan Agreement, properly completed, payable to the order of the Authority evidencing advances made under the PCP Loan Agreement. "PCP Security Agreement" means the Security Agreement dated as of December 1, 1993 made by VCC in favor of the Authority with respect to certain collateral for the Bonds, as the same may be amended, modified, supplemented or restated from time to time in accordance with the provisions of this Agreement. "Trustee" means First National Bank of Vicksburg, as trustee under the PCP Indenture, and any successor Trustee appointed in accordance with the terms of the PCP Indenture. (c) amending Section 2.01(b) Reduction of Outstandings in its entirety to read as follows: (b) Reduction of Outstandings. Notwithstanding the provisions of SECTIONS 2.01(a) and 2.07: (i) in 1994 and in -4- 5 each calendar year thereafter Cedar shall choose a day (the "Initial Clean-up Day") occurring on or after July 1 and before October 1 of such year and shall notify the Agent thereof at least two Business Days in advance, (ii) on or before each such Initial Clean-up Day the Borrowers shall repay outstanding Revolving Credit Advances in accordance with SECTION 2.07(a) and provide cash collateral as contemplated by SECTION 2.07(c) for outstanding Letters of Credit, such that the aggregate principal amount of all outstanding Revolving Credit Advances, PLUS the aggregate face amount of outstanding Letters of Credit, LESS the amount of such cash collateral, does not exceed $7,000,000, and (iii) the Borrowers shall not borrow under SECTION 2.01(a) or SECTION 2.12 during the 31 consecutive days including and following each such Initial Clean-up Day to the extent that any such Borrowing would result in Revolving Credit Advances and Letters of Credit being outstanding in excess of $7,000,000. (d) amending Section 2.02(a) Requests for Borrowing (i) by inserting in subsection (iv) thereof immediately after the phrase "under this Agreement" the phrase "or under the PCP Loan Agreement or the PCP Notes" and (ii) by inserting in subsection (v) thereof immediately after the phrase "under this Agreement" the phrase ", the PCP Loan Agreement, the PCP Notes"; (e) adding thereto a new Article IIA to read as follows: ARTICLE IIA THE BOND ADVANCES SECTION 2A.01. The Bond Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Bond Advances on the Issuance Date and, if requested to do so in accordance with the terms of the Bond Purchase Agreement, on the first Business Day of each month thereafter through and including June 1, 1995; PROVIDED, that the aggregate principal amount of all Bond Advances made by each Lender shall not exceed such Lender's Bond Financing Commitment. SECTION 2A.02. Requests for Bond Advances. Each request for a Bond Advance shall be made not later than three Business Days before the date of such advance, and otherwise in accordance with the provisions of the Bond Purchase Agreement and the PCP Loan Agreement. Without regard to any other provision of this Agreement, the Agent shall only make proceeds of Bond Advances available to the Authority (or to the Trustee or to VCC) to the extent the -5- 6 Agent has received such funds, of the same type, from the Lenders. SECTION 2A.03. Repayment of and Interest on the Bond Advances. The principal of the Bond Advances and interest thereon shall be paid to the Lenders in accordance with the terms of the Bond Documents. SECTION 2A.04. Payments Made Under Notes. VCC expressly acknowledges, for the benefit of the Agent and the Lenders, the validity and enforceability against it of the Bond Documents to which it is or as of the Issuance Date will be a party. (f) amending Section 3.01 Unconditional Guarantee by adding as a new sentence at the end of subsection (a) thereof, the following: Without limiting the effect or generality of the foregoing, each of Cedar, Potash and VCC expressly acknowledges and agrees that VCC's Obligations under the PCP Loan Agreement, the PCP Notes and under any other Bond Documents, to the extent such Obligations are part of the security for the Bonds included in the "Trust Estate" (as defined in the PCP Indenture), constitute Obligations of VCC to the Lenders and the Agent under the Loan Documents and constitute Guaranteed Obligations. (g) amending Section 3.06 Survival by inserting after the phrase "the Advances owing to it and any", the phrase "Bond or"; (h) redesignating Section 4.02 Conditions Precedent to Each Borrowing thereof as Section 4.03 and adding thereto a new Section 4.02 to read as follows: SECTION 4.02. Conditions Precedent to Bond Advances. The obligation of each Lender to make its initial Bond Advance is subject to the conditions precedent that: (a) There shall exist no action, suit, investigation, litigation or proceeding affecting any Borrower pending or threatened before any court, Governmental Authority or arbitrator that, if adversely determined, would have a material adverse effect on the business, condition (financial or otherwise), operations, performance, properties or prospects of any Borrower (other than Disclosed Litigation) or that purports to affect the legality, validity or enforceability of this Agreement, any Note, any other Loan Document, any Bond Document or the consummation of the transactions contemplated hereby or thereby. -6- 7 (b) All conditions to the issuance of the Bonds, other than tender of the Bond Advances to be made by the Lenders on the Issuance Date, and to the Lenders' obligations under the Bond Purchase Agreement to purchase Bonds, shall have been satisfied or waived in accordance with the terms of the PCP Indenture or the Bond Purchase Agreement, as applicable, and the Agent shall have received, dated such day, a certificate of an Authorized Officer of Cedar and VCC to such effect, having attached thereto, copies of all Bond Documents, as executed by the parties thereto, together with copies of all certificates, legal opinions, resolutions, financing statements and other documents delivered in connection therewith, certified by such officer of Cedar and VCC as true and complete copies thereof, together with reliance letters as to such certificates or opinions, not otherwise addressed to the Agent and the Lenders, as any of them may reasonably request. (c) The Agent shall have received, in form and substance satisfactory to it, each of the following: (i) signed copies of proper financing statements, in appropriate form to be filed on or promptly after the Issuance Date under the Uniform Commercial Code of all jurisdictions that the Agent may deem necessary or desirable in order to continue and protect the perfection of the Security Interest; (ii) Revolving Credit Notes in substantially the form of Exhibit A-1b, properly completed, duly executed and delivered by the Borrowers; (iii) evidence of the insurance required by the terms of the Security Agreements; (iv) a Mortgage modification with respect to each Mortgage, effective to include as indebtedness secured by such Mortgage, the Obligations of the applicable Borrower to the Agent and the Lenders in connection with the Bonds, duly executed by the applicable Borrower, together with (A) evidence that each such Mortgage modification has been duly recorded on or before the Issuance Date (or acknowledgement by the representative of the title insurance issuer of receipt of such Mortgage modifications in form for recording) in all filing or recording offices that the Agent may deem necessary or desirable in order to preserve the valid and enforceable first and subsisting Lien on the property described therein in favor of the Lenders; -7- 8 (B) American Land Title Association Lender's Extended Coverage title insurance policies, or endorsements thereto or unconditional commitments for the issuance of the same, in each case in form and in amounts acceptable to the Agent, issued and reinsured by title insurers acceptable to the Agent, insuring the Mortgages (other than the Mortgage made by Potash) as modified by such Mortgage modifications to be valid and enforceable first Liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics' and materialmen's liens) and encumbrances, excepting only Permitted Encumbrances, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents (including Bond Advances) and for mechanics' and materialmen's liens) and coinsurance and reinsurance with direct access as the Agent may deem necessary or desirable; (C) such consents and agreements of lessors and other third parties, and such estoppel letters and other confirmations, as the Agent may deem necessary or desirable; (D) evidence of the insurance required (including, without limitation, for any business or property) by the terms of the Mortgages as modified by such Mortgage modifications; and (E) evidence that all other action that the Agent may deem necessary or desirable in order to preserve valid first and subsisting Liens in favor of the Agent, for the benefit of the Lenders, on the property described in the Mortgages has been taken; (v) A favorable opinion of Apperson, Crump, Duzane & Maxwell, counsel for the Borrowers, in substantially the form of EXHIBIT M hereto and as to such other matters as any Lender through the Agent may reasonably request; and (vi) Favorable opinions of Hilburn, Calhoon, Harper, Pruniski & Calhoun, Ltd.; McCormick, Forbes, Caraway & Tabor; and Gerald & Brand, local counsel to the Lenders in Arkansas, New Mexico, and Mississippi, respectively, in substantially the forms of EXHIBITS N-1, N-2 AND N-3, respectively, and as to such other matters as any Lender through the Agent may reasonably request; -8- 9 (d) Cedar or another Borrower shall have paid to the Agent for the ratable account of the Lenders a facility fee in the amount of $112,500, which fee shall be fully earned when due and payable and not subject to refund or rebate; and (e) The Agent shall have received in form and substance satisfactory to it, such other certificates, instruments, agreements and documents relating to the transactions contemplated to occur in connection herewith and with the issuance of the Bonds as the Agent or any Lender may reasonably request. (i) amending the redesignated Section 4.03 in its entirety to read as follows: SECTION 4.03. Conditions Precedent to Each Borrowing and Bond Advance. (a) The obligation of each Lender to make an Advance on the occasion of each Borrowing (including the initial Borrowing) shall be subject to the further conditions precedent that on the date of such Borrowing (i) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing and the acceptance by any Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by such Borrower that on the date of such Borrowing such statements are true): (A) The representations and warranties contained in each Loan Document are correct on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, except for those representations and warranties made as of a specified date; (B) No event has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom, that constitutes a Default; and (C) The Aggregate Borrowing Base exceeds the aggregate principal amount of all Revolving Credit Advances that will be outstanding to all Borrowers after giving effect to such Borrowing and each Borrower's Borrowing Base exceeds the aggregate principal amount of all Revolving Credit Advances that will be outstanding to such Borrower after giving effect to such Borrowing; -9- 10 and (ii) the Agent shall have received such other approvals, opinions or documents as any Lender through the Agent may reasonably request. (b) The obligation of each Lender to make a Bond Advance (including the initial Bond Advance) upon request therefor by VCC and the Authority made in accordance with the terms of the Bond Purchase Agreement, the PCP Loan Agreement and the PCP Indenture, shall be subject to the further conditions precedent that on the date of such Bond Advance (i) the following statements shall be true (and each of the giving of the applicable request for such Bond Advance and the acceptance (directly or indirectly) by any Borrower of the proceeds of such Bond Advance shall constitute a representation and warranty by the Borrowers that on the date of such Bond Advance such statements are true): (A) The representations and warranties contained in each Loan Document and the representations and warranties of the Borrowers contained in each Bond Document are correct on and as of the date of such Bond Advance, before and after giving effect to such Bond Advance and to the application of the proceeds therefrom, as though made on and as of such date, except for those representations and warranties made as of a specified date; and (B) No event has occurred and is continuing, or would result from such Bond Advance or from the application of the proceeds therefrom, that constitutes a Default; (ii) the Agent shall have received at least three Business Days prior to the date on which such Bond Advance is requested to be made, in sufficient copies for each Lender, a certificate of an Authorized Officer of VCC or Cedar setting forth (A) the date of the requested Bond Advance (which purchase date shall be the first Business Day of a month on or prior to the first Business Day of June 1995), (B) the amount of the requested Bond Advance (which shall be at least $100,000), and (C) such Borrower's certification that the amount of the requested Bond Advance does not exceed 75% of the PCP Construction Cost incurred by VCC through the date of such certificate, LESS the aggregate amount of all Bond Advance theretofore made, and accompanied by a computation in reasonable detail supporting such certification and by copies of invoices or other evidences of payment acceptable to the Agent in its reasonable judgment, and -10- 11 (iii) the Agent shall have received such other approvals, opinions or documents as any Lender through the Agent may reasonably request. (j) amending Section 5.01 Representations and Warranties of the Borrowers by adding thereto a new subsection (z) to read as follows: (z) Bond Documents. The representations and warranties of VCC set forth in the Bond Documents to which it is a party are (or will be) true and correct on and as of the Issuance Date and each of the Bond Documents to which any Borrower is a party is (or, upon execution and delivery by such Borrower, will be) the legal, valid, binding and enforceable obligation of such Borrower. (k) amending Section 6.01 Covenants of the Borrowers by (i) adding in the first grammatical paragraph thereof immediately after the phrase "any Advance" the phrase "or any amount outstanding under any PCP Note or any Bond" and (ii) amending the parenthetical phrase appearing in clause (iii) of subsection (l) Maintenance of Fixed Charge Coverage in its entirety to read as follows: (other than those made from the proceeds of Capital Expenditure Debt or included in PCP Construction Cost); (l) amending Section 6.02 Negative Covenants by (i) adding in the first grammatical paragraph thereof immediately after the phrase "any Advance" the phrase "or any amount outstanding under any PCP Note or any Bond", (ii) adding to clause (i) of subsection (a) Liens, Etc. thereof, immediately prior to the semi-colon at the end thereof, the phrase "or, to the extent they affect only property of VCC, the Bond Documents", (iii) amending subsection (l) Prepayments, Etc. of Debt in its entirety to read as follows: (l) Prepayments, Etc. of Debt. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Existing Debt (other than the Advances or the Debt outstanding under the PCP Notes), or amend, modify or change in any manner any term or condition of any such Debt, EXCEPT that (A) if on July 31 of 1993, 1994 or 1995 and on the date such amount (or any portion thereof) is paid, no Default has occurred and is continuing or would exist after giving effect to such payment, Cedar may repay outstanding principal of the Cedar Subordinated Debt in an amount not greater than $666,667 in respect of each such year, on a cumulative basis, and (B) not earlier than 12 months after the date which an Authorized Officer of Cedar and VCC shall -11- 12 have certified to the Agent and the Lenders as the date on which the PCP became operational, Cedar may repay outstanding principal of Cedar Subordinated Debt in an additional amount not greater than $3,500,000, PROVIDED that both on and as of the date of the audited financial statements of the Borrowers then most recently delivered pursuant to SECTION 6.01(p)(iv) and on the date or dates of payment of such amount (or any portion thereof) no Default shall have occurred and be continuing or would result from such payment. and (iv) adding thereto a new subsection (p) to read as follows: (p) Amendment of Bond Documents. Permit the Bond Documents to which it is a party, or any of them, to be amended, modified or supplemented, other than strictly in accordance with the terms thereof. (m) amending Section 7.01 Events of Default by amending the first parenthetical phrase of subsection (d) thereof in its entirety to read as follows: (including any Debt of VCC under the PCP Loan Agreement and the PCP Notes, but excluding Debt referred to in SECTION 7.01(a) and unsecured Debt of a Borrower incurred in the ordinary course of such Borrower's business for the deferred purchase price of property of services up to an amount, for all Borrowers, of $1,000,000 at any time) (n) amending Section 9.01 Amendments, Etc. by (i) inserting after the phrase "the other Loan Documents" the first time it appears therein, a parenthetical phrase to read "(including, without being limited to, the Bond Documents)", (ii) deleting the reference in clause (i) thereof to "Section 4.01 or 4.02" and substituting therefor a reference to "Article IV", (iii) inserting in clause (v) thereof after the phrase "the Commitments" appearing therein, the phrase "or the Bond Financing Commitments", (iv) inserting in each of clauses (vi) and (vii) thereof immediately after the phrase "the Notes" appearing in each the phrase ", the PCP Notes or the Bonds" and (v) adding at the end thereof a new sentence to read as follows: The Lenders hereby authorize and direct the Agent to vote 100% of the Bonds held by Lenders in connection with any request for consent or approval or waiver of the Lenders, as bondholders, under the Bond Documents entirely in accordance with the direction of the Majority Lenders or all Lenders, as the case may be. (o) adding thereto a new Section 9.13 to read in its entirety as follows: -12- 13 SECTION 9.13. Conflict with Bond Documents. As between the Borrowers, the Lenders and the Agent, in the event that any provisions of the Bond Documents (other than Sections 4.12 and 4.13 of the PCP Loan Agreement and the corollary provisions of the other Bond Documents) conflict with or are inconsistent with the provisions of the Loan Documents, the provisions of the Loan Documents shall govern. (p) amending Schedule I to the Credit Agreement in its entirety to be the form of Schedule I attached hereto as ANNEX 1; and (q) further amending the Credit Agreement by adding thereto as a new SCHEDULE 1.1 -- PCP SPECIFICATIONS the document attached hereto as ANNEX 2, as new SCHEDULE 1.1 -- CERTAIN BOND TERMS the document attached hereto as ANNEX 3, as new EXHIBITS A-1b, M, N-1, N-2 and N-3, respectively, the documents attached hereto as ANNEXES 4, 5, 6, 7 and 8, and by deleting Schedule 5.01(t) to the Credit Agreement and substituting therefor the Schedule bearing the same designation attached hereto as ANNEX 9. Section 2. Conditions to Effectiveness of this Amendment. This Amendment will become effective on the date (the "Amendment Effective Date") on which all of the following conditions are first satisfied (terms defined in the Credit Agreement, as amended by this Amendment, being used in this Section 2 as so defined): (a) Documents. The Agent shall have received each of the following documents, each in form and substance satisfactory to the Lenders and the Agent: (i) Certified copies of the resolutions of the Board of Directors of each Borrower approving this Amendment and each other Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Amendment and each other such Loan Document. (ii) A certificate of the Secretary or an Assistant Secretary of each Borrower certifying the names and true signatures of the officers of such Borrower authorized to sign this Amendment and each other Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder. (iii) Such additional Financing Statements naming a Borrower as debtor and the Agent as secured party duly executed and delivered by such Borrower as the Agent shall require. -13- 14 (iv) A certificate of an authorized officer of each Borrower stating that, based on an examination sufficient to permit him or her to express an informed opinion, both before and after giving effect to this Amendment, (A) each representation and warranty of such Borrower contained in the Agreement, as amended by this Amendment, the other Loan Documents and any Bond Documents that have been executed and delivered on or prior to the Amendment Effective Date by such Borrower, is true and correct on and as of the Amendment Effective Date, as though made on and as of such date, and (B) no Default or Event of Default has occurred and is continuing. (v) Nine West, as the pledgor under the Pledge Agreement, and TRI, as the holder of the Subordinated Debt, shall each have executed and delivered an acknowledgement and consent in substantially the form attached hereto. (vi) Such other documents and instruments as the Agent or any Lender may reasonably request. (b) Representation; No Material Adverse Change. The statements set forth in Section 2(a)(iv) above shall be true and since the date of the most recent financial statements timely delivered by the Borrowers in accordance with the provisions of Section 6.01(p) of the Credit Agreement, no material adverse change in the business, condition (financial or other), performance, properties or prospects of any Borrower shall have occurred. Section 3. Representations and Warranties of Borrowers. Each of the Borrower represents and warrants to the Agent and each Lender as follows (terms defined in the Agreement, as amended by this Amendment, being used in this Section 3 as so defined): (a) each of the representations and warranties of the Borrower, or any of them, set forth in the Credit Agreement or in any other Loan Document (including, in each case, as amended in connection with the consummation of the transactions contemplated by this Amendment), is true and correct on and as of the date of this Amendment as though made on and as of such date; (b) each Borrower has the power and has taken the necessary action to authorize it to execute, deliver and perform this Amendment and the Agreement, as amended by this Amendment, in accordance with its terms; -14- 15 (c) this Amendment has been, and each other document contemplated to be delivered by a Borrower hereunder when delivered pursuant to this Amendment (or to the Credit Agreement as amended by this Amendment) will have been, executed and delivered by duly authorized officers of such Borrower and constitutes or will when executed and delivered constitute the legal, valid and binding obligation of the Borrower or Borrowers party thereto, enforceable against such Borrower(s) in accordance with its respective terms; (d) no Default or Event of Default has occurred and is continuing; and (e) no litigation, governmental investigation or other similar action involving any Borrower has been commenced or threatened in writing, to restrain or prohibit the transactions contemplated by the Credit Agreement, the other Loan Documents or the Bond Documents in each case as in effect on the date hereof or as the same are to be amended in connection with the consummation of the transactions contemplated by this Amendment. Section 4. Effect of Effectiveness. From and after the Amendment Effective Date, each reference in the Credit Agreement or in any other Loan Document to "this Agreement," "the Credit Agreement," "hereunder," "hereof," or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Amendment. Each Borrower hereby expressly confirms its Security Agreement and the continuing effectiveness thereof and of the Liens created thereby as security for such Borrower's Obligations and Guaranteed Obligations as they may exist after the effectiveness of this Amendment, the issuance of the Bonds and application of the proceeds of each Bond Advance. Section 5. General Provisions. (a) Titles and Captions. Titles and captions of Sections and subsections in this Amendment are for convenience only, and neither limit nor amplify the provisions of this Amendment. (b) Governing Law. This Amendment shall be construed in accordance with and governed by the laws of the State of Georgia. (c) Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. -15- 16 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. CEDAR CHEMICAL CORPORATION By: /s/ John C. Bumpers ----------------------------------- Name: John C. Bumpers Title: Executive Vice President NEW MEXICO POTASH CORPORATION By: /s/ John C. Bumpers ----------------------------------- Name: John C. Bumpers Title: Vice President VICKSBURG CHEMICAL COMPANY By: /s/ John C. Bumpers ----------------------------------- Name: John C. Bumpers Title: Vice President THE FIRST NATIONAL BANK OF BOSTON, as Agent By: /s/ William C. Purinton ----------------------------------- William C. Purinton Vice President Lenders ------- THE FIRST NATIONAL BANK OF BOSTON By: /s/ William C. Purinton ------------------------------------ William C. Purinton Vice President NATIONSBANK OF GEORGIA, N.A. By: /s/ Lynn Webster ---------------------------------- Name: Lynn Webster Title: Vice President EX-10.22 5 BOND PURCHASE AGREEMENT 1 EXHIBIT 10.22 NOT TO EXCEED $11,250,000 MISSISSIPPI BUSINESS FINANCE CORPORATION TAXABLE INDUSTRIAL DEVELOPMENT REVENUE BONDS, SERIES 1993 (VICKSBURG CHEMICAL COMPANY) NOVEMBER 10, 1993 BOND PURCHASE AGREEMENT Mississippi Business Finance Corporation Jackson, Mississippi Vicksburg Chemical Company Vicksburg, Mississippi The First National Bank of Boston and NationsBank of Georgia, N.A. (collectively, the "Purchasers") offer to enter into this Bond Purchase Agreement (this "Agreement") with the Mississippi Business Finance Corporation, a public corporation organized and existing under the laws of the State of Mississippi (the "State") (the "Issuer") and Vicksburg Chemical Company, a corporation organized and validly existing under the laws of the State of Delaware, and qualified to do business and in good standing under the laws of the State (the "Company"), which, upon your acceptance will be binding upon the Issuer, the Company and the Purchasers. 1. BACKGROUND (a) The Issuer will issue and sell its Taxable Industrial Development Revenue Bonds, Series 1993 (Vicksburg Chemical Company) in the maximum aggregate principal amount of $11,250,000 (the "Bonds") to provide for the permanent financing of the Project (as defined in the Loan Agreement, as hereinafter defined) to be located in the State and to be owned by the Company. The Issuer and the Company will enter into a Loan Agreement (the "Loan Agreement") dated as of December 1, 1993, providing, among other things, for payments at times and in amounts sufficient to pay when due the principal of and interest on the Bonds. (b) The Bonds will be issued pursuant to the provisions of Title 57, Chapter 10, Article 7 of the Mississippi Code of 1972, as amended and supplemented (the "Act"), resolutions of the Issuer dated October 14, 1993 and November 10, 1993 (collectively the E-7 2 "Resolution") and a Trust Indenture (the "Indenture") dated as of December 1, 1993, between the Issuer and First National Bank of Vicksburg, Vicksburg, Mississippi, as Trustee (the "Trustee"). The Bonds are limited obligations of the Issuer, payable solely from payments to be made by the Company pursuant to the Loan Agreement and a promissory note delivered to the Issuer (the "Note"). Payment of the Bonds is secured by (i) the lien of the Indenture on the trust estate created thereunder which consists generally of money deposited in the funds and accounts established under the Indenture and income from the investment of such money as required by the Indenture, the Loan Agreement and the Note and (ii) a lien and security interest on the Project as provided for in the Loan Agreement by the Deed of Trust from the Company to the Issuer (the "Deed of Trust") (as defined in the Indenture), and the Security Agreement from the Company to the Issuer (as defined in the Indenture) (the "Security Agreement"). The Loan Agreement, Note, Deed of Trust and Security Agreement are referred to herein collectively as the "Loan Documents." This Agreement, the Bonds and the Indenture are referred to herein collectively as the "Bond Documents." (c) The Bonds will contain the terms and provisions as described in the Indenture and will bear interest at the rates described in the Indenture. (d) The terms and provisions of the Bonds have been approved by the Company which enters into this Agreement in order to induce the Purchasers to purchase the Bonds at the price set forth herein. (e) No preliminary official statement, final official statement or other disclosure document will be distributed in connection with the issuance and sale of the Bonds. (f) It is intended that interest on the Bonds will be includable in the gross income of the holder thereof for federal income tax purposes. (g) The Purchasers are purchasing the Bonds for their own account and will, on the Initial Closing Date (as hereinafter defined), execute a document satisfactory to the Issuer agreeing not to sell or otherwise transfer or dispose of the Bonds without (i) complying with applicable disclosure and registration requirements of federal and state securities laws and (ii) if such transfer or disposition is to an entity other than a United States bank, thrift institution, insurance company, or other U.S. company having the principal business of providing commercial financing, receiving the prior written consent of the Issuer, which consent shall not be withheld unreasonably. 2. JOINT REPRESENTATION OF THE ISSUER AND THE COMPANY The Issuer and the Company represent that the Project will constitute a "project" within the meaning of the Act. - 2 - 3 3. REPRESENTATIONS OF THE ISSUER The Issuer makes the following representations, all of which will survive the purchase and offering of the Bonds. (a) The Issuer is a public corporation organized and existing under the laws of the State. (b) The Issuer has complied with all provisions of the State Constitution and laws governing the issuance and sale of the Bonds and has full power and authority to authorize and thereafter consummate all transactions contemplated by the Bond Documents, the Loan Documents, and all other agreements relating thereto. (c) The Issuer has duly adopted the Resolution, has duly authorized all necessary actions to be taken by the Issuer and has obtained all approvals necessary and appropriate for: (i) the issuance and sale of the Bonds upon the terms set forth herein and in the Indenture, (ii) the execution, delivery, receipt and due performance of the Bond Documents, the Loan Documents, and any and all other agreements and documents as may be required to be executed, delivered and received by the Issuer in order to carry out, give effect to and consummate the transaction contemplated hereby and by the issuance and sale of the Bonds and (iii) the carrying out, giving effect to, and consummation of the transactions contemplated hereby, by the Indenture and by the issuance and sale of the Bonds. The Bonds and executed counterparts of other Bond Documents and the Loan Documents will be delivered to the Purchasers by the Issuer on the Initial Closing Date (as hereinafter defined). (d) To the best of the Issuer's knowledge, there is no action, suit, proceeding, inquiry, investigation at law or in equity or before or by any court, public board or body pending or threatened against or affecting the Issuer (or any basis therefor), wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated hereby or by the issuance and sale of the Bonds or the validity of the Bond Documents, the Loan Documents, or any agreement or instrument to which the Issuer is or is expected to be a party and which is used or contemplated for use in the consummation of the transaction contemplated hereby or by the issuance and sale of the Bonds. (e) The execution and delivery by the Issuer of the Bond Documents, the Loan Documents, and other agreements contemplated hereby or by the issuance and sale of the Bonds and compliance with the provisions thereof will not conflict with or constitute, on the part of the Issuer, a breach of or a default under any existing law, court or administrative regulation, decree or order or any agreement, indenture, mortgage, lease or other instrument to which the Issuer is subject or by which the Issuer is bound. (f) Any certificate signed by any of the Issuer's authorized officers and delivered to the Purchasers shall be deemed a representation and warranty by the Issuer to the Purchasers as to the statements made therein. - 3 - 4 4. REPRESENTATIONS OF THE COMPANY The Company makes the following representations, all of which will survive the purchase and offering of the Bonds. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified as a foreign corporation and is in good standing to do business in the State. (b) The Company has full corporate power and authority to authorize and thereafter consummate on its behalf all transactions contemplated by the Bond Documents, the Loan Documents, and any and all other agreements relating thereto. (c) The Company has duly authorized all necessary actions to be taken by the Company for (i) the execution, delivery, receipt and due performance of this Agreement, the Loan Documents, and all other agreements and documents as may be required to be executed, delivered and received by the Company in order to carry out, give effect to and consummate the transaction contemplated hereby and by the issuance and sale of the Bonds, (ii) the carrying out, giving effect to and consummation of the transactions contemplated by the Indenture, the issuance and the sale of the Bonds, this Agreement, and the Loan Documents, and (iii) the Loan Documents, this Agreement, and any related documents executed by the Company to constitute valid and binding obligations of the Company enforceable in accordance with their respective terms, except to the extent that the enforceability thereof may be limited (A) by bankruptcy, reorganization, or similar laws limiting the enforceability of creditors' rights generally or (B) by the validity of any discretionary equitable remedies. (d) The Company's execution and delivery of this Agreement, the Loan Documents, and the other documents contemplated hereby and by the issuance and sale of the Bonds and compliance with the provisions thereof will not conflict with or constitute on the Company's part a breach of or a default under any existing law, court or administrative regulation, decree or order or any agreement, indenture, mortgage, lease or other instrument to which the Company is subject or by which the Company is bound. (e) The Company has obtained or will obtain as and when required by applicable law all approvals, licenses, permits, or other governmental authorizations required in connection with the execution and delivery of and performance by the Company of its obligations under this Agreement, the Loan Documents and in relation to the acquisition, construction, installation, operation and financing of Project. (f) Any certificate signed by any of the Company's authorized officers and delivered to the Purchasers shall be deemed a representation and warranty by the Company to the Purchasers as to the statements made therein. - 4 - 5 (g) To the best of the Company's knowledge, there is no action, suit, proceeding, inquiry, investigation at law or in equity or before or by any court, public board or body pending or threatened against or affecting the Company (or any basis therefor), other than Disclosed Litigation (as defined in the Loan Agreement) wherein an unfavorable decision, ruling or finding would have a material, adverse effect on the transactions contemplated hereby or by the issuance and sale of the Bonds or the validity of the Bonds, the Indenture, the Loan Documents, or any agreement or instrument to which the Company is or is expected to be a party and which is used or contemplated for use in the consummation of the transaction contemplated hereby. 5. COVENANTS OF THE COMPANY The Company covenants and agrees to the following covenants, all of which will survive the purchase and offering of the Bonds and any investigations made by or on behalf of the Purchasers. (a) The Company agrees to indemnify and hold harmless the Issuer, its counsel, Bond Counsel, the Purchasers, the Trustee, any officer, agent or employee of the Issuer and each person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (collectively referred to herein as the "Indemnified Parties"), against any and all losses, claims, damages, liabilities or expenses whatsoever arising out of or resulting from or in any way related to the issuance and sale of the Bonds, any breach by the Company of any of, or the inaccuracy of any of, its representations, warranties and covenants set forth in this Agreement, and the acquisition, installation, equipping and the use of the Project; provided, however, that the Company shall not indemnify and hold harmless any Indemnified Party from damages that result from negligence or intentional misconduct on the part of the Indemnified Party seeking such indemnity. If any action is brought against an Indemnified Party based upon the information described in the preceding paragraph and in respect of which indemnity may be sought against the Company, the Indemnified Party shall promptly notify the Company in writing and the Company shall promptly assume the defense thereof, including the employment of counsel reasonably acceptable to the Indemnified Party, the payment of all expenses, and the right to negotiate and consent to settlement. An Indemnified Party has the right, at its own expense, to employ separate counsel in any such action and to participate in the defense thereof. The Company shall not be liable for any settlement of any such action effected without its consent, but if settled with the consent of the Company, or if there be a final judgment for the plaintiff in any such action with or without its consent, the Company agrees to indemnify and hold harmless the Indemnified Party from and against any loss or liability by reason of such settlement or judgment. - 5 - 6 (b) The Company will not take or omit to take, as may be applicable, any action which would, in any way, cause the proceeds of the Bonds to be applied in a manner contrary to the requirements of the Bond Documents and the Loan Documents. (c) Whether or not the sale of the Bonds by the Issuer to the Purchasers is consummated, the Company agrees that the Purchasers shall have no obligation to pay any costs or expenses incident to the performance of the obligations of the Issuer or the Purchasers under this Agreement. All costs and expenses to affect the preparation, issuance, sale and delivery of the Bond Documents, the Loan Documents, and all related documents, and the fees and expenses of the Issuer and of Bond Counsel shall be paid by the Company. 6. PURCHASE, SALE AND DELIVERY OF THE BONDS (a) On the basis of the representations, warranties and covenants contained herein, and in the other agreements referred to herein and subject to the terms and conditions herein set forth, on the Initial Closing Date the Purchasers agree to purchase from the Issuer and the Issuer agrees to sell to the Purchasers all or any portion of the Bonds for a purchase price of one hundred percent (100%) of the principal amount of the Bonds issued and sold, as provided for hereunder and in the Indenture. Pursuant to the terms hereof, sixty percent (60%) of the aggregate principal amount of the Bonds shall be purchased by The First National Bank of Boston and the remaining forty percent (40%) of the aggregate principal amount of the Bonds shall be purchased by NationsBank of Georgia, N.A. (b) The Issuer will deliver the Bonds to or for the account of the Purchasers against payment of the purchase price. The payment of the purchase price may be made in the form of periodic advances of the principal amount of the Bonds, up to the maximum principal amount. Such advances, including the initial advance made upon the delivery of the Bonds, shall be made by the Purchasers: (i) upon the written request of the Company, (ii) subject to the satisfaction (in the Purchasers' opinion) of the conditions set forth in the Bond Documents for making such advances, and (iii) in the manner and according to the Issuer's written instructions. The Bonds will be dated as of the Initial Closing Date, will be delivered in fully registered form, will be registered to the Purchasers, and will be issued in the amounts and in the form specified in the Indenture. The Bonds may be in printed, engraved, typewritten or photocopied form and each such form shall constitute "definitive form". (c) The Bonds shall bear interest at the rates, mature on the date and have such other terms as described in the Indenture. (d) The Purchasers shall solely determine the principal amount of the Bonds to be advanced from time to time to the Trustee or the Company. - 6 - 7 7. TRANSACTION DOCUMENTS On or prior to December 1, 1993 or such other date mutually agreeable to the Issuer, the Company and the Purchasers (the "Initial Closing Date"), the Purchasers shall be provided with a copy of each of the Bond Documents, the Loan Documents, and all related documents duly executed by all parties thereto as certified to the satisfaction of the Purchasers. The Issuer and the Company shall immediately upon their execution provide the Purchasers with any amendments of the Bond Documents, Loan Documents, and related documents. 8. CONDITIONS TO THE PURCHASERS' OBLIGATIONS TO PURCHASE BONDS AND TO MAKE SUBSEQUENT ADVANCES OF PRINCIPAL a. Conditions to Purchase of the Bonds on the Initial Closing Date The obligation of the Purchasers to purchase and pay for the Bonds on the Initial Closing Date shall be subject to the following conditions precedent: (1) There shall exist no action, suit, investigation, litigation or proceeding affecting the Company or any Related Entity (as defined in the Loan Agreement) pending or threatened before any court, governmental authority or arbitrator that, if adversely determined, would have a material adverse effect on the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company or any Related Entity (other than Disclosed Litigation) or that purports to affect the legality, validity or enforceability of the Credit Agreement and related documents (as defined in the Loan Agreement), Loan Documents, the Bond Documents or the consummation of the transactions contemplated hereby or thereby. (2) All conditions to the issuance of the Bonds, other than the payment for the Bonds to be made by the Purchasers on the Initial Closing Date, and to the Purchasers' obligations under this Agreement to purchase the Bonds, shall have been satisfied or waived in accordance with the terms of the Indenture or this Agreement, as applicable, and the Agent shall have received, dated such day, a certificate of an Authorized Company Representative (as defined in the Loan Agreement) to such effect, having attached thereto, copies of all Bond Documents and Loan Documents as executed by the parties thereto, together with copies of all certificates, legal opinions, resolutions, financing statements and other documents delivered in connection therewith, certified by the Company as true and complete copies thereof, together with reliance letters as to such certificates or opinions, not otherwise addressed to the Agent and the Purchasers, as any of them may reasonably request. (3) The Agent (as defined in the Loan Agreement) shall have received, in form and substance satisfactory to it, signed copies of proper financing statements, in appropriate form to be filed on or promptly after the Initial Closing Date under the Uniform commercial Code of all jurisdictions that the Agent may deem necessary or desirable in order to continue and protect the perfection of the Security Agreement. - 7 - 8 (4) The Agent shall have received in form and substance satisfactory to it, evidence of the insurance required by the terms of the Security Agreement. (5) The Agent shall have received, in form and substance satisfactory to it, a Mortgage (as defined in the Loan Agreement) modification with respect to each Mortgage, effective to include as indebtedness secured by such Mortgage, the obligations of the Company or Related Entity, as applicable, to the Purchasers in connection with the Bonds, duly executed by the Company or Related Entity, as applicable, together with (i) evidence that each such Mortgage modification has been duly recorded on or before the Initial Closing Date (or acknowledgement by the representative of the title insurance issuer of receipt of such Mortgage modifications in form for recording) in all filing or recording offices that the Agent may deem necessary or desirable in order to preserve the valid and enforceable first and subsisting lien on the property described therein in favor of the Purchasers; (ii) American Land Title Land Association Lender's Extended Coverage title insurance policies, or endorsements thereto or unconditional commitments for the issuance of the same, in each case in form and in amounts acceptable to the Agent, issued and reinsured by title insurers acceptable to the Agent, insuring the Mortgages (other than the Mortgage by Potash) as modified by such Mortgage modifications to be valid and enforceable first liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics' and materialmen's liens) and encumbrances, excepting only Permitted Encumbrances, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents (including Bond purchases) and for mechanics' and materialmen's liens) and coinsurance and reinsurance with direct access as the Agent may deem necessary or desirable; (iii) such consents and agreements of lessors and other third parties, and such estoppel letters and other confirmations, as the Agent may deem necessary or desirable; (iv) evidence of the insurance required (including, without limitation, for any business or property) by the terms of the Mortgages as modified by such Mortgage modifications; and (v) evidence that all other action that the Agent may deem necessary or desirable in order to preserve valid first and subsisting liens on the property described in the Mortgages has been taken. - 8 - 9 (6) The Purchasers shall have received an opinion of counsel to the Company, dated the Initial Closing Date and addressed to the Purchasers in form and substance acceptable to the Purchasers. (7) The Agent shall have received the favorable opinions of counsel to the Purchasers, dated the Initial Closing Date and addressed to the Agent in form and substance acceptable to the Agent. (8) The Purchasers shall have received, in form and substance satisfactory to them and to the Agent, reports of independent reputable appraisers of the "in use" or "going concern" and liquidation values of the fixed assets of the Company and each Related Entity; (9) The Company or another Related Entity shall have paid to the Agent for the ratable account of the Purchasers a facility fee in the amount of $112,500, which fee shall be fully earned when due and payable and not subject to refund or rebate. (10) Such other certificates, instruments, agreements and documents relating to the transactions contemplated to occur in connection with the issuance of the Bonds as the Agent or any Purchaser may reasonably request. b. Conditions to Subsequent Advances The obligation of each Purchaser to make a principal advance on the occasion of each principal advance (including the initial advance on the Initial Closing Date) shall be subject to the conditions precedent that on the date of such principal advance: (1) the following statements shall be true (and each of the giving of the applicable notice of advance and the acceptance by the Company of the proceeds of such advance shall constitute a representation and warranty by the Company that on the date of such advance such statements are true): (a) The representations and warranties contained in each Loan Document and the Credit Agreement are correct on and as of the date of such advance, before and after giving effect to such advance and to the application of the proceeds therefrom, as though made on and as of such date, except for those representations and warranties made as of a specified date; and (b) No event has occurred and is continuing, or would result from such advance or from the application of the proceeds therefrom, that constitutes a default under the Loan Documents or the Credit Agreement. (2) The Agent shall have received such other approvals, opinions or documents as any Purchaser through the Agent may reasonably request. - 9 - 10 (3) The Agent shall have received at least three Business Days prior to the date on which such principal advance is requested to be made, in sufficient copies for each Purchaser, a certificate of an Authorized Officer of the Company setting forth (i) the date of the requested principal advance (which advance date shall be the first Business Day of a month on or prior to the first Business Day of June 1995), (ii) the amount of the requested principal advance (which shall be at least $100,000), and (iii) such Authorized Officer's certification that the amount of the requested principal advance does not exceed 75% of the Project construction cost incurred by the Company through the date of such certificate, LESS the aggregate amount of all principal advances theretofore made, and accompanied by a computation in reasonable detail supporting such certification and by copies of invoices or other evidences of payment acceptable to the Agent in its reasonable judgment. 9. OTHER CONDITIONS TO BOND SALE AND PRINCIPAL ADVANCES The obligation of the Purchasers to purchase the Bonds and the obligation of the Issuer to sell the Bonds to the Purchasers are further subject to the following conditions: a. The representations and warranties of the Company herein and the representations and warranties made in each Loan Document and each of the Bond Documents by the respective parties thereto shall be true, correct and complete on the date hereof, on the Initial Closing Date and on the date of each subsequent advance of principal, and each such party to the Loan Documents and Bond Documents, including the Company, shall deliver a certificate to such effect on the Initial Closing Date and the Company shall deliver such a certificate on the date of each principal advance. The Issuer and the Company shall have performed all of their obligations hereunder and the statements made on behalf of the Issuer and the Company hereunder shall be true and correct on the date hereof, on the Initial Closing Date and on the date of each principal advance, and the Issuer and the Company shall deliver certificates to such effect on the Initial Closing Date and the Company shall deliver such a certificate on the date of each principal advance. b. Except as may have been agreed to by the Purchasers, as of the Initial Closing Date and the date of each principal advance, each of the Bond Documents, the Loan Documents, the Resolution and all other official action of the Issuer relating thereto shall be in full force and effect and shall not have been amended, modified or supplemented without the written approval of the Purchasers. c. The Issuer shall have received the approving opinion of Bond Counsel in form and substance acceptable to the Purchasers, and the Purchasers shall have received a letter from Bond Counsel dated the Initial Closing Date and addressed to the Purchasers, to the effect that the Purchasers may rely upon such firm's opinion as if it were addressed to the Purchasers. - 10 - 11 d. The Purchasers, the Trustee, the Company and Bond Counsel shall have received an opinion of Issuer's counsel in form and substance agreeable to the aforesaid parties. e. Each of the Bond Documents shall have been executed and delivered by each of the respective parties thereto, all such documents shall be in the forms attached to the resolution adopted by the Issuer on the date hereof with only such changes as the Purchasers may approve, and each of the Bond Documents shall be in full force and effect. f. None of the events referred to in Section 10 of this Agreement shall have occurred and be continuing. g. The Purchasers and Issuer shall have received a certificate, dated the Initial Closing Date and signed by an authorized officer of the Trustee, to the effect that (i) he or she is an authorized officer of the Trustee, (ii) the Indenture has been duly executed and delivered by the Trustee, (iii) the Trustee has all necessary corporate and trust powers required to carry out the trust created by the Indenture, (iv) to the best of his or her knowledge, the acceptance by the Trustee of the duties and obligations of the Trustee under the Indenture and compliance with the provisions thereof will not conflict with or constitute a breach of or default under any law, administrative regulations, consent decree or any agreement or other instrument to which the Trustee is subject or by which the Trustee is bound, and (v) the Trustee has duly authenticated the Bonds, and the person signing the certificate of authentication on each bond has been duly authorized to do so. h. Evidence, satisfactory in form and substance to the Purchasers and Bond Counsel, of a satisfactory and favorable conclusion to a bond validation proceeding under the laws of the State with respect to the Bonds shall have been received. i. Such other certificates, opinions and other documents as the Purchasers or Bond Counsel may reasonably request to evidence performance of or compliance with the provisions of this Agreement and the transactions contemplated hereby and by the issuance and sale of the Bonds, all such certificates and other documents to be satisfactory in form and substance to the Purchasers, shall have been received. If any conditions to the obligations of the Purchasers or the Issuer contained in this Agreement are not satisfied and the satisfaction of such conditions shall not be waived by the Purchasers, then, at the option of the Purchasers (i) the Initial Closing Date shall be postponed for such period as may be necessary for such conditions to be satisfied or (ii) without limiting the generality of Section 14 of this Agreement, the obligations of the Purchasers and the Issuer under this Agreement shall terminate, neither the Purchasers nor the Issuer shall have any further obligations or liabilities hereunder, and the Company shall have no further obligations or liabilities hereunder other than its obligations under Section 5 hereof. All of the legal opinions, certificates, proceedings, instruments and other documents mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to the Purchasers and the Issuer. - 11 - 12 10. TERMINATION The Purchasers may terminate their obligations hereunder by written notice to the Issuer if, at any time subsequent to the date hereof and on or prior to the Initial Closing Date: (a) There shall have occurred any material change in the business or affairs of the Issuer or the Company or any material change in the Project which, in the sole judgment of the Purchasers, materially adversely affects the financial condition, business, properties or prospects of the Company. (b) Any condition to the Purchasers' obligations hereunder is not satisfied because of any refusal, inability or failure on the part of the Company or the Issuer to comply with any of the terms or to fulfill any of the conditions provided for or contemplated by this Agreement, or if for any reason the Company, the Trustee or the Issuer shall be unable to perform all of their obligations or satisfy conditions, respectively, provided for or contemplated in this Agreement. 11. EXPENSES Except as otherwise provided herein, the Company shall cause to be paid out of its own funds or the proceeds of the Bonds, the costs of issuing the Bonds, including, but not limited to, the fees and expenses described in Section 5 of this Agreement; whether or not the sale of the Bonds by the Issuer to the Purchasers is consummated. 12. CONDITION OF THE ISSUER'S OBLIGATIONS The Issuer's obligations hereunder are subject to the Purchasers' performance of their obligations hereunder. 13. NOTICES Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing as follows: If to the Issuer - Mississippi Business Finance Corporation 1306 Walter Sillers Building Post Office Box 849 Jackson, Mississippi 39205 Attention: William T. Barry with a copy to: Holcomb, Dunbar, Connell, Chaffin & Willard Suite 900, 120 North Congress (39201) P. O. Box 2990 Jackson, Mississippi 39207-2990 Attention: W. Larry Harris
- 12 - 13 If to the Company - Vicksburg Chemical Company 5100 Poplar, Suite 2414 Memphis, Tennessee 38137 Attention: John C. Bumpers If to the Trustee - First National Bank of Vicksburg Post Office Box 39 Vicksburg, Mississippi 39181 Attention: Joe Schmidt If to the Purchasers - The First National Bank of Boston Suite 745 400 Perimeter Center Terrace Atlanta, Georgia 30346 Attention: John K. Hood and NationsBank of Georgia, N.A. 600 Peachtree Street Atlanta, Georgia 30308 Attention: Lynn Webster
14. SUCCESSORS This Agreement is made solely for the benefit of the Issuer, the Purchasers and the Company (including their successors or assigns) and no other person shall acquire or have any right hereunder or by virtue hereof (other than pursuant to Section 5 hereof). 15. SURVIVAL OF CERTAIN REPRESENTATIONS AND WARRANTIES All agreements, covenants, representations and warranties and all other statements of the Issuer and the Company set forth in or made pursuant to this Agreement shall remain in full force and effect and shall survive the Initial Closing Date and the delivery of the Bonds, from time to time. - 13 - 14 16. GOVERNING LAW This Agreement shall be governed by the laws of the State. 17. MISCELLANEOUS This Agreement constitutes the only agreement among the parties hereto relating to the subject matter hereof and it supersedes and cancels any and all previous contracts, agreements or understandings with respect thereto. This Agreement may not be amended or modified except in writing executed by all parties hereto. Capitalized terms not otherwise defined herein shall have the meaning assigned to them in the Indenture and the Loan Agreement. 18. COUNTERPARTS This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Very truly yours, THE FIRST NATIONAL BANK OF BOSTON By: ---------------------------------------------------------- Title: ------------------------------------------------------- NATIONSBANK OF GEORGIA, N.A. By: ---------------------------------------------------------- Title: ------------------------------------------------------- Accepted on MISSISSIPPI BUSINESS FINANCE November 10, 1993 CORPORATION By: ---------------------------------------------------------- Executive Director
- 14 - 15 Accepted on VICKSBURG CHEMICAL COMPANY November 10, 1993 By: ---------------------------------------------------------- Title: -------------------------------------------------------
- 15 - EX-21 6 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 The following table sets forth certain information, as of March 23, 1994, with respect to the subsidiaries of the Company, other than certain subsidiaries which, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.
Percentage of voting securities State or other owned by its jurisdiction in immediate parent which incorporated ----------------- ------------------ Subsidiaries of the Company: Haifa Chemicals Ltd. 100% (1) Israel Haifa Chemicals South, Ltd. 100% Israel Hi-Chem (UK) Ltd. 100% United Kingdom Hi-Chem S.A. 100% Belgium Fertilizantes Quimicos, S.A. 100% Spain Hi-Agri S.R.L. 100% (2) Italy Duclos International S.A. 80% France Eddy Potash, Inc. 100% Delaware Nine West Corporation 100% Delaware Cedar Chemical Corporation 100% Delaware New Mexico Potash Corporation 100% New Mexico Vicksburg Chemical Company 100% Delaware
_____________________________ (1) Including approximately 7% owned by Trans-Resources (Israel) Ltd. (2) Including approximately 5% owned by Haifa Chemicals South, Ltd. E-8 EX-24 7 POWER OF ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY Each of the undersigned officers and directors of Trans-Resources, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint Arie Genger and Lester W. Youner, and each of them, as the undersigned's true and lawful attorney-in-fact, with full power to each of them to act without the other, to execute in the name and on behalf of the undersigned, individually and in the capacity stated below, the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1993 and any and all amendments thereto, which amendments may make such changes in such Form 10-K as either such attorney-in-fact may deem appropriate. Each of the undersigned does further hereby ratify and confirm all that either said attorney-in-fact may do or cause to be done pursuant to the power granted hereby. Dated: March 23, 1994 s/ Arie Genger ---------------------------------------- Arie Genger Director, Chairman of the Board and Chief Executive Officer (principal executive officer) s/ Lester W. Youner ---------------------------------------- Lester W. Youner Vice President, Treasurer and Chief Financial Officer (principal financial and accounting officer) s/ Thomas G. Hardy ---------------------------------------- Thomas G. Hardy Director s/ Martin A. Coleman ---------------------------------------- Martin A. Coleman Director s/ Sash A. Spencer ---------------------------------------- Sash A. Spencer Director
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