-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AnpNyO6mp9fcqArOkxa0JP+xTzrAJXju4hnuDVj5+U1Q7otMb6AJUCq4xcYxurir tuhvjfbEuoL3ySUDfr6EVw== 0000889812-98-002374.txt : 19980930 0000889812-98-002374.hdr.sgml : 19980930 ACCESSION NUMBER: 0000889812-98-002374 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 22 FILED AS OF DATE: 19980929 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHILIPP BROTHERS CHEMICALS INC CENTRAL INDEX KEY: 0001069899 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 131840497 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641 FILM NUMBER: 98717588 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKET PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: C P CHEMICALS INC CENTRAL INDEX KEY: 0001069900 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 221548721 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-01 FILM NUMBER: 98717589 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKET PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOFFOLK INC CENTRAL INDEX KEY: 0001069986 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 223429128 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-02 FILM NUMBER: 98717590 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHIBRO TECH INC CENTRAL INDEX KEY: 0001069987 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 223060339 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-03 FILM NUMBER: 98717591 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MRT MANAGEMENT CORP CENTRAL INDEX KEY: 0001069988 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 223060339 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-04 FILM NUMBER: 98717592 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MINERAL RESOURCE TECHNOLOGIES LLC CENTRAL INDEX KEY: 0001069989 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 582204234 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-05 FILM NUMBER: 98717593 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRINCE AGRIPRODUCTS INC CENTRAL INDEX KEY: 0001069990 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231653576 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-06 FILM NUMBER: 98717594 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRINCE MANUFACTURING CO/PA CENTRAL INDEX KEY: 0001069991 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 132793019 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-07 FILM NUMBER: 98717595 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRINCE MANUFACTURING CO/IL CENTRAL INDEX KEY: 0001069992 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 132793024 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-08 FILM NUMBER: 98717596 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHIBROCHEM INC CENTRAL INDEX KEY: 0001069993 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 222758614 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-09 FILM NUMBER: 98717597 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHIBRO CHEMICALS INC CENTRAL INDEX KEY: 0001069994 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 222871784 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-10 FILM NUMBER: 98717598 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN MAGNESIUM CORP CENTRAL INDEX KEY: 0001069995 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 132849569 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-64641-11 FILM NUMBER: 98717599 BUSINESS ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 2019446020 MAIL ADDRESS: STREET 1: ONE PARKER PLZ CITY: FORT LEE STATE: NJ ZIP: 07024 S-4 1 REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ PHILIPP BROTHERS CHEMICALS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW YORK 2819 13-1840497 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ ONE PARKER PLAZA FORT LEE, NEW JERSEY 07024 (201) 944-6020 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) SEE TABLE OF ADDITIONAL REGISTRANTS ------------------------ JACK C. BENDHEIM, PRESIDENT AND CHIEF EXECUTIVE OFFICER PHILIPP BROTHERS CHEMICALS, INC. ONE PARKER PLAZA FORT LEE, NEW JERSEY 07024 (201) 944-6020 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ With a copy to: LAWRENCE M. BELL, ESQ. GOLENBOCK, EISEMAN, ASSOR & BELL 437 MADISON AVENUE NEW YORK, NEW YORK 10022-7302 (212) 907-7300 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / ------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS AGGREGATE REGISTRATION OF SECURITIES TO BE REGISTERED OFFERING PRICE FEE 9 7/8% Senior Subordinated Notes due 2008................................................. $100,000,000 $29,500
(1) Calculated pursuant to Rule 457(f) and (o) solely for purposes of calculating the registration fee. ------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO THE SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF ADDITIONAL REGISTRANTS
STATE OR OTHER PRIMARY STANDARD JURISDICTION OF INDUSTRIAL EXACT NAME OF REGISTRANT INCORPORATION OR CLASSIFICATION IRS EMPLOYER AS SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBER IDENTIFICATION NO. C.P. Chemicals, Inc. New Jersey 2819 22-1548721 One Parker Plaza Fort Lee, New Jersey 07024 (201) 944-6020 Koffolk, Inc. Delaware 2819 22-3429128 One Parker Plaza Fort Lee, New Jersey 07024 (201) 944-6020 Phibro-Tech, Inc. Delaware 2819 22-3060339 One Parker Plaza Fort Lee, New Jersey 07024 (201) 944-6020 MRT Management Corp. Delaware 2819 22-3407010 One Parker Plaza Fort Lee, New Jersey 07024 (201) 944-6020 Mineral Resource Technologies, L.L.C. Delaware 2819 58-2204234 120 Interstate North Parkway East, Suite 440 Atlanta, Georgia 30339 (770) 989-0089 Prince Agriproducts, Inc. Delaware 2819 23-1653576 One Prince Plaza Quincy, Illinois 62301 (217) 222-8854 The Prince Manufacturing Company Pennsylvania 2819 13-2793019 700 Lehigh Street Bowmanstown, Pennsylvania 18030 (610) 852-2345 The Prince Manufacturing Company Illinois 2819 13-2793024 One Prince Plaza Quincy, Illinois 62301 Phibrochem, Inc. New Jersey 2819 22-2758614 One Parker Plaza Fort Lee, New Jersey 07024 (201) 944-6020 Phibro Chemicals, Inc. New York 2819 22-2871784 One Parker Plaza Fort Lee, New Jersey 07024 (201) 944-6020 Western Magnesium Corp. California 2819 13-2849569 One Parker Plaza Fort Lee, New Jersey 07024 (201) 944-6020
PHILIPP BROTHERS CHEMICALS, INC. CROSS REFERENCE SHEET PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
ITEM OF FORM S-4 PROSPECTUS LOCATION - --------------------------------------------------------- ----------------------------------------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus................... Forepart of the Registration Statement; Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus....................................... Inside Front and Outside Back Cover Pages 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information............................ Summary; Risk Factors; Selected Consolidated Financial Data 4. Terms of the Transaction........................... Summary; The Exchange Offer; Description of the Notes; Certain Federal Income Tax Consequences; Plan of Distribution 5. Pro Forma Financial Information.................... Summary; Unaudited Pro Forma Condensed Consolidated Financial Information; Selected Consolidated Financial Data 6. Material Contracts with the Company Being Acquired......................................... Not Applicable 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters.... Not Applicable 8. Interests of Named Experts and Counsel............. Legal Matters; Experts 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities... Not Applicable 10. Information with Respect to S-3 Registrants........ Not Applicable 11. Incorporation of Certain Information by Reference........................................ Not Applicable 12. Information with Respect to S-2 or S-3 Registrants...................................... Not Applicable 13. Incorporation of Certain Information by Reference........................................ Not Applicable 14. Information with Respect to Registrants Other than S-2 or S-3 Registrants........................... Available Information; Summary; Risk Factors; Use of Proceeds; Capitalization; Unaudited Pro Forma Condensed Consolidated Financial Information; Selected Consolidated Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Conditions in Israel; Management; Description of Capital Stock; Principal Stockholders; Certain Relationships and Related Transactions; Description of Certain Indebtedness; Description of the Notes; Legal Matters; Experts; Index to Financial Statements
ITEM OF FORM S-4 PROSPECTUS LOCATION - --------------------------------------------------------- ----------------------------------------------------- 15. Information with Respect to S-3 Companies.......... Not Applicable 16. Information with Respect to S-2 or S-3 Companies... Not Applicable 17. Information with Respect to Companies Other than S-2 or S-3 Companies............................. Not Applicable 18. Information if Proxies, Consents or Authorizations are to be Solicited.............................. Not Applicable 19. Information if Proxies, Consents or Authorizations are not to be Solicited or in Exchange Offer..... Summary; Risk Factors; The Exchange Offer; Description of Notes; Book Entry; Delivery and Form; Exchange Offer; Registration Rights; Certain United States Federal Income Tax Considerations; Plan of Distribution
PROSPECTUS SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 1998 OFFER FOR ALL OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2008 IN EXCHANGE FOR 9 7/8% SENIOR SUBORDINATED NOTES DUE 2008, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF [LOGO] PHILIPP BROTHERS CHEMICALS, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED Philipp Brothers Chemicals, Inc. ("Philipp Brothers" and, collectively with its consolidated subsidiaries, the "Company") hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"), to exchange an aggregate principal amount of $100,000,000 of its 9 7/8% Senior Subordinated Notes due 2008 (the "New Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and outstanding 9 7/8% Senior Subordinated Notes due 2008 (the "Old Notes" and, together with the New Notes, the "Notes") from the holders (the "Holders") thereof. The terms of the New Notes are identical in all material respects to the Old Notes, except for certain transfer restrictions and registration rights relating to the Old Notes and except for certain provisions providing for an increase in the interest rate on the Old Notes under certain circumstances relating to the timing of the Exchange Offer. On June 11, 1998 (the "Issue Date"), Philipp Brothers issued $100,000,000 in aggregate principal amount of Old Notes. The Old Notes were issued pursuant to an offering (the "Offering") exempt from registration under the Securities Act and applicable state securities laws. Interest on the Notes is payable semi-annually on June 1 and December 1 of each year, commencing December 1, 1998. The Notes mature on June 1, 2008, unless previously redeemed. The Notes are redeemable in cash at the option of the Company, in whole or in part, on or after June 1, 2003, at the redemption prices set forth herein, together with accrued interest thereon to the date of redemption. In addition, at any time prior to June 1, 2001, the Company may, at its option, redeem up to 30% of the sum of (i) the initial aggregate principal amount of the Notes issued in the Offering and (ii) the respective initial aggregate principal amount of the Notes issued under the indenture pursuant to which the Old Notes were, and the New Notes will be, issued (the "Indenture") after the Issue Date, on one or more occasions with the net proceeds of one or more Public Equity Offerings (as defined) at 109 7/8% of the principal amount thereof, plus accrued interest to the date of redemption; provided, that immediately after giving effect to such redemption, at least 70% of the sum of (i) the initial aggregate principal amount of the Notes issued in the Offering and (ii) the respective initial aggregate principal amount of the Notes issued under the (Continued on next page) SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS , 1998. Indenture after the Issue Date remain outstanding. Upon a Change of Control (as defined), the Company will be required to offer to repurchase the Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued interest thereon to the date of repurchase. ii (Continued from previous page) The Notes are unsecured senior subordinated obligations of the Company and are subordinated in right of payment to all existing and future Senior Debt (as defined) of the Company. The Notes are effectively subordinated to all secured indebtedness of the Company to the extent of the assets securing such indebtedness. The Notes are unconditionally guaranteed by each of the current domestic subsidiaries and certain future subsidiaries of the Company (the "Guarantors") on an unsecured senior subordinated basis. Each of the Guarantees (as defined) is effectively subordinated to all secured indebtedness of such Guarantor to the extent of the assets securing such indebtedness. The Notes and the Guarantees rank pari passu with any future senior subordinated indebtedness of the Company or the Guarantors, respectively, and rank senior in right of payment to all other subordinated obligations of the Company or the Guarantors, respectively. The Company and the Guarantors had approximately $4.3 million in aggregate principal amount of outstanding Senior Debt as of June 30, 1998, and $35 million of availability, subject to a borrowing base, under the New Credit Agreement (as defined) as of August 31, 1998. The Indenture governing the Notes permits the Company and its subsidiaries to incur additional indebtedness, including Senior Debt, subject to certain limitations. For each Old Note accepted for exchange, the Holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. The New Notes will bear interest from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from June 11, 1998. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued interest on such Old Notes. The New Notes are being offered hereunder in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement (as defined). Based on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by Holders thereof (other than any Holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act; provided, that such New Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangement with any person to participate in the distribution of such New Notes. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each Holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of such New Notes and has no arrangement or understanding to participate in a distribution of New Notes. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period (the "Applicable Period") of up to 180 days after the effective date of the Registration Statement of which this Prospectus is a part, or such longer period if extended pursuant to the Registration Rights Agreement among the Company, the Guarantors and the Initial Purchaser (as defined), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." The Company will not receive any proceeds from the Exchange Offer. The Company will pay all of its expenses incident to the Exchange Offer. Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. In the event the Company terminates the Exchange Offer and does not accept for exchange any Old Notes, the Company will promptly return the Old Notes to the Holders thereof. See "The Exchange Offer." There is no existing trading market for the New Notes, and there can be no assurance regarding the future development of a market for the New Notes, or the ability of Holders of the New Notes to sell their New Notes or the price at which such Holders may be able to sell their New Notes. Schroder & Co., Inc. (the "Initial Purchaser") has advised the Company that it currently intends to make a market in the New Notes. The Initial Purchaser is not obligated to do so, however, and any market-making with respect to the New Notes may be discontinued at any time without notice. The Company does not intend to apply for listing or quotation of the New Notes on any securities exchange or stock market. iii AVAILABLE INFORMATION The Company has filed with the SEC a registration statement on Form S-4 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act with respect to the New Notes offered hereby. This Prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto, certain parts of which are omitted in accordance with the rules and regulations of the SEC. For further information with respect to the Company and the New Notes offered hereby, reference is made to the Registration Statement. Any statements made in this Prospectus concerning the provisions of certain documents are not necessarily complete and, in each instance, reference is made to the copy of such documents filed as an exhibit to the Registration Statement otherwise filed with the SEC. Upon the effectiveness of the Registration Statement, the Company will become subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, will file reports and other information with the SEC. The Registration Statement, the exhibits and schedules forming a part thereof and the reports and other information filed by the Company with the SEC in accordance with the Exchange Act may be inspected, without charge, at the Public Reference Section of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the SEC located at Seven World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of all or any portion of the material may be obtained from the Public Reference Section of the SEC upon payment of the prescribed fees. In addition, the SEC maintains a site on the World Wide Web that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of such site is http://www.sec.gov. In addition, the Company has agreed that, whether or not it is required to do so by the rules and regulations of the SEC, for so long as any Notes remain outstanding, it will furnish to the registered holders of the Notes and, to the extent permitted by applicable law or regulation, file with the SEC, all quarterly and annual and other documents that would be required to be filed with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act or any successor provision thereto. In addition, for so long as any of the Notes remain outstanding, the Company has agreed to make available to any registered holder (and, upon request, certain others) the information required by Rule 144A(d)(4) under the Securities Act. MARKET DATA USED THROUGHOUT THIS PROSPECTUS WAS OBTAINED THROUGH COMPANY RESEARCH, SURVEYS OR STUDIES PURCHASED BY THE COMPANY AND CONDUCTED BY THIRD PARTIES AND FROM INDUSTRY OR GENERAL PUBLICATIONS. THE COMPANY HAS NOT INDEPENDENTLY VERIFIED MARKET DATA PROVIDED BY THIRD PARTIES OR INDUSTRY OR GENERAL PUBLICATIONS. SIMILARLY, INTERNAL COMPANY SURVEYS, WHILE BELIEVED BY THE COMPANY TO BE RELIABLE AND REFLECTING THE COMPANY'S ESTIMATES, HAVE NOT BEEN VERIFIED BY ANY INDEPENDENT SOURCES. NO ASSURANCE CAN BE GIVEN REGARDING THE ACCURACY OF SUCH RESEARCH, SURVEYS, STUDIES OR ESTIMATES. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Prospectus includes "Forward-Looking Statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical facts included in this Prospectus, including, without limitation, statements regarding the Company's future financial position, business strategy, budgets, project costs and plans and objectives of management for future operations, are Forward-Looking Statements. In addition, Forward-Looking Statements generally can be identified by the use of forward-looking terminology such as "may," "will," "except," "should," "intend," "estimate," "anticipate," "believe," or "continue" or the negative thereof or variations thereon or similar terminology. Although the Company believes that the expectations reflected in such Forward-Looking Statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements") are disclosed under "Risk Factors" and elsewhere in this Prospectus, including, without limitation, in conjunction with the Forward-Looking Statements included in this Prospectus. All subsequent written and oral Forward-Looking Statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the Cautionary Statements. iii MAJOR PRODUCTS OVERVIEW [LOGO]
PRINCIPAL PRODUCTS PRINCIPAL END SELECTED WELL-KNOWN PRODUCT GROUP AND BRANDS MARKETS OR USERS CUSTOMERS ANIMAL NUTRITION Amprolium Animal Feed Agway AND HEALTH Animal Feed Ingredients Coccidiostats Cargill Copper Sulfate F.G. Feed Mills Continental Grain Nicarbazin Nutritional Eli Lilly Trace Mineral Premixes Supplements Farmland Trace Minerals Poultry and Pet Meriel Food (Merck/Rhone-Poulenc) Perdue Purina Mills (Koch Industries) Tyson Foods INTERMEDIATES Anisic Alcohol Acetylene BOC AND INDUSTRIAL Anisic Aldehyde Adhesion Promoter Colgate Palmolive CHEMICALS Calcium Carbide Brick and Tile Elementis Copper Oxide Catalysts Engelhard Dicyandiamide Cement Coatings Ferro DL Panthenol Concrete Hoffman La Roche Fly Ash Flame Retardation Laporte Iron Oxide Frits Morton International Manganese Dioxide Glass Osmose Selenium Disulfide Pharmaceutical Owens Corning Sodium Fluoride Intermediates Fiberglass Superchlon Preservatives Pfizer 1,3-Difluorobenzene Shampoo PPG Industries Toothpaste Procter & Gamble Wood Treatment Sherwin-Williams SmithKline Beecham Unilever CROP PROTECTION Copper Fungicides Citrus BASF Champ Flowable Grapes Helena (Marubeni) Champion Nuts Sivam Macclesfield 50 and 80 Vegetables Sumitomo Gibberellic Acid Vines United Agri Products GibGro 4% LC (Conagra) GibGro 20% SP ELECTRONICS AND Alkaline Etchant Chemical Milling Ashland METAL TREATMENT Phibro-Guard TFT Metal Finishers Automata Ac-Cu-Guard Plus Printed Circuit Board Hadco Ac-Cu-Fine9 Manufacturers Hutchinson Ferric Chloride MacDermid PF Etchant Sanmina High Speed Circuit Etch Shipley Rapid Circuit Etch Tyco International Metal Treatment Van Waters & Rogers Recycling Activities
Advancing Animal Nutrition (Registered), A-STAB (Registered), Champ Flowable (Registered), Champion (Registered), Copikem (Registered), CP and design (Registered), GibGro (Registered), High Speed Circuit Etch (Registered), Kastab (Registered), Manpower (Registered), MRT (Registered), N-cap (Registered), Nicarb (Registered), Nicarmix (Registered), Phibro-Guard (Registered), Prince and design (Registered), TFT (Registered), Tripolymer (Registered), Ac-Cu-Guard (Trademark), Agri-tin (Trademark), High Speed Ac-Cu-Guard Plus (Trademark), Ac-Cu-Fine9 (Trademark), D Stab (Trademark), Necoxine (Trademark), Chromax (Trademark), Chromox (Trademark), Brickox (Trademark), Macclesfield (Trademark), MRT Cement (Trademark), Ultra Flourish (Trademark) and Phibro and design (Trademark) are trademarks of the Company. iv SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the more detailed information and the Company's historical consolidated financial statements and "Unaudited Pro Forma Condensed Consolidated Financial Information," and the respective notes thereto, included elsewhere in this Prospectus. Unless otherwise indicated, industry and market data used throughout this Prospectus are based on Company estimates which, while believed by the Company to be reliable, have not been verified by independent sources. Unless otherwise indicated or the context otherwise requires, (i) references to "Philipp Brothers" are to Philipp Brothers Chemicals, Inc. and references to the Company are to Philipp Brothers and its consolidated subsidiaries, and (ii) references to the Company's fiscal year refer to the 12-month period ended June 30 of the applicable year. THE COMPANY Philipp Brothers Chemicals, Inc. is a leading diversified global manufacturer and marketer of a broad range of specialty and industrial chemicals, which are sold world-wide for use in numerous markets including animal nutrition and health, electronics, wood treatment, agricultural, pharmaceutical and personal care products, glass, construction and concrete. The Company also provides recycling and hazardous waste services primarily to the electronics and metal treatment industries. The Company has leading positions in certain of its end markets, and has global marketing and manufacturing capabilities. The Company's net sales and EBITDA (as defined) were $278.0 million and $10.6 million, respectively, for the year ended June 30, 1998 and $268.4 million and $20.6 million, respectively, for the year ended June 30, 1997. Approximately 35% of the Company's fiscal 1998 net sales consisted of sales made by the Company outside the United States. During fiscal 1998, the Company's products were manufactured at nine facilities in the United States, two facilities in Europe, two facilities in Israel, and one facility in South America. The Company manufactures and markets more than 350 specialty and industrial chemicals, of which 50 products accounted for approximately 80% of fiscal 1998 net sales. The Company focuses on specialty and industrial chemicals for which it has a strong market position or an advantage in product development, manufacturing or distribution. Many of the Company's products provide critical performance attributes to its customers' products, while representing a relatively small percentage of total end-product costs. The Company has four core product groups: o ANIMAL NUTRITION AND HEALTH. The Company manufactures and markets trace minerals, trace mineral premixes and animal feed ingredients, as well as vitamins, vitamin premixes and other animal health products to the animal feed, poultry and pet food industries. The Company produces, at one of its plants in Israel, nicarbazin and amprolium, which it distributes to the world-wide poultry industry through major multinational pharmaceutical and animal health companies. The Company believes it is the sole world-wide producer of amprolium, and the largest world-wide producer of nicarbazin, both of which are coccidiocides approved by the U.S. Food and Drug Administration ("FDA") for the prevention of coccidiosis (a parasitic infection) in chickens. The Company believes it is one of the largest manufacturers and marketers of copper sulfate, a key ingredient in animal nutrition, to the animal feed industries in the United States and France. Animal Nutrition and Health products accounted for approximately $129 million, or 47%, of the Company's fiscal 1998 net sales. o INTERMEDIATES AND INDUSTRIAL CHEMICALS. The Company manufactures and markets a number of specialty and fine organic chemicals and intermediates, as well as industrial pigments and other mineral products for use in the chemical, catalyst, pharmaceutical and personal care, construction, concrete, wood treatment, automotive, aerospace, glass and coal mining industries. Certain of these products are produced from the Company's recycling operations, resulting in a cost advantage for the Company. One of the Company's main products in this group, copper oxide, used in the production of water-borne wood preservatives, is produced from its recycling operations. The Company believes that it is one of the major suppliers of copper oxide to the North American wood preservative market. In addition to copper oxide, the Company supplies other mineral oxides, such as iron and manganese compounds, which are used as colorants and for other purposes in the brick, masonry, glass and other industries. The Company also manufactures and markets chemical intermediates for the pharmaceutical and personal care 1 industries. The Company believes it is a leading U.S. marketer of sodium fluoride, the active ingredient in fluoride toothpaste. The Company also manufactures and markets DL Panthenol, often labeled "pro vitamin B5," a key ingredient in shampoo for providing luster. Intermediates and Industrial Chemicals accounted for approximately $74 million, or 27%, of the Company's fiscal 1998 net sales. o CROP PROTECTION. The Company manufactures and markets fungicides and other agricultural products for the United States, French and other international markets. These products are primarily copper-based fungicides, which are used in the treatment of crop bacteria and fungal diseases, and gibberellins, which are plant growth regulators used in table grape and citrus production, as well as value-added branded crop protection chemicals. Copper-based fungicide products include Macclesfield 80, a Bordeaux mixture, and Champion and Champ Flowable, both copper hydroxide fungicides that are more efficacious forms of copper-based fungicides. The gibberellins include liquid and soluble powder GibGro, a plant growth regulator. The majority of these products are covered by United States and foreign registrations granted to or held by the Company. Crop Protection products accounted for approximately $36 million, or 13%, of the Company's fiscal 1998 net sales. o ELECTRONICS AND METAL TREATMENT. The Company believes that it is the largest manufacturer and recycler of alkaline etchants in North America. Through five of its facilities, the Company sells fresh etchant to printed circuit board manufacturers and recycles spent etchants. The Company believes it is the only national recycler of spent etchant generated principally by printed circuit board manufacturers and metal finishers. Using its proprietary recycling processes, the Company recovers copper, nickel and other materials for use in the manufacture of a broad range of intermediates and industrial chemicals. Electronics and Metal Treatment accounted for approximately $39 million, or 14%, of the Company's fiscal 1998 net sales. BUSINESS STRATEGY The Company's objective is to continue to enhance its revenue growth and profitability. The Company plans to achieve its objective through the following key strategies: o Enhance Growth through Selective Acquisitions and Strategic Alliances. The Company will continue to seek acquisitions of businesses and products that improve profitability. In 1994, the Company acquired Agtrol International (formerly La Cornubia S.A.), a producer of copper chemicals and crop protection chemicals in France. In 1995, the Company acquired Planalqumica Industrial Ltda. ("Planalqumica"), the sole manufacturer of nicarbazin in Latin America. In 1996, Koffolk Inc. ("Koffolk USA"), then an affiliate of the Company that became a subsidiary through the Transactions, purchased the right to sell nicarbazin from the Animal Feed Division of Merck & Co. Inc. ("Merck"). Koffolk USA became the registered transferee and owner of the New Animal Drug Application ("NADA") for nicarbazin approved by the FDA. Separately, Merck appointed Koffolk USA as its exclusive U.S. distributor of amprolium for poultry markets. In 1996, Elanco Animal Health, a division of Eli Lilly, agreed to act as the Company's exclusive distributor in the United States and Brazil for nicarbazin. This arrangement was terminated by the Company with respect to the United States in August 1998. In June 1998, Koffolk USA become a subsidiary of the Company upon the closing of the Offering. In September 1998, the Company completed the ODDA Acquisition (as defined below). See "--Recent Developments." o Increase Product Offerings to Primary Markets. The Company seeks to offer an extensive animal nutrition and crop protection product portfolio to a given customer, thereby enhancing its position as a valuable supplier to the industries it serves and increasing its unit sales per customer. The Company seeks to increase its product lines through identification and registration of generic fungicides under the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA"), either directly or through joint ventures or strategic alliances. In 1998, the Company obtained a U.S. registration under FIFRA to sell a triphenyltin hydroxide-based product ("TPTH"), under the name Agri-tin, a fungicide used primarily in the sugar beet, pecan and potato industries. In 1998, the Company also launched a mefenoxam-based product, under the name Ultra Flourish, a systemic fungicide used in the tobacco, citrus and vegetable industries, for use in a variety of end use formulations. 2 o Introduce New or Technologically Improved Products. The Company focuses on the acquisition and development of new and technologically advanced products to respond to customer demands, changes in the marketplace, technology and environmental regulations. The Company continues to use its recycling expertise, hydro-metallurgical experience and chemical formulation capability to develop new products and services. The Company continues to seek and develop opportunities that enable it to offer new products and technologies. For example, Mineral Resource Technologies, L.L.C., a subsidiary of the Company which commenced operations in 1996, has recently obtained two patents for the development of a new series of cement products. Such products, called MRT Cement, are made primarily from fly ash, an ash residue generated chiefly by coal-burning electric utilities. The Company believes that MRT Cement could serve as a competitive alternative to portland cement for use in the building and construction industries. The Company has recently entered into an agreement with an electronic component manufacturer to recycle ferric chloride for that manufacturer. In 1998, the Company introduced an environmentally friendly livestock litter treatment product and a line of animal nutrition palatants (flavor enhancers) for the United States feed market. The Company is also capitalizing on its technology to develop a fourth generation copper-based fungicide expected to have enhanced biological activity and reduced cost of disease control. o Continue to Improve Operating Efficiencies. With the curtailment of the Company's Sewaren, New Jersey facility, the Company expects to realize significant cost savings. The Company intends to implement additional cost-saving and productivity-enhancing programs in the future, including yield improvement programs. The Company intends to move or expand product capacity to improve production efficiency and reduce transportation costs. The Company is analyzing additional opportunities to increase operating efficiencies and profitability. See "--Restructuring and Other Charges." o Expand and Strengthen Customer Base. The Company intends to expand and strengthen its customer base by (i) focusing on relationships with key accounts, (ii) continuing to incentivize its sales force to concentrate on fast-growing, high-margin areas within existing product groups, and (iii) pursuing growth opportunities for its existing products in new markets outside the United States. COMPETITIVE STRENGTHS o Leadership Positions in Targeted Markets. The Company believes it holds leading positions in several specialty agricultural markets, including copper-based feed additives and fungicides, and in specialty and industrial chemical markets, including metal ore-based colorants, etchants and certain organic compounds. The Company's brand names in its target markets include Nicarb, Champion, Champ Flowable, GibGro, Macclesfield, Nicarmix, Necoxine, Ac-Cu-Guard, High Speed Ac-Cu-Guard Plus, Ac-Cu-Fine 9, Phibro-Guard TFT, Kastab, D Stab, Chromax, Chromox, Brickox, Agri-tin and Ultra Flourish. The Company believes these leadership positions will enhance its ability to broaden its product lines within its markets, and its brand name recognition will increase its ability to launch its existing products in new markets. o Manufacturing Expertise. The Company's extensive experience in various metal recovery processes provides the Company with a high quality, low cost source of raw material for use in products sold to the agricultural and animal nutrition markets. In addition, the Company's expertise in certain organic synthesis processes has led to long-term manufacturing relationships with its customers. Further, the Company's formulation and compounding expertise is recognized by its customers in the animal health and nutrition market. In 1994, the Company entered into a long-term supply agreement whereby Merck agreed to purchase all of its requirements for amprolium from the Company. o Proven Experience in New Product Development. The Company is a leader in the development of new agricultural and industrial products and applications. The Company has introduced high quality generic formulations of fungicides and has further enhanced the bio-availability of the active ingredient. In addition, the Company has modified formulations as required by crop and soil conditions and market demand, and is currently developing and field testing the fourth generation of one of its fungicides. The Company has also developed several specialty nutrient 3 blends. The Company is expert in the innovative use of fluorine compounds to produce its chemical intermediates. New products introduced by the Company since 1994 accounted for approximately $74 million of the Company's total revenues in fiscal year 1998. o Established Global Network and Diverse Customer Base. The Company manufactures and markets over 350 products sold through multiple distribution channels to over 3,100 customers in a wide variety of end-use markets. The Company sells its products through an established global sales, marketing and distribution network to customers in 81 countries. Approximately 35% of the Company's total sales for fiscal 1998 were made by the Company outside the United States, with 11% of sales from Europe, 22% of sales from Israel and 2% of sales from South America. The Company's U.S., Israeli and European manufacturing operations provide it with cost-effective access to major geographic markets. In fiscal 1998, no single customer accounted for over 5% of total revenues and the top 10 customers accounted for less than 17% of total revenues. o Strong Management Team. The Company has assembled a strong and experienced management team at both the corporate and operating levels. The Company's top operating managers have an average of over 25 years of experience in the chemicals industry. RECENT DEVELOPMENTS The Offering In June 1998, the Company completed a private placement (the "Offering") under Rule 144A of the Securities Act, pursuant to which the Company issued and sold $100 million of Old Notes, from which the Company received net proceeds of approximately $96.2 million, after payment of discounts and commissions to the Initial Purchaser and offering expenses. The proceeds of the Offering were used in part to retire certain indebtedness of the Company, to effect the Transactions, to finance the acquisition of ODDA (as defined below), in connection with the Restructuring and Other Charges, and will be used in part to finance other potential acquisitions and capital expenditures and to provide additional working capital for general corporate purposes. ODDA Acquisition The Company is in the process of closing the acquisition (the "ODDA Acquisition") of ODDA Smeltverk, AS, a Norwegian manufacturer and the business of BOC Carbide Industries, a related U.K. distributor (together, "ODDA") of calcium carbide used in the production of acetylene for welding and cutting and as a desulphurization agent in the steel and foundry industry, and dicyandiamide used in several applications, including as a flame retardant treatment for wood. The purchase price is approximately $35 million (comprised of approximately $19 million in cash plus the assumption of approximately $16 million in principal amount of indebtedness). Prior to the ODDA Acquisition, the Company was ODDA's exclusive U.S. distributor for dicyandiamide. See Note 14(a) to the Company's Consolidated Financial Statements and Unaudited Pro Forma Condensed Consolidated Financial Information. According to unaudited financial statements provided by the seller for the twelve months ended June 30, 1998, ODDA had revenues of approximately $41.8 million, EBITDA of $4.7 million and assets of $37.7 million. New Credit Facility In August 1998, the Company terminated its existing credit agreement with Fleet Bank, National Association (the "Old Credit Agreement"), and entered into a new credit agreement with PNC Bank, National Association (the "New Credit Agreement" or the "Credit Facility"). The New Credit Agreement provides, among other things, for the extension of a $60 million senior secured financing, consisting of a $35 million revolving credit facility (subject to the availability of certain eligible receivables and eligible inventory, with a sub-limit for inventory of $15 million), including a $7.5 million letter of credit sub-facility, and a $25 million acquisition facility. See "Description of Certain Indebtedness." 4 RESTRUCTURING AND OTHER CHARGES The Company has implemented a restructuring program in fiscal 1998 and has incurred the charges described below (the "Restructuring and Other Charges"). See Note 11(d) and (e) to the Company's Consolidated Financial Statements. o Curtailment of operations at the Company's Sewaren, New Jersey manufacturing facility, which manufactured products primarily in the Intermediates and Industrial Chemicals product group. The curtailment program resulted in non-recurring charges of approximately $10 million, of which $5.6 million is associated with the non-cash write down of fixed assets, $1.1 million for one-time costs associated with the actual shutdown and $3.3 million for ongoing site monitoring and ground water remediation. o Charges associated with the forgiveness of certain promissory notes issued to the Company's Phibro-Tech subsidiary by certain executives and tax-related adjustments, which aggregate $5.6 million. See "Certain Relationships and Related Transactions." o Charges of approximately $1.2 million arising out of severance payments associated with personnel changes. The Company will continue to analyze opportunities to increase operating efficiencies and profitability, which may result in additional restructuring and other charges in the future. Additional matters have not currently been identified. THE TRANSACTIONS The Company has undertaken the following transactions to provide it with greater flexibility in the next several years with respect to its capital expenditure and working capital requirements and to simplify the capital structure of the Company and certain related entities. Concurrently with the consummation of the Offering, all of the Company's outstanding indebtedness under the Company's Old Credit Agreement with Fleet Bank, N.A. was repaid in full out of the proceeds of the Notes. In addition, the Company paid all amounts outstanding under and discharged $20.0 million in aggregate principal amount of the Company's 11% Senior Notes due June 29, 2004 held by The Northwestern Mutual Life Insurance Company (the "Old Senior Notes"). Concurrently with the consummation of the Offering, Jack Bendheim, the President and principal shareholder of the Company, sold all of the stock of Koffolk USA to the Company in exchange for $1.5 million in indebtedness owed by Mr. Bendheim to the Company (collectively, the "Koffolk USA Purchase"). In addition, the Company acquired from Jack Bendheim his 29.2% interest in Mineral Resource Technologies, L.L.C ("MRT") for $25,000 and repaid $995,000 in advances made by Mr. Bendheim to MRT (the "MRT Transaction"). See "Certain Relationships and Related Transactions." The foregoing transactions, together with the Offering of the Old Notes, are collectively referred to herein as the "Transactions." --------------------------- The Company was founded in 1947 by Charles H. Bendheim, as the successor to the chemical business of Philipp Brothers Incorporated. Siegfried Bendheim, the father of Charles H. Bendheim, was the founder and principal shareholder of such predecessor, Philipp Brothers Incorporated, which was founded in 1916. The Company has grown through internal growth and selective acquisitions. Mr. Jack Bendheim, the son and grandson of the founders, is the principal shareholder and President and Chief Executive Officer of the Company. The principal executive offices of the Company are located at One Parker Plaza, Fort Lee, New Jersey and its telephone number is (201) 944-6020. 5 THE EXCHANGE OFFER Securities Offered........................ $100,000,000 principal amount of 9 7/8% Senior Subordinated Notes due 2008, which have been registered under the Securities Act. The terms of the New Notes and the Old Notes are identical in all material respects, except that the offer of the New Notes will have been registered under the Securities Act and, therefore, the New Notes will not be subject to certain transfer restrictions, registration rights and related liquidated damage provisions applicable to the Old Notes described below under "--Summary Description of the New Notes." The Exchange Offer........................ The New Notes are being offered in exchange for a like principal amount of Old Notes. The issuance of the New Notes is intended to satisfy obligations of the Company contained in the Registration Rights Agreement dated as of June 11, 1998 among the Company, the Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). Expiration Date; Withdrawal Rights........ The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1998, or such later date and time to which it is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Note not accepted for exchange for any reason will be returned without expense to the tendering Holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. See "The Exchange Offer--Terms of the Exchange Offer; Period for Tendering Old Notes" and "--Withdrawal Rights." Procedures for Tendering Old Notes............................... Each Holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with either certificates for such Old Notes or a Book-Entry Confirmation (as defined herein) of such Old Notes into the Book-Entry Transfer Facility (as defined herein), if such procedure is available, and any other required documentation to the exchange agent (the "Exchange Agent") at the address set forth herein. By executing the Letter of Transmittal, each Holder will represent to the Company, among other things, that (i) the New Notes acquired pursuant to the Exchange Offer by the Holder and any other person are being obtained in the ordinary course of business of the person receiving such New Notes, (ii) neither the Holder nor such other person is participating in, intends to participate in or has an arrangement or understanding with any person to participate in the distribution of such New Notes and (iii) neither the Holder nor such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker or dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of
6 Transmittal states that by so acknowledging and by delivering a prospectus, a broker or dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "The Exchange Offer--Procedures for Tendering Old Notes" and "Plan of Distribution." Untendered Old Notes...................... Following the consummation of the Exchange Offer, holders of Old Notes eligible to participate but who do not tender their Old Notes will not have any further exchange or registration rights and such Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Old Notes could be adversely affected. Shelf Registration Statement.............. If any holder of the Old Notes (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) is not eligible under applicable securities laws to participate in the Exchange Offer, and such holder has satisfied certain conditions relating to the provision of information to the Company for use therein, the Company has agreed to register the Old Notes on a shelf registration statement (the "Shelf Registration Statement") and to use its reasonable best efforts to cause it to be declared effective by the SEC. The Company has also agreed to file a Shelf Registration Statement under certain other circumstances. The Company has agreed to maintain the effectiveness of the Shelf Registration Statement for, under certain circumstances, a maximum of two years, to cover resales of the Old Notes held by such holders. Special Procedures for Beneficial Owners.................................. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered Holder. The transfer of registered ownership may take considerable time. See "The Exchange Offer--Procedures for Tendering Old Notes." Guaranteed Delivery Procedures............ Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who can not deliver their Old Notes or any other documents required by the Letter of Transmittal to the Exchange Agent must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures." Federal Income Tax Consequences........... The exchange pursuant to the Exchange Offer should not result in gain or loss to the Holders or the Company for federal income tax purposes. See "Certain United States Federal Income Tax Consequences." Use of Proceeds........................... There will be no proceeds to the Company from the Exchange Offer. Exchange Agent............................ The Chase Manhattan Bank is serving as Exchange Agent in connection with the Exchange Offer. See "The Exchange Offer--Exchange Agent."
7 CONSEQUENCES OF EXCHANGING OLD NOTES Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register Old Notes under the Securities Act. See "Description of the Notes--Registration Rights." Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by Holders thereof (other than any Holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangement with any person to participate in the distribution of such New Notes. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each Holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities and that it will deliver a Prospectus in connection with any resale of such New Notes. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, it may be necessary to qualify for sale or register thereunder the New Notes prior to offering or selling such New Notes. The Company has agreed, pursuant to the Registration Rights Agreement, subject to certain limitations specified therein, to register or qualify the New Notes for offer or sale under the securities laws of such jurisdictions as any Holder reasonably requests in writing. Unless a Holder so requests, the Company does not intend to register or qualify the sale of the New Notes in any such jurisdictions. See "The Exchange Offer--Consequences of Exchanging Old Notes." SUMMARY DESCRIPTION OF THE NEW NOTES The terms of the New Notes and the Old Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Old Notes and except for certain provisions providing for an increase in the interest rates on the Old Notes under certain circumstances relating to timing of the Exchange Offer, which rights will terminate upon consummation of the Exchange Offer. The New Notes will bear interest from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from June 11, 1998. Accordingly, registered Holders of New Notes on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from June 11, 1998. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of interest on such Old Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer, and the right of such Holders to receive any such payment will terminate upon consummation of the Exchange Offer. 8 THE OFFERING Notes Offered............................. $100,000,000 in aggregate principal amount of 9 7/8% Senior Subordinated Notes due 2008, which have been registered under the Securities Act. Maturity Date............................. June 1, 2008. Interest Payment Dates.................... June 1 and December 1 of each year, commencing December 1, 1998. Ranking................................... The Notes are general unsecured obligations of the Company. The Notes are subordinated in right of payment to all existing and future Senior Debt (as defined) of the Company and rank pari passu in right of payment with all other existing and future senior subordinated indebtedness of the Company. In addition, the Notes are effectively subordinated to all secured indebtedness of either the Company or any of its subsidiaries to the extent of the assets securing such indebtedness. After giving effect to the Transactions, Philipp Brothers and the Guarantors had approximately $4.3 million in aggregate principal amount of Senior Debt outstanding as of June 30, 1998, and $35 million of availability, subject to a borrowing base, under the New Credit Agreement as of August 31, 1998. The Indenture governing the Notes permits Philipp Brothers and its subsidiaries to incur additional indebtedness, subject to certain limitations. See "Risk Factors--Ranking of the Notes" and "Description of the Notes--Subordination." Optional Redemption....................... The Notes are redeemable in cash at the option of the Company, in whole or in part, at any time or from time to time on or after June 1, 2003, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to June 1, 2001, the Company may, at its option, redeem up to 30% of the sum of (i) the initial aggregate principal amount of the Notes issued in the Offering and (ii) the respective initial aggregate principal amount of the Notes issued under the Indenture after the Issue Date, on one or more occasions with the net proceeds of one or more Public Equity Offerings at 109 7/8% of the principal amount thereof, plus accrued interest to the date of redemption, provided, that immediately after giving effect to such redemption, at least 70% of the sum of (i) the initial aggregate principal amount of the Notes issued in the Offering and (ii) the respective initial aggregate principal amount of the Notes issued under the Indenture after the Issue Date remain outstanding. See "Description of the Notes--Optional Redemption." Change of Control......................... Upon a Change of Control, the Company will be required to offer to repurchase the Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. See "Description of the Notes--Change of Control." Guarantees................................ The Notes are unconditionally guaranteed on a senior subordinated basis (the "Guarantees") by the Guarantors. The Guarantees are unsecured senior subordinated obligations of the Guarantors and are subordinated in right of payment to all existing and future Senior Debt (including their guarantees under the Credit Facility) of each Guarantor. As of June 30,
9 1998, the Guarantors had approximately $4.3 million principal amount of Senior Debt outstanding. See "Description of the Notes--Guarantees." Certain Covenants......................... The Indenture contains certain covenants with respect to the Company and its Restricted Subsidiaries (as defined), which restrict, among other things, (a) the incurrence of additional indebtedness, (b) the payment of dividends and other restricted payments, (c) the creation of certain liens, (d) the sale of assets, (e) certain payment restrictions affecting subsidiaries, and (f) transactions with affiliates. The Indenture also restricts the Company's ability to consolidate or merge with or into, or to transfer all or substantially all of its assets to, another person. These restrictions and requirements are subject to a number of important qualifications and exceptions. See "Description of the Notes--Certain Covenants." Exchange Offer; Registration.............. Holders of New Notes (other than as set forth below) are not entitled to any registration rights with respect to the New Notes. Pursuant to the Registration Rights Agreement, the Company has agreed, for the benefit of the Holders of Old Notes, to file an Exchange Offer Registration Statement (as defined). The Registration Statement of which this Prospectus is a part constitutes the Exchange Offer Registration Statement. Under certain circumstances, certain Holders of Notes (including Holders who may not participate in the Exchange Offer or who may not freely resell New Notes received in the Exchange Offer) may require the Company to file, and cause to become effective, a shelf registration statement under the Securities Act, which would cover resales of Notes of such Holders. See "Description of Notes--Exchange Offer; Registration Rights." Use of Proceeds........................... The proceeds from the Offering of the Old Notes were used in part to retire certain existing indebtedness of the Company, to effect the Transactions, to finance the acquisition of ODDA, and in connection with the Restructuring and Other Charges, and will be used in part to finance other potential acquisitions and capital expenditures and to provide additional working capital for general corporate purposes. See "Use of Proceeds." Risk Factors.............................. Holders of the Old Notes should consider carefully the information set forth under the caption "Risk Factors" and all other information set forth in this Prospectus before making a decision to tender their Old Notes in the Exchange Offer.
10 SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth summary consolidated historical financial and other data of the Company on a consolidated basis for each of the years in the five-year period ended June 30, 1998, and pro forma financial and other data of the Company on a consolidated basis for the fiscal year ended June 30, 1998. The summary consolidated historical financial data for each of the years in the five-year period ended June 30, 1998 were derived from the audited consolidated financial statements of the Company. The summary consolidated pro forma data for the fiscal year ended June 30, 1998 were derived from the "Unaudited Pro Forma Condensed Consolidated Financial Information," giving effect to the events described therein, included elsewhere in this Prospectus. The pro forma financial data are not necessarily indicative of operating results or financial position that would have been achieved had these events been consummated on the dates indicated and should not be construed as representative of future operating results or financial position. The information contained in this table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Condensed Consolidated Financial Information" and the Company's historical consolidated financial statements, including the notes thereto, included elsewhere in this Prospectus.
PRO FORMA(A) YEAR ENDED YEAR ENDED JUNE 30, JUNE 30, -------------------------------------------------------- 1998 1998 1997 1996 1995(B) 1994(C) ------------------- -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS) INCOME STATEMENT DATA: Net sales..................... $ 319,770 $277,983 $268,362 $241,395 $230,805 $197,287 Gross profit.................. 97,201 69,070 67,324 60,362 62,305 53,997 Curtailment of operations at manufacturing facility...... 10,000 10,000 -- -- -- -- Operating income (loss)....... (2,817) (4,227) 11,231 9,191 11,023 9,447 Interest expense.............. 11,672 6,865 6,253 5,546 5,409 4,205 Net income (loss) before extraordinary items......... (9,333) (7,065) 8,036 (10) 2,982 2,760 Extraordinary items........... (1,962) (1,962) -- -- -- -- Net income (loss)(d).......... (11,295) (9,027) 8,036 (10) 2,982 2,760 CASH FLOW DATA: Provided by operating activities.................. -- 701 2,923 680 2,774 13,256 Used in investing activities.. -- (8,031) (4,697) (12,773) (12,134) (4,272) Provided by (used in) financing activities........ -- 27,458 436 13,944 6,092 (9,064) Net (decrease) increase in cash........................ -- 20,128 (1,338) 1,851 (3,268) (80) OTHER FINANCIAL DATA: Depreciation and amortization................ $ 12,580 $ 9,253 $ 9,342 $ 8,006 $ 7,777 $ 6,554 Capital expenditures.......... 14,105 8,031 4,697 8,892 12,666 4,307 Ratio of earnings to fixed charges(e).................. -- -- 2.3x 1.4x 1.9x 2.1x EBITDA(f)..................... 14,553 10,560 20,573 17,197 18,800 16,001 Ratio of EBITDA to interest expense(g).................. 1.3x 1.5x 3.3x 3.1x 3.5x 3.8x Ratio of debt to EBITDA(h).... 8.3x 9.9x 3.3x 4.1x 3.0x 3.1x
AS OF JUNE 30, ------------------------------------------------------------------------ PRO FORMA(A) 1998 1997 1996 1995(B) 1994(C) ------------ -------- -------- -------- -------- -------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital...................... $ 70,502 $ 79,667 $ 23,504 $ 35,942 $ 31,298 $ 26,840 Total assets......................... 217,304 192,196 162,700 158,182 149,798 126,558 Debt(h).............................. 120,292 104,296 67,259 70,269 56,171 49,313 Stockholders' equity................. 23,577 23,577 35,404 33,514 34,039 30,415
See accompanying Notes to Summary Consolidated Financial Data 11 NOTES TO SUMMARY CONSOLIDATED FINANCIAL DATA (a) See "Unaudited Pro Forma Condensed Consolidated Financial Information" and related notes thereto. (b) Reflects the acquisition of Planalqumica effective December 7, 1995. (c) Reflects the acquisition of La Cornubia S.A. effective June 1, 1994. (d) In 1997, includes $5.6 million gain related to proceeds from the life insurance policy received on the death of the then Chairman of the Board of the Company. (e) For the purpose of computing the ratio of earnings to fixed charges, "earnings" consist of earnings before income taxes, extraordinary items and fixed charges. "Fixed charges" consist of interest expense, amortization of deferred financing costs and that portion of rental expense deemed representative of the interest factor. For the year ended June 30, 1998, the Company's earnings were less than its fixed charges by $11,754 and $15,151, on a historical and pro forma basis, respectively. The decrease in earnings was primarily due to non-recurring charges related to the curtailment of operations at a manufacturing facility and the forgiveness of promissory notes related to stock of a subsidiary. (f) EBITDA represents the sum of consolidated operating income (loss) plus depreciation and amortization and other non-cash operating charges that do not require future cash payments. EBITDA is presented here to provide additional information about the Company's ability to meet its future debt service, capital expenditures and working capital requirements and is defined substantially consistent with financial covenants included in the Indenture. EBITDA is not a measure of financial performance under generally accepted accounting principles ("GAAP") and should not be considered as an alternative to either net income as an indicator of the Company's operating performance, or to cash flows as a measure of the Company's liquidity. In computing EBITDA and pro forma EBITDA for year ended June 30, 1998, asset write downs related to the curtailment of operations at a manufacturing facility of $5.5 million have been added back to consolidated operating income (loss). There were no "other non-cash operating charges" reflected in the calculation of EBITDA for the years ended June 30, 1994 through 1997. (g) For the purpose of the computation, interest expense includes both interest expensed and capitalized. (h) Debt is equal to loans payable to banks plus other loans payable plus long term debt plus current portion of long term debt. 12 RISK FACTORS Holders of Old Notes should consider carefully all of the information set forth in this Prospectus and, in particular, should evaluate the following risks before tendering their Old Notes in the Exchange Offer, although the risk factors set forth below (other than "--Consequences of Failure to Exchange and Requirements for Transfer of New Notes") are generally applicable to the Old Notes as well as the New Notes. CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF NEW NOTES Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register Old Notes under the Securities Act. Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by Holders thereof (other than any such Holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangement with any person to participate in the distribution of such New Notes. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each Holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any Holder is an affiliate of the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for the Applicable Period, it will, upon request, make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." However, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Rights Agreement, subject to certain limitations specified therein, to register or qualify the New Notes for offer or sale under the securities laws of such jurisdictions as any Holder reasonably requests in writing. Unless the Company is so requested, the Company does not currently intend to register or qualify the sale of the New Notes in any such jurisdictions. See "The Exchange Offer--Consequences of Exchanging Old Notes." To participate in the Exchange Offer and avoid the consequences of failing to exchange the Old Notes, Holders of Old Notes must transmit a properly completed Letter of Transmittal, including all other 13 documents required by such Letter of Transmittal, to the Exchange Agent at one of the addresses set forth below under "The Exchange Offer--Exchange Agent" on or prior to the Expiration Date. In addition, either (i) certificates for such Old Notes must be received by the Exchange Agent along with the Letter of Transmittal or (ii) a timely confirmation of a book-entry transfer of such Old Notes, if such procedure is available, into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the procedure for book-entry transfer described herein, must be received by the Exchange Agent prior to the Expiration Date, or (iii) the Holder must comply with the guaranteed delivery procedures described herein and in the Letter of Transmittal. See "The Exchange Offer." SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT The Company has significant indebtedness and is highly leveraged. As of June 30, 1998, the Company had approximately $104.3 million of debt (the sum of long-term debt, current maturities of long-term debt, notes payable and capitalized lease obligations) and approximately $23.6 million of stockholders' equity. As of June 30, 1998, on a pro forma basis after giving effect to the ODDA Acquisition, the Company would have had total indebtedness of $120.3 million and $23.6 million of stockholders' equity. In addition, subject to the restrictions in the Credit Facility and the Indenture, the Company may incur additional indebtedness from time to time to finance working capital needs, acquisitions or capital expenditures or for other purposes. See "Capitalization," "Description of the Notes" and "Description of Certain Indebtedness." The degree to which the Company is leveraged could have important consequences to holders of the Notes, including the following: (i) a substantial portion of the Company's consolidated cash flow from operations must be dedicated to the payment of the principal of and interest on its outstanding indebtedness and will not be available for other purposes, (ii) the Company's ability to obtain additional financing in the future for working capital needs, capital expenditures, acquisitions and general corporate purposes may be materially limited or impaired or such financing may not be on terms favorable to the Company, (iii) the Company may be more highly leveraged than its competitors which may place it at a competitive disadvantage, and (iv) the Company's leverage may make it more vulnerable to a downturn in its business or the economy in general. The Company's ability to pay interest on the Notes and to satisfy its other debt obligations will depend upon its future operating performance, which will be affected by the factors described herein and by prevailing economic conditions and financial, business, regulatory and other factors, many of which are beyond its control. The Company anticipates that its cash balance together with cash flow from operations and borrowings available under the Credit Facility will be sufficient to fund anticipated operating expenses, capital expenditures and to service its debt requirements as they become due. There can be no assurance, however, that the amounts available from such sources will be sufficient for such purposes. No assurance can be given that additional sources of funding will be available if required or, if available, will be on terms satisfactory to the Company. If the Company is unable to service its indebtedness it will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing its indebtedness, or seeking additional equity capital. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." DEPENDENCE ON DISTRIBUTIONS FROM SUBSIDIARIES; ENFORCEABILITY OF GUARANTEES Philipp Brothers derives substantially all of its operating income from its subsidiaries. Accordingly, Philipp Brothers will be dependent on dividends and other distributions from its subsidiaries to generate the funds necessary to meet its obligations, including the payment of principal and interest on the Notes. The ability of the Company's subsidiaries to pay such dividends will be subject to, among other things, the terms of any debt instruments of the Company's subsidiaries then in effect and applicable law. In addition, in the case of the Company's foreign subsidiaries, dividend and interest may be subject to foreign withholding taxes which would reduce the amount of funds the Company receives from such foreign subsidiaries. The holders of the Notes have no direct claim against the Company's subsidiaries other than the claim created by the Guarantees, if any, which may themselves be subject to legal 14 challenge in the event of the bankruptcy or insolvency of a Guarantor. See "--Fraudulent Transfer Considerations." If such a challenge were upheld, the Guarantees would be invalidated and unenforceable. To the extent that the Guarantees are held to be unenforceable or have been released pursuant to the terms of the Indenture, the rights of holders of the Notes to participate in any distribution of assets of any Guarantor upon liquidation, bankruptcy or reorganization may, as is the case with other unsecured creditors of Philipp Brothers, be subject to prior claims of creditors of such Guarantor. The Indenture, among other things, limits the incurrence of additional debt by certain subsidiaries of Philipp Brothers. However, these limitations are subject to a number of important qualifications. See "Description of the Notes." INTERNATIONAL OPERATIONS The Company has significant assets located outside the United States and a significant portion of the Company's sales and earnings are attributable to operations conducted abroad. During fiscal 1998, the Company operated manufacturing and other facilities in five countries and sold its products in approximately 81 countries. At June 30, 1998, approximately 41% of the Company's assets were located outside the United States, representing manufacturing facilities in the United Kingdom, Israel, France and Brazil, and, for the fiscal year ended June 30, 1998, approximately 35% of the Company's net sales consisted of sales made by the Company outside the United States, predominantly from Western Europe and Israel. At June 30, 1998, on a pro forma basis after giving effect to the ODDA Acquisition, approximately 51% of the Company's assets were located outside the United States, and for the fiscal year ended June 30, 1998, approximately 43% of the Company's net sales consisted of sales made by the Company or a subsidiary outside the United States, predominantly from Western Europe and Israel. Changes in the relative values of currencies take place from time to time and could in the future adversely affect the Company's results of operations as well as the Company's ability to meet interest and principal obligations on the Notes. To the extent that the U.S. dollar weakens or strengthens versus the applicable foreign currency, the Company's results are favorably or unfavorably affected. The Company often manages this exposure by entering into foreign currency forward exchange contracts. Such contracts generally are entered into with respect to anticipated revenues denominated in foreign currencies for which timing of the receipt of payment can be reasonably estimated. No assurances can be given that such hedging activities will not result in losses which will have an adverse effect on the Company's financial condition or results of operations. In addition, there are times when the Company does not hedge against foreign currency fluctuations and is therefore subject to the risks associated with fluctuations in currency exchange rates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Effect of Inflation; Foreign Currency Exchange Rates" and Note 1 to the Company's Consolidated Financial Statements included elsewhere herein. In addition, international manufacturing, sales and raw materials sourcing are subject to other inherent risks, including possible nationalization or expropriation, labor unrest, political instability, price and exchange controls, limitation on foreign participation in local enterprises, health-care regulation, export duties and quotas, domestic and international customs and tariffs, unexpected changes in regulatory environments, difficulty in obtaining distribution and support, and potentially adverse tax consequences. Although such risks have not had a material adverse effect on the Company in the past, there can be no assurance that these factors will not have a material adverse impact on the Company's ability to increase or maintain its international sales or on its results of operations in the future. ISRAELI OPERATIONS Israeli operations are conducted through Koffolk (1949) Ltd. ("Koffolk Israel"), a wholly owned subsidiary of the Company, and accounted for approximately 28% of the Company's consolidated assets as of June 30, 1998 and approximately 22% of its consolidated net sales for the year then ended (excluding in each case Koffolk Israel's non-Israeli subsidiaries). The Company maintains two manufacturing facilities in Israel, one located near Tel Aviv in Petach Tikva, which specializes in the development and production of vitamins, vitamin premixes and animal health products for the animal feed industry, and the second located south of Beersheba in Ramat Hovav, which produces organic 15 chemical intermediates and animal health specialties. The Ramat Hovav plant synthesizes aromatic aldehydes and alcohols, coccidiocides (nicarbazin and amprolium) and vitamins, the bulk of which are exported from Israel to the major world markets. Accordingly, Koffolk Israel is dependent on foreign markets and its ability to reach those markets. Consequently, the Company is affected by social, political and economic conditions affecting Israel, and any major hostilities involving Israel or curtailment of trade between Israel and its current trading partners, either as a result of hostilities or otherwise, could have a material adverse effect on the Company. However, for so long as Koffolk Israel has been owned by the Company, its operations have never been adversely affected by any military action. See "Conditions in Israel." RESTRICTIONS IMPOSED BY THE TERMS OF THE COMPANY'S INDEBTEDNESS; CONSEQUENCES OF FAILURE TO COMPLY The terms and conditions of the Credit Facility and the Indenture impose restrictions that affect, among other things, the ability of Philipp Brothers and its Restricted Subsidiaries to incur debt (including other subordinated debt), pay dividends or make distributions, make acquisitions, create liens, sell assets, create restrictions on the payment of dividends and other payments by its Restricted Subsidiaries and make certain investments. The Credit Facility requires the Company to maintain specified financial ratios and tests, including minimum net worth and minimum fixed charge coverage ratios. Moreover, the indebtedness outstanding under the Credit Facility is guaranteed by all of the Company's domestic subsidiaries and is secured by a first priority lien on substantially all of the accounts receivable and inventory of the Company and its domestic subsidiaries, now owned or acquired later (collectively, the "Collateral"). The Company's ability to comply with the foregoing provisions can be affected by events beyond its control. The breach of any of these covenants could result in a default under one or more of the debt instruments of the Company or its subsidiaries. In the event of a default under any indebtedness of the Company or its subsidiaries, the holders of such indebtedness could elect to declare all amounts outstanding under their respective debt instruments to be due and payable. Any such declaration under a debt instrument of the Company or its subsidiaries is likely to result in an event of default under one or more of the other debt instruments of the Company or its subsidiaries. If indebtedness of the Company or its subsidiaries were to be accelerated, there could be no assurance that the assets of the Company or the Company's subsidiaries, as the case may be, would be sufficient to repay in full borrowings under all of such debt instruments, including the Notes. In the case of the Credit Facility, if such indebtedness were not so repaid, refinanced or restructured, the lenders could proceed to realize on the Collateral. See "Description of the Notes" and "Description of Certain Indebtedness." RANKING OF THE NOTES; SUBORDINATION OF NOTES AND GUARANTEES The payment of principal, premium, if any, and interest on, and any other amounts owing in respect of, the Notes is subordinated to the prior payment in full of all existing and future Senior Debt, including indebtedness under the Credit Facility. As of June 30, 1998, on a pro forma basis after giving effect to the ODDA Acquisition, the Company and the Guarantors would have had approximately $20.3 million of Senior Debt outstanding, exclusive of unused commitments, and $35.0 million of availability, subject to a borrowing base, under the Credit Facility as of August 31, 1998. In addition, the Guarantees of the Notes by each of the Guarantors are general unsecured obligations of each of such Guarantors and are subordinated in right of payment to all existing and future Senior Debt of each of such Guarantors, including such Guarantors' guarantees of the Company's obligations under the Credit Facility. Subject to certain limitations, the Indenture permits Philipp Brothers and its Restricted Subsidiaries, including the Guarantors, to incur additional Senior Debt. See "Description of the Notes--Certain Covenants--Limitation on Incurrence of Indebtedness." As a result of the subordination provisions contained in the Indenture, in the event of a liquidation or insolvency, holders of Senior Debt and trade creditors of Philipp Brothers and the Guarantors may recover more, ratably, than the holders of the Notes. The holders of any indebtedness of the Company's subsidiaries (other than the Guarantors) will be entitled to payment of their indebtedness from the assets of such subsidiaries prior to the holders of any general unsecured obligations of the Company, including the Notes. In addition, in the event of a payment 16 default under the Credit Facility, no payment may be made on account of the principal, premium, if any, or interest on the Notes until such default has been cured or waived. Under certain circumstances, no payments may be made for a specified period with respect to the principal, premium, if any, or interest on the Notes if a nonpayment default exists under the Credit Facility. The Company's operations are predominantly conducted through subsidiaries. Although the Company's domestic subsidiaries have guaranteed the Notes, the Company's foreign subsidiaries have not guaranteed or otherwise become obligated with respect to the Notes. Claims of creditors of such subsidiaries, including trade creditors, will generally have priority as to the assets of such subsidiaries over the claims of the Company and the holders of the Company's indebtedness, including the Notes. The Notes will therefore be effectively subordinated to all existing and future liabilities, including indebtedness, of the Company's foreign subsidiaries. As of June 30, 1998, on a pro forma basis after giving effect to the ODDA Acquisition, the Company's foreign subsidiaries would have had indebtedness for borrowed money and had other liabilities of approximately $47.6 million reflected on the Company's consolidated balance sheet. In addition, in the event a Guarantor's obligations under a Guarantee were voided, the Notes will be similarly subordinated to the indebtedness and the liabilities of such Guarantor. As of June 30, 1998, on a pro forma basis after giving effect to the ODDA Acquisition, the Guarantors would have had $40.9 million of indebtedness and other liabilities reflected on the Company's consolidated balance sheet (exclusive of obligations under the Credit Facility). See "--Fraudulent Transfer Considerations" and "Description of the Notes--Subordination." COMPETITIVE INDUSTRY The Company faces competition in each of its markets from a number of large and small companies, some of which have greater financial, research and development, production and other resources than the Company. Many of the Company's products, including its Animal Nutrition and Health and Crop Protection products, face competition from products which may be used as an alternative or substitute therefor, including amprolium and nicarbazin. The Company competes with several regional companies of varying sizes and financial resources in the hazardous metal-containing chemical waste and coal combustion product recycling industry. The Company also competes with large national companies which offer alternative methods of treatment or disposal of hazardous metal-containing chemical waste and which have substantially greater financial resources than the Company. While these national companies do not currently offer recycling services similar to those offered by the Company, their entry into the hazardous metal-containing chemical waste recycling business could have a material adverse effect on the Company. In addition, the Company competes with several large chemical companies in the chemical production business, none of which obtains a significant portion of its raw materials from recycling. To the extent these companies, or new entrants into the market, offer comparable finished chemical products at lower prices, the Company's business could be adversely affected. The Company's competitive position is based principally on customer service and support, breadth of product line, product quality, manufacturing technology, facility location, and the selling prices of its products. The Company's competitors can be expected to continue to improve the design and performance of their specialty chemical products and to introduce new products with competitive price and performance characteristics. There can be no assurance that the Company will have sufficient resources to maintain its current competitive position or market share. The Company typically does not enter into long-term agreements with its customers. See "Business--Products," "Business-- Competition" and "Business--Customers." ENVIRONMENTAL MATTERS Like similar companies, the operations and properties of the Company and its subsidiaries are subject to a wide variety of complex and stringent federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, handling, generation, treatment, emission, release, discharge and disposal of certain materials and wastes, the remediation of contaminated soil and groundwater, the manufacture, sale and use of pesticides and the health and safety of employees 17 (collectively, "Environmental Laws"). Pursuant to these Environmental Laws, certain of the Company's subsidiaries are required to obtain and retain numerous governmental permits and approvals, including RCRA Part B permits, to conduct various aspects of their operations, any of which may be subject to revocation, modification or denial under certain circumstances. U.S. manufacturers of specialty and industrial chemicals, including certain of the Company's subsidiaries, have expended, and may be required to expend in the future, substantial funds for compliance with such Environmental Laws. As recyclers of hazardous metal-containing chemical waste, certain of the Company's subsidiaries have been, and are likely to be, the focus of extensive compliance reviews by federal, state and local environmental regulatory authorities. In the past, certain of the Company's subsidiaries have paid certain fines and agreed to certain consent orders. While procedures have been implemented at each facility which are intended to achieve compliance in all material respects with Environmental Laws, there can be no assurance that operations or activities of the Company or certain of its subsidiaries will not result in civil or criminal enforcement actions or private actions, resulting in mandatory clean-up requirements, revocation of required permits or licenses or significant fines, penalties or damages which could have a material adverse effect on the Company. In addition, the Company cannot predict the extent to which any further legislation or regulation may affect the market for the Company's services or its cost of doing business. For instance, if governmental enforcement efforts should lessen, the market for the recycling services by certain of the Company's subsidiaries could decline. Alternatively, changes in Environmental Laws (some of which are set forth below) might increase the cost of such services by imposing additional requirements. States that have received authorization to administer their own hazardous waste management programs may also amend their applicable Environmental Laws, and may impose requirements which are stricter than those imposed by the U.S. Environmental Protection Agency ("EPA"). No assurance can be provided that such changes will not adversely affect the ability of subsidiaries of the Company to provide services at a competitive price and thereby reduce the market for their services. As such, the nature of the current and former operations of subsidiaries of the Company exposes the Company and its subsidiaries to the risk of claims with respect to such matters and there can be no assurance that material costs and liabilities will not be incurred in connection with such claims. Based upon its experience to date, the Company believes that the future cost of compliance with existing Environmental Laws, and liability for known environmental claims pursuant to such Environmental Laws, will not have a material adverse effect on the Company. However, future events, such as new information, changes in existing Environmental Laws or their interpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business--Environmental Matters," "Business--Litigation," and the Company's Consolidated Financial Statements included herein. GOVERNMENT REGULATION The testing, manufacturing, and marketing of certain of the Company's agriculture products are subject to extensive regulation by numerous government authorities in the United States and other countries, including, but not limited to, the FDA. Among other requirements, FDA approval of the Company's products, including a review of the manufacturing processes and facilities used to produce such products, is required before such products may be marketed in the United States. Similarly, marketing approval by a foreign governmental authority is typically required before such products may be marketed in a particular foreign country. Koffolk USA has acquired from the Animal Feed Division of Merck the NADA, as well as the trademark and related assets, for nicarbazin, permitting Koffolk USA to enter the U.S. market with an approved finished product. In order to obtain FDA approval of a new product, the Company must, among other things, demonstrate to the satisfaction of the FDA that the product is safe and effective for its intended uses and that the Company is capable of manufacturing the product with procedures that conform to the FDA's then current good manufacturing practice ("GMP") regulations, which must be followed at all times. The process of seeking FDA approvals can be costly, time consuming, and subject to 18 unanticipated and significant delays. There can be no assurance that such approvals will be granted to the Company on a timely basis, or at all. Any delay in obtaining or any failure to obtain such approvals would adversely affect the Company's ability to introduce and market products and to generate product revenue. See "Business--Government Regulation." FIFRA, a health and safety statute, requires that all pesticides sold or distributed in the U.S. must first be registered with the EPA. In order to obtain a registration, an applicant typically must demonstrate through test data that its product will not cause unreasonable adverse effects on the environment. Depending on the specific requirements at issue, these tests can be very expensive, running to millions of dollars. However, if the product in question is generic in nature (i.e., chemically identical or substantially similar to a previously-registered product), the applicant has the option of citing and relying on the test data supporting the original registrant's product, in lieu of submitting data. Should the generic applicant choose the citation option, it must offer to pay compensation to the original submitter and must agree to enter into binding arbitration with the original submitter if the parties are unable to agree on the terms and amount of compensation. The Company has elected the citation option in the past; has a currently outstanding offer to pay compensation with respect to citation of data in registering one of its products; and intends to use the citation option in the future should it conclude it is economically desirable to do so. While there are cost savings associated with the opportunity to avoid one's own testing and demonstration to the EPA of test data, there is, in each instance, a risk that the level of compensation ultimately required to be paid by the Company to the original registrant will be substantial. There is also the risk that a third party will elect the citation option with respect to a product of the Company, and that the level of compensation ultimately required to be paid to the Company as the original registrant will not be substantial. VOTING CONTROL BY PRINCIPAL STOCKHOLDER Mr. Jack Bendheim owns all of the outstanding shares of voting capital stock of the Company. Accordingly, pursuant to corporate law, Mr. Bendheim controls the election of all of the directors of the Company and, in general, has sufficient voting power to determine (without the consent of the Company's other stockholders) the outcome of any corporate transaction or other matter submitted to the stockholders for approval, including mergers, consolidations and the sale of all or substantially all of the Company's assets, and also the power to prevent or cause a change in control of the Company. Mr. Bendheim is also a director and President and Chief Executive Officer of the Company. In addition, the other two current members of the Board of Directors are related to Mr. Bendheim. The interests of Mr. Bendheim may differ from the interest of the holders of the Notes. See "Management--Directors and Executive Officers" and "Principal Stockholders." RAW MATERIAL PRICE VOLATILITY The principal raw materials used by the Company in the manufacture of its products can be subject to significant cyclical price fluctuations. No single raw material accounted for more than 6% of the Company's fiscal 1998 cost of goods sold. While the selling prices of the Company's products tend to increase or decrease over time with the cost of raw materials, such changes may not occur simultaneously or to the same degree. Maintenance of current margins for various Intermediates and Industrial Chemicals are dependent on the continued supply of raw materials from the Company's recycling operations. If the Company were to be unable to source certain raw materials from its recycling operations, its costs of such raw materials, purchased as virgin materials from third parties, would increase. There can be no assurance that the Company will be able to pass any increases in raw material costs through to its customers in the form of price increases. Significant increases in the price of raw materials, if not offset by product price increases, would have an adverse impact upon the profitability of the Company. See "Business--Intermediates and Industrial Chemicals" and "Raw Materials." 19 RELIANCE ON CONTINUED OPERATION AND SUFFICIENCY OF MANUFACTURING FACILITIES; INTELLECTUAL PROPERTY The Company's revenues are dependent on the continued operation of its various manufacturing facilities. Although presently all operating plants are considered to be in good condition, the operation of chemical manufacturing plants involves many risks, including the breakdown, failure or substandard performance of equipment, power outages, the improper installation or operation of equipment, natural disasters and the need to comply with environmental and other directives of governmental agencies. Certain of the Company's product lines are manufactured at a single facility and production would not be transferable to another site. The occurrence of material operational problems, including but not limited to the above events, may adversely affect the profitability of the Company during the period of such operational difficulties. MRT's success will depend in part on its ability to exploit the two U.S. patents issued to it for MRT Cement and to operate without having third parties circumvent MRT's patent rights. There can be no assurance that such issued patents will provide the Company with significant protection against competitive products or otherwise be commercially valuable. Litigation, which could be costly and time consuming, may be necessary to enforce patents issued to the Company and/or determine the scope and validity of others' proprietary rights, in either case in judicial or administrative proceedings. The Company's competitive position is also dependent upon unpatented trade secrets which generally are difficult to protect. There can be no assurance that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to the Company's trade secrets, that such trade secrets will not be disclosed or that the Company can effectively protect its rights to unpatented trade secrets. LEGAL PROCEEDINGS AND GENERAL LITIGATION EXPENSE In addition to the matters discussed above, because certain of the Company's subsidiaries' products constitute or contain hazardous materials, and because the production of certain chemicals involves the use, handling, processing, storage and transportation of hazardous materials, the Company and its subsidiaries have been subject to claims of injury from direct exposure to such materials and from indirect exposure when such materials are incorporated into other companies' products. There can be no assurance that as a result of past or future operations, there will not be additional claims of injury by employees or members of the public due to exposure, or alleged exposure, to such materials. Furthermore, the Company and its subsidiaries are parties to a number of claims and lawsuits arising out of the normal course of business including product liabilities and governmental regulation. Certain of these actions seek damages in various amounts. In most cases, such claims are covered by insurance. The Company also has exposure to present and future claims with respect to workplace exposure, workers' compensation and other matters. There can be no assurance as to the actual amount of these liabilities or the timing thereof. OPERATING HAZARDS AND UNINSURED RISKS In addition to pollution and other environmental risks (see "--Environmental Matters" above), the Company is subject to risks inherent in the chemical industry, such as explosions, fires and chemical spills or releases. Any significant interruption of operations at the Company's principal facilities could have a material adverse effect on the Company. The Company maintains general liability insurance and property and business interruption insurance with coverage limits it believes are adequate. Because of the nature of industry hazards, it is possible that liabilities for pollution and other damages arising from a major occurrence may not be covered by the Company's insurance policies or could exceed insurance coverages or policy limits or that such insurance may not be available at reasonable rates in the future. Any such liabilities, which could arise due to injury or loss of life, severe damage to and destruction of property and equipment, pollution or other environmental damage or suspension of operations, could have a material adverse effect on the Company. See "Business--Litigation." 20 LABOR RELATIONS As of June 30, 1998, approximately 10% of the Company's domestic employees were covered by collective bargaining agreements which expire from 1998 through 2000. Most of the Company's employees in Israel and France are covered by collective bargaining agreements. In Israel, the Company continues to operate under the terms of the national collective bargaining agreement, portions of which expired in 1994. In Norway, wage and income developments are largely determined in negotiations between the National Labor Organization and the employees during national and central collective bargaining settlements, and through local negotiations. Approximately 75% of ODDA's employees are covered by collective bargaining agreements. The present agreement is a two-year agreement, expiring in 2000. The Company believes that it has satisfactory relations with its unions and, therefore, anticipates reaching new agreements on satisfactory terms as the existing agreements expire or shortly thereafter. There can be no assurance, however, that new agreements will be reached without a work stoppage or strike or will be reached on terms satisfactory to the Company. A prolonged work stoppage or strike at any of its manufacturing facilities could have a material adverse effect on the Company's results of operations. See "Business--Employees." DEPENDENCE ON KEY PERSONNEL The Company's operations are dependent on the continued efforts of its senior executive officers, Jack Bendheim, I. David Paley, Marvin S. Sussman, James O. Herlands and Nathan Z. Bistricer. The loss of the services of any of Messrs. Bendheim, Paley, Sussman, Herlands or Bistricer could have a material adverse effect on the Company. The Company does not carry key-man life insurance other than to fund stock repurchase or compensation obligations. See "Management--Directors and Executive Officers" and "Management--Employment and Severance Agreements." UNCERTAIN IMPACT OF ACQUISITION PLANS The Company intends to continue to pursue a strategy of targeted expansion through the acquisition of compatible businesses and product lines and the formation of strategic alliances, joint ventures and other business combinations. The Company has used a portion of the proceeds of the Offering to finance the ODDA Acquisition and may use a portion of the proceeds of the Offering to finance other acquisitions and investments. However, there can be no assurance that the Company will find attractive acquisition candidates or successfully complete or finance any future acquisition. With respect to ODDA, and, should the Company complete any material acquisition, the Company's success or failure in integrating the operations of the acquired business may have a material impact on the future growth or success of the Company. See "Summary--Recent Developments." SEASONALITY OF BUSINESS The Company's sales are typically highest in the fourth fiscal quarter. The Company's sales of copper-based fungicides and other agricultural products are typically highest in the first and fourth fiscal quarters, and its sales of gibberellic acid are highest in the fourth quarter, due to the seasonal nature of the agricultural industry. The Company's sales of finished chemicals to the wood treatment industry are typically highest in the first and fourth fiscal quarters due to the increased level of home construction during these periods. Additionally, sales of these products may be more concentrated in one of these quarters due to weather conditions. FRAUDULENT TRANSFER CONSIDERATIONS The obligations of any Guarantor under its Guarantee may be subject to avoidance under state fraudulent transfer laws or federal bankruptcy law. If a court were to find, in a lawsuit by an unpaid creditor of a Guarantor or a representative of creditors, such as a trustee in bankruptcy, (a) that such Guarantor incurred the indebtedness represented by its Guarantee with the intent to hinder, delay or defraud present or future creditors, or received less than a reasonably equivalent value or fair consideration for any such indebtedness and (b) at the time of such incurrence (i) was insolvent, (ii) was rendered insolvent by reason of such incurrence, (iii) was engaged or about to engage in a business or 21 transaction for which its remaining assets constituted unreasonably small capital to carry on its business or (iv) intended to incur, or believed or reasonably should have believed that it would incur debts beyond its ability to pay as such debts matured, such court could void such Guarantor's obligations under its Guarantee, subordinate such Guarantee to all other indebtedness of such Guarantor or take other action detrimental to the holders of the Notes. In such an event, there can be no assurance that any payment on such Guarantee could ever be recovered by holders of the Notes. In addition, any payments by any Guarantor pursuant to such Guarantor's Guarantee could be voided and may be required to be returned to such Guarantor or to a fund for the benefit of its creditors. The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the foregoing. Generally, however, a Guarantor would be considered insolvent if the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets at a fair valuation or if the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature. Although the Company believes that each of the Guarantors is solvent under the foregoing standards, there can be no assurance as to what standard a court would apply in making such determination or that a court would reach the same conclusion. See "Description of the Notes--The Guarantees." In rendering their opinions with respect to the validity of the New Notes and the Guarantees, counsel for the Company and the Guarantors will not express any opinion as to the applicability of federal or state statutes relating to fraudulent conveyances and obligations. LIMITATIONS ON REPURCHASE OF THE NOTES UPON A CHANGE OF CONTROL Upon a Change of Control, the Company will be required to offer to repurchase the Notes then outstanding at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. The Credit Facility prohibits the Company from purchasing any Notes pursuant to a Change of Control offer prior to repayment in full of the Company's indebtedness under the Credit Facility. The failure of the Company following a Change of Control to make or consummate an offer to repurchase the Notes would constitute an Event of Default under the Indenture. In such an event, the Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Notes may accelerate the maturity of all of the Notes. A Change of Control includes any transaction which results in any person (other than Permitted Holders (as defined in the Indenture)) beneficially owning or controlling more than 50% of the voting stock of the Company. See "Description of the Notes--Change of Control." The occurrence of the events constituting a Change of Control with respect to the Notes would result in an event of default under the Credit Facility and would give the lenders thereunder the right to require payments in full of the indebtedness thereunder. If a Change of Control were to occur, there can be no assurance that the Company would have adequate funds to first satisfy its obligations under the Credit Facility or other agreements relating to indebtedness, if accelerated, and then to repurchase the Notes. ABSENCE OF PUBLIC MARKET FOR THE NOTES The New Notes are being offered to the Holders of the Old Notes. The Old Notes were issued on June 11, 1998 to a small number of institutional investors and are eligible for trading in the Private Offering, Resale and Trading through Automated Linkages (PORTAL) Market, the National Association of Securities Dealers' screenbased, automated market for trading of securities eligible for resale under Rule 144A. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market for the remaining untendered Old Notes could be adversely affected. There is no existing trading market for the New Notes, and there can be no assurance regarding the future development of a market for the New Notes, or the ability of Holders of the New Notes to sell their New Notes or the price at which such Holders may be able to sell their New Notes. If such a market were to develop, the New Notes could trade at prices that may be higher or lower than the initial offering price of the Old Notes 22 depending on many factors, including prevailing interest rates, the Company's operating results and the market for similar securities. Although the Initial Purchaser has informed the Company that it currently intends to make a market in the New Notes, it is not obligated to do so, and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes. The Company does not intend to apply for listing of the New Notes on any securities exchange or for quotation through the National Association of Securities Dealers Automated Quotation System. The liquidity of, and trading market for, the Notes may also be adversely affected by general declines in the market or by declines in the market for similar securities. Such declines may adversely affect such liquidity and trading markets independent of the financial performance of, and prospects for, the Company. See "Description of the Notes." USE OF PROCEEDS The Company will not receive any proceeds from the Exchange Offer. The gross proceeds of the Offering of Old Notes were used in part to repay in full indebtedness outstanding under the Old Credit Agreement and the Old Senior Notes, to finance the acquisition of ODDA and to pay fees and expenses related to the Transactions, including the discount to the Initial Purchaser. See "Summary--The Transactions." The following table sets forth the uses of the proceeds of the Offering of Old Notes in connection with the Transactions.
AMOUNT -------------- (IN THOUSANDS) Repayment of amounts outstanding under Old Credit Agreement(a)................ $ 12,200 Repayment of amounts under subsidiaries' credit facilities(b)................. 34,664 Repayment of amounts outstanding under Old Senior Notes(c).................... 23,597 ODDA Acquisition(d)........................................................... 19,200 Tax-Related Reimbursements(e)................................................. 2,740 Repayment of 8 1/2% Subordinated Notes(f)..................................... 322 Redemption of Preferred Stock(g).............................................. 680 Discharge intercorporate affiliate debt(h).................................... 482 MRT Transaction(i)............................................................ 1,020 General corporate purposes(j)................................................. 1,295 Fees and expenses(k).......................................................... 3,800 -------- Total......................................................................... $100,000 -------- --------
- ------------------ (a) As of June 11, 1998, $12.2 million in principal amount and unpaid interest was outstanding under the Old Credit Agreement, which had a maturity date of October 1, 1998 and bore interest at a weighted average rate of 8.6% per annum. (b) As of June 11, 1998, $34.7 million principal amount and unpaid interest was outstanding under various revolving credit and term loan facilities of subsidiaries (including $34.3 million under facilities of certain of the Company's foreign subsidiaries and $.4 million under a facility between Koffolk USA and The Berkshire Bank) which matured at various dates through 2004 and bore interest at a weighted average rate of 7.1% per annum. (c) As of June 11, 1998, the annual interest rate of borrowings under the Old Senior Notes was 11% and the maturity date of the Old Senior Notes was June 29, 2004. The Old Senior Notes provided for a prepayment fee of $2.6 million. Such prepayment fee was based on the amount to "make whole" the lender, and was calculated in respect of the yield on government SECURITIES WITH MATURITIES CORRESPONDING TO THE WEIGHTED AVERAGE LIFE TO maturity of such notes being prepaid. See (Footnotes continued on next page) 23 (Footnotes continued from previous page) "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Liquidity." (d) Does not include assumption of approximately $16 million in indebtedness. See "Summary--Recent Developments." (e) Constituted reimbursement for tax liability resulting from the cancellation of certain indebtedness owed by certain executives to Phibro-Tech in the aggregate principal amount plus accrued interest of approximately $2.7 million. See "Certain Relationships and Related Transactions." (f) These notes, initially issued in the aggregate principal amount of $.4 million, were issued as consideration by the Company for its redemption of 3,450 shares of its Second Preferred Stock. See "Certain Relationships and Related Transactions." (g) Includes redemption of shares of Second Preferred Stock from Jack and Philip Bendheim and certain members of their families. See "Certain Relationships and Related Transactions." (h) Represents accounts payable to an affiliate of the Company. (i) The Company acquired from Jack Bendheim his 29.2% interest in MRT for $25,000 and repaid $995,000 in advances made by Mr. Bendheim to MRT. See "Certain Relationships and Related Transactions." (j) Includes potential acquisitions and capital expenditures in addition to the ODDA Acquisition. Although the Company is continually reviewing and negotiating with respect to acquisitions of complementary businesses, the Company has no firm commitment or other agreement, arrangement or understanding with respect to any such acquisition. (k) Represents fees and expenses related to the Transactions, including (i) discounts to the Initial Purchaser and (ii) legal, accounting and other professional fees and expenses related to the Transactions. CAPITALIZATION The following table sets forth the consolidated capitalization of the Company at June 30, 1998 and the consolidated capitalization of the Company on a pro forma basis after giving effect to the ODDA Acquisition as if it had occurred at June 30, 1998. This table should be read in conjunction with the Company's historical consolidated financial statements and "Unaudited Pro Forma Condensed Consolidated Financial Information," and the respective notes thereto, included elsewhere in this Prospectus.
JUNE 30, 1998 ------------------------ ACTUAL PRO FORMA(A) -------- ------------ (IN THOUSANDS) Long-term debt (including current portion): Loans payable and other debt............................................. $ 4,296 $ 20,292 The Notes................................................................ 100,000 100,000 -------- -------- Total long-term debt.................................................. 104,296 120,292 Redeemable securities...................................................... 5,186 5,186 Total stockholders' equity................................................. 23,577 23,577 -------- -------- Total capitalization.................................................. 133,059 149,055 -------- -------- -------- --------
- ------------------ (a) Reflects consummation of the ODDA Acquisition. 24 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma condensed consolidated financial information (the "Unaudited Pro Forma Condensed Consolidated Financial Information") has been derived by the application of pro forma adjustments to the Company's consolidated historical financial statements included elsewhere herein. The Unaudited Pro Forma Financial Information gives effect to (i) the ODDA Acquisition as if such transaction had occurred on July 1, 1997 for purposes of the unaudited pro forma consolidated statements of operations and June 30, 1998 for purposes of the unaudited pro forma consolidated balance sheet and (ii) the Company's issuance on June 11, 1998 of $100 million 9 7/8% Senior Subordinated Notes due 2008 as if the Notes had been issued on July 1, 1997 for purposes of the pro forma consolidated statement of operations. The results of operations for ODDA represent the historical unaudited twelve month period ended June 30, 1998 on a combined basis for the Norwegian manufacturing operations and the business of BOC Carbide Industries, a related U.K. distributor. The pro forma consolidated balance sheet reflects the combined balance sheet of ODDA as of June 30, 1998. The pro forma adjustments are described in the accompanying notes and are based upon available information and certain assumptions that management believes are reasonable. The Unaudited Pro Forma Condensed Consolidated Financial Information is presented for informational purposes only and does not purport to represent what the Company's financial position or results of operations would actually have been if the aforementioned events or transactions had occurred on the dates specified or to project the Company's financial position or results of operations at any future date or for any future periods. The Unaudited Pro Forma Condensed Consolidated Financial Information should be read in conjunction with the Company's consolidated historical financial statements, and the notes thereto, included elsewhere herein. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Use of Proceeds." 25 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1998 (IN THOUSANDS)
PRO FORMA PRO FORMA HISTORICAL ODDA(A) ADJUSTMENTS(B) ADJUSTED ---------- -------------- -------------- --------- Net sales............................................ $277,983 $ 41,787 $ 319,770 Cost of goods sold................................... 208,913 13,656 222,569 -------- -------- --------- Gross profit....................................... 69,070 28,131 97,201 Selling, general and administrative expenses......... 63,297 26,458 $ 263 90,018 Curtailment of operations at manufacturing facility........................................... 10,000 -- 10,000 -------- -------- -------- --------- Operating income (loss)............................ (4,227) 1,673 (263) (2,817) Other: Interest expense................................... 6,865 582 4,225 11,672 Interest income.................................... (383) -- (383) Other expense, net................................. 1,045 -- 1,045 -------- -------- -------- --------- Income (loss) before income taxes.................... (11,754) 1,091 (4,488) (15,151) Provision (benefit) for income taxes................. (4,689) 349 (1,478) (5,818) -------- -------- -------- --------- Net income (loss) before extraordinary items......... (7,065) 742 (3,010) (9,333) Extraordinary items--net of tax...................... (1,962) -- (1,962) -------- -------- -------- --------- Net income (loss).................................... $ (9,027) $ 742 $ (3,010) $ (11,295) -------- -------- -------- --------- -------- -------- -------- ---------
26 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 30, 1998 (IN THOUSANDS)
PRO FORMA PRO FORMA HISTORICAL ODDA(A) ADJUSTMENTS(B) ADJUSTED ---------- -------------- -------------- --------- ASSETS Current assets: Cash and cash equivalents........................... $ 24,221 $ 36 $(19,200) $ 5,057 Trade receivables................................... 57,560 5,937 63,497 Other receivables................................... 6,000 1,214 7,214 Inventories......................................... 37,567 9,623 47,190 Prepaid expenses and other current assets........... 5,491 413 5,904 -------- -------- -------- --------- Total current assets.............................. 130,839 17,223 (19,200) 128,862 Property, plant and equipment, net.................... 40,510 16,473 56,983 Intangibles........................................... 3,771 6,651 10,422 Other assets.......................................... 17,076 3,961 21,037 -------- -------- -------- --------- $192,196 $ 37,657 $ 12,549 $ 217,304 -------- -------- -------- --------- -------- -------- -------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Loans payable to banks.............................. $ -- $ 1,100 $ 1,100 Current portions of long-term debt.................. 1,646 -- 1,646 Accounts payable.................................... 33,432 3,379 36,811 Other loans payable................................. 492 -- 492 Accrued expenses and other current liabilities...... 15,602 2,709 18,311 -------- -------- --------- Total current liabilities......................... 51,172 7,188 58,360 Long-term debt........................................ 102,158 14,896 117,054 Other liabilities..................................... 10,103 3,024 13,127 -------- -------- --------- Total liabilities................................. 163,433 25,108 188,541 -------- -------- --------- Commitments and contingencies Redeemable securities................................. 5,186 -- 5,186 -------- -------- --------- Stockholders' equity: Third preferred stock............................... 521 -- 521 Common stock........................................ 3 4,642 $ (4,642) 3 Paid-in capital..................................... 435 435 (435) 435 Retained earnings................................... 23,221 7,472 (7,472) 23,221 Foreign currency translation adjustment............. (603) -- (603) -------- -------- -------- --------- Total stockholders' equity........................ 23,577 12,549 (12,549) 23,577 -------- -------- -------- --------- $192,196 $ 37,657 $(12,549) $ 217,304 -------- -------- -------- --------- -------- -------- -------- ---------
27 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS) The following adjustments are reflected in the Unaudited Pro Forma Condensed Consolidated Financial Information: (a) Reflects unaudited historical results of operations and financial position of ODDA as of and for the twelve months ended June 30, 1998. (b) The acquisition of ODDA will be accounted for as a purchase in accordance with Accounting Principles Board Opinion No. 16, "Business Combinations." The purchase price will be allocated to tangible and identifiable intangible assets and liabilities based upon their fair values, with the excess of purchase price over fair value allocated to goodwill. The Company is in the process of completing its valuation of the assets and liabilities of ODDA. Pending the completion of its valuation, the Company has assumed for purposes of pro forma information that the fair values of assets and liabilities will approximate underlying book values. Purchase price in excess of the assumed fair value of net assets acquired has been ascribed to goodwill and amortized over 25 years. This resulted in adjustments to record $6,651 of goodwill and annual amortization of $263. The final allocation of purchase price may differ materially from amounts assumed in the accompanying pro forma information. For purposes of the pro forma consolidated statement of operations, the $100 million 9 7/8% Senior Subordinated Notes due June 2008 are assumed to have been issued on July 1, 1997, with deferred financing costs of $3,724 amortized using the interest method over the life of the Notes. Debt repaid with the proceeds of the Notes of approximately $70 million is also assumed to have been repaid on July 1, 1997. 28 SELECTED CONSOLIDATED FINANCIAL DATA The following table sets forth selected consolidated historical financial and other data of the Company on a consolidated basis for each of the years in the five-year period ended June 30, 1998, and pro forma financial and other data of the Company on a consolidated basis for the fiscal year ended June 30, 1998. The Company's selected consolidated historical financial data for each of the years in the five-year period ended June 30, 1998 were derived from the audited consolidated financial statements of the Company. The selected consolidated pro forma data for the fiscal year ended June 30, 1998 were derived from the "Unaudited Pro Forma Condensed Consolidated Financial Information," giving effect to the events described therein, included elsewhere in this Prospectus. The pro forma financial data are not necessarily indicative of operating results or financial positions that would have been achieved had these events been consummated on the dates indicated and should not be construed as representative of future operating results or financial position. The information contained in this table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Condensed Consolidated Financial Information" and the Company's historical consolidated financial statements, including the notes thereto, included elsewhere in this Prospectus. 29 SELECTED CONSOLIDATED FINANCIAL DATA
PRO FORMA(A) YEAR ENDED YEAR ENDED JUNE 30, JUNE 30, -------------------------------------------------------- 1998 1998 1997 1996 1995(B) 1994(C) ------------ -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS) INCOME STATEMENT DATA: Net sales............................ $319,770 $277,983 $268,362 $241,395 $230,805 $197,287 Cost of goods sold................... 222,569 208,913 201,038 181,033 168,500 143,290 Gross profit......................... 97,201 69,070 67,324 60,362 62,305 53,997 Selling, general and administrative expenses............ 90,390 63,297 56,093 51,171 51,282 44,550 Curtailment of operations at manufacturing facility............. 10,000 10,000 -- -- -- -- Operating income (loss).............. (2,817) (4,227) 11,231 9,191 11,023 9,447 Interest expense..................... 11,672 6,865 6,253 5,546 5,409 4,205 Interest income...................... (383) (383) (252) (377) (437) (587) Other (income) expense(d)............ 1,045 1,045 (3,874) 1,371 766 719 Income (loss) before provision (benefit) for income taxes and extraordinary item............................... (15,151) (11,754) 9,104 2,651 5,285 5,110 Provision (benefit) for income taxes.............................. (6,126) (4,689) 1,068 2,661 2,303 2,350 Net income (loss) before extraordinary items................ $ (9,333) $ (7,065) $ 8,036 $ (10) $ 2,982 $ 2,760 Extraordinary items.................. (1,962) (1,962) -- -- -- -- Net income (loss).................... $(11,295) $ (9,027) $ 8,036 $ (10) $ 2,982 $ 2,760 CASH FLOW DATA: Provided by operating activities..... -- 701 2,923 680 2,774 13,256 Used in investing activities......... -- (8,031) (4,697) (12,773) (12,134) (4,272) Provided by (used in) financing activities......................... -- 27,458 436 13,944 6,092 (9,064) Net (decrease) increase in cash...... -- 20,128 (1,338) 1,851 (3,268) (80) OTHER FINANCIAL DATA: Depreciation and amortization....................... $ 12,580 $ 9,253 $ 9,342 $ 8,006 $ 7,777 $ 6,554 Capital expenditures................. 14,105 8,031 4,697 8,892 12,666 4,307 Ratio of earnings to fixed charges(e)......................... -- -- 2.3x 1.4x 1.9x 2.1x EBITDA(f)............................ 14,553 10,560 20,573 17,197 18,800 16,001 Ratio of EBITDA to interest expense(g)......................... 1.3x 1.5x 3.3x 3.1x 3.5x 3.8x Ratio of debt to EBITDA(h)........... 8.3x 9.9x 3.3x 4.1x 3.0x 3.1x
AS OF JUNE 30, ------------------------------------------------------------------------ PRO FORMA(A) 1998 1997 1996 1995(B) 1994(C) ------------ -------- -------- -------- -------- -------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital...................... $ 70,502 $ 79,667 $ 23,504 $ 35,942 $ 31,298 $ 26,840 Total assets......................... 217,304 192,196 162,700 158,182 149,798 126,558 Debt(h).............................. 120,292 104,296 67,259 70,269 56,171 49,313 Stockholders' equity................. 23,577 23,577 35,404 33,514 34,039 30,415
See accompanying Notes to Selected Consolidated Financial Data 30 NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA (a) See "Unaudited Pro Forma Condensed Consolidated Financial Information" and related notes thereto. (b) Reflects the acquisition of Planalqumica effective December 7, 1995. (c) Reflects the acquisition of La Cornubia S.A. effective June 1, 1994. (d) In 1997, includes $5.6 million gain related to proceeds from the life insurance policy received on the death of the then Chairman of the Board of the Company. (e) For the purpose of computing the ratio of earnings to fixed charges, "earnings" consist of earnings before income taxes, extraordinary items and fixed charges. "Fixed charges" consist of interest expense, amortization of deferred financing costs and that portion of rental expense deemed representative of the interest factor. For the year ended June 30, 1998, the Company's earnings were less than its fixed charges by $11,754 and $15,151, on a historical and pro forma basis, respectively. The decrease in earnings was primarily due to non-recurring charges related to the curtailment of operations at a manufacturing facility and the forgiveness of promissory notes related to stock of a subsidiary. (f) EBITDA represents the sum of consolidated operating income (loss) plus depreciation and amortization and other non-cash operating charges that do not require future cash payments. EBITDA is presented here to provide additional information about the Company's ability to meet its future debt service, capital expenditures and working capital requirements and is defined substantially consistent with financial convenants included in the Indenture. EBITDA is not a measure of financial performance under GAAP and should not be considered as an alternative to either net income as an indicator of the Company's operating performance, or to cash flows as a measure of the Company's liquidity. In computing EBITDA and pro forma EBITDA for the year ended June 30, 1998, asset write downs related to the curtailment of operations at a manufacturing facility of $5.5 million have been added back to consolidated operating income (loss). There were no "other non-cash operating charges" reflected in the calculation of EBITDA for the years ended June 30, 1994 through 1997. (g) For the purpose of the computation, interest expense includes both interest expensed and capitalized. (h) Debt is equal to loans payable to banks plus other loans payable plus long term debt plus current portion of long term debt. 31 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This information should be read in conjunction with the Company's Consolidated Financial Statements, including the notes thereto, contained in this Offering Memorandum. See also "Selected Consolidated Financial Data." GENERAL The Company is a leading diversified global manufacturer and marketer of a broad range of specialty and industrial chemicals, which are sold world-wide for use in numerous markets including animal nutrition and health, electronics, wood treatment, agricultural, pharmaceutical and personal care products, glass, construction and concrete. The Company also provides recycling and hazardous waste services primarily to the electronics and metal treatment industries. The Company operates in one industry segment, with revenues derived from sales in four core product groups: Animal Nutrition and Health, Intermediates and Industrial Chemicals, Electronics and Metal Treatment, and Crop Protection. The revenues of each of the Company's product groups are affected by factors such as trends in the industries of each of the customers of the Company, the impact of lower prices for competing products, changes in production levels of certain products resulting from expansion of Company production facilities, the inclusion of revenues from acquisitions, and seasonality. The Company net sales have increased through internal growth, selective acquisitions, strategic alliances and new product introductions. In 1994, the Company acquired La Cornubia, S.A. a producer of copper chemicals and crop protection chemicals in France. In 1995, the Company acquired Planalqumica, the sole manufacturer of nicarbazin in Latin America. In 1996, Koffolk USA, an affiliate of the Company that will become a subsidiary through the Transactions, purchased the right to sell nicarbazin from Merck. Koffolk USA became the registered transferee and owner of the NADA for nicarbazin approved by the FDA. Separately, Merck appointed Koffolk USA as its exclusive U.S. distributor of amprolium for poultry markets. In 1996, Elanco Animal Health, a division of Eli Lilly, agreed to act as the Company's exclusive distributor in the United States and Brazil for nicarbazin. This arrangement was terminated by the Company with respect to the United States in August 1998. In June 1998, Koffolk USA became a subsidiary of the Company upon the closing of the Offering. In September 1998, the Company is in the process of closing the ODDA Acquisition. RESULTS OF OPERATIONS NET SALES
YEAR ENDED JUNE 30 -------------------------------- 1998 1997 1996 -------- -------- -------- (IN THOUSANDS) PRODUCT GROUPS Animal Nutrition and Health............................................... $129,358 $118,744 $ 95,340 Intermediates and Industrial Chemicals.................................... 74,110 74,606 68,607 Electronics and Metal Treatment........................................... 38,582 39,134 42,761 Crop Protection........................................................... 35,933 35,878 34,687 -------- -------- -------- Total..................................................................... $277,983 $268,362 $241,395 -------- -------- -------- -------- -------- --------
32 Comparison of Fiscal Year Ended June 30, 1998 to Fiscal Year Ended June 30, 1997 Net Sales. Net sales increased by $9.6 million, or 3.6%, to $278.0 million in fiscal 1998 as compared to the prior year. This increase was primarily attributable to higher net sales of the Company's Animal Nutrition and Health products, primarily due to higher net sales of animal feed supplements ($4.2 million) and higher net sales of animal health products ($1.8 million). Gross Profit. Gross profit increased by $1.7 million, or 2.6%, to $69.1 million and 24.9% of net sales in fiscal 1998, as compared to 25.1% of net sales in the prior year. This gross profit increase was primarily attributable to higher sales of the Company's Animal Nutrition and Health products for animal feed supplements ($2.1 million) and higher sales and lower costs for animal health products ($1.1 million). This was somewhat offset by lower margins of crop protection products ($1.9 million), which also contributed to the decline in gross margin as a percentage of net sales. Selling, General and Administrative Expense. Selling, general and administrative expenses increased $7.2 million, or 12.8%, to $63.3 million in fiscal 1998 as compared to the prior year. This increase was primarily attributable to compensation expense associated with the forgiveness by the Company of limited recourse notes receivable from certain executives of the Company in connection with their acquisition of 10.7% of the stock of a subsidiary of the Company and payment to the executives for income taxes resulting from the cancellation of the Notes (totalling $5.6 million), a $1.2 million provision for personnel reductions at one of the Company's foreign subsidiaries and the Company's Sewaren, New Jersey facility, and a $.8 million increase in the environmental provision. These expenses were partially offset by a non-cash compensation adjustment of $1.2 million to reflect a lower repurchase value of the redeemable common stock of a minority shareholder and officer of the Company as a result of decreases in the Company's book value. See "Certain Relationships and Related Transactions" and "Business--Restructuring and Other Charges." Curtailment of Operations. During the fourth quarter of fiscal 1998, the Company curtailed manufacturing operations of its Sewaren, New Jersey facility. Consequently, the Company recorded a non-recurring charge of $10.0 million related to curtailment of operations, site restoration and ongoing groundwater monitoring and remediation activities. Of these charges, $5.6 million represents non-cash asset write downs related to the manufacturing facility, $1.1 million represents associated site restoration (which are classified as other current liabilities) and $3.3 million represents long-term groundwater monitoring and remediation costs that will continue in accordance with the Company's environmental plans. Operating Income (Loss). The operating loss of $4.2 million for the fiscal year ended June 30, 1998 is primarily attributable to non-recurring charges associated with the Company's curtailment of its Sewaren, New Jersey facility and the forgiveness of executive notes and related income tax reimbursements amounting to $10.0 million and $5.6 million, respectively. Excluding the effect of these charges, operating income in fiscal year 1998 was comparable to the prior year. Interest Expense. Interest expense increased by $.6 million to $6.9 million in fiscal 1998 as compared to the prior year primarily due to interest associated with the $100 million Notes issued June 11, 1998. Taxes. The fiscal 1998 net benefit for income taxes includes a deferred benefit at the statutory tax rate of 34% for the U.S. pre-tax loss and the impact of lower tax rates on foreign pre-tax income. No valuation allowance has been provided on the Company's net deferred tax assets, as management believes that it is more likely than not that such amounts will be recovered in future periods. Extraordinary Loss. The extraordinary loss of $2.0 million (net of an income tax benefit of $1.0 million) for the fiscal year ended June 30, 1998 is comprised of prepayment fees in connection with early extinguishment of the $20 million Old Senior Notes and the write-off of deferred financing costs associated with indebtedness of the Company repaid from proceeds of the Notes. Net Income (Loss). The net loss of $9.0 million for the fiscal year ended June 30, 1998 is primarily attributable to non-recurring operating charges. Net income of $8.0 million for the 1997 fiscal year included a $5.6 million nontaxable gain on life insurance. 33 Comparison of Fiscal Year Ended June 30, 1997 To Fiscal Year Ended June 30, 1996 Net Sales. Net sales increased by $27.0 million, or 11.2%, to $268.4 million in fiscal 1997, as compared to the prior year. The increase was primarily attributable to higher sales of the Company's Animal Nutrition and Health products due to completion of the Company's amprolium plant in Israel ($8.4 million), higher unit sales for animal feed supplements ($7.7 million), higher unit sales and prices for nicarbazin ($2.8 million), and higher sales associated with the acquisition of Planalqumica ($2.5 million). Higher net sales of the Company's Intermediates and Industrial Chemicals product group for mineral oxides (as a result of strength in the construction and automotive markets), anisic aldehyde and anisyl alcohol, accounted for approximately $2.9 million, $0.9 million and $1.6 million, respectively, of the increase from the prior year. MRT had revenues of $1.3 million, as compared to zero in the prior year. Electronic and Metal Treatment product sales decreased as compared to the prior year, primarily due to lower unit sales of alkaline etchants and copper sulfate crystal. Gross Profit. Gross profit increased by $7.0 million, or 11.5%, to $67.3 million and 25.1% of net sales in fiscal 1997, as compared to 25% of net sales in the prior year. This increase was primarily attributable to higher sales of the Company's Animal Nutritional and Health products, including higher unit sales of the Company's animal health products (nicarbazin and amprolium), amounting to $3.4 million, higher unit sales of animal nutrition supplements such as copper sulfate feed grade in the United States amounting to $1.0 million, as well as higher prices for the Company's animal nutrition premixes in Israel, amounting to $1.5 million, as compared to the prior year. These increases were partially offset by lower net sales of Electronics and Metal Treatment products. Selling, General and Administrative Expense. Selling, general and administrative expenses increased $4.9 million, or 9.6%, to $56.1 million in 1997 from $51.2 million in fiscal 1996, primarily due to the first full year of expenses associated with MRT, the Company's acquisition of Planalqumica, higher freight expenses associated with the Company's recycling activities, and other administrative costs. Selling, general and administrative expenses as a percentage of revenues for fiscal 1997 represented 20.9% of net sales, as compared to 21.2% of net sales for fiscal 1996. Operating Income. Operating income increased by $2.0 million, or 22.2%, to $11.2 million in fiscal 1997, as compared to the prior year, primarily due to higher net sales and gross profits from the Company's Animal Nutrition and Health products, partially offset by increases in selling, general and administrative expenses. Interest Expense. Interest expense increased by $.7 million to $6.3 million in fiscal 1997, as compared to the prior year, primarily due to higher levels of bank borrowings by the Company's Israeli subsidiary, Koffolk Israel, in connection with the construction of the amprolium plant in Ramat Hovav. The fiscal 1996 year reflects the capitalization of interest in the amount of approximately $.4 million by Koffolk Israel, related to the financing of such construction. Taxes. The provision for income taxes for fiscal 1997 is lower than the federal statutory rate, primarily due to the non-taxability of insurance gain. The fiscal 1996 tax provision was impacted principally by taxes relating to reorganization of foreign subsidiaries and substantially higher effective state taxes. Net Income. Net income for fiscal 1997 increased to $8.0 million, from a negligible loss in fiscal 1996. The increase included a $5.6 million gain on life insurance and higher gross profits from the Company's Animal Nutrition and Health products. LIQUIDITY AND CAPITAL RESOURCES Net Cash Provided By Operating Activities. Net cash provided by operations was $.7 million for fiscal 1998, a decline of $2.2 million from fiscal 1997. This was primarily a result of the loss before extraordinary item, and higher levels of accounts receivable (due to Crop Protection product group sales having occurred later in the season than the prior year), offset by depreciation and amortization and non-cash, non-recurring charges. Net cash provided by operating activities in fiscal 1997 was $2.9 million, an increase of $2.2 million, as compared to the prior year. This increase was primarily due 34 to increased net income, and increased depreciation due to the Company's new amprolium plant in Israel. Net Cash Used In Investing Activities. Net cash used in investing activities for fiscal 1998 was $8.0 million, an increase of $3.3 million, as compared to the prior year. This increase was primarily due to increased capital expenditures (approximately $2.0 million) at the Company's Ramat Hovav, Israel facility and $1.8 million for site paving at the Company's Sewaren, New Jersey facility. Net cash used in investing activities for fiscal 1997 was $4.8 million, a decrease of $8.8 million, as compared to the prior year. Included in the 1996 fiscal year is a cash payment of $3.9 million for the acquisition of Planalqumica, the Company's Brazilian subsidiary, and approximately $4.5 million for capital expenditures for construction of the amprolium plant in Israel. Net Cash Provided By Financing Activities. Net cash provided by financing activities for fiscal 1998 was $27.5 million, primarily as a result of proceeds from issuance of the $100 million Old Notes less discounts and fees of $3.8 million and after repayments of the Company's long-term and short-term indebtedness. Capital Expenditures. Capital expenditures for the years ended June 30, 1998, 1997 and 1996 were $8.0 million, $4.7 million, and $8.9 million, respectively. Capital expenditures over this period were primarily for construction of the amprolium plant in Israel, expansion and modernization of product facilities in France, and expansion of the Company's production facilities in the United States for fungicides and animal nutrition supplements. The Company anticipates spending $11.0 million and $7.0 million for capital expenditures for its existing businesses for fiscal 1999 and 2000, respectively, including expenditures for the registration and acquisition of generic fungicides under FIFRA. In addition, the Company has budgeted $10.0 million and $1.6 million associated with the growth of MRT for 1999 and 2000, respectively, and $5.0 million related to the ODDA Acquisition for each of 1999 and 2000. These budgets are subject to change, depending upon, among other factors, the actual needs of the Company, MRT and ODDA. Liquidity. As of June 30, 1998, the Company had $79.7 million of working capital. See "Description of Certain Indebtedness." In June 1998, the Company issued $100 million aggregate principal amount of 9 7/8% Senior Subordinated Notes due June 1, 2008. The Notes are general unsecured obligations of the Company and are subordinated in right of payment to all existing and future Senior Debt and will rank pari passu in right of payment with all other existing and future senior subordinated indebtedness of the Company. The Notes are unconditionally guaranteed on a senior subordinated basis by the current domestic subsidiaries of the Company. Additional future domestic subsidiaries may become Guarantors under certain circumstances. Proceeds from the Offering were used in part to repay indebtedness of the Company. The Indenture contains certain covenants with respect to the Company and the Guarantors, which will restrict, among other things, (a) the incurrence of additional indebtedness, (b) the payment of dividends and other restricted payments, (c) the creation of certain liens, (d) the sale of assets, (e) certain payment restrictions affecting subsidiaries, and (f) transactions with affiliates. The Indenture will also restrict the Company's ability to consolidate, or merge with or into, or to transfer all or substantially all of its assets to, another person. The Company is in the process of closing the acquisition of all of the outstanding capital stock of ODDA Smelteverk, AS, a Norwegian company, and the related business of BOC Carbide Industries in the United Kingdom, from the BOC Group Plc for approximately $19 million in cash and the assumption of approximately $16 million in debt. In August 1998, the Company and certain of its domestic subsidiaries terminated the Loan and Security Agreement dated as of August 31, 1994 with Fleet Bank (formerly National Westminster Bank NJ). Simultaneously, the Company and all of its domestic subsidiaries entered into the New Credit Agreement with PNC Bank, National Association, providing, among other things, for the extension of a $60 million senior secured financing, consisting of a $35 million revolving credit facility (subject to the availability of certain eligible receivables and eligible inventory, with a sub-limit for inventory of 35 $15 million), including a $7.5 million letter of credit sub-facility, and a $25 million acquisition facility. See "Description of Certain Indebtedness." At August 31, 1998, the Company had no outstanding borrowings under the New Credit Agreement, and had availability thereunder of $35.0 million, subject to a borrowing base. The Company expects that cash flows from operations and available borrowing arrangements will provide sufficient working capital to operate the Company's business, to make expected capital expenditures and service interest and principal on outstanding debt and meet the Company's foreseeable liquidity requirements for the next twelve months. YEAR 2000 Over the last three year's, the Company has replaced or upgraded most of the core management information systems used in the Company's domestic operations, as well as certain international operations. The Company is currently conducting a review of its core management information systems to verify their compliance with Year 2000 date codes. In addition, the Company is conducting an inventory, review and assessment of its desktop computers, networks and servers, software applications and packages, and products and services provided by third parties for internal operations to determine whether or not they support Year 2000 date codes. The Company's Year 2000 initiative also provides for contacting key suppliers to determine whether they have effective plans to address the Year 2000. The Company believes that its internal manufacturing systems at its plants are currently in substantial compliance, and plans to complete modification of the systems, including financial accounting systems, that are not currently in compliance and to complete testing all of its systems in calendar 1999. The Company expects that any required modifications will be made on a timely basis. Capitalizable costs for software upgrades and changes have not been significant to capital expenditures and related consulting costs have not been material to operating results in any of the prior three years. Future costs are also not expected to be material. EFFECT OF INFLATION; FOREIGN CURRENCY EXCHANGE RATES Inflation generally affects the Company by increasing the cost of labor, equipment and raw materials. The Company does not believe that inflation has had any material effect on the Company's business over the last three years. The Company's substantial foreign operations expose it to risk of exchange rate fluctuations. Balance sheet accounts of the Company's foreign subsidiaries, with the exception of the Brazilian subsidiary and a subsidiary of Koffolk Israel, are translated at current rates of exchange and income and expense items are translated at the average exchange rate for the year. The resulting translation adjustments are reflected as a separate component of stockholders' equity. The Brazilian subsidiary operates in a highly inflationary economy and the subsidiary of Koffolk Israel transacts substantially all of its business in U.S. dollars. Accordingly, the U.S. dollar is designated as the functional currency of these operations and translation gains and losses are included in net income. Foreign currency transaction gains and losses are included in net income. Currency translation losses relating principally to short and long-term debt of Koffolk Israel are denominated or linked to foreign currencies, and have been translated to the functional currency, the Shekel, and included in earnings. Such translation losses were $979,000, $2,270,000 and $1,055,000 for 1998, 1997 and 1996 fiscal years, respectively. See Note 1 to the Company's Consolidated Financial Statements. IMPACT OF RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No. 121"). SFAS No. 121, effective for the Company's fiscal year 1997, established criteria for recognizing, measuring and disclosing impairments of long-lived assets, including intangibles and goodwill. The adoption of SFAS No. 121 has not had a significant impact on the Company's results of operations, financial position or cash flows. 36 Commencing with fiscal 1998, the Company has adopted American Institute of Certified Public Accountants Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities." This SOP requires that accrued environmental remediation-related expenses include direct costs of remediation and indirect costs related to the remediation effort. The effect of adoption of this SOP is accounted for as a change in accounting estimate and did not have a material effect on financial position, results of operations or cash flows upon initial application at the beginning of fiscal 1998. The Company is required to adopt SFAS No. 130, "Reporting Comprehensive Income," SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," and SFAS No. 132 "Employers' Disclosures about Pension and Other Postretirement Benefits" in fiscal 1999. These standards will require additional disclosure, but are not expected to have a material effect on the Company's financial position, results of operations or cash flows. The Company will also be required to adopt SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" in fiscal 2001. This standard will require the Company to record all its derivative financial instruments as assets or liabilities measured at fair value. Management has not yet assessed the potential impact of this standard on its financial position, results of operations or cash flows. ENVIRONMENTAL LIABILITIES The Company and its subsidiaries are subject to various federal, state, local and foreign environmental laws and regulations which govern the management of chemical wastes. The most significant regulation governing the recycling activities of certain of the Company's subsidiaries is the Resource Conservation and Recovery Act of 1976 ("RCRA"). In connection with applying for RCRA "Part B" permits, such subsidiaries have been required to perform extensive site investigations at each of their operating facilities (and inactive sites) to identify possible contamination and to provide the regulatory authorities with plans and schedules for remediation. Some soil and groundwater contamination has been identified at several plant sites and will require corrective action over the next several years. Expenditures for ongoing compliance with environmental regulations that relate to current operations are expensed or capitalized as appropriate. Expenditures related to improving the condition of property compared with the condition of that property when constructed or acquired are capitalized. The Company also capitalizes expenditures that prevent future environmental contamination. The Company's subsidiary, C.P. Chemicals, Inc., has been named as a potentially responsible party ("PRP") in connection with an action commenced by the EPA, involving a third party fertilizer manufacturing site in South Carolina. The Company has also received a settlement proposal approximating $.8 million, which it believes is unfairly high in relation to settlements offered to other PRPs. While the outcome of ongoing negotiation is uncertain, the Company has accrued its best estimate of the amount for which this matter can be settled. Total accruals for environmental matters are $5.3 million as of June 30, 1998, including $3.3 million for long-term groundwater monitoring and remediation costs associated with curtailment of operations at the Company's Sewaren, New Jersey facility. See Note 11 to the Company's Consolidated Financial Statements. SEASONALITY OF BUSINESS The Company's sales are typically highest in the fourth fiscal quarter. The Company's sales of copper-based fungicides and other agricultural products are typically highest in the first and fourth fiscal quarters, and its sales of gibberellic acid are highest in the fourth quarter, due to the seasonal nature of the agricultural industry. The Company's sales of finished chemicals to the wood treatment industry are typically highest in the first and fourth fiscal quarters due to the increased level of home construction during these periods. Additionally, sales of these products may be more concentrated in one of these quarters due to weather conditions. 37 THE EXCHANGE OFFER TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the Exchange Offer), the Company will accept for exchange Old Notes which are properly tendered on or prior to the Expiration Date and not withdrawn as permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New York City time, on , 1998; provided, that if the Company, in its sole discretion, has extended the period of time for which the Exchange Offer is open, the term "Expiration Date" means the latest time and date to which the Exchange Offer is extended. As of the date of this Prospectus, $100.0 million aggregate principal amount of the Old Notes is outstanding. This Prospectus, together with the Letter of Transmittal, is first being sent on or about the date of this Prospectus, to all Holders of Old Notes known to the Company. The Company's obligation to accept Old Notes for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth under "--Certain Conditions to the Exchange Offer" below. The Company expressly reserves the right, at any time or from time to time, to extend the period of time during which the Exchange Offer is open, and thereby delay acceptance for exchange of any Old Notes, by giving oral or written notice of such extension to the Holders thereof as described below. During any such extension, all Old Notes previously tendered will remain subject to the Exchange Offer and may be accepted for exchange by the Company. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering Holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Old Notes tendered in the Exchange Offer must be in denominations of principal amount of $1,000 or any integral multiple thereof. The Company expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Old Notes not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified below under "--Certain Conditions to the Exchange Offer." The Company will give oral or written notice of any extension, amendment, non-acceptance or termination to the Holders of the Old Notes as promptly as practicable, such notice in the case of any extension to be issued by means of a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. PROCEDURES FOR TENDERING OLD NOTES The tender to the Company of Old Notes by a Holder thereof as set forth below and the acceptance thereof by the Company will constitute a binding agreement between the tendering Holder and the Company upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. Except as set forth below, a Holder who wishes to tender Old Notes for exchange pursuant to the Exchange Offer must transmit a properly completed and duly executed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to The Chase Manhattan Bank (the "Exchange Agent") at the address set forth below under "Exchange Agent" on or prior to the Expiration Date. In addition, either (i) certificates for such Old Notes must be received by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date, or (iii) the Holder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. 38 The Exchange Agent and the Depository have confirmed that any financial institution that is a participant in the Depository's system may utilize the Depository's Automated Tender Offer Program ("ATOP") to tender private securities. To effect a tender pursuant to the ATOP system, Holders should transmit their acceptance to DTC through ATOP by causing DTC to transfer securities to the Exchange Agent in accordance with ATOP's procedures for transfer. DTC will then send an Agent's Message to the Exchange Agent. The term "Agent's Message" means a message transmitted by DTC to, and received by, the Exchange Agent and forming a part of the Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the securities referred to in such Agent's Message, that such participant has received the Letter of Transmittal and agrees to be bound by the terms of the Letter of Transmittal and that the Company may enforce such agreement against such participant. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered Holder. The transfer of registered ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Old Notes surrendered for exchange pursuant thereto are tendered (i) by a registered Holder of the Old Notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution (as defined below). In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm which is a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program (collectively, "Eligible Institutions"). If Old Notes are registered in the name of a person other than a signer of the Letter of Transmittal, the Old Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company in its sole discretion, duly executed by the registered Holder with the signature thereon guaranteed by an Eligible Institution. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Old Notes tendered for exchange will be determined by the Company in its sole discretion, which determination shall be final and binding. The Company reserves the absolute right to reject any and all tenders of any particular Old Notes not properly tendered or to not accept any particular Old Note which acceptance might, in the judgment of the Company or its counsel, be unlawful. The Company also reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Old Notes either before or after the Expiration Date (including the right to waive the ineligibility of any Holder who seeks to tender Old Notes in the Exchange Offer). The interpretation of the terms and conditions of the Exchange Offer as to any particular Old Notes either before or after the Expiration Date (including the Letter of Transmittal and the instructions thereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes for exchange must be cured within such reasonable period of time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of Old Notes for exchange, nor shall any of them incur any liability for failure to give such notification. If the Letter of Transmittal is signed by a person or persons other than the registered Holder or Holders of Old Notes, such Old Notes must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name or names of the registered Holder or Holders that appear on the Old Notes. 39 If the Letter of Transmittal or any Old Notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. By tendering, each Holder will represent to the Company that, among other things, the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the Holder, and that neither the Holder nor such other person has any arrangement or understanding with any person to participate in the distribution of the New Notes. In the case of a Holder that is not a broker-dealer, each such Holder, by tendering, will also represent to the Company that such Holder is not engaged in and does not intend to engage in, a distribution of the New Notes. If any Holder or any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company, or is engaged in or intends to engage in or has an arrangement or understanding with any person to participate in a distribution of such New Notes to be acquired pursuant to the Exchange Offer, such Holder or any such other person (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. See "Plan of Distribution." The Letter of Transmittal states that by so acknowledging and by delivering such a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will accept, promptly after the Expiration Date, all Old Notes properly tendered and will issue the New Notes promptly after acceptance of the Old Notes. See "--Certain Conditions to the Exchange Offer" below. For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Old Notes for exchange when, as and if the Company has given oral or written notice thereof to the Exchange Agent, with written confirmation of any oral notice to be given promptly thereafter. For each Old Note accepted for exchange, the Holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. The New Notes will bear interest from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from June 11, 1998. Accordingly, registered Holders of New Notes on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from June 11, 1998. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued interest on such Old Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. In all cases, issuance of New Notes for Old Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Old Notes are submitted for a greater principal amount than the Holder desires to exchange, such unaccepted or non-exchanged Old Notes will be returned without expense to the tendering Holder thereof (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry procedures described below, such non-exchanged Old Notes will be credited to an account maintained 40 with such Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Exchange Offer. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Old Notes at the Book-Entry Transfer Facility for purposes of the Exchange Offer within two business days after the date of this Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Old Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the Exchange Agent at the address set forth below under "--Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES If a registered Holder of the Old Notes desires to tender such Old Notes and the Old Notes are not immediately available, or time will not permit such Holder's Old Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if (i) the tender is made through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the Holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the Expiration Date, the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and all other documents required by the Letter of Transmittal, are received by the Exchange Agent within three NYSE trading days after the Expiration Date. WITHDRAWAL RIGHTS Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address or, in the case of Eligible Institutions, at the facsimile number, set forth below under "--Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Notes to be withdrawn (including the certificate number or numbers and principal amount of such Old Notes), (iii) contain a statement that such holder is withdrawing his election to have such Old Notes exchanged, (iv) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer to have the Trustee with respect to the Old Notes register the transfer of such Old Notes in the name of the person withdrawing the tender and (v) specify the name in which such Old Notes are registered, if different from that of the Depositor. If Old Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on 41 all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes that have been tendered for exchange but which are not exchanged for any reason will be returned to the Holder thereof without cost to such Holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Old Notes will be credited to an account maintained with the Book-Entry Transfer Facility for the Old Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following the procedures described under "--Procedures for Tendering Old Notes" above at any time on or prior to 5:00 p.m., New York City time, on the Expiration Date. CERTAIN CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the Exchange Offer, the Company shall not be required to accept for exchange, or to issue New Notes in exchange for, any Old Notes and may terminate or amend the Exchange Offer, if at any time before the acceptance of such Old Notes for exchange or the exchange of the New Notes for such Old Notes, the Company determines that (i) the Exchange Offer violates applicable law or any applicable interpretation of the staff of the SEC, (ii) an action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Company to proceed with the Exchange Offer, or a material adverse development shall have occurred in any existing action or proceeding with respect to the Company or (iii) any governmental approval shall not have been obtained, which approval the Company deems necessary for the consummation of the Exchange Offer. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition or may be waived by the Company in whole or in part at any time and from time to time in its sole discretion. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. In addition, the Company will not accept for exchange any Old Notes tendered, and no New Notes will be issued in exchange for any such Old Notes, if at such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended. 42 EXCHANGE AGENT The Chase Manhattan Bank has been appointed as the Exchange Agent for the Exchange Offer. All executed Letters of Transmittal should be directed to the Exchange Agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: The Chase Manhattan Bank, Exchange Agent By Mail or Hand Delivery: The Chase Manhattan Bank Global Trust Services 450 West 33rd Street, 15th Floor New York, New York 10001-2697 Attention: Mr. Sheik Wiltshire By Facsimile Transmission (for Eligible Institutions only): (212) 946-8161 Attention: Mr. Sheik Wiltshire Confirm by Telephone: (212) 946-3082 DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL. FEES AND EXPENSES The Company will not make any payment to brokers, dealers, or others soliciting acceptances of the Exchange Offer. The estimated cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company and are estimated in the aggregate to be $200,000. TRANSFER TAXES Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct the Company to register New Notes in the name of, or request that Old Notes not tendered or not accepted in the Exchange Offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. CONSEQUENCES OF EXCHANGING OLD NOTES Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the provisions in the Indenture regarding transfer and exchange of the Old Notes and the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Old Notes under the Securities Act. See "Description of the Notes--Registration Rights." Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by Holders thereof (other than any such Holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) 43 without compliance with the registration and prospectus delivery provisions of the Securities Act; provided, that such New Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangement or understanding with any person to participate in the distribution of such New Notes. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in such other circumstances. Each Holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any Holder is an affiliate of the Company, or is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Rights Agreement, subject to certain limitations specified therein, to register or qualify the New Notes for offer or sale under the securities laws of such jurisdictions as any Holder reasonably requests in writing. Unless the Company is so requested, the Company does not intend to register or qualify the sale of the New Notes in any such jurisdictions. 44 BUSINESS Philipp Brothers Chemicals, Inc. is a leading diversified global manufacturer and marketer of a broad range of specialty and industrial chemicals, which are sold world-wide for use in numerous markets including animal nutrition and health, electronics, wood treatment, agricultural, pharmaceutical and personal care products, glass, construction and concrete. The Company also provides recycling and hazardous waste services primarily to the electronics and metal treatment industries. The Company has leading positions in certain of its end markets, and has global marketing and manufacturing capabilities. The Company's net sales and EBITDA were $278.0 million and $10.6 million, respectively, for the year ended June 30, 1998 and $268.4 million and $20.6 million, respectively, for the year ended June 30, 1997. Approximately 35% of the Company's fiscal 1998 net sales consisted of sales made by the Company outside the United States. During fiscal 1998, the Company's products were manufactured at nine facilities in the United States, two facilities in Europe, two facilities in Israel and one facility in South America. The Company manufactures and markets more than 350 specialty and industrial chemicals, of which 50 products accounted for approximately 80% of fiscal 1998 net sales. The Company focuses on specialty and industrial chemicals for which it has a strong market position or an advantage in product development, manufacturing or distribution. Many of the Company's products provide critical performance attributes to its customers' products, while representing a relatively small percentage of total end-product costs. The Company has four core product groups: o ANIMAL NUTRITION AND HEALTH. The Company manufactures and markets trace minerals, trace mineral premixes and animal feed ingredients, as well as vitamins, vitamin premixes and other animal health products to the animal feed, poultry and pet food industries. o INTERMEDIATES AND INDUSTRIAL CHEMICALS. The Company manufactures and markets a number of specialty and fine organic chemicals and intermediates, as well as industrial pigments and other mineral products for use in the chemical, catalyst, pharmaceutical and personal care, construction, concrete, wood treatment, automotive, aerospace, glass and coal mining industries. o CROP PROTECTION. The Company manufactures and markets fungicides and other agricultural products for the United States, French and other international markets. Products in this group are primarily copper-based fungicides, which are used in the treatment of crop bacteria and fungal diseases, and gibberellins, which are plant growth regulators used in table grape and citrus production, as well as value-added branded crop protection chemicals. o ELECTRONICS AND METAL TREATMENT. The Company believes that it is the largest manufacturer and recycler of alkaline etchants in North America. Through five of its facilities, the Company sells fresh etchant to printed circuit board manufacturers and recycles spent etchants. BUSINESS STRATEGY The Company's objective is to continue to enhance its revenue growth and profitability. The Company plans to achieve its objective through the following key strategies: o Enhance Growth through Selective Acquisitions and Strategic Alliances. The Company will continue to seek acquisitions of businesses and products that improve profitability. In 1994, the Company acquired Agtrol International (formerly La Cornubia, S.A.), a producer of copper chemicals and crop protection chemicals in France. In 1995, the Company acquired Planalqumica, the sole manufacturer of nicarbazin in Latin America. In 1996, Koffolk USA purchased the right to sell nicarbazin from Merck. Koffolk USA became the registered transferee and owner of the NADA for nicarbazin approved by the FDA. Separately, Merck appointed Koffolk USA as its exclusive U.S. distributor of amprolium for poultry markets. In 1996, Elanco Animal Health, a division of Eli Lilly, agreed to act as the Company's exclusive distributor in the United States and Brazil for nicarbazin. This arrangement was terminated by the Company with respect to the United States in August 1998. In June 1998 Koffolk USA became a subsidiary of the Company upon the closing of the Offering. In September 1998, the Company completed the ODDA Acquisition. 45 o Increase Product Offerings to Primary Markets. The Company seeks to offer an extensive animal nutrition and crop protection product portfolio to a given customer, thereby enhancing its position as a valuable supplier to the industries it serves and increasing its unit sales per customer. The Company seeks to increase its product lines through identification and registration of generic fungicides under FIFRA either directly or through joint ventures or strategic alliances. In 1998, the Company obtained a U.S. registration under FIFRA to sell a TPTH-based product, under the name Agri-tin, a fungicide used primarily in the sugar beet, pecan and potato industry. In 1998, the Company also launched a mefenoxam-based product, under the name Ultra Flourish, a systemic fungicide used in the tobacco, citrus and vegetable industries, for use in a variety of end use formulations. o Introduce New or Technologically Improved Products. The Company focuses on the acquisition and development of new and technologically advanced products to respond to customer demands, changes in the marketplace, technology and environmental regulations. The Company continues to use its recycling expertise, hydro-metallurgical experience and chemical formulation capability to develop new products and services. The Company continues to seek and develop opportunities that enable it to offer new products and technologies. For example, Mineral Resource Technologies, a subsidiary of the Company which commenced operations in 1996, has recently obtained two patents for the development of a new series of cement products. Such products, called MRT Cement, are made primarily from fly ash, an ash residue generated chiefly by coal-burning electric utilities. The Company believes that MRT Cement could serve as a competitive alternative to portland cement for use in the building and construction industries. The Company has recently entered into an agreement with an electronic component manufacturer to recycle for that manufacturer. In 1998, the Company introduced a livestock litter treatment product that improves poultry-house conditions and productivity and benefits the environment by aiding in the control of phosphorous runoff into rivers, streams and lakes, and a line of animal nutrition palatants (flavor enhancers) for the United States feed market. The Company is also capitalizing on its technology to develop a fourth generation copper-based fungicide expected to have enhanced biological activity and reduced cost of disease control. o Continue to Improve Operating Efficiencies. With the curtailment of the Company's Sewaren, New Jersey facility, the Company expects to realize significant cost savings. The Company intends to implement additional cost-saving and productivity-enhancing programs in the future, including yield improvement programs. The Company intends to move or expand product capacity to improve production efficiency and reduce transportation costs. The Company is analyzing additional opportunities to increase operating efficiencies and profitability. See "Summary--Restructuring and Other Charges." o Expand and Strengthen Customer Base. The Company intends to expand and strengthen its customer base by (i) focusing on relationships with key accounts, (ii) continuing to incentivize its sales force to concentrate on fast-growing, high-margin areas within existing product groups, and (iii) pursuing growth opportunities for its existing products in new markets outside the United States. COMPETITIVE STRENGTHS o Leadership Positions in Targeted Markets. The Company believes it holds leading positions in several specialty agricultural markets, including copper-based feed additives and fungicides, and in specialty and industrial chemical markets, including metal ore-based colorants, etchants and certain organic compounds. The Company's brand names in its target markets include Nicarb, Champion, Champ Flowable, GibGro, Macclesfield, Nicarmix, Necoxine, Ac-Cu- Guard, Ac-Cu-Fine 9, High Speed Ac-Cu-Guard Plus, Phibro-Guard TFT, Kastab, D Stab, Chromax, Chromox, Brickox, Agri-tin and Ultra Flourish. The Company believes these leadership positions will enhance its ability to broaden its product lines within its markets, and its brand name recognition will increase its ability to launch its existing products in new markets. o Manufacturing Expertise. The Company's extensive experience in various metal recovery processes provides the Company with a high quality, low cost source of raw material for use in 46 products sold to the agricultural and animal nutrition markets. In addition, the Company's expertise in certain organic synthesis processes has led to long-term manufacturing relationships with its customers. Further, the Company's formulation expertise is recognized by its customers in the animal health and nutrition market. In 1994, the Company entered into a long-term supply agreement whereby Merck agreed to purchase all of its requirements for amprolium from the Company. o Proven Experience in New Product Development. The Company is a leader in the development of new agricultural and industrial products and applications. The Company has introduced high quality generic formulations of fungicides and has further enhanced the bio-availability of the active ingredient. In addition, the Company has modified formulations as required by crop and soil conditions and market demand, and is currently developing and field testing the fourth generation of one of its fungicides. The Company has also developed several specialty nutrient blends. The Company is also expert in the innovative use of fluorine compounds to produce its chemical intermediates. New products introduced by the Company since 1994 accounted for approximately $29 million of the Company's total revenues in fiscal year 1998. o Established Global Network and Diverse Customer Base. The Company manufactures and markets over 350 products sold through multiple distribution channels to over 3,100 customers in a wide variety of end-use markets. The Company sells its products through an established global sales, marketing and distribution network to customers in 81 countries. Approximately 35% of the Company's total sales for fiscal 1998 were made by the Company outside the United States, with 11% of sales from Europe, 22% of sales from Israel and 2% of sales from South America. The Company's U.S., Israeli and European manufacturing operations provide it with cost-effective access to major geographic markets. In fiscal 1998, no single customer accounted for over 5% of total revenues and the top 10 customers accounted for less than 17% of total revenues. o Strong Management Team. The Company has assembled a strong and experienced management team at both the corporate and operating levels. The Company's top operating managers have an average of over 25 years of experience in the chemicals industry. RESTRUCTURING AND OTHER CHARGES The Company has begun to implement a restructuring program and has incurred or will incur the Restructuring and Other Charges described below. See Note 11(d) and (e) to the Company's Consolidated Financial Statements. o Curtailment of operations at the Company's Sewaren, New Jersey manufacturing facility, which manufactured products primarily in the Intermediates and Industrial Chemicals product group. The curtailment program has resulted or will result in non-recurring charges of approximately $10 million, of which $5.6 million is associated with the non-cash write down of fixed assets, $1.1 million for one time costs associated with the actual shutdown and $3.3 million for ongoing site monitoring and ground water remediation. o Charges associated with the forgiveness of certain promissory notes issued to Phibro-Tech by certain executives and tax-related adjustments, which aggregate $5.6 million. See "Certain Relationships and Related Transactions." o Charges of approximately $1.2 million arising out of severance payments associated with personnel changes. The Company will continue to analyze opportunities to increase operating efficiencies and profitability, which may result in additional restructuring and other charges in the future. Additional matters have not currently been identified. 47 PRODUCTS The Company manufactures and markets more than 350 specialty and industrial chemicals. Many of the Company's products provide critical performance attributes to its customers' products, but represent a relatively small percentage of their total end-product costs. The table below sets forth the Company's fiscal 1998 net sales by product group, principal products and brands, principal end markets or users, and selected well-known customers.
PRODUCT GROUP PRINCIPAL PRODUCTS PRINCIPAL END SELECTED WELL-KNOWN (1998 NET SALES) AND BRANDS MARKETS OR USERS CUSTOMERS ANIMAL NUTRITION Amprolium Animal Feed Agway AND HEALTH Animal Feed Ingredients Coccidiostats Cargill ($129 MILLION) Copper Sulfate F.G. Feed Mills Continental Grain Nicarbazin Nutritional Eli Lilly Trace Mineral Premixes Supplements Farmland Trace Minerals Poultry and Pet Food Meriel (Merck/Rhone-Poulenc) Perdue Purina Mills (Koch Industries) Tyson Foods INTERMEDIATES Anisic Alcohol Acetylene BOC AND INDUSTRIAL Anisic Aldehyde Adhesion Promoter Colgate Palmolive CHEMICALS Calcium Carbide Brick and Tile Elementis ($74 MILLION) Copper Oxide Catalysts Engelhard Ferro Dicyandiamide Cement Coatings Hoffman La Roche DL Panthenol Concrete Laporte Fly Ash Flame Retardation Morton International Iron Oxide Frits Osmose Manganese Dioxide Glass Owens Corning Selenium Disulfide Pharmaceutical Fiberglass Sodium Fluoride Intermediates Pfizer Superchlon Preservatives PPG Industries 1,3-Difluorobenzene Shampoo Toothpaste Procter & Gamble Wood Treatment Sherwin-Williams SmithKline Beecham Unilever CROP PROTECTION Copper Fungicides Citrus BASF ($36 MILLION) Champ Flowable Grapes Helena (Marubeni) Champion Nuts Sivam Macclesfield 50 and 80 Vegetables Sumitomo Gibberellic Acid Vines United Agri Products GibGro 4% LC (Conagra) GibGro 20% SP ELECTRONICS AND Alkaline Etchant Chemical Milling Ashland METAL TREATMENT Phibro-Guard TFT Metal Finishers Automata ($39 MILLION) Ac-Cu-Guard Plus Printed Circuit Board Hadco Ac-Cu-Fine9 Manufacturers Hutchinson Ferric Chloride MacDermid PF Etchant Sanmina High Speed Circuit Etch Shipley Rapid Circuit Etch Tyco International Metal Treatment Van Waters & Rogers Recycling Activities
48 The Company manufactures and markets a broad range of specialty and industrial chemicals, comprising four core product groups: ANIMAL NUTRITION AND HEALTH The Company manufactures and markets trace minerals, trace mineral premixes, as well as vitamins, vitamin premixes and animal health care products, to the animal feed, poultry and pet food industries. The Company believes the world is experiencing and will continue to experience a growing demand for food, due to population increases and economic growth of developing countries and an increasing desire for and consumption of protein. Animal Nutritional Supplements Through its subsidiary, Prince Agri Products, Inc. ("Prince Agri"), the Company manufacturers and markets trace minerals, trace mineral and selenium premixes and other ingredients to the animal and poultry feed and pet food industries predominantly in the United States. These products generally fortify, enhance or make more nutritious or palatable the animal and poultry feeds and pet foods with which they are mixed. The Company believes that it has one of the most comprehensive lines of trace mineral additives for the U.S. animal feed industry. The majority of the ingredients the Company sells are nutrients which are used as supplement for animal feed. The Company serves customers in all the major feed segments, including swine, dairy, poultry, and beef as well as pet food and aquaculture. The Company's foundation and strength in the animal feed industry have come from its basic position in several trace minerals. The Company also manufactures and markets copper sulfate as an animal feed supplement. Copper is a nutritional requirement for the production of hemoglobin and for the normal growth and well being of animals. Supplemental rates higher than nutritional levels are frequently recommended for use in poultry and swine for growth performance or therapeutic benefits. The Company believes it is one of the largest manufacturers and marketers of copper sulfate to the animal feed industry, both in North America and in France. The Company customizes trace mineral and selenium premixes at its blending facilities in Marion, Iowa, Quincy, Illinois and Bowmanstown, Pennsylvania, and makes a diverse line of other trace minerals and macro-minerals. The Company's major customers for these products are medium to large companies, co-ops, blenders, integrated poultry operations and pet food companies. Typical customers include Purina Mills, Continental Grain, Cargill, ADM, Agway, Farmland, Perdue and Tyson Foods. The Company sells other ingredients, such as buffers, vitamin K and amino acids, including lysine, tryptophan and threonine. The Company has recently begun marketing new value added products to the feed industry. In 1996, it introduced Chromax brand chromium picolinate. Prince Agri has the exclusive marketing rights for this product to the animal feed industry. The Company believes that it is the only chromium product which can be used according to FDA regulations in animal feed in the United States. In 1997, the Company introduced a line of yeast products, and in 1998 introduced a livestock litter treatment product designed to aid the environment by reducing phosphorous runoff from chicken litter fertilizer, and a line of palatants for the U.S. feed market. The Company believes that its Israeli subsidiary, Koffolk (1949) Ltd., is the major producer and distributor of vitamins and premixes for the animal feed and poultry industries in Israel. Koffolk Israel has developed proprietary know-how for coating and stabilizing vitamins, including Vitamin K3 as well as oil-soluble Vitamins A and D3. Koffolk Israel also provides a wide range of services to the animal feed industry in Israel including: mobile computer units for on-the-spot feed information, comprehensive feed laboratory services for both chemical and microbiological assay, and an experimental farm for field testing of feed additives and animal health products. Koffolk Israel's nutritionists, field specialists and veterinary experts provide technical assistance to ensure effective product use. 49 Animal Health Products Through Koffolk Israel and its Brazilian subsidiary, Planalqumica, the Company produces nicarbazin and through Koffolk Israel, the Company also produces amprolium for distribution to the world-wide poultry industry through major multinational pharmaceutical and veterinary companies. The Company believes it is the sole world-wide producer of amprolium, and is the largest world-wide producer of nicarbazin through its facilities in Israel and Brazil. The Company is the sole Latin American producer of nicarbazin. The production operations of the Company in Israel for such animal drugs have been approved by the FDA. Modern, large scale poultry production is based on intensive animal management practices. This type of animal production requires routine prophylactic medications in order to prevent health problems. Coccidiosis is one of the critical diseases challenges which poultry producers face, globally. Coccidiosis is an infection of coccidia, a microscopic parasite which routinely infects chickens. Nicarbazin and amprolium are among the most effective medications for the prevention of coccidiosis in chickens when used in rotation with other coccidiocides. In 1994, the Company entered into a long-term supply agreement whereby Merck agreed to purchase all of its requirements for amprolium from the Company, subject to certain minimum purchase obligations. In 1996, Koffolk USA purchased from Merck the right to sell nicarbazin, which Koffolk Israel had been manufacturing in Israel. Koffolk USA became the registered transferee and owner of the NADA for nicarbazin approved by the FDA. Separately, Merck appointed Koffolk USA as its exclusive U.S. distributor of amprolium for poultry markets. In 1996, the Elanco Animal Health Division of Eli Lilly agreed to act as the Company's exclusive distributor for nicarbazin in the United States and Brazil. This arrangement was terminated by the Company with respect to the United States in August 1998. Elanco sells the product as part of its feed additive portfolio and provides the necessary technical and commercial support to integrated poultry producers. Koffolk Israel provides marketing support. INTERMEDIATES AND INDUSTRIAL CHEMICALS The Company manufactures and markets a number of specialty and fine organic chemicals and intermediates, industrial grade pigments and specialty mineral products for use in the chemical catalyst, pharmaceutical and personal care, construction, concrete, wood treatment, automotive, aerospace, glass and coal mining industries. Some of these products are produced from raw materials derived from the Company's recycling operations. The Company also purchases crude inorganic minerals in the form of ores and processes these in various grades to produce chemicals for sale to manufacturers which incorporate the resultant products into their finished products in various industrial markets, including construction, with end-use applications in clay brick, ceramic, masonry colorant, coatings, heavy media, foundry, glass, electrodes, abrasives, dust control, and as an intermediate to various chemical applications. Inorganic Chemical Intermediates Using its recycling technology, the Company produces certain copper and nickel chemicals. The Company also produces various mineral oxides. Copper Chemicals. The Company manufactures and sells various copper chemicals. The Company's major copper chemicals are described below: Copper Oxide. Copper oxide is used as an ingredient in the production of water-borne wood preservatives ("CCA"). The U.S. consumption of CCA is estimated at approximately 144 million pounds per year, which equates to a copper oxide consumption of approximately 30 million pounds. Due to its recycling capabilities, the Company believes that it is a low cost supplier of copper oxide to the CCA market. The Company also sells copper oxide to the catalyst, dye, ceramic, and feed industries. Copper Sulfate. The Company sells a high purity copper sulfate to worldwide producers of electroless copper. Industrial uses of copper sulfate include the manufacturing of pigments, electroplating, catalysts and chemical intermediates, and water treatment. The Company markets copper sulfate solution to the mining and wood treatment industries. 50 Nickel Chemicals. The Company manufactures and markets various nickel chemicals, including nickel carbonate, nickel sulfate and nickel chloride, to the metal finishing and ceramic frit industries. Certain of these nickel chemicals are derived from the Company's recycling operations. Mineral Oxides. The Company manufactures and sells various mineral oxides. The Company's major mineral oxide products include iron compounds and manganese compounds. The Company's iron compounds include red iron oxide (Hematite) (sold to the brick, masonry, glass, foundry, electrode, abrasive, feed, and various other chemical industries); black iron oxide (Magnetite) (sold under the "Magna Float" brand name to the heavy media, coal, steel foundry, electrode, abrasive, colorant, fertilizer, and various other chemical industries); iron chromite (sold under the Chromox brand as a colorant or additive to the glass industry). The Company's manganese compounds include manganese dioxide (sold under the Brickox brand name, which is considered a standard color in many applications, to the brick, masonry, glass, and various other chemical industries); and manganous oxide (sold to customers requiring an acid soluble form of manganese, such as animal feed, fertilizer and chemical manufacturers). Organic Chemical Intermediates The Company sells its organic chemical intermediates to multi-national pharmaceutical companies, including Pfizer, Merck, Johnson & Johnson and Hoffman La Roche. Often the Company's intermediate products are used as building blocks in multi-stage pharmaceutical production. Through Koffolk Israel, the Company sells anisic aldehyde and anisic alcohol to worldwide manufacturers of sunscreen as a key intermediate in the manufacture of an ingredient that blocks UVB rays and as a key building block in the manufacture of certain pharmaceuticals. The Company also produces other intermediates used in the manufacture of certain pharmaceuticals. The Company's plant in Ramat Hovav, Israel operates under the FDA's GMP regulations, and has received FDA approval for some of its processes. The Company also manufactures and markets specialty chemicals to manufacturers of health and personal care products. Among the Company's major products for such applications are sodium fluoride and stannous fluoride, DL Panthenol and selenium disulfide. The Company believes it is the largest U.S. marketer of sodium fluoride for use in toothpaste. Sodium fluoride is the active anti-cavity ingredient in fluoride toothpaste, powders and mouthwashes. Koffolk Israel manufactures and markets DL Panthenol, a hair and skin care ingredient. The use of Panthenol (Provitamin B-5) enables the formulation of high performance shampoos, conditioners, styling and treatment products and gives skin creams and lotions a smooth texture. The Company also manufactures and markets selenium disulfide, which is used as a dandricide in shampoo and hair care preparations. Through its English subsidiary, Wychem Limited, the Company markets a wide range of halogenated organic compounds, mainly brominated and fluorinated. These chemical intermediates are sold mainly into the pharmaceutical industry as building blocks for further synthesis. Wychem is able to tailor the quality and supply characteristics of its chemicals to those desired by its customers by close coordination with the customer at an early stage in the customer's product development. Wychem's customers include Pfizer, Schering Plough, Merck Sharpe & Dohme, Johnson & Johnson and SmithKline Beecham. In certain cases the product supplied by Wychem is novel and included in the customer's regulatory submissions. ODDA Through the acquisition of ODDA, the Company will become a manufacturer and distributor of calcium carbide and dicyandiamide. See "Summary--Recent Developments." Calcium Carbide. The principal uses of calcium carbide are in the production of acetylene for welding and cutting, as a desulphurization agent in the steel and foundry industry, and in the manufacture of chemicals. 51 Dicyandiamide. Dicyandiamide is used in several applications, including as a fire retardant for fiber, wood and paint, for producing epoxy laminates for circuit boards and adhesives, for producing paper chemicals, and as a dye fixative for textiles. Marketed Products The Company markets and distributes nationally approximately 50 specialty chemicals, which are sold to industries such as electronics, textiles, plastics, automotive, chemical, metal finishing, pulp and paper. The majority of these chemicals are imported from the Far East and Europe. The Company believes that it offers end users a diverse product mix not available from other suppliers. Among the major chemicals the Company distributes is the following: Superchlon. Superchlon "chlorinated" polyolefins ("CPO") are used as adhesion promoters for thermal plastic olefins substrates (automotive parts--bumpers) and for gravure and thermal set printing inks on polypropylene films. Fly Ash Related Products Through MRT, a business started by the Company in 1996, the Company manages combustion and mineral by-products. It provides management and recycling of coal combustion residues, including fly ash and bottom ash, and also mineral processing residues and municipal solid waste incinerator ash. Through the MRT Technology Center in Atlanta, MRT seeks to develop end-use markets for certain of these by-products. Coal is the largest indigenous fossil fuel resource in the United States. The combustion of coal provides cost-effective electricity generation, but results in a high percentage of residual material, which serves as the "raw material" for MRT. Fly ash is the fine residue and bottom ash is the heavier particles that result from the combustion of coal. Fly ash is a pozzolan, a siliceous and aluminous mixture that, in the presence of water, will combine with an activator (lime, portland cement or kiln dust) to produce a cement-like material. It is this characteristic that allows fly ash to act as cost-competitive substitute for other more expensive cementatious building materials. Concrete manufacturers can typically use fly ash as a substitute for 15% to 40% of their cement requirements, depending on the quality of the fly ash and the proposed end-use applications for the concrete. Generally, coal combustion by-products and related industrial materials require minimal processing or additives to fulfill their applications. MRT typically provides these products to its customers directly from a client's site or through its own terminals. In fiscal 1998, MRT sold coal combustion products to traditional markets (e.g., the use of fly ash as a pozzolan in portland cement concrete). MRT seeks various types of long-term source contracts that range in the services provided and material managed. Such contracts can generally be terminated at the convenience of the utility company. MRT's research and development program has resulted, in March 1998, in two issued U.S. patents and a proprietary value added product, called MRT Cement, made primarily from fly ash. The Company believes that MRT Cement could serve as a competitive alternative to traditional portland cement for use by the building and construction industry as well as a new application for coal fly ash by utilities. In late Fall 1998, MRT plans to make the initial MRT Cement products available commercially. MRT Cement products are expected to consume less energy during manufacturing, and be able to be made at a lower cost, in facilities that require lower capital construction costs, than traditional portland cement. The Company believes that MRT Cement uses less water, reducing concrete shrinkage and cracking, and is not as sensitive to temperature changes, so it can be used more easily during cold weather. However, there is no assurance that MRT Cement will be, or the Company's research and development efforts will result in the development of, a commercially successful product. MRT's success will depend in part on its ability to exploit the two U.S. patents issued to it for MRT Cement and to operate without having third parties circumvent MRT's patent rights. There can be no assurance that such issued patents will provide the Company with significant protection against competitive products or otherwise be commercially valuable. Litigation, which could be costly and time 52 consuming, may be necessary to enforce patents issued to the Company and/or determine the scope and validity of others' proprietary rights, in either case in judicial or administrative proceedings. The Company's and in particular MRT's competitive position is also dependent upon unpatented trade secrets which generally are difficult to protect. There can be no assurance that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to MRT's trade secrets, that MRT's trade secrets will not be disclosed or that MRT can effectively protect its rights to unpatented trade secrets. In recent years, the power industry has been impacted by federal legislation. The Clean Air Act Amendments of 1990 require power producers to meet certain emission levels. This has caused some utilities to modify fuel, equipment or change burner design parameters that have usually resulted in a higher carbon-content fly ash than acceptable for use in traditional end-use markets. MRT holds the license to Michigan Technological University's patented fly ash beneficiation process. This process removes excess carbon from fly ash. MRT is currently engaged in negotiations with a number of utilities regarding the installation of systems utilizing this process. There can be no assurance that MRT will enter into agreements regarding such installation, or if entered into, as to the profitability of any such agreement. MRT is in the development stage and has generated limited revenues. Its operations include (i) providing materials management services to utilities and other producers of coal combustion residues, (ii) selling the fly ash and other residues produced by utilities, (iii) marketing products derived from such fly ash and related industrial materials to consumers of building materials and construction-related products and (iv) selling fly ash beneficiation services to remove excess carbon from fly ash. MRT has incurred losses since commencement of operations in 1996 and through June 1998 had cumulative net losses of approximately $4.5 million since its inception. Losses have resulted principally from costs incurred in research activities aimed at developing MRT Cement and from general and administrative costs. MRT believes it will achieve profitability in fiscal year 1999. MRT has recently entered into long-term sales and distribution agreements relating to the management and disposition by MRT of fly ash products at utility generating stations and providing for certain minimum payments by MRT. MRT's ability to achieve long-term revenue growth and profitability is dependent upon securing additional long-term ash management contracts with utilities, developing fly ash beneficiation facilities and successfully commercializing MRT Cement. The Company is in the process of evaluating methods to exploit such technology, including constructing cement manufacturing plants. Consideration is also being given to partnership relationships with utilities or cement manufacturers in relation to development of MRT Cement manufacturing capacity. However, there can be no assurance that the Company will enter into any such relationships, or, if it does, as to the terms thereof. The Company anticipates that MRT will enter into long-term contracts with coal-fired electric generating utilities to purchase and manage their fly ash as the source of raw material for MRT Cement. The utilities are required to manage, or contract to manage, fly ash in accordance with state and federal environmental regulations. Consistent with industry practice, in connection with such long-term contracts, the Company has furnished and expects to furnish substantial performance bonds or guarantees to such utilities, and has made and expects to make purchase and other commitments to such utilities. CROP PROTECTION Through its division, Agtrol International, the Company focuses on developing, registering, manufacturing and marketing crop protection chemicals. The Company has a large and diversified portfolio of more than 50 products registered under FIFRA for use in crop protection in the United States, and holds product registrations for its crop protection chemicals in more than 80 foreign countries. The principal markets are in the Northern Hemisphere, particularly in North America and Europe. The business is seasonal, with approximately 70% of sales occurring between March and June. The Company's current product line consists of a variety of copper fungicides and gibberellins, a plant growth regulator used in table grapes and citrus production. The Company also seeks to increase its product lines through identification and registration of generic fungicides under FIFRA either directly 53 or through joint ventures or strategic alliances. In 1998, the Company obtained the U.S. registration under FIFRA required to sell a TPTH-based product, under the name Agri-tin, a fungicide used primarily in the sugar beet, pecan and potato industry. In 1998, the Company also launched a mefenoxam-based product, under the name Ultra Flourish, for use in a variety of end use formulations. Mefenoxam is a systemic fungicide used in the tobacco, citrus and vegetable industries. The Company is currently developing three new fungicides, one plant growth regulator, one bactericide and one miticide for launch over the next three years. The Company intends to continue developing a strong product line focusing on fungicides, bactericides, and plant growth regulators used in specialty crop production. Copper Fungicides. The Company sells copper fungicides for the citrus, vegetable, nut and vine industries. These copper fungicides generally have greater efficacy than traditional copper sulfate and copper oxychloride preparations. The Company sells its copper hydroxide fungicides under the names Champion and Champ Flowable and, in France, Macclesfield 50. The Company also sells its proprietary Bordeaux mixtures under the name Macclesfield 80. Gibberellins. The Company sells gibberellic acid, a plant growth regulator, under the name GibGro, for use primarily in the table grape and citrus industries. ELECTRONICS AND METAL TREATMENT The Company manufacturers various different etchants to remove excess copper from printed circuit boards and metal parts. The Company manufactures a range of alkaline etchants for the printed circuit board industry. In addition, the Company recycles spent alkaline and acidic etchants generated by the printed circuit board industry. The Company also manufactures ferric chloride as an etchant for the chemical milling industry. The Company recycles other metal-containing chemicals generated principally by printed circuit board manufacturers and metal finishers, and uses the copper, nickel and other materials it recovers to manufacture finished chemical products. Alkaline Etchants Through its U.S. subsidiary, Phibro-Tech, Inc. ("Phibro-Tech"), the Company believes that it is the largest manufacturer and recycler of alkaline etchants in North America. Of the Company's five facilities involved with these products, four have final RCRA Part B hazardous waste treatment and storage permits and one is in an interim permit status. See "--Environmental Matters." The Company's etchants are used to remove excess copper from printed circuit boards, leaving the desired circuit pattern. The Company sells fresh etchant to printed circuit board manufacturers and recycles spent etchants. Phibro-Tech generates its revenue from the sale of fresh etchants as well as the recovery of the dissolved copper contained in the spent etchants, which are processed into saleable copper-based products. The Company believes that it is the only national recycler of spent etchants from the printed circuit board industry, with an etchant plant in every major geographic area except New England. These plants generally allow the Company to distribute product and transport spent etchant, a freight intensive product which is classified as hazardous waste, over relatively short distances. The Company believes that it has a competitive advantage in the etchant market based on the broad range of services it provides to its recycling customers, including transportation, recycling, manufacturing, regulatory advice and technical services. Ferric Chloride Ferric chloride is used by the chemical milling industry as an etchant, to remove excess metal from metal parts and highly engineered metallic electronic components, including aperture masks and computer disk drive suspensions. The Company operates a facility in California for recycling spent ferric chloride generated by the chemical milling industry. The Company has recently expanded its Joliet, Illinois facility to produce ferric chloride for the electronic component market, and has entered into a long-term supply and recycling arrangement with a manufacturer of electronic components. 54 Recycling Activities The Company is a leading recycler in North America of hazardous chemical waste streams that contain metals. These waste streams are generated principally by printed circuit board manufacturers and metal finishers. The metal finishing and printed circuit board industries also generate other spent chemicals, which are raw material sources of acid, copper and nickel, and the Company charges fees for processing such materials based on metal content. The Company also recycles a variety of other metal-containing chemical waste, including spent catalysts, pickling solutions and metal strippers containing brass, cobalt, copper, nickel, iron, tin and zinc, in liquid, solid or slurry form. The Company also uses these recovered materials to produce copper and nickel chemicals for use as raw materials in certain of its products. Metal-containing waste is either collected by the Company or delivered directly to one of its facilities by the waste generator. The Company collects and transports chemical waste in its specially-constructed tankers and semi-trailers and drum transporting trailers. In some locations, rail transportation by tank cars or piggyback trailers is also utilized. Upon arrival at one of the Company's recycling and processing facilities, and prior to unloading, a representative sample of the delivered waste is tested and analyzed to assure that it conforms to the customer's contracted waste profile specifications. The Company recycles and processes metal-containing hazardous chemical waste streams using hydrometallurgical technology. This technology involves the reclamation of various metals and the production of finished chemical products using chemical reactions such as leaching, extraction and precipitation. The Company determines the precise chemical process required to treat each batch of hazardous waste based on the type and amount of the waste as well as the proportion of useful raw materials it contains. Metal Treatment The Company markets a wide range of chemicals used in the metal treatment industry. These products include nickel and copper chemicals, fluorborates, cyanides and fluoride salts. The Company is the exclusive U.S. agent to the metal finishing industry for one of the three global cyanide producers. Applications for these products are as electrolytes in metal plating baths and as a source of the metal to be electro-deposited. Metal finishing has two primary applications: decorative and functional. The Company services both applications, but the functional aspect is being emphasized due to the growth in the electronics industry. Both electro and electroless metal deposition are used in the printed circuit board industry, and in computer disc manufacturing. SALES, MARKETING AND DISTRIBUTION The Company sells specialty chemicals to manufacturers who incorporate the Company's products into their finished goods. The Company has more than 3,100 customers. Sales to the top ten customers represented approximately 17% of the Company's 1998 net sales and no single customer represented more than 5% of the Company's 1998 net sales. The Company's sales and marketing network consists of a direct sales force of more than 83 persons, with average industry experience of over 25 years, as well as over 40 independent agents and distributors, who specialize in particular markets. This market specialization allows the Company's products to gain access to a broader range of distribution channels and end users and further strengthens the Company's brand names. The Company's products are often critical to the performance of its customers' products while representing a relatively small percentage of the total end-product cost. Management believes that there are three key factors to marketing its products successfully: o Quality. Many of the Company's specialty and industrial chemicals are used to ensure and enhance the performance or appeal of their customers' end products and therefore consistency and high quality are essential. The Company believes that its reputation as a manufacturer of 55 value-added, high-quality specialty and industrial chemicals provides it with a competitive advantage when marketing its products to existing and potential customers. o Highly Trained and Technical Sales Force. The sales force works closely with customers to satisfy existing product needs and to identify new applications and product improvement opportunities. The Company's sales efforts are complemented by its product development and technical support staff, who work together with the sales force to develop new products based on customer needs. Because of the specialized nature of many of the niche markets the Company serves, its direct sales force must have advanced technical knowledge of the Company's products and the applications for which they are used. As a result, many of the Company's direct salespeople have a number of years of industry experience and significant technical expertise related to the products they sell. o Superior Customer Service. The Company's technical sales force provides technical support services directly to the customer, enabling the Company to offer its operational expertise and develop a better understanding of the customer's process technology. The Company's sales and marketing efforts and customer relationships are enhanced by the numerous customer-specific technical approvals the Company has secured. These approvals typically involve significant customer time and effort and result in a strong competitive position for the qualified products. In addition to technical support, the Company endeavors to meet the demands of its customers, including those who operate "just-in-time" inventory systems, requiring prompt and reliable delivery of the Company's specialty chemical products, guided by ISO-based procedures. The Company has recently expanded both its direct selling efforts and its international sales network. The Company could experience growth in certain of its product groups as the world-wide demand for food grows, developing countries continue to develop economically, and consumption of food, brick, and other products containing products manufactured by the Company increases. In addition, the Company intends to add products for its sales force to market. The Company believes there are opportunities to enhance international revenues by increasing international registrations of agricultural products, and by focusing on increasing the level of technical service, providing more assistance in product development, and increasing the scope of the Company's product line offered to its international customers. The Company is in the process of expanding its world-wide registration of agricultural products. This will enable the Company to sell certain agricultural products and enable agricultural distributors to use the Company's registrations to sell into various local markets around the world. 56 FACILITIES The Company maintains its principal executive offices and a sales office in Fort Lee, New Jersey. The Company has 14 manufacturing facilities which allow it to produce a broad array of products. The chart below sets forth the locations and sizes of the principal manufacturing and other facilities operated by the Company and uses of such facilities, all of which are owned, except as noted.
APPROXIMATE LOCATION SQUARE FOOTAGE USES - ----------------------------------------------- -------------- ----------------------------------------------- Fort Lee, New Jersey (a)....................... 23,500 Corporate Headquarters Atlanta, Georgia (a)........................... 5,000 MRT Administrative and Sales, Laboratory Bowmanstown, Pennsylvania...................... 56,500 Intermediates and Industrial Chemicals; Animal Nutrition and Health Garland, Texas................................. 20,000 Animal Nutrition and Health; Electronics and Metal Treatment Houston, Texas (a)............................. 10,300 Administrative and Sales Joliet, Illinois............................... 34,500 Electronics and Metal Treatment; Intermediates and Industrial Chemicals Ladora, Iowa................................... 9,500 Warehouse Marion, Iowa................................... 32,500 Animal Nutrition and Health Phoenix City, Alabama.......................... 6,000 Intermediates and Industrial Chemicals Quincy, Illinois (b)........................... 187,300 Intermediates and Industrial Chemicals; Animal Nutrition and Health; Warehouse; Administrative and Sales Santa Fe Springs, California (c)............... 90,000 Electronics and Metal Treatment; Intermediates and Industrial Chemicals Sumter, South Carolina......................... 123,000 Crop Protection; Electronics and Metal Treatment Union City, California......................... 20,600 Electronics and Metal Treatment; Intermediates and Industrial Chemicals Wilmington, Illinois........................... 119,000 Warehouse Bordeaux, France............................... 141,000 Animal Nutrition and Health; Crop Protection; Administrative and Sales Braganca Paulista, Brazil...................... 35,000 Animal Nutrition and Health; Administrative and Sales Meerbusch, Germany (a)......................... 700 Sales Petach Tikva, Israel........................... 60,000 Animal Nutrition and Health; Administrative and Sales Ramat Hovav, Israel (a)........................ 140,000 Animal Nutrition and Health; Intermediates and Industrial Chemicals Reading, Berks, United Kingdom (a)............. 3,100 Administrative and Sales Stradishall, United Kingdom.................... 20,000 Intermediates and Industrial Chemicals; Administrative and Sales
- ------------------ (a) This facility is leased. The Company's leases expire from 1998 to 2027. For information concerning the Company's rental obligations, see Note 11 to the Company's Consolidated Financial Statements included herein. (b) Comprises four facilities, including two manufacturing, one sales and one warehouse facility. (c) The Company leases the land under this facility from a partnership owned by Jack Bendheim, Marvin Sussman and James Herlands. See "Certain Relationships and Related Transactions." 57 The Company's subsidiary, C.P. Chemicals, Inc., owns a manufacturing facility in Sewaren, New Jersey at which operations have been curtailed and another subsidiary of the Company owns inactive, former manufacturing facilities in Powder Springs, Georgia and Union, Illinois. See "--Environmental Matters--Particular Facilities." MRT leases terminal facilities in Atlanta, Georgia and Spartanburg, South Carolina. ODDA owns the buildings on its 160,000 square meter factory site and the land under such buildings located in the town of Odda at the end of a deep water fjord in Western Norway, including two wharves, production facilities, storage and office areas, a diesel steam plant and a landfill site, and leases a facility in Bremen, Germany, used for warehousing and, to a lesser extent, repacking of product containers, pursuant to a lease expiring in 2000. BOC Carbide Industries, a related U.K. distributor included as part of the ODDA Acquisition, leases its facilities at Althorpe Wharf, Scunthorpe, Humberside, in the United Kingdom, including a carbide mill plant, bagging areas, drum store, and an office and laboratory facility. The Company believes that its existing and planned facilities are and will be adequate for the conduct of its business as currently conducted and as currently contemplated to be conducted. ODDA has direct access to low cost hydro-electric power through its approximately 21% holding in Aktieselskabet Tyssefaldene ("Tyssefaldene") which operates three power stations within the region of Norway in which ODDA is located, two of which are leased from the Government of Norway by Tyssefaldene and one of which is owned by Tyssefaldene. The other shareholders in Tyssefaldene are the other two major industrial foundries within the town of Odda. All such shareholders receive concessions from the Government of Norway to buy power at cost until 2006 or 2010, depending on the power station. The Company and its subsidiaries are subject to extensive regulation by numerous governmental authorities, including the FDA and corresponding state and foreign agencies, and to various domestic and foreign safety standards. Manufacturing facilities of the Company in Ramat Hovav and Brazil manufacture products that conform to the FDA's GMP regulations. Of the Company's five domestic facilities involved with recycling, four have final RCRA Part B hazardous waste storage and treatment permits and one is in an interim permit status. The Company's regulatory compliance programs have been expanded to encompass compliance with international standards known as ISO 9002 standards, which will become mandatory in Europe in 1999. The FDA is in the process of adopting the ISO 9002 standards as regulatory standards for the United States, and it is anticipated that these standards will be phased in for U.S. manufacturers over a period of time. The Company's plants in Bowmanstown, Pennsylvania and Petach Tikva, Israel have achieved ISO 9002 certification, and in France ISO 9003 certification, and the Company plans to implement the ISO 9002 standards at other facilities. ODDA's facility in Norway has achieved ISO 9001 certification. The Company does not believe that adoption of the ISO 9002 standards by the FDA will have a material effect on its financial condition or results of operations. See "--Government Regulation." RAW MATERIALS The raw materials used in the Company's business consist chiefly of a wide variety of organic intermediates and inorganic chemicals which are purchased from manufacturers in the United States, Europe and Asia. In fiscal 1998, no single raw material accounted for more than 6% of the Company's cost of goods sold. Total raw materials cost was approximately $133 million or 48% of net sales in 1998. The Company believes that its raw materials are generally available in sufficient quantities to meet its supply needs. The Company believes that for most of its raw materials alternate sources of supply are available to the Company at competitive prices. In addition, the Company's ability to recycle hazardous waste streams allows the Company to recover certain metals and other raw materials that it substitutes in its products for virgin materials, thereby reducing the Company's cost of goods and its reliance on suppliers of certain virgin materials. RESEARCH AND DEVELOPMENT Research, development and technical service efforts are conducted by approximately 78 chemists and technicians at the various facilities of the Company. The Company operates a Research and Development Center in Sumter, South Carolina, relating to inorganic chemicals and crop protection products, and at Stradishall, England, relating to organic chemical intermediates. In addition, Koffolk Israel conducts substantial research and development at its Ramat Hovav facility. Most of the Company's plants have chemists and technicians on staff involved in product development, quality 58 assurance, quality control and also providing technical services to customers. Technical assurance is an important aspect of the Company's overall sales effort. Technology is an important component of the Company's competitive position, providing the Company with a low cost position and enabling the Company to produce high quality products. Patents protect some of the Company's technology, but a great deal of the Company's competitive advantage revolves around know-how built up over many years of commercial operation. The Company possesses important formulation and compounding technology for the animal feed industry. The Company also possesses what it believes to be unique technology and know-how for the production of copper-containing fungicides. This technology enables the Company to produce fungicides of extremely fine particle size, which improves efficacy while reducing the quantity of active ingredients needed through enhanced bio-availability. Finally, the Company and its predecessors have over 20 years experience in the use of hydrometallurgical technology for recycling metal-containing by-products and a strong technological position in the production of metal-containing chemicals. The Company recently commercialized a process to recycle ferric chloride for manufacturers of electronic components. PATENTS AND TRADEMARKS The Company owns certain patents, tradenames and trademarks and uses know-how, trade secrets, formulae and manufacturing techniques which assist in maintaining the competitive positions of certain of its products. Formulae and know-how are of particular importance in the manufacture of a number of the products sold in the Company's specialty chemical business. The Company believes that no single patent or trademark is of material importance to its business, and, accordingly, that the expiration or termination thereof would not materially affect its business. See "--Government Regulation." CUSTOMERS The Company does not consider its business to be dependent on a single customer or a few customers, and the loss of any of its customers would not have a material adverse effect on the Company's results. No single customer accounted for more than 5% of the Company's 1998 net sales. The Company typically does not enter into long-term contracts with its customers. However, the Company has entered into certain long-term contracts with respect to nicarbazin and amprolium, as well as its ferric chloride recycling activities. For additional information on the Company's customers, see "--Products" and "--Sales, Marketing and Distribution." COMPETITION The Company is engaged in highly competitive industries and, with respect to all of its major products, faces competition from a substantial number of global and regional competitors. Some of the companies with which the Company competes have greater financial, research and development, production and other resources than the Company. The Company's competitive position is based principally on customer service and support, product quality, manufacturing technology, facility location and price. See "--Sales, Marketing and Distribution." The Company has competitors in every market in which it participates. Many of the Company's products, including its Animal Nutrition and Health and Crop Protection products, face competition from products which may be used as an alternative or substitute therefor, including amprolium and nicarbazin. The Company competes with several regional companies of varying sizes and financial resources in the hazardous metal-containing chemical waste recycling industry. The Company also competes with large national companies which offer alternative methods of treatment or disposal of hazardous metal-containing chemical waste and which have substantially greater financial resources than the Company. While these national companies do not currently offer recycling services similar to those offered by the Company, their entry into the recycling business could have a material adverse effect on the Company. In addition, the Company competes with several large chemical companies in the chemical production business, none of which obtains a significant portion of its raw materials from recycling. To the extent these companies, or new entrants into the market, offer comparable finished chemical products at lower prices, the Company's business could be adversely affected. 59 EMPLOYEES As of June 30, 1998, the Company had approximately 852 employees worldwide, of whom 41% were salaried employees and 59% were hourly employees. Of these, 191 employees were in management and administration, 83 in sales and marketing, 78 were chemists or technicians and 500 were in production. Approximately 10% of the Company's domestic employees were covered by collective bargaining agreements with three unions, including 5 employees at the Company's Sewaren, New Jersey facility, at which operations have been curtailed. These agreements expire from 1998 through 2000. Certain employees of Koffolk Israel are covered by individual employment agreements. Koffolk Israel continues to operate under the terms of Israel's national collective bargaining agreement, portions of which expired in 1994. In Norway, approximately 75% of ODDA's employees were covered by collective bargaining agreements, which expire in 2000. The Company considers its relations with both its union and non-union employees to be good. ENVIRONMENTAL MATTERS Like similar companies, the Company and its subsidiaries are subject to a wide variety of complex and stringent federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, handling, generation, treatment, emission, release, discharge and disposal of certain materials and wastes, the manufacture, sale and use of pesticides and the health and safety of employees. Pursuant to the Environmental Laws, the Company is required to obtain and retain numerous governmental permits and approvals to conduct various aspects of its operations, any of which may be subject to revocation, modification or denial under certain circumstances. Under certain circumstances, the Company or any of its subsidiaries might be required to curtail its operations until a particular problem is remedied. Known costs and expenses under such Environmental Laws incidental to ongoing operations are generally included within operating budgets. Potential costs and expenses may also be incurred in connection with the repair or upgrade of facilities to meet existing or new requirements under Environmental Laws or to investigate or remediate potential or actual contamination and from time to time the Company establishes reserves for such contemplated investigation and remediation costs. In many instances, the ultimate costs under Environmental Laws and the time period during which such costs are likely to be incurred are difficult to predict. The Company and its subsidiaries have from time to time implemented procedures at its facilities designed to respond to its obligations to comply with Environmental Laws. The Company believes that its operations are currently in material compliance with such Environmental Laws, although at various sites the Company's subsidiaries are engaged in continuing investigation and/or remediation efforts to address contamination associated with their historic operations. As many Environmental Laws impose a strict liability standard, however, there can be no assurance that future environmental liability will not arise. In addition, the Company cannot predict the extent to which any future Environmental Laws may affect any market for the Company's products or services or its costs of doing business. For instance, if governmental enforcement efforts should lessen, the market for the Company's recycling services could decline. Alternatively, changes in Environmental Laws might increase the cost of the Company's products and services by imposing additional requirements on the Company. States that have received authorization to administer their own hazardous waste management programs may also amend their applicable statutes or regulations, and may impose requirements which are stricter than those imposed by U.S. Environmental Protection Agency (the "EPA"). No assurance can be provided that such changes will not adversely affect the Company's ability to provide products and services at competitive prices and thereby reduce the market for the Company's products and services. As such, the nature of the Company's current and former operations exposes it to the risk of claims with respect to such matters and there can be no assurance that material costs and liabilities will not be incurred in connection with such claims. Based upon its experience to date, the Company believes that the future cost of compliance with existing Environmental Laws, and liability for known environmental claims pursuant to such Environmental Laws, will not have a material adverse effect on the Company. However, future events, such as new information, changes in existing Environmental Laws or their interpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material. 60 For all purposes of the discussion under this caption, under "--Litigation," and elsewhere in this Prospectus, it should be noted that the Company takes and has taken the position that neither the parent company, Philipp Brothers Chemicals, Inc. nor any of its subsidiaries is liable for environmental or other claims made against one or more of its other subsidiaries or for which any of such other subsidiaries may ultimately be responsible. References to the Company should accordingly not be read or interpreted as a statement or admission that Philipp Brothers or any of its subsidiaries is liable for activities of or claims made against any of its other subsidiaries. Federal Regulation The following summarizes the principal federal Environmental Laws affecting the business of the Company: Resource Conservation and Recovery Act of 1976, as amended ("RCRA"). Congress enacted RCRA to regulate, among other things, the generation, transportation, treatment, storage and disposal of solid and hazardous wastes. RCRA required the EPA to promulgate regulations governing the management of hazardous wastes, and to allow individual states to administer and enforce their own hazardous waste management programs as long as such programs were equivalent to and no less stringent than the federal program. The EPA's regulations, and most state regulations in authorized states, establish categories of regulated entities and set standards and procedures those entities must follow in their handling of hazardous wastes. The three general categories of waste handlers governed by the regulations are hazardous waste generators, hazardous waste transporters, and owners and operators of hazardous waste treatment, storage and/or disposal facilities. Generators are required, among other things, to obtain identification numbers and to arrange for the proper treatment and/or disposal of their wastes by licensed or permitted operators and all three categories of waste handlers are required to utilize a document tracking system to maintain records of their activities. Transporters must obtain permits, transport hazardous waste only to properly permitted treatment, storage or disposal facilities, and maintain required records of their activities. Treatment, storage and disposal facilities are subject to extensive regulations concerning their location, design and construction, as well as the operating methods, techniques and practices they may use. Such facilities are also required to demonstrate their financial responsibility with respect to compliance with RCRA, including closure and post-closure requirements. The Federal Water Pollution Control Act, as amended (the "Clean Water Act"). The Clean Water Act prohibits the discharge of pollutants to the waters of the United States without governmental authorization. Like RCRA, the Clean Water Act provides that states with programs approved by the EPA may administer and enforce their own water pollution control programs. Pursuant to the mandate of the Clean Water Act, the EPA has promulgated "pretreatment" regulations, which establish standards and limitations for the introduction of pollutants into publicly owned treatment works. Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA" or "Superfund"). Under CERCLA and similar state laws, the Company and its subsidiaries may have strict and, under certain circumstances, joint and several liability for the investigation and remediation of environmental pollution and natural resource damages associated with real property currently and formerly owned or operated by the Company or a subsidiary and at third-party sites at which the Company's subsidiaries disposed of or treated, or arranged for the disposal of or treatment of, hazardous substances. Federal Insecticide, Fungicide and Rodenticide Act, as amended ("FIFRA"). FIFRA governs the manufacture, sale and use of pesticides, including the copper-based fungicides sold by the Company. FIFRA requires such products and the facilities at which they are formulated to be registered with the EPA before they may be sold. If the product in question is generic in nature (i.e., chemically identical or substantially similar to a previously registered product), the new applicant for registration is entitled to cite and rely on the test data supporting the original registrant's product in lieu of submitting data of its own. Should the generic applicant choose this citation option, it must offer monetary compensation to the original registrant and must agree to binding arbitration if the parties are unable to agree on the terms and amount of compensation. The Company has elected this citation option in the past; has a 61 currently-outstanding offer to pay compensation with respect to citation of data in registering one of its products; and intends to use the citation option in the future should it conclude it is economically desirable to do so. While there are cost savings associated with the opportunity to avoid one's own testing and demonstration to the EPA of test data, there is, in each instance, a risk that the level of compensation ultimately required to be paid to the original registrant will be substantial. Under FIFRA, the EPA also has the right to "call in" additional data from existing registrants of a pesticide, should the EPA determine, for example, that the data already in the file need to be updated or that a specific issue or concern needs to be addressed. The existing registrants have the option of submitting data separately or by joint agreement. Alternatively, if one registrant agrees to generate and submit the data, the other(s) may meet their obligations under the statute by making a statutory offer to jointly develop or share in the costs of developing the data. In that event, the offering party must, again, agree to binding arbitration to resolve any dispute as to the terms of the data development arrangement. The Clean Air Act. The federal Clean Air Act of 1970 ("Clean Air Act") and Amendments to the Clean Air Act ("Clean Air Act Amendments"), and corresponding state laws regulate the emissions of materials into the air. Such laws affect the coal industry both directly and indirectly. The coal industry is directly affected by Clean Air Act permitting requirements and/or emissions control requirements relating to particulate matter (such as "fugitive dust"), and may also be impacted by future regulation of fine particulate matter. In July 1997, the EPA adopted new, more stringent National Ambient Air Quality Standards ("NAAQS") for particulate matter and ozone. The extent of the potential impact of the new NAAQS on the coal industry will depend on the policies and control strategies associated with the state implementation process under the Clean Air Act, as well as on pending legislative proposals to delay or eliminate aspects of the standard. The Clean Air Act indirectly affects the Company's operations by extensively regulating the air emissions of sulfur dioxides and other compounds emitted by coal-fired utility power plants. Title IV of the Clean Air Act Amendments places limits on sulfur dioxide emissions from electric power generation plants, setting baseline emission standards for such facilities. The effect of the Clean Air Act Amendments on MRT cannot be completely ascertained at this time. The Clean Air Act Amendments also require that utilities that currently are major sources of nitrogen oxides in moderate or higher ozone nonattainment areas install reasonably available control technology for nitrogen oxides, which are precursors of ozone. The Ozone Transport Assessment Group ("OTAG"), formed to make recommendations to the EPA for addressing ozone problems in the eastern United States, submitted its final recommendations to the EPA in June 1997. Based on the OTAG's recommendations, the EPA recently announced a proposal (the "SIP call") that would require 22 eastern states to make substantial reductions in nitrogen oxide emissions. Under this proposal, the EPA expects that states will achieve these reductions by requiring power plants to make substantial reductions in their nitrogen oxide emissions. Installation of reasonably available control technology and additional control measures required under the SIP call will make it more costly to operate coal-fired utility power plants and, depending on the requirements of individual state attainment plans and the development of revised new source performance standards, could make coal a less attractive fuel alternative in the planning and building of utility power plants in the future. The effect such regulation or other requirements that may be imposed in the future could have on the coal industry in general and on MRT in particular cannot be predicted with certainty. No assurance can be given that the implementation of the Clean Air Act Amendments or any future regulatory provisions will not materially adversely affect MRT. In addition, the Clean Air Act Amendments require a study of utility power plant emissions of certain toxic substances, including mercury, and direct the EPA to regulate these substances, if warranted. Future federal or state regulatory or legislative activity may seek to reduce mercury emissions and such requirements, if enacted, could result in reduced use of coal if utilities switch to other sources of fuel. 62 State and Local Regulation In addition to those state programs described above, a number of states and some local governments have also enacted laws and regulations similar to the federal laws described above governing hazardous waste generation, handling and disposal, emissions to the water and air and the design, operation and maintenance of recycling facilities. Foreign Regulation The Company's foreign operations and subsidiaries are subject to a variety of foreign Environmental Laws relating to pollution and protection of the environment, including the generation, handling, storage, management, transportation, treatment and disposal of solid and hazardous materials and wastes, the manufacture and processing of pesticides and animal feed additives, emissions to the air, discharges to land, surface water and subsurface water, human exposure to hazardous and toxic materials and the remediation of environmental pollution relating to their past and present properties and operations. Regulation of Recycling Activities The Company's recycling activities may be broken down into the following segments for purposes of regulation under RCRA or equivalent state programs: (i) transport of wastes to the Company's facilities, (ii) storage of wastes prior to processing, (iii) treatment and/or recycling of wastes, and (iv) corrective action at its RCRA facilities. Although all aspects of the treatment and recycling of waste at its recycling facilities are not currently the subject of federal RCRA regulation, the Company made the strategic decision to permit its recycling facilities as RCRA regulated facilities and has been issued final RCRA "Part B" permits to operate as hazardous waste treatment and storage facilities at its facilities in Santa Fe Springs, California; Garland, Texas; Joliet, Illinois; Sumter, South Carolina; and Sewaren, New Jersey. The Company has also obtained an interim status RCRA permit from the California Department of Health Services and has filed a Part B permit application with the Department for its Union City, California facility. In connection with RCRA Part B permits for the waste storage and treatment units of the Company's facilities, the Company has been required to perform extensive site investigations at such facilities to identify possible contamination and to provide regulatory authorities with plans and schedules for remediation. Soil and groundwater contamination has been identified at several plant sites and has required and will continue to require corrective action and monitoring over future years. In order to maintain compliance with RCRA Part B permits, which are subject to suspension, revocation, modification or denial under certain circumstances, the Company has been, and in the future may be, required to undertake additional capital improvements or corrective action. The Company is required by RCRA and its Part B permits to develop and incorporate in its Part B permits estimates of the cost of closure and post-closure monitoring for its operating facilities. In general, in order to close a facility which has been the subject of a RCRA Part B permit, a RCRA Part B closure permit is required which approves the investigation, remediation and monitoring closure plan, and requires post-closure monitoring and maintenance for up to 30 years. Accordingly, additional costs are incurred in connection with any such closure. These cost estimates are updated annually for inflation, developments in available technology and corrective actions already undertaken by the Company. The Company has in most instances chosen to provide the regulatory guarantees required in connection with these matters by means of its coverage under an environmental impairment liability insurance policy. There can be no assurance that such policy will continue to be available in the future at economically acceptable rates, in which event other methods of financial assurance will be necessary. In addition to certain operating facilities, the Company has been and will be required to investigate and remediate certain environmental contamination at shutdown plant sites. The Company is also required to monitor such sites and continues to develop controls to manage these sites within the requirements of RCRA corrective action programs. Based upon available information, accruals for management estimates of the cost of further environmental investigation and remediation at operating, curtailed and closed sites are approximately $5.3 million as of June 30, 1998. 63 Waste Byproducts In connection with the Company's subsidiaries' production of finished chemical products, limited quantities of waste by-products are generated primarily in the form of sludge. Depending on the contents of the sludge, the subsidiaries of the Company either send it to smelters for metal recovery or sent it for treatment or disposal to regulated facilities. Particular Facilities The following is a description of certain environmental matters relating to certain facilities of certain subsidiaries of the Company. As noted above, references throughout to the Company are intended to refer only to the applicable subsidiary unless the context otherwise requires. These matters should be read in conjunction with the description of litigation matters below under "Litigation," certain of which involve such facilities, and Note 11 to the Company's Consolidated Financial Statements. In 1984, Congress enacted certain amendments to RCRA under which facilities with RCRA permits were required to have RCRA facility assessments ("RFA") by the EPA or the authorized state agency. Following an RFA, a RCRA facility investigation, a corrective measures study, and corrective measure implementation must, if warranted, be developed and implemented. As indicated below, the Company's subsidiaries are in the process of developing or completing various actions associated with these regulatory phases at certain of its facilities. Sewaren, New Jersey. In April 1989, the New Jersey Department of Environmental Protection, Division of Waste Management and Division of Water Resources (collectively the "DEP"), issued an Administrative Order and Notice of Civil Administrative Penalty Assessment against C.P. Chemicals, Inc. ("CP"), a subsidiary of the Company, relating to CP's recycling and manufacturing facility in Sewaren, New Jersey. This proceeding resulted in an Administrative Consent Order (the "ACO"), effective March 11, 1991. The ACO mandates the development and implementation of an environmental remediation plan and requires payment of a penalty in the amount of $2.2 million plus interest calculated at 8.57% per annum, to be paid in ten yearly installments. This charge was previously reflected in the Company's consolidated financial statements. In addition, the ACO sets forth stipulated penalties for specified violations of the ACO and requires reimbursement by CP to the DEP for prior costs and future oversight costs. The Company has posted $500,000 in financial assurances which amount may be modified based on cost reviews which the Company is required to submit annually as part of its investigation and remediation program. The Company has substantially completed its investigation and remediation efforts which include installation of a hydraulic control system to pump and pre-treat ground water on the site and capping to address soil contamination concerns and satisfy waste water management requirements. Such efforts remain subject to continuing review by the DEP. The Company has determined to curtail operations at the Sewaren facility. See "--Litigation." Sumter, South Carolina. In connection with the RCRA Part B permit for its Sumter, South Carolina facility in 1991, CP undertook the closure of certain waste water treatment impoundments pursuant to RCRA closure requirements and installed a waste water treatment system at the plant and is engaged in an additional phase of facility investigation at the site. CP will also shortly undertake remedial action to remove material from an area used by the former owner of the site. See "--Litigation." Santa Fe Springs, California. In connection with its RCRA Part B permit for its Santa Fe Springs, California facility, and the administrative order noted below, for this facility, Phibro-Tech has implemented various phases of environmental investigation and corrective measure study and assessments. It is currently in a continuing investigation and corrective measure phase which will involve additional sampling to determine the level of corrective action. At this time it is anticipated that this will involve a pump and treat system through an existing on-site pre-treatment plant. Phibro-Tech is also subject to an investigative and enforcement order, the ultimate scope of which is currently being discussed with the California Department of Toxic Substance Control ("DTSC"). The principal outstanding issue under the order is the requirement of further soil investigation and the development of a remediation plan, if necessary, beyond that already covered by the facility investigation originally conducted. See "--Litigation." 64 Union City, California. Phibro-Tech's Union City, California facility is an interim status facility with an application for a RCRA Part B permit pending. In lieu of conducting investigation activities under a final Part B permit, Phibro-Tech entered into a consent order with the California DTSC requiring the assessment and investigation of soil and ground water quality and remediation, if required, similar to that which would be required under a Part B permit. Phibro-Tech has initiated the first phase of the investigation process and does not currently anticipate any extensive ongoing corrective measures. In 1997, Phibro-Tech settled a civil enforcement action brought by the Alameda County District Attorney, captioned People of the State of California v. Phibro-Tech (in the Alameda County Superior Court), alleging ammonia air releases at the facility to be a nuisance. The settlement called for reimbursement payment for costs of investigation and enforcement, and an injunction restraining violations of applicable provisions of the California Health and Safety Code, and a compliance schedule for sensory monitoring plans if there is to be future use of anhydrous ammonia at the facility. Joliet, Illinois. In connection with the RCRA Part B permit for this facility, Phibro-Tech completed an initial RCRA facility investigation and an additional sampling and investigative phase. The results of such sampling and investigation are to be submitted to the Illinois Environmental Protection Agency, and, based on the agency's response, Phibro-Tech will develop a plan for further investigation or monitoring, or, if necessary, corrective action. Garland, Texas. In connection with the RFA for its Garland, Texas facility no action was recommended. However, during a subsequent inspection some discoloration of soil was noted. Accordingly, Phibro-Tech developed a corrective action plan to address discolored top soil at the site. The project included the upgrading of pollution control equipment. The next phase will be limited soil removal, which will commence shortly. Powder Springs, Georgia. Phibro-Tech's facility in Powder Springs, Georgia has been operationally closed since 1985. Phibro-Tech retains environmental compliance responsibility for this facility and has effected a RCRA closure of the regulated portion of the facility, a surface impoundment. Post-closure monitoring and the implementation of a corrective measures plan are required. Under this plan, Phibro-Tech initiated a RCRA facility investigation phase and submitted for regulatory review a survey as part of its Part B permit renewal. Phibro-Tech is awaiting a response to determine if more investigation is needed or if corrective measures are to be implemented. Union, Illinois. Phibro-Tech's facility in Union, Illinois has also been operationally closed since 1986. Phibro-Tech has recently performed additional soil sampling and expects to close the site in the coming year. Phibro-Tech has performed investigation and closure activities in conjunction with the Illinois EPA, and the U.S. EPA is expected to review such work. Third Party Sites. The Company has, and certain of the Company's subsidiaries have, sent products to customers at chemical processing or manufacturing sites and sent wastes from their operations to various third party waste disposal sites. In addition to the litigation described below with respect to the Jericho, South Carolina site, from time to time the Company or a subsidiary receives notices from representatives of governmental agencies and private parties, or is named as a potentially responsible party in legal proceedings, in which claims are made that it is potentially liable for a portion of the investigation and remediation costs and natural resource damages at such third party sites. Such claims are for strict liability and carry with them the possibility of joint and several liability under applicable Environmental Laws such as CERCLA, regardless of the relative fault or level of involvement of the Company and other potentially responsible parties. Although there can be no assurance, the Company does not believe that liabilities in connection with such third party sites as to which claims have been received to date will have a material adverse effect on the Company's consolidated financial position or result of operations. Ramat Hovav, Israel. Koffolk Israel's Ramat Hovav plant produces a wide range of organic chemical intermediates for the chemical, pharmaceutical, fragrance and veterinary industries. Israeli legislation enacted in 1997 amended certain environmental laws by authorizing the relevant administrative and regulatory agencies to impose certain sanctions, including issuing an order against any person that violates such environmental laws to remove the environmental hazard. In addition, such law imposes criminal liability on the officers and directors of a corporation that violates such environmental related laws, and increases the monetary sanctions that such officers, directors and 65 corporations may be ordered to pay as a result of such violations. The Ramat Hovav plant operates under the supervision of the Ministry of Environment of the State of Israel. The sewage system of the plant is connected to the Ramat Hovav Local Industrial Council's central installation, where Koffolk Israel's sewage is treated together with sewage of other local plants. Recently, the owners of all the plants in the area, including Koffolk Israel, were required by the Israeli Ministry of Environment to build a facility for pre-treatment of their sewage. Koffolk Israel submitted a detailed plan to the Israeli Ministry of Environment for the construction of such an installation according to the Ministry's requirements. The plant must be built by December 1999. The budget for this installation is approximately $750,000. Odda, Norway. Like other Norwegian companies, ODDA has to ensure that the activities of the enterprise are planned, organized, performed and maintained in conformity with requirements laid down in or pursuant to Norwegian health, environmental and safety legislation. Norwegian law requires the person responsible for an enterprise to ensure compliance with the requirements of the Working Environment Act, the Pollution Control Act, in legislation on prevention of fires and explosions, the Products Control Act, the Civil Defense Act and the Electrical Installations and Electrical Equipment Act. The applicable supervisory authority pursuant to such legislation is responsible for supervising and providing guidance on implementation of and compliance with such regulations. The supervisory authorities can respond to violations of health, environmental and safety legislation with various sanctions, including orders, fines, pollution charges and/or notification to the police. Norwegian legislation requires that ODDA produce its products according to its discharge permit and implementation system for environmental control and improvements. Both local and central authorities are now focusing on the environmental situation in the fjord at Odda and on waste disposal there by the three primary manufacturers in the area, including ODDA. In ODDA's case, the focus has been on the discharge of polynucleated aromatic hydrocarbons ("PAH") from the Venturi scrubber in the calcium carbide plant and the nitrogen content in the filtercake (1%) discharge from the dicyandiamide plant. In a meeting between ODDA and SFT (Norwegian Pollution Control Authority) in June 1998, SFT indicated that ODDA should make a diligent effort to develop a commercial use for filtercake within three years, and consider the reduction of discharges of PAH from existing levels (which discharges are in compliance with ODDA's permits). GOVERNMENT REGULATION Certain agricultural feed products offered by the Company, namely nicarbazin and amprolium products, require licensing by a governmental agency before marketing. In the United States, governmental oversight of animal nutrition and health products is shared primarily by the United States Department of Agriculture ("USDA") and the Food and Drug Administration. A third agency, the Environmental Protection Agency, has jurisdiction over certain products applied topically to animals or to premises to control external parasites. Within the FDA, two Centers are responsible for the safety and wholesomeness of the human food supply. The Center for Food Safety and Applied Nutrition regulates foods intended for human consumption. The Center for Veterinary Medicine ("CVM") regulates the manufacture and distribution of animal drugs, including feed additives and drugs that will be given to animals from which human foods are derived, as well as feed additives and drugs for pet (or companion) animals. To protect the food and drug supply for animals, the FDA develops technical standards for animal drug safety and effectiveness and evaluates data bases necessary to support approvals of veterinary drugs. The USDA monitors the food supply for animal drug residues. Before a new animal drug may receive FDA approval, it must be clinically tested for quality, effectiveness and safety. If a product is intended for use in a food-producing animal, not only must the safety to the animal be demonstrated, but it must also be tested for safety to human consumers, and the edible animal products must be free of unsafe drug residues. The sponsor must also develop analytical methods to detect and measure drug residues in edible animal products. The Office of New Animal Drug Evaluation ("NADE") is responsible for reviewing information submitted by drug sponsors who wish to obtain approval to manufacture and sell animal drugs. A new animal drug is deemed unsafe unless there is an approved new animal drug application ("NADA"). Virtually all animal drugs are "new animal drugs" within the meaning of the term in the Federal Food, Drug, and Cosmetic Act. Although the procedure for licensing products by the USDA are formalized, the 66 acceptance standards of performance for any product are agreed upon between the manufacturer and the NADE. For novel products that are unlike others already licensed, the agreement on expected performance standards is typically reached through a dialogue between the NADE and the manufacturer. When a sponsor feels that adequate data have been gathered to support the safety and effectiveness requirements of a new animal drug, the data are organized and submitted as a NADA, requesting approval for the manufacture, marketing and commercial shipment of the product. CVM's pre-marketing group is involved in two processes in regulating the interstate shipment of animal drug products. The first process, the Investigational New Animal Drug exemption ("INAD"), involves the interstate shipment of experimental drugs used for testing in animals. This testing may require drugs be given to animals that will later be used to produce human food products. FDA must ensure that the food products derived from these experimental animals will be safe for human consumption. The second process is the NADA review. It includes the evaluation of data regarding an animal drug's safety to the target animal and to humans who might consume products from the treated animal; the review also evaluates effectiveness for the purposes claimed. To be legally marketed, a new animal drug product must be approved under an NADA. A sponsor must conduct certain tests to show that a drug is safe for the target animal, has the intended effect, and that edible products derived from treated animals are safe for human consumption. If animals receiving an investigational drug are to be slaughtered for consumption, authorization to do so is needed from the FDA. These animals must be slaughtered in a federally inspected facility. The USDA, in coordination with the FDA, provides for a USDA inspector to monitor the slaughter of research animals intended for human consumption. To market a generic animal drug product in the United States, a person or a company must obtain approval of an Abbreviated New Animal Drug Application ("ANADA"). Under the Generic Animal Drug and Patent Term Restoration Act of 1988, a generic animal drug product may be approved by providing evidence that it has the same active ingredients, in the same concentration, as the approved animal drug product, and that it is bioequivalent to the approved animal drug product. This information is submitted to NADE in the form of an ANADA. An NADA in animal health is analogous to a New Drug Application ("NDA") in human pharmaceuticals. Both are administered by the FDA. However, the drug development process for human therapeutics can be more involved than that for animal drugs. The company sponsor of a human drug must obtain FDA marketing approval in a multi-phase process, as follows: First, extensive preclinical studies in animal models to assess safety and efficacy as well as laboratory toxicology and pharmacokinetic studies of the drug must be conducted. The company must then submit to the FDA an application for an Investigational New Drug which must become effective before human clinical trials can commence. Human clinical trials are then conducted in three sequential phases. Phase I, which is safety testing, generally involves a small group of patients or healthy volunteers. Phase II, in which the drug is tested for efficacy, optimal dosage and safety risks, is conducted in a larger, but still limited, patient population. If the drug proves efficacious in Phase II trials, expanded Phase III trials are conducted to evaluate the overall risks and benefits of the drug in relation to available therapies for the disease. Only after these clinical trials are complete may the company submit a NDA to the FDA for marketing approval of the drug. The time requirement for animal drugs is shorter than the analogous time requirement for human drugs, in part because clinical trials may be conducted immediately in the animal for which the drug is intended. Also, for animal drugs, unlike human drugs, advantages over existing therapies do not have to be demonstrated. However, for food-producing animals, food safety residue levels are an issue, making the approval process longer than for animal drugs for non-food producing animals, such as pets. The FDA may deny a NADA if applicable regulatory criteria are not satisfied, require additional testing or information, or require postmarketing testing and surveillance to monitor the safety or efficacy of a product. There can be no assurances that FDA approval of any NADA will be granted on a timely basis or at all. Moreover, if regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which it may be marketed. Finally, product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing. Among the conditions for NADA approval is the requirement that the prospective 67 manufacturer's quality control and manufacturing procedures conform to GMP regulations, which must be followed at all times in the manufacture of the approved product. In complying with standards set forth in these regulations, manufacturers must continue to expend time, monies and effort in the area of production and quality control to ensure full compliance. Both before and after approval is obtained, a product, its manufacturer, and the holder or the holders of the NDA for the product are subject to comprehensive regulatory oversight. Violations of regulatory requirements at any stage, including the testing process, the review process, or thereafter (including after approval) may result in various adverse consequences, including the FDA's delay in approving or refusal to approve a product, withdrawal of an approved product from the market, and/or the imposition of criminal penalties against the manufacturer and/or NADA holder. In addition, later discovery of previously unknown problems may result in restrictions on a product, manufacturer, or NADA holder, including withdrawal of the product from the market. Also, new government requirements may be established that could delay or prevent regulatory approval of the Company's products under development. For clinical investigation and marketing outside the United States, the Company is also subject to foreign regulatory requirements governing investigation, clinical trials and marketing approval for animal drugs. The foreign regulatory approval process includes all of the risks associated with FDA approval set forth above. Currently, in the European Union ("EU"), feed additives which are successfully sponsored by a manufacturer are assigned to an Annex. Initially, they are assigned to Annex II. During this period, member states may approve the feed additive for local use. After five years or earlier, the product passes to Annex I if no adverse reactions or trends develop over the probationary period. The Company currently markets nicarbazin directly and through Elanco, a division of Eli Lilly, in the EU. Nicarbazin holds an Annex I registration. This means that the compound must be registered in each of the member states and can be used legally by customers in the EU. Any manufacturer, including generic producers, is permitted to sell nicarbazin in the EU on the basis of a Certificate of Analysis. The distributor selling the product warrants that it contains what is indicated on the label. The registration may not be transferred in a manner similar to an FDA registration. The originator of the registration, however, retains certain rights. For one, the originator or a successor to the rights of the originator may refer to the data file of the originator and any predecessors when making a submission. The EU is in the process of centralizing the regulatory process for animal drugs for member states. In 1997, the EU drafted new regulations requiring the re-registration of feed additives, including coccidiocides. Part of these regulations include a provision for manufacturers to submit quality data for their own formulation, in effect adopting a Product License procedure similar to that of the FDA. The provision is known as Brand Specific Approval ("BSA"), and provides manufacturers with the opportunity to register their own unique brands, instead of simply the generic compound. The BSA process is being implemented over time. The new system is more like the U.S. system, where regulatory approval is for the formulated product or "brand." Successful Brand Specific Approvals will allow the individual manufacturer a 10-year period of exclusivity for the formulation as well as the compound. The procedure will, in effect, restart the patent clock. The Company has taken the necessary steps to apply for a BSA for nicarbazin in the EU. However, there is no assurance that the Company will receive a BSA for nicarbazin in the EU, or if its does receive such BSA, when it will be granted or whether it will be unlimited. LITIGATION Reference is made to the discussion above under "Environmental Regulation" for information as to various environmental investigation and remediation obligations of the Company's subsidiaries associated principally with their recycling and production facilities and to certain legal proceedings associated with such facilities. In addition to such matters, the Company or certain of its subsidiaries is subject to certain litigation described below. On or about April 17, 1997, CP and the Company were served with a complaint filed by Chevron USA, Inc. ("Chevron") in the United States District Court for the District of New Jersey, alleging that operations of CP at its Sewaren plant affected adjoining property owned by Chevron and that Philipp Brothers, as the parent of CP, is also responsible to Chevron. The complaint includes statutory claims under RCRA and common law claims. There are several other defendants in the action, including the 68 former owner of the Sewaren site and Chevron's site and a prior tenant of the Chevron site, and the Company has recently filed a complaint against certain third parties. This litigation is in the discovery stages. The Company is not, at this time, in a position to assess the extent of any ultimate liability it may have in connection with this suit or the potential responsibility of other defendants, or the future cost of remediation of the Chevron site, and is actively defending the action. CP was named in 1993 as a potentially responsible party ("PRP") in connection with an action commenced under CERCLA by the EPA, involving a former fertilizer manufacturing site in Jericho, South Carolina. CP responded that it had supplied a useful product to the operator of the site and that it believes this constitutes a defense to the claims brought against it. CP and various other PRPs participated in settlement discussions, but recently the South Carolina Department of Health and Environmental Control ("SCDHEC") concluded certain settlements with a number of PRPs, without participation by CP and certain other PRPs. CP has also received a settlement proposal from SCDHEC which it believes is unfairly high in relation to settlements offered to other PRPs. CP has submitted comments to such effect to SCDHEC and has requested an opportunity to be heard. CP believes that the most recent settlement proposal made to CP would involve payment obligations of approximately $800,000 but is hopeful that it will obtain a substantially lower settlement proposal. See Note 11 to the Company's Consolidated Financial Statements. There can be no assurance that such a lower proposal will be forthcoming and under applicable law all non-settling PRPs could be found to have strict, joint and several liability under CERCLA. Accordingly, CP will continue to assess how best to respond to claims raised in this proceeding. CP has been sued in the United States District Court in the Central District of California in an action captioned BKK Corporation v. North American Rockwell, filed May 20, 1997. The lawsuit names CP as one of many defendants and alleges CP is liable for clean up costs, equitable relief and damages associated with waste materials transported to or located at the Basin By-Products Site located in Los Angeles, California. The complaint alleges that CP is liable as the successor to Southern California Chemical ("SCC") which allegedly sent waste materials to such Site prior to 1984; CP bought assets of SCC, including its name, after 1984. The Company has answered the claims asserting that it did not assume liabilities of, and is not legally responsible as a successor to, SCC in connection with the matters underlying the suit. This litigation is in the discovery phase. A "phase one" trial on the collective liability of the entire defendant group occurred in September 1998. Later phases of trial will calculate the proper measure of damages and apportion damages among the individual defendants. Given the preliminary phase of the proceedings and CP's denial of any liability, it remains impossible to determine the eventual outcome of this matter, or any costs associated with its resolution. The Company and its subsidiaries are party to a number of claims and lawsuits arising out of the normal course of business including product liabilities and governmental regulation. Certain of these actions seek damages in various amounts. In most cases, such claims are covered by insurance. The Company believes that none of the claims or pending lawsuits, either individually or in the aggregate, will have a material adverse effect on the Company's financial position or results of operations. CONDITIONS IN ISRAEL The following information discusses certain conditions in Israel that could affect the Company's Israeli subsidiary, Koffolk Israel. As of June 30, 1998 and for the year then ended, Israeli operations (excluding Koffolk Israel's non-Israeli subsidiaries) accounted for approximately 28% of the Company's consolidated assets and approximately 22% of its consolidated net sales. All figures and percentages are approximate. A portion of the information with respect to Israel presented hereunder and under "Risk Factors--Israeli Operations" has been taken from Annual Reports of the Bank of Israel and publications of the Israeli General Bureau of Statistics. No independent verification has been made of such information or of other information taken from other Israeli government publications. POLITICAL CONDITIONS Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors and a state of hostility, varying from time to time in intensity and degree, has led to security and economic problems for Israel. However, a peace agreement between Israel and Egypt was signed in 1979, a peace agreement between Israel and Jordan was 69 signed in 1994 and, since 1993, several agreements between Israel and the Palestine Liberation Organization ("PLO")--Palestinian Authority representatives have been signed. In addition, Israel and several other Arab states have announced their intention to establish trade and other relations and are discussing certain projects. As of the date hereof, Israel has not entered into any peace agreement with Syria or Lebanon. Recently there has been stagnation in the peace process in the Middle East. There can be no assurance as to whether or how the "peace process" will develop or what effect it may have upon the Company. Beginning in 1948, nearly all Arab countries formally adhered to a boycott of Israel and Israeli companies and, since the early 1950's of non-Israeli companies doing business in Israel or with such companies. Despite measures to counteract the boycott, including anti-boycott legislation in the United States, the boycott has had an indeterminate negative effect upon trade with and foreign investment in Israel. The Company does not believe that the boycott has had a material adverse effect on the Company, but there can be no assurance that restrictive laws, policies or practices directed toward Israel or Israeli businesses will not have an adverse impact on the operation or expansion of the Company's business. Generally, all male adult citizens and permanent residents of Israel under the age of 54 are, unless exempt, obligated to perform certain military duty annually. Additionally, all such residents are subject to being called to active duty at any time under emergency circumstances. Some of the employees of the Company's Israeli subsidiaries currently are obligated to perform annual reserve duty. While the Company's Israeli subsidiaries have operated effectively under these and similar requirements in the past, no assessment can be made of the full impact of such requirements on the Company in the future, particularly if emergency circumstances occur. ECONOMIC CONDITIONS Israel's economy has been subject to numerous destabilizing factors, including a period of rampant inflation in the early to mid-1980s, low foreign exchange reserves, fluctuations in world commodity prices, military conflicts, security incidents and for at least the five years preceding 1997, expansion. The Israeli government has, for these and other reasons, intervened in the economy by utilizing, among other means, fiscal and monetary policies, import duties, foreign currency restrictions and control of wages, prices and exchange rates. The Israeli government periodically changes its policies in all these areas. In 1997, growth decelerated markedly, for the first time since 1989, despite the contraction of the trade deficit, along with accelerated export growth and a significant decline in inflation. These developments reflected primarily the deceleration of domestic demand as the expansionary effects of both the influx of immigrants and the political process waned, and the effect of the tight fiscal and monetary policies implemented in 1997. Other factors contributing to the slowdown in economic activity were the security and political uncertainty, the wage path (influenced by the rise in the minimum wage and existing wage-contracts), and the intensification of the process of structural economic changes--the expansion of high-tech industries and the contraction of traditional ones. Israel has high balance of payments deficit, primarily as a result of its defense burden, the absorption of immigrants, especially from the former Soviet Union, the provision of a minimum standard of living for lower income segments of the community and the maintenance of a minimum level of net foreign reserves. In order to finance this deficit, Israel must sustain an adequate inflow of capital from abroad. The major sources of the country's capital imports include U.S. military and economic aid, personal remittances from abroad, sales of Israeli government bonds (primarily in the United States) and loans from foreign governments, international institutions and the private sector. ASSISTANCE FROM THE UNITED STATES The State of Israel receives significant amounts of economic and military assistance from the United States, averaging approximately $3 billion annually over the last several years. In addition, in 1992, the United States approved the issuance of up to $10 billion in loan guarantees during United States fiscal years 1993-1998 to help Israel absorb a large influx of new immigrants, primarily from the republics of the former Soviet Union. Under the loan guarantee program, Israel may issue up to $2 billion in principal amount of guaranteed loans each year, subject to reduction in certain circumstances. There is no assurance that foreign aid from the United States will continue at or near amounts received in the past. If the grants for economic and military assistance or the United States 70 loan guarantees are eliminated or reduced significantly, the Israeli economy could suffer material adverse consequences. TRADE AGREEMENTS Israel is a member of the United Nations, the International Monetary Fund, the International Bank for Reconstruction and Development and the International Finance Corporation. Israel is also a signatory to the General Agreement on Tariffs and Trade, which provides for reciprocal lowering of trade barriers among its members. In addition, Israel has been granted preferences under the Generalized System of Preferences from the United States, Australia, Canada and Japan. These preferences allow Israel to export the products covered by such programs either duty-free or at reduced tariffs. Israel and the European Union concluded a Free Trade Agreement in July, 1975 which confers certain advantages with respect to Israeli exports to most European countries and obligates Israel to lower its tariffs with respect to imports from these countries over a number of years. In 1985, Israel and the United States entered into an agreement to establish a Free Trade Area ("FTA"). Under the FTA, most products received immediate duty-free status, and by 1995 all other tariffs and certain non-tariff barriers on most trade between the two countries were ultimately eliminated. On January 1, 1993, an agreement between Israel and EFTA, which at present includes Norway, Switzerland, Iceland and Liechtenstein, established a free-trade zone between Israel and the EFTA nations. In recent years, Israel has established commercial and trade relations with a number of other nations, including Russia, China and nations in Eastern Europe, with which Israel had not previously had such relations. EMPLOYEES Most of Koffolk Israel's employees are members of the Histadrut (the General Federal of Labor in Israel), and are represented by collective bargaining units. Koffolk Israel is subject to various Israeli labor laws and collective bargaining agreements between Histadrut and the federation of industrial employers. Such laws and agreements cover a wide range of areas, including hiring practices, wages, promotions, employment conditions (such as working hours, overtime payment, vacations, sick leave and severance pay), benefits programs (such as pension plans and education funds) and special issues, such as equal pay for equal work, equal opportunity in employment and employment of women. The collective bargaining agreements also cover the relations between management and the employees' representatives, including Histadrut's involvement in certain aspects of hiring and dismissing employees and procedures for settling labor disputes. Koffolk Israel continues to operate under the terms of Israel's national collective bargaining agreement, portions of which expired in 1994. Israeli employers and employees are required to pay predetermined sums to the National Insurance Institute, an organization similar to the United States Social Security Administration. These contributions entitle the employees to receive a range of medical services and other benefits. Certain employees of Koffolk Israel are covered by individual employment agreements. INVESTMENT INCENTIVES Certain of the Israeli production facilities of the Company have been granted Approved Enterprise status pursuant to the Law for the Encouragement of Capital Investments, 1959, and consequently may enjoy certain tax benefits and investment grants. Taxable income of Koffolk Israel derived from these production facilities is subject to a lower rate of company tax than the normal rate applicable in Israel. Dividends distributed by Koffolk Israel out of the same income are subject to lower rates of withholding tax than the rate normally applicable to dividends distributed by an Israeli company to a non-resident corporate shareholder. The grant available to newly approved Approved Enterprises was decreased throughout recent years. Certain of the Israeli production facilities of the Company further enjoyed accelerated depreciation under regulation extended from time to time and other deductions. There can be no assurance that the Company will, in the future, be eligible for or receive such or similar grants. 71 MANAGEMENT The executive officers and directors of the Company on the date hereof are named below. Each director and executive officer will hold the office listed until his successor is elected and qualified or until his earlier death, resignation or removal.
NAME AGE POSITION - ------------------------------------------ --- --------------------------------------------------------------- Jack Bendheim............................. 51 Director, President and Chief Executive Officer Marvin S. Sussman......................... 51 Director and Executive Vice President; President, Prince Group James O. Herlands......................... 56 Director and Executive Vice President; President, CP/PhibroChem Group I. David Paley............................ 59 President and Chief Operating Officer, Phibro-Tech Nathan Z. Bistricer....................... 47 Vice President and Chief Financial Officer Joseph Katzenstein........................ 56 Treasurer and Secretary
Jack Bendheim, Director, President and Chief Executive Officer. Mr. Bendheim has been President since 1988. He was appointed Chief Operating Officer in 1988 and Chief Executive Officer in 1998. He has been a director since 1984. Mr. Bendheim joined the Company in 1969 and served as Executive Vice President and Treasurer from 1983 to 1988 and as Vice President and Treasurer from 1975 to 1983. Mr. Bendheim is also a director of The Berkshire Bank, in New York, N.Y. Marvin S. Sussman, Director and Executive Vice President, and President of the Company's Prince Group. He has been a director since 1988. Mr. Sussman joined the Company in 1971. Since then, he has served in various executive positions at the Company and at the Prince Group. Since 1988, Mr. Sussman has been President of the Company's Prince Group and Executive Vice-President of the Company. Mr. Sussman is the brother-in-law of Jack Bendheim. James O. Herlands, Director and Executive Vice President, and President of CP/PhibroChem. Mr. Herlands joined the Company in 1964. Since then, he has served in various capabilities in sales/marketing and purchasing. He has been a director since 1988. Since 1992, Mr. Herlands has been President of the Company's CP/PhibroChem Group. From 1988 to 1992, Mr. Herlands was Senior Vice President of the Company. Mr. Herlands is the first cousin of Jack Bendheim. I. David Paley, President and Chief Operating Officer of Phibro-Tech, Inc. Mr. Paley has been President and Chief Operating Officer of Phibro-Tech since 1989. Prior to his joining the Company, Mr. Paley served as President of the IMC Industry Group, Inc. of International Minerals & Chemical Corporation, a manufacturer and miner of minerals, metals and fertilizers, from 1981 to 1988, and was Division Vice President and General Manager from 1973 to 1981 of the Ferroalloys & Metals Division. Mr. Paley is also a director of Miller & Company. Nathan Z. Bistricer, Vice President and Chief Financial Officer. Mr. Bistricer has served as Vice President and Chief Financial Officer since he joined the Company in 1985. From 1981 to 1985, Mr. Bistricer served as Vice President--Administrator and Treasurer of Belco Petroleum Corporation, an oil and gas exploration company. Joseph Katzenstein, Treasurer and Secretary. Mr. Katzenstein joined the Company in 1962. Since 1982, he has been Secretary and Treasurer of the Company. Mr. Katzenstein served as corporate controller from 1966 to 1985. 72 EXECUTIVE COMPENSATION The following table sets forth the cash compensation paid by the Company and its subsidiaries for services during fiscal 1998, 1997 and 1996 to each of the Company's five most highly compensated executive officers: SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ------------------------------------------ OTHER ANNUAL NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION** - ------------------------------ ---- ---------- -------- -------------- Jack Bendheim, 1998 $1,725,000 $ -- $ -- President and CEO 1997 967,500 -- -- 1996 1,205,000 -- -- Marvin S. Sussman,* 1998 479,500 423,700 -- Executive Vice President; 1997 517,500 450,780 -- President of Prince Group 1996 510,000 450,000 -- James O. Herlands, 1998 350,000 250,000 1,030,100 Executive Vice President; 1997 337,000 145,000 -- President of CP/PhibroChem 1996 320,000 165,000 -- I. David Paley, 1998 360,000 -- 3,450,700 President and COO of 1997 347,500 -- -- Phibro-Tech 1996 320,000 100,000 -- Nathan Z. Bistricer, 1998 223,700 60,000 1,030,100 Vice President and CFO 1997 215,000 60,000 -- 1996 205,000 60,000 -- LONG TERM COMPENSATION --------------------------------- AWARDS ----------------------- PAYMENTS RESTRICTED SECURITIES -------- STOCK UNDERLYING LTIP ALL OTHER NAME AND PRINCIPAL POSITION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION*** - ---------------------------------------- ------------ -------- --------------- Jack Bendheim, -- -- $ -- $ 5,200 President and CEO -- -- -- 4,925 -- -- -- 4,925 Marvin S. Sussman,* -- -- -- 5,200 Executive Vice President; -- -- -- 4,925 President of Prince Group -- -- -- 4,925 James O. Herlands, -- -- -- 5,200 Executive Vice President; -- -- -- 4,925 President of CP/PhibroChem -- -- -- 4,925 I. David Paley, -- -- -- 5,200 President and COO of -- -- -- 4,925 Phibro-Tech -- -- -- 4,925 Nathan Z. Bistricer, -- -- -- 5,200 Vice President and CFO -- -- -- 4,925 -- -- -- 4,925
- ------------------ * Pursuant to a Stockholders Agreement between Mr. Sussman and the Company, the Company is required to purchase at book value all shares of the Company's Class B Common Stock owned by Mr. Sussman in the event of his retirement, death, permanent disability or the termination of his employment by the Company. See "Certain Relationships and Related Transactions." As a result, the Company is required to record as compensation to Mr. Sussman each year the change in the book value of the Company attributable to Mr. Sussman's shares. For 1998, 1997 and 1996 the amount attributable to Mr. Sussman's shares was $(1,250,000), $130,000 and ($28,000), respectively. Such amounts have not been distributed to Mr. Sussman. ** In fiscal 1998, Phibro-Tech, a subsidiary of the Company, canceled the limited recourse notes issued by executives related to acquiring 10.7% of the stock of Phibro-Tech, and forgave all amounts due the Company, resulting in compensation expense. The Company also paid the executives an additional amount as reimbursement for their income tax liability related to the forgiveness, which was also recorded as compensation expense. See "Certain Relationships and Related Transactions." *** Represents contributions by the Company under its 401(k) Retirement and Savings Plan. See "--Compensation Pursuant to Plans." In fiscal 1998, the Company granted no options or long-term incentive plan awards to the named executive officers and no options were held or exercised by any of the named executive officers. 73 EMPLOYMENT AND SEVERANCE AGREEMENTS The Company entered into an employment agreement with Marvin S. Sussman in December 1987. Mr. Sussman, as President of the Company's Prince Group, is responsible for the day-to-day operations of that group. The term of employment is from year to year, unless terminated by the Company at any time or by his death or permanent disability. Upon the termination of his employment, the Company is obligated to make a severance payment to Mr. Sussman in an amount equal to the principal balance of and all accrued interest on certain promissory notes dated June 30, 1993 made by Mr. Sussman and his wife to Jack Bendheim and his wife. As of June 30, 1998, the aggregate balance of such notes was $60,000 plus accrued interest at 6% per annum. In 1995, Nathan Bistricer, I. David Paley and James O. Herlands purchased stock in Phibro-Tech. In connection therewith, the Company entered into severance agreements with Nathan Bistricer and James O. Herlands, and Phibro-Tech entered into a severance agreement with I. David Paley. The agreements provide that, upon the Actual or Constructive Termination of such executive or a Change in Control Event (as such terms are defined), the executive is entitled to receive a cash Severance Amount (as defined therein), based upon a multiple of Phibro-Tech's pretax earnings (as defined therein). In addition, if an Extraordinary Event (as defined) occurs within 12 months after the occurrence of an Actual or Constructive Termination, the executive is entitled to receive an additional Catch-up Payment (as defined). See "Certain Relationships and Related Transactions." COMPENSATION PURSUANT TO PLANS 401(k) Plan. The Company maintains for the benefit of its employees a 401(k) Retirement and Savings Plan (the "Plan"), which is a defined contribution, profit sharing plan qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). Employees of the Company are eligible for participation in the Plan once they have attained age 21 and completed a year of service (in which the employee completed 1,000 hours of service). Up to $150,000 (indexed for inflation) of an employee's base salary may be taken into account for Plan purposes. Under the Plan, employees may make pre-tax contributions of up to 6.0% of such employee's base salary, and the Company will make non-matching contributions equal to 1% of an employee's base salary and matching contribution equal to 50.0% of an employee's pre-tax contribution up to 3.0% of such employee's base salary and 25.0% of such employee's pre-tax contribution over 3.0% of base salary. Participants are vested in Employer contributions in 20% increments beginning after completion of the second year of service and become fully vested after five years of service. Distributions are generally payable in a lump sum after termination of employment, retirement, death, disability, plan termination, attainment of age 59 1/2, disposition of substantially all of the Company's assets or upon financial hardship. The Plan also provides for Plan loans to participants. The accounts of Messrs. Bendheim, Sussman, Paley, Herlands and Bistricer were credited with employer contributions of $4,925, respectively, for fiscal 1998. Retirement Plan. The Company has adopted The Retirement Plan of Philipp Brothers Chemicals Inc. and Subsidiaries and Affiliates which is a defined benefit pension plan (the "Retirement Plan"). Employees of the Company are eligible for participation in the Retirement Plan once they have attained age 21 and completed a year of service (which is a Plan Year in which the employee completes 1,000 hours of service). The Retirement Plan provides benefits equal to the sum of (a) 1.0% of an employee's "average salary" plus 0.5% of the employee's "average salary" in excess of the average of the employee's social security taxable wage base, times years of service after July 1, 1989, plus (b) the employee's frozen accrued benefit, if any, as of June 30, 1989 calculated under the Retirement Plan formula in effect at that time. "Average salary" for these purposes means the employee's salary over the consecutive five year period in the last ten years preceding retirement or other termination of employment which produces the highest average; or, if an employee has fewer than five years of service, all such years of service. An employee becomes vested in his plan benefit once he completes five years of service with the Company. In general, benefits are payable after retirement or disability in the form of a 50%, 75% or 100% joint or survivor annuity, life annuity or life annuity with a five or ten 74 year term certain. In some cases benefits may also be payable under the Retirement Plan in the event of an employee's death. The following table shows estimated annual benefits payable upon retirement in specified compensation and years of service classifications, assuming a life annuity with a ten year term certain.
YEARS OF SERVICE --------------------------------------------------- AVERAGE COMPENSATION 15 20 25 30 35 - ------------------------------------------------------ ------- ------- ------- ------- ------- 25,000................................................ $ 3,750 $ 5,000 $ 6,250 $ 7,500 $ 8,750 50,000................................................ 7,500 10,000 12,500 15,000 17,500 75,000................................................ 12,770 16,510 20,150 23,970 27,930 100,000............................................... 18,390 24,010 29,520 35,220 41,060 150,000............................................... 29,640 39,010 48,270 57,720 67,310 200,000............................................... 31,890 42,010 52,020 62,220 72,560
As of June 30, 1998, Messrs. Bendheim, Sussman, Paley, Herlands and Bistricer had 29, 27, 9, 34 and 13 estimated credited years of service, respectively, under the Retirement Plan. The compensation covered by the Retirement Plan for each of these officers as of June 30, 1998 is $160,000. Such individuals, at age 65, will have 43, 41, 15, 43 and 31 credited years of service, respectively. The annual expected benefit after normal retirement at age 65 for each of these individuals, based on the compensation taken into account as of June 30, 1998, is $110,960, $125,230, $36,200, $125,080 and $65,500, respectively. Most of the Company's foreign subsidiaries have retirement plans covering substantially all employees. Contributions to these plans are generally deposited under fiduciary-type arrangements. Benefits under these plans are primarily based on levels of compensation. Funding policies are based on applicable legal requirements and local practices. Deferred Compensation Plan. In 1994, the Company adopted a non-qualified Deferred Compensation Plan and Trust, as an incentive for certain executives. The plan provides for (i) a Retirement Income Benefit (as defined), (ii) a Survivor's Income Benefit (as defined), and (iii) Deferred Compensation Benefit (as defined). Five employees currently participate in this plan. A trust has been established to provide the benefits described above. The following table shows the estimated benefits from this plan as of June 30, 1998.
ANNUAL SURVIVOR'S DEFERRED RETIREMENT INCOME COMPENSATION INCOME BENEFIT BENEFIT BENEFIT -------------- ---------- ------------ Jack C. Bendheim................................................. $ 10,317 $ 950,000 $105,758 Nathan Z. Bistricer.............................................. 7,800 455,000 72,634 James O. Herlands................................................ 10,317 710,000 87,106 I. David Paley................................................... 10,317 730,000 105,758 Marvin S. Sussman................................................ 10,317 934,000 34,742
The Retirement Income Benefit is determined by the Company based upon the employee's salary, years of service and age at retirement. At present, it is contemplated that a benefit of 1% of each participant's eligible compensation will be accrued each year. The benefit is payable upon retirement (after age 65 with at least 10 years of service) in monthly installments over a 15 year period to the participant or his named beneficiary. The Survivor's Income Benefit for the current participants is two times annualized compensation at the time of death, payable in 24 equal monthly installments. The Deferred Compensation Benefit is substantially funded by compensation deferred by the participants. Such benefit is based upon a participant making an election to defer no less than $3,000 and no more than $20,000 of his compensation in excess of $150,000, payable in a lump sum or in monthly installments for up to 15 years. The Company makes a matching contribution of $3,000. The plan is substantially funded. Participants have no claim against the Company other than as unsecured creditors. To assist in providing benefits, the Company has obtained a life insurance policy on each participant. 75 Executive Income Program. On March 1, 1990, the Company entered into an Executive Income Program to provide a pre-retirement death benefit and a retirement benefit to certain of its executives. The Program consists of a Split Dollar Agreement and a Deferred Compensation Agreement with Jack Bendheim, Marvin S. Sussman and James O. Herlands (the "Executives"). The Split Dollar Agreement provides for the Company to own a whole life insurance policy in the amount of $1,000,000 (plus additions) on the life of each Executive. Each policy also contains additional paid-up insurance and extended term insurance. On the death of the Executive prior to his 60th birthday or his actual retirement date, whichever is later: (i) the first $1,000,000 of the death benefit is payable to the Executive's spouse, or issue; (ii) the excess is payable to the Company up to the aggregate amount of premiums paid by the Company; and (iii) any balance is payable to the Executive's spouse or issue. The Split Dollar Agreement terminates and no benefit is payable if the Executive dies after his retirement from the Company. The Deferred Compensation Agreement provides that upon the Executive's retirement, at or after attaining age 65, the Company will make a monthly retirement payment to the Executive during his life for 10 years or until he or his beneficiaries have received a total of 120 monthly payments. The Company intends to fund the payments using the cash value or the death benefit from the life insurance policy insuring each Executive's life. The monthly retirement benefits are as follows: Jack Bendheim $2,500; Marvin S. Sussman $2,500; and James O. Herlands $1,666. MEETINGS AND COMPENSATION OF DIRECTORS During fiscal 1998, the Board of Directors took certain action by written consent. There were no formal meetings of the Board. Directors are elected annually and serve until the next annual meeting of Shareholders or until their successors are elected and qualified. The Company's directors do not receive any cash compensation for service on the Board of Directors, but directors may be reimbursed for certain expenses in connection with attendance at board meetings. The Company has entered into certain transactions with certain of the directors. See "Certain Relationships and Related Transactions." COMMITTEES OF THE BOARD OF DIRECTORS The Company's Board of Directors has not created any committees. REPORT OF BOARD OF DIRECTORS AS TO COMPENSATION The Company does not have a compensation committee or other Board committee performing equivalent functions. Executive compensation is determined by Jack Bendheim, the President and Chief Executive Officer of the Company. During fiscal 1998, Messrs. Bendheim, Sussman and Herlands participated in deliberations regarding compensation of the Company's other officers. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Jack Bendheim, Marvin S. Sussman and James O. Herlands are Members of the Board of Directors and executive officers of the Company. No executive officer of the Company serves as a member of the Board of Directors of any other non-Company entity which has one or more members serving as a member of the Company's Board of Directors. Messrs. Bendheim, Sussman and Herlands have participated in certain transactions with the Company and its subsidiaries and affiliates. See "Certain Relationships and Related Transactions." 76 PRINCIPAL STOCKHOLDERS The table sets forth certain information as of June 30, 1998 regarding beneficial ownership of the Company's capital stock by each director and named executive officer of the Company, each beneficial owner of 5% or more of the outstanding shares of capital stock and all directors and officers as a group. See "Description of Capital Stock."
NUMBER OF SHARES (PERCENTAGE OF CLASS) ---------------------------------------------------- NAME CLASS A VOTING(1) CLASS B NON-VOTING(2) - -------------------------------------------------- ---------------------- --------------------------- Jack Bendheim(3).................................. 12,600 (100%) 10,699.65 (90%) (4) Marvin S. Sussman................................. -- 1,188.85 (10%) All other officers and directors.................. -- -- All officers and directors as a group............. 12,600 (100%) 11,888.50 (100%)
- ------------------ (1) The entire voting power of the Company is exercised by the holders of Class A Common Stock, except that the Class B Common Stock elect one of the five directors but do not vote on any other matters. (2) Class B shareholders will receive the entire equity of the Company upon its liquidation, after payment of preferences to holders of all classes of preferred stock and Class A Common Stock. (3) Jack Bendheim also owns 5,207 (100%) shares of Series A Preferred Stock (formerly designated Third Preferred Stock). (4) Includes 2,914.24 shares owned by trusts for the benefit of Jack Bendheim, his spouse, his children and their spouses and his grandchildren. DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company consists of 30,300 shares of Common Stock, allocated as follows: 16,200 shares of Class A Common Stock, par value $.10 per share, and 14,100 shares of Class B Common Stock, par value $.10 per share, and 155,750 shares of Preferred Stock, of which a series of 5,207 shares of Series A Preferred Stock (formerly designated Third Preferred Stock), par value $100 per share, has been established. At the date of this Prospectus, there are issued and outstanding 12,600 shares of Class A Common Stock, 11,888.50 shares of Class B Common Stock, and 5,207 shares of Series A Preferred Stock. Subsequent to the consummation of the Offering, the Company simplified its capitalization by eliminating classes of authorized but unissued preferred stock and common stock, establishing "blank check" preferred stock, redesignating the Third Preferred Stock as Series A Preferred Stock, combining on a basis to preserve as nearly as practicable the rights and benefits of the former Class A Common shares and Class C Common shares into a single class designated as Class A Common Stock, and the former Class B Common shares and Class E Common shares into a single class designated as Class B Common Stock. The following description of the terms of all classes and series of the Company's common and preferred stock is not complete and is subject to and qualified in its entirety by reference to the Company's amended and restated certificate of incorporation (the "Certificate of Incorporation"). The entire voting power of the Company is vested in the holders of Class A Common Stock. The holders of shares of Class A Common Stock are entitled to one vote per share upon all matters submitted for a vote to the shareholders of the Company and are entitled to elect all but one of the directors. The holders of Class B Common Stock are entitled to elect one director and are not entitled to vote on any other corporate action. Directors elected by the holders of Class A Common Stock have the exclusive right and power to cause the Company to declare and pay dividends. The Certificate of Incorporation of the Company does not provide for cumulative voting. The shareholders of the Company are entitled to preemptive rights. 77 Non-cumulative dividends are payable on the outstanding preferred and common stock of the Company, in the following order of priority only when and as declared by the Board: each share of Series A Preferred Stock-- $1.00 per year; each share of Class A Common Stock--$.0055 per year; and each share of Class B Common Stock--as determined by the Board. The shares of Series A Preferred Stock are redeemable at the option of the Company, in whole or part, at any time or from time to time, for a redemption price equal to the par value thereof plus any declared but unpaid dividends. In the event of any complete liquidation, dissolution or winding up of the business, or sale of all of the assets of the Company, each share of Series A Preferred Stock is entitled to a distribution equal to the par value thereof and any declared but unpaid dividends. Thereafter, the remaining assets of the Company shall be distributed, first to the holders of Class A Common Stock in an amount equal to $.10 per share, and then to the holders of Class B Common Stock. In the event that no shares of Class B Common Stock are then outstanding, all remaining assets will be paid to the holders of Class A Common Stock. The Board of Directors is authorized to issue shares of Preferred Stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series, without further vote or action by the stockholders. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change in control of the Company without further action by the stockholders. The issuance of Preferred Stock with voting and conversion rights may adversely affect the voting power of the holders of Common Stock, including the loss of voting control to others. At present, the Company has no plans to issue any shares of Preferred Stock. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Phibro-Tech leases the property underlying its Santa Fe Springs, California facility from First Dice Road Company, a California limited partnership ("First Dice"), in which Jack Bendheim, the Company's President and principal stockholder, Marvin S. Sussman and James O. Herlands, directors of the Company, own 39.0%, 40.0% and 20.0% limited partnership interests, respectively. The general partner, having a 1% interest in the partnership, is Western Magnesium Corp., a wholly-owned subsidiary of the Company, of which Jack Bendheim is the president. The lease expires on June 30, 2008. The annual rent is $250,000. Phibro-Tech is also required to pay all real property taxes, personal property taxes and liability and property insurance premiums. On June 30, 1995, Jack Bendheim borrowed $1,500,000 from NatWest Bank N.A. (now Fleet Bank) which he reloaned to First Dice. The repayment to Jack Bendheim of such loan by First Dice is personally guaranteed by each of the limited partners of First Dice in proportion to their respective limited partnership interests. The Company was assigned a 10-year secured note for collection of obligations receivable from a partnership controlled by the Company's shareholders. The receivable ($332,000 at June 30, 1996) was paid in full in fiscal 1997. Following the death in May 1997 of Charles H. Bendheim, a founder of the Company and its Chairman of the Board, the Company redeemed, for $6,032,000 in cash, 55,123.14 shares of Second Preferred Stock held by certain members of his family, using the proceeds of an insurance policy on the life of Mr. Bendheim having a face value of $6,000,000. In addition, the Company redeemed 3,450 shares of its Second Preferred stock by issuing to the holders thereof the Company's five year, 8 1/2% subordinated promissory notes in the aggregate principal amount of $399,475. Such notes were guaranteed by Jack Bendheim and subordinate to all institutional and publicly held debt of the Company. These notes were paid in full from proceeds of the Offering. After such redemption, 6,800 shares of Second Preferred Stock remained outstanding, which shares were redeemed upon closing of the Offering. 78 In fiscal 1996, Jack Bendheim canceled a promissory note payable to him by the Company in the principal amount of $578,000, including interest, in exchange for 5,207 shares of the Company's Third Preferred Stock. Pursuant to a Shareholders Agreement dated December 29, 1987 between Marvin S. Sussman and the Company, the Company is required to purchase at book value all shares of the Company's Class B and Class E Common Stock owned by Mr. Sussman, in the event of his retirement, death, permanent disability or the termination of his employment by the Company. In 1995, Phibro-Tech sold shares of its Class B common stock to I. David Paley (240.08 shares), Nathan Z. Bistricer (71.67 shares) and James O. Herlands (71.67 shares) (the "Executives"), which resulted in the Executives owning an aggregate of 10.7% of the capital stock of Phibro-Tech. Phibro-Tech received, as consideration for such shares, cash equal to the par value thereof ($.01 per share) and limited recourse promissory notes from Messrs. Paley, Bistricer and Herlands in the principal amount of $1,392,461, $415,685 and $415,685, respectively, bearing interest at the rate of 7.74% per annum. Both principal and accrued interest were due on the earlier of the Executive's death or termination of his employment. An aggregate of $628,000 of interest had accrued under such notes as of June 11, 1998. Payment of each Executive's note was secured by a pledge of such Executive's Phibro-Tech shares. In connection with the consummation of the Offering, Phibro-Tech canceled such notes and forgave all amounts due thereunder, and paid the Executives an additional aggregate amount of $2,740,000 as reimbursement for their resulting income tax liability. A Shareholders Agreement among the Executives and Phibro-Tech provides, among other things, for restrictions on such shares as to voting, dividends, liquidation, transfer rights and conversion to Phibro-Tech Class A common stock. The Shareholders Agreement also provides that upon the death of an Executive or termination of an Executive's employment, Phibro-Tech must purchase the Executive's shares at their fair market value, as determined by a qualified appraiser. In the event of a Change of Control (as defined), the Executive has the option to sell his shares to Phibro-Tech at such value. The Shareholders Agreement provides, that, upon the consent of Phibro-Tech, the Executives and the Company, the Executives' shares of Phibro-Tech Class B Common Stock may be exchanged for a number of shares of the Company's Common Stock, which may be non-voting Common Stock, having an equivalent value, and upon any such exchange such shares of the Company's Common Stock will become subject to the Shareholders Agreement. The Company and Phibro-Tech also entered into Severance Agreements with the Executives which provide, among other things, for certain severance payments. See "Management--Employment and Severance Agreements." In November 1995, the Company formed MRT Management Corp. ("MMC"), as a subsidiary of Phibro-Tech, to manage MRT. Before giving effect to the acquisition by MMC of membership units in MRT held by Jack Bendheim, MMC owned 57.6% of the membership interests in MRT, and Jack Bendheim and certain employees of MRT owned 29.2% and 13.2% interests in MRT, respectively. Prior to the Offering, Mr. Bendheim from time to time made loans and advances to MRT when and as needed, in response to MRT's working capital requirements. As of June 11, 1998, the aggregate principal amount of such loans and advances was $995,000. Upon the closing of the Offering, the Company acquired Mr. Bendheim's interest in MRT for $25,000 and repaid all loans made by Mr. Bendheim to MRT. The MRT Limited Liability Company Agreement provides for the grant of contingent member units to employees of MRT, in an amount which, together with the 13.2% interests retained by such employees, does not exceed an aggregate of 20% in MRT, and for the purchase of the interest of minority members of MRT under certain circumstances in connection with a termination of employment at the Appraised Value of the purchased interest as determined pursuant to such agreement. The Company's interest in MRT is held through its Phibro-Tech subsidiary. As noted above, executives of Phibro-Tech hold an aggregate of 10.7% of the outstanding capital stock of Phibro-Tech. Prior to the Offering, Koffolk USA had a $1.0 million secured line of credit with The Berkshire Bank. Such credit facility was guaranteed by Jack Bendheim, who had also loaned $200,000 to Koffolk USA on a subordinated basis. Upon the closing of the Offering, the Company repaid $401,000, equal to all 79 amounts owed by Koffolk USA to The Berkshire Bank, and pursuant to the Koffolk USA Purchase, Mr. Bendheim sold all of the stock of Koffolk USA to the Company, in exchange for the cancellation of $1.5 million in indebtedness owed by Mr. Bendheim to the Company. The Company periodically advances funds to Jack Bendheim on a short-term, non-interest-bearing basis. The Company has advanced $200,000 to Marvin Sussman and his wife pursuant to a secured promissory note that is payable on demand and bears interest at the annual rate of 9%. DESCRIPTION OF CERTAIN INDEBTEDNESS The following is a summary of certain indebtedness of the Company. To the extent such summary contains descriptions of the New Credit Agreement and other loan documents, such descriptions do not purport to be complete and are qualified in their entirety by reference to such documents, which are available upon request from the Company. NEW CREDIT AGREEMENT In August 1998, the Company and certain of its domestic subsidiaries terminated the Old Credit Agreement with Fleet Bank (formerly National Westminster Bank NJ), and the Company and all of its domestic subsidiaries entered into the New Credit Agreement with PNC Bank, as agent and on behalf of itself. Pursuant to the New Credit Agreement, PNC and the other lenders thereunder (collectively, the "Lenders") are obligated to provide up to $60.0 million in senior secured financing, comprised of a $35.0 million revolving credit facility ("Revolving Facility") and a $25.0 million acquisition facility ("Acquisition Facility"). Borrowings under the Revolving Facility are limited to percentages of eligible domestic receivables and domestic inventory, with a sub-limit for inventory of $15.0 million. The Revolving Facility also includes a $7.5 million letter of credit sub-facility. Under the Revolving Facility, the Company may choose between two interest rate options: (i) the bank's or agent's published base rate as defined and (ii) the LIBOR rate as defined plus 2%, with such LIBOR margin subject to adjustment based on the Company's EBITDA as specified (which margin could range from 1 1/4% to 2%). The Company may also choose the duration (one to three months) for which the applicable interest rate may apply. Indebtedness under the Revolving Facility is secured by a first priority lien on domestic receivables and domestic inventory. The Company has agreed to pay a facility fee of 3/8% on the unused portion of the Revolving Facility, and has agreed to pay standard letter of credit fees to issuing banks. Borrowings under the Revolving Facility are available until, and are repayable no later than, August 28, 2003. Amounts outstanding under the Acquisition Facility can be drawn down, under certain circumstances, within two years, will amortize over the five-year term of the New Credit Agreement and will bear interest at PNC's published base rate plus 3/4% per annum or, at the Company's option, the LIBOR rate plus 2 1/2% per annum. Indebtedness outstanding under the Acquisition Facility will be guaranteed by each company acquired by the Company with financing under the Acquisition Facility, and each such guaranty will be secured by a first priority lien on substantially all of the assets of the acquired company. The indebtedness outstanding under the New Credit Agreement is guaranteed by all of the Company's domestic subsidiaries, and the Revolving Facility and Acquisition Facility are cross-defaulted. The New Credit Agreement also contains various covenants which restrict the Company and its subsidiaries with respect to, among other things, incurring indebtedness, entering into merger or consolidation transactions, disposing of assets (other than in the ordinary course of business), acquiring assets (with permitted exceptions), making certain restricted payments, repaying the Notes, creating any liens on the Company's assets, making investments, creating guarantee obligations and entering into sale and leaseback transactions and transactions with affiliates. The New Credit Agreement also 80 requires that the Company comply with various financial covenants, including a fixed charge coverage ratio and a minimum net worth requirement. The New Credit Agreement provides for certain events of default, including default upon the nonpayment of principal, interest, fees or other amounts, a cross default with respect to other obligations of the Company and its subsidiaries, failure to comply with certain covenants, conditions or provisions under the New Credit Agreement, the existence of certain unstayed or undischarged judgments, the invalidity or unenforceability of the relevant security documents, the making of materially false or misleading representations or warranties, commencement of reorganization, bankruptcy, insolvency or similar proceedings and the occurrence of certain ERISA events. Upon the occurrence of an event of default under the New Credit Agreement, the Lenders may declare all obligations thereunder to be immediately due and payable. The Company is likely from time to time, prior to the maturity date of the Notes, to refinance, replace, restructure, substitute for, amend or supplement the New Credit Agreement. The actual terms of any new or modified Credit Facility which replaces the New Credit Agreement could differ substantially from the facility summarized above. OTHER CREDIT FACILITIES Certain of the Company's foreign subsidiaries, including subsidiaries in Israel, France and Norway, have existing local credit arrangements. All amounts outstanding under such foreign credit arrangements were paid in full from the proceeds of the Offering. Koffolk Israel is in the process of negotiating a $10,000,000 working capital facility with Israeli banks for loans in various currencies, including dollars, deutsche marks, francs and shekels. Borrowings under such facility are expected to bear interest at the LIBOR rate as defined plus 1 1/2%. Such facility is expected to mature every 12 months, subject to renewal, and is expected to be secured by a general floating lien over the accounts receivables and inventories of Koffolk Israel and its Israeli subsidiaries. No assurance can be given that Koffolk Israel can successfully complete the entry into such or any other credit facility on terms acceptable to the Company. The Company's French subsidiary has entered into two Fr 7,500,000 (approximately $1,200,000 as of June 30, 1998) short-term bank facilities secured by French receivables, one with Banque Nationale de Paris, with interest at an average monthly money market rate ("T4M") plus 1%, and the other with Credit Agricole de la Gironde, with interest at T4M plus 1.5%. Such subsidiary has medium-term facilities with each of such banks of Fr 1,500,000. An additional facility with Societe Bordelaise de CIC provides for a Fr 3,000,000 unsecured overdraft with interest at T4M plus 1.5%. "T4M" was 3.377% at June 30, 1998. Each facility is subject to annual renewal and may be terminated by the lender on 60 days notice. For further information concerning such credit facilities, see Note 6 to the Company's Consolidated Financial Statements. ODDA has recently entered into two separate multi-currency revolving facilities, as follows: In August 1998, ODDA entered into a five year multi-currency credit facility, for NOK (Norwegian Kroner) 90,000,000 (approximately $11,750,000 as of June 30, 1998), in agreed Euro-currencies. Borrowings under such facility bear interest at the LIBOR or NIBOR rate as defined plus 0.475%. ODDA has agreed to pay a commitment fee of 1/4% on the unused portion of such facility. In August 1998, ODDA entered into a five-year multi-currency revolving credit facility, for NOK 65,000,000 (approximately $8,500,000 as of June 30, 1998), in agreed Euro-currencies. Borrowings under such facility bear interest at the LIBOR (or NIBOR) rate as defined plus the applicable margin. Such LIBOR or NIBOR margin shall be subject to adjustment based on ODDA's debt service coverage and equity ratios (which margins could be 3/4% or 1%). ODDA has agreed to pay a commitment fee equal to 50% of the applicable margin. In connection with both such facilities, ODDA may choose the duration (one, three or six months) for which the interest rate may apply. Indebtedness under both such currency facilities is secured by a lien on ODDA's receivables and inventory and a pledge of ODDA's shares of and receivables from Tyssefaldene, and a negative pledge on ODDA's other property and production facilities. 81 DESCRIPTION OF THE NOTES GENERAL The New Notes offered hereby will be issued under an Indenture (the "Indenture"), dated as of June 11, 1998, by and among the Company, the Guarantors and The Chase Manhattan Bank, as trustee (the "Trustee"). The following is a summary of the material provisions of the Indenture. This summary does not purport to be complete and is subject to the detailed provisions of, and is qualified in its entirety by reference to, the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), the Notes and the Indenture, including the definitions of certain terms contained therein and including those terms made part of the Indenture by reference to the Trust Indenture Act. A copy of the Indenture is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The definitions of certain terms used in the following summary are set forth below under "--Certain Definitions." Reference is made to the Indenture for the full definition of all such terms, as well as any other capitalized terms used herein for which no definition is provided. As used in this "Description of the Notes" section, reference to the "Company" means Philipp Brothers Chemicals, Inc., but not any of its subsidiaries (unless the context otherwise requires). MATURITY AND INTEREST The New Notes will be unsecured senior subordinated obligations of the Company limited in aggregate principal amount to $100,000,000. The New Notes will mature on June 1, 2008. Additional amounts may be issued in one or more series from time to time subject to the limitation set forth under the first paragraph of "--Certain Covenants--Limitation on Incurrence of Indebtedness" and restrictions contained in the Credit Facility. Interest on the Notes will accrue at the rate of 9 7/8% per annum and will be payable semi-annually in arrears on June 1 and December 1 in each year, commencing on December 1, 1998, to holders of record on the immediately preceding May 15 and November 15, respectively. Interest on the New Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from June 11, 1998 (the "Issue Date"). Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of interest on such Old Notes otherwise payable on any interest payment date the record date for which occurs on or after the consummation of the Exchange Offer. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Trustee will authenticate and deliver from time to time New Notes for original issue only in exchange for a like principal amount of Old Notes. Principal of, premium, if any, and interest on the New Notes will be payable at the office or agency of the Company maintained for such purpose in The City of New York or, at the option of the Company, payment of interest may be made by check mailed to the holders of the Notes at their respective addresses as set forth in the register of holders of Notes. Until otherwise designated by the Company, the Company's office or agency in The City of New York will be the office of the Trustee maintained for such purpose. The New Notes will be issued in fully registered form, without coupons, and in denominations of $1,000 and integral multiples thereof. No service charge will be made for any transfer, exchange or redemption of New Notes, except in certain circumstances for any tax or other governmental charge that may be imposed in connection therewith. For each Old Note accepted for exchange, the Holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Notes. All Old Notes and New Notes will be treated as a single class of securities under the Indenture. 82 THE GUARANTEES The Notes are guaranteed on a senior subordinated basis by each of the Guarantors. Each of the Guarantors has fully and unconditionally guaranteed (each, a "Guarantee") on a joint and several basis all of the Company's obligations under the Notes and the Indenture, including its obligations to pay principal, premium, if any, and interest with respect to the Notes. The Guarantees are subordinated to all existing and future Senior Debt of the respective Guarantors, including such Guarantor's guarantees of the Company's obligations under the Credit Facility. Except as provided in "--Certain Covenants" below, the Company is not restricted from selling or otherwise disposing of any of the Guarantors. Pursuant to the Guarantees, if the Company defaults in payment of any amount owing in respect of any Notes, each Guarantor is obligated to duly and punctually pay the same. Pursuant to the terms of the Indenture, each of the Guarantors has agreed that its obligations under its Guarantee are unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. If no Default exists or would exist under the Indenture, concurrently with any sale or disposition (by merger or otherwise) of any Guarantor (other than a transaction subject to the provisions described under "--Merger, Consolidation and Sale of Assets") by the Company or a Restricted Subsidiary to any person or entity that is not a Subsidiary of the Company which transaction is in compliance with the terms of the Indenture, such Guarantor will automatically and unconditionally be released from all obligations under its Guarantee. REDEMPTION Mandatory Redemption. The Notes are not subject to any mandatory sinking fund redemption prior to maturity. Optional Redemption. The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after June 1, 2003 at the redemption prices (expressed as percentages of the principal amount of the Notes) set forth below plus in each case accrued and unpaid interest, if any, to the date of redemption, if redeemed during the twelve-month period beginning on June 1, of the years indicated below:
YEAR PERCENTAGE - ------------------------------------------------------------- ---------- 2003......................................................... 104.938% 2004......................................................... 103.292% 2005......................................................... 101.646% 2006 and thereafter.......................................... 100.000%
In addition, at any time prior to June 1, 2001, the Company may, at its option, redeem up to 30% of the sum of (i) the initial aggregate principal amount of the Notes issued in the Offering and (ii) the respective initial aggregate principal amount of the Notes issued under the Indenture after the Issue Date, on one or more occasions with the net proceeds of one or more Public Equity Offerings at 109 7/8% of the principal amount thereof, plus accrued interest to the date of redemption; provided, that immediately after giving effect to such redemption, at least 70% of the sum of (i) $100 million (the initial aggregate principal amount of the Notes issued in the Offering) and (ii) the respective initial aggregate principal amount of the Notes issued under the Indenture after the Issue Date remain outstanding (other than any Notes owned by the Company or any of its Affiliates). In order to effect the foregoing redemption with the proceeds of any Public Equity Offering, the Company shall make such redemption not more than 90 days after the consummation of any such Public Equity Offering. "Public Equity Offering" means an underwritten public offering of Capital Stock (other than Disqualified Stock) of the Company pursuant to an effective registration statement filed under the Securities Act. 83 Selection and Notice. If less than all of the Notes are to be redeemed at any time, selection of the Notes to be redeemed will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a securities exchange, on a pro rata basis or by lot or any other method as the Trustee shall deem fair and appropriate; provided, that Notes redeemed in part shall only be redeemed in integral multiples of $1,000; and provided, further, that any such redemption pursuant to the provisions relating to a Public Equity Offering shall be made on a pro rata basis or on as nearly a pro rata basis as practicable (subject to the procedures of The Depository Trust Company or any other depositary), unless such method is otherwise prohibited. Notices of any optional or mandatory redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at such holder's registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed, and the Trustee shall authenticate and mail to the holder of the original Note a new Note in principal amount equal to the unredeemed portion of the original Note promptly after the original Note has been canceled. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption. SUBORDINATION The payment of the principal of, premium, if any, and interest on, or Liquidated Damages, if any, with respect to, the Notes is subordinated, as set forth in the Indenture, in right of payment to the prior payment in full of all existing and future Senior Debt (including the indebtedness under the Credit Facility). The Notes are senior subordinated indebtedness of the Company ranking pari passu with all other existing and future senior subordinated indebtedness of the Company. Upon any payment or distribution of cash, securities or other property of the Company to creditors upon any liquidation, dissolution or winding up of the Company, or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property or securities, an assignment for the benefit of creditors or any marshalling of the Company's assets or liabilities, the holders of any Senior Debt of the Company will be entitled to receive payment in full, in cash in the case of the Credit Facility, or in cash or Cash Equivalents in the case of any other Senior Debt, of all obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the agreements governing such Senior Debt) before the holders of the Notes or the Trustee on behalf of such holders will be entitled to receive any payment or distribution with respect to the Notes. The Company also may not make any payment upon or in respect of the Notes (except from the trust described under "--Defeasance" below) if (i) a default in the payment of the principal of, premium, if any, or interest on any Designated Senior Debt occurs and is continuing, whether at maturity or on a date fixed for payment or prepayment or by declaration of acceleration or otherwise, or (ii) the Trustee has received written notice ("Payment Blockage Notice") from the representative of any holders of Designated Senior Debt that a nonpayment default has occurred and is continuing with respect to such Designated Senior Debt that permits such holders to accelerate the maturity of such Designated Senior Debt. Payments on the Notes shall resume (and all past due amounts on the Notes, with interest thereon as specified in the Indenture, shall be paid) (i) in the case of a payment default in respect of any Designated Senior Debt, on the date on which such default is cured or waived or otherwise ceases to exist; and (ii) in the case of a nonpayment default in respect of any Designated Senior Debt, on the earlier of (a) the date on which such nonpayment default is cured or waived, or (b) 179 days after the date on which the Payment Blockage Notice with respect to such default was received by the Trustee, in each case, unless the maturity of any Designated Senior Debt has been accelerated and the Company has defaulted with respect to the payment of such Designated Senior Debt, or (c) the date on which such Payment Blockage Period (as defined below) shall have been terminated by written notice to the Company or the Trustee from the representative of the holders of Designated Senior Debt initiating such Payment Blockage Period. During any consecutive 365-day period, the aggregate number of days in which payments due on the Notes may not be made as a result of nonpayment defaults on Designated 84 Senior Debt (a "Payment Blockage Period") shall not exceed 179 days, and there shall be a period of at least 186 consecutive days in each consecutive 365-day period during which no Payment Blockage Period is in effect. No event or circumstance that creates a nonpayment default under any Designated Senior Debt that (i) gives rise to the commencement of a Payment Blockage Period or (ii) exists at the commencement of or during any Payment Blockage Period shall be made the basis for the commencement of any subsequent Payment Blockage Period unless such default has been cured or waived for a period of not less than 90 consecutive days. As a result of the subordination provisions described above, holders of Notes may recover less ratably than creditors holding Senior Debt of the Company. In such circumstances, funds which would otherwise be payable to the holders of the Notes will be paid to the holders of the Senior Debt to the extent necessary to pay the Senior Debt in full in cash in the case of the Credit Facility, or in cash or Cash Equivalents in the case of any other Senior Debt, and the Company may be unable to meet its obligations fully with respect to the Notes. If the Company fails to make any payment on the Notes when due or within any applicable grace period, whether or not on account of the payment blockage provisions referred to above, such failure would constitute an Event of Default under the Indenture and would enable the holders of the Notes to accelerate the maturity thereof. See "--Events of Default." As of June 30, 1998, after giving effect to the Transactions, the Company and the Guarantors had approximately $4.3 million in aggregate principal amount of Senior Debt and $35.0 million of availability, subject to a borrowing base, under the Credit Facility. The Company's operations are predominantly conducted through subsidiaries. Although the Company's domestic subsidiaries have guaranteed the Notes, the Company's foreign subsidiaries have not guaranteed or otherwise become obligated with respect to the Notes. Claims of creditors of such subsidiaries, including trade creditors, will generally have priority as to the assets of such subsidiaries over the claims of the Company and the holders of the Company's indebtedness, including the Notes. The Notes will therefore be effectively subordinated to all existing and future liabilities, including indebtedness, of the Company's foreign subsidiaries. As of June 30, 1998, after giving effect to the Transactions, the Company's foreign subsidiaries had no indebtedness for borrowed money (other than to Philipp Brothers) and had other liabilities of approximately $22.5 million reflected on the Company's consolidated balance sheet. In addition, in the event a Guarantor's obligations under a Guarantee were voided, the Notes will be similarly subordinated to the Indebtedness and the liabilities of the Guarantors. As of June 30, 1998, after giving effect to the Transactions, the Guarantors had $40.9 million of Indebtedness and other liabilities reflected on the Company's consolidated balance sheet. See "Risk Factors--Fraudulent Transfer Considerations." CHANGE OF CONTROL In the event of a Change of Control, each holder of Notes will have the right, unless the Company has given a notice of redemption, subject to the terms and conditions of the Indenture, to require the Company to offer to purchase all or any portion (equal to $1,000 or an integral multiple thereof) of such holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase, in accordance with the terms set forth below (a "Change of Control Offer"). The New Credit Agreement contains a "change of control" provision that is similar to the provision in the Indenture relating to a Change of Control, and the occurrence of such a "change of control" would constitute a default under the New Credit Agreement. The Company's obligations under the New Credit Agreement represent obligations senior in right of payment to the Notes and the New Credit Agreement will not permit the purchase of the Notes absent consent of the lenders thereunder in the event of a change of control thereunder (although the failure by the Company to comply with its obligations in the event of a Change of Control under the Indenture would constitute a Default under the Notes. 85 In addition, other debt instruments of the Company may in the future restrict the Company's ability to purchase Notes pursuant to a Change of Control Offer. Moreover, such debt instruments may contain a "change of control" provision that is similar to the provision in the Indenture relating to a Change of Control, and the occurrence of such a "change of control" would constitute a default under such debt instruments. The Company's obligations under such debt instruments may represent obligations senior in right of payment to the Notes, and such debt instruments may not permit the purchase of the Notes absent consent of the lenders thereunder in the event of a Change of Control. Notwithstanding the foregoing, the failure of the Company to effect a Change of Control Offer would constitute an Event of Default under the Indenture. If the Company is unable to obtain the requisite consents and/or repay all indebtedness which restricts the Company's ability to repurchase the Notes upon the occurrence of a Change of Control, the Company may not be able to commence a Change of Control Offer to purchase the Notes within 30 days of the occurrence of the Change of Control. Such failure would constitute an Event of Default under the Indenture. If a Change of Control were to occur, there can be no assurance that the Company would have sufficient assets to first satisfy its obligations under any other agreements relating to indebtedness, if accelerated, and then to purchase all of the Notes that might be delivered by holders seeking to accept a Change of Control Offer. On or before the 30th day following the occurrence of any Change of Control, the Company shall mail to each holder of Notes at such holder's registered address a notice stating: (i) that a Change of Control has occurred and that such holder has the right to require the Company to purchase all or a portion (equal to $1,000 or an integral multiple thereof) of such holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase (the "Change of Control Purchase Date"), which shall be a business day, specified in such notice, that is not earlier than 30 days or later than 60 days from the date such notice is mailed, (ii) the amount of accrued and unpaid interest, if any, as of the Change of Control Purchase Date, (iii) that any Note not tendered will continue to accrue interest, (iv) that, unless the Company defaults in the payment of the purchase price for the Notes payable pursuant to the Change of Control Offer, any Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest on the Change of Control Purchase Date, (v) the procedures, consistent with the Indenture, to be followed by a holder of Notes in order to accept a Change of Control Offer or to withdraw such acceptance, and (vi) such other information as may be required by the Indenture and applicable laws and regulations. On the Change of Control Purchase Date, the Company will (i) accept for payment all Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent the aggregate purchase price of all Notes or portions thereof accepted for payment, and (iii) deliver or cause to be delivered to the Trustee all Notes tendered pursuant to the Change of Control Offer. The Paying Agent shall promptly mail to each holder of Notes or portions thereof accepted for payment an amount equal to the purchase price for such Notes plus accrued and unpaid interest, if any, thereon, and the Trustee shall promptly authenticate and mail to each holder of Notes accepted for payment in part a new Note equal in principal amount to any unpurchased portion of the Notes, and any Note not accepted for payment in whole or in part shall be promptly returned to the holder of such Note. On and after a Change of Control Purchase Date, interest will cease to accrue on the Notes or portions thereof accepted for payment, unless the Company defaults in the payment of the purchase price therefor. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date. As used in the definition of Change of Control, the phrase "all or substantially all" of the capital stock or assets of the Company and its Restricted Subsidiaries will likely be interpreted under applicable state law and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or disposition of "all or substantially all" of the capital stock or assets of the Company and its Restricted Subsidiaries has occurred, in which case a holder's ability to obtain the benefit of a Change or Control Offer may be impaired. 86 The Company will comply with the applicable tender offer rules, including the requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all other applicable securities laws and regulations in connection with any Change of Control Offer and will be deemed not to be in violation of any of the covenants under the Indenture to the extent such compliance is in conflict with such covenants. CERTAIN COVENANTS Limitation on Incurrence of Indebtedness. The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or directly or indirectly guarantee or in any other manner become directly or indirectly liable for ("incur") any Indebtedness (including Acquired Debt), except that the Company and any Restricted Subsidiary may incur Indebtedness (including Acquired Debt) if, at the time of, and immediately after giving pro forma effect to, such incurrence of Indebtedness, the Consolidated Cash Flow Coverage Ratio of the Company for the most recently ended four fiscal quarters would be at least 2.0 to 1.0 if incurred during the period from the Issue Date through June 1, 2000, and 2.25 to 1.0 if incurred thereafter. The foregoing limitations do not apply to the incurrence of any of the following (collectively, "Permitted Indebtedness"), each of which shall be given independent effect: (i) Indebtedness of the Company arising under the Credit Facility, in an aggregate principal amount not to exceed at any time outstanding the greater of (x) $35.0 million and (y) the sum, at such time, of (I) 80% of the consolidated book value of eligible receivables of the Company and the Restricted Subsidiaries and (II) 60% of the consolidated book value of inventory of the Company and the Restricted Subsidiaries; (ii) Indebtedness of the Company and the Guarantors represented by the Notes, the Guarantees and the New Notes; (iii) Indebtedness of the Company or any Restricted Subsidiary not covered by any other clause of this paragraph which is outstanding on the Issue Date ("Existing Indebtedness"); (iv) Indebtedness owed or issued by any Restricted Subsidiary to the Company or to another Restricted Subsidiary, or owed or issued by the Company to any Restricted Subsidiary; provided, however, that any such Indebtedness shall at all times be held by a Person which is either the Company or a Restricted Subsidiary; provided, further, however, that upon either (a) the transfer or other disposition of any such Indebtedness to a Person other than the Company or another Restricted Subsidiary or (b) the sale, lease, transfer or other disposition of shares of Capital Stock (including by consolidation or merger) of any such Restricted Subsidiary to a Person other than the Company or another Restricted Subsidiary, the incurrence of such Indebtedness shall be deemed to be an incurrence that is not permitted by this clause (iv); (v) Indebtedness of the Company or any Restricted Subsidiary arising with respect to Interest Rate Agreement Obligations and Currency Agreement Obligations incurred for the purpose of fixing or hedging interest rate risk or currency risk with respect to any fixed or floating rate Indebtedness that is permitted by the terms of the Indenture to be outstanding or with respect to any receivable or liability the payment of which is determined by reference to a foreign currency; (vi) Indebtedness represented by performance, completion, guarantee, surety and similar bonds and assurances provided by or for the Company or any Restricted Subsidiary in the ordinary course of business; (vii) any Indebtedness incurred in connection with or given in exchange for the renewal, extension, substitution, refunding, defeasance, refinancing or replacement, in whole or in part (a "refinancing"), of any Indebtedness incurred as permitted under the first paragraph of this covenant or any Indebtedness described in any of clauses (ii) or (iii) above, this clause (vii) and clauses (x), (xi) or (xii) below ("Refinancing Indebtedness"); provided, however, that (a) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount (or accreted amount, if less, 87 or in the case of a revolving credit facility the maximum amount of the facility, if more) of the Indebtedness so refinanced (plus the premiums and reasonable expenses to be paid in connection therewith, which, with respect to such premiums, shall not exceed the stated amount of any premium or other payment required to be paid in connection with such a refinancing pursuant to the terms of the Indebtedness being refinanced); (b) if the Weighted Average Life to Maturity of the Indebtedness being refinanced is equal to or greater than the Weighted Average Life to Maturity of the Notes, the Refinancing Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being refinanced; (c) with respect to Refinancing Indebtedness other than Senior Debt incurred by the Company or a Guarantor, such Refinancing Indebtedness shall rank no more senior than, and, if applicable, shall be at least as subordinated in right of payment to the Notes as, the Indebtedness being refinanced; and (d) the obligor on such Refinancing Indebtedness shall be the obligor on the Indebtedness being refinanced or the Company; (viii) Indebtedness of the Company or any Restricted Subsidiary (a) representing Capital Lease Obligations and any amendments, modifications, renewals, refundings, replacements or refinancings thereof and/or (b) in respect of Purchase Money Obligations for property acquired, constructed or improved in the ordinary course of business and any refinancings thereof, which taken together in the aggregate principal amount do not exceed the greater of (i) $5.0 million and (ii) 5% of Consolidated Tangible Assets of the Company at any one time outstanding; (ix) commodity agreements entered into in the ordinary course of business to protect against fluctuations in the prices of raw materials and not for speculative purposes; (x) Indebtedness incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self- insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims or self-insurance; (xi) Indebtedness of Koffolk arising under the Koffolk Credit Facility, in an aggregate principal amount not to exceed at any time outstanding the greater of (x) $10.0 million and (y) the sum, at such time, of (I) 80% of the book value of eligible receivables of Koffolk and its Israeli subsidiaries and (II) 50% of the book value of inventory of Koffolk and its Israeli subsidiaries; provided that the aggregate principal amount at any time outstanding shall not, in any case, exceed $15.0 million and such Indebtedness is issued for working capital purposes; (xii) Indebtedness of Foreign Subsidiaries of the Company incurred to finance working capital of such Foreign Subsidiaries in an aggregate principal amount at any time outstanding not to exceed the sum of (x) 80% of the book value of net accounts receivable of such Foreign Subsidiaries and (y) 50% of the book value of the inventory of such Foreign Subsidiaries; (xiii) Guarantees by the Company and its Restricted Subsidiaries of each other's Indebtedness; provided that such Indebtedness is permitted to be incurred under the Indenture; and (xiv) Indebtedness of the Company or any Restricted Subsidiary in addition to that described in clauses (i) through (xiii) above, and any amendments, modifications, renewals, refundings, replacements or refinancings of such Indebtedness, so long as the aggregate principal amount of all such Indebtedness incurred pursuant to this clause (xiv) does not exceed $5.0 million at any one time outstanding. For purposes of determining any particular amount of Indebtedness under this covenant, Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included. Indebtedness of any Person which is outstanding at the time such Person becomes a Restricted Subsidiary or is merged with or into or consolidated with the Company or a Restricted Subsidiary shall 88 be deemed to have been incurred at the time such Person becomes a Restricted Subsidiary or is merged with or into or consolidated with the Company or a Restricted Subsidiary, and Indebtedness which is assumed at the time of the acquisition of any asset shall be deemed to have been incurred at the time of such acquisition. Limitation on Restricted Payments. The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment, unless at the time of and immediately after giving effect to the proposed Restricted Payment (with the value of any such Restricted Payment, if other than cash, to be determined reasonably and in good faith by the Board of Directors of the Company): (i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (ii) the Company could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the covenant described under "--Limitation on Incurrence of Indebtedness;" and (iii) the aggregate amount of all Restricted Payments made after the Issue Date shall not exceed the sum of: (a) an amount equal to 50% of the Company's aggregate cumulative Consolidated Net Income accrued on a cumulative basis during the period (treated as one accounting period) beginning on the first day of the first calendar month after the Issue Date and ending on the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Net Income for such period shall be a deficit, minus 100% of such deficit); plus (b) the aggregate amount of all net cash proceeds received since the Issue Date by the Company from the issuance and sale (other than to a Restricted Subsidiary) of, or equity contribution with respect to, Capital Stock (other than Disqualified Stock) and the principal amount of Indebtedness of the Company or any Restricted Subsidiary issued or incurred on or after the Issue Date that has been converted into or exchanged for Capital Stock (other than Disqualified Stock), in any such case and solely for purposes of avoiding duplication, to the extent that such proceeds are not theretofore used (x) to redeem, repurchase, retire or otherwise acquire Capital Stock or any Indebtedness of the Company or any Restricted Subsidiary pursuant to clause (ii) of the next paragraph or (y) to make any Restricted Investment pursuant to clause (iv) of the next paragraph; plus (c) the amount of the net reduction in Investments in Unrestricted Subsidiaries resulting from (x) the payment of dividends or the repayment in cash of the principal of loans or the cash return on any Investment, in each case to the extent received by the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, (y) the release or extinguishment of any Guarantee of Indebtedness of any Unrestricted Subsidiary, and (z) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued as provided in the definition of "Investment"), such aggregate amount of the net reduction in Investments not to exceed in the case of any Unrestricted Subsidiary the amount of Restricted Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments; plus (d) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or the proceeds of such sale are converted into cash or otherwise liquidated or repaid for cash, the amount of cash proceeds received with respect to such Restricted Investment, net of taxes and the cost of disposition, not to exceed the amount of Restricted Investments made after the Issue Date. 89 The foregoing provisions do not prohibit, so long as no Default or Event of Default is continuing, the following actions (collectively, "Permitted Payments"): (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such payment would have been permitted under the Indenture (which payment shall be deemed to have been paid on such date of declaration for purposes of clause (iii) of the preceding paragraph); (ii) the redemption, repurchase, retirement or other acquisition of any Capital Stock or any Indebtedness of the Company or any Restricted Subsidiary in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary) of, or equity contribution with respect to, Capital Stock of the Company (other than any Disqualified Stock); (iii) any purchase or defeasance of Subordinated Indebtedness to the extent required upon a Change of Control or Asset Sale (as defined therein) by the indenture or other agreement or instrument pursuant to which such Subordinated Indebtedness was issued or any refinancing of Subordinated Indebtedness permitted by the indenture or other agreement or instrument pursuant to which such Subordinated Indebtedness was issued, but only if the Company (x) in the case of a Change of Control, has complied with its obligations under the provisions described under "--Change of Control" or (y) in the case of an Asset Sale, has applied the Net Proceeds from such Asset Sale in accordance with the provisions described under "--Limitation on Asset Sales;" (iv) any Restricted Investment to the extent the sole consideration for which consists of, or is made with the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of, or equity contribution with respect to, Capital Stock of the Company (other than any Disqualified Stock); (v) the repurchase of Capital Stock of the Company (including options, warrants or other rights to acquire such Capital Stock) from departing or deceased directors, officers and employees of the Company and its Subsidiaries pursuant to the terms of an employee benefit plan or employee agreement in an amount that shall not exceed $250,000 in any fiscal year plus any amount available for such payments hereunder since the Issue Date which have not been used for such purpose and in no event shall such payments exceed $1.0 million in any fiscal year, in each case, plus the aggregate cash proceeds from any payments on insurance policies in which the Company or any of its Subsidiaries is the beneficiary with respect to any directors, officers or employees of the Company and its Subsidiaries which proceeds are used to purchase the Capital Stock of the Company or any Restricted Subsidiary of the Company held by any of such directors, officers or employees; and the repurchase of Capital Stock of the Company or a Restricted Subsidiary by the Company or such Restricted Subsidiary pursuant to the terms of any of the Shareholders Agreements; (vi) loans or advances to employees of the Company or any of its Subsidiaries which loans or advances exist on the Issue Date, and other loans or advances to employees of the Company or any Subsidiary to pay reasonable relocation expenses or otherwise entered into in the ordinary course of business not to exceed $500,000 in the aggregate principal amount at any one time; (vii) Restricted Investments in an amount such that the sum of the aggregate amount of Restricted Investments made pursuant to this clause (vii) after the Issue Date does not exceed $5.0 million at any one time outstanding; and (viii) payments made in accordance with the table appearing under the caption "Use of Proceeds" (other than the ODDA Acquisition, other acquisitions and general corporate purposes) in the Offering Memorandum pursuant to which the Notes are offered and sold. For purposes of clause (iii) of the first paragraph of this covenant, the Permitted Payments referred to in clauses (i), (v) and (vii) above shall be included in the aggregate amount of Restricted Payments made since the Issue Date, and any other Permitted Payments described above shall be excluded. 90 Limitation on Asset Sales. The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, make any Asset Sale unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value (as evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or other property sold or disposed of in the Asset Sale and (ii) at least 75% of such consideration consists of either cash or Cash Equivalents; provided, however, that for purposes of this covenant, "cash" shall include (x) the amount of any Indebtedness (other than any Indebtedness that is by its terms subordinated to the Notes and/or the Guarantees) of the Company or such Restricted Subsidiary as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto that is assumed by the transferee of any such assets or other property in such Asset Sale (and excluding any liabilities that are incurred in connection with or in anticipation of such Asset Sale), but only to the extent that such assumption is effected on a basis such that there is no further recourse to the Company or any of the Restricted Subsidiaries with respect to such liabilities and (y) any notes, obligations or securities received by the Company or such Restricted Subsidiary from such transferee that are converted within 60 days by the Company or such Restricted Subsidiary into cash (to the extent of the cash received). Within 270 days after receipt of Net Proceeds from any Asset Sale, the Company may elect to apply the Net Proceeds from such Asset Sale to (a) permanently reduce any Senior Debt and/or (b) make an investment in, or acquire assets and properties that will be used in, the business of the Company, or a Restricted Subsidiary, existing on the Issue Date or in a Related Business. Pending the final application of any such Net Proceeds, the Company or any Restricted Subsidiary may temporarily reduce Indebtedness of the Company under the Credit Facility or temporarily invest such Net Proceeds in cash or Cash Equivalents. Any Net Proceeds from an Asset Sale not applied or invested as provided in the first sentence of this paragraph within 270 days of such Asset Sale will be deemed to constitute "Excess Proceeds." Each date that the aggregate amount of Excess Proceeds in respect of which an Asset Sale Offer (as defined below) has not been made exceeds $5.0 million shall be deemed an "Asset Sale Offer Trigger Date." As soon as practicable, but in no event later than 20 business days after each Asset Sale Offer Trigger Date, the Company shall commence an offer (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds. Any Notes to be purchased pursuant to an Asset Sale Offer shall be purchased pro rata based on the aggregate principal amount of Notes outstanding, and all Notes shall be purchased at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. To the extent that any Excess Proceeds remain after completion of an Asset Sale Offer, the Company may use the remaining amount for general corporate purposes otherwise permitted by the Indenture. In the event that the Company is prohibited under the terms of any agreement governing outstanding Senior Debt of the Company from repurchasing Notes with Excess Proceeds pursuant to an Asset Sale Offer as set forth in the first sentence of this paragraph, the Company shall promptly use all Excess Proceeds to reduce permanently such outstanding Senior Debt of the Company. Upon the consummation of any Asset Sale Offer, the amount of Excess Proceeds shall be deemed to be reset to zero. Notice of an Asset Sale Offer shall be mailed by the Company not later than the 20th business day after the related Asset Sale Offer Trigger Date to each holder of Notes at such holder's registered address, stating: (i) that an Asset Sale Offer Trigger Date has occurred and that the Company is offering to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds (to the extent provided in the immediately preceding paragraph), at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of the purchase (the "Asset Sale Offer Purchase Date"), which shall be a business day, specified in such notice, that is not earlier than 30 days or later than 60 days from the date such notice is mailed, (ii) the amount of accrued and unpaid interest, if any, as of the Asset Sale Offer Purchase Date, (iii) that any Note not tendered will continue to accrue interest, (iv) that, unless the Company defaults in the payment of the purchase price for the Notes payable pursuant to the Asset Sale Offer, any Notes accepted for 91 payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Offer Purchase Date, (v) the procedures, consistent with the Indenture, to be followed by a holder of Notes in order to accept an Asset Sale Offer or to withdraw such acceptance, and (vi) such other information as may be required by the Indenture and applicable laws and regulations. On the Asset Sale Offer Purchase Date, the Company will (i) accept for payment the maximum principal amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer that can be purchased out of Excess Proceeds from such Asset Sale that are to be applied to an Asset Sale Offer, (ii) deposit with the Paying Agent the aggregate purchase price of all Notes or portions thereof accepted for payment, and (iii) deliver or cause to be delivered to the Trustee all Notes tendered pursuant to the Asset Sale Offer. If less than all Notes tendered pursuant to the Asset Sale Offer are accepted for payment by the Company for any reason consistent with the Indenture, selection of the Notes to be purchased by the Company shall be in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis or by lot; provided, however, that Notes accepted for payment in part shall only be purchased in integral multiples of $1,000. The Paying Agent shall promptly mail to each holder of Notes or portions thereof accepted for payment an amount equal to the purchase price for such Notes plus accrued and unpaid interest, if any, thereon, and the Trustee shall promptly authenticate and mail to such holder of Notes accepted for payment in part a new Note equal in principal amount to any unpurchased portion of the Notes, and any Note not accepted for payment in whole or in part shall be promptly returned to the holder of such Note. On and after an Asset Sale Offer Purchase Date, interest will cease to accrue on the Notes or portions thereof accepted for payment, unless the Company defaults in the payment of the purchase price therefor. The Company will publicly announce the results of the Asset Sale Offer on or as soon as practicable after the Asset Sale Offer Purchase Date. The foregoing provisions will not apply to a transaction consummated in compliance with the provisions of the Indenture described under "--Merger, Consolidation and Sale of Assets" below. The Company will comply with the applicable tender offer rules, including the requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all other applicable securities laws and regulations in connection with any Asset Sale Offer and will be deemed not to be in violation of any of the covenants under the Indenture to the extent such compliance is in conflict with such covenants. Limitation on Liens. The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness that is pari passu with or subordinated in right of payment to the Notes (other than Permitted Liens) on any asset now owned or hereafter acquired, or any income or profits therefrom, or assign or convey any right to receive income therefrom to secure any such Indebtedness, unless (i) if such Lien secures Indebtedness which is pari passu with the Notes, then the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligation is no longer secured by a Lien or (ii) if such Lien secures Indebtedness which is subordinated to the Notes, any such Lien shall be subordinated to a Lien granted to the holders of the Notes in the same collateral as that securing such Lien to the same extent as such Subordinated Indebtedness is subordinated to the Notes. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause to become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions to the Company or any other Restricted Subsidiary on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (ii) make loans or advances to, or issue Guarantees for the benefit of, the Company or any other Restricted Subsidiary or (iii) transfer any of its properties or assets to the Company or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of (a) the Credit Facility as in effect on the Issue Date, and any amendments, modifications, renewals, refundings, replacements or refinancings thereof; provided that such 92 amendments, modifications, renewals, refundings, replacements or refinancings are no more restrictive in the aggregate with respect to such dividend and other payment restrictions than those contained in the Credit Facility (or, if more restrictive, than those contained in the Indenture) immediately prior to any such amendment, restatement, renewal, replacement or refinancing, (b) applicable law, (c) any instrument governing Indebtedness or Capital Stock of an Acquired Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition); provided, however, that no such encumbrance or restriction is applicable to any Person, or the properties or assets of any Person, other than the Acquired Person, (d) by reason of customary non-assignment, subletting or net worth provisions in leases or other agreements entered into the ordinary course of business, (e) Purchase Money Obligations for property acquired in the ordinary course of business that impose restrictions only on the property so acquired, (f) an agreement for the sale or disposition of assets or the Capital Stock of a Restricted Subsidiary; provided, however, that such restriction or encumbrance is only applicable to such Restricted Subsidiary or assets, as applicable, and such sale or disposition otherwise is permitted by the provisions described under "--Limitation on Asset Sales;" provided, further, however, that such restriction or encumbrance shall be effective only for a period from the execution and delivery of such agreement through a termination date not later than 270 days after such execution and delivery, (g) Refinancing Indebtedness permitted under the Indenture; provided, however, that the restrictions contained in the agreements governing such Refinancing Indebtedness are no more restrictive in the aggregate than those contained in the agreements governing the Indebtedness being refinanced immediately prior to such refinancing, (h) the Indenture, the Notes and the Guarantees and (i) encumbrances and restrictions imposed by amendments, restatements, renewals, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (a) through (h) above; provided that such encumbrances and restrictions are, in the good faith judgment of the Company's Board of Directors, no more restrictive, in any material respect, than those contained in such contracts, instruments or obligations immediately prior to such amendment, restatement, renewal, replacement or refinancing. Limitation on Transactions with Affiliates. The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or suffer to exist any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate of the Company unless (1) such transaction or series of transactions is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could reasonably be obtainable at such time in a comparable transaction in arm's-length dealings with an unrelated third party, and (2) the Company delivers to the Trustee (a) with respect to any transaction or series of transactions involving aggregate payments in excess of $500,000, an Officers' Certificate certifying that such transaction or series of related transactions complies with clause (1) above and (b) with respect to any transaction or series of transactions involving aggregate payments in excess of $2.0 million, an Officer's Certificate certifying that such transaction or series of related transactions has been approved by a majority of the members of the Board of Directors of the Company, and (c) with respect to any transaction or series of transactions involving aggregate payments in excess of $5.0 million, an opinion as to the fairness of the transaction to the Company from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. Notwithstanding the foregoing, this covenant does not apply to (i) employment agreements or compensation or employee benefit arrangements with any officer, director or employee of the Company or any of its Restricted Subsidiaries entered into in the ordinary course of business (including customary benefits thereunder and including reimbursement or advancement of out-of-pocket expenses, and director's and officer's liability insurance), (ii) any transaction entered into by or among the Company or one of its Restricted Subsidiaries with one or more Restricted Subsidiaries of the Company, (iii) any transaction permitted by the second paragraph under "--Limitation on Restricted Payments," (iv) transactions permitted by, and complying with, the provisions described under "--Merger, Consolidation and Sale of Assets," and (v) any transaction described under the caption "Use of Proceeds" in the Offering Memorandum pursuant to which the Notes are offered and sold. 93 Limitation on Designation of Unrestricted Subsidiaries. The Indenture provides that the Company will not designate any Subsidiary of the Company (other than a newly created Subsidiary in which no Investment has previously been made) as an "Unrestricted Subsidiary" under the Indenture (a "Designation") unless: (a) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (b) immediately after giving effect to such Designation, the Company would be able to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the covenant described under "--Limitation on Incurrence of Indebtedness;" and (c) the Company would not be prohibited under the Indenture from making an Investment at the time of Designation in an amount (the "Designation Amount") equal to the greater of (x) the book value of such Restricted Subsidiary on such date and (y) the Fair Market Value of such Restricted Subsidiary on such date. In the event of any such Designation, the Company shall be deemed to have made an Investment constituting a Restricted Payment pursuant to the covenant described under "--Limitation on Restricted Payments" for all purposes of the Indenture in an amount equal to the Designation Amount. The Indenture further provides that the Company will not designate an Unrestricted Subsidiary as a Restricted Subsidiary (a "Redesignation"), unless: (a) no Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation; and (b) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Redesignation shall be deemed to have been incurred at such time and shall have been permitted to be incurred for all purposes of the Indenture. An Unrestricted Subsidiary shall be deemed to be redesignated as a Restricted Subsidiary at any time if (a) the Company or any other Restricted Subsidiary (i) provides credit support for, or a guarantee of, any Indebtedness of such Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness) or (ii) is directly or indirectly liable for any Indebtedness of such Unrestricted Subsidiary or (b) a default with respect to any Indebtedness of such Unrestricted Subsidiary (including any right which the holders thereof may have to take enforcement action against it) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity, except in the case of clause (a) to the extent permitted under the covenant described above under the caption "--Limitation on Restricted Payments." None of the Company's Subsidiaries were Unrestricted Subsidiaries as of the Issue Date. All Designations and Redesignations must be evidenced by Board Resolutions delivered to the Trustee certifying compliance with the foregoing provisions. Subsidiaries that are not designated by the Board of Directors as Restricted or Unrestricted Subsidiaries will be deemed to be Restricted Subsidiaries. The Designation of a Restricted Subsidiary as an Unrestricted Subsidiary shall be deemed a Designation of all of the Subsidiaries of such Unrestricted Subsidiary as Unrestricted Subsidiaries. Sale and Leaseback Transactions. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company or any Restricted Subsidiary may enter into a sale and leaseback transaction if (a) the Company could have (i) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to either (1) the Consolidated Cash Flow Coverage Ratio test set forth in the first paragraph of the covenant described under "--Limitation on Incurrence of Indebtedness" or (2) clause (xiv) of the definition of the term "Permitted Indebtedness" and (ii) incurred a Lien to secure such Indebtedness pursuant to the covenant described under "--Limitation on Liens," and (b) the sale portion of such sale and leaseback transaction complies with the covenant described 94 under "--Limitation on Asset Sales," and the net proceeds from such sale are applied in accordance with such covenant and (c) the cash proceeds of such sale and leaseback transaction are at least equal to the Fair Market Value (as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction. Business Activities. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than a Related Business. Limitation on Incurrence of Senior Subordinated Indebtedness. The Indenture provides that the Company (i) will not, directly or indirectly, incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinated or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes and (ii) will not, directly or indirectly, permit any Guarantor to incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinated or junior in right of payment to its Senior Debt and senior in any respect in right of payment to its Guarantee. For purposes of this provision, no Indebtedness shall be deemed to be subordinated in right of payment to any other Indebtedness by reason of the fact that such other Indebtedness is secured by any Lien or is subject to a Guarantee. Limitation on Guarantees of Indebtedness by Subsidiaries. The Indenture provides that in the event that any Restricted Subsidiary guarantees any Indebtedness of the Company other than the Notes (the "Other Debt"), the Company will cause such Restricted Subsidiary to concurrently guarantee the Company's obligations under the Indenture and the Notes to the same extent that such Restricted Subsidiary guaranteed the Company's obligations under the Other Debt (including waiver of subrogation, if any); provided, however, that if such Other Debt is (i) Senior Debt, such Guarantee will be subordinated in right of payment to all Senior Debt of such Guarantor (which will include such Guarantee of such Other Debt) pursuant to the subordination provisions of the Indenture (which subordination will be substantially identical to the subordination provisions of the Indenture applicable to the Notes), (ii) Indebtedness which is not Senior Debt or Subordinated Indebtedness, such Guarantee will be pari passu in right of payment with the Guarantee of the Other Debt, or (iii) Subordinated Indebtedness, such Guarantee will be senior in right of payment to the Guarantee of the Other Debt (which Guarantee of such Subordinated Indebtedness will provide that such Guarantee is subordinated to the Guarantee to the same extent and in the same manner as the Notes are subordinated to Senior Debt); provided, further, however, that each Restricted Subsidiary issuing a Guarantee pursuant to the provisions of this covenant will be automatically and unconditionally released and discharged from its obligations under such Guarantee upon the release or discharge of the Guarantee of the Other Debt that resulted in the Company's obligations under the Notes and the Indenture being so guaranteed. The Company will cause each Restricted Subsidiary required to issue a Guarantee after the date of issuance of the Notes to execute and deliver an indenture supplemental to the Indenture, as described below under "Future Guarantors." Future Guarantors. The Indenture provides that the Company and each Guarantor shall cause each Restricted Subsidiary of the Company (other than any Foreign Subsidiary) which, after the date of the Indenture (if not then a Guarantor), becomes a Restricted Subsidiary to execute and deliver an indenture supplemental to the Indenture and thereby become a Guarantor which shall be bound by the Guarantee of the Notes in the form set forth in the Indenture (without such future Guarantor being required to execute and deliver the Guarantee endorsed on the Notes). Provision of Financial Statements and Information. Whether or not the Company is then subject to Section 13(a) or 15(d) of the Exchange Act, the Indenture provides that the Company will file with the Securities and Exchange Commission (the "Commission") following the effectiveness of the Exchange Offer Registration Statement, so long as any Notes are outstanding, the annual reports, quarterly reports and other periodic reports which the Company would have been required to file with the Commission pursuant to such Section 13(a) or 15(d) if the Company were so subject, and such documents shall be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required so to file such documents if the Company 95 were so subject; provided the Commission will accept such filings. The Company will also in any event (i) within 15 days of each Required Filing Date following the effectiveness of the Exchange Offer Registration Statement, file with the Trustee, and supply the Trustee with copies for delivery to the holders of the Notes and prospective purchasers, the annual reports, quarterly reports and other periodic reports which the Company would have been required to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company were subject to such Sections and (ii) if the Commission will not accept the filing of such documents promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective holder of the Notes. Prior to the effectiveness of the Exchange Offer Registration Statement, the Company will provide upon request from holders of the Notes or prospective holders the information required by Rule 144A(d)(4) under the Securities Act. Additional Covenants. The Indenture also contains covenants with respect to the following matters: (i) payment of principal, premium and interest; (ii) maintenance of an office or agency in The City of New York; (iii) maintenance of corporate existence; (iv) payment of taxes and other claims; (v) maintenance of properties; and (vi) maintenance of insurance. MERGER, CONSOLIDATION AND SALE OF ASSETS The Indenture provides that the Company shall not, in any single transaction or series of related transactions, consolidate or merge with or into (whether or not the Company is the Surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets (determined on a consolidated basis for the Company and its Restricted Subsidiaries) in one or more related transactions to, another Person, and the Company will not permit any Restricted Subsidiary to enter into any such transaction or series of related transactions if such transaction or series of related transactions, in the aggregate, would result in a sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties and assets of the Company and the Restricted Subsidiaries, taken as a whole, to another Person, unless (i) the Surviving Person is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the Surviving Person (if other than the Company) assumes all the obligations of the Company under the Notes (and the Guarantees of the Company's Restricted Subsidiaries shall be confirmed as applying to such Surviving Person's obligations), the Indenture and, if then in effect, the Registration Rights Agreement pursuant to a supplemental indenture or other written agreement, as the case may be, in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction, no Default or Event of Default shall have occurred and be continuing; and (iv) after giving pro forma effect to such transaction, the Surviving Person (x) would have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately preceding such transaction and (y) would be permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the covenant described under "--Limitation on Incurrence of Indebtedness." Notwithstanding clauses (iii) and (iv) above, any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or another Restricted Subsidiary. In the event of any transaction (other than a lease) described in and complying with the conditions listed in the immediately preceding paragraph in which the Company is not the Surviving Person, such Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company, and the Company shall be discharged from its obligations under, the Indenture, the Notes and the Registration Rights Agreement. EVENTS OF DEFAULT The Indenture provides that each of the following constitutes an Event of Default: (i) a default for 30 days in the payment when due of interest on, or Additional Interest (if any) with respect to, any Note (whether or not prohibited by the subordination provisions of the Indenture); 96 (ii) a default in the payment when due of principal on any Note (whether or not prohibited by the subordination provisions of the Indenture), whether upon maturity, acceleration, optional or mandatory redemption, required repurchase or otherwise; (iii) failure to perform or comply with any covenant, agreement or warranty in the Indenture (other than the defaults specified in clauses (i) and (ii) above) which failure continues for 30 days after written notice thereof has been given to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the then outstanding Notes; (iv) the occurrence of one or more defaults under any agreements, indentures or instruments under which the Company or any Restricted Subsidiary then has outstanding Indebtedness in excess of $5.0 million in the aggregate and, if not already matured at its final maturity in accordance with its terms, such Indebtedness shall have been accelerated and such acceleration is not rescinded, annulled or cured within 10 days thereafter; (v) one or more judgments, orders or decrees for the payment of money in excess of $5.0 million, either individually or in the aggregate, shall be entered against the Company or any Restricted Subsidiary or any of their respective properties and which judgments, orders or decrees are not paid, discharged, bonded or stayed or stayed pending appeal for a period of 60 days after their entry; (vi) certain events of bankruptcy, insolvency or reorganization (of the Company or any Significant Subsidiary); or (vii) any Guarantee of a Significant Subsidiary ceases to be in full force and effect (other than as expressly provided for under the Indenture) or is declared null and void, or any Guarantor which is a Significant Subsidiary denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of the Indenture or the release of any such Guarantee in accordance with the Indenture). If any Event of Default (other than as specified in clause (vi) of the preceding paragraph with respect to the Company) occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Notes may, and the Trustee at the request of such holders shall, declare all the Notes to be due and payable immediately by notice in writing to the Company, and to the Company and the Trustee if by the holders, specifying the respective Event of Default and that such notice is a "notice of acceleration," and the Notes shall become immediately due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from the events specified in clause (vi) of the preceding paragraph with respect to the Company, the principal of, premium, if any, and any accrued interest on all outstanding Notes shall ipso facto become immediately due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. The holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except (i) a continuing Default or Event of Default in the payment of the principal of, or premium, if any, or interest on, the Notes (which may only be waived with the consent of each holder of Notes affected), or (ii) in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the holder of each Note outstanding. Subject to certain limitations, holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium or interest) if it determines that withholding notice is in their interest. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 97 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS The Indenture provides that no recourse for the payment of the principal of, premium, if any, interest on or Additional Interest, if any, with respect to any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture, or in any of the Notes or because of the creation of any Indebtedness represented thereby, shall be had against any officer, employee, incorporator, direct or indirect controlling person, shareholder, member, partner or affiliate of the Company or of any successor Person thereof. Each Holder and the Trustee, by accepting the Notes, waives and releases all such liability. DEFEASANCE The Company may, at its option and at any time, elect to have the obligations of the Company discharged with respect to the outstanding Notes ("defeasance"). Such defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and to have satisfied all other obligations under the Notes and the Indenture except for (i) the rights of holders of the outstanding Notes to receive, solely from the trust fund described below, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an office or agency for payment, (iii) the rights, powers, trusts, duties and immunities of the Trustee under the Indenture, and (iv) the defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("covenant defeasance") and any omission to comply with such obligations shall not constitute a Default or an Event of Default with respect to the Notes. In the event that a covenant defeasance occurs, certain events (not including non-payment, bankruptcy and insolvency events) described under "--Events of Default" will no longer constitute Events of Default with respect to the Notes. In order to exercise either defeasance or covenant defeasance, (i) the Company shall irrevocably deposit with the Trustee, as trust funds in trust, for the benefit of the holders of the Notes, cash in United States dollars, U.S. Government Obligations (as defined in the Indenture), or a combination thereof, in such amounts as will be sufficient, in the report of a nationally recognized firm of independent public accountants or a nationally recognized investment banking firm, to pay and discharge the principal of, premium, if any, and interest on the outstanding Notes to redemption or maturity; (ii) the Company shall have delivered to the Trustee an opinion of counsel in the United States to the effect that the holders of the outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance or covenant defeasance, as the case may be, and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance, as the case may be, had not occurred (in the case of defeasance, such opinion must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable Federal income tax laws); (iii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as clause (vi) under the first paragraph under "--Events of Default" is concerned, at any time during the period ending on the 91st day after the date of deposit; (iv) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default under, the Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; (v) the Company shall have delivered to the Trustee an opinion of counsel to the effect that (A) the trust funds will not be subject to any rights of holders of Indebtedness (other than holders of the Notes) and (B) after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (vi) the Company shall have delivered to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent under the Indenture to either defeasance or covenant defeasance, as the case may be, have been complied with and that no violations under agreements governing any other outstanding Indebtedness would result therefrom. 98 SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (i) either (a) all Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company has irrevocably deposited or caused to be deposited with the Trustee an amount in United States dollars sufficient to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for the principal of, premium, if any, and interest to the date of deposit; (ii) the Company has paid or caused to be paid all other sums payable under the Indenture by the Company; and (iii) the Company has delivered to the Trustee an Officers' Certificate and an opinion of counsel each stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. RELEASE OF GUARANTEE So long as no Event of Default shall have occurred and be continuing upon the sale or disposition (whether by merger, stock purchase, asset or sale or otherwise) of a Guarantor (or all or substantially all of the assets of any such Guarantor or 50% or more of the Capital Stock of any such Guarantor) to an entity which is not a Subsidiary of the Company, which transaction is otherwise in compliance with the Indenture, such Guarantor shall be deemed released from all its obligations under its Guarantee of the Notes and under the Indenture; provided, however, that any such termination shall occur only to the extent that all obligations of such Guarantor under all its guarantees of, and under all of its pledges of assets or other security interests which secure, any Indebtedness of the Company shall also terminate upon such release, sale or transfer. Upon the release of any Guarantor from its Guarantee pursuant to the provisions of the Indenture, each other Guarantor not so released shall remain liable for the full amount of principal of, and interest on, the Notes as and to the extent provided in the Indenture. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two paragraphs, the Indenture or the Notes may be amended or supplemented with the written consent of the holders of at least a majority in aggregate principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes), and any existing Default or Event of Default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the holders of a majority in aggregate principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of each holder affected, an amendment or waiver shall not: (i) reduce the principal amount of the Notes whose holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note, or alter or waive the provisions with respect to the redemption of the Notes in a manner adverse to the holders of the Notes other than with respect to a Change of Control Offer or an Asset Sale Offer, (iii) reduce the rate of or change the time for payment of interest on any Notes, (iv) waive a Default or Event of Default in the payment of principal of, premium, if any, or interest on the Notes (except that holders of at least a majority in aggregate principal amount of the then outstanding Notes may (a) rescind an acceleration of the Notes that resulted from a non-payment default, and (b) waive the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to the right of Holders to waive past Defaults or the rights of holders of Notes to receive payments of principal of, or premium, if any, or interest on, the Notes, (vii) following the occurrence of a Change of Control, amend, change or modify the Company's obligation to make and consummate a Change of Control Offer by reason of such a Change of Control or modify any of the provisions or definitions with respect thereto in a manner adverse to the holders of the Notes with respect to such Change of Control, or following the occurrence of an Asset Sale, amend, 99 change or modify the Company's obligation to make and consummate an Asset Sale Offer with respect to such Asset Sale or modify any of the provisions or definitions with respect thereto in a manner adverse to the holders of the Notes with respect to such Asset Sale, or (viii) modify or change any of the provisions of the Indenture relating to the subordination of the Notes in a manner adverse to the holders of the Notes. Notwithstanding the foregoing, without the consent of any holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes (i) to cure any ambiguity, defect or inconsistency, (ii) to provide for uncertificated Notes in addition to or in place of certificated Notes, (iii) to provide for the assumption of the Company's obligations to holders of the Notes in the event of any Disposition involving the Company in which the Company is not the Surviving Person, (iv) to make any change that would provide any additional rights or benefits to the holders of the Notes or that does not adversely affect the rights of any such holder, (v) to release any Guarantee permitted to be released under the Indenture, or (vi) to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. TRANSFER AND EXCHANGE The registered holder of a Note will be treated as the owner of such Note for all purposes. A holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a holder among other things, to furnish appropriate endorsements and transfer documents and the Company may require a holder to pay any taxes and fees required by law or permitted by the Indenture. Neither the Company nor the Registrar shall be required to issue, register the transfer of or exchange any Note (i) during a period beginning at the opening of business on the day that the Trustee receives notice of any redemption from the Company and ending at the close of business on the day the notice of redemption is sent to holders, (ii) selected for redemption, in whole or in part, except the unredeemed portion of any Note being redeemed in part may be transferred or exchanged, and (iii) during a Change of Control Offer or an Asset Sale Offer if such Note is tendered pursuant to such Change of Control Offer or Asset Sale Offer and not withdrawn. THE TRUSTEE The Chase Manhattan Bank is the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes. The Indenture (including the provisions of the Trust Indenture Act incorporated by reference therein) contains limitations on the rights of the Trustee thereunder, should it become a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions; provided, however, if it acquires any conflicting interest (as defined in the Trust Indenture Act) it must eliminate such conflict or resign. GOVERNING LAW The Indenture is, and the New Notes and the Guarantees will be, governed by the laws of the State of New York, without regard to the principles of conflicts of law. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for the definition of all other terms used in the Indenture. "Acquired Debt" means, with respect to any specified Person, Indebtedness of any other Person (the "Acquired Person") existing at the time the Acquired Person merges with or into, or becomes a Restricted Subsidiary of, such specified Person, including Indebtedness incurred in connection with, or in contemplation of, the Acquired Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; provided, however, that Indebtedness of such Acquired Person which is 100 redeemed, defeased, retired or otherwise repaid at the time of or immediately upon consummation of the transactions by which such Acquired Person merges with or into or becomes a Restricted Subsidiary of such specified Person shall not be Acquired Debt. "Additional Interest" has the meaning set forth in the Registration Rights Agreement. "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with") of any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. "Asset Sale" means (i) any sale, lease, conveyance or other disposition by the Company or any Restricted Subsidiary of any assets (including by way of a sale-and-leaseback) other than in the ordinary course of business or (ii) the issuance or sale of Capital Stock of any Restricted Subsidiary, in the case of each of (i) and (ii), whether in a single transaction or a series of related transactions, to any Person (other than to the Company or a Restricted Subsidiary and other than directors' qualifying shares) for Net Proceeds in excess of $250,000. The (i) disposition of property of the Company or any of its Restricted Subsidiaries that, in the reasonable judgment of the Company, is no longer useful in the conduct of the business of the Company and its Restricted Subsidiaries or (ii) a Permitted Investment in a Permitted Joint Venture of the Company shall not constitute an Asset Sale. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Capital Lease Obligation" of any Person means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease for property leased by such Person that would at such time be required to be capitalized on the balance sheet of such Person in accordance with GAAP. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock or other equity participations, including partnership interests, whether general or limited, of such Person, including any Preferred Stock. "Cash Equivalents" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency or instrumentality thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Rating Services or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor's Rating Services or at least P-1 from Moody's Investors Service, Inc.; (iv) certificates of deposit, time deposits or bankers' acceptances (or, with respect to foreign banks, similar instruments) maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any member of the European Union or any U.S. branch of a foreign bank or (with respect to any Restricted Subsidiary) any foreign country in which such Restricted Subsidiary is located, having at the date of acquisition thereof combined capital and surplus of not less than $250 million and a Thompson or Keefe Bank Watch Rating of "B" or better (including bank accounts in such banks); (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the 101 qualifications specified in clause (iv) above; (vi) in the case of any Foreign Subsidiary, Investments: (a) in direct obligations of the sovereign nation (or any agency or instrumentality thereof) in which such Foreign Subsidiary is organized or is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or any agency or instrumentality thereof), (b) of the type and maturity described in clauses (i) through (v) above of foreign obligors, which Investments or obligors (or the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies or (c) of the type and maturity described in clauses (i) through (v) above of foreign obligors (or the parents of such obligors), which Investments or obligors (or the parents of such obligors), are not rated as provided in such clauses or in clause (vi)(b) but which are, in the reasonable judgment of the Company, comparable in investment quality to such Investments and obligors (or the parents of such obligors); and (vii) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (vi) above. "Cash Flow" means, with respect to any period, Consolidated Net Income for such period, plus, to the extent deducted in computing such Consolidated Net Income: (i) extraordinary net losses, plus (ii) provision for taxes based on income or profits and any provision for taxes utilized in computing the extraordinary net losses under clause (i) hereof, plus (iii) Consolidated Interest Expense, plus (iv) depreciation, amortization and all other non-cash charges (including amortization of goodwill and other intangibles but excluding any items that will require cash payments in the future for which an accrual or reserve is made). "Change of Control" means the occurrence of any of the following events after the Issue Date: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) (other than one or more Permitted Holders) is or becomes (including by merger, consolidation or otherwise) the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have beneficial ownership of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 50% or more of the voting power of the total outstanding Voting Stock of the Company; (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Board of Directors of the Company then in office; (iii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company as a whole and not any Restricted Subsidiary or Guarantor (whether or not otherwise in compliance with the terms of the Indenture); or (iv) the sale or other disposition (other than by way of merger or consolidation) of all or substantially all of the Capital Stock or assets of the Company and its Restricted Subsidiaries taken as a whole to any Person or group (as defined in Rule 13d-5 of the Exchange Act) (other than to one or more of the Permitted Holders) as an entirety or substantially as an entirety in one transaction or a series of related transactions, unless the "beneficial owners" of the Voting Stock of such Person immediately prior to such transaction own, directly or indirectly, more than 50% of the total voting power of such Person immediately after such transaction. "Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Consolidated Cash Flow Coverage Ratio" means, for any period, the ratio of (i) the aggregate amount of Cash Flow for such period, to (ii) Consolidated Interest Expense for such period, determined on a pro forma basis after giving pro forma effect to (a) the incurrence of the Indebtedness giving rise to the calculation of the Consolidated Cash Flow Coverage Ratio and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred, and the application of such proceeds occurred, at the beginning of such period; (b) the 102 incurrence, repayment or retirement of any other Indebtedness by the Company and its Restricted Subsidiaries since the first day of such period as if such Indebtedness was incurred, repaid or retired at the beginning of such period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility shall be computed based upon the average balance of such Indebtedness at the end of each month during such period); (c) in the case of Acquired Debt, the related acquisition as if such acquisition had occurred at the beginning of such period; and (d) any acquisition or disposition by the Company and its Restricted Subsidiaries of any company or any business or any assets out of the ordinary course of business, or any related repayment of Indebtedness, in each case since the first day of such period, assuming such acquisition or disposition had been consummated on the first day of such period. "Consolidated Interest Expense" means, with respect to any period, the sum of (i) the interest expense of the Company and its Restricted Subsidiaries for such period, including, without limitation, (a) amortization of debt discount, (b) the net payments, if any, under interest rate contracts (including amortization of discounts), (c) the interest portion of any deferred payment obligation and (d) accrued interest, plus (ii) the interest component of the Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the Company and its Restricted Subsidiaries during such period, and all capitalized interest of the Company and its Restricted Subsidiaries, plus (iii) all dividends paid during such period by the Company and its Restricted Subsidiaries with respect to any Disqualified Stock (other than by any Restricted Subsidiary to the Company or any other Restricted Subsidiary and other than any dividend paid in Capital Stock (other than Disqualified Stock)), in each case, as determined on a consolidated basis in accordance with GAAP consistently applied. "Consolidated Net Income" means, with respect to any period, the net income (or loss) of the Company and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP consistently applied, adjusted to the extent included in calculating such net income (or loss), by excluding, without duplication, (i) all extraordinary gains (less all fees and expenses relating thereto), (ii) the portion of net income (or loss) of the Company and its Restricted Subsidiaries allocable to interests in unconsolidated Persons or Unrestricted Subsidiaries, except to the extent of the amount of dividends or distributions actually paid to the Company or its Restricted Subsidiaries by such other Person during such period, (iii) for purposes of the covenant entitled "--Limitation on Restricted Payments," net income (or loss) of any Person combined with the Company or any of its Restricted Subsidiaries on a "pooling-of-interests" basis attributable to any period prior to the date of combination, (iv) net gains and losses (less all fees and expenses relating thereto) in respect of disposition of assets (including, without limitation, pursuant to sale and leaseback transactions) other than in the ordinary course of business, (v) the net income of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income to the Company is not at the time permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, or (vi) the cumulative non-cash effect of any change in accounting principles; provided that any net gain referred to in clause (iv) above that relates to a Restricted Investment and which is received in or converted into cash by the Company or a Restricted Subsidiary during such period shall be included in the consolidated net income of the Company. "Consolidated Net Worth" means, with respect to any Person at any date, the sum of (i) the consolidated stockholders' equity of such Person less the amount of such stockholders' equity attributable to Disqualified Stock of such Person and its Subsidiaries (Restricted Subsidiaries, in the case of the Company), as determined on a consolidated basis in accordance with GAAP consistently applied and (ii) the amount of any Preferred Stock of such Person not included in the stockholders' equity of such Person in accordance with GAAP, which Preferred Stock does not constitute Disqualified Stock. "Consolidated Tangible Assets" means, with respect to any Person, as of any date of determination, the total assets, less goodwill, deferred financing costs and other intangibles and less accumulated amortization, shown on the most recent balance sheet of such Person, determined on a consolidated basis in accordance with GAAP. 103 "Credit Facility" means the Loan and Security Agreement dated as of August 31, 1994 and as amended between the Company, certain of its Subsidiaries and the lenders named therein as the same may be further amended, modified, renewed, refunded, replaced or refinanced from time to time (including extending the maturity of, increasing the amount of available borrowings under, extending the purpose to include acquisition, working capital and other facilities of, changing the conditions and basis of borrowing of, combining the seniority of, changing the covenants and other provisions of, and adding Subsidiaries of the Company as additional borrowers or guarantors, or otherwise restructuring all or any portion of the Indebtedness under such agreement or any successor or replacement and whether with the same or any other agent, lender or group of lenders), including (i) any related notes, letters of credit, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time, and (ii) any notes, guarantees, collateral documents, instruments and agreements executed in connection with any such amendment, modification, renewal, refunding, replacement or refinancing. "Currency Agreement Obligations" means the obligations of any person under a foreign exchange contract, currency swap agreement or other similar agreement or arrangement to protect such person against fluctuations in currency values. "Default" means any event that is, or after the giving of notice or passage of time or both would be, an Event of Default. "Designated Senior Debt" means (i) the Indebtedness under the Credit Facility, and (ii) any other Senior Debt permitted to be incurred under the Indenture the principal amount of which is $15.0 million or more (including to a syndicate of lenders or an agent thereof) at the time of the designation of such Senior Debt as "Designated Senior Debt" by the Company in a written instrument delivered to the Trustee. "Disposition" means, with respect to any Person, any merger, consolidation or other business combination involving such Person (whether or not such Person is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets. "Disqualified Stock" means (i) any Preferred Stock of any Restricted Subsidiary (other than Preferred Stock owned by the Company or any Wholly Owned Restricted Subsidiary) and (ii) that portion of any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than upon a Change of Control of the Company in circumstances where the holders of the Notes would have similar rights), in whole or in part on or prior to the stated maturity of the Notes. "Dollars" and "$" means lawful money of the United States of America. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy. "Foreign Subsidiary" means a Restricted Subsidiary not organized under the laws of the United States or any political subdivision thereof and the operations of which are located entirely outside the United States. "GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the 104 accounting profession in the United States of America, which are applicable as of the Issue Date and consistently applied. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection or deposit in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantor" means (i) the domestic Subsidiaries of the Company on the Issue Date (ii) each of the Company's Restricted Subsidiaries which become Restricted Subsidiaries after the Issue Date and which are organized in the United States, and (iii) each of the Company's Restricted Subsidiaries that in the future executes a supplemental indenture in which such Restricted Subsidiary agrees to be bound by the terms of the Indenture as a Guarantor. "Indebtedness" means, with respect to any Person, without duplication, and whether or not contingent, (i) all indebtedness of such Person for borrowed money or which is evidenced by a note, bond, debenture or similar instrument, (ii) all obligations of such Person to pay the deferred or unpaid purchase price of property, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto, (iii) all Capital Lease Obligations of such Person, (iv) all obligations of such Person in respect of letters of credit or bankers' acceptances issued or created for the account of such Person, (v) to the extent not otherwise included in this definition, all net obligations of such Person under Interest Rate Agreement Obligations or Currency Agreement Obligations of such Person, (vi) all liabilities of others of the kind described in the preceding clause (i), (ii) or (iii) secured by any Lien on any property owned by such Person; provided, however, if the obligations secured by a Lien (other than a Permitted Lien not securing any liability that would itself constitute Indebtedness) on any assets or property have not been assumed by such Person in full or are not such Person's legal liability in full, the amount of such Indebtedness for purposes of this definition shall be limited to the lesser of the amount of Indebtedness secured by such Lien and the Fair Market Value of the property subject to such Lien, (vii) all Disqualified Stock issued by such Person and all Preferred Stock issued by a Subsidiary of such Person (other than Preferred Stock of a Restricted Subsidiary owned by the Company or a Wholly Owned Restricted Subsidiary), and (viii) to the extent not otherwise included, any Guarantee by such Person of any other Person's indebtedness or other obligations described in clauses (i) through (vii) above. "Indebtedness" of the Company and the Restricted Subsidiaries shall not include current trade payables incurred in the ordinary course of business, and non-interest bearing installment obligations and accrued liabilities incurred in the ordinary course of business. The principal amount outstanding of any Indebtedness issued with original issue discount is the accreted value of such Indebtedness. Notwithstanding the foregoing, Indebtedness shall not include Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within 3 business days of the incurrence thereof. In addition, Indebtedness shall not include a government grant and any Guarantee of the Company or a Restricted Subsidiary required by such grant which obligates the Company or a Restricted Subsidiary to repay such grant at the discretion of such government or upon the failure of the conditions of such grant specified therein to be fulfilled, but which is forgiven solely by reason of the passage of time or the fulfillment of such grant conditions (other than repayment); provided that if the conditions for forgiveness of such government grant lapse for whatever reason and the Company or a Restricted Subsidiary becomes obligated to repay such grant, the grant shall be deemed Indebtedness which is incurred at the time such obligation to repay is triggered. "Interest Rate Agreement Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a Guarantee) or capital contribution to (by means of any transfer of 105 cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. "Investment" shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Restricted Subsidiary, as the case may be. For the purposes of the "Limitation on Restricted Payments" covenant, (i) "Investment" shall include and be valued at the Fair Market Value of the net assets of any Restricted Subsidiary (to the extent of the Company's equity interest in such Restricted Subsidiary) at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the Fair Market Value of the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided, however, that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, greater than 50% of the outstanding Common Stock of such Restricted Subsidiary, the Company and/or such Restricted Subsidiary shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Common Stock of such Restricted Subsidiary not sold or disposed of. "Issue Date" means June 11, 1998, the date of the original issuance of the Notes. "Koffolk" means Koffolk (1949) Ltd., an Israeli corporation and wholly owned Subsidiary of the Company. "Koffolk Credit Facility" means such credit agreement as may be entered into, from time to time, by Koffolk and one or more lenders as the same may be amended, modified, renewed, refunded, replaced or refinanced from time to time, including (i) any related notes, letters of credit, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time, and (ii) any notes, guarantees, collateral documents, instruments and agreements executed in connection with any such amendment, modification, renewal, refunding, replacement or refinancing. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or similar encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to give a security interest in any asset). "MRT" means Mineral Resource Technologies, L.L.C., a Delaware limited liability company, and any corporation into which such limited liability company may be converted. "Net Proceeds" means, with respect to any Asset Sale by any Person, the aggregate cash or Cash Equivalent proceeds received by such Person and/or its Affiliates in respect of such Asset Sale, which amount is equal to the excess, if any, of (i) the cash or Cash Equivalents received by such Person and/or its Affiliates (including any cash payments received by way of deferred payment pursuant to, or monetization of, a note or installment receivable or otherwise, but only as and when received) in connection with such Asset Sale, over (ii) the sum of (a) the amount of any Indebtedness that is secured by such asset and which is repaid by such Person in connection with such Asset Sale, plus (b) all fees, commissions and other expenses incurred by such Person in connection with such Asset Sale, plus (c) provision for taxes, including income taxes, directly attributable to the Asset Sale or to prepayments or repayments of Indebtedness with the proceeds of such Asset Sale, plus (d) if such Person is a Restricted Subsidiary, any dividends or distributions payable to holders of minority interests in such 106 Restricted Subsidiary from the proceeds of such Asset Sale, plus (e) appropriate amounts to be provided or established by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale; provided that upon the release of any such reserves, such amounts shall constitute "Net Proceeds" hereunder. "obligations" means any principal, interest, penalties, fees, indemnifications, reimbursement obligations, damages and other liabilities payable under the documentation governing any Indebtedness. "Officers' Certificate" means a certificate signed on behalf of a Person by two Officers of such Person, one of whom must be the principal executive officer, the principal financial officer or the principal accounting officer of such Person, that meets the requirements set forth in the Indenture. "Permitted Holders" means (i) Jack Bendheim; (ii) each of his spouse, siblings, ancestors, descendants (whether by blood, marriage or adoption, and including stepchildren) and the spouses, siblings, ancestors and descendants thereof (whether by blood, marriage or adoption, and including stepchildren) of such natural persons, the beneficiaries, estates and legal representatives of any of the foregoing, the trustee of any bona fide trust of which any of the foregoing, individually or in the aggregate, are the majority in interest beneficiaries or grantors, and any corporation, partnership, limited liability company or other Person in which any of the foregoing, individually or in the aggregate, own or control a majority in interest; and (iii) all Affiliates controlled by the individual named in clause (i) above. "Permitted Investments" means (i) any Investment in or in securities of the Company or any Wholly Owned Restricted Subsidiary; (ii) any investment in cash or Cash Equivalents; (iii) any Investment in or in securities of a Person engaged in a Related Business (an "Acquired Person") if, as a result of such Investment, (a) the Acquired Person becomes a Wholly Owned Restricted Subsidiary, or (b) the Acquired Person either (1) is merged, consolidated or amalgamated with or into the Company or one of its Wholly Owned Restricted Subsidiaries and the Company or such Wholly Owned Restricted Subsidiary is the Surviving Person, or (2) transfers or conveys substantially all of its assets to, or is liquidated into, the Company or one of its Wholly Owned Restricted Subsidiaries; (iv) Investments in accounts and notes receivable acquired in the ordinary course of business; (v) any notes, obligations or other securities received in connection with an Asset Sale that complies with the covenant described under "Limitations on Asset Sales" or any other disposition not constituting an Asset Sale; (vi) Interest Rate Agreement Obligations and Currency Agreement Obligations permitted pursuant to the second paragraph of the covenant described under "Limitation on Incurrence of Indebtedness" above; (vii) investments in or acquisitions of Capital Stock or similar interests in Persons (other than Affiliates of the Company) received in the bankruptcy or reorganization of or by such Person or any exchange of such investment with the issuer thereof or taken in settlement of or other resolution of claims or disputes; (viii) any Investment in or in securities of a Restricted Subsidiary of the Company in which at least 80% of the outstanding voting securities (other than directors" qualifying shares) are owned, directly or indirectly, by the Company or one or more Restricted Subsidiaries or a Surviving Person of any Disposition involving the Company, as the case may be; provided that for the purposes of the term "Permitted Investments" an Investment in a Foreign Subsidiary of the Company pursuant to clauses (i) and (viii) above shall mean only any direct or indirect loan or other extension of credit at then prevailing market rates payable in cash (including, without limitation, a guarantee) or any purchase or acquisition of any bonds, notes, debentures or other securities or evidences of Indebtedness issued by such Foreign Subsidiary at commercially reasonable rates payable in cash; provided further, however, that the previous proviso does not apply in the case of clause (iii) above or to any Investment in a Foreign Subsidiary existing on the Issue Date; and (ix) any Investment comprised of property (which shall not include Capital Stock, cash or Cash Equivalents or Indebtedness) contributed to or in a Permitted Joint Venture of the Company or a Restricted Subsidiary in the aggregate amount not to exceed 5% of Consolidated Tangible Assets of the Company for which the Person making such Investment receives equity interests in such Permitted Joint Venture. 107 "Permitted Joint Venture" means, with respect to any Person, any corporation, association, partnership, joint venture, limited liability partnership, limited liability company or other business entity, in which the Company or any of its Restricted Subsidiaries shall contribute capital in the form of cash or Cash Equivalents or intangible assets, including without limitation technology and contracts related thereto; provided, however, that (i) such Person or any Subsidiary of such Person is engaged in a Related Business, (ii) any cash, Cash Equivalents or assets contributed by such Person to the capital of such entity shall be treated no less favorably to the Company or the Restricted Subsidiary than like amounts or values of cash, Cash Equivalents or assets contributed by other shareholders, partners, members or other investors, and (iii) if, in the case of a corporation, association or other business entity, the Company and its Restricted Subsidiary shall own or control, directly or indirectly, less than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof or, in the case of a partnership, joint venture, limited liability partnership, limited liability company or similar entity, the Company and its Restricted subsidiaries shall own or control, directly or indirectly, less than 50% of the total equity and voting interests, then in each such case the Company or its Restricted Subsidiary shall obtain the agreement of the other shareholders, partners or members of such entity that no technology or other non-cash assets contributed to the capital of such entity by the Company or a Restricted Subsidiary may be voluntarily disposed of or distributed to any Person other than the Company or a Restricted Subsidiary without the prior written consent of the Company or a Restricted Subsidiary. "Permitted Liens" means (i) Liens on assets or property of the Company that secure Senior Debt and Liens on assets or property of a Guarantor that secure Senior Debt; (ii) Liens securing Indebtedness of a Person existing at the time that such Person is merged into or consolidated with the Company or a Restricted Subsidiary; provided, however, that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of such Person; (iii) Liens on property acquired by the Company or a Restricted Subsidiary; provided, however, that such Liens were in existence prior to the contemplation of such acquisition and do not extend to any other property other than those of the Person merged into or consolidated with the Company or such Restricted Subsidiary; (iv) Liens in respect of Interest Rate Agreement Obligations and Currency Agreement Obligations permitted under the Indenture; (v) Liens in favor of the Company or any Restricted Subsidiary; (vi) Liens existing or created on the Issue Date; (vii) Liens securing the Notes or the Guarantees; (viii) Liens to secure Attributable Debt that is permitted to be incurred pursuant to the covenant described above under the caption "--Certain Covenants--Sale and Leaseback Transactions;" (ix) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries; (x) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (xii) Liens to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or any of its Restricted Subsidiaries, including the performance of statutory obligations, surety or appeal bonds or performance bonds, or landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's or other like Liens, in any case incurred in the ordinary course of business and rights to offset and set-off; (xiii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (xiv) Liens securing Indebtedness incurred to amend, modify, renew, refund, replace or refinance Indebtedness that has been secured by a Lien permitted under the Indenture, provided that (a) any such Lien not extend to or cover any assets or property not securing the Indebtedness so refinanced and (b) the Refinancing Indebtedness secured by such Lien shall have been permitted to be incurred under the Indenture; and (xv) Liens on assets of Foreign Subsidiaries securing Indebtedness permitted by the Indenture. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. 108 "Preferred Stock" as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Capital Stock of any other class of such Person. "Purchase Money Obligation" means any Indebtedness (as amended, modified, renewed, refunded, replaced or refinanced) secured by a Lien on assets related to the business of the Company or the Restricted Subsidiaries, and any additions and accessions thereto, which are purchased, constructed or improved by the Company or any Restricted Subsidiary at any time after the Issue Date; provided, however, that (i) any security agreement or conditional sales or other title retention contract pursuant to which the Lien on such assets is created (collectively, a "Security Agreement") shall be entered into within 90 days after the purchase or substantial completion of the construction or improvement of such assets and shall at all times be confined solely to the assets so purchased, constructed or improved, any additions and accessions thereto and any proceeds therefrom, (ii) at no time shall the aggregate principal amount of the outstanding Indebtedness secured thereby be increased, except in connection with the purchase of additions and accessions thereto and except in respect of fees and other obligations in respect of such Indebtedness and (iii) (A) the aggregate outstanding principal amount of Indebtedness secured thereby (determined on a per asset basis in the case of any additions and accessions) shall not at the time such Security Agreement is entered into exceed 100% of the purchase price or cost of construction or improvement to the Company or any Restricted Subsidiary of the assets subject thereto or (B) the Indebtedness secured thereby shall be with recourse solely to the assets so purchased, constructed or improved, any additions and accessions thereto and any proceeds therefrom. "Related Business" means any business that is reasonably related to or complementary to the businesses conducted by the Company, or the Restricted Subsidiaries, on the Issue Date. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payment" means (i) any dividend or other distribution declared or paid on any Capital Stock of the Company (other than (A) dividends or distributions payable solely in Capital Stock (other than Disqualified Stock) of the Company or (B) dividends or distributions payable to the Company or any Restricted Subsidiary or (C) dividends or distributions by MRT to its members to permit such members to make payments upon tax obligations); (ii) any payment to purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company; (iii) any payment to purchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled maturity, repayment or sinking fund payment, any Subordinated Indebtedness other than a purchase, redemption, defeasance or other acquisition or retirement for value that is paid for with the proceeds of Refinancing Indebtedness that is permitted under the covenant described under "--Certain Covenants--Limitation on Incurrence of Indebtedness;" or (iv) any Restricted Investment. A Permitted Investment is not a Restricted Payment. "Restricted Subsidiary" means each direct or indirect Subsidiary of the Company other than an Unrestricted Subsidiary. "Senior Debt" means (A) with respect to the Company, the principal of and interest (including post-petition interest) on, and all other amounts owing in respect of, (x) the Credit Facility and (y) any other Indebtedness incurred by the Company (including, but not limited to, reasonable fees and expenses of counsel and all other charges, fees and expenses incurred in connection with such Indebtedness), unless the instrument creating or evidencing such Indebtedness or pursuant to which such Indebtedness is outstanding expressly provides that such Indebtedness is on a parity with or subordinated in right of payment to the Notes, and (B) with respect to any Guarantor, the principal of and interest (including post-petition interest) on, and all other amounts owing in respect of, (i) such Guarantor's obligations in respect of the Credit Facility, including its obligations as a guarantor thereof, and (ii) any other Indebtedness incurred by such Guarantor (including, but not limited to, reasonable fees and expenses of counsel and all other charges, fees and expenses incurred in connection with such Indebtedness), unless the instrument creating or evidencing such Indebtedness or pursuant to which such Indebtedness is outstanding expressly provides that such Indebtedness is on a parity with 109 or subordinated in right of payment to the Guarantee of such Guarantor. Notwithstanding the foregoing, Senior Debt shall not include (i) any Indebtedness for federal, state, local or other taxes, (ii) any Indebtedness among or between the Company, any Restricted Subsidiary and/or any of their Affiliates, (iii) any Indebtedness that is incurred in violation of the Indenture, (iv) Indebtedness evidenced by the Notes or the Guarantees, or (v) Indebtedness of a Person that is expressly subordinate or junior in right of payment (other than as a result of the Indebtedness being unsecured) to any other Indebtedness of such Person. "Shareholders Agreements" means (i) the Shareholders Agreement dated December 29, 1987 by and between Marvin S. Sussman and the Company; (ii) the Shareholders Agreement dated February 21, 1995 among Phibro-Tech, Inc., I. David Paley, Nathan Z. Bistricer and James O. Herlands; (iii) the Limited Liability Company Agreement of MRT dated as of November 21, 1995; and (iv) each of the Severance Agreements between Phibro-Tech, Inc. and I. David Paley, Nathan Z. Bistricer and James O. Herlands, respectively, each dated February 21, 1995; each as amended and in effect on the Issue Date, and as thereafter amended, except for any amendment subsequent to the Issue Date which causes the terms of such agreement to be less favorable to the Company, Phibro-Tech or MRT, as the case may be. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X promulgated pursuant to the Securities Act, as such Regulation S-X is in effect on the Issue Date. "Subordinated Indebtedness" means Indebtedness of the Company or a Guarantor which (A) if incurred by the Company, is subordinated in right of payment to the Notes, or (B) if incurred by a Guarantor, is subordinated in right of payment to the Guarantee of such Guarantor. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding voting power of the Voting Stock of which is owned or controlled, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person, or by such Person and one or more other Subsidiaries thereof, or (ii) any limited partnership of which such Person or any Subsidiary of such Person is a general partner, or (iii) any other Person (other than a corporation or limited partnership) in which such Person or one or more other Subsidiaries of such Person, or such Person and one or more other Subsidiaries thereof, directly or indirectly, has more than 50% of the outstanding partnership or similar interests or has the power, by contract or otherwise, to direct or cause the direction of the policies, management and affairs thereof. "Surviving Person" means, with respect to any Person involved in or that makes any Disposition, the Person formed by or surviving such Disposition or the Person to which such Disposition is made. "Unrestricted Subsidiary" means any Subsidiary of the Company designated as such pursuant to and in compliance with the covenant described under "--Limitation on Designations of Unrestricted Subsidiaries" and not redesignated a Restricted Subsidiary in compliance with such covenant. "Voting Stock" of a Person means Capital Stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required scheduled payment of principal, including payment at final maturity, in respect thereof, with (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding aggregate principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary with respect to which all of the outstanding voting securities (other than directors' qualifying shares or nominee shares held by a third party to comply with local law) of which are owned, directly or indirectly, by the Company or a Surviving Person of any Disposition involving the Company, as the case may be. 110 BOOK-ENTRY; DELIVERY AND FORM The certificates representing the New Notes will be issued in fully registered form, without coupons. Except as described below, the New Notes will be deposited with, or on behalf of, The Depository Trust Company, New York, New York (the "Depository"), and registered in the name of Cede & Co. ("Cede") as the Depository's nominee in the form of a global Note (the "Global Note"). The Depository has advised the Company as follows: The Depository is a limited-purpose trust company and organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and "a clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. The Depository was created to hold securities of institutions that have accounts with the Depository Participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depository's participants include securities brokers and dealers (which may include the Initial Purchaser), banks, trust companies, clearing corporations and certain other organizations. Access to the Depository's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. The Depository agrees with and represents to its participants that it will administer its book-entry system in accordance with its rules and by-laws and requirements of law. The Depository will credit, on its book-entry registration and transfer system, the respective principal amounts of the New Notes represented by such Global Note to the accounts of participants. Ownership of beneficial interests in the Global Note will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the Global Note will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by the Depository (with respect to participants' interest) and such participants (with respect to the owners of beneficial interests in the Global Note other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to transfer or pledge beneficial interests in the Global Note. So long as the Depository, or its nominee, is the registered holder and owner of the Global Note, the Depository or such nominee, as the case may be, will be considered the sole owner and holder of the related New Notes for all purposes of such New Notes. Owners of beneficial interests in the Global Note will not be entitled to have the New Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of certificated Notes in definitive form and will not be considered to be the owners or holders of any New Notes under the Global Note. Accordingly, each person owning a beneficial interest in the Global Note must rely on the procedures of the Depository and, if such person is not a participant, on the procedures of the participant through which such person owns its interests, to exercise any right of a holder of New Notes under the Global Note. The Company understands that under existing industry practice, in the event an owner of a beneficial interest in the Global Note desires to take any action that the Depository, as the holder of the Global Note, is entitled to take, the Depository would authorize the participants to take such action, and that the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. Payment of principal of and interest on New Notes represented by the Global Note registered in the name of and held by the Depository or its nominee will be made to the Depository or its nominee, as the case may be, as the registered owner and holder of the Global Note. The Company expects that the Depository or its nominee, upon receipt of any payment of principal or interest in respect of the Global Note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of the Depository or its nominee. The Company also expects that payments by participants to owners of beneficial interests in such Global Notes through such participants will be governed by standing instructions and customary practices, and will be the responsibility of such 111 participants. The Company will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Global Notes for any Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for other aspect of the relationship between the Depository and its participants or the relationship between such participants and the owners of beneficial interests in the Global Notes owning through such participants. Unless and until they are exchanged in whole or in part for certificated New Notes in definitive form, the Global Note may not be transferred except as a whole by the Depository to a nominee of such Depository or by a nominee of such Depository to such Depository or another nominee of such Depository. Beneficial owners of New Notes registered in the name of the Depository or its nominee will be entitled to be issued, upon request, New Notes in definitive certificated form. CERTIFICATED NOTES The New Notes represented by the Global Note are exchangeable for certificated New Notes in definitive form of like tenor as such New Notes in denominations of U.S.$1,000 and integral multiples thereof if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Global Note or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act, (ii) the Company in its discretion at any time determines not to have all of the New Notes represented by the Global Note or (iii) a default entitling the holders of the Notes to accelerate the maturity thereof has occurred and is continuing. Any New Note that is exchangeable pursuant to the preceding sentence is exchangeable for certificated Notes issuable in authorized denominations and registered in such names as the Depository shall direct. Although the Depository has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Note among participants of the Depository, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Trustee nor the Company will have any responsibility for the performance by the Depository or its respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. EXCHANGE OFFER; REGISTRATION RIGHTS In connection with the initial issuance and sale of the Old Notes, the Initial Purchaser and its assignees became entitled to the benefits of the Registration Rights Agreement. Pursuant to the Registration Rights Agreement with the Initial Purchaser, for the benefit of the holders of the Old Notes, the Company and the Guarantors are obligated, at their expense, (i) to file the Registration Statement of which this Prospectus forms a part with the SEC with respect to a registered offer to exchange the Old Notes for the New Notes, which will have terms substantially identical in all material respect to those of the Old Notes (except that the New Notes will not contain terms with respect to transfer restrictions) on or before October 9, 1998 and (ii) to use their best efforts to cause the Registration Statement to be declared effective under the Securities Act by December 8, 1998. Upon the effectiveness of the Registration Statement, the Company will offer the New Notes in exchange for surrender of the Old Notes. The Company will keep the Exchange Offer open for not less than 20 business days (or longer if required by applicable law) after the date the Exchange Offer Registration Statement is declared effective. For each Old Note surrendered to the Company pursuant to the Exchange Offer, the Holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. Interest on each New Note will accrue from the last interest payment date on which interest was paid on the Old Note surrendered in exchange thereof or, if no interest has been paid on such Old Note, from June 11, 1998. Under existing interpretations of the staff of the Commission's Division of Corporation Finance (the "Staff"), the New Notes will generally be freely transferable after the Exchange Offer without further 112 registration under the Securities Act if the holder of the New Notes represents that it is acquiring the New Notes in the ordinary course of its business, that it has no arrangement or understanding with any person to participate in the distribution of New Notes and that it is not an affiliate (as such term is defined in Rule 405 under the Securities Act) of the Company, as such terms are interpreted by the Commission; provided, however, that broker-dealers ("Participating Broker-Dealers") receiving New Notes in the Exchange Offer will be subject to a prospectus delivery requirement with respect to resales of such New Notes. To date, the Staff has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to transactions involving an exchange of securities such as the exchange pursuant to the Exchange Offer (other than a resale of an unsold allotment from the sale of the Old Notes to the Initial Purchaser) with the prospectus contained in the Exchange Offer Registration Statement. Pursuant to the Registration Rights Agreement, the Company and the Guarantors have agreed to permit Participating Broker-Dealers and other persons, if any, subject to similar prospectus delivery requirements to use this Prospectus in connection with the resale of such New Notes. Each holder of the Old Notes who wishes to exchange its Old Notes for New Notes in the Exchange Offer will be required to make certain representations to the Company and the Guarantors, including that (i) any New Notes to be received by it will be acquired in the ordinary course of its business, (ii) it has no arrangement with any person to participate in a public distribution (within the meaning of the Securities Act) of the New Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company, or if it is such an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable to it. In addition, each holder who is not a broker-dealer will be required to represent that it is not engaged in, and does not intend to engage in, a public distribution of the New Notes. Each holder who is a broker-dealer and who receives New Notes for its own account in exchange for Old Notes that were acquired by it as a result of market-making activities or other trading activities will be required to acknowledge that it will deliver a prospectus in connection with any resale by it of such New Notes. In the event that applicable interpretations of the Staff do not permit the Company and the Guarantors to effect the Exchange Offer or if for any other reason the Exchange Offer is not consummated by January 7, 1999, or if the Initial Purchaser so requests with respect to the Old Notes not eligible to be exchanged for New Notes in the Exchange Offer or if any holder of Old Notes is not eligible to participate in the Exchange Offer or does not receive freely tradeable New Notes in the Exchange Offer, the Company and the Guarantors will, at their expense, (a) promptly (but in no event prior to October 9, 1998) file a Shelf Registration Statement permitting resales from time to time of the Notes, (b) use their best efforts to cause the Shelf Registration Statement to become effective and (c) use their best efforts to keep the Shelf Registration Statement current and effective until two years from the Issue Date or such shorter period that will terminate when all the Notes covered by the Shelf Registration Statement have been sold pursuant thereto. The Company and the Guarantors, at their expense, will provide to each holder of the Notes copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Notes from time to time. A holder of Notes who sells such Notes pursuant to the Shelf Registration Statement generally will be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such holder (including certain indemnification obligations). In the event that (i) the Exchange Offer Registration Statement is not filed with the SEC on or prior to October 9, 1998 (the 120th day after the Issue Date) or declared effective on or prior to December 8, 1998 (the 180th day after the Issue Date), (ii) the Exchange Offer is not consummated on or prior to January 7, 1999 (the 210th day following the Issue Date), (iii) the Shelf Registration Statement is not filed or declared effective within the required time periods or (iv) the Exchange Offer Registration Statement or the Shelf Registration Statement is declared effective but thereafter ceases to be effective (except as specifically permitted therein) for a period of 15 consecutive days without being succeeded 113 immediately by an additional Exchange Offer Registration Statement or Shelf Registration Statement, as the case may be, filed and declared effective (each such event, a "Registration Default"), the interest rate borne by the Notes shall be increased by 0.50% per annum for the 90-day period following such Registration Default. Such interest rate will increase by an additional 0.25% per annum at the beginning of each subsequent 90-day period following such Registration Default, up to a maximum aggregate increase of 1.0% per annum. From and after the date that all Registration Defaults have been cured, the Notes will bear interest at the rate set forth on the cover page of this Prospectus. Interest on each New Note will accrue from June 11, 1998 or from the most recent interest payment date to which interest was paid on the Old Note surrendered in exchange therefor or on the New Note, as the case may be. The New Notes will bear interest at 9 7/8% per annum, except that, if any interest accrues on the New Notes in respect of any period prior to their issuance, such interest will accrue at the rate or rates borne by the Notes from time to time during such period. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of the form of which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of certain United States federal income tax consequences associated with the exchange of Old Notes for New Notes and the ownership and disposition of the New Notes by holders who acquired the New Notes pursuant to the Exchange Offer. The summary is based upon current laws, regulations, rulings and judicial decisions, all of which are subject to change. The discussion below does not address all aspects of United States federal income taxation that may be relevant to particular holders in the context of their specific investment circumstances or certain types of holders subject to special treatment under such laws (for example, financial institutions, banks, tax-exempt organizations and insurance companies). In addition, the discussion does not address any aspect of state, local or foreign taxation and assumes that a holder of the New Notes (i) will hold them as "capital assets" (generally, property held for investment) within the meaning of Section 1221 of the Code, and (ii) will not own, directly or indirectly, 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote. For purposes of the discussion, a "United States holder" is an individual who is a citizen or resident of the United States, a corporation, partnership or other entity created under the laws of the United States or any political subdivision thereof, or an estate or trust that is subject to United States federal income taxation without regard to the source of income and a "Non-United States holder" is any holder who is not a United States holder. PROSPECTIVE ACQUIRORS OF THE NEW NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF THE NEW NOTES AS WELL AS THE APPLICATION OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS. EXCHANGE OFFER The exchange of Old Notes for New Notes pursuant to the Exchange Offer should not be treated as an exchange or other taxable event for U.S. federal income tax purposes because under Treasury regulations, the New Notes should not be considered to differ materially in kind or extent from the Old Notes. Rather, the New Notes received by a holder should be treated as a continuation of the Old Notes in the hands of such holder. As a result, there should be no U.S. federal income tax consequences to holders who exchange Old Notes for New Notes pursuant to the Exchange Offer and any such holder should have the same tax basis and holding period in the New Notes as it had in the Old Notes immediately before the exchange. 114 UNITED STATES HOLDERS Interest payable on the New Notes will be includible in the income of a United States holder in accordance with such holder's regular method of accounting. If a New Note is redeemed, sold or otherwise disposed of, a United States holder generally will recognize gain or loss equal to the difference between the amount realized on the sale or other disposition of such New Note (to the extent such amount does not represent accrued but unpaid interest) and such holder's tax basis in the New Note. Subject to the market discount rules discussed below, such gain or loss will be capital gain or loss, assuming that the holder has held the New Note as a capital asset, and will be long-term if the holder's holding period in the New Note (which includes its holding period in the Old Note for which it was exchanged) exceeds one year at the time of disposition. Under the market discount rules of the Code, a holder (other than a holder who made the election described below) who purchased an Old Note with "market discount " (generally defined as the amount by which the stated redemption price at maturity exceeds the holder's purchase price) will be required to treat any gain recognized on the redemption, sale or other disposition of the New Note received in the exchange as ordinary income to the extent of the market discount that accrued during the holding period of such New Note (which would include the holding period of the Old Note). A holder who has elected under applicable Code provisions to include market discount in income annually as such discount accrues will not, however, be required to treat any gain recognized as ordinary income under these rules. Holders should consult their tax advisors as to the portion of any gain that would be taxable as ordinary income under these provisions. NON-UNITED STATES HOLDERS An investment in the New Notes by a Non-United States holder generally will not give rise to any United States federal income tax consequences if the interest received or any gain recognized on the sale, redemption or other disposition of the New Notes by such holder is not treated as effectively connected with the conduct by such holder of a trade or business in the United States, and in the case of gains derived by an individual, such individual is not present in the United States for 183 days or more and certain other requirements are met. Under current Treasury regulations, in order to avoid withholding of up to 31% on payments of interest (i) a Non-United States holder of the New Notes generally must certify to the issuer or its agent, under penalties of perjury, that it is not a United States person (or, in the case of an individual, that he is not a U.S. citizen or resident) and complete and provide the payor with a U.S. Treasury Form W-8 (or a suitable substitute form), which includes its name and address, or (ii) a securities clearing organization, bank or other financial organization that holds customers' securities in the ordinary course of business (a "financial institution") and holds the New Note, must certify under penalties of perjury that such a Form W-8 (or suitable substitute form) has been received from the beneficial owner of the New Notes by it or by a financial institution between it and the beneficial owner, and must furnish the payor with a copy thereof. PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the date of this Prospectus, as extended, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 1998 (90 days after the date of this Prospectus), all dealers effecting transactions in the New Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, 115 through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the date of this Prospectus (as extended) the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS Certain legal matters as to the validity of the New Notes and the Guarantees offered hereby will be passed upon for the Company and certain of the Guarantors by Golenbock, Eiseman, Assor & Bell, New York, New York. Certain legal matters relating to the issuance of the Guarantees offered hereby will be passed upon for the Guarantors, as to matters of California law by Blanc Williams Johnston & Kronstadt, LLP, Los Angeles, California, as to matters of Pennsylvania law by Martin H. Philip, Esq., Palmerston, Pennsylvania, and as to matters of Illinois law by Schmiedeskamp, Robertson, New & Mitchell, Quincy, Illinois. EXPERTS The consolidated balance sheets of Philipp Brothers Chemicals, Inc. and Subsidiaries as of June 30, 1998 and 1997 and the consolidated statements of operations, changes in stockholders equity, and cash flows for the years then ended, included in this Prospectus have been included herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. As indicated in their report, the opinion of PricewaterhouseCoopers LLP with respect to the 1997 financial statements is based, in part, on the report of other auditors. The consolidated statements of operations, changes in stockholders equity, and cash flows of Philipp Brothers Chemicals, Inc. and Subsidiaries for the year ended June 30, 1996, included in this Prospectus, have been included herein in reliance on the report of Edward Isaacs & Company LLP, independent accountants, given on the authority of that firm as experts in accounting and auditing. As indicated in their report, the opinion of Edward Isaacs & Co. LLP is based, in part, on the reports of other auditors. 116 INDEX TO FINANCIAL STATEMENTS
PAGE ---- Reports of Independent Accountants........................................................................ F-2 Consolidated Balance Sheets--June 30, 1998 and 1997....................................................... F-8 Consolidated Statements of Operations--for the years ended June 30, 1998, 1997 and 1996............................................................................ F-9 Consolidated Statements of Changes in Stockholders' Equity--for the years ended June 30, 1998, 1997 and 1996............................................................................ F-10 Consolidated Statements of Cash Flows--for the years ended June 30, 1998, 1997 and 1996............................................................................ F-11 Notes to Consolidated Financial Statements................................................................ F-12
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders of Philipp Brothers Chemicals, Inc.: In our opinion, based on our audits and, in fiscal 1997, the report of other auditors, the accompanying consolidated balance sheets and the related consolidated statements of operations, changes in stockholders' equity and cash flows present fairly, in all material respects, the financial position of Philipp Brothers Chemicals, Inc. and Subsidiaries as of June 30, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the fiscal 1997 financial statements of LC Holding S.A., a wholly owned subsidiary located in France, which statements reflect total assets and revenues constituting 6.6 percent and 7.4 percent, respectively, of the related consolidated totals as of and for the year ended June 30, 1997. Those 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 LC Holding S.A., is based solely on the report of the other auditors. We conducted our audits of the consolidated financial statements 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 the opinion expressed above. PRICEWATERHOUSECOOPERS LLP Parsippany, New Jersey September 11, 1998 F-2 INDEPENDENT ACCOUNTANTS' REPORT To the Stockholders of Philipp Brothers Chemicals, Inc. We have audited the accompanying consolidated statement of operations, changes in stockholders' equity and cash flows of Philipp Brothers Chemicals, Inc. and Subsidiaries (the "Company") for the year ended June 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of consolidated subsidiaries located outside the United States, which statements reflect total assets of 47% of the consolidated total as of June 30, 1996, and total revenues of 34% of the consolidated totals for the year ended June 30, 1996. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to those subsidiaries, is based solely on the reports of the other auditors. We conducted our audit 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 audit and the reports of other auditors provides a reasonable basis for our opinion. In our opinion, based on our audit and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Philipp Brothers Chemicals, Inc. and Subsidiaries for the year ended June 30, 1996, in conformity with generally accepted accounting principles. EDWARD ISAACS & COMPANY LLP New York, New York September 6, 1996 F-3 AUDITORS' REPORT To the Shareholders of Koffolk (1949) Ltd: We have audited the consolidated financial statements of Koffolk (1949) Ltd. (the "Company") and its subsidiaries - translated into U.S. dollars: balance sheet as of March 31, 1996 and the related statement of income, shareholders' equity, and cash flows for the year ended. These financial statements are the responsibility of the Company's board of directors and management. Our responsibility is to express an opinion of these financial statements based on our audits. We did not audit the financial statements of the foreign subsidiaries whose assets constitute 16.8% of the total consolidated assets included in the consolidated balance sheet and whose revenues constitute 10.3% of the total consolidated sales included in the consolidated statement of income. The financial statements of those companies were audited by other independent auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for those companies is based solely on the reports of the other independent auditors. We conducted our audits in accordance with generally accepted auditing standards, including those prescribed by the Israeli Auditors (Mode of Performance) Regulations, 1973. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement either due to error or to intentional misrepresentation. 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 the Company's board of directors and management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other independent auditors provide a fair basis for our opinion. In our opinion, based on our audits and the reports of other independent auditors, the financial statements present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of March 31, 1996 and the consolidated results of their operations and the changes in shareholders' equity and the cash flows for the year ended in conformity with generally accepted accounting principles in the United States. DOV KAHANA & CO. Certified Public Accountants (Isr.) Tel Aviv, Israel May 13, 1998 F-4 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders of Philipp Brothers Chemicals, Inc. We have audited the consolidated balance sheet of LC Holding S.A. and subsidiary as of June 30, 1997 and the related consolidated statements of income and retained earnings and cash flows for the years ended June 30, 1996 and June 30, 1997 (not included herein). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements, based on our audits. We conducted our audit in accordance with generally accepted auditing standards. These 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 audit provides a reasonable basis for our opinion. In our opinion, the aforementioned consolidated financial statements (not included herein), present fairly, in all material respects, the consolidated financial position of LC Holding S.A. and its subsidiary as at June 30, 1996 and 1997 and the consolidated results of operations and cash flows for the year ended June 30, 1996 and the year ended June 30, 1997, in conformity with generally accepted accounting principles. CONSTANTIN ASSOCIES Paris, France August 24, 1998 F-5 REPORT OF THE INDEPENDENT ACCOUNTANTS To the Stockholders of Philipp Brothers Chemicals Inc. We have audited the accompanying balance sheet of Ferro Metal and Chemical Corporation Limited (the "Company") as of 30th June 1996, and the related statements of operations, stockholders' equity and cash flows for the year then ended not presented herein. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based upon our audit. BASIS OF OPINION We conducted our audit 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 audit provides a reasonable basis for our opinion. OPINION In our opinion, based on our audit, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ferro Metal and Chemical Corporation Limited as of 30th June 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. WILSON WRIGHT & CO., Chartered Accountants and Registered Auditors, 71 Kingsway, London WC2B 6 ST. Date: 28th August 1998 F-6 REPORT OF THE INDEPENDENT ACCOUNTANTS To the Stockholders of Philipp Brothers Chemicals Inc. We have audited the accompanying balance sheet of Wychem Limited (the "Company") as of 30th June 1996, and the related statements of operations, stockholders' equity and cash flows for the year then ended not presented herein. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based upon our audit. BASIS OF OPINION We conducted our audit 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 audit provides a reasonable basis for our opinion. OPINION In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of Wychem Limited as of 30th June 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. WILSON WRIGHT & CO., Chartered Accountants and Registered Auditors, 71 Kingsway, London WC2B 6 ST. Date: 29th September 1998 F-7 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1998 AND 1997 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS 1998 1997 -------- -------- Current assets: Cash and cash equivalents............................................................. $ 24,221 $ 4,093 Trade receivables, less allowance for doubtful accounts of $751 in 1998 and $656 in 1997.............................................................. 57,560 52,129 Other receivables..................................................................... 6,000 9,180 Inventories........................................................................... 37,567 37,639 Prepaid expenses and other current assets............................................. 5,491 4,138 -------- -------- Total current assets.................................................................... 130,839 107,179 Property, plant and equipment, net...................................................... 40,510 45,309 Intangibles............................................................................. 3,771 1,355 Other assets............................................................................ 17,076 8,857 -------- -------- $192,196 $162,700 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Loans payable to banks................................................................ $ -- $ 13,332 Current portions of long-term debt.................................................... 1,646 19,127 Accounts payable...................................................................... 33,432 31,279 Other loans payable................................................................... 492 387 Accrued expenses and other current liabilities........................................ 15,602 19,550 -------- -------- Total current liabilities............................................................... 51,172 83,675 Long-term debt.......................................................................... 102,158 34,413 Other liabilities....................................................................... 10,103 5,395 -------- -------- Total liabilities....................................................................... 163,433 123,483 -------- -------- Commitments and contingencies Redeemable securities: Common stock.......................................................................... 2,563 3,813 Common stock of subsidiary............................................................ 2,623 -- -------- -------- Total redeemable securities............................................................. 5,186 3,813 -------- -------- Stockholders' equity: Special preferred stock--$100 par value, 1,000 shares authorized; none issued at June 30, 1998...................................................................... -- -- First preferred stock--$100 par value, 28,750 shares authorized; none issued.......... -- -- Second preferred stock--$100 par value, 66,000 shares authorized; none issued at June 30, 1998 and 6,800 shares issued at June 30, 1997............................. -- 680 Third preferred stock--$100 par value, 6% noncumulative, 60,000 shares authorized; 5,207 shares issued at June 30, 1998 and 1997...................................... 521 521 Common stock--$0.10 par value, 38,400 shares authorized; 24,488 shares issued at June 30, 1998 and 1997 (See Note 8)................................................ 3 3 Paid-in capital....................................................................... 435 2,364 Retained earnings..................................................................... 23,221 32,314 Foreign currency translation adjustment............................................... (603) (478) -------- -------- Total stockholders' equity.............................................................. 23,577 35,404 -------- -------- $192,196 $162,700 -------- -------- -------- --------
The accompanying notes are an integral part of the consolidated financial statements. F-8 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996 (IN THOUSANDS)
1998 1997 1996 -------- -------- -------- Net sales................................................................... $277,983 $268,362 $241,395 Cost of goods sold.......................................................... 208,913 201,038 181,033 -------- -------- -------- Gross profit.............................................................. 69,070 67,324 60,362 Selling, general and administrative expenses................................ 63,297 56,093 51,171 Curtailment of operations at manufacturing facility......................... 10,000 -- -- -------- -------- -------- Operating income (loss)................................................... (4,227) 11,231 9,191 Other: Interest expense, net of capitalized interest of $377 in 1996............. 6,865 6,253 5,546 Interest income........................................................... (383) (252) (377) Gain on life insurance policy............................................. -- (5,642) -- Other expense, net........................................................ 1,045 1,768 1,371 -------- -------- -------- Income (loss) before income taxes and extraordinary item.................. (11,754) 9,104 2,651 Provision (benefit) for income taxes........................................ (4,689) 1,068 2,661 -------- -------- -------- Income (loss) before extraordinary item................................... (7,065) 8,036 (10) Extraordinary loss on extinguishment of debt (net of applicable income taxes of $1,011)................................................................ (1,962) -- -- -------- -------- -------- Net income (loss)......................................................... $ (9,027) $ 8,036 $ (10) -------- -------- -------- -------- -------- --------
The accompanying notes are an integral part of the consolidated financial statements. F-9 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 1996, 1997 AND 1998 (IN THOUSANDS)
COMMON STOCK PREFERRED STOCK ----------------------------- ------------------------- CLASS CLASS CLASS CLASS PAID-IN SPECIAL SECOND THIRD "A" "B" "C" "E" CAPITAL ------- ------- ----- ----- ----- ----- ----- ------- Balance, July 1,1995................................. $ 100 $ 6,537 $ -- $ 1 $ 1 $ 1 $-- $ 7,003 Issuance of third preferred stock.................. -- -- 521 -- -- -- -- 57 Translation adjustment............................. -- -- -- -- -- -- -- -- Net loss........................................... -- -- -- -- -- -- -- -- ----- ------- ----- --- --- --- --- ------- Balance, June 30, 1996............................... 100 6,537 521 1 1 1 -- 7,060 Redemption of preferred stock...................... (100) (5,857) -- -- -- -- -- (4,696) Translation adjustment............................. -- -- -- -- -- -- -- -- Net income......................................... -- -- -- -- -- -- -- -- ----- ------- ----- --- --- --- --- ------- Balance, June 30, 1997............................... -- 680 521 1 1 1 -- 2,364 Redemption of preferred stock...................... -- (680) -- -- -- -- -- -- Translation adjustment............................. -- -- -- -- -- -- -- -- Receivable from principal shareholder.............. -- -- -- -- -- -- -- (429) Distribution to principal shareholder for acquisition of business......................... -- -- -- -- -- -- -- (1,500) Net income......................................... -- -- -- -- -- -- -- -- ----- ------- ----- --- --- --- --- ------- Balance, June 30, 1998............................... $ -- $ -- $ 521 $ 1 $ 1 $ 1 $-- $ 435 ----- ------- ----- --- --- --- --- ------- ----- ------- ----- --- --- --- --- ------- APPRAISAL FOREIGN VALUE CURRENCY REFLECTED IN RETAINED TRANSLATION PREFERRED EARNINGS ADJUSTMENT STOCK TOTAL -------- ---------- ------------ ------- Balance, July 1,1995................................. $ 24,288 $ 97 $ (4,200) $33,828 Issuance of third preferred stock.................. -- -- -- 578 Translation adjustment............................. -- (882) (882) Net loss........................................... (10) -- -- (10) -------- ------ -------- ------- Balance, June 30, 1996............................... 24,278 (785) (4,200) 33,514 Redemption of preferred stock...................... -- -- 4,200 (6,453) Translation adjustment............................. -- 307 -- 307 Net income......................................... 8,036 -- -- 8,036 -------- ------ -------- ------- Balance, June 30, 1997............................... 32,314 (478) -- 35,404 Redemption of preferred stock...................... -- -- -- (680) Translation adjustment............................. -- (125) -- (125) Receivable from principal shareholder.............. -- -- -- (429) Distribution to principal shareholder for acquisition of business......................... (66) -- -- (1,566) Net income......................................... (9,027) -- -- (9,027) -------- ------ -------- ------- Balance, June 30, 1998............................... $ 23,221 $ (603) $ -- $23,577 -------- ------ -------- ------- -------- ------ -------- -------
The accompanying notes are an integral part of the consolidated financial statements F-10 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30 , 1998, 1997 AND 1996 (IN THOUSANDS)
1998 1997 1996 -------- ------- -------- Operating activities: Net income (loss).......................................................... $ (9,027) $ 8,036 $ (10) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization........................................... 9,253 9,342 8,006 Gain on life insurance.................................................. -- (5,642) -- Deferred income taxes................................................... (6,240) (859) 272 Forgiveness of promissory notes......................................... 2,591 -- -- Provision for curtailment of operations at manufacturing facility....... 10,000 -- -- Change in redemption amount of redeemable securities.................... (1,250) -- -- Extraordinary loss on extinguishment of debt, net of tax................ 1,962 -- -- Other................................................................... 1,391 (222) (694) Changes in operating assets and liabilities, net of effect of business acquired: Accounts receivable................................................... (5,487) (4,356) 841 Inventories........................................................... 1,605 (868) (1,859) Prepaid expenses and other current assets............................. (2,906) 439 844 Other assets.......................................................... (1,349) (529) (377) Accounts payable...................................................... (879) (1,394) (6,644) Accrued expenses and other current liabilities........................ 1,037 (1,024) 301 -------- ------- -------- Net cash provided by operating activities.................................... 701 2,923 680 -------- ------- -------- Investing activities: Capital expenditures....................................................... (8,031) (4,697) (8,892) Purchase of business, net of cash acquired................................. -- -- (3,881) -------- ------- -------- Net cash used in investing activities........................................ (8,031) (4,697) (12,773) -------- ------- -------- Financing activities: Cash overdraft............................................................. 1,915 2,817 -- Net (decrease) increase in short-term debt................................. (13,533) (176) 3,993 Proceeds from long-term debt............................................... 100,380 1,691 13,050 Payments of long-term debt................................................. (52,922) (3,896) (3,099) Payments of deferred financing costs....................................... (3,724) -- -- Extraordinary loss on extinguishment of debt, net of tax................... (1,962) -- -- Proceeds from life insurance............................................... 6,045 -- -- Distribution to principal shareholder for acquisition of business.......... (1,500) -- -- Receivable from principal shareholder...................................... (429) -- -- Redemption of preferred stock.............................................. (6,812) -- -- -------- ------- -------- Net cash provided by financing activities.................................... 27,458 436 13,944 -------- ------- -------- Net increase (decrease) in cash and cash equivalents......................... 20,128 (1,338) 1,851 Cash and cash equivalents at beginning of year............................... 4,093 5,431 3,580 -------- ------- -------- Cash and cash equivalents at end of year..................................... $ 24,221 $ 4,093 $ 5,431 -------- ------- -------- -------- ------- -------- Supplementary cash flow information: Interest paid.............................................................. $ 6,060 $ 7,313 $ 4,157 -------- ------- -------- -------- ------- -------- Income taxes paid.......................................................... $ 1,930 $ 1,134 $ 2,595 -------- ------- -------- -------- ------- -------- Summary of significant noncash investing and financing activities: Preferred stock redemption................................................. $ -- $ 6,453 $ -- -------- ------- -------- -------- ------- -------- Conversion of debt to preferred stock...................................... $ -- $ -- $ 578 -------- ------- -------- -------- ------- --------
The accompanying notes are an integral part of the consolidated financial statements. F-11 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS: Philipp Brothers Chemicals, Inc., is a diversified global manufacturer and marketer of a broad range of specialty and industrial chemicals, which are sold worldwide for use in numerous markets. Many of the Company's products provide critical performance attributes to its customers' products, while representing a relatively small percentage of total end-product costs. The Company has four product groups: (i) Animal Nutrition and Health; (ii) Intermediates and Industrial Chemicals; (iii) Crop Protection; and (iv) Electronics and Metal Treatment. During fiscal 1998, the Company's products were manufactured at nine facilities in the United States, two facilities in Europe, two facilities in Israel and one facility in South America. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION: The consolidated financial statements include the accounts of Philipp Brothers Chemicals, Inc. and its subsidiaries, all of which are either wholly owned or controlled (collectively, referred to as the "Company"). All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. The fiscal years of the Company's Israeli and Brazilian subsidiaries end on March 31. Accordingly, the accounts of these subsidiaries are included in the consolidated financial statements on a three month lag. The consolidated balance sheets include a receivable from the subsidiaries in the amount of $2,686 at June 30, 1998, included in other receivables, and a payable of $271 at June 30, 1997, included in accrued expenses and other current liabilities, which represent net transactions (merchandise purchases and cash payments) with the subsidiaries during the three months ended June 30. RISKS AND UNCERTAINTIES: As a specialty and industrial chemicals company, the Company is subject to a variety of United States and foreign laws and regulations relating to pollution and protection of the environment. In addition, the testing, manufacturing and marketing of certain products are subject to extensive regulation by several government authorities in the United States and other countries. The Company is also required to obtain and retain governmental permits and approvals to conduct various aspects of its operations. The Company has significant assets located outside of the United States, and a significant portion of the Company's sales and earnings are attributable to operations conducted abroad. International manufacturing, sales and raw materials sourcing are subject to certain inherent risks, including political instability, price and exchange controls, unexpected changes in regulatory environments, and potentially adverse tax consequences. In addition, the Company is affected by social, political and economic conditions affecting Israel, and any major hostilities involving Israel or curtailment of trade between Israel and its current trading partners, either as a result of hostilities or otherwise, could have a material adverse effect on the Company. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements and during the periods reported. Actual results could differ from those estimates. The most significant estimates include reserves for bad debts, inventory obsolescence, and environmental matters. F-12 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) REVENUE RECOGNITION: Revenue is recognized upon shipment of products. Net sales are comprised of total sales billed, net of goods returned, trade discounts and customer allowances. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. INVENTORIES: Inventories are valued at the lower of cost or market. Cost is determined principally under the first-in, first-out (FIFO) and average methods; however, certain subsidiaries of the Company use the last-in, first-out (LIFO) method for valuing inventories. Obsolete or unsaleable inventory is reflected at its estimated net realizable value. Inventory costs include materials, direct labor and manufacturing overhead. If the LIFO method of valuing certain inventories had not been used, total inventories at June 30, 1998 and 1997 would have been higher by $928 and $796, respectively. Inventories valued at LIFO amounted to $3,999 at June 30, 1998 and $4,475 at June 30,1997. Inventories consist of the following at June 30,1998 and 1997:
1998 1997 ------- ------- Raw materials............................................... $18,511 $20,396 Work in process............................................. 2,604 2,425 Finished goods.............................................. 16,452 14,818 ------- ------- $37,567 $37,639 ------- ------- ------- -------
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are carried at cost less accumulated depreciation. Major renewals and improvements are capitalized, while maintenance and repairs are expensed when incurred. Upon retirement or other disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations. Depreciation is calculated using the straight-line method based upon estimated useful lives as follows: Building and improvements............................... 8-20 years Machinery and equipment................................. 3-10 years
DEFERRED FINANCING COSTS: In connection with the issuance of notes described in Note 2, the Company has recorded deferred financing costs of $3,724 that are included in Other Assets. These costs will be amortized using the interest method over the ten year life of the notes. F-13 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) INTANGIBLES: The excess of cost over fair value of purchased subsidiaries is being amortized over 10 to 15 years. Identifiable intangible assets are being amortized on a straight-line basis over their estimated useful lives ranging from 5 to 10 years. Accumulated amortization amounted to $ 7,843 and $7,073 at June 30, 1998 and 1997, respectively. At each balance sheet date, management evaluates the recoverability of intangible assets using certain financial indicators, such as historical and future ability to generate income from operations. The Company's policy is to record an impairment loss in the period when it is determined that the carrying amount of the asset may not be recoverable. This determination is based on an evaluation of such factors as the occurrence of a significant event, a significant change in the environment in which the business operates, or if the expected future net cash flows (undiscounted and without interest) are less than the carrying amount of the assets. LICENSING AND PERMIT FEES: Licensing and permit fees incurred to obtain the required federal, state and local hazardous waste treatment, storage and disposal permits are included in other assets and are amortized over the lives of the licenses and permits of 5 to 10 years. The balances included in other assets are $885 at June 30, 1998 and $1,109 at June 30, 1997, net of accumulated amortization. FOREIGN CURRENCY TRANSLATION: Balance sheet accounts of the Company's foreign subsidiaries, with the exception of the Brazilian subsidiary and a subsidiary of Koffolk Israel are translated at current rates of exchange, and income and expense items are translated at the average exchange rate for the year. The resulting translation adjustments are reflected as a separate component of stockholders' equity. The Brazilian subsidiary operates in a highly inflationary economy and the subsidiary of Koffolk Israel transacts substantially all of its business in U.S. dollars. Accordingly, the U.S. dollar is designated as the functional currency for these operations and translation gains and losses are included in determining net income or loss. Translation losses relating to short and long-term debt of the Company's Israeli subsidiary that are denominated or linked to foreign currencies are included in other expense, net in the amounts of $979, $2,270, and $1,055 in the accompanying consolidated statements of operations for the years ended June 30, 1998, 1997 and 1996, respectively. Other foreign currency transaction gains and losses are not material. DERIVATIVE FINANCIAL INSTRUMENTS: The Company uses a variety of derivative financial instruments, including interest rate caps and foreign currency forward contracts as a means of hedging exposure to interest rate and foreign currency risks. The Company utilized interest rate caps to hedge its floating interest rate exposure on bank borrowings. Reimbursements and amortization of the interest caps over their terms are recorded as adjustments to interest expense. Gains or losses on foreign currency forward contracts are included in cost of sales when transactions are settled. The Company also utilizes, on a limited basis, certain commodity derivatives, primarily on copper used in its manufacturing process, to hedge the cost of its anticipated production requirements. The gains or losses on these instruments are included in cost of sales upon expiration or sale of the instruments. The Company and its subsidiaries do not utilize these instruments for speculative purposes. The Company monitors the financial stability and credit standing of its major counterparties. F-14 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) ADVERTISING COSTS: Advertising expenditures, expensed when incurred, were $826, $799 and $930 for the years ended June 30, 1998, 1997 and 1996, respectively. IMPAIRMENT OF LONG-LIVED ASSETS: Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", was effective for the Company's fiscal year 1997. This standard requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The adoption of this standard had no effect on the Company's financial position, results of operations or cash flows. ENVIRONMENTAL LIABILITIES: Expenditures for ongoing compliance with environmental regulations that relate to current operations are expensed or capitalized as appropriate. Expenditures related to improving the condition of property compared with the condition of that property when constructed or acquired are capitalized. The Company also capitalizes expenditures that prevent future environmental contamination. Other expenditures are expensed as incurred. Liabilities are recorded when environmental assessments indicate that remedial efforts are probable and the costs can be reasonably estimated. Estimates of the liability are based upon currently available facts, existing technology, and presently enacted laws and regulations taking into consideration the likely effects of inflation and other societal and economic factors. All available evidence is considered, including prior experience in remediation of contaminated sites, other companies' clean-up experience, and data released by the Environmental Protection Agency or other organizations. When such costs are incurred over a long-term period and can be reliably estimated as to timing, the liabilities are included in the consolidated balance sheets at their discounted amounts. The Company adopted American Institute of Certified Public Accountants Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities", in fiscal 1998. This SOP prescribes that accrued environmental remediation-related expenses include direct costs of remediation and indirect costs related to the remediation effort. The effect of initially applying the provisions of this SOP at the beginning of fiscal 1998 did not have a material effect on the Company's financial position, results of operations or cash flows. INCOME TAXES: Income tax expense includes U.S. and foreign income taxes. The tax effect of certain temporary differences between amounts recognized for financial reporting purposes and amounts recognized for tax purposes are reported as deferred income taxes. Deferred tax balances are adjusted to reflect tax rates, based on current tax laws, that will be in effect in the years in which the temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to amounts more likely than not to be realized. F-15 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) RESEARCH AND DEVELOPMENT EXPENDITURES: Research and development expenditures were $774, $754 and $610 for the years ended June 30, 1998, 1997 and 1996, respectively. NEW PRONOUNCEMENTS: The Company intends to adopt SFAS No. 130, "Reporting Comprehensive Income," SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," and SFAS No. 132, "Employers' Disclosures About Pension and other Postretirement Benefits" in fiscal 1999. These standards will require revised disclosure but will not have a material effect on the Company's financial position, results of operations, or cash flows. The Company will also be required to adopt SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" in fiscal 2001. This standard will require the Company to record all its derivative financial instruments as assets or liabilities measured at fair value. Management has not yet assessed the potential impact of this standard on its financial position, results of operations or cash flows. 2. ISSUANCE OF SENIOR SUBORDINATED NOTES AND RELATED TRANSACTIONS On June 11, 1998, the Company issued $100 million aggregated principal amount of 9-7/8% Senior Subordinated Notes due June 1, 2008. Proceeds from the note offering were used to repay indebtedness of the Company. In connection with the issuance of the Senior Subordinated Notes, the Company (i) acquired Koffolk USA from its principal shareholder, (ii) acquired the interest in MRT (Note 3) owned by its principal shareholder and (iii) forgave certain indebtedness of executives related to stock ownership of a subsidiary. Koffolk USA was acquired from the principal shareholder of the Company for $1.5 million in cancellation of advances due from the principal shareholder, representing the fair value of the assets acquired based upon a valuation performed on behalf of the principal shareholder of the Company. As a result of common ownership, Koffolk USA has been included in the financial statements in a manner similar to a pooling of interests. Consequently, the net assets of Koffolk USA have been recorded at the carryover basis of the principal shareholder (a net deficit of $66) and the $1.5 million consideration has been reflected as a distribution of paid-in capital. The results of operations for fiscal 1998 include the results of Koffolk USA from the beginning of the year. Prior year financial statements have not been restated due to the immateriality of Koffolk USA to the consolidated results of operations and financial position of the Company. Prior to issuance of the Notes, the Company owned 58% of MRT. As part of the transaction, the Company acquired the principal shareholder's interest in MRT of 29.2% for $25,000. Additionally, in June 1998, a subsidiary of the Company canceled the limited recourse notes issued by executives related to acquiring 10.7% of the stock of the subsidiary and forgave all amounts due the Company. The Company also paid the executives an additional aggregate amount of $2,740 as reimbursement for their income tax liability related to the forgiveness. The forgiveness of the notes and the income tax reimbursement totaling $5,604 is reflected as compensation expense in selling, general and administrative expenses in the accompanying consolidated statement of operations. F-16 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 3. ACQUISITION AND FORMATION OF SUBSIDIARY Effective December 7, 1995, the Company's Israeli subsidiary acquired all of the outstanding shares of Planalqumica Industrial Ltda., a Brazilian company engaged in the manufacture and sale of animal health products, for $3,881 in cash and $202 in short-term debt. The acquisition cost was funded with long-term borrowings. The acquisition was accounted for as a purchase and, accordingly, the acquired assets and liabilities were recorded at their fair values at the acquisition date. The operating results of Planalqumica Industrial Ltda. are included in the Company's consolidated statements of operations from the date of acquisition. The fair value of assets acquired, including goodwill, was $5,504, and liabilities assumed totaled $1,421. Goodwill related to this acquisition of $776 is being amortized over 10 years on a straight-line basis. Effective November 21, 1995, a subsidiary of the Company formed Mineral Resource Technologies, L.L.C., ("MRT"). The limited liability company agreement of MRT provides for the vesting of interests to the minority members over certain periods of employment and granting of additional membership interests to the minority members based on certain performance goals. No additional membership interests have been granted. The agreement also provides for the purchase of the minority interests for fair value in connection with termination of employment. MRT is engaged principally in the management and recycling services of coal fly ash and municipal solid waste ash and related by-products and residues generated by public utilities and other combustion and mineral by-product producers. Refer to Note 2 concerning the Company's ownership of MRT. 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following at June 30:
1998 1997 ------- ------- Land........................................................ $ 2,108 $ 2,124 Buildings and improvements.................................. 19,837 19,729 Machinery and equipment..................................... 74,491 79,514 ------- ------- 96,436 101,367 Less: Accumulated depreciation.............................. 55,926 56,058 ------- ------- $40,510 $45,309 ------- ------- ------- -------
Certain of the buildings of the Company's Israeli subsidiary are situated on land leased for a nominal amount from the Israel Land Authority. The lease expires on July 9, 2027. Depreciation expense amounted to $8,023, $7,886 and $6,618 for the years ended June 30, 1998, 1997 and 1996, respectively. 5. RELATED PARTY TRANSACTIONS In June 1998, the Company acquired the stock of Koffolk Inc. ("Koffolk USA") from the principal shareholder of the Company (refer to Note 2). Koffolk USA was formed on February 6, 1996 to purchase from Merck & Co., Inc. ("Merck") the United States distribution rights for Nicarb and Amprol, together with certain labels and trademarks relating to Nicarb. These drugs are used in the poultry production industry to prevent and treat a parasitic disease. Prior to such acquisition and since the beginning of the operations of Koffolk USA in 1996, a subsidiary of the Company sold products to Koffolk USA. Sales by the subsidiary amounted to $4,371 in 1997, and accounts receivable in the 1997 consolidated balance sheet includes $2,243 due from the affiliate in connection with these sales. In addition, the Company charged the affiliate a fee for certain administrative services including treasury, credit and collections, customer service, order processing F-17 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 5. RELATED PARTY TRANSACTIONS--(CONTINUED) and financial reporting functions. Fees charged for the year ended June 30, 1997, amounted to $367, and other receivables in the 1997 consolidated balance sheet include $217 due from the affiliate in connection with these charges. In November 1995, the Company formed MRT Management Corp. ("MMC"), to manage Mineral Resource Technologies, L.L.C. Before giving effect to the acquisition by MMC of membership units in MRT from the principal shareholder of the Company, MMC owned 57.6% of the membership interests in MRT, and the principal shareholder and certain unrelated parties owned 29.2% and 13.2% interests in MRT, respectively. The principal shareholder has from time to time made loans and advances to MRT when and as needed, in response to MRT's working capital requirements. In June 1998, the Company has acquired the principal shareholder's interest in MRT for $25 and repaid $995 of loans made by him to MRT. A subsidiary of the Company leases the property underlying its Santa Fe Springs, California plant from an affiliate which is controlled by shareholders of the Company. The lease requires annual base rent of $250. The Company is responsible under the lease agreement to pay all real property taxes. In connection with the sale by the Company of its Senior Subordinated Notes due June 1, 2008, (refer to Note 2) the term of such lease was extended to June 30, 2008. The Company had a liability to an affiliate controlled by the principal shareholder of the Company in the amount of $482 and $436 at June 30, 1998 and 1997, respectively. The liability, which is non-interest bearing and was paid in July 1998, was reflected in the consolidated balance sheets net of unamortized discount of $0, $43 and $81 at June 30, 1998, 1997 and 1996, respectively, based on imputed interest at 9.5%. The Company periodically advances funds to the principal shareholder on a short-term, non-interest-bearing basis. The amounts outstanding at June 30, 1998 have been reflected as a reduction of stockholders' equity and the amounts at June 30, 1997 was not material. F-18 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 6. DEBT Long-term debt consists of the following at June 30, 1998 and 1997:
1998 1997 -------- ------- Domestic: Senior Subordinated Notes due June 1, 2008(a)...................... $100,000 $ -- Note payable in seven equal annual installments beginning June 29, 1998(b)......................................................... -- 20,000 Bank borrowings under revolving credit loan agreement(b)........... -- 11,400 Note payable by subsidiary in monthly installments of $21, inclusive of interest at 10%, through December 1997(c).......... -- 123 Notes payable by subsidiary in connection with noncompete agreements, payable through June 1999 without interest, less unamortized discount of $69 in 1997 based on imputed interest at 10 1/2%(c)...................................................... 226 431 Environmental litigation settlement, with interest at 8.57%, payable in annual installments through March 2001, interest imputed at 10%(d)............................................... 836 1,044 Obligation, payable through March 2000 without interest, less unamortized discount of $191, based on an effective interest rate of 8.5%(e)................................................. 1,809 -- Capitalized lease obligations and other............................ 878 653 Foreign: Loans payable to banks in U.S. dollars or linked to U.S. dollars with variable interest based on LIBOR-approximately at 6.9% to 7.4% in 1997 maturing through fiscal 2004(f).................... -- 17,103 Bank term loan with interest at 7.75%, payable in French Francs in annual installments through May 31, 2001(g)..................... -- 1,136 Bank term loan with interest at PIBOR plus 1.50%, payable in French Francs in annual installments through May 31, 2001(g)........... -- 1,136 Capitalized lease obligations and other............................ 55 514 -------- ------- 103,804 53,540 Less: Current maturities............................................. 1,646 19,127 -------- ------- $102,158 $34,413 -------- ------- -------- -------
- ------------------ (a) In June 1998, the Company issued $100 million aggregate principal amount of 9-7/8% Senior Subordinated Notes due June 1, 2008. The Notes are general unsecured obligations of the Company and are subordinated in right of payment to all existing and future senior debt (as defined in the indenture agreement of the Company) and will rank pari passu in right of payment with all other existing and future senior subordinated indebtedness of the Company. The Notes are unconditionally guaranteed on a senior subordinated basis by the current domestic subsidiaries of the Company (the "Guarantors"). Additional future domestic subsidiaries may become Guarantors under certain circumstances. The Indenture contains certain covenants with respect to the Company and the Guarantors, which will restrict, among other things, (a) the incurrence of additional indebtedness, (b) the payment of dividends and other restricted payments, (c) the creation of certain liens, (d) the sale F-19 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 6. DEBT--(CONTINUED) of assets, (e) certain payment restrictions affecting subsidiaries, and (f) transactions with affiliates. The Indenture will also restrict the Company's ability to consolidate, or merge with or into, or to transfer all or substantially all of its assets to, another person. (b) On August 31, 1994, the Company issued a 10-year, $20,000 senior unsecured note ("Note") with interest at 11%, payable semi-annually. This Note was repaid in June 1998. On that same date, the Company entered into a three-year renewable revolving credit facility ("Revolving Facility") with a bank for up to $20,000 in revolving credit advances. Borrowings were limited to percentages of eligible receivables as defined. The Company, under terms of this facility, was able to choose between two interest rate options: (i) bank base rate as defined plus 3/4% or (ii) LIBOR rate as defined plus 2-3/4%, and the duration (one to six months) for which the applicable interest rate may apply. The facility had been extended through October 1, 1998 before being repaid in June 1998. The Note and Revolving Facility agreements required, among other things, the maintenance of certain fixed charge coverage, leverage and current ratios, and a certain level of tangible net worth for the domestic operations of the Company, as defined. In addition, there are certain restrictions on additional borrowings, additional liens on the Company's assets, guarantees, dividend payments, redemption or purchase of the Company's stock, sale of subsidiaries' stock, disposition of assets, investments, mergers and acquisitions. At June 30, 1997, the Company was in default of the fixed charge coverage ratio, which had been waived by the lenders. In connection with the termination of the Note and Revolving Facility agreements the Company repaid all amounts outstanding under the Note and Revolving Facility agreement, paid a prepayment fee of $2,600, terminated certain interest rate caps on floating rate debt that was repaid for a charge of $162 and wrote off unamortized financing costs of $210. These charges of $1,962 (net of $1,011 in taxes) are reflected as an extraordinary item in the accompanying consolidated statements of operations. (c) These notes were collateralized by real property and machinery of a domestic subsidiary and were repaid in June 1998. (d) The New Jersey Department of Environmental Protection Division of Hazardous Waste Management and the Division of Water Resources and a subsidiary of the Company entered into an Administrative Consent Order (ACO) effective March 11, 1991, which resolved all previous enforcement actions against the Company's subsidiary. The ACO required payment of a penalty, which was provided for in prior years, in the amount of $2,200 with interest calculated at 8.57% per annum, in 10 equal annual installments. (e) This obligation is in connection with the acquisition of certain intangible assets acquired by Koffolk USA (see Note 2). (f) The loans are collateralized by certain assets of the Company's Israeli subsidiary and were repaid in June 1998. (g) These notes were secured by the pledge of shares of the Company's French subsidiary and were repaid in June 1998. The loan agreement also restricted the payment of dividends by the subsidiary. F-20 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 6. DEBT--(CONTINUED) The aggregate maturities of long-term debt after June 30, 1998 are as follows:
YEAR ENDED JUNE 30, - ------------------------------------------------------------- 1999......................................................... $ 1,646 2000......................................................... 1,416 2001......................................................... 439 2002......................................................... 121 2003......................................................... 108 Thereafter................................................... 100,074 -------- Total...................................................... $103,804 -------- --------
7. REDEEMABLE COMMON STOCK OF SUBSIDIARY In fiscal 1995, a subsidiary of the Company sold restricted shares of Class B common stock to certain key executives at fair market value, which resulted in the executives having a 10.7% ownership in the subsidiary. The Company received, as consideration for the shares, limited recourse notes in the amount of $2,225 maturing the earlier of: (a) termination of the key executive, (b) death or (c) February 21, 2003. Interest accrued at the annual rate of 7.74% and was payable at maturity of the notes. The subsidiary's shares are redeemable at fair market value, based on independent appraisal, upon death, disability or termination of the key executive. Adjustments to record the shares at their redeemable value have been charged to compensation expense. The redeemable value of the shares at June 30, 1997 has been reduced by the outstanding amounts of the notes and included in other liabilities in the consolidated financial statements. In connection with the issuance of the Senior Subordinated Notes, referred to in Note 2, the limited recourse notes have been forgiven. In addition, the Company and its subsidiary entered into severance agreements with the executives for payments based on a multiple of pretax earnings, as defined, and which were subject to certain restrictions pursuant to terms of the Note Agreement. 8. PREFERRED STOCK, COMMON STOCK AND PAID-IN CAPITAL PREFERRED STOCK: In connection with the death of the Chairman of the Board of the Company in May 1997, pursuant to terms of an agreement with shareholders, the Company recorded a liability in the amount of $6,453 for the effective redemption of 59,573 shares of special and second preferred stock and reduced this number of shares from the amount outstanding. The Company was required to redeem the preferred stock at approximately 116% of par value payable over five years with interest at 2% below prime. An insurance policy with a face value of $6,000 on the life of the Chairman funded such redemption. The redemption obligation, of which $6,131 was paid in fiscal 1998, was recorded at its present value at June 30, 1997 ($6,131 included in other current liabilities and $322 included in other liabilities). In connection therewith, the Company reversed the $4,200 of an appraisal increment of certain assets which pursuant to a prior year recapitalization was included in the par value of the preferred stock, and recorded a charge to paid-in capital in the amount of $4,696 for the difference between the redemption value and carrying value of the stock. Current assets in the 1997 consolidated balance sheet included a receivable in the amount of $6,032 for the proceeds, plus interest, from the life insurance policy which was collected in July 1997. The proceeds, net of cash surrender value, in the amount of $5,642, is reflected as a gain on life insurance policy in the 1997 consolidated statement of operations. The net F-21 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 8. PREFERRED STOCK, COMMON STOCK AND PAID-IN CAPITAL--(CONTINUED) effect of these transactions resulted in a reduction in stockholders' equity of $811, for the year ended June 30, 1997. In fiscal 1996, the principal shareholder of the Company exchanged a promissory note due to him by the Company in the amount of $578 including interest for 5,207 shares of the Company's third preferred stock. The third preferred stock are nonvoting, 6% noncumulative and are redeemable at par, in whole or in part, at the option of the Company. COMMON STOCK: Common stock consisted of the following at June 30, 1998 and 1997:
AUTHORIZED SHARES ISSUED SHARES AMOUNT AT PAR ---------- ------------- ------------- Class A........................................ 8,100 6,300 $ 1 Class B........................................ 8,100 6,713 1 Class C........................................ 8,100 6,300 1 Class D........................................ 8,100 -- -- Class E........................................ 6,000 5,175 -- ------ ------- --- 38,400 24,488 $ 3 ------ ------- --- ------ ------- ---
Holders of Class A, Class C and Class D common stock have voting rights and are entitled to share pro rata in dividends, if any, that may be declared by the Company. Thereafter, holders of Class B and Class E common stock are entitled to share pro rata in any such dividends. No dividends may be paid to common stockholders until all dividends have been paid or declared and set apart on all preferred stock. In the event of any complete liquidation, dissolution, winding up of the business, or sale of all the assets of the Company, and after the redemption of the preferred stock, the Class A, Class C and Class D common stockholders are entitled to a distribution equal to the par value of the stock plus declared and unpaid dividends. Thereafter, holders of Class B and Class E common stock would participate ratably in all distributions. Issued shares include redeemable shares of a minority shareholder (see below). REDEEMABLE COMMON STOCK: Pursuant to terms of an agreement with a minority shareholder, who is also an officer of the Company, the Company is required to purchase the Class B shares of such shareholder upon his death, disability, termination of employment or upon his exercise of the right to sell such shares at any time at a price based on the book value of the Company's common shares. Adjustments to record the shares at redeemable value have been charged or credited to compensation expense. 9. EMPLOYEE BENEFIT PLANS The Company and its domestic subsidiaries maintain noncontributory defined benefit pension plans for all eligible nonunion employees who meet certain requirements of age, length of service and hours worked per year. The benefits provided by the plans are based upon years of service and the employees' average compensation, as defined. The Company's policy is to fund the pension plans in amounts which comply with contribution limits imposed by law. F-22 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 9. EMPLOYEE BENEFIT PLANS--(CONTINUED) The following tables set forth the plans' funded status at June 30, 1998 and 1997
1998 1997 ------- ------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $3,468 and $2,715 in 1998 and 1997, respectively......... $(3,844) $(3,010) ------- ------- ------- ------- Projected benefit obligation.................................. $(6,240) $(5,038) Plan assets at fair value..................................... 4,834 3,402 ------- ------- Projected benefit obligation in excess of plan assets......... (1,406) (1,636) Unrecognized net loss (gain).................................. (336) 20 Unrecognized prior service credit............................. (1,411) (1,576) Unrecognized net transition asset............................. (28) (31) ------- ------- Accrued pension liability..................................... $(3,181) $(3,223) ------- ------- ------- -------
Plan assets at fair value consisted primarily of listed stocks, bonds and short-term money market instruments. Accrued pension liability is included in the consolidated balance sheets at June 30 as follows:
1998 1997 ------- ------- Accrued expenses and other current liabilities................ $ 489 $ 489 Other liabilities............................................. 2,692 2,734 ------- ------- $ 3,181 $ 3,223 ------- ------- ------- -------
Net pension cost included in the consolidated statements of operations is comprised of the following:
1998 1997 1996 ---- ---- ---- Service cost benefits earned during the period................................. $900 $838 $670 Interest cost on projected benefit obligation.................................. 375 295 219 Actual return on plan assets................................................... (557) (279) (8) Amortization of unrecognized prior service credit.............................. (165) (165) (165) Net amortization and deferral.................................................. 265 68 (178) ---- ---- ---- $818 $757 $538 ---- ---- ---- ---- ---- ----
The discount rate used in determining the present value of the projected benefit obligation and the expected long-term rate of return on plan assets was 7.5%. The assumed rate of increase in future compensation levels was 4.0%. The Company and its domestic subsidiaries have a 401(k) plan, under which an employee may make a pretax contribution of up to 6% of base compensation, and the Company makes a non-matching contribution equal to 1% of the employee's base compensation and a matching contribution equal to 50% of the contribution up to the first 3% of an employee's base compensation and 25% of any contribution in excess of 3% of base compensation. All contributions are subject to the maximum amount deductible for federal income tax purposes. The Company's contribution amounted to $529, $497 and $474 in 1998, 1997 and 1996, respectively. F-23 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 9. EMPLOYEE BENEFIT PLANS--(CONTINUED) The Company has a deferred compensation and supplemental retirement plan for certain key executives of the Company and a subsidiary. The benefits provided by the plan are based upon years of service and the employees' average compensation subject to certain limits. The plan also provides for death benefits before retirement. Deferred compensation expense was $89, $91 and $89 in 1998, 1997 and 1996, respectively. At June 30, 1998 and 1997, the aggregate liability under this plan amounted to $387 and $316, respectively. To assist in funding the retirement and death benefits of the plan, the Company invested in corporate-owned life insurance policies, through a trust, which at June 30, 1998 and 1997 had cash surrender values of $729 and $548, respectively. Most of the Company's foreign subsidiaries have retirement plans covering substantially all employees. Contributions to these plans are generally deposited under fiduciary-type arrangements. Benefits under these plans are primarily based on levels of compensation. Funding policies are based on legal requirements and local practices. 10. INCOME TAXES Income (loss) from operations before provision for income taxes and extraordinary item consisted of:
1998 1997 1996 -------- ------- ------- Domestic............................................................. $(15,750) $ 4,697 $ 2,116 Foreign.............................................................. 3,996 4,407 535 -------- ------- ------- $(11,754) $ 9,104 $ 2,651 -------- ------- ------- -------- ------- -------
Components of income tax (benefit) expense are as follows:
1998 1997 1996 ------- ------ ------ Current tax provision (benefit): U.S. Federal.......................................................... $ (306) $ (88) $ 624 State and local....................................................... 64 343 599 Foreign............................................................... 782 1,521 1,304 ------- ------ ------ Total current tax provision........................................ 540 1,776 2,527 ------- ------ ------ Deferred tax provision (benefit): U.S. Federal.......................................................... (5,121) (889) 312 State and local....................................................... (115) 121 71 Foreign............................................................... 7 60 (249) ------- ------ ------ Total deferred tax provision (benefit)............................. (5,229) (708) 134 ------- ------ ------ Provision (benefit) for income taxes before extraordinary item.......... (4,689) 1,068 2,661 Benefit for extraordinary item.......................................... (1,011) -- -- ------- ------ ------ Provision (benefit) for income taxes.................................... $(5,700) $1,068 $2,661 ------- ------ ------ ------- ------ ------
F-24 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 10. INCOME TAXES--(CONTINUED) A reconciliation of the Federal statutory rate and the Company's effective tax rate follows:
1998 1997 1996 ----- ----- ----- U.S. Federal income tax rate............................................... (34.0)% 34.0% 34.0% State and local taxes, net of federal income tax effect.................... (0.2) 3.4 16.7 Tax rate differences on foreign operations................................. (3.5) (0.3) 7.0 Non-taxable insurance policy gain.......................................... -- (21.1) -- Additional taxes (credit) on reorganization of foreign subsidiaries........ -- (7.4) 35.8 Expenses with no tax benefit............................................... -- 2.6 8.9 Other...................................................................... (2.2) 0.5 (2.0) ----- ----- ----- (39.9)% 11.7% 100.4% ----- ----- ----- ----- ----- -----
In June 1996, pursuant to a plan of reorganization of the Company's foreign subsidiaries, including liquidation of two subsidiaries, the Company recorded a charge of approximately $950 for additional foreign and United States taxes on previously undistributed earnings of foreign subsidiaries. The credit recorded in 1997 represents principally the final determination of U.S. foreign tax credits on certain prior year transactions. Provision has not been made for United States or additional foreign taxes on undistributed earnings of other foreign subsidiaries of approximately $18,000, whose earnings have been or are primarily intended to be reinvested. It is not practicable at this time to determine the amount of income tax liability that would result should such earnings be repatriated. The tax effects of the significant temporary differences which comprise the deferred tax assets and liabilities at June 30, 1998 and 1997 are as follows:
1998 1997 ------- ------- Deferred tax assets: Employee benefits......................................... $ 2,542 $ 2,132 Depreciation.............................................. 1,267 2,082 Insurance................................................. 368 442 Asset valuation allowances................................ 505 423 Inventory capitalization.................................. 379 341 Plant curtailment and environmental remediation........... 4,927 332 Alternative minimum tax................................... 503 557 Net operating loss carryforward........................... 1,841 -- Other..................................................... 346 290 ------- ------- 12,678 6,599 Deferred tax liabilities.................................... (456) (432) ------- ------- Net deferred tax asset...................................... $12,222 $ 6,167 ------- ------- ------- -------
Deferred taxes are included in the following line items in the consolidated balance sheets:
1998 1997 ------- ------- Prepaid expenses and other current assets................... $ 4,018 $ 2,023 Accrued expenses, taxes and other current liabilities....... (60) (169) Other assets................................................ 8,599 4,492 Other liabilities........................................... (335) (179) ------- ------- $12,222 $ 6,167 ------- ------- ------- -------
F-25 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 10. INCOME TAXES--(CONTINUED) The Company has net operating loss carryforwards that begin to expire in 2018. 11. COMMITMENTS AND CONTINGENCIES (a) Leases: The Company leases office, warehouse and manufacturing facilities through fiscal 2006 for minimum annual rentals (plus certain cost escalations) as follows:
CAPITAL OPERATING YEAR ENDED JUNE 30 LEASES LEASES - ---------------------------------------------------- ------ --------- 1999................................................ $136 $ 1,134 2000................................................ 136 1,138 2001................................................ 127 1,153 2002................................................ 84 1,030 2003................................................ 63 978 Thereafter.......................................... -- 2,332 ---- ------- Total minimum lease payments........................ 546 $ 7,765 ------- ------- Amounts representing interest....................... 91 ---- Present value of minimum lease payments............. $455 ---- ----
Property, plant and equipment under capitalized leases included in the consolidated balance sheets at June 30, 1998 and 1997 amounted to $351 and $382, net of accumulated depreciation of $1,086 and $1,267, respectively. The commitment for facilities includes $2,000 with an affiliate controlled by shareholders of the Company. Rent expense for facilities and equipment for the years ended June 30, 1998, 1997 and 1996 amounted to $2,126, $2,224 and $1,944, respectively. (b) Litigation: The Company and its subsidiaries are a party to a number of claims and lawsuits arising in the normal course of business, including patent infringement, product liabilities and governmental regulation concerning environmental and other matters. Certain of these actions seek damages in various amounts. All such claims are being contested, and management believes the resolution of these matters will not materially affect the consolidated financial position, results of operations or cash flows of the Company. (c) Environmental Remediation: The Company's domestic subsidiaries are subject to various federal, state and local environmental laws and regulations which govern the management of chemical wastes. The most significant regulation governing the Company's recycling activities is the Resource Conservation and Recovery Act of 1976 ("RCRA"). The Company has been issued final RCRA "Part B" permits to operate as hazardous waste treatment and storage facilities at its facilities in Santa Fe Springs, California; Garland, Texas; Joliet, Illinois; Sumter, South Carolina and Sewaren, New Jersey. The Company has also obtained an interim status RCRA permit for its Union City, California facility. In connection with applying for RCRA "Part B" permits, the Company has been required to perform extensive site investigations at certain of its operating facilities and inactive sites to identify F-26 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 11. COMMITMENTS AND CONTINGENCIES--(CONTINUED) possible contamination and to provide the regulatory authorities with plans and schedules for remediation. Some soil and groundwater contamination has been identified at several plant sites and will require corrective action over the next several years. The Company has been named as a potentially responsible party ("PRP") in connection with an action commenced by the EPA, involving a third party fertilizer manufacturing site in South Carolina. The Company has also received a settlement proposal approximating $800, which it believes is unfairly high in relation to settlements offered to other PRPs. While the outcome of ongoing negotiation is uncertain, the Company has accrued its best estimate of the amount for which this matter can be settled. Based upon information available, management estimates the cost of further investigation and remediation of identified soil and groundwater problems at operating sites, closed sites and third party sites to be approximately $2,000, which is included in current and long-term liabilities in the 1998 consolidated balance sheet ($1,400 in 1997). Such amounts represent primarily the cost of feasibility studies and remediation activities and are expected to be substantially incurred over a three year period. No amounts have been discounted. Environmental provisions are $925, $530 and $0 for the fiscal years ended June 30, 1998, 1997 and 1996, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations. In addition, such amounts exclude the fiscal 1998 accrual related to the Sewaren facility described in 11(d). (d) Plant Curtailment: During the fourth quarter of fiscal 1998, the Company decided to curtail major manufacturing operations of its Sewaren, New Jersey facility and recorded nonrecurring charges of $10.0 million related to this curtailment. Of these charges, $5.6 million represents non-cash asset write downs related to the manufacturing facility, $1.1 million represents associated site restoration (which are classified as other current liabilities) and $3.3 million represents the long-term cost of groundwater monitoring and remediation activities that will continue in accordance with the Company's environmental plans. The accrual for groundwater monitoring represents personnel, utility and related costs aggregating an estimated $4.7 million over 10 years and discounted at a 7% rate. (e) Employee Terminations: In connection with the plant curtailment noted above and certain other personnel changes, the Company has implemented a plan to reduce its workforce by 24 employees resulting in a non-recurring charge for severance of $1,173 in fiscal 1998, (reflected in selling, general and administrative expenses in the accompanying consolidated statement of operations). These employees are primarily involved in plant operations, both domestically and foreign. Through June 30, 1998, 19 employees have been terminated and the remainder are expected to be terminated in fiscal 1999. All severance amounts will begin to be paid in fiscal 1999. 12. FINANCIAL INSTRUMENTS Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents, and trade receivables. The Company places its cash and cash equivalents with high quality financial institutions in various countries. The Company sells to customers in a variety of industries, markets and countries. Concentrations of credit risk with respect to receivables arising from these sales are limited due to the large number of customers comprising the Company's customer base. F-27 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 12. FINANCIAL INSTRUMENTS--(CONTINUED) Ongoing credit evaluations of customers' financial conditions are performed and, generally, no collateral is required. The Company maintains appropriate reserves for uncollectible receivables. The carrying amounts of cash and cash equivalents, trade receivables, trade payables and short-term debt is considered to be representative of their fair value because of their short maturities. The fair values of the Company's long-term debt are estimated using discounted cash flow analyses, based on the Company's incremental borrowing rates for similar types of borrowing arrangements. At June 30, 1998 and 1997, the fair value does not differ materially from its carrying amount. The Company obtains third-party letters of credit in connection with certain inventory purchases and insurance obligations. The contract values of the letters of credit at June 30, 1998 and 1997 were $4,600 and $4,900, respectively. The fair values of these letters of credit were not material. The Company had mitigated its floating interest rate exposure on substantially all floating rate bank borrowings of its Israeli subsidiary by purchasing interest caps expiring at various dates through October 2001, with interest caps of 11% based on 3-month LIBOR for domestic debt and 9% for U.S. dollar debt. Reimbursements and amortization of the cost of interest rate caps over their terms are recorded as adjustments to interest expense. The fair values of the interest rate caps does not differ materially from their carrying values. The interest rate caps were terminated in connection with the repayment of the floating rate debt in June 1998. The fair value associated with the foreign currency contracts has been estimated by valuing the net position of the contracts using the applicable spot rates and forward rates as of the reporting date. At June 30, 1998 and 1997, the fair value does not differ materially from its carrying amount. The fair value of commodity contracts is estimated based on quotes from the market makers of these instruments and represents the estimated amounts that the Company would expect to receive or pay to terminate the agreements as of the reporting date. At June 30, 1998 and 1997, the Company has $1,127 and $664, respectively, in carrying amounts of commodity contracts with a fair value of $1,062 and $690, respectively. F-28 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 13. GEOGRAPHIC SEGMENTS The Company operates in one business segment, specialty and industrial chemicals. The following is information about the Company's operations in different geographic areas:
1998 1997 1996 -------- -------- -------- Sales: North America................................................. $181,648 $165,447 $160,255 Western Europe................................................ 30,152 31,716 27,345 Israel........................................................ 62,399 67,659 52,798 South America................................................. 3,784 3,540 997 -------- -------- -------- Total Sales................................................ $277,983 $268,362 $241,395 -------- -------- -------- -------- -------- -------- 1998 1997 1996 -------- -------- -------- Operating Income (loss): North America................................................. $ (6,451) $ 8,509 $ 11,176 Western Europe................................................ 2,980 3,136 2,453 Israel........................................................ 4,711 6,078 1,422 South America................................................. 51 (80) (300) Corporate..................................................... (5,518) (6,412) (5,560) -------- -------- -------- Total Operating Income (loss).............................. $ (4,227) $ 11,231 $ 9,191 -------- -------- -------- -------- -------- -------- 1998 1997 1996 -------- -------- -------- Identifiable Assets: North America................................................. $ 82,556 $ 75,074 $ 77,265 Western Europe................................................ 20,504 18,075 17,770 Israel........................................................ 52,937 52,378 52,334 South America................................................. 4,932 4,185 4,504 Corporate..................................................... 31,267 12,988 6,309 -------- -------- -------- Total Identifiable Assets.................................. $192,196 $162,700 $158,182 -------- -------- -------- -------- -------- --------
14. VALUATION AND QUALIFYING ACCOUNTS Activity in the allowance for doubtful accounts consisted of the following for the fiscal years ended June 30:
1998 1997 1996 ---- ---- ---- Balance at beginning of period................................................. $656 $756 $631 Provision for bad debts........................................................ 144 16 155 Bad debt write-offs............................................................ (49) (116) (30) ---- ---- ---- Balance at end of period....................................................... $751 $656 $756 ---- ---- ---- ---- ---- ----
15. SUBSEQUENT EVENTS a) Acquisition: The Company is in the process of acquiring all of the outstanding capital stock of ODDA Smelteverk, a Norwegian company, and the business of BOC Carbide Industries in the United Kingdom (together ODDA) from the BOC Group Plc for approximately $19 million in cash and $16 million in debt. ODDA manufactures calcium carbide and dicyandiamide which is distributed worldwide. The principal uses of calcium carbide are for the production of acetylene for welding and cutting, and desulphurization of iron and steel. The principal uses of dicyandiamide are for F-29 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 15. SUBSEQUENT EVENTS--(CONTINUED) pharmaceutical manufacture and a fire-retarding agent for fabrics, wood and paint. The acquisition will be accounted for using the purchase method of accounting. b) Credit Facility: On August 19, 1998, the Company entered into a $60 million senior secured credit facility with PNC Bank, as agent and on behalf of itself. The credit facility is structured as a five-year, $35 million revolving credit facility subject to availability under a borrowing base formula for domestic accounts receivable and inventories. The Company, under terms of this facility, may choose between two interest rate options: (i) base rate, as defined, or (ii) Euro rate as defined, plus 1 1/4%-2% depending on the Companys operating performance. In addition, a two-year, $25 million acquisition line of credit will be available to the Company. Drawdowns under the acquisition line shall amortize on a five-year basis with the balances due at maturity. The credit agreement requires, among other things, the maintenance of certain fixed charge coverage ratios and a certain level of net worth for the domestic operations of the Company, as defined. In addition, there are certain restrictions on additional borrowings, additional liens on the Company's assets, guarantees, dividend payments, redemption or purchase of the Company's stock, sale of subsidiaries stock, disposition of assets, investments, and mergers and acquisitions. c) Capital Stock In September 1998, the Company simplified its capitalization by eliminating classes of authorized but unissued preferred stock and common stock, establishing "Blank Check" preferred stock, re-designating the third preferred stock as Series A Stock Preferred Stock, combining on a basis to preserve as nearly as practicable the rights and benefits of the following: the former Class A common shares and the Class C common shares into a single class designated as Class A Common Stock, and the former Class B common shares and Class E common shares into a single class designated as Class B Common Stock. These changes have not been reflected in the accompanying consolidated financial statements. 16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS In June 1998, the Company issued $100 million in Senior Subordinated Notes as described in Note 2. In connection with the issuance of these Notes, the Company's majority-owned U.S. Subsidiaries fully and unconditionally guaranteed such Notes on a joint and several basis. Foreign subsidiaries do not presently guarantee the Notes. The following condensed consolidating financial data summarizes the assets, liabilities, and results of operations and cash flows of the Parent, Guarantors and Non-Guarantor subsidiaries. The Parent is Philipp Brothers Chemicals, Inc. ("PBC"). The U.S. Guarantor Subsidiaries include all domestic subsidiaries of PBC including the following: PBC and its subsidiaries (C.P. Chemicals, Inc., Koffolk, Inc., Phibro-Tech, Inc., MRT Management Corp., Mineral Resource Technologies, L.L.C., Prince Agriproducts, Inc., The Prince Manufacturing Company (PA), The Prince Manufacturing Company (IL) Phibrochem, Inc., Phibro Chemicals, Inc., Western Magnesium Corp.). The Non-Guarantor Subsidiaries include the following: (Koffolk (1949) Ltd., Agtrol International and Ferro Metal and Chemical Corporation). The U.S. and foreign Guarantor and Non-Guarantor Subsidiaries are majority owned by the Parent. Investments in subsidiaries are accounted for by the Parent using the equity method. Income tax expense (benefit) is allocated among the consolidating entities based upon taxable income (loss) by jurisdiction within each group. F-30 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS The principal consolidation adjustments are to eliminate investments in subsidiaries and intercompany balances and transactions. Separate financial statements of the U.S. Guarantor Subsidiaries and the Non-Guarantor Subsidiaries are not presented because management has determined that such financial statements would not be material to investors. PHILIPP BROTHERS CHEMICALS INC. CONSOLIDATING BALANCE SHEET JUNE 30, 1998 (000'S OMITTED)
GUARANTOR NON-GUARANTOR CONSOLIDATION PARENT SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------------ -------------- ------------- ------------- ------------ ASSETS Current assets: Cash and cash equivalents........................ $ 18,312 $ 928 $ 4,981 $ 24,221 Trade receivables................................ 5,729 27,999 23,832 57,560 Other receivables................................ 952 60 4,988 6,000 Inventory........................................ 3,596 18,910 15,061 37,567 Prepaid expenses & other current assets.......... 3,599 1,241 651 5,491 -------- -------- ------- --------- -------- Total current assets............................... 32,188 49,138 49,513 $ 0 130,839 -------- -------- ------- --------- -------- Total property, plant, & equipment................. 3,280 44,748 48,408 96,436 Less: accumulated depreciation..................... 2,117 32,158 21,651 55,926 -------- -------- ------- --------- -------- Property, plant & equipment, net................... 1,163 12,590 26,757 40,510 -------- -------- ------- --------- -------- Intangibles........................................ 15 3,136 620 3,771 Deferred charges and other......................... 7,729 7,864 1,483 17,076 Investment in subsidiaries......................... 67,049 1,534 (2,483) (66,100) 0 Intercompany....................................... 28,932 (29,587) 655 0 -------- -------- ------- --------- -------- Total assets....................................... $137,076 $ 44,675 $76,545 ($ 66,100) $192,196 -------- -------- ------- --------- -------- -------- -------- ------- --------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt................ $ 144 $ 1,491 $ 11 $ 1,646 Accounts payable................................. 3,281 12,801 17,350 33,432 Other loans payable.............................. 492 492 Accrued expenses and other....................... 4,223 8,281 3,098 15,602 -------- -------- ------- --------- -------- Total current liabilities.......................... 8,140 22,573 20,459 $ 0 51,172 -------- -------- ------- --------- -------- Long term debt..................................... 100,199 2,575 34,775 (35,391) 102,158 Other liabilities.................................. 1,679 6,437 1,987 10,103 Redeemable securities: Common stock..................................... 2,563 2,563 Common stock of subsidiary....................... 2,623 2,623 -------- -------- ------- --------- -------- Total redeemable securities........................ 2,563 2,623 0 0 5,186 -------- -------- ------- --------- -------- Stockholders equity Third preferred stock............................ 521 521 Common stock..................................... 3 3 Paid in capital.................................. 764 2,560 (429) (2,460) 435 Foreign currency translation adjustment.......... (14) 30 (619) (603) Retained earnings................................ 23,221 7,877 20,372 (28,249) 23,221 -------- -------- ------- --------- -------- Total stockholders equity.......................... 24,495 10,467 19,324 (30,709) 23,577 -------- -------- ------- --------- -------- Total liabilities & stockholders' equity........... $137,076 $ 44,675 $76,545 ($ 66,100) $192,196 -------- -------- ------- --------- -------- -------- -------- ------- --------- --------
F-31 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS--(CONTINUED) PHILIPP BROTHERS CHEMICALS INC. INCOME STATEMENT YEAR TO DATE FOR THE YEAR ENDED JUNE 30, 1998 (000'S OMITTED)
GUARANTOR NON-GUARANTOR CONSOLIDATION PARENT SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------- -------------- ------------------- ------------- ------------ Net sales............................... $36,318 $166,816 $ 104,555 $ (29,706) $277,983 Cost of goods sold...................... 29,914 123,828 84,877 (29,706) 208,913 ------- -------- --------- --------- -------- Gross profit.......................... 6,404 42,988 19,678 0 69,070 Selling, general and administrative expenses.............................. 9,878 41,483 11,936 63,297 Curtailment of operations at manufacturing facility................ 10,000 10,000 ------- -------- --------- --------- -------- Operating income (loss)................. (3,474) (8,495) 7,742 0 (4,227) Other expense........................... 74 971 1,045 Interest expense........................ 3,798 287 2,780 6,865 Interest income......................... (253) (97) (33) (383) Intercompany allocations................ (5,903) 5,863 40 (Profit) loss relating to subsidiaries ......................... 6,430 (6,430) 0 ------- -------- --------- --------- -------- Income/(loss) before income taxes and extraordinary item.................... (7,620) (14,548) 3,984 6,430 (11,754) Income taxes............................ (448) (5,080) 839 0 (4,689) ------- -------- --------- --------- -------- Net income/(loss) before extraordinary item.................................. (7,172) (9,468) 3,145 6,430 (7,065) Extraordinary loss (net of $1,011 of tax).................................. (1,855) (107) (1,962) ------- -------- --------- --------- -------- Net income/(loss)....................... $(9,027) $ (9,468) $ 3,038 $ 6,430 $ (9,027) ------- -------- --------- --------- -------- ------- -------- --------- --------- --------
F-32 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS--(CONTINUED) PHILIPP BROTHERS CHEMICALS INC. CONSOLIDATING CASH FLOWS FOR THE YEAR ENDED JUNE 30, 1998 (000'S OMITTED)
GUARANTOR NON-GUARANTOR CONSOLIDATION PARENT SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------------ ------------ ------------- ------------- ------------ Operating activities: Net income (loss)..................................... $ (9,027) $ (9,468) $ 3,038 $ 6,430 $ (9,027) Adjustments to reconcile net income (loss) Cash provided by operating activities: Depreciation and amortization....................... 536 5,047 3,670 9,253 Gain on life insurance.............................. 0 0 Deferred income taxes............................... (2,102) (4,138) (6,240) Forgiveness of promissory notes..................... 2,591 2,591 Provision for curtailment of operations at manufacturing facility............................ 10,000 10,000 Change in redemption amount of redeemable securities........................................ (1,250) (1,250) Extraordinary loss on extinguishment of debt, net of tax............................................... 1,855 107 1,962 Other............................................... (902) 729 1,564 1,391 Changes in operating assets and liabilities, net effect of business acquired: Accounts receivable................................... (566) (5,994) 1,073 (5,487) Inventory............................................. (143) 1,842 (94) 1,605 Prepaid expenses and other............................ (1,667) 1,569 (2,808) (2,906) Other assets.......................................... (956) (397) 4 (1,349) Intercompany.......................................... (27,945) 742 33,633 (6,430) 0 Accounts payable...................................... (1,276) 425 (28) (879) Accrued expenses and other............................ 1,117 942 (1,022) 1,037 -------- -------- ------- ------- -------- Net cash provided by (used in) operating activities... (42,326) 3,890 39,137 0 701 -------- -------- ------- ------- -------- Investing activities: Capital expenditures.................................. (567) (4,230) (3,234) (8,031) -------- -------- ------- ------- -------- Net cash used in investing activities................. (567) (4,230) (3,234) 0 (8,031) -------- -------- ------- ------- -------- Financing activities: Cash overdraft........................................ 913 1,002 1,915 Net (decrease) increase in short-term debt............ 149 (350) (13,332) (13,533) Proceeds from long-term debt.......................... 100,000 380 100,380 Payments of long-term debt............................ (31,517) (1,570) (19,835) (52,922) Payments of deferred financing costs.................. (3,724) (3,724) Extraordinary loss on extinguishment of debt, net of tax................................................. (1,855) (107) (1,962) Proceeds from life insurance.......................... 6,045 6,045 Distribution to principal shareholder for purchase of subsidiary.......................................... (1,500) (1,500) Receivable from principal shareholder................. (429) (429) Redemption of preferred stock......................... (7,569) 757 (6,812) -------- -------- ------- ------- -------- Net cash provided by (used in) financing activities... 60,942 219 (33,703) 0 27,458 -------- -------- ------- ------- -------- Net (decrease) increase in cash and cash equivalents......................................... 18,049 (121) 2,200 0 20,128 Cash and cash equivalents at beginning of year........ 263 1,049 2,781 4,093 -------- -------- ------- ------- -------- Cash and cash equivalents at end of year.............. $ 18,312 $ 928 $ 4,981 $ 0 $ 24,221 -------- -------- ------- ------- -------- -------- -------- ------- ------- --------
F-33 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS--(CONTINUED) PHILIPP BROTHERS CHEMICALS INC. CONSOLIDATING BALANCE SHEET JUNE 30, 1997 (000'S OMITTED)
GUARANTOR NON-GUARANTOR CONSOLIDATION PARENT SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------------ -------------- ------------- ------------- ------------ ASSETS Current Assets: Cash and cash equivalents......................... $ 263 $ 1,049 $ 2,781 $ 4,093 Trade receivables................................. 5,267 21,823 25,039 52,129 Other receivables................................. 7,160 136 1,884 9,180 Inventory......................................... 3,453 19,219 14,967 37,639 Prepaid expenses & other current assets........... 1,856 1,475 807 4,138 -------- -------- ------- --------- -------- Total current assets................................ 17,999 43,702 45,478 $ 0 107,179 -------- -------- ------- --------- -------- Total property, plant and equipment................. 2,222 53,213 45,932 101,367 Less: accumulated depreciation...................... 1,839 35,112 19,107 56,058 -------- -------- ------- --------- -------- Property, plant & equipment, net.................... 383 18,101 26,825 0 45,309 -------- -------- ------- --------- -------- Intangibles....................................... 32 597 726 1,355 Deferred charges and other........................ 3,536 3,712 1,609 8,857 Investment in subsidiaries........................ 37,450 874 (2,483) (35,841) 0 Intercompany...................................... 27,360 (26,044) 101 (1,417) 0 -------- -------- ------- --------- -------- Total assets........................................ $ 86,760 $ 40,942 $72,256 ($ 37,258) $162,700 -------- -------- ------- --------- -------- -------- -------- ------- --------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Loan payable to banks............................. $13,332 $ 13,332 Current portion of long-term debt................. $ 14,397 $ 600 4,130 19,127 Accounts payable.................................. 3,644 10,257 17,378 31,279 Other loans payable............................... 387 387 Accrued expenses and other........................ 9,235 6,196 4,119 19,550 -------- -------- ------- --------- -------- Total current liabilities........................... 27,663 17,053 38,959 $ 0 83,675 -------- -------- ------- --------- -------- Long term debt...................................... 17,463 2,607 15,760 (1,417) 34,413 Other liabilities................................... 1,947 2,668 780 5,395 Redeemable securities: Common stock...................................... 3,813 3,813 STOCKHOLDERS' EQUITY Second preferred stock.............................. 680 680 Third preferred stock............................... 521 521 Common stock........................................ 3 1 (1) 3 Paid in capital..................................... 2,364 1,734 (1,734) 2,364 Foreign currency translation adjustment........................................ (8) 30 (500) (478) Retained earnings................................... 32,314 16,849 17,257 (34,106) 32,314 -------- -------- ------- --------- -------- Total stockholders' equity.......................... 35,874 18,614 16,757 (35,841) 35,404 -------- -------- ------- --------- -------- Total liabilities & stockholders' equity............ $ 86,760 $ 40,942 $72,256 ($ 37,258) $162,700 -------- -------- ------- --------- -------- -------- -------- ------- --------- --------
F-34 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS--(CONTINUED) PHILIPP BROTHERS CHEMICALS INC. INCOME STATEMENT YEAR TO DATE FOR THE YEAR ENDED JUNE 30, 1997 (000'S OMITTED)
GUARANTOR NON-GUARANTOR CONSOLIDATION PARENT SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED -------- -------------- ------------- ------------- ------------ Net sales....................................... $ 34,360 $151,379 $ 108,822 $ (26,199) $268,362 Cost of goods sold.............................. 28,099 111,443 87,695 (26,199) 201,038 -------- -------- --------- --------- -------- Gross profit................................ 6,261 39,936 21,127 0 67,324 Selling, general and administrative expenses.... 10,360 33,740 11,993 56,093 -------- -------- --------- --------- -------- Operating income (loss)......................... (4,099) 6,196 9,134 0 11,231 Other (income)/expense.......................... (719) 0 2,487 1,768 Interest expense................................ 3,197 506 2,550 6,253 Interest income................................. (80) (14) (158) (252) Intercompany allocations........................ (5,215) 5,215 Gain on life insurance policy................... (5,642) (5,642) (Profit) loss relating to subsidiary............ (2,454) 2,454 0 -------- -------- --------- --------- -------- Income/(loss) before income taxes............... 6,814 489 4,255 (2,454) 9,104 Income taxes.................................... (1,222) 723 1,567 0 1,068 -------- -------- --------- --------- -------- Net income/(loss)............................... $ 8,036 $ (234) $ 2,688 $ (2,454) $ 8,036 -------- -------- --------- --------- -------- -------- -------- --------- --------- --------
F-35 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS--(CONTINUED) PHILIPP BROTHERS CHEMICALS INC. CONSOLIDATING CASH FLOWS FOR THE YEAR ENDED JUNE 30, 1997 (000'S OMITTED)
GUARANTOR NON-GUARANTOR CONSOLIDATION PARENT SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------- ------------ ------------- ------------- ------------ Operating activities: Net income (loss)......................................... $ 8,036 $ (234) $ 2,688 $ (2,454) $ 8,036 Adjustments to reconcile net income (loss) cash provided by operating activities: Depreciation and amortization........................... 585 5,056 3,701 9,342 Gain on life insurance.................................. (5,642) (5,642) Deferred income taxes................................... (19) (132) (557) (708) Other................................................... 135 (125) (383) (373) Changes in operating assets and liabilities, net of effect of business acquired: Accounts receivable..................................... (5) 185 (4,536) (4,356) Inventory............................................... (354) 38 (552) (868) Prepaid expenses and other.............................. (80) (199) 718 439 Other assets............................................ (298) (141) (90) (529) Intercompany............................................ (2,510) (1,627) 1,683 2,454 0 Accounts payable........................................ (2,258) 138 726 (1,394) Accrued expenses and other.............................. (868) 270 (426) (1,024) ------- -------- ------- --------- -------- Net cash provided by (used in) operating activities....... (3,278) 3,229 2,972 0 2,923 ------- -------- ------- --------- -------- Investing activities: Capital expenditures.................................... (113) (2,964) (1,620) (4,697) ------- -------- ------- --------- -------- Net cash used in investing activities..................... (113) (2,964) (1,620) 0 (4,697) ------- -------- ------- --------- -------- Financing activities: Cash overdraft.......................................... 2,817 2,817 Net (decrease) increase in short-term debt.................................................. 5 (181) (176) Proceeds from long term debt............................ 900 791 1,691 Payments of long term debt.............................. (104) (835) (2,957) (3,896) ------- -------- ------- --------- -------- Net cash provided by (used in) financing activities....... 3,618 (835) (2,347) 0 436 ------- -------- ------- --------- -------- Net (decrease) increase in cash and cash equivalents...... 227 (570) (995) 0 (1,338) Cash and cash equivalents at beginning of year............ 36 1,619 3,776 5,431 ------- -------- ------- --------- -------- Cash and cash equivalents at end of year.................. $ 263 $ 1,049 $ 2,781 $ 0 $ 4,093 ------- -------- ------- --------- -------- ------- -------- ------- --------- --------
F-36 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS--(CONTINUED) PHILIPP BROTHERS CHEMICALS INC. INCOME STATEMENT YEAR TO DATE FOR THE YEAR ENDED JUNE 30, 1996 (000'S OMITTED)
GUARANTOR NON-GUARANTOR CONSOLIDATION PARENT SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------- ------------ ------------- ------------- ------------ Net sales...................................... $35,474 $143,581 $ 85,614 $ (23,274) $241,395 Cost of goods sold............................. 29,634 103,140 71,533 (23,274) 181,033 ------- -------- --------- --------- -------- Gross profit................................. 5,840 40,441 14,081 0 60,362 Selling, general and administrative expenses... 9,288 31,377 10,506 51,171 ------- -------- --------- --------- -------- Operating income (loss)........................ (3,448) 9,064 3,575 0 9,191 Other (income)/expense......................... (1,738) 3,109 1,371 Interest expense............................... 3,124 527 1,895 5,546 Interest income................................ (94) (62) (221) (377) Intercompany allocations....................... (5,040) 4,900 140 0 (Profit) loss relating to subsidiary........... 1,014 (1,014) 0 ------- -------- --------- --------- -------- Income/(loss) before income taxes................................. (714) 3,699 (1,348) 1,014 2,651 Income taxes................................... (704) 1,942 1,423 2,661 ------- -------- --------- --------- -------- Net income/(loss).............................. $ (10) $ 1,757 $ (2,771) $ 1,014 $ (10) ------- -------- --------- --------- -------- ------- -------- --------- --------- --------
F-37 PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (IN THOUSANDS) 16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS--(CONTINUED) PHILIPP BROTHERS CHEMICALS INC. CONSOLIDATING CASH FLOWS FOR THE YEAR ENDED JUNE 30, 1996 (000'S OMITTED)
GUARANTOR NON-GUARANTOR CONSOLIDATION PARENT SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------------ ------------ -------------- ------------- ------------ Operating Activities: Net income (loss).................................... $ (10) $ 1,757 $ (2,771) $ 1,014 $ (10) Adjustments to reconcile net income (loss) cash provided by operating activities: Depreciation and amortization........................ 512 4,918 2,576 8,006 Deferred income taxes................................ 782 (496) (152) 134 Other................................................ (1,152) (94) 690 (556) Changes in operating assets and liabilities, net of effect of business acquired: Accounts receivable.................................. 422 (100) 519 841 Inventory............................................ 146 (2,294) 289 (1,859) Prepaid expenses and other........................... 549 (84) 379 844 Other assets......................................... 7 (170) (214) (377) Intercompany......................................... (2,570) 4,018 (434) (1,014) 0 Accounts payable..................................... (1,167) (2,035) (3,442) (6,644) Accrued expenses and other........................... (1,423) (103) 1,827 301 -------- -------- -------- ------- -------- Net cash provided by (used in) operating activities......................................... (3,904) 5,317 (733) 0 680 -------- -------- -------- ------- -------- Investing activities: Capital expenditures................................. (157) (3,784) (4,951) (8,892) Purchase of business, net of cash acquired...................................... (3,881) (3,881) -------- -------- -------- ------- -------- Net cash used in investing activities................ (157) (3,784) (8,832) 0 (12,773) -------- -------- -------- ------- -------- Financing activities: Net (decrease) increase in short-term debt........... 31 0 3,962 3,993 Proceeds from long term debt......................... 3,500 0 9,550 13,050 Payments of long term debt........................... (52) (425) (2,622) (3,099) -------- -------- -------- ------- -------- Net cash provided by (used in) financing activities......................................... 3,479 (425) 10,890 13,944 0 -------- -------- -------- ------- -------- Net (decrease) increase in cash and cash equivalents........................................ (582) 1,108 1,325 0 1,851 Cash and cash equivalents at beginning of year....... 671 458 2,451 3,580 -------- -------- -------- ------- -------- Cash and cash equivalents at end of year............. $ 89 $ 1,566 $ 3,776 $ 0 $ 5,431 -------- -------- -------- ------- -------- -------- -------- -------- ------- --------
F-38 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY GUARANTOR OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. ------------------------ TABLE OF CONTENTS PAGE ---- Available Information.......................... iii Disclosure Regarding Forward-Looking Statements................................... iii Summary........................................ 1 Risk Factors................................... 13 Use of Proceeds................................ 23 Capitalization................................. 24 Unaudited Pro Forma Condensed Consolidated Financial Information........................ 25 Selected Consolidated Financial Data........... 29 Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 32 Net Sales...................................... 32 The Exchange Offer............................. 38 Business....................................... 45 Conditions in Israel........................... 69 Management..................................... 72 Principal Stockholders......................... 77 Description of Capital Stock................... 77 Certain Relationships and Related Transactions................................. 78 Description of Certain Indebtedness............ 80 Description of the Notes....................... 82 Book Entry; Delivery and Form.................. 111 Exchange Offer; Registration Rights............ 112 Certain United States Federal Income Tax Considerations............................... 114 Plan of Distribution........................... 115 Legal Matters.................................. 116 Experts........................................ 116 Index to Financial Statements.................. F-1 UNTIL , 1998, (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES OFFERED HEREBY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $100,000,000 [LOGO] PHILIPP BROTHERS CHEMICALS, INC. 9 7/8% SENIOR SUBORDINATED NOTES DUE 2008 ------------------------ PROSPECTUS ------------------------ , 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The following summaries are subject to the complete text of the statutes and organizational documents of the Registrants described below and are qualified in their entirety by reference thereto. I. Koffolk, Inc., MRT Management Corp., Phibro-Tech, Inc. and Prince Agriproducts, Inc., each a Delaware corporation A. Section 145 of the Delaware General Corporation Law ("DGCL") provides generally and in pertinent part that a Delaware corporation may indemnify its directors and officers who are or were party or are threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation, by reason of the fact that they are or were a director, officer, employee or agent of the corporation, or are or were serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by them in connection with such action, suit or proceeding if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. Section 145 further provides that a Delaware corporation may indemnify its directors and officers who were or are a party or are threatened to be a made party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that they are or were a director, officer, employee or agent of the corporation, or are or were serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by them in connection with the defense or settlement of such action or suit if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 102(b)(7) of the DGCL provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL (relating to liability for unauthorized acquisitions or redemptions of, or dividends on, capital stock) or (iv) for any transaction from which the director derived an improper personal benefit. B. Article Six of the Certificate of Incorporation of Koffolk, Inc. provides that the corporation shall have the power to indemnify and advance expenses to any person to the full extent permitted from time to time by the DGCL. Article VIII of the By-Laws of Koffolk, Inc. provides that, to the fullest extent permitted by the laws of the State of Delaware, a director of the corporation shall not be liable to the corporation or the stockholders for monetary damages for breach of fiduciary duty as director. Article VIII further provides that each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a II-1 director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the laws of the State of Delaware, as the same exists or may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expense, liability and loss reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however that, if the laws of the State of Delaware require, the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation. Article VIII further provides that the corporation may maintain insurance, at its expense, to protect itself and any director or officer of the corporation against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the laws of the State of Delaware. C. Article IV of the By-Laws of MRT Management Corp. provides that, to the fullest extent permitted by the DGCL as the same exists or may be amended, a director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as director. Article IV further provides that each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the DGCL, as the same exists or may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expense, liability and loss reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however that the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the Board of Directors of the corporation. Such right to indemnification shall be a contract right and shall include the right to be paid by the corporation the expense incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the DGCL requires, the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation. Article IV further provides that the corporation may maintain insurance, at its expense, to protect itself and any director or officer of the corporation against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. II-2 D. Article Nine of the Certificate of Incorporation of Phibro-Tech, Inc. provides that the corporation shall indemnify, to the full extent permitted by Section 145 of the DGCL, as amended from time to time, all persons whom it may indemnify pursuant thereto. Article V of the By-Laws of Phibro-Tech, Inc. provides that the corporation, to the full extent permitted by the laws of the State of Delaware, shall indemnify any person who, was or is made a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (including any appeal thereof), whether civil, criminal, administrative or investigative in nature (other than an action by or in the right of the corporation), by reason of the fact that such person is or was a director or officer of the corporation, or it at a time when he was a director or officer of the corporation, is or was serving at the request of, or to represent the interests of, the corporation as a director, officer, partner, fiduciary, employee or agent (a "Subsidiary Officer") of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (and "Affiliated Entity"), against expenses (including attorneys' fees and disbursements), costs, judgment, fines, penalties and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interest of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful; provided, however, that the corporation shall not be obligated to indemnify against any amount paid in settlement unless the corporation has consented to such settlement, which consent shall not be unreasonably withheld. The termination or any action suit or proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, that such person had reasonable cause to believe that his or her conduct was unlawful. Article V further provides that the corporation, to the full extent permitted by the laws of the State of Delaware, shall indemnify any person who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action or suit (including any appeal thereof) brought in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or, if at a time when he was a director or officer to the corporation, is or was serving at the request or, or to represent the interests of, the corporation as a Subsidiary Officer of an Affiliated Entity against expenses (including attorneys' fees and disbursements) and costs actually and reasonably incurred by such person in connection with such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to the corporation unless, and except to the extent that, the Court of Chancery of the State of Delaware or the court in which such judgment was rendered shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses and costs as the Court of Chancery of the State of Delaware or such other court shall deem proper. Any indemnification described in the preceding paragraph shall be made by the corporation only as authorized in the specific case upon a determination that indemnification is proper under the circumstances because such person has met the applicable standard as set forth above. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding in respect of which indemnification is sought or by majority vote of the members of a committee of the Board of Directors composed of at least three members each of whom is not a party to such action, suit or proceeding, or (b) if such quorum is not obtainable and/or such a committee is not established or obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders. Expenses and costs incurred by an officer or director in defending any such action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit II-3 or proceeding upon receipt or an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation. In addition, the corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of, or to represent the interests of, the corporation as a Subsidiary Officer of any Affiliated Entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of Article V or applicable law. E. Article IX of the Certificate of Incorporation of Prince Agriproducts, Inc. provides that the corporation shall indemnify each director and officer thereof against all costs and expenses reasonably incurred by or imposed upon him in connection with or arising out of any action, suit or proceeding in which he may be involved or to which he may be made a party by reason of his being or having been a director of officer of the corporation, except in relation to matters as to which he shall be finally adjudged in any such action, suit or proceeding to be liable for negligence or misconduct in the performance of his duty as such director or officer. In the case of settlement of any such action, suit or proceeding, such director or officer shall be indemnified by the corporation against the cost and expense of such settlement, including any amount paid to the corporation or to such other corporation, reasonably incurred by him, after and only after (a) the corporation shall have been advised by independent counsel that such director or officer is not liable for negligence or misconduct in the performance of his duty as such director or officer in relation to the matters covered by such action, suit or proceeding, and that such cost and expense does not substantially exceed the expense which might reasonably be incurred by such director or officer in conducting such action, suit or proceeding to a final conclusion, or (b) the holders of a majority of the shares of the capital stock of the corporation issued and outstanding in the hands of disinterested persons and entitled to vote shall by vote at any annual meeting of the stockholders, or at any special meeting called for the purpose, approve such settlement and the indemnification of such director or officer. "Disinterested persons" as used therein shall mean any (w) person other than a director or officer who, at the time, is or may, as such director or officer, be entitled to indemnification pursuant to the foregoing provisions, (x) any corporation or organization of which any such person owns of record or beneficially five per cent (5%) or more of the voting stock, (y) any firm or association of which any such person is a member, and (z) any spouse, child, parent, brother or sister or any such stockholder. II. Mineral Resource Technologies, L.L.C., a Delaware limited liability company A. Section 18-108 of the Delaware Limited Liability Company Act ("DLLCA") provides that subject to the standards and restrictions, if any, as are set forth in its limited liability company agreement, a limited liability company may, and shall have the power to, indemnify and hold harmless any member, manager or other person from and against any and all claims and demands whatsoever. B. Article 2 of the Limited Liability Company Agreement of Mineral Resource Technologies, L.L.C. provides that the members thereof and each other person who is admitted as a member of the company and a party thereto, and acquires a membership interest in the company, with the rights, obligations, preferences and limitations specified therein, shall not have any liability for any obligations or liabilities of the company whatsoever except if and then only to the extent expressly provided by the DLLCA. No managing member, nor any affiliate of any managing member, shall have any personal liability to the company or any of the members for damages for any breach of duty as a manager of the company or as a managing member or as an authorized agent, as the case may be, and/or when acting with the consent of the managing member(s); provided that the foregoing shall not eliminate or limit the liability of any managing member if a judgment or other final adjudication adverse thereto establishes that acts or omissions thereto were in bad faith or involved intentional misconduct or a knowing violation or law or that such person personally gained in fact a financial profit or other advantage to which such person was not legally entitled thereof. II-4 III. Philipp Brothers Chemicals, Inc. and Phibro Chemicals, Inc., each a New York corporation. A. Under Sections 721 through 725 of the New York Business Corporation Law (the "NYBCL"), a corporation has broad powers to indemnify its directors, officers and other employees. These sections (i) provide that the statutory indemnification and advancement of expenses provisions of the NYBCL are not exclusive, provided that no indemnification may be made to or on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his or her acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled, (ii) establish procedures for indemnification and advancement of expenses that may be contained in the certificate of incorporation or by-laws, or, when authorized by either of the foregoing, set forth in a resolution of the shareholders or directors or an agreement providing for indemnification and advancement of expenses, (iii) apply a single standard for statutory indemnification for third-party and derivative suits by providing that indemnification for third-party and derivative suits by providing that indemnification is available if the director or officer acted in good faith, for a purpose which he or she reasonably believed to be in the best interests of the corporation, and in criminal actions, had no reasonable cause to believe that his or her conduct was unlawful and (iv) permit the advancement of litigation expenses upon receipt of an undertaking to repay such advance if the director or officer is ultimately determined not to be entitled to indemnification or to the extent the expenses advanced exceed the indemnification to which the director or officer is entitled. Section 726 of the NYBCL permits the purchase of insurance to indemnify a corporation or its officers and directors to the extent permitted. B. Article Sixth of the Certificate of Incorporation of Philipp Brothers Chemicals, Inc. provides that each and every person who may become a director of the corporation shall be relieved from any liability that might exist through contracting or dealing with the corporation for the benefit of himself or any firm, association or corporation in which he is or may be in any manner interested, provided that the interest in any such contract or transaction of any such director shall be fully disclosed. Article Sixth further provides that the corporation shall indemnify each director and officer against expenses reasonably incurred by him in connection with any action, suit, or proceeding to which he may be made a party by reason of his being or having been a director or officer of the corporation, to the fullest extent permitted by the NYBCL. Article Eighth of the Certificate of Incorporation of Philipp Brothers Chemicals, Inc. provides that, to the fullest extent permitted by the NYBCL, the personal liability of directors of the corporation to the corporation or its shareholders for damages for any breach of duty in such capacity is eliminated. C. Article VI of the By-Laws of Phibro Chemicals, Inc. provides that, to the fullest extent permitted by the laws of the State of New York, a director of the corporation shall not be liable to the corporation or the shareholders for monetary damages for breach of fiduciary duty as director. Article VI further provides that each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the laws of the State of New York, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however II-5 that the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the Board of Directors of the corporation. Such right to indemnification shall be a contract right and shall include the right to be paid by the corporation the expense incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the laws of the State of New York require, the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the laws of the State of New York. IV. C. P. Chemicals, Inc. and Phibrochem, Inc, each a New Jersey corporation Section 14A:3-5 of the New Jersey Business Corporation Act ("NJBCA") provides that a New Jersey business corporation shall have the power to indemnify its directors, officers, employees and agents against expenses and liabilities in connection with any proceeding involving such persons by reason of his serving or having served in such capacities or for each such person's acts taken in his capacity as a director, officer, employee or agent of the corporation if such actions were taken in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal proceeding, if he had no reasonable cause to believe his conduct was unlawful, provided that any such proceeding is not by or in the right of the corporation. Section 14A:3-5 further provides that a New Jersey corporation shall have the power to indemnify its directors, officer, employees and agents against expenses incurred in connection with any proceeding by or in the right of the corporation to procure a judgment in its favor which involves such person by reason of his serving or having served in such capacities, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. However, in such proceeding no indemnification shall be provided in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the Superior Court or the court in which such proceeding was brought shall determine upon application that despite the adjudication of liability, but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnify for such expenses as the Superior Court or such other court shall deem proper. Section 14A:2-7(3) of the NJBCA enables a corporation in its certificate of incorporation to limit the liability of directors and officers of the corporation to the corporation or its shareholders. Specifically, the certificate of incorporation may provide that directors and officers of the corporation will not be personally liable for money damages for breach of a duty as a director or an officer, except for liability (i) for any breach of the director's or officer's duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve a knowing violation of law, (iii) as to directors only, under Section 14A:6-12(1) of the NJBCA, which relates to unlawful declarations of dividends or other distributions of assets to shareholders or the unlawful purchase of shares of the corporation, or (iv) for any transaction from which the director or officer derived an improper personal benefit. B. Article VII of the By-Laws of C.P. Chemicals, Inc. provides that the corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of New Jersey. Article VII of the By-Laws of Phibrochem, Inc. provides that, to the fullest extent permitted by the NJBCA as the same exists or may be amended, a director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as director. Article VII further provides that each person who was or is made a party or is threatened to be made a party to or II-6 is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the NJBCA, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however that the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the Board of Directors of the corporation. Such right to indemnification shall be a contract right and shall include the right to be paid by the corporation the expense incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the NJBCA requires, the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the NJBCA. V. The Prince Manufacturing Company, a Pennsylvania corporation Section 1741 of the Pennsylvania Business Corporation Law ("PBCL") provides that, unless otherwise restricted in its bylaws, a business corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a representative of the corporation, or is or was serving at the request of another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to, the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person did not act in good faith and in a manner that he reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 1743 of the PBCL provides that the corporation is required to indemnify directors and officers against expenses they may incur in defending actions against them in such capacities if they are successful on the merits or otherwise in the defense of such actions. Section 1746 of the PBCL grants a corporation broad authority to indemnify its directors and officers for liabilities and expenses incurred in such capacity, except in circumstances where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. Section 1747 of the PBCL permits a corporation to purchase and maintain insurance on behalf of any II-7 person who is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a representative of another corporation or other enterprise, against any liability asserted against such person and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify the person against such liability under Chapter 17, Subchapter D of the PBCL. VI. The Prince Manufacturing Company, an Illinois corporation Section 8.75 of the Illinois Business Corporation Act of 1983 provides that an Illinois corporation may indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or who is or was serving at the request of the corporation as a director, officer employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation or, with respect to any criminal action or proceeding, that the person had reasonable cause to believe that his or her conduct was unlawful. Section 8.75 further provides that a corporation may indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact hat such person is or was a director, officer employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement or such action or suit, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed, to the best interests of the corporation, provided that no indemnification shall be made with respect to any claim, issue, or matter as to which such person has been adjudged to have been liable to the corporation, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication or liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. VII. Western Magnesium Corp. Section 317 of the California General Corporation Law provides generally and in pertinent part that a California corporation may indemnify its directors and officers against expenses, judgments, fines and settlements actually and reasonably incurred in connection with any threatened, pending or completed civil, criminal, administrative or investigative action, other than an action by or in the right of the corporation, if, in connection with the matters in issue, they acted in good faith and in a manner the person reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of the person was unlawful. Section 317 further provides that, in connection with the defense or settlement of any action by or in the right of the corporation, a California corporation may indemnify its directors and officers against expenses actually and reasonably incurred by that person in connection with the defense or settlement of the action if the person acted in good faith, in a manner the person believed to be in the best interest of the corporation and its shareholders. Section 317 further provides that a California corporation may grant its directors and officer additional rights of indemnification through Articles of Incorporation and By-Laws provisions, and otherwise. II-8 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ------------------------------------------------------------------------------------------------------- 3.1 -- Restated Certificate of Incorporation of Philipp Brothers Chemicals, Inc. 3.2 -- By-laws of Philipp Brothers Chemicals, Inc. 3.3 -- Certificate of Incorporation of Phibro-Tech, Inc.* 3.4 -- By-Laws of Phibro-Tech, Inc. 3.5 -- Certificate of Incorporation of C.P. Chemicals, Inc. 3.6 -- By-Laws of C.P. Chemicals, Inc. 3.7 -- Certificate of Incorporation of Prince Agriproducts, Inc. 3.8 -- By-Laws of Prince Agriproducts, Inc. 3.9 -- Certificate of Incorporation of The Prince Manufacturing Company, an Illinois corporation 3.10 -- By-Laws of The Prince Manufacturing Company, an Illinois corporation 3.11 -- Certificate of Incorporation of The Prince Manufacturing Company, a Pennsylvania corporation 3.12 -- By-Laws of The Prince Manufacturing Company, a Pennsylvania corporation 3.13 -- Certificate of Formation of Mineral Resource Technologies, L.L.C. 3.14 -- Limited Liability Company Agreement of Mineral Resource Technologies, L.L.C., dated as of November 21, 1995, as amended as of June 1, 1998 3.15 -- Certificate of Incorporation of MRT Management Corp. 3.16 -- By-Laws of MRT Management Corp. 3.17 -- Certificate of Incorporation of Koffolk, Inc. 3.18 -- By-Laws of Koffolk, Inc. 3.19 -- Certificate of Incorporation of Phibrochem, Inc. 3.20 -- By-Laws of Phibrochem, Inc. 3.21 -- Certificate of Incorporation of Phibro Chemicals, Inc. 3.22 -- By-Laws of Phibro Chemicals, Inc. 3.23 -- Certificate of Incorporation of Western Magnesium Corp. 3.24 -- By-Laws of Western Magnesium Corp. 4.1 -- Indenture, dated as of June 11, 1998, among the Company, the Guarantors named therein and The Chase Manhattan Bank, as trustee, relating to the 9 7/8% Senior Subordinated Notes due 2008 of the Company, and exhibits thereto, including Form of 9 7/8% Senior Subordinated Note due 2008 of the Company Certain instruments which define the rights of holders of long-term debt of the Company and its consolidated subsidiaries have not been filed as Exhibits to this Registration Statement since the total amount of securities authorized under any such instrument does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis, as of June 30, 1998. For a description of such indebtedness, see Note 6 of Notes to Consolidated Financial Statements. The Company hereby agrees to furnish copies of such instruments to the Securities and Exchange Commission upon its request. 5.1 -- Opinion of Golenbock, Eiseman, Assor & Bell regarding the legality of securities being registered* 5.2 -- Opinion of Blanc Williams, Johnston & Kronstadt L.L.C. regarding the legality of securities being registered* 5.3 -- Opinion of Martin H. Philip, Esq. regarding the legality of securities being registered*
II-9
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ------------------------------------------------------------------------------------------------------- 5.4 -- Opinion of Schmiedeskamp, Robertson, New & Mitchell regarding the legality of securities being registered* 10.1 -- Registration Rights Agreement, dated June 11, 1998, among Philipp Brothers Chemicals, Inc., the Guarantors named therein and Schroder & Co. Inc. 10.2 -- Revolving Credit, Acquisition Term Loan and Security Agreement, dated August 19, 1998, among Philipp Brothers Chemicals, Inc., as Borrower, the Guarantors named therein, PNC Bank, N.A. as Agent and Lender, and the other institutions from time to time party thereto as Lenders 10.3 -- Manufacturing Agreement, dated May 15, 1994, by and between Merck & Co., Inc., Koffolk, Ltd., and Philipp Brothers Chemicals, Inc.+ 10.4 -- Distribution Agreement, dated March 1, 1996, between Elanco Quimica Ltda. and Planalquimica Industrial Ltda.+ 10.5 -- Asset Purchase and Trademark Assignment Agreement, dated August 5, 1996, between Koffolk, Inc. and Merck & Co., Inc.; assigned by Merck & Co., Inc. to Merial Limited.+ 10.6 -- Distributorship Agreement, dated August 5, 1996, by and between Merck & Co., Inc. and Koffolk, Inc.; assigned by Merck & Co., Inc. to Merial Limited.+ 10.7 -- License Agreement, dated May 30, 1996, by and between Michigan Technological University and Mineral Resource Technologies, L.L.C.+ 10.8 -- Lease, dated July 25, 1986, between Philipp Brothers Chemicals, Inc. and 400 Kelby Associates, as amended December 30, 1994 10.9 -- Lease, dated June 30, 1995, between First Dice Road Co. and Phibro-Tech, Inc., as amended May 1998 10.10 -- Lease, dated December 24, 1981, between Koffolk (1949) Ltd. and Israel Land Administration* 10.11 -- Master Lease Agreement, dated February 27, 1998, between General Electric Capital Corp., Philipp Brothers Chemicals, Inc. and Phibro-Tech, Inc. 10.12 -- Stockholders Agreement, dated December 29, 1987, by and between Philipp Brothers Chemicals, Inc., Charles H. Bendheim, Jack C. Bendheim and Marvin S. Sussman 10.13 -- Employment Agreement, dated December 29, 1987, by and between Philipp Brothers Chemicals, Inc. and Marvin S. Sussman 10.14 -- Stockholders Agreement, dated February 21, 1995, between I. David Paley, Nathan Z. Bistricer, James O. Herlands and Phibro-Tech, Inc., as amended as of June 11, 1998 10.15 -- Severance Agreement, dated as of February 21, 1995, between I. David Paley and Phibro-Tech, Inc. 10.16 -- Form of Severance Agreement, each dated as of February 21, 1995, between Philipp Brothers Chemicals, Inc. and each of Nathan Z. Bistricer and James O. Herlands 10.17 -- Agreement of Limited Partnership of First Dice Road Company, dated June 1, 1985, by and among Western Magnesium Corp., Jack Bendheim, Marvin S. Sussman and James O. Herlands, as amended November 1985 10.18 -- Philipp Brothers Chemicals, Inc. Retirement Income and Deferred Compensation Plan Trust, dated January 1, 1994, by and between Philipp Brothers Chemicals, Inc. on its own behalf and on behalf of C.P. Chemicals, Inc., Phibro-Tech, Inc. and the Trustee thereunder; Philipp Brothers Chemicals, Inc. Retirement Income and Deferred Compensation Plan Trust, dated March 18, 1994
II-10
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ------------------------------------------------------------------------------------------------------- 10.19 -- Form of Executive Income Deferred Compensation Agreement, each dated March ]1, 1990, by and between Philipp Brothers Chemicals, Inc. and each of Jack Bendheim, James Herlands and Marvin Sussman 10.20 -- Form of Executive Income Split Dollar Agreement, each dated March 1, 1990, by and between Philipp Brothers Chemicals, Inc. and each of Jack Bendheim, James Herlands and Marvin Sussman 10.21 -- Agreement for the Sale and Purchase of the Shares of ODDA Smelteverk A/S and of the Business and Certain Assets of BOC Carbide Industries, a division of BOC Ltd., dated June 26, 1998, between The BOC Group plc and Philipp Brothers Chemicals, Inc.++* 10.22 -- Supply Agreement, dated as of September 28, 1998, between BOC Limited and Phillip Brothers Chemicals, Inc.++* 10.23 -- Administrative Consent Order, dated March 11, 1991, issued by the State of New Jersey Department of Environmental Protection, Division of Hazardous Waste Management, to C.P. Chemicals, Inc. 12.1 -- Statement regarding computation of ratios. 21.1 -- Subsidiaries of Philipp Brothers Chemicals, Inc. 21.2 -- Subsidiaries of C.P. Chemicals, Inc. 21.3 -- Subsidiaries of Phibro-Tech, Inc. 23.1 -- Consent of PricewaterhouseCoopers LLP, certified public accountants 23.2 -- Consent of Edward Isaacs & Co. LLP, certified public accountants 23.3 -- Consent of Dov Kahana & Co., certified public accountants 23.4 -- Consent of Cabinet Associes, certified public accountants 23.5 -- Consent of Wilson Wright & Co., chartered accountants and registered auditors 23.6 -- Consent of Wilson Wright & Co., chartered accountants and registered auditors 23.7 -- Consent of Golenbock, Eiseman, Assor & Bell (to be included as part of Exhibit 5.1 to this Registration Statement)* 23.8 -- Consent of Blanc, Williams, Johnston & Kronstadt L.L.C. (to be included as part of Exhibit 5.2 to this Registration Statement)* 23.9 -- Consent of Martin H. Philip, Esq. (to be included as part of Exhibit 5.3 to this Registration Statement)* 23.10 -- Consent of Schmiedeskamp, Robertson, New & Mitchell (to be included as part of Exhibit 5.4 to this Registration Statement)* 24.1 -- Power of Attorney (set forth on signature pages of this Registration Statement) 25.1 -- Statement of Eligibility under the Trust Indenture Act of 1939 of The Chase Manhattan Bank on Form T-1 27.1 -- Financial Data Schedule 99.1 -- Form of Letter of Transmittal 99.2 -- Form of Notice of Guaranteed Delivery 99.3 -- Form of Letter to Clients 99.4 -- Form of Letter to Brokers, Dealers, Trust Companies and Other Nominees
- ------------------ * To be filed by amendment. + A request for confidential treatment has been made for portions of such document. Confidential portions have been omitted and filed separately with the SEC as required by Rule 406(b). ++ A request for confidential treatment will be made for portions of such document. (b) Financial Statement Schedules II-11 All supplemental schedules are omitted because of the absence of conditions under which they are required or because the information is shown in the financial statements or notes thereto or in other supplemental schedules. ITEM 22. UNDERTAKINGS. (a) The undersigned Registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment of this Registration Statement (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereto) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned Registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned Registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject to and included in the registration statement when it became effective. II-12 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. PHILIPP BROTHERS CHEMICALS, INC. By: /s/ JACK C. BENDHEIM ------------------------------- Jack C. Bendheim, President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------------------- ------------------- /s/ JACK C. BENDHEIM Director, President and September 28, 1998 - ------------------------------------------ Chief Executive Officer Jack C. Bendheim (Principal Executive Officer) /s/ MARVIN S. SUSSMAN Director September 28, 1998 - ------------------------------------------ Marvin S. Sussman /s/ JAMES O. HERLANDS Director September 28, 1998 - ------------------------------------------ James O. Herlands /s/ NATHAN Z. BISTRICER Vice President and Chief Financial September 28, 1998 - ------------------------------------------ Officer (Principal Financial Officer and Nathan Z. Bistricer Principal Accounting Officer)
II-13 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. C.P. CHEMICALS, INC. BY: /S/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------------------- ------------------- /s/ JACK C. BENDHEIM Director and Chief Executive Officer September 28, 1998 - ------------------------------------------ (Principal Executive Officer) Jack C. Bendheim /s/ I. DAVID PALEY Director and President September 28, 1998 - ------------------------------------------ I. David Paley /s/ JAMES O. HERLANDS Director September 28, 1998 - ------------------------------------------ James O. Herlands /s/ NATHAN Z. BISTRICER Vice President and Chief Financial September 28, 1998 - ------------------------------------------ Officer (Principal Financial Officer and Nathan Z. Bistricer Principal Accounting Officer)
II-14 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1993, THE COMPANY HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. KOFFOLK, INC. By: /s/ JACK C. BENDHEIM -------------------------------- Jack C. Bendheim, President KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-if-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1993, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------------------- ------------------- /s/ JACK C. BENDHEIM Director, President and September 28, 1998 - ------------------------------------------ Treasurer (Principal Executive Officer, Jack C. Bendheim Principal Financial Officer and Principal Accounting Officer)
II-15 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. MINERAL RESOURCE TECHNOLOGIES, L.L.C. By: MRT Management Corp., Managing Member By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------- ------------------ /s/ JACK C. BENDHEIM Director, President and Chief Executive September 28, 1998 Jack C. Bendheim Officer, Managing Member (Principal Executive Officer, Managing Member) /s/ I. DAVID PALEY Director and Vice President, Managing September 28, 1998 I. David Paley Member /s/ NATHAN Z. BISTRICER Director, Vice President and Chief September 28, 1998 Nathan Z. Bistricer Financial Officer, Managing Member (Principal Financial Officer and Principal Accounting Officer) /s/ HUGH P. SHANNONHOUSE Director, Managing Member September 28, 1998 Hugh P. Shannonhouse
II-16 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. MRT MANAGEMENT CORP. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------------------- ------------------- /s/ JACK C. BENDHEIM Director, President and September 28, 1998 - ------------------------------------------ Chief Executive Officer Jack C. Bendheim (Principal Executive Officer) /s/ I. DAVID PALEY Director and Vice President September 28, 1998 - ------------------------------------------ I. David Paley /s/ HUGH P. SHANNONHOUSE Director September 28, 1998 - ------------------------------------------ Hugh P. Shannonhouse /s/ NATHAN Z. BISTRICER Director, Vice President and September 28, 1998 - ------------------------------------------ Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
II-17 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. PHIBROCHEM, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------------------- ------------------- /s/ JACK C. BENDHEIM Director, President and September 28, 1998 - ------------------------------------------ Chief Executive Officer Jack C. Bendheim (Principal Executive Officer) /s/ JAMES O. HERLANDS Director September 28, 1998 - ------------------------------------------ James O. Herlands /s/ NATHAN Z. BISTRICER Director, Vice President and September 28, 1998 - ------------------------------------------ Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
II-18 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. PHIBRO CHEMICALS, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------------------- ------------------- /s/ JACK C. BENDHEIM Director, President and September 28, 1998 - ------------------------------------------ Chief Executive Officer Jack C. Bendheim (Principal Executive Officer) /s/ JAMES O. HERLANDS Director September 28, 1998 - ------------------------------------------ James O. Herlands /s/ NATHAN Z. BISTRICER Director, Vice President and September 28, 1998 - ------------------------------------------ Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
II-19 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. PHIBRO-TECH, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------------------- ------------------- /s/ JACK C. BENDHEIM Director and September 28, 1998 - ------------------------------------------ Chief Executive Officer Jack C. Bendheim (Principal Executive Officer) /s/ I. DAVID PALEY Director, President and September 28, 1998 - ------------------------------------------ Chief Operating Officer I. David Paley /s/ NATHAN Z. BISTRICER Director, Senior Vice President September 28, 1998 - ------------------------------------------ and Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
II-20 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. PRINCE AGRIPRODUCTS, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------------------- ------------------- /s/ JACK C. BENDHEIM Director and Chief Executive September 28, 1998 - ------------------------------------------ Officer (Principal Executive Officer) Jack C. Bendheim /s/ MARVIN S. SUSSMAN Director and President September 28, 1998 - ------------------------------------------ Marvin S. Sussman /s/ NATHAN Z. BISTRICER Director, Vice President and September 28, 1998 - ------------------------------------------ Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
II-21 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. THE PRINCE MANUFACTURING COMPANY By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------------------- ------------------- /s/ JACK C. BENDHEIM Director and Chief Executive Officer September 28, 1998 - ------------------------------------------ (Principal Executive Officer) Jack C. Bendheim /s/ MARVIN S. SUSSMAN Director and President September 28, 1998 - ------------------------------------------ Marvin S. Sussman /s/ NATHAN Z. BISTRICER Director, Vice President and September 28, 1998 - ------------------------------------------ Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
II-22 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. THE PRINCE MANUFACTURING COMPANY By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ---------------------------------------- ------------------- /s/ JACK C. BENDHEIM Director and Chief Executive Officer September 28, 1998 - ------------------------------------------ (Principal Executive Officer) Jack C. Bendheim /s/ MARVIN S. SUSSMAN DIRECTOR AND PRESIDENT SEPTEMBER 28, 1998 - ------------------------------------------ MARVIN S. SUSSMAN /s/ NATHAN Z. BISTRICER DIRECTOR, VICE PRESIDENT AND SEPTEMBER 28, 1998 - ------------------------------------------ CHIEF FINANCIAL OFFICER NATHAN Z. BISTRICER (PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER)
II-23 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 28, 1998. WESTERN MAGNESIUM CORP. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of JACK C. BENDHEIM and NATHAN Z. BISTRICER, severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign the within Registration Statement and any and all amendments thereto, and to file the same, and all exhibits thereto, and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ ------------------------------------------- ------------------ /s/ JACK C. BENDHEIM Director, President and September 28, 1998 Jack C. Bendheim Chief Executive Officer (Principal Executive Officer) /s/ JAMES O. HERLANDS Director September 28, 1998 James O. Herlands /s/ NATHAN Z. BISTRICER Director, Vice President and September 28, 1998 Nathan Z. Bistricer Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
II-24 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY GUARANTOR OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. ------------------------ TABLE OF CONTENTS PAGE ---- Available Information.......................... iii Disclosure Regarding Forward-Looking Statements................................... iii Summary........................................ 1 Risk Factors................................... 13 Use of Proceeds................................ 23 Capitalization................................. 24 Unaudited Pro Forma Condensed Consolidated Financial Information........................ 25 Selected Consolidated Financial Data........... 29 Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 32 Net Sales...................................... 32 The Exchange Offer............................. 38 Business....................................... 45 Conditions in Israel........................... 69 Management..................................... 72 Principal Stockholders......................... 77 Description of Capital Stock................... 77 Certain Relationships and Related Transactions................................. 78 Description of Certain Indebtedness............ 80 Description of the Notes....................... 82 Book Entry; Delivery and Form.................. 111 Exchange Offer; Registration Rights............ 112 Certain United States Federal Income Tax Considerations............................... 114 Plan of Distribution........................... 115 Legal Matters.................................. 116 Experts........................................ 116 Index to Financial Statements.................. F-1 UNTIL , 1998, (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES OFFERED HEREBY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $100,000,000 [LOGO] PHILIPP BROTHERS CHEMICALS, INC. 9 7/8% SENIOR SUBORDINATED NOTES DUE 2008 ------------------------ PROSPECTUS ------------------------ , 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EX-3.1 2 RESTATED CERTIFICATE OF INCORPORATION RESTATED CERTIFICATE OF INCORPORATION OF PHILIPP BROTHERS CHEMICALS, INC. (Under Section 807 of the Business Corporation Law) WE THE UNDERSIGNED, the President and Secretary of PHILIPP BROTHERS CHEMICALS, INC., hereby certify: FIRST: The name of the corporation is PHILIPP BROTHERS CHEMICALS INC. SECOND: The certificate of incorporation of the corporation was filed by the Department of State on May 11, 1946. THIRD: The amendment and restatement of the certificate of incorporation of the corporation herein provided for was authorized by the written consent of the holders of all of the outstanding shares of the corporation entitled to vote thereon pursuant to Section 615 of the Business Corporation Law. FOURTH: The certificate of incorporation as heretofore amended is hereby amended or changed to effect one or more of the amendments or changes authorized by Section 801 of the Business Corporation Law, namely: A. To amend Article THIRD of the certificate of incorporation by (i) eliminating as separate classes the Special Preferred Shares, First Preferred Shares, Second Preferred Shares and Class D Capital Stock heretofore authorized, no shares of which are issued or outstanding, (ii) changing the designation of the Third Preferred shares heretofore authorized to Series A Preferred shares, and reducing the number of authorized Series A Preferred shares from 60,000 to 5,207 shares, (iii) providing for the creation of a class of 155,750 shares of authorized preferred shares, and vest in the Board of Directors authority to fix the designations, relative rights, preference and limitations of shares of each series, (iv) changing the designation of the Class A Capital Stock heretofore authorized to Class A Common shares and increasing the number of authorized Class A Common shares from 8,100 to 16,200 shares and increasing the per share dividend rate of the Class A Common shares from $.01 to $.055, so that the holder thereof, after exchanging Class C Capital Stock, having a dividend rate of $.10 per share, shall be entitled to receive the same aggregate dividend as payable in respect of the former Class A Capital Stock and Class C Capital Stock, (v) changing the designation of the Class B Capital Stock heretofore authorized to Class B Common shares and increasing the authorized number of Class B Common shares from 8,100 to 14,100 shares, (vi) eliminating as separate classes the Class C Capital Stock and Class E Capital Stock and changing all authorized and issued shares thereof into authorized and issued Class A Common shares and Class B Common shares, respectively, (vii) deleting the statement as to the amount, in dollars, of the capital stock of 2 the corporation, and (viii) in connection therewith, changing the headings for the paragraphs of Article THIRD; B. To amend Article THIRD of the certificate of incorporation corporation by decreasing the total number of shares which the corporation is authorized to issue by 8,100 shares, an amount equal to the number of authorized shares of the former Class D Capital Stock, from 194,150 to 186,050 shares; C. To delete Article SEVENTH, relating to the names and addresses of the initial directors of the Corporation; D. To delete Article EIGHTH, relating to the names and addresses of the subscribers of the original certificate of incorporation of the corporation; E. To delete Article NINTH, relating to certain additional information concerning such subscribers; F. To combine Articles TENTH and FOURTH, relating to the designation of the Secretary of State as agent of the corporation and the address to which the Secretary of State shall mail a copy of process, respectively, into a new Article FIFTH; G. To delete Article SIXTH, relating to the size of the Board of Directors of the corporation; H. To add Articles SEVENTH and EIGHTH, relating to the indemnification of directors and officers, and deleting parts of Article EIGHTH inconsistent therewith; and I. To re-number certain Articles. 3 FIFTH: The text of the certificate of incorporation of the corporation as heretofore amended and as amended or changed hereby, is hereby restated to read in full as follows: CERTIFICATE OF INCORPORATION OF PHILIPP BROTHERS CHEMICALS, INC. (Under Section 807 of the Business Corporation Law) ----------------------------- FIRST: The name of the corporation is: PHILIPP BROTHERS CHEMICALS, INC. SECOND: The purpose for which the corporation is formed are to engage in any lawful act or activity for which corporations may be organized under the Business Corporation Law; provided, however, that the corporation shall not engage in any act or activity requiring the consent or approval of any state official, department, board, agency or other body without such consent or approval first being obtained. THIRD: The aggregate number of shares which the corporation shall have authority to issue is One Hundred Eighty- Six Thousand Fifty (186,050), which are divided into One Hundred Fifty-Five Thousand Seven Hundred Fifty (155,750) Preferred shares (hereinafter sometimes called the "Preferred Shares") of a par value of $100 each, of which a series of Five Thousand Two Hundred Seven (5,207) Series A Preferred shares (hereinafter sometimes called the "Series A Preferred Shares") of a par value of $100 each has been established, Sixteen Thousand Two Hundred (16,200) Class A Common shares (hereinafter sometimes called the "Class A Common Shares") of a par value of $.10 each and Fourteen Thousand One Hundred (14,100) Class B Common shares (hereinafter sometimes called the "Class B Common Shares") of a par value of $.10 each (such classes of common shares are also hereinafter sometimes referred to collectively as the "Common Shares"). A. Preferred Shares. The statement of the relative rights, preferences and limitations of the shares of each class is as follows: 4 a. General. Preferred Shares may be issued from time to time in one or more series, each of such series to have such designations, relative rights, preferences and limitations as are stated and expressed herein and/or in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors as hereinafter provided. Authority is hereby expressly granted to the Board of Directors, subject to the provisions set forth herein, to establish and designate one or more series of Preferred Shares and to fix the variations in the relative rights, preferences and limitations of each series, including without limitation: 1. The number of shares to constitute such series and the distinctive designations thereof; 2. The dividend rate or rates to which such shares shall be entitled and the restrictions, limitations and conditions upon the payment of such dividends, whether dividends shall be cumulative, non-cumulative, participating, or non- participating, the date or dates from which dividends (if cumulative) shall accumulate and the dates on which dividends (if declared) shall be payable and the form of payment of dividends; 3. Whether or not the shares of such series shall be redeemable and, if so, the terms, limitations and restrictions with respect to such redemption, including without limitation the manner of selecting shares for redemption if less than all shares are to be redeemed, and the amount, if any, in addition to any accrued dividends thereon, which the holders of shares of such series shall be entitled to receive upon the redemption thereof, which amount may vary at different redemption dates and may be different with respect to shares redeemed through the operation of any purchase, retirement or sinking fund and with respect to shares otherwise redeemed; 4. The amount in addition to any accrued dividends thereon which the holders of shares of such series shall be entitled to receive upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, which amount may vary at different dates and may vary depending on whether such liquidation, dissolution or winding up is voluntary or involuntary; 5 5. Whether or not the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund and, if so, the terms, limitations and restrictions with respect thereto, including without limitation whether such purchase, retirement or sinking fund shall be cumulative or non-cumulative, the extent to and the manner in which such fund shall be applied to the purchase, retirement or redemption of the shares of such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof; 6. Whether or not the shares of such series shall have conversion privileges and, if so, prices or rates of conversion and the method, if any, of adjusting the same; 7. The voting powers, if any, of such series; and 8. Any other relative rights, preferences and limitations pertaining to such series. b. Series A Preferred Shares. 1. Dividends. Subject to the rights of any other series of Preferred shares that from time to time may come into existence, each issued and outstanding Series A Preferred Share shall entitle the holder of record thereof to receive, out of funds legally available therefor, when and as declared by the Board of Directors of the corporation, dividends in cash and/or property at the rate of six per centum (6%) of the par value thereof, which shall be payable quarterly on such date or dates in each fiscal year as the Board of Directors shall deem advisable, and which shall be declared and set apart or paid before dividends of any kind may be declared upon the issued and outstanding Common Shares. The right as aforesaid to quarterly dividends upon the issued and outstanding Series A Preferred Shares shall be non-cumulative and shall not be deemed to accrue, whether dividends are earned or whether there be funds legally available therefor, unless and until said dividends have been declared by the Board of Directors. Whenever full dividends upon the issued and outstanding Series A Preferred Shares for the then current fiscal year shall have been declared and either paid or a sum sufficient for the payment thereof set aside in full, without interest, the Board of Directors may declare, set aside, or pay 6 additional cash dividends, and/or may make share distributions of the authorized but unissued Common Shares of the corporation and/or its treasury Common Shares, if any, and/or may make distributions of bonds or property of the corporation, including the shares or bonds of other corporations, including the shares or bonds of other corporations. The holders of record of the issued and outstanding Common Shares shall be entitled in respect of said Common Shares exclusively to receive any such additional cash dividends which may be declared and/or any such distributions which made be made, as hereinafter provided. Any reference to "distributions" in this paragraph contained shall not be deemed to include any distributions made in connection with any liquidation, dissolution, or winding up of the corporation, whether voluntary or involuntary; nor shall any such reference to "distributions" in relation to issued and outstanding shares be deemed to limit, curtail, or divest the authority of the Board of Directors to make any proper distributions, including distributions of authorized but unissued Common Shares, in relation to its treasury Common Shares, if any. 2. Redemption. The corporation may, through its Board of Directors and in conformity with the provisions of the Business Corporation Law, at any time and from time to time, redeem all or any part of the issued and outstanding Series A Preferred Shares by paying the holders of record thereof, out of funds legally available therefor, the par value for each such share to be redeemed plus an amount equivalent to all dividends, if any, which have been declared but not paid, to the date fixed for redemption. In the event of such redemption, a notice fixing the time and place of redemption shall be mailed not less than thirty days prior to the date so fixed to each holder of record of the Series A Preferred Shares to be redeemed at his address as it appears on the record of shareholders. In the event that less than all of the issued and outstanding Series A Preferred Shares are to be redeemed, the shares to be redeemed shall be chosen by lot, pro rata, or by such equitable method as the Board of Directors may determine. On and after the date fixed for such redemption, the holders of the shares so called for redemption shall not be entitled to any dividends and shall not have any rights or interests as holders of said shares except to receive the payment or payments herein designated, without interest thereon, 7 upon presentation and surrender of their certificate therefor. 3. Liquidation. Subject to the rights of any other series of Preferred shares that may from time to time come into existence, in the event of any liquidation, dissolution, or winding up of the affairs of the corporation, whether voluntary or involuntary, each issued and outstanding Series A Preferred Share shall entitle the holder of record thereof to payment at the rate of the par value thereof, plus an amount equal to all dividends, if any, which have been declared but not paid, without interest, before any payment or distribution of the net assets of the corporation (whether stated capital or surplus) shall be made to or set apart for the holders of record of the issued and outstanding Common Shares in respect of said Common Shares. After setting apart or paying in full the preferential amounts aforesaid to the holders of record of the issued and outstanding Series A Preferred Shares, the remaining net assets (whether stated capital or surplus), if any, shall be distributed exclusively to the holders of record of the issued and outstanding Common Shares, as hereinafter provided. If the net assets of the corporation shall be insufficient to pay in full the preferential amounts among the holders of the Series A Preferred Shares as aforesaid, then each issued and outstanding Series A Preferred Share shall entitle the holder of record thereof to an equal proportion of said net assets, and the holders of the Common Shares shall in no event be entitled to participate in the distribution of said net assets in respect of their Common Shares. Without excluding any other proceeding which does not in fact effect a liquidation, dissolution, or winding up of the corporation, a merger or consolidation of the corporation into or with any other corporation, a merger of any other corporation into the corporation, or a sale, lease, mortgage, pledge, exchange, transfer, or other disposition by the corporation of all or substantially all of its assets shall not be deemed, for the purposes of this paragraph, to be a liquidation, dissolution, or winding up of the corporation. 4. Voting. Each issued and outstanding Common Share shall entitle the holder thereof to full voting power, as hereinafter provided. Except as any 8 provision of law may otherwise require, no Series A Preferred Share shall entitle the holder thereof to any voting power, to participate in any meeting of shareholders, or to have notice of any meeting of shareholders. B. Common Shares. The statement of the relative rights, preferences, and limitations of the shares of each class of Common Shares is as follows: 1. Dividends. After payment in full of all dividends to which the holders of Preferred Shares shall be entitled as set forth above, each issued and outstanding Class A Common Share shall entitle the holder of record thereof to receive, out of funds legally available therefor, when and as declared by the Board of Directors of the corporation, dividends in cash and/or property at the rate of five and one-half per centum (5 1/2%) of the par value thereof, which shall be payable quarterly on such date or dates in each fiscal year as the Board of Directors shall deem advisable, and which shall be declared and set apart or paid before dividends of any kind may be declared upon the Class B Common Shares of the corporation and before distribution of any kind may be made upon the issues and outstanding Class B Common Shares. The right as aforesaid to quarterly dividends upon the issued and outstanding Class A Common Shares shall be non-cumulative and shall not be deemed to accrue, whether dividends are earned or whether there be funds legally available therefor unless and until said dividends shall have been declared by the Board of Directors. 2. Liquidation. (a) After payment in full of the preferential amount of the Preferred Shares as set forth above, then, before any payment or distribution of the remaining assets of the corporation (whether stated capital or surplus), if any, shall be made to or set apart for the holders of shares of Class B Common Shares as provided in subparagraph (b) below, the holders of shares of Class A Common Shares shall be entitled to receive out of the remaining assets of the corporation (whether stated capital or surplus), if any, payment of an amount equal to the value thereof, plus an amount equal to all dividends, if any, which have been declared but not paid, without interest, but they shall be entitled to no further payment with respect to such Class A Common Shares. If, upon any 9 liquidation, distribution of assets, dissolution or winding-up of the corporation, the assets of the corporation, or proceeds thereof, distributable among the holders of shares of Class A Common Shares, shall be insufficient to pay in full the respective preferential amounts of such Class A Common Shares, then such assets, or the proceeds thereof, shall be distributed among such holders ratably in accordance with the respective liquidation amounts which would be payable on such shares if all amounts payable were paid in full. (b) After paying in full the preferential amount set forth in the preceding paragraph of this paragraph B(2), the remaining assets (whether stated capital or surplus), if any, shall be distributed exclusively to the holders of record of the issued and outstanding Class B Common Shares, each issued and outstanding Class B Common Share entitling the holder of record thereof to receive an equal portion of said remaining net assets. 3. Voting. Except as any provision of law or except as any provision herein or elsewhere of the certificate of incorporation may otherwise provide, each Common Share of the corporation without distinction as to class shall have the same rights, privileges, interests, and attributes, and shall be subject to the same limitations, as every other Common Share of the corporation. The Class A Common shares of the corporation shall at all times entitle the holders of record of the issued and outstanding shares thereof, exclusively and as a class, by plurality vote, to elect all but one (1) of the directors of the corporation, to exercise any right of removal of any of said directors, and to fill all vacancies and all newly created directorships in said directors except those vacancies and newly created directorship which may be filled, under a duly adopted by-law, by the existing directors or director elected by those holders of said class of shares. The Class B Common shares of the corporation shall at all times entitle the holders of record of the issued and outstanding shares thereof, exclusively and as a class, by plurality vote, to elect one (1) director of the corporation, to exercise any right of removal of said director, and to fill all vacancies and all newly created directorships in said director except those vacancies and newly created directorships which may be filled, under a duly adopted by-law, by the existing director elected by those holders of said class of shares. In all matters other than in the election and removal of directors, each issued and outstanding Class A Common share 10 shall entitle the holder of record thereof to full voting power, and voting shall not be by class unless otherwise required by law. Except as any provision of law may otherwise require and except as hereinabove provided with respect to the election or removal of one (1) director, no Class B Common Share shall entitle the holder thereof to any voting power, to any right to participate in any meeting of shareholders, or to have any notice of any meeting of shareholders. FOURTH: The county within the State of New York within which the office of the corporation is located is New York County. FIFTH: The Secretary of State of the State of New York is designated as the agent of the corporation upon whom process against the corporation may be served. The post office address within or without the State of New York to which the Secretary of State shall mail a copy of any process against the corporation served upon him is: c/o Golenbock, Eiseman, Assor & Bell, 437 Madison Avenue, New York, New York 10022. SIXTH: No director shall be disqualified from voting or acting on behalf of the corporation, in contracting with any other corporation in which he is or may be an officer, a director or a stockholder, and no contract or other transaction between this corporation and any other corporation shall be affected by the fact that the directors of this corporation are interested in or are directors or officers of such other corporation and any director individually may be a party to or may be interested in any contract or transaction of this corporation and no contract or transaction of this corporation with any person or persons, firm or association, shall be affected by the fact that any director of this corporation is a party thereto or is connected with such person or persons, firm or association, provided that the interest in any such contract or other transaction of any such director shall be fully disclosed; and, subject to the foregoing provision, each and every person who may become a director or officer of this corporation is hereby relieved from any liability that might otherwise exist through contracting or dealing with this corporation for the benefit of himself or any firm, association or corporation in which he is or may be in any manner interested. Each director and officer shall be indemnified by the corporation against expenses reasonably incurred by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a director or officer of the corporation to the fullest extent permitted by New York law, and the foregoing right of indemnification shall not be exclusive of other rights to which he may be entitled as a matter of law. 11 SEVENTH: No provision of this certificate of incorporation is intended by the corporation to be construed as limiting, prohibiting, denying, or abrogating any of the general or specific powers or rights conferred under the Business Corporation Law upon the corporation with respect to the power of the corporation to furnish indemnification and to advance expenses to directors and officers in the capacities defined and prescribed by the Business Corporation Law and the defined and prescribed rights of said persons to indemnification and advancement of expenses as the same are conferred by the Business Corporation Law. The indemnification and advancement of expenses granted pursuant to, or provided by, the Business Corporation Law shall not be deemed exclusive of any other rights to which a director or officer seeking indemnification or advancement of expenses may be entitled, whether contained in this certificate of incorporation or the by-laws or (i) a resolution of shareholders, (ii) a resolution of directors, or (iii) an agreement providing for such indemnification, except as expressly prohibited by the Business Corporation Law. EIGHTH: To the fullest extent permitted by the Business Corporation Law of the State of New York, as the same exists or may hereafter be amended, the personal liability of directors of the corporation to the corporation or its shareholders for damages for any breach of duty in such capacity is hereby eliminated. Neither the amendment nor repeal of this Article EIGHTH, nor the adoption of any provision of this Certificate of Incorporation or of the By-Laws of the corporation or of any statute inconsistent with this Article EIGHTH shall eliminate or limit the effect of this Article EIGHTH in respect of any acts or omissions occurring prior to such amendment, repeal or adoption of such an inconsistent provision. IN WITNESS WHEREOF, I have executed and subscribed this certificate and do hereby affirm the foregoing as true under the penalties of perjury, this 8th day of May, 1946. /s/ Rose Goldsweig -------------------------- Rose Goldsweig 70 Pine Street New York, New York /s/ Ruth I. Votava -------------------------- Ruth I. Votava 70 Pine Street New York, New York 12 /s/ Robert S. Adams -------------------------------- Robert S. Adams 70 Pine Street New York, New York IN WITNESS WHEREOF, we, the President and Secretary of the corporation, have subscribed this document on the ____ day of September, 1998, and do hereby affirm, under the penalties of perjury, that the statements contained herein have been examined by us and are true and correct. /s/ Jack C. Bendheim ------------------------------- Jack C. Bendheim, President /s/ Joseph Katzenstein -------------------------------- Joseph M. Katzenstein, Secretary 13 EX-3.2 3 BY-LAWS OF PHILIPP BROTHERS CHEMICALS, INC. BY-LAWS -of PHILIPP BROTHERS CHEMICALS. INC. ARTICLE I. Location of Corporation The principal office of this corporation shall be in the Borough of Manhattan, City, County and State of New York. This corporation may also have offices at such other places as the board of directors may from time to time appoint or the business of this corporation may require. ARTICLE II. Stockholders' Meetings. Section 1. ANNUAL MEETING. The annual meeting of the stockholders of this corporation, entitled to vote thereat, for the election of directors, and for the transaction of such other business as may come before it, shall be held at the principal office of the corporation in the City of New York, State of New York, or at such other place as may be designated from time to time, on the fourth Tuesday in June of each year, at two o'clock in the afternoon, or in the event that the same shall fall upon a legal holiday, then upon the next succeeding business day. Section 2. NOTICE OF ANNUAL MEETING. Notice of any annual meeting of stockholders of this corporation shall be given by the secretary to each stockholder of record entitled to vote thereat, and to each stockholder of record, who, by reason of any action proposed at such meeting, would be entitled to have his stock appraised, if such action were taken, by mailing at least ten (10) days before such meeting, a notice thereof addressed to each such stockholder of record of this corporation at his or her last known post-office address. Section 3. SPECIAL MEETING. A special meeting of the stockholders of this corporation may be called at any time by the President, and shall be called by the President or the Secretary at any time upon the written request of the stockholders holding at least fifty (50%) percent of the stock of this corporation then issued and outstanding, which shall be entitled to vote thereat, or upon the written request of a majority of the board of directors; and such meeting may be held at any time and place specified in such request. Section 4. NOTICE OF SPECIAL MEETING. The Secretary of this corporation shall mail, at least three (3) days before such special meeting, a notice thereof, addressed to each stockholder of record of this corporation, who shall, be entitled to vote thereat, or who, by reason of any action proposed at such special meeting, would be entitled to have his stock appraised, if such action were taken, at his or her last known post-office address, which notice shall state the time and place of such meeting and its object. Section 5. WAIVER OF NOTICE. Any stockholder, entitled to such notice pursuant to these by-laws, may waive notice either of the annual or any special meeting of stockholders, and if such notice be waived by all the stockholders of record entitled thereto ( except such as have received the notice required by these by-laws), such meeting may then be held without further notice, at the tine and place mentioned in such waiver. Section 6. QUORUM. Except as otherwise provided by law, at all meetings of stockholders a majority of the issued and outstanding capital stock of this corporation entitled to vote thereat shall be requisite to constitute a quorum, except that if at any meeting less than a quorum of the stockholders be present or represented, those present or represented thereat may adjourn the meeting from time to time, without notice other then announcement at the meeting, until such time as a quorum can be had. Section 7. VOTING. The voting powers of the capital stock of this corporation shall be as prescribed in the certificate of incorporation thereof, or other certificate filed pursuant to law. Each holder of the capital stock of this corporation who shall be entitled to vote the same pursuant to such certificate of incorporation or such other certificate filed pursuant to law, shall be entitled to one vote, in person or by proxy, for each share of such stock standing in his or her name on the books of this corporation. Section 8. INSPECTORS OF ELECTION. At all meetings of stockholders, at which an election of directors shall be held, the chairman of the meeting shall appoint two (2) inspectors of election who shall, before entering on the discharge of their duties, be sworn faithfully to execute the duties of inspectors with strict impartiality and according to the best of their abil ity, and who shall make a written certificate of the result of the election. ARTICLE III. Directors. Section 1. NUMBER, QUALIFICATION AND ELECTION. The property, business and affairs of the corporation shall be managed by a board of not less than three nor more than seven directors, as the stockholders entitled to vote thereat may determine at any annual meeting or at any special meeting called for such purpose. Directors need not be stockholders. Directors shall be elected at the annual meeting of the stockholders and each director shall be elected to serve for one year and until his successor shall be elected and shall qualify. In the event of any increase in the number of directors, the stockholders entitled to vote thereat may elect additional directors at any special meeting called for such purpose, by the same vote as that required to elect directors at any annual meeting, such additional directors to serve until the next annual meeting of the stockholders and until their successors shall be elected and shall qualify. Section 2. REMOVAL AND VACANCIES. Any director may be removed by the stockholders, with or without cause, at any special meeting called for such purpose, by the vote of the holders of a majority of the outstanding stock entitled to vote, present or represented thereat. In the event of any vacancy in the Board of Directors, caused by death, resignation, retirement, or removal, the stockholders may elect a successor director to fill such vacancy at any special meeting called for such purpose, by the same vote as that required to elect a director at any annual meeting, such successor director to serve until the next annual meeting of the stockholders and until his successor shall be elected and shall qualify. Section 3. REGULAR MEETINGS. Regular meetings of the board of directors may be held at such time and place as shall from time to time be determined by the board of directors. It shall be the duty of the Secretary to mail a notice to each of the directors at his last known post-office address as the same appears upon the books of the corporation, at least five days before the holding of each regular meeting, but a failure of the Secretary to do so shall not invalidate any proceedings of said board. Regular meetings of the board of directors may be held within or without the State of New York. Section 4. SPECIAL MEETINGS. Special meetings of the board of directors may be called at any time by the President or by any two members of the board of directors. There shall be at least two days' notice to each director, either personally or by mail or by wire, of the holding of any special meeting of the board of directors. Special meetings of the board of directors may be held within or without the State of New York. Section 5. WAIVER OF NOTICE. Notice of any special or regular meeting may be waived by a writing signed by any of the directors not notified as above provided, and such meetings may then be held at the time and place mentioned in such waivers. Section 6. QUORUM. Pursuant to the provisions of Section 27 of the General Corporation Law, a majority of the directors of this corporation shall constitute a quorum for the transaction of business. Section 7. TIME AND PLACE OF MEETINGS. Meetings of the board of directors may be held at the principal office of the corporation in the City of New York, State of New York, or at such other place or places as said board may designate. Section 8. POWERS OF DIRECTORS. The board of directors shall have the management of the business of the corporation, and in addition to the powers and authorities by these by-laws expressly conferred upon them, they may exercise all such powers and do all such acts and things as may be exercised or done by the corporation, but subject nevertheless to the exercised or done by the corporation, but subject nevertheless to the provisions of the statutes, of the Certificate of Incorpor ation and of these by-laws. Without prejudice to the general powers conferred by these by-laws, it is hereby expressly declared that the board of directors shall have the following powers, that is to say: To purchase or otherwise acquire for the corporation any property, rights or privileges which the corporation is authorized to acquire, at such prices and on such terms and conditions and for such consideration as they shall deem proper. At their discretion, to pay for any property or rights acquired by the corporation, either wholly or partly in money or in stocks, bonds, debentures, or other securities of the corporation. To appoint, and at their discretion to remove or sus pend, such officers of the corporation and assistants, or other wise, as they may from time to time deem necessary for the in terests of the corporation; and to determine their duties, and fix, and from time to time change, their salaries or emoluments, and to require security in such instances and in such amounts as they shall see fit. To confer, by resolution, upon any officer of the cor- poration, the right to choose, remove or suspend, subordinate officers, agents or factors. To appoint any incorporated company, person or persons, to accept and hold in trust for the corporation any property belonging to the corporation, or in which it is interested, or for any other purpose, and to execute and perform all such duties and things as may be requisite in relation to any such trust. To determine who shall be authorized to sign, on behalf of the corporation, bills, notes, receipts, acceptances, endorsements, checks, releases, contracts and documents, except as otherwise provided in these by-laws. To authorize the seal of this corporation to be affixed to all papers which may require it. From time to time to provide for the management of the affairs of the corporation, at home or abroad, in such manner as they shall decide; and in particular, from time to time, to delegate any of the powers of the board of directors to a committee, officer or agent, to act when the board is not in session, and to appoint any incorporated company, person or persons to be the agent or agents of this corporation, with such powers (including the power to sub--delegate), and upon such terms as shall be deemed advantageous and so far as may be lawful. ARTICLE IV. Officers. Section 1. ELECTION. Immediately after the annual election of the directors, if a majority of the persons so elected be then present in person, or if not then, at the first meeting of the board of directors thereafter, the directors shall choose a president, who shall be a director, and one or more vice-presidents, a secretary, a treasurer and one or more assistant secretaries and assistant treasurers, who need not be directors or stockholders, all of said officers to hold office until the first meeting of the board following the next annual meeting of the stockholders and until their respective successors are elected and shall qualify. Section 2. APPOINTMENT, SUSPENSION AND REMOVAL. The officers of the corporation shall consist of those above named and such other officers, agents, or factors as may from time to time be necessary in the conduct of the business of the corpor ation. Such other officers, agents or factors may be appointed by the president with the approval of the board of directors. All officers of the corporation may be removed or suspended at any time by a majority vote of the board of directors, with or without cause. Officers and agents appointed by the president may be removed by him at any time. Section 3. POWERS AND DUTIES OF THE PRESIDENT. It shall be the duty of the president to preside at stockholders' meetings and at all meetings of the board of directors, and to execute all contracts and agreements which are authorized by the board of directors. He may sign bonds and certificates of stock. He shall submit a report of the operations of this corporation for each preceding year to the directors at their last regular meeting, or at a special meeting called for that purpose before the annual meeting of stockholders, and to the stockholders at their annual meeting, and from time to time he shall report to the directors all matters within his knowledge which the interests of this corporation may require to be brought to their notice. Section 4. POWERS AND DUTIES OF THE VICE-PRESIDKNT. The vice-president of this corporation shall, upon the death, resignation or inability to act of the president, assume pro tempore the discharge of the duties of the president of this corporation until a new president shall have been duly elected. In the absence of or in the event of the death, disability or resignation of the president, he shall perform such duties in connection with the management of the corporation as may, pur suant to law, be delegated to be performed by the president. Section 5. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall be ex officio secretary of the board of direc- tors. He shall keep the minutes of all meetings of the board of directors and stockholders. He shall keep in safe custody the seal of this corporation, and when authorized by the board, shall affix the seal to any instrument requiring the same. The certificates of stock shall be signed by him. (or by the treasurer) in addition to bearing the signature of the president or the vice-president. He shall keep accounts of stock registered and transferred, in such form and manner and under such regulations as the board of directors may prescribe. He shall give and serve all notices of this corporation. He shall attend to such correspondence as may be assigned to him, and in general he shall do and perform all the duties incident to his office. Section 6. POWERS AND DUTIES OF THE TREASURER. The treasurer shall keep full and accurate accounts of receipts and disbursements in books belonging to this corporation, and he shall deposit all moneys and other valuable effects in the name of and to the credit of this corporation in such depositaries as may be designated by the board of directors. He shall have the authority to endorse, on behalf of this corporation, for the purpose only of transfer to the depositary, bank or trust company, to be deposited therein, all checks, drafts, notes, warrants and orders. The certificates of stock shall be signed by him (or by the secretary) in addition to bearing the signature of the president or the vice-president. At each annual meeting of the stockholders he shall present a full statement of the financial affairs of this corporation. He shall, at the meeting of the directors next preceding the annual meeting of the stockholders, and at all other meetings at which he may be requested to do, make a like report to the board of directors for the year preceding; and whenever required by the board of directors, he shall report on all moneys received and disposed of by him, and on the amount of money in his hands, and he shall make such other statements and reports as are required by law. In general, he shall perform all the duties incident to his office and such as may be required of him by the board of directors. If required by the board of directors, he shall give this corporation a bond in a sum and with sureties satisfactory to the board of directors, for the faithful performance of the duties of his office and for the restoration to this corporation, in case of his death, resignation or removal from office, of all books, papers, vouchers, moneys or other property of whatever kind in his possession, belonging to the corporation. Section 7. VACANCIES If any vacancy occurs among the officers of this corporation, such vacancy may be filled for the remainder of the term by the board of directors, at a special meeting of the board of directors, such substitute officer to hold office until his successor shall be duly elected and shall qualify. Section 8. STATEMENTS OF OFFICERS. It shall be the duty of each officer of this corporation to make and file any and all returns, reports, lists or statements required by law, either State or Federal. It shall also be the duty of each officer of this corporation to make full report to the board of directors respecting the affairs of the corporation in his charge at any time he is required so to do. ARTICLE V. Shares of Stock Section 1. ISSUE AND REGISTRATION. Certificates of stock shall be signed by the president or vice-president, and the secretary or treasurer, and shall be numbered and registered in the order in which they are issued. They shall be bound in a book and shall be issued in consecutive order therefrom; and in the margin of this book shall be entered the names of the persons owning the shares therein respectively represented, the number of shares and the dates thereof. All certificates exchanged or returned to the corporation shall be marked "Cancelled", with the date of cancellation, and each cancelled certificate shall be preserved and attached to the stub from which the same was taken. No new certificates shall be issued until the old certificate has been cancelled, provided, however, that in the case any certificate shall be lost the directors may order a new certificate to be issued in its place upon receiving such proof of loss and such security therefor as may be satisfactory to them. Section 2. TRANSFERS. Transfer of shares shall be made upon the books of the corporation by the holder in person or by attorney duly authorized, and upon the surrender of the cer tificate or certificates properly endorsed, but no transfers of stock upon the books of the corporation shall be made within ten days preceding the day appointed for paying a dividend. Section 3. RECORD HOLDERS. This corporation shall be entitled to treat the holder of record of any share or shares of its capital stock as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of New York. Section 4. CLOSING OF TRANSER BOOKS OR FIXING OF RECORD DATE. The board of directors may prescribe a period, not exceeding forty (40) days prior to any meeting of the stockholders of this corporation, during which no transfer of stock on the books of this corporation may be made; or, in lieu of prohibiting the transfer of stock, may fix a date and hour, not more than forty (40) days prior to the holding of any meeting of stockholders, as the time as of which stockholders entitled to notice of and to vote at any such meeting shall be determined; and all persons who are holders of record at such time, and no others, shall be entitled to notice and to vote at such meeting. The board of directors may also fix a day and hour, not exceeding forty (40) days preceding the date fixed for the payment of any dividend or the delivery of evidence of rights, as a record time for the determination of the stockholders entitled to receive any such dividends or rights, or the board of directors may, at its option, prescribe a period, not exceeding forty (40) days prior to the payment of such dividend or delivery of evidence of rights, during which no transfer of stock on the books of this corporation may be made. ARTICLE VI. Contracts and Agreements; Banks, Depositaries, Checks, Drafts, etc. Section 1. CONTRACTS, etc. No agreement, contract or obligation involving the payment of money, or the credit or liability of this corporation shell be binding upon this corporation until approved by the board of directors. Section 2. CONTRACTS, HOW EXECUTE. The board of directors may authorize any officer or officers, agent or agents, to execute any contract or other instrument on behalf of this corporation, and such authority may be general or confined to specific instances; but except as herein provided and unless otherwise provided by the board of directors, no officer, agent or employee, except the president, secretary or treasurer, shall have any power or authority to bind this corporation by any contract or engagement, or to pledge its credit or to render it liable, pecuniarily, for any purpose or for any amount. Section 3. DEPOSITS, CHECKS, DRAFTS, etc. All checks and drafts or funds of this corporation shall be deposited from time to time to the credit of this corporation in such banks or trust companies, or with such banks or other depositaries as the board of directors may from time to time designate. All checks shall be drawn out of the regular check books of this corporation and upon the stubs of such checks and each such stub, the purpose and amount for which the same is drawn shall be specified. All checks, notes, drafts, bills of exchange, acceptances or other order for the payment of money or other evidences of the indebtedness of this corporation, shall be signed as the board of directors shall designate from time to time. ARTICLE VII. Notice and Waiver Thereof. Whenever, under the provisions of these by-laws, notice is required to be given to any director, officer or stockholder, it shall not be construed to be limited to personal notice, but such notice may be given in writing by depositing the same in the post-office or letter box in a postpaid, sealed wrapper, addressed to such director, officer or stockholder at his or her address, as the same appears on the books of the corporation, and the time when the same shall be thus mailed shall be deemed to be the time of the giving of such notice. Any stockholder, director or other person may waive any notice required by these by-laws to be given to him. ARTICLE VIII. Seal. The common corporate seal of this corporation is, and, until otherwise ordered by the board of directors, shall be, an impression upon paper or wax, bearing the words: ARTICLE IX. Amendment of these By-Laws. These by-laws may be amended from time to time by the stockholders at any annual or special meeting, by the affirmative vote of the holders of a majority of the outstanding stock entitled to vote, present or represented thereat, provided that the substance of the proposed amendment shall be stated in the notice of such meeting. These by-laws may be amended from time to time by the Board of Directors, at any regular or special meeting, by the affirmative vote of a majority of the whole board, provided that the substance of the proposed amendment shall be stated in the notice of such meeting and provided further that such amendments shall not regulate or affect the election of directors or officers and shall not be inconsistent with the by-laws passed by the stockholders. The directors may repeal by-laws passed by them, but may not repeal by-laws passed by the stockholders. EX-3.4 4 BY-LAWS OF PHIBRO-TECH, INC. EXHIBIT B BY-LAWS OF ENTECH RECOVERY, INC. (A Delaware Corporation) ARTICLE I STOCKHOLDERS 1. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 2. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stock holders" refers to (i) an outstanding share or shares of stock and to a holder or holders of record or outstanding shares of stock when the Corporation has only one class of shares of stock outstanding and (ii) any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the Certificate of Incorporation or a resolution of the Board of Directors theretofore certified and effective pursuant to section 151 of the General corporation Law of Delaware (the "General corporation Law") confers such rights when the corporation has two or more classes or series of shares of stock outstanding or upon which or upon whom the General corporation Law confers such rights notwithstanding that the certificate of Incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder. 3. STOCKHOLDER MEETINGS. TIME The annual meeting shall be held on the date and at the time fixed, from time to time, by the directors, provided, that the first annual meeting shall be held on a date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date and at the time fixed by the directors. PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal executive office of the corporation. CALL. Annual meetings and special meetings may be called by the directors or by any officer instructed by the directors to call the meeting. NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, date, and hour of the meeting and stating the place within the city or other municipality or community at which the list of stockholders of the corporation may be examined. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall, (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is to be called. The notice of any meeting shall also include, or be accompanied by, any additional statements, information or documents prescribed by the General Corporation Law. Except as otherwise provided by the General Corporation Law, a copy of the notice of any meeting shall be given, personally or by mail, not less than ten days nor more than sixty days before the date of the meeting, unless the prescribed period for notice shall have been waived, and directed to each stockholder at his record address or at such other address which he may have furnished by request in writing to the Secretary of the Corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States Mail. If a meeting is adjourned to another time, not more than thirty days hence, and/or to another place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice need not be given to any stockholder who submits a written waiver of notice signed by him whether before or after the time stated therein. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. STOCKHOLDER LIST. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city or other municipality or community where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote at any meeting of stockholders. --CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the following order of seniority and if present and acting the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, any Vice-President or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the Corporation, or in his absence, an Assistant Secretary, if any, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the chairman of the meeting shall appoint a secretary of the meeting. --PROXY REPRESENTATION. Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent to corporate action in writing without a meeting. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. --INSPECTORS. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy .may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute & certificate of any fact found by him or them. -- QUORUM. The holders of a majority of the outstanding shares of stock shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders present may adjourn the meeting despite the absence of a quorum. -- VOTING. Each share of stock shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Any other action shall be authorized by the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter, except where the General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power. In the election of directors, and for any other action, voting need not be by written ballot. 4. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General Corporation Law to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of The taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II DIRECTORS 1. FUNCTIONS AND DEFINITION. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors of the Corporation. The Board of Directors shall have The authority to fix the compensation of The members thereof. The use of the phrase "whole board" herein refers to the total number of directors which the corporation would have if there were no vacancies. 2. OUALIFICATIONS AND NUMBER. A director need not be a stockholder, or a citizen or resident of the United States or the State of Delaware. The Board of Directors shall initially consist of three (3) persons; provided, however that the number of directors constituting the whole Board may be increased or decreased, from time to time, by action of the stockholders or of the Board of Directors. 3. ELECTION AND TERM. The first Board of Directors, unless the members Thereof shall have been named in the Certificate of Incorporation, shall be elected by the incorporator or incorporators and shall hold office until the first annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon written notice to the Corporation. Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. In the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors and/or for the removal of one or more directors and for the filling of any vacancies in that connection, newly created directorships and any vacancies in the Board of Directors, including, unfilled vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of a majority of the directors then in office although less than a quorum, or by the sole remaining director. 4. BOARD OF DIRECTORS MEETINGS. -- TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble. PLACE. Meetings shall be held at such place within or without the State of Delaware as shall be fixed by the Board. -- CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice-Chairman, if any, or the President, or any two directors in office. NOTICE OR WAIVER OF NOTICE. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. Notice need not be given to any director or to any member of a committee of directors who submits a written waiver of notice signed by him before or after the time for the meeting stated therein. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice. -- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the Board, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board, shall preside. -- QUORUM. A majority of the whole Board shall constitute a quorum except when a board of one (1) director is authorized then one (1) director shall constitute a quorum and when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided, that such majority shall constitute at least one--third of the whole Board. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. 4. ACTION. Except as otherwise provided herein or by the General Corporation Law, the act of the Board shall be the act by vote of a majority of the directors present at a meeting, a quorum being present, The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the General Corporation Law and the By-Laws which govern a meeting of directors held to fill vacancies and newly created directorships in the Board or action taken by the Board on a matter in respect of which a director voting on the matter is an interested director (as defined by the General Corporation Law). 5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General Corporation Law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. 6. COMMITTEES. The Board of Directors may, by resolution passed by the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. In so doing, the Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, except any authority the delegation of which is prohibited by Section 141 of the General Corporation Law, and may authorize the seal of the Corporation to be affixed to all papers which may require it. In the absence or disqualification of any member of any such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. No such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. 7. MEETINGS BY TELEPHONE. Any member or members of the Board of Directors or of any committee designated by the Board may participate in a meeting of the Board or any such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. 8. ACTION WITHOUT MEETINGS. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. ARTICLE III OFFICERS 1. ELECTION OF OFFICERS. All officers of the Corporation shall be chosen by the Board of Directors. The officers of the Corporation shall consist of the Chief Executive Officer who shall be the Chairman of the Board of Directors, the President, the Treasurer and the Secretary and, if deemed necessary, expedient or desirable by the Board of Directors, a Vice-Chairman of the Board, one or more Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers, with such titles, as shall be designated by resolution of the Board of Directors electing them. Except as may otherwise be provided in the resolution of the Board of Directors electing him, no officer other than the Chairman or Vice-Chairman of the Board, if any, need be a director. Any number of offices other than the offices of President and Secretary may be held by the same person. 2. TERM OF OFFICE. Unless otherwise provided in the resolution electing him, each officer shall be chosen for a term which shall continue until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor shall have been chosen and qualified. Any officer may be removed with or without cause by the Board of Directors. Any vacancy in any office may be filled by the Board of Directors. 3. DUTIES OF OFFICERS. All officers of the Corporation shall have such powers and authority and shall perform such duties in the management and operation of the corporation as may be prescribed by the By-Laws and, subject thereto, in the resolutions of the Board of Directors designating and choosing such officers or prescribing the powers, authority and duties of The various officers of the Corporation and, subject thereto, such powers and duties as are customarily incident to their office. The Secretary or the Assistant Secretary, if any, of the Corporation shall record all of the proceedings of all meetings and the actions in writing of stockholders, directors and committees of directors, and shall exercise such additional authority and perform such additional duties as The Board shall assign to him. ARTICLE IV CERTIFICATES REPRESENTING STOCK 1. CERTIFICATES REPRESENTING STOCK -- SIGNATURES ON CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of, the Corporation by the Chairman or a Vice-Chairman of the Board of Directors, or by the President or a Vice-President, and by a Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation certifying the number of shares owned by him in the Corporation. Any or all signatures on any such certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. -- SIGNATURES STATEMENTS. Whenever the Corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock and whenever the Corporation shall issue any shares of its stock as partly paid stock, the certificate representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously oh the certificate representing such shares. REPLACEMENT OF CERTIFICATES. The Corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Corporation may require the owner of any lost, stolen, or destroyed certificate, or his legal representative, to indemnify the Corporation against, or give the Corporation a bond sufficient in the Corporation's reasonable judgment to indemnify the Corporation against, any claim That may be made against it on account of the alleged loss, theft, or destruction of any such certificate or the issuance of any such new certificate. 2. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall not be required to, issue fractions of a share. If the Corporation does not issue fractions of a share, it shall (i) arrange for the disposition of fractional interests by those entitled thereto, (ii) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (iii) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Corporation in the event of liquidation, in each case to the extent of such fraction. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. 3. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the corporation shall be made only on the stock ledger of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon. ARTICLE V INDEMNIFICATION 1. INDEMNIFICATION RESPECTING THIRD PARTY CLAIMS. The Corporation, to the full extent permitted, and in the manner required, by the laws of the State of Delaware as in effect at the time of the adoption of this Article or as such laws may be amended from time to time, shall indemnify any person who, was or is made a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (including any appeal thereof), whether civil, criminal, administrative or investigative in nature (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or, if at a time when he was a director, officer, employee or agent of the Corporation, is or was serving at the request of, or to represent the interests of, the Corporation as a director, officer, partner, fiduciary, employee or agent (a "Subsidiary Officer") of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (an "Affiliated Entity"), against expenses (including attorneys' fees and disbursements), costs, judgment, fines, penalties and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful; provided, however, that the Corporation shall not be obligated to indemnify against any amount paid in settlement unless the Corporation has consented to such settlement, which consent shall not be unreasonably withheld. The termination of any action, suit or proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, that such person had reasonable cause to believe that his or her conduct was unlawful. Notwithstanding anything to the contrary in the foregoing provisions of this Section 1, a person shall not be entitled, as a matter of right, to indemnification pursuant to this Section 1 against costs or expenses incurred in connection with any action, suit or proceeding commenced by such person against any person who is or was a director, officer, fiduciary, employee or agent of the Corporation or a Subsidiary Officer of any Affiliated Entity, but such indemnification may be provided by the Corporation in a specific case as permitted by Section 6 of this Article. 2. INDEMNIFICATION RESPECTING DERIVATIVE CLAIMS. The Corporation, to the full extent permitted, and in the manner required, by the laws of the State of Delaware as in effect at the time of the adoption of this Article or as such laws may be amended from time to time, shall indemnify any person who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action or suit (including any appeal thereof) brought in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or, if at a time when he was a director, officer, employee or agent to the Corporation, is or was serving at the request of, or to represent the interests of, the Corporation as a Subsidiary Officer of an Affiliated Entity against expenses (including attorneys' fees and disbursements) and costs actually and reasonably incurred by such person in connection with such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless, and except to the extent that, the Court of Chancery of the State of Delaware or the court in which such judgment was rendered shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses and costs as the Court of Chancery of the State of Delaware or such other court shall deem proper. Notwithstanding anything to the contrary in the foregoing provisions of this Section 2, a person shall not be entitled, as a matter of right, to indemnification pursuant to this Section 2 against costs and expenses incurred in connection with any action or suit in the right of the Corporation commenced by such person, but such indemnification may be provided by the Corporation in any specific case as permitted by Section 6 of this Article. 3. DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. Any indemnification under Section 1 or 2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification is proper under the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or 2 of this Article. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding in respect of which indemnification is sought or by majority vote of the members of a committee of the Board of Directors composed of at least three members each of whom is not a party to such action, suit or proceeding, or (ii) if such quorum is not obtainable and/or such a committee is not established or obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stock holders. In the event a request for indemnification is made by any person referred to in Section 1 or Section 2 of this Article, the Corporation shall cause such determination to be made not later than 60 days after such request is made. 4. RIGHT TO INDEMNIFICATION UPON SUCCESSFUL DEFENSE AND FOR SERVICE AS WITNESS. (a) Notwithstanding the other. provisions of this Article, to the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 or 2 of this Article, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees and disbursements) and costs actually and reasonably incurred by such person in connection therewith. (b) To the extent any person who is or was a director, officer, employment or agent of the Corporation has served or prepared to serve as a witness in any action, suit or proceeding (whether civil, criminal, administrative or investigative in nature) or in any investigation by the Corporation or the Board of Directors thereof or committee thereof or by any securities exchange on which securities of the corporation are or were listed by reason of his services as a director, officer, employee or agent of the Corporation or as a Subsidiary Officer of any Affiliated Entity (other than in a suit commenced by such person), the Corporation shall indemnify such person against expenses (including attorneys' fees and disbursements) and costs actually and reasonably incurred by such person in connection therewith within 30 days after receipt by the Corporation from such person of a statement requesting such indemnification, averring such service and reasonably evidencing such expenses and costs. 5. ADVANCE OF EXPENSES. Expenses and costs incurred by any person referred to in Section 1 or Section 2 of this Article in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized by this Article. 6. INDEMNIFICATION NOT EXCLUSIVE. The provision of indemnification to, or the advancement of expenses and costs to, any person under this Article, or the entitlement of any person to indemnification or advancement of expenses and costs under this Article, shall not limit or restrict in any way the power of the Corporation to indemnify or advance expenses and costs to such person in any other way permitted by law or be deemed exclusive of, or invalidate, any right to which any person seeking indemnification or advancement of expenses and costs may be entitled under any law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's capacity as an officer, director, employee or agent of the Corporation and as to action to any other capacity while holding any such position. 7. ACCRUAL OF CLAIMS; SUCCESSORS. The indemnification provided or permitted under this Article shall apply in respect of any expense, cost, judgment, fine, penalty or amount paid in settlement, whether or not the claim or cause of action in respect thereof accrued or arose before or after the effective date of this Article. The right of any person who is or was a director, officer, employee or agent of the Corporation to indemnification under this Article shall continue after he shall have ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, distributees, executors, administrators and other legal representatives of such person. 8. CORPORATE OBLIGATIONS; RELIANCE. This Article shall be deemed to create a binding obligation on the part of the Corporation to its current and former officers, directors, employees and agents and their heirs, distributes, executors, administrators and other legal representatives, and such persons acting in such capacities shall be entitled to rely on the provisions of this Article, without giving notice thereof to the Corporation. 9. INSURANCE The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of, or to represent the interests of, the Corporation as a Subsidiary Officer of any Affiliated Entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article or applicable law. 10. DEFINITIONS OF CERTAIN TERMS. (a) For purposes of this Article, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its corporate existence had continued, would have been permitted under applicable law to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request, or to represent the interests of, such constituent corporation as a director, officer, employee or agent of any Affiliated Enterprise shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. (b) For purposes of this Article, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; references to "serving at the request of the Corporation" shall include any service as a director, officer, fiduciary, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, fiduciary, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interest of the Corporation" as referred to in this Article. ARTICLE VI CORPORATE SEAL The corporate seal shall be in such form as the Board of Directors shall prescribe. ARTICLE VII FISCAL YEAR The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors. ARTICLE VIII CONTROL OVER BY-LAWS The power to amend, alter or repeal the By-Laws and to adopt new By-Laws may be exercised by the Board of Directors or by action of the stockholders. EX-3.5 5 CERTIFICATE OF INCORPORATION OF C.P. CHEMICALS, INC. STATE OF NEW JERSEY DEPARTMENT OF STATE LONG FORM STANDING WITH CHARTER DOCUMENTS C P CHEMICALS, INC. (FORMERLY* COPPER PIGMENT & CHEMICAL WORKS, I, the Secretary of State of the State of New Jersey, do hereby certify that the above-named New Jersey Domestic Profit Corporation was registered by this office on November 2, 1972. As of the date of this certificate, said business continues as an active business in good standing in the State of New Jersey, and its Annual Reports are current. I further certify that the registered agent and registered office are: The Corporation Trust Co 820 Bear Tavern Road Trenton, NJ 08628 I further certify that as of the date of this certificate, the following amendments and changes are on file in this office: Name Change 11/02/1972 Continued on next page... STATE OF NEW JERSEY DEPARTMENT OF STATE LONG FORM STANDING WITH CHARTER DOCUMENTS C P CHEMICALS, INC.(FORMERLY* COPPER PIGMENT & CHEMICAL WORKS, Merged 10/21/1985 103185 Merged 07/29/1987 72787 Change Of Agent And Office 11/30/1988 Merged 03/26/1993 3-9-93 Merged 01/06/1994 12-28-93 Revoked For Failure To Pay Annual Reports 06/30/1994 Merged 07/08/1994 6-24-94 Reinstated 08/19/1994 IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my Official Seal at Trenton, this 20th day of May, 1998 /s/ Lonna R. Hooks LONNA R HOOKS Secretary of State Continued on next page... STATE OF NEW JERSEY DEPARTMENT OF STATE LONG FORM STANDING WITH CHARTER DOCUMENTS C P CHEMICALS, INC.(FORMERLY* COPPER PIGMENT & CHEMICAL WORKS, Note: Long form standings with charter documents may reflect two dates for filed amendments. The system processing date, which is the date of entry into the State's database, is always shown immediately to the right of the amendment description. If shown alone, the system processing date also constitutes the filing date for the amendment. If an amendment was reviewed and stamped filed prior to the system processing date, a second date called the back-stamp date is shown at the far right margin. In cases where the two dates are shown, the date at the far right margin date is the act ual filing date for the amendment. CERTIFICATE OF AMENDMENT of the CERTIFICATE OF INCORPORATION -of COPPER PIGMENT & CHEMICAL WORKS. INC. To: The Secretary of State State of New Jersey Pursuant to the provisions of Section 14A:9-2(4) and Section 14A:9-4(a), Corporations, General, of the New Jersey Statutes, the undersigned Corporation executes the following Certificate of Amendment to its Certificate of Incorporation: 1. The name of the Corporation is COPPER PIGMENT & CHEMICAL WORKS, INC. 2. The Certificate of Incorporation was filed by the Secretary of State on November 16, 1953. 3. Paragraph "FIRST" of the Certificate of incorporation is hereby amended to read as follows: "FIRST: The name of the Corporation shall be C P CHEMICALS, INC." The foregoing amendment to the Certificate of Incorporation was duly adopted at a Special Joint Meeting of the Board of Directors and Stockholders held October 6th , 1972, by the unanimous affirmative vote of all of the directors of the Corporation and of the holders of all of the issued and outstanding shares of the Corporation entitled to vote thereon. 4. At the time of the adoption of said amendment, there were issued and outstanding forty-five (45) shares of the Class A capital stock of the Corporation, forty-five (45) shares of the Class B capital stock of the Corporation and ten (10) shares of the Class C capital stock of the Corporation of which only the Class A and Class B shares of such stock were entitled to vote thereon. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to its Certificate of Incorporation to be signed by its President this 26th day of October, 1972. COPPER PIGMENT CHEMICAL WORKS, INC., By: /s/ Norman Feldman -------------------- NORMAN FELDMAN, President CERTIFICATE OF AMENDMENT of the CERTIFICATE OF INCORPORATION -of- COPPER PIGMENT & CHEMICAL WORKS INC. LICENSE FEE FILING FILE RECORDING CERTIFYING COPY SEC. OF STATE WEITZNER LEVINE & LOUIS 230 PARK AVENUE NEW YORK N V. 10017 CERTIFICATE OF MERGER OF C.P. CHEMICALS, INC. (a Georgia corporation) INTO C.P. CHEMICALS, INC. (a New Jersey corporation) TO: The Secretary of State State of New Jersey Pursuant to the provisions of Section 14A:1O-7 Corporations, General, of the New Jersey Statutes, the undersigned corporations hereby execute the following Certificate of Merger. ARTICLE ONE The names of the corporations proposing to merge and the names of the States under the laws of which such corporations are organized, are as follows: Name of Corporation State of Incorporation ------------------- ---------------------- C.P. Chemicals, Inc. New Jersey (formerly known as Copper Pigment & Chemical Works, Inc.) C.P. Chemicals Inc. Georgia (formerly known as Vertac Metal Chemicals Inc.) ARTICLE TWO The laws of Georgia, the State under which such foreign corporation is organized, permit such merger and the applicable provisions of the laws of said jurisdiction under which such foreign corporation was organized have been or, upon compliance with filing and recording requirements will have been complied with. ARTICLE THREE The name of the surviving corporation shall be C.P. Chemicals, Inc. and it shall be governed by the laws of the State of New Jersey. The total authorized capital stock of the surviving corporation shall. be, as presently existing, 2,500 shares of common stock, each having a par value of $1.00. The address of the surviving corporation's registered office is Arbor Street, Seawaren, New Jersey 07077 and the name of its registered agent at. such address is Mr. Norman Feldman. ARTICLE FOUR The Plan of Merger, a copy of which is annexed bereto as Exhibit "A", was approved by the sole shareholder and the board of directors of C.P. CHEMICALS, INC., a New Jersey corporation, the surviving corporation, in the manner prescribed by the New Jersey Business Corporation Act, and was approved by the undersigned foreign corporation in the manner prescribed by the laws of the State under which it is organized. No vote of the shareholders of the surviving corporation was required because of the applicability of the provisions of Section 14A:l0-3(4), Title 14A, Revised Statutes of New Jersey. ARTICLE FIVE As to each corporation whose shareholders are entitled to vote, the number of shares entitled to vote thereon, and if the shares of any class or series are entitled to vote thereon as a class, the designation and number of shares of each such class or series, is as follows; Designation of Number Class or Series of Shares Total Number Entitled to of Such of Shares Vote as a Class or Entitled Class Series Name of Corporation to Vote (if any) (if any) - ------------------- ------- -------- -------- C.P. Chemicals, Inc. 2,500 None None (N J.) C.P. Chemicals, Inc. 1,000 None None (GA,) ARTICLE SIX As to each corporation whose shareholders are entitled to vote, the number of shares that voted for and against the merger respectively, and the number of shares of any class or series entitled to vote as a class, if any, that voted for and against the merger are: Total Shares Total Shares Name of Corporation Voted For Voted Against - ------------------- --------- ------------- C.P. Chemicals Inc. 2,500 None (N.J.) C.P. Chemicals Inc 1,000 None (GA.) ARTICLE SEVEN The effective date of this Certificate shall be October 31, 1985 or the date of the filing thereof by the Secretary of State of New Jersey, whichever date shall be later. IN WITNESS WHEREOF each of the undersigned corporations has caused this Certificate of Merger to be executed in its name by its President as of the 11th day of October, 1985. C.P. CHEMICALS INC. (N.J.) By: /s/ Jack C. Bendheim -------------------------- Jack C Bendheim, Vice President C.P. CHEMICALS, INC. (GA) By: /s/ Jack C. Bendheim -------------------------- Jack C. Bendheim, Vice President -4- STATEMENT OF POST MERGER ADDRESS OF C. P. CHEMICALS INC (GA.) A MERGED CORPORATION To: The Secretary of State State of Georgia C. P. CHEMICALS, INC., a domestic corporation baying been merged into C. P. CHEMICALS INC., a New Jersey corporation being a foreign corporation, the undersigned corporation hereby designates the following post-office address, to which the Secretary of State may mail a copy of any process against the undersigned corporation that may be served on him or to which any other communications intended for the corporation shall be mailed: Arbor Street, Seawaren, New Jersey 07077 Dated this 11th day of October, 1985 C.P. CHEMICALS, INC. (N.J.) By: /s/ Jack C. Bendheim -------------------------- Jack C. Bendheim, Vice President CERTIFICATE OF MERGER OF SOUTHERN CALIFORNIA CHEMICAL CO., INC. (a California corporation) INTO C.P. CHEMICALS, INC. (a New Jersey corporation) TO: The Secretary of State State of New Jersey Pursuant to the provisions of Section 14A:lO-7 Corporations, General, of the New Jersey Statutes, the undersigned corporations hereby execute the following Certificate at Merger. ARTICLE ONE The names of the corporations proposing to merge and the names of the States under the laws of which such corporations are organized, are as follows: Name of Corporation State of Incorporation ------------------- ---------------------- C.P. Chemicals, Inc. New Jersey (formerly known as Copper Pigment & Chemical Works, Inc.) Southern California Chemical California Co., Inc. ARTICLE TWO The laws of California, the State under which such foreign corporation is organized, permit merger and the applicable provisions of the laws of said jurisdiction under which such foreign corporation was organized have been, or, upon compliance with filing and recording requirements will have been, complied with. ARTICLE THREE The name of the surviving corporation shall be C.P. CHEMICALS, INC. and it shall be governed by the laws of the State of New Jersey. The total authorized capital Stock of the surviving corporation shall be, as presently existing, 2,500 shares of common stock, each having a par value of $1.00. The address of the surviving corporation's registered office is Arbor Street, Seawaren, New Jersey 07077 and the name of its registered agent at such address is Mr. Norman Feldman ARTICLE FOUR The Plan of Merger, a copy of which is annexed hereto as Exhibit A was approved by the board of directors of C.P. CHEMICALS, INC., a New Jersey corporation, the surviving corporation, in the manner prescribed by the New Jersey Business Corporation Act, and was approved by the' undersigned foreign corporation in the manner prescribed by the laws of the State under which it is organized. No vote of the shareholders of the surviving corporation was required because of the applicability of the provisions of Section 14A:10-3(4), Title 14A, Revised Statutes of New Jersey. 2 ARTICLE FIVE The effective date of this Certificate shall be July 31, 1987 or the date of the filing hereof by the Secretary of State of New Jersey, whichever date shall be later. IN WITNESS WHEREOF, each of the undersigned corporations has caused this Certificate of Merger to be executed in its name by its President as of the 21st day of July, 1997. C.P. CHEMICALS, INC. By: /s/ Jack C. Bendheim -------------------------- Jack C. Bendheim, President SOUTHERN CALIFORNIA CHEMICAL CO., INC. By: /s/ Jack C. Bendheim -------------------------- Jack C. Bendheim, President EXHIBIT A PLAN OF MERGER OF. SOUTHERN CALIFORNIA CHEMICAL CO. INC. INTO C.P. CHEMICALS, INC. 1. It is proposed to merge Southern California Chemical Co., Inc., a California corporation, into C.P. Chemicals, Inc., a New Jersey corporation, so that the latter corporation shall be the surviving corporation. Said corporations are hereinafter referred to, respectively, as the California corporation and the New Jersey or surviving corporation. 2. The terms and conditions of the merger are as follows: (a) On the effective date of this Plan, all of the shares of stock of the California corporation which shall be authorized, issued or outstanding shall be surrendered and cancelled and each of the certificates evidencing said shares shall be endorsed to indicate their cancellation by reason of merger pursuant to this Plan. (b) The authorized, issued and outstanding shares of the New Jersey corporation, the surviving corporation, shall not be changed in any respect, and no change shall be effected with respect to the provisions of the certificate of incorporation of said surviving corporation. (c) Upon the effective date of this Plan, the separate existence of the California corporation shall cease and said corporation shall be merged into the surviving corporation and the surviving corporation shall possess all the riqhts, privileges, powers, and franchises of a public and private nature and shall be subject to all the duties at said California corporation: all of the rights, privileges, powers and franchises of laid California corporation, and all property, real, personal, and mixed, and all debts due to said California corporation on whatever account shall be vested in the surviving corporation; and all property, rights, privileges, powers, contracts, and franchises and every other interest of said California corporation shall be thereafter effectively the property of the surviving corporation as they were of said California corporation; but all rights of creditor, and all liens upon any property of said California corporation shall be preserved unimpaired and all debts, liabilities and duties of said California corporation shall thenceforth attach to the surviving corporation and be enforceable against said surviving corporation to the same extent as if said debts, liabilities and duties had been incurred or contracted by said surviving corporation. (d) if, at any time, the surviving consider that any further assignments or assurances in law or any other acts or deeds are necessary or desirable to vest in the surviving corporation, according to the terms hereof, the title to any property or rights of said California corporation, the proper officers and directors of said California corporation shall make and execute all such assignments and assurances and do all things necessary or proper to vest title in such property or rights in the surviving corporation and Otherwise to carry out the purposes of this Plan. (e) Upon the effective date of the merger, the assets and liabilities of maid California corporation shall be carried on the books of the surviving corporation at the amounts at which they are respectively carried on such date on the books of said California corporation. The capital surplus and earned surplus of the surviving corporation shall be the sum of the respective capital surpluses and earned surpluses of the corporations party to this Plan, subject in each case to such intercompany or accounting adjustments as may be appropriate or may be required to give effect to the merger. The aggregate amount, if any, of the net assets of the corporations party to this Plan which was legally available for the payment of dividends immediately prior to the merger, to the extent that the value thereof is not transferred to stated capital by the issuance of shares or otherwise, shall continue to be available for payment of dividends by the surviving corporation. (f) The directors and officers of the corporation shall continue in office until they resign and their successors are duly elected. (g) The by--laws of the surviving corporation, as they shall exist on the effective date of this merger, shall be and remain the by-laws of the surviving corporation until the same shall be altered, amended or repealed as therein provided. 4. The effective date of this Plan shall be July 31, 1987 or as soon thereafter as the Certificate of Merger with respect to the Merger is filed by the Secretary of State of New Jorsey, whichever is later. 5. The President, other officers and directors of each of the corporations which are party to this Plan shall be authorized and directed to prepare and execute such agreements, certificates and other documents as may be necessary in order to carry out this Plan. 6. Anything herein or elsewhere to the contrary notwithstanding, this Plan may be terminated and abandoned by mutual consent of the Board of Directors of either corporation party hereto at any time prior to the effective date of this Plan, If, in the opinion of said Boards of Directors the merger is impractical or undesirable for any reason whatsoever. Dated: July 21 , 1987 C.P. CHEMICALS, INC. By: /s/ Jack C. Bendheim -------------------------- Jack C. Bendheim President SOUTHERN CALIFORNIA CHEMICAL CO., INC. By: /s/ Jack C. Bendheim -------------------------- Jack C. Bendheim, President CERTIFICATE OF MERGER OF C. P. INORGANICS, INC. (An Illinois Corporation) AND CHEM-EX CORPORATION (An Illinois Corporation) INTO C. P. CHEMICALS, INC. (A New Jersey Corporation) UNDER SECTION 14A:lO-7 CORPORATIONS, GENERAL, OF NEW JERSEY STATUTES Pursuant to the provisions of Section 14A:l0-7 Corporations, General, of New Jersey Statutes, the undersigned corporations hereby execute the following Certificate of Merger: 1. (a) The name of each subsidiary corporation to be merged is as follows: C.P. Inorganic., Inc. (incorporated in Illinois) Chem-Ex Corporation (incorporated in Illinois) (b) The name of the surviving corporation is C.P. Chemicals, Inc., (incorporated in New Jersey), and following the merger its name shall be C.P. Chemicals, Inc. Following the merger the surviving corporation shall continue to be governed by the laws of the State of New Jersey. 2. The laws of Illinois, the state under which such foreign subsidiary corporations are organized, permit such merger: and the applicable provisions of the laws of such jurisdiction have been, or upon compliance with filing and recording requirements will have been, complied with. 3. The total authorized capital stock of the surviving corporation shall be, as presently existing, 2,500 shares of common stock, par value $1.00 per share. The address of the surviving corporations registered office is Arbor Street, Sewaren, New Jersey 07077, and the name of the registered agent at such address is Mr. I. David Paley. 4. As to each subsidiary corporation to be merged, the designation and number of outstanding shares of each class, and the number of such shares of each class owned by the surviving corporation, are as follows: C.P. Inorganics. Inc. (incorporated in Illinois): 525 shares of common stock outstanding; 525 shares of common stock owned by the surviving corporation Chem-Ex Corporation (incorporated in Illinois): 1,000 shares of common stock outstanding; 1,000 shares of common stock owned by the surviving corporation. The number of shares of each subsidiary corporation outstanding and owned by the surviving corporation, as set forth above, is not subject to change prior to the effective date of the merger. 5. The Plan of Merger, a copy of which is annexed hereto as Exhibit A" hereof, was adopted by the board of directors of C.P. Chemicals, Inc., a New Jersey Corporation and the surviving corporation, on March 1, 1993, in the manner prescribed by the New Jersey Business Corporation Act, and was approved by the undersigned foreign corporations in the manner prescribed by the laws of the State of Illinois, under which they are organized. No vote of the shareholders of the surviving corporation was required because of the applicability of the provisions of Section 14A: 10-3(4), Title 14A, Revised Statutes of New Jersey. IN WITNESS WHEREOF, each of the undersigned corporations has caused this Certificate of merger to be executed in its name by its President as of the lst day of March, 1993. C.P. CHEMICALS, INC. By: /s/ I. David Paley -------------------------- I. David Paley, President C.P. INORGANICS INC By: /s/ Jack C. Bendheim -------------------------- Jack C. Bendheim, President CHEM-EX CORPORATION By: /s/ Jack C. Bendheim -------------------------- Jack C. Bendheim, President EXHIBIT "A" PLAN OF MERGER FIRST: (a) The name of each subsidiary corporation to be merged is as follows: C.P. Inorganics, Inc. (incorporated in Illinois) and Chem-Ex Corporation (incorporated in Illinois). (b) The name of the surviving corporation is C.P. Chemicals, Inc. (incorporated in New Jersey), and following the merger its name shall be C.P. Chemicals, Inc. SECOND: (a) As to each subsidiary corporation to be merged, the designation and number of outstanding shares of each class, and the number of such shares of each class owned by the surviving corporation, are as follows: C.P. Inorganics. Inc.: 525 shares of common stock outstanding; 525 shares of common stock owned by the surviving corporation. Chem-Ex Corporation.: 1,000 shares of common stock outstanding; 1,000 shares of common stock owned by the surviving corporation. (b) The number of shares of each subsidiary corporation outstanding and owned by the surviving corporation, set forth above in paragraph "SECOND (a)", is not subject to change prior to the effective date of the merger. THIRD: The terms and conditions of the merger are as follows: (a) On the effective date of this Plan, all of the issued and outstanding shares of stock of the subsidiary corporations to be merged hereunder, identified in paragraph "FIRST (a)" hereof, shall be surrendered and cancelled, and each of the certificates evidencing such shares shall be endorsed to indicate their cancellation by reason of merger pursuant to this Plan. (b) The issued and outstanding shares of the surviving corporation, identified in paragraph "FIRST (b)" hereof, shall not be changed in any respect, and no change shall be effected with respect to the provisions of the certificate of incorporation of such surviving corporation. (c) On the effective date of this Plan, the separate existence of each of the subsidiary corporations identified in paragraph "FIRST (a)" hereof shall cease and such corporations shall be merged into the surviving corporation, and the surviving corporation shall possess all rights, privileges, powers and franchises of a public and private nature and shall be subject to all the duties of each such subsidiary corporation; all of the rights, privileges, powers and franchises of each such subsidiary corporation, and all property, real, personal, and mixed (including all debts due to any of such subsidiary corporations on whatever account) of each such subsidiary corporation, shall be vested in the surviving corporation; and all property, rights, privileges, powers, contracts, and franchises and every other interest of each such subsidiary corporation shall be thereafter effectively the property of the surviving corporation as they were of the respective subsidiary corporations; but all rights of creditors and all liens upon any property of any such subsidiary corporation shall be preserved unimpaired, and all debts, liabilities and duties of each such subsidiary corporation shall thenceforth attach to the surviving corporation and be enforceable against such surviving corporation to the same extent as it such debts, liabilities and duties had been incurred or contracted by the surviving corporation. (d) If, at any time, the surviving corporation shall consider that any further assignments or assurances in law or any other acts or deeds are necessary or desireable to vest in the surviving corporation, according to the terms hereof, the title to any property or rights of any merging subsidiary corporation, the proper officers and directors of such subsidiary corporation shall make and execute all such assignments and assurances and do all things necessary or proper to vest title in such property or rights in the surviving corporation and otherwise to carry out the purposes of this Plan. (e) On the effective date of this Plan, the assets and liabilities of each merging subsidiary corporation shall be carried on the books of the surviving corporation at the amounts at which they are respectively carried on such date on the books of the subsidiary corporations. The capital surplus and earned surplus of the surviving corporation shall be the sum of the respective capital surpluses and earned surpluses of the merging subsidiary corporations and the surviving corporation, subject in each case to such inter company or accounting adjustments as may be appropriate. The aggregate amount, if any, of the net assets of the merging subsidiary corporations and the surviving corporation which was legally available for the payment of dividends immediately prior to the merger, to the extent that the value thereof is not transferred to stated capital by the issuance of shares or otherwise, shall continue to be available for payment of dividends by the surviving corporation. (f) The directors and officers of the surviving corporation shall continue in office until the expiration of their terms and the election of their respective successors, or until their earlier death, resignation or removal. (g) The by-laws of the surviving corporation, as they shall exist on the effective date of this merger, shall be and remain the by-laws of the surviving corporation until the same shall be altered, amended or repealed as therein provided. FOURTH: The effective date of this Plan shall be the later of the following: (I) the date on which the Certificate of Merger with respect to the merger is filed by the Secretary of State of New Jersey; FIFTH: Under Illinois law, shareholders of a merging subsidiary corporation have the right to dissent to a proposed merger. As stated above in paragraph SECOND (a)," C. P. Chemicals, Inc., the surviving corporation under the present Plan of Merger, owns all of the outstanding shares of each merging subsidiary corporation, both of which are incorporated in Illinois. Distribution of this Plan of Merger shall constitute notice to the sole shareholder of the subsidiary corporations of its right to dissent under Illinois law. Adoption of this Plan of Merger by the unanimous written consent of the directors of C.P. Chemicals, Inc., the sole shareholder of the subsidiary corporation., shall constitute the written consent of such sole shareholder for the merger. SIXTH: The President, Treasurer/Secretary, and other officers and directors of the surviving corporation are hereby authorized and directed to prepare and execute such agreements, certificates and other documents as may be necessary or appropriate in order to carry out this Plan. SEVENTH: Anything herein or elsewhere to the contrary notwithstanding, this Plan may be terminated and abandoned by consent of the Board of Directors of the surviving corporation at any time prior to the effective date of this Plan, if, in the opinion of such Board of Directors, the merger is impractical or undesirable for any reason whatever. CERTIFICATE OF MERGER OF KEYSTONE PLATING SUPPLY, INC. (A Michigan Corporation) INTO C. P. CHEMICALS, INC. (A New Jersey Corporation) UNDER SECTION 14A:lO-7 CORPORATIONS, GENERAL, OF NEW JERSEY STATUTES Pursuant to the provisions of Section 14A:lO-7 Corporations, General, of New Jersey Statutes, the undersigned corporations hereby execute the following Certificate of Merger: 1. (a) The name of the subsidiary corporation to be merged is as follows: Keystone Plating Supply, Inc. (incorporated in Michigan). (b) The name of the surviving corporation is C.P. Chemicals, Inc. (incorporated in New Jersey), and following the ( merger its name shall be C.P. Chemicals, Inc. Following the merger the surviving corporation shall continue to be governed by the laws of the State of New Jersey. 2. The laws of Michigan, the state under which such foreign subsidiary corporation is organized, permit such merger; and the applicable provisions of the laws of such jurisdiction have been, or upon compliance with filing and recording requirements will have been, complied with. 3. The total authorized capital stock of the surviving corporation shall be, as presently existing, 2,500 shares of common stock, par value $1.00 per share. The address of the surviving corporation's registered office is Arbor Street, Sewaren, New Jersey 07077, and the name of the registered agent at such address is Mr. I. David Paley. 4. As to the subsidiary corporation to be merged, the designation and number of outstanding shares of each class, and the number of such shares of each class owned by the surviving corporation, are as follows: Keystone Plating Supply, Inc. (incorporated in Michigan): 1 share of common stock outstanding: 1 share of common stock owned by the surviving corporation. The number of shares of the subsidiary corporation outstanding and owned by the surviving corporation, as set forth above, is not subject to change prior to the effective date of the merger. 5. The Plan of Merger, a copy of which is annexed hereto as Exhibit "A" hereof, was adopted by the board of directors of C.P. Chemicals, Inc., a New Jersey Corporation and the surviving corporation, on December 10, 1993, in the manner prescribed by the New Jersey Business Corporation Act, and was approved by the undersigned foreign corporation (Keystone Plating Supply, Inc.) in the manner prescribed by the laws of the State of Michigan, under which it is organized. No vote of the shareholders of the 2 surviving corporation was required because of the applicability of the provisions of Section 14A: 10-3(4), Title 14A, Revised Statutes of New Jersey. IN WITNESS WHEREOF, each of the undersigned corporations has caused this Certificate of merger to be executed in its name by its President as of the 10th day of December, 1993. C.P. CHEMICALS, INC. By: /s/ I. David Paley -------------------------- I. David Paley, President KEYSTONE PLATING SUPPLY, INC By: /s/ Jack C. Bendheim -------------------------- Jack C. Bendheim, President 3 EXHIBIT "A" PLAN OF MERGER FIRST: (a) The name of the subsidiary corporation to be merged is as follows: Keystone Plating Supply, Inc. (incorporated in Michigan). (b) The name of the surviving corporation is C P. Chemicals, Inc. (incorporated in New Jersey), and following the merger its name shall be C.P. Chemicals, Inc. SECOND: (a) As to the subsidiary corporation to be merged, the designation and number of outstanding shares of each class, and the number of such shares of each class owned by the surviving corporation, are as follows: 1. share of common stock outstanding; 1 share of common stock owned by the surviving corporation. (b) The number of shares of the subsidiary corporation outstanding and owned by the surviving corporation, set forth above in paragraph "SECOND (a)", is not subject to change prior to the effective date of the merger. THIRD: The terms and conditions of the merger are as follows: (a) On the effective date of this Plan, all of the issued and outstanding shares of stock of the subsidiary corporation to be merged hereunder, identified in paragraph "FIRST (a)" hereof, shall be surrendered and cancelled, and each of the certificates evidencing such shares shall be endorsed to indicate their cancellation by reason of merger pursuant to this Plan. (b) The issued and outstanding shares of the surviving corporation, identif led in paragraph "FIRST (b)" hereof, shall not be changed in any respect, and no change shall be effected with respect to the provisions of the certificate of incorporation of such surviving corporation. (c) On the effective date of this Plan, the separate existence of the subsidiary corporation identified in paragraph "FIRST (a)" hereof shall cease and such corporation shall be merged into the surviving corporation, and the surviving corporation shall possess all rights, privileges, powers and franchises of a public and private nature and shall be subject to all the duties of such subsidiary corporation; all of the rights, privileges, powers and franchises of such subsidiary corporation, and all property, real, personal, and mixed (including all debts due to such subsidiary corporation on whatever account) of such subsidiary corporation, shall be vested in the surviving corporation; and all property, rights, privileges, powers, contracts, and franchises and every other interest of such subsidiary corporation shall be thereafter effectively the property of the surviving corporation as they were of the subsidiary corporation; but all rights of creditors and all liens upon any property of such subsidiary corporation shall be preserved unimpaired, and all debts, liabilities and duties of such subsidiary corporation shall thenceforth attach to the surviving corporation and be enforceable against such surviving corporation to the same extent as if such debts, liabilities and duties had been incurred or contracted by the surviving corporation. 2 (d) If, at any time, the surviving corporation shall consider that any further assignments or assurances in law or any other acts or deeds are necessary or desireable to vest in the surviving corporation, according to the terms hereof, the title to any property or rights of the merging subsidiary corporation, the proper officers and directors of such subsidiary corporation shall make and execute all such assignments and assurances and do all things necessary or proper to vest title in such property or rights in the surviving corporation and otherwise to carry out the purposes of this Plan. (e) On the effective date of this Plan, the assets and liabilities of the merging subsidiary corporation shall be carried on the books of the surviving corporation at the amounts at which they are respectively carried on such date on the books of the subsidiary corporation. The capital surplus and earned surplus of the surviving corporation shall be the sum of the capital surplus and earned surplus of the merging subsidiary corporation and the surviving corporation, subject to such intercompany or accounting adjustments as may be appropriate. The aggregate amount, if any, of the net assets of the merging subsidiary corporation and the surviving corporation which was legally available for the payment of dividends immediately prior to the merger, to the extent that the value thereof is not transferred to stated capital by the issuance of shares or otherwise, shall continue to be available for payment of dividends by the surviving corporation. 3 (f) The directors and officers of the surviving corporation shall continue in office until the expiration of their terms and the election of their respective successors, or until their earlier death, resignation or removal. (g) The by-laws of the surviving corporation, as they shall exist on the effective date of this merger, shall be and remain the by-laws of the surviving corporation until the same shall be altered, amended or repealed as therein provided. FOURTH: The effective date of this Plan shall be the later of the following: (i) the date on which the Certificate of Merger with respect to the merger is filed by the Secretary of State of New Jersey; (ii) or the date on which the Certificate of Merger with respect to the merger is filed with the Secretary of State of Michigan: or (iii) December 31, 1993. FIFTH: Under Michigan law, shareholders of a merging subsidiary corporation have the right to dissent to a proposed merger. As stated above in paragraph "SECOND (a)," C. P. Chemicals, Inc., the surviving corporation under the present Plan of Merger, owns all of the outstanding shares of the merging subsidiary corporation, which is incorporated in Michigan. Distribution of this Plan of Merger shall constitute notice to the sole shareholder of the subsidiary corporation of its right to dissent under Michigan law. Adoption of this Plan of Merger by the unanimous written consent of the directors of C.P. Chemicals, Inc., the sole shareholder of the subsidiary corporation, shall 4 constitute the written consent of such sole shareholder for the merger. SIXTH: The President, Treasurer/Secretary, and other officers and directors of the surviving corporation are hereby authorized and directed to prepare and execute such agreements, certificates and other documents as may be necessary or appropriate in order to carry out this Plan. SEVENTH: Anything herein or elsewhere to the contrary notwithstanding, this Plan may be terminated and abandoned by consent of the Board of Directors of the surviving corporation at any time prior to the effective date of this Plan, if, in the opinion of such Board of Directors, the merger is impractical or undesirable for any reason whatever. 5 CERTIFICATE OF MERGER OF SEABOARD MINERAL SUPPLY, INC. (A Pennsylvania Corporation) INTO C. P. CHEMICALS, INC. (A New Jersey Corporation) UNDER SECTIONS 14A:1O-5.l AND 14A:lO-7 OF THE NEW JERSEY BUSINESS CORPORATION ACT The undersigned domestic corporation, C. P. Chemicals, Inc., and its wholly-owned foreign subsidiary, Seaboard Mineral Supply, Inc., desiring to merge, do hereby certify as follows: 1. Names of Merging and Surviving Corporations. (a) The name of the subsidiary corporation to be merged is Seaboard Mineral Supply, Inc. (incorporated in Pennsylvania) (b) The name of the surviving corporation is C. P. Chemicals, Inc. (incorporated in New Jersey), and following the merger its name shall continue to be C. P. Chemicals, Inc. 2. Plan of Merger The Plan of Merger is set forth on Exhibit "A" attached hereto and hereby made a part hereof. 3. Approval By Directors. The Board of Directors of the surviving parent corporation approved the Plan of Merger on May 27, 1994. 4. Subsidiary Shares Outstanding and Owned By Surviving Parent Corporation. As to the subsidiary corporation to be merged, the designation and number of outstanding shares of each class, and the number of such shares of each class owned by the surviving corporation, are as follows: 1,000 shares of common stock outstanding; 1,000 shares of common stock owned by the surviving corporation. The number of shares of the subsidiary corporation outstanding and owned by the surviving corporation, as set forth above, is not subject to change prior to the effective date of the merger. 5. Additional Information Relating to Foreign Corporation The applicable provisions of the laws of the Commonwealth of Pennsylvania, the jurisdiction under which the foreign subsidiary corporation to be merged hereunder is organized, have been, or, upon compliance with filing and recording requirements, will have been, complied with in connection with the proposed merger. IN WITNESS WHEREOF, the undersigned corporations have signed this certificate on the 27 day of May, 1994. Surviving Corporation: C.P. CHEMICALS, INC. (A New Jersey Domestic Corporation) /s/ I. David Paley -------------------------- I. David Paley, President Corporation To Be Merged: SEABOARD MINERAL SUPPLY, INC. (A Pennsylvania Corporation and 100% Subsidiary of C. P. Chemicals, Inc.) /s/ Marvin S. Sussman -------------------------- Marvin S. Sussman, President 2 PLAN OF MERGER FIRST: (a) The name of the constituent corporation to be merged is as follows: Seaboard Mineral Supply, Inc., a Pennsylvania corporation which is a wholly- owned subsidiary of the surviving corporation. The name of the surviving corporation is C.P. Chemicals, Inc., a New Jersey corporation, and following the merger its name shall continue to be C. P. Chemicals, Inc. SECOND: (a) As to the corporation to be merged, the designation and number of outstanding shares of each class and series, and the voting rights thereof, including information relating to class voting, if any, are as follows: No. of Voting Rights and Class Series Shares Outstanding Class Voting ----- ------ ------------------ ------------ Common None 1,000 Full voting rights (no class voting) (b) As to the surviving corporation, the designation and number of outstanding shares of each class and series, and the voting rights thereof, including information relating to class voting, if any, are as follows: No. of Voting Rights and Class Series Shares Outstanding Class Voting ----- ------ ------------------ ------------ Common None 2,500 Full voting rights (no class voting) (c) The number of outstanding shares in each class of the corporation to be merged and of the surviving corporation, as set forth above in subparagraphs (a) and (b) of paragraph "SECOND," is not subject to change prior to the effective date of the merger. THIRD: The terms and conditions of the merger are as follows: On the effective date of this Plan: (i) all of the issued and outstanding shares of the corporation to be merged shall be cancelled, and each of the certificates evidencing such shares shall be endorsed to indicate their cancellation by reason of merger pursuant to this Plan. FOURTH: The Certificate of Incorporation of the surviving corporation will be not be amended in connection with the merger. FIFTH: (a) On the effective date of this Plan, the separate existence of the corporation to be merged shall cease and such corporation shall be merged into the surviving corporation, and the surviving corporation shall possess all the rights, privileges, powers and franchises of a public and private nature and shall be subject to all the duties of such corporation to be merged; all of the rights, privileges, powers and franchises of such corporation to be merged, and all property, real, personal, and mixed (including all debts due to such corporation on whatever account) of such corporation to be merged, shall be vested in the surviving corporation; and all property, rights, privileges, powers, contracts, and franchises and every other interest of such corporation to be merged shall be thereafter effectively the property of the surviving corporation as they were of the corporation to be merged; but all rights of creditors and all liens upon any property of such corporation to be merged shall be preserved unimpaired, and all debts, liabilities and duties of such corporation to be merged shall thenceforth attach to the surviving corporation and be enforceable against such surviving corporation to the same extent as if such debts, liabilities and duties had been incurred or contracted by the surviving corporation. (b) If, at any time, the surviving corporation shall consider that any further assignments or assurances in law or any other acts or deeds are necessary or desirable to vest in the surviving corporation, according to the terms hereof, the title to any property or rights of the merging corporation, the proper officers and directors of such merging corporation shall make and execute all such assignments and assurances and do all things necessary or proper to vest title in such property or rights in the surviving corporation and otherwise to carry out the purposes of this Plan. (c) On the effective date of this Plan, the assets and liabilities of the merging corporation shall be carried on the books of the surviving corporation at the amounts at which they are carried on such date on the books of the merging corporation. The capital surplus and earned surplus of the surviving corporation shall be the sum of the capital surpluses and earned surpluses of the merging corporation and the surviving corporation, subject to such intercompany or accounting adjustments as may be appropriate. The aggregate amount, if any, of the net assets of the merging corporation and the surviving corporation which was legally available for the payment of dividends immediately prior to the merger, to the extent that the value thereof is not transferred to stated capital by the issuance of shares or otherwise, shall continue to be available for payment of dividends by the surviving corporation. (d) The directors and officers of the surviving corporation shall continue in office until the expiration of their terms and the election of their respective successors, or until their earlier death, resignation or removal. (e) The by-laws of the surviving corporation, as they shall exist on the effective date of this merger, shall be and remain the by-laws of the surviving corporation until the same shall be altered, amended or repealed as therein provided. SIXTH: The effective date of this Plan shall be the date on which the Certificate of Merger with respect to the merger is filed by the Secretary of State of New Jersey. SEVENTH: The President, Treasurer/Secretary, and other officers and directors of the merging and of the surviving corporation are hereby authorized and directed to prepare and execute such agreements, certificates and other documents as may be necessary or appropriate in order to carry out this Plan. EIGHTH: Anything herein or elsewhere to the contrary notwithstanding, this Plan may be terminated and abandoned by consent of the Board of Directors of the merging corporation or of the surviving corporation at any time prior to the effective date of this Plan, if, in the opinion of such Board of Directors, the merger is impractical or undesirable for any reason whatever. EX-3.6 6 BY-LAWS OF C.P. CHEMICALS, INC. EXHIBIT B C. P. CHEMICALS, INC. BY - LAWS ARTICLE I OFFICES Section 1. The registered office shall be in the City of Sewarren, State of New Jersey. Section 2. The corporation may also have offices at such other places both within and without the State of New Jersey as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held in the City of New York, State of New York, at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of New Jersey as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of New Jersey, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders shall be held on the first day of October if not a legal holiday, and if a legal holiday, then on the next secular day following, at 9:00 A.M., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than 3 nor more than 10 days-before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of 2 the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than 3 nor more than 10 days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purpose stated in the notice. 3 Section 8. The holders of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in 4 which case such express provision shall govern and control the decision of such question. section 10. Unless otherwise provided in the certificate of incorporation each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. At all elections of directors of the corporation each stockholder having voting power shall be entitled to exercise the right of cumulative voting as provided in the certificate of incorporation. Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present 5 and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be three. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and the director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors (by means of an amendment to these by-laws) may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. Section 3. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such 6 lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. MEETINGS OF THE BOARD OF DIRECTORS Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of New Jersey. Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. 7 Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. special meetings of the board may be called by the president on 1 days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. Section 8. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. Section 9. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar 8 communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. COMPENSATION OF DIRECTORS Section 10. Unless otherwise restricted by the certificate of incorporation or these by-laws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. REMOVAL OF DIRECTORS Section 11. Unless otherwise restricted by the certificate of incorporation or by law, any director or the entire board of directors may be removed, with or without cause, by the 9 holders of a majority of shares entitled to vote at an election of directors. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. 10 ARTICLE V OFFICERS section 1. The officers of the corporation shall be chosen by the board of directors and shall be a Chairman of the Board, a president, a secretary and a treasurer. The board of directors may also choose one or more vice presidents, and one or more assistant secretaries and assistant treasurers or controllers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, a secretary and a treasurer. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any 11 officer elected or appointed by the board of directors may be removed at any tine by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. THE CHAIRMAN OF THE BOARD Section 6. The Chairman of the Board shall be the chief executive officer of the corporation, and shall preside at all meetings of the stockholders and the board of directors. THE PRESIDENT Section 7. The President shall be the chief operating officer of the corporation. He shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. Section 8. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. 12 THE VICE-PRESIDENT Section 9. In the absence of the president or in the event of his inability or refusal to act, the vice-president (if any) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-president shall perform such other duties and have such other powers as the board of directors nay from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 10. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature 13 of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 11. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 12. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 13. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or 14 when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 14. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 15. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. 15 ARTICLE VI CERTIFICATES FOR SHARES Section 1. The shares of the corporation shall be represented by a certificate which shall be signed by the chairman or vice chairman of the board, or the president or vice president, and the treasurer or the secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, or there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 16 Section 2. Any of or all the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sun as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. 17 TRANSFER OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. FIXING RECORD DATE Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action determination of stockholders of record, entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting: provided, however, that the board of directors may fix a new record date for the adjourned meeting. 18 REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of New Jersey. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available 19 for dividends such sun or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. ANNUAL STATEMENT Section 3. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. CHECKS Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 5. The fiscal year of the corporation shall be fixed by resolution of the board of directors. 20 SEAL Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, New Jersey." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. INDEMNIFICATION Section 7. The corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of New Jersey. ARTICLE VIII AMENDMENTS Section 1. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders at any regular meeting of the stockholders or at any special meeting of the stockholders if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meetings. 21 EX-3.7 7 CERTIFICATE OF INCORPORATION OF PRINCE AGRIPRODUCTS, INC. PAGE 1 State of Delaware Office of the Secretary of State I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THAT "PRINCE AGRIPRODUCTS, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE NOT HAVING BEEN CANCELLED OR DISSOLVED SO FAR AS THE RECORDS OF THIS OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS. THE FOLLOWING DOCUMENTS HAVE BEEN FILED: CERTIFICATE OF INCORPORATION, FILED THE NINETEENTH DAY OF MARCH, A.D. 1963, AT 10 O'CLOCK A.M. CERTIFICATE OF AMENDMENT, FILED THE TENTH DAY OF DECEMBER, A.D. 1964, AT 10 O'CLOCK A.M. CERTIFICATE OF AMENDMENT, CHANGING ITS NAME FROM "SOUTHWESTERN SUGAR AND MOLASSES COMPANY" TO "INTERMOL LIMITED", FILED THE THIRTIETH DAY OF MARCH, A.D. 1970, AT 10 O'CLOCK A.M. CERTIFICATE OF AMENDMENT, CHANGING ITS NAME FROM "INTERMOL LIMITED" TO "NAMOLCO MINERALS, INC.", FILED THE NINETEENTH DAY OF FEBRUARY, A.D. 1976, AT 10 O'CLOCK A.M. CERTIFICATE OF OWNERSHIP, FILED THE TWENTY-SIXTH DAY OF DECEMBER, A.D. 1978, AT 10 O'CLOCK A.M. CERTIFICATE OF AMENDMENT, CHANGING ITS NAME FROM "NAMOLCO State of Delaware Office of the Secretary of State MINERALS, INC." TO "PRINCE AGRIPRODUCTS, INC.", FILED THE TWENTY-FIFTH DAY OF FEBRUARY, A.D. 1981, AT 10 O'CLOCK A.M. AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION. AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO DATE. AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO DATE. /s/ Edward J. Freel Edward J. Freel, Secretary of State I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "SOUTHWESTERN SUGAR AND MOLASSES COMPANY", FILED IN THIS OFFICE ON THE NINETEENTH DAY OF MARCH, A.D. 1963, AT 10 O'CLOCK A.M. /s/ Edward J. Freel Edward J. Freel, Secretary of State CERTIFICATE OF INCORPORATION OF SOUTHWESTERN SUGAR AND MOLASSES COMPANY FIRST. The name of the corporation is Southwestern Sugar and Molasses Company, SECOND. Its principal office in the State of Delaware is located at No. 100 West Tenth Street, in the City of Wilmington, County of NEW Castle. The name and address of its resident agent is The Corporation Trust Company, No. 100 West Tenth Street, Wilmington 99, Delaware. THIRD. The nature of the business, or objects or purposes to be transacted, promoted or carried on are: (1) To manufacture, process, purchase, or otherwise acquire, hold, store, warehouse, own, use, sell, import, export, transport, dispose of or otherwise trade or deal in and deal with goods, wares, merchandise and agricultural commodities of all kinds including by-products derived directly or indirectly therefrom; including, but without limiting the generality of the foregoing, the acquisition and operation of terminals, storage facilities, and means of transport for the business of dealing in molasses and related by-products. (2) To make, manufacture, produce, prepare, process, purchase or otherwise acquire, and to hold, own, use, sell, import, export, dispose of or otherwise trade or deal in and with, machines, machinery, appliances, apparatus, goods, wares, products and merchandise of every kind, nature and description; and in general, to engage or participate in any manufacturing or other business of any kind or character whatsoever, whether or not related to, conducive to, incidental to or in any way connected with the above business, To carry on any one or more agricultural, manufacturing, mercantile or commercial business. To engage in research, exploration, laboratory and development work relating to any material, substance, compound or mixture now known or which may hereafter be known, discovered, or developed, and to perfect, develop, manufacture, use, apply and generally to deal in and with any such material, substance, compound or mixture. (5) To adopt, apply for, obtain, register, purchase, lease, take licensee in respect of or otherwise acquire, and to maintain, protect, hold, use, own, exercise, develop, manufacture under, operate and introduce, and to sell and grant licenses or other rights in respect or, assign or otherwise dispose of, turn to account, or in any manner deal with and contract with reference to, any trade-marks, trade names, patents, patent rights, concessions, franchises, designs, copyrights and distinctive marks and rights analogous thereto, and inventions, devices, processes, recipes, formulae and improvement and modifications thereof. -3- (6) To purchase, lease or otherwise acquire, to hold, own, sue, develop, maintain, manage and operate, and to sell, transfer, lease, assign, convey, exchange or otherwise turn to account or dispose of, and otherwise deal in and with such real property, wherever located, as may be necessary or convenient in connection with the business of the Corporation, and personal property, tangible or intangible, without limitation, (7) To purchase, lease, construct or otherwise acquire, and to hold, own, use, maintain, manage and operate buildings, factories, wharves, docks, warehouses, plants, laboratories, installations, equipment, machinery, pipelines, rolling stocks, shipping and transportation instrumentalities, and other structures, facilities and apparatus of every kind and description, used or useful in the conduct of the business of the Corporation. (8) To purchase or otherwise acquire, and to hold, pledge, seal, exchange, or otherwise dispose of securities (which term, for the purpose of this Article THIRD, shall include any shares of stock, shares of beneficial interest, bonds, debentures, notes, mortgages or other obligations and any certificates, receipts or other instruments representing rights to receive, purchase or subscribe for the same, or representing any other rights or interests therein or in any property or assets) created or issued by any person, firm, association, trust, business trust, corporation or governmental body, and while the holder thereof to exercise all the rights, powers and privileges in respect thereof, including the right to execute consents end to vote, to the same extent as a natural person might or could do, (9) To enter into, make, perform and carry out contracts of every kind and description with any person, firm, association, trust, business trust, corporation or governmental body; and to guarantee the contracts or obligations, and the payment of interest or dividends on securities of any other person, firm, association, trust, business trust, corporation or governmental body, (10)To lend its uninvested funds from time to time to such extent, to such person, firms, associations, trusts, business trusts, corporations or governments or Subdivisions, agencies or instrumentalities thereof, and on such terms and on such security, if any, as the Board of Directors of the Corporation may determine. (11) To borrow money for any of the purposes of the Corporation, from time to time, and without limit as to amount; from time to time to issue and sell its own securities in such amounts, on such terms and conditions, for such purposes and for such consideration, as may now be or hereafter shall be permitted by any applicable laws; and to secure the sane by mortgage upon, or the pledge of, or the conveyance or assignment in trust of, the whole or any part of the properties, assets, business and good will of the Corporation, then owned or thereafter acquired, -5- (12) To acquire and undertake all or any part of the business assets and liabilities or any person, firm, association, trust, business trust, or corporation on such terms and conditions as may be agreed upon, and to pay for the same in cash, property or securities of the Corporation, or otherwise, and to conduct the whole or any part of any business thus acquired, subject only to the provisions of any applicable laws, (13) To merge into, merge into itself or consolidate with, and to enter into agreements and cooperative relations with any person, firm, association, trust, business trust, or corporation, (14) To purchase, or otherwise acquire and to hold, cancel, reissue, sell, exchange, transfer or otherwise deal in its own securities from time to time to such extent and upon such terms as shall be permitted by any applicable laws; provided, however, that shares of its own capital stock so purchased or held shall not be directly or indirectly voted, nor shall they be entitled to dividends during such period or periods as they shall be held by the Corporation. (15) To such extent as a corporation organized under the laws of the State of Delaware may now or hereafter lawfully do, to do, either as principal or agent and either alone or through subsidiaries or in connection with other persons, firms, associations or corporations, all and everything necessary, suitable, convenient or proper for, or in connection with, or incident to, the accomplishment of -6- any of the purposes or the attainment of any one or more of the objects herein enumerated, or designed directly or indirectly to promote the interests of the Corporation or to enhance the value of its properties; and in general to do any and all things and exercise any and all powers, rights, and privileges which a corporation may now or hereafter be organized to do or to exercise under the laws of the State of Delaware. (16) To do any of the above, have one or more offices, and carry on any of its operations or businesses, in any place whether within or without the United States, The foregoing provisions of this Article THIRD shall be construed both as purposes and powers and each as an independent purpose and power. The foregoing enumeration of specific purposes and powers shall not be held to limit or restrict in any manner the purposes and powers of the Corporation, and the purposes and powers herein specified shall, except when otherwise provided in this Article THIRD, be in no wise limited or restricted by reference to, or inference from the terms of any provision of this or any other Article of this Certificate of Incorporation. The Corporation is to be carried on for pecuniary profit. FOURTH. The total number of shares of Common Stock which the Corporation shall have authority to issue is Five Million (5,000,000) shares and the par value of each such share is One Dollar ($1.00) amounting in the aggregate to Five Million Dollars ($5,000,000). All voting rights shall -7- be vested in the holders of the Common Stock. Each share of Common Stock shall entitle the holder thereof to one vote. No holder of any stock of the Corporation shall, as such holder, have any preemptive right in, or to subscribe for, any additional shares of stock of any class whatsoever, or in or to subscribe for securities convertible into stock of any class whatsoever; but any such shares of stock or securities convertible into stock may be issued and disposed of by resolution of the Board of Directors to such persons, firms, corporations or associations1 and upon such terms, as may be deemed advisable by the Board of Directors. FIFTH: The minimum amount of capital with which the Corporation will commence business is One Thousand Dollars ($1,000). SIXTH: The names and places of residence of the incorporators are as follows: NAMES RESIDENCES B. A. PenningWilmington, Delaware C. A. Wolfe Wilmington, Delaware A. D. Stoddard Wilmington, Delaware SEVENTH. The Corporation is to have perpetual existence. EIGHTH. The private property or the stockholders shall not be subject to the payment of corporate debts to any extent whatever. -8- NINTH. For the management of the business and for the conduct of the affairs of the Corporation and in further creation, definition, limitation and regulation of the powers or the Corporation and of its directors and stockholders, it is further provided: (1)The number of directors of the Corporation shall be fixed by, or in the manner provided in, the By--laws, but in no case shall the number be less than three, except that, if all the shares of the Corporation are owned beneficially and of record by either one or two stockholders, the number of directors may be less than three but not less than the number of stockholders. The directors need not be stockholders, Election of directors need not be by ballot unless the By--laws so require. Meetings of the Board of Directors may be held at such place or places within or without the State of Delaware as shall be specified in the respective notices thereof or in the respective waivers of notice thereof signed by all the directors of the Corporation at the time in office. (2) In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, and subject at all times to the provisions thereof, the Board of Directors is expressly authorized and empowered: (a) To make, alter and repeal the By-laws of the Corporation. (b) To determine, from time to time, whe ther and to what extent and at what times and -9- places and under what conditions and regulations the accounts and books and documents of the Corporation (other than the stock ledger), or any of them, shall be open to inspection by the stockholders; and no stockholder shall have any right to inspect any account or bock or document of the Corporation, except as conferred by the laws of the State of Delaware, or the By-laws, unless and until duly authorized to do so by resolution of the Board of Directors. (c) To authorize and issue obligations of the Corporation, secured or unsecured, to include therein such provisions as to redeemability, convertibility or otherwise, as the Board of Directors in its sole discretion may determine, and to authorize the mortgaging or pledging of, and to authorize and cause to be executed mortgages and liens upon, any property of the Corporation, real or personal, including after-acquired property. (d) To determine whether any, and, if any, what part, of the net profits of the Corporation or of its net assets in excess of its capital shall be declared in dividends and paid to the stockholders, and to direct and determine the use and disposition thereof, (e) To set apart a reserve or reserves, and to abolish any such reserve or reserves, or to make such other provisions, if any, as the Board of Directors may deem necessary or advisable for working capital, for additions, improvements and betterments to plant and equipment, for expansion -10- or the business or the Corporation (including the acquisition of real and personal property for that purpose) and for any other purpose of the Corporation, (f) To establish bonus, profit-sharing. pension, thrift, and other types of incentive, compensation or retirement plans for the officers and employees (including officers and employees who are also directors) of the Corporation and to fix the amounts of profits to be distributed or shared or contributed and the amounts of the Corporation's funds otherwise to be devoted thereto and to determine the persons to participate in any such plans and the amounts of their respective participations. (g) To issue, or grant options for the purchase of, shares of stock of the Corporation to officers and employees (including officers and employees who are also directors) of the Corporation and its subsidiaries for such consideration and on such terms and conditions as the Board of Directors may from time to time determine, (h) To enter into contracts for the management of the business of the Corporation for terms not exceeding three years. (i) By resolution or resolutions passed by a majority of the whole Board, to designate, one or more committees, each committee to consist of two or more of the directors of the Corporation, which to the extent provided in such resolution or resolutions or in the By-laws, shall have and -11- may exercise the powers of the Board of Directors (other than the power to remove or elect officers) in the management of the business and affairs of the Corporation and may have the power to authorize the seal of the Corporation to be affixed to all papers which may require it, such committee or committees to have such name or names as may be stated in the By-laws or as may be determined from time to time by resolution adopted by the Board of Directors. (j) To exercise all the powers of the Corporation, except such as are conferred by law, or by this Certificate of Incorporation or by the By--laws of the Corporation, upon the stock holders. ' (3) Any one or all of the directors may be removed, with or without cause, at any time, by either (a) the vote of the holders of a majority of the stock of the Corporation issued and outstanding and entitled to vote and present in person or by proxy at any meeting of the stockholders called for the purpose, or (b) an instrument or instruments in writing addressed to the Board of Directors directing such removal and signed by the holders of a majority of the stock of the Corporation issued and outstanding and entitled to vote; and thereupon the term of each such director who shall be so removed shall terminate. (4) No contract or other transaction between the Corporation and any other corporation, whether or not such other corporation is related to the Corporation through the direct or indirect ownership by such -12- other corporation of (pound) majority of the shares of the capital stock of the Corporation or by the Corporation or a majority or the shares of the capital stock of such other corporation, and no other act of the Corporation in the absence of fraud, in any way be effected or invalidated by the fact that any of the directors of the Corporation are pecuniarily or otherwise interested in, or are directors or officers of, such other corporation or by the fact that such other corporation is so related to the Corporation. Any director of the Corporation individually, or any firm or association of which any director may be a member, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation, provided that the fact that he individually or such firm or association is so interested shall be disclosed or shall have been known to the Board of Directors or a majority of such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction shall be taken. My director of the Corporation who is also a director or officer of such other corporation or who is so interested may be counted in determining the existence of a quorum at any meeting of the Board of Directors which shall authorize any such contract or transaction and may vote thereat to authorize any such contract or transaction, with like force and effect as if he were not such director or officer of such other corporation or not so interested. -13- (5) Each director and officer or the Corporation (and each director or officer of any other corporation serving as such at the request of the Corporation because of the Corporation's interest in such other corporation), whether or not then in office, shall be indemnified by the Corporation against all costs and expenses reasonably incurred by or imposed upon him in connection with or arising out of any action, suit or proceeding in which he may be involved or to which he may be made a party by reason of his being or having been a director or officer of the Corporation or of such other corporation, except in relation to matters as to which he shall be finally adjudged in any such action, suit or proceeding to be liable for negligence or misconduct in the performance of his duty as such director or officer, In case of settlement of any such action, suit or proceeding, such director or officer shall be indemnified by the Corporation against the cost and expense of such settlement (including any amount paid to the Corporation or to such other corporation) reasonably incurred by him, after, and only after (a) the Corporation shall have been advised by independent counsel that such director or officer is not liable for negligence or misconduct in the performance of his duty as such director or officer in relation to the matters covered by such action, suit or proceeding, and that such cost and expense does not substantially exceed the expense which might reasonably be incurred by such director or officer in conducting such action, -14- suit or proceeding to a final conclusion, or (b) the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding in the hands of disinterested persons and entitled to vote shall by vote at any annual meeting of the stockholders, or at any special meeting called for the purpose, approve such settlement and the indemnification of such director or officer of the cost and expense thereof, The phrase "disinterested persons" as used herein shall mean any person other than (i) a director or officer who, at the time, is or may, as such director or officer, be entitled to indemnification pursuant to the foregoing provisions, (ii) any corporation or organization of which any such person owns of record or beneficially five per cent (5%) or more of the voting stock, (iii) any firm or association of which any such person is a member, and (iv) any spouse, child, parent, brother or sister of any such stockholder, The foregoing rights of indemnification shall apply to the heirs, executors and administrator. of any such director or officer of the Corporation or of any other such corporation, and shall not be exclusive of any other rights to which any director or officer (or his heirs, executors or administrators) may be entitled under any provision of the By-laws of the Corporation, any agreement or any vote of the stockholders or as a matter of law, or otherwise, -15- TENTH. Meetings of stockholders may be held outside the State of Delaware, if the By-laws so provide. ELEVENTH. The Corporation reserves the right to amend, alter or repeal any of the provisions of this Certificate or Incorporation and to add other provisions authorized by the laws of the State of Delaware at the time in force in the manner and at the time prescribed by said laws, and all rights, powers and privileges at any time conferred upon the Board of Directors and the stockholders are granted subject to the provisions of this Article. WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that the facts herein stated are true, and accord ingly have hereunto set our hands and seals this 19th day of March A.D. 1963. /s/ B. A. Pennington -------------------- /s/ -------------------- /s/ A.D. Stoddard ----------------- STATE OF DELAWARE ) COUNTY OF NEW CASTLE ) SS: BE IT REMEMBERED that on this 19th day of March, A.D. 1963 , personally came before me, a Notary Public for the State of Delaware, B. A. Pennington, C. A. Wolfe and A. D. Stoddard, all of the parties to the foregoing Certificate of Incorporation, known to me personally to be such, and severally acknowledged the said Certificate to be the act and deed of the signers respectively and that the facts therein stated are truly set forth. GIVEN under my hand and seal of office the day and year aforesaid, /s/ M. Ruth Mannering --------------------- Notary Public STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE PAGE 1 I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "SOUTHWESTERN SUGAR AND MOLASSES COMPANY", FILED IN THIS OFFICE ON THE TENTH DAY OF DECEMBER, A.D. 1964, AT 10 O'CLOCK A.M. /s/ Edward J. Freel ------------------- Edward J. Freel, Secretary of State 0595502 8100 981190864 9088390 05-19-98 CERTIFICATE OF AMENDMENT OF CERTIFICATE OP INCORPORATION SOUTHWESTERN SUGAR AND MOLASSES COMPANY, a corporation organized and existing under and by virtue of the General Corporation law of the State of Delaware, DOES HEREBY CERTIFY. FIRST: That the Board of Directors of said corporation by the unanimous written consent of its members, riled with the minutes of the board, adopted a resolution proposing arid declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered "FOURTH" so that as amended, said Article shall be and read as follows: "FOURTH: The total number of shares of Common Stock which the corporation shall have authority to issue is Five Thousand (5,000) shares and the par value of each such share is One Thousand Dollars ($1,000.00) amounting in the aggregate to Five Million Dollars ($5,000,000). All voting rights shall be vested in the holders of the Common Stock. Each share of Common Stock shall entitle the holder thereof to one vote. No holder of any stock of the corporation shall, as such holder, have any preemptive right in, or to subscribe for, any additional shares of stock of any class whatsoever, or in or to subscribe for securities convertible into stock of any class whatsoever; but any such shares of stock or securities convertible into stock may be issued and disposed of by resolution of the Board of Directors to such persons, firms, corporations or associations, and upon such terms, as may be deemed advisable by the Board of Directors." SECOND: That the said amendment has been consented to and authorized by the holders of all the Issued and outstanding stock, entitled to vote, by a written consent given in accordance with the provisions of Section 228 of The General Corporation Law of Delaware, and filed with the corporation. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of The General Corporation Law of Delaware FOURTH: That the capital of said corporation will not be reduced under or by reason off said amendment, IN WITNESS WHEREOF, said SOUTHWESTERN SUGAR AND MOLASSES COMPANY has caused its corporate seal to be hereunto affixed and this certificate to be signed by JOSEPH COHEN its Vice President, and MARVIN S. BOYER, its Secretary, this 7th day of December, 1964. SOUTHWESTERN SUGAR AND MOLASSESS COMPANY By: /s/ Joseph Cohen ---------------- Vice President By: /s/ Marvin S. Boyer -------------------- Secretary STATE OP PENNSYLVANIA SS COUNTY OP PHILADELPHIA BE IT REMEMBERED that on this 7th day of December A.D. 1964, personally came before me, Marie L. Harrer, a Notary Public in and for the County and State aforesaid, JOSEPH COHEN, Vice President, SOUTHWESTERN SUGAR AND MOLASSES COMPANY, a corporation of the State of Delaware, the corporation described in and which executed the forego ing certificate, known to me personally to be such, and he, the said JOSEPH COHEN, as such Vice President, duly executed said certificate before me and acknowledged the said certificate to be his act and deed and the act and deed of said corporation; that the signatures of the said President and of the Secretary of said corporation to said foregoing certificate are in the handwriting of the said President and and of the Secretary of said corporation respectively, and that the seal affixed to said certificate is the common or corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my band and seal of office the day and year aforesaid. /s/ --- Notary Public SECRETARY OF STATE PAGE 1 I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "SOUTHWESTERN SUGAR AND MOLASSES COMPANY", CHANGING ITS NAME FROM "SOUTHWESTERN SUGAR AND MOLASSES COMPANY" TO "INTERMOL LIMITED", FILED IN THIS OFFICE ON THE THIRTIETH DAY OF MARCH, A.D. 1970, AT 10 O'CLOCK A.M. /s/ Edward J. Freel ------------------- Edward J. Freel, Secretary of State CERTIFICATE OF AMENDMENT 0F CERTIFICATE OF INCORPORATION SOUTHWESTERN SUGAR AND MOLASSES COMPANY, a CORPORATION organized and existing under and by virtue of the General Corporation Law of the State at Delaware, DOES HEREBY CERTIFY FIRST: That the Board of Directors of said corporation, by the unanimous written consent of its members filed with the minutes of the board adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation SOUTHWESTERN SUGAR AND MOLASSES COMPANY be amended by changing the Article thereof numbered so that, as amended, said Article shall be and read as follows: "FIRST: The name of the corporation is INTERMOL LIMITED." SECOND: That in lieu of a meeting and vote of Stockholders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions of section 228 of The General Corporation Law of the State of Delaware THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of The General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said SOUTHWESTERN SUGAR AND MOLASSES COMPANY has caused its corporate seal to be hereunto affixed and this certificate to be signed be Joseph Cohen, its Vice President and attested by Marvin S. Boyer, its Secretary this 18th day of March, 1970. SOUTHWESTERN SUGAR AND MOLASSES COMPANY By: /s/ Joseph Cohen ---------------- Joseph Cohen - Vice-President ATTEST: By: /s/ Marvn S. Boyer ------------------ Marvin S. Boyer - Secretary STATE OF PENNSYLVANIA COUNTY OF MONTGOMERY SS: BE IT REMEMBERED that on this 18th day of March 1970, personally came before me, a Notary Public in and for the County and State aforesaid, Joseph Cohen Vice President of SOUTHWESTERN SUGAR AND MOLASSES COMPANY, a corporation of the State of Delaware, and he duly executed said certificate before me and acknowledged the said certificate to be his act and deed and the act and deed of said corporation and the facts stated therein are true; and that the seal affixed to said certificate and attested by the Secretary of said corporation is the Common or corporate seal of said corporation, IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and year aforesaid. /s/ ---- Notary Public 3 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE PAGE 1 I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "INTERMOL LIMITED", CHANGING ITS NAME FROM "INTERMOL LIMITED" TO "NAMOLCO MINERALS, INC.", FILED IN THIS OFFICE ON THE NINETEENTH DAY OF FEBRUARY, A.D. 1976, AT 10 O'CLOCK A.M. /s/ Edward J. Freel ------------------- Edward J. Freel, Secretary of State CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION INTERMOL LIMITED, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HERESY CERTIFY. FIRST: That the Board of Directors of said corporation, by the unanimous written consent of its members, Filed with the minutes of the board, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the certificate of Incorporation of INTERMOL LIMITED be amended by changing the Article thereof numbered "FIRM' SO that, as amended, said Article shall be and read as follows "FIRST: The name of the corporation is NAMOLCO MINERALS, INC." SECOND: That in lieu of a meeting and vote of stock holders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions of section 228 of The General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of The General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said INTERMOL LIMITED has caused this certificate to be signed by Arnold B. Polcari, its Executive Vice President and attested by Marvin S. Boyer, its Secretary this 28th day of January 1976. INTERMOL LIMITED By: /s/ Arnold B. Polcari --------------------- Arnold B. Polcari Executive Vice President STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE PAGE 1 I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP, WHICH MERGES: WITH AND INTO "NAMOLCO MINERALS, INC." UNDER THE NAME OF "NAMOLCO MINERALS, INC.", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE TWENTY-SIXTH DAY OF DECEMBER, A.D. 1978, AT 10 O'CLOCK A.M. /s/ Edward J. Freel ------------------- Edward J. Freel, Secretary of State Certificate OF OWNERSHIP AND MERGER MERGING BONEWITZ LABORATORY & SUPPLY CO., KING CASTLE, INC. AND LADORA MINERAL, INC. INTO NAMOLCO MINERALS, INC. NAMOLCO MINERALS, INC., a corporation organized and existing under the laws of the State of Delaware, DOES HEREBY CERTIFY: FIRST:That this corporation was incorporated on the 19th day of March, 1963, pursuant to the General Corporation Law of the State of Delaware. SECOND: That this corporation owns all of the outstanding shares of the stock of each of the following corporations: Bonewitz Laboratory & Supply Co., a corporation incorporated on the 1st day of August, 1964, pursuant to the Iowa Business Corporation Act; King Castle, Inc., a corporation incorporated on the 1st day of January, 1956, pursuant to the Iowa Business Corporation Act and Ladora Mineral, Inc., a corporation incor porated on the 25th day of June, 1949, pursuant to the Iowa Business Corporation Act. THIRD: That this corporation, by the following resolutions of it's Board of Directors, duly adopted by the unanimous written consent of its members, filed with the minutes of the board on the 21 day of December, 1978, determined to and did merge into itself said Bonewitz Laboratory & Supply Co., King Castle, Inc. and Ladora Mineral, Inc.: RESOLVED, That Namolco Minerals, Inc. merge, and it hereby does merge into itself Bonewitz Laboratory & Supply Co., King Castle, Inc. and Ladora Mineral, Inc, and assumes all of the obligations of said corporations; and FURTHER RESOLVED, That the merger shall become effective as of the close of business on December 31, 1978; and FURTHER RESOLVED, That the proper officers of this corporation be and they hereby are directed to make and execute a Certificate of Ownership and Merger setting forth a copy of the resolutions to merge Bonewitz Laboratory & Supply Co., King Castle, Inc. and Ladora Mineral, Inc., and assume their liabilities and obligations, and the date of adoption thereof, and to cause the same to be filed with the Secretary of State and a certified copy recorded in the office of the Recorder of Deeds of New Castle County and to do all acts and things whatsoever, whether within or without the State of Delaware, which may be in anywise necessary or proper to effect said merger. FOURTH: Anything herein or elsewhere to the contrary notwithstanding this merger may be terminated and abandoned by the board of directors of Namolco Minerals, Inc. at any time prior to the date of filing the merger with the Secretary of State, IN WITNESS WHEREOF, said Namolco Minerals, Inc. has caused this certificate to be signed by Wouter Nicolai, its Vice President and attested by John P. Merryman, its Assistant Secretary, this 21st day of December, 1978. NAMOLCO MINERALS, INC. By: /s/ --- Vice President ATTEST: By: /s/ --- Assistant Secretary STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE PAGE 1 I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "NAMOLCO MINERALS, INC.", CHANGING ITS NAME FROM "NAMOLCO MINERALS, INC." TO "PRINCE AGRIPRODUCTS, INC.", FILED IN THIS OFFICE ON THE TWENTY-FIFTH DAY OF FEBRUARY, A.D. 1981, AT 10 O'CLOCK A.M. /s/ Edward J. Freel Edward J. Freel, Secretary of State CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF NAMOLCO MINERALS, INC. Namolco Minerals, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, by the unanimous written consent of its members, filed with the minutes of the board, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: "RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing Article number "FIRST" so that, as amended, the same shall be and read as follows: FIRST The name of the corporation is PRINCE ACRIPRODUCTS, INC." SECOND:That in lieu of a meeting and vote of stockholders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Nanolco Minerals, Inc. has caused this certificate to be signed by Morris Bock, its Senior Vice President, and attested by Marvin S. Sussman, its Secretary, this 13th day of February, 1981. NAMOLCO MINERALS, INC. BY: /s/ --- Senior Vice President ATTESTED TO: By: /s/ --- Secretary EX-3.8 8 BY-LAWS SOUTHWESTERN SUGAR AND MOLASSES COMPANY BY-LAWS ---ooOoo-- Article I Offices Section 1. The principal office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. Article II Meetings of Stockholders Section 1. All meetings of the stockholders for the election of directors shall be held in the City of Willow Grove, Pennsylvania, at such place as may be fixed from time to time by the board of directors. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders, commencing with the year 1963, shall be held on the Monday preceding the third Wednesday of October, if not a legal holiday, and if a legal holiday, then on the next secular day following, at 2:00 p.m., at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting shall be given to each stockholder entitled to vote thereat at least ten days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every election of directors, a complete list of the stockholders entitled to vote at said election, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder during ordinary business hours, for a period of at least ten days prior to the election, either at a place within the city, town or village where the election is to be held and which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any stockholder who may be present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting of stockholders, stating the time, place and object thereof, shall be given to each stockholder entitled to vote thereat, at least five days before the date fixed for the meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and Control the decision of such question Section 10. Each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shal1 be voted on after three years from its date, unless the proxy provides for a longer period, and, except where the transfer books of the corporation have been closed or a date has been fixed as a record date for the determination of its stockholders entitled to vote, no share of stock shall be voted on at any election for directors which has been transferred on the books of the corporation within twenty days next preceding such election of directors. Section 11. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provisions of the statutes or of the certificate of incorporation, the meeting and vote of stockholders may be dispensed with, if all the stockholders who would have been entitled to vote upon the action if such meeting were held, shall consent in writing to such corporate action being taken. Article III Directors Section 1. The number of directors which shall constitute the whole board shall be not less than three nor more than nine. The first board shall consist of six directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. When one or more directors shall resign from the board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as herein provided in the filling of other vacancies. Section 3. The business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. Meetings of the Board of Directors Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stock- holders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. Special meetings of the board may be called by the president on two days notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors. Section 8. At all meetings of the board one-third of the total number of directors but in no event less than three directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. Committees of Directors Section 10. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in the resolution, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Section 11. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Compensation of Directors Section 12. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Article IV Notices Section 1. Notices to directors and stockholders shall be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Article V Officers Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a vice-president, a secretary, a treasurer, a controller and, in addition thereto in the discretion of the board of directors, a chairman of the board of directors. The board of directors may also choose additional vice-presidents, and one or more assistant secretaries and assistant treasurers. Two or more offices may be held by the same person, except that where the offices of president and secretary are held by the same person, such person shall not hold any other office. Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, one or more vice-presidents, a secretary and a treasurer, none of whom need be a member of the board. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exer- cise such powers and perform such duties as shall be deter-- rained from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the coporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. The Chairman Section 6. Whenever there shall be a chairman of the board of directors, he shall preside at all meetings of the stockholders and of the board of directors, and he shall have powers and perform such duties as may be assigned to him from time to time by the board of directors. The President Section 7. The president shall be the chief executive officer of the corporation, and if there shall be no chairman of the board of directors, or in the absence of the chairman of the board of directors, the president shall preside at meetings of the stockholders and the board of directors. The president shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. Section 8. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The Vice Presidents Section 9. The vice president, or if there shall be more than one, the vice presidents in the order determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. The Secretary and Assistant Secretaries Section 10. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corpor- ation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 11. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. The Treasurer and Assistant Treasurers Section 12. The treasurer shall be the financial officer of the corporation and shall have the powers and perform the duties customarily incidental to his office. Except insofar as some other officer or employee shall from time to time be expressly authorized and instructed so to do, the treasurer shall have custody of all funds and securities of the corporation and shall be responsible for the banking relationships of the corporation. He shall have such other powers and duties as may be given to him elsewhere in these by-laws or as may be assigned to him from time to time by the board of directors or by the president. In the absence or disability of the treasurer, or if that office is vacant, his duties may be performed by the controller or by an assistant treasurer. Section 13. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. The Controller Section 14. The controller shall be the accounting. officer of the corporation and shall have the powers and perform the duties customarily incidental to his office. Except insofar as some other officer or employee shall from time to time expressly be authorized and instructed to do, the controller shall keep all financial books of the corporation and keep accounts of the financial transactions of the corporation and render statements of the same in such form and at such times as the board of directors shall require. He shall have such other powers and duties as may be given to him elsewhere in these by-laws or as may be assigned to him from time to time by the board of directors or the president. In the absence or disability of the controller, or if that office is vacant, his duties may be performed by the treasurer or by an assistant treasurer. Article VI Certificates of Stock Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, the president or a vice-president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. If the corporation shall be authorized to issue more than one class of stock, or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preference and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class of stock; provided, however, that except as otherwise provided in Section 194 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Where a certificate is signed (I) by a transfer agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf of the corporation and a registrar, the signature of any such chairman or vice chairman of the board of directors, president, vice president, treasurer, assistant treasurer, secretary or assistant secretary may be facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. Lost Certificates Section 3. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certifi- cates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. Transfers of Stock Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Closing of Transfer Books Section 5. The board of directors may close the stock: transfer books of the corporation for a period not exceeding fifty days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect or for a period not exceeding fifty days in connection with obtaining the consent of stockholders for any purpose. In 1ieu of closing the stock transfer books as aforesaid, the board of directors may fix in advance a date, not exceeding fifty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent, and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. Registered Stockholders Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. Article VII General Provisions Dividends Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation avail- able for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Annual Statement Section 3. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. Checks Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. Fiscal Year Section 5. The fiscal year of the corporation shall be fixed by resolution of the board of directors. Seal Section 6. The corporate seal shall have inscribed thereon the name of the corporation the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Article VIII Amendments Section 1. These by-laws may be altered or repealed at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration or repeal be contained in the notice of such special meeting. No change of the time or place of the meeting for the election of directors shall be made within sixty days next before the day on which such meeting is to be held, and in case of any change of such time or place, notice thereof shall be given to each stockholder in person or by letter mailed to his last known post-office address at least twenty days before the meeting is held. EX-3.9 9 CERTIFICATE OF INCORPORATION OF THE PRINCE MANUFACTURING COMPANY Certificate Number 94506 STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE To all to whom these Presents Shall Come, greeting: Whereas, Articles of Incorporation duly signed and verified of P. B. Quincy, Inc. have been filed in the Office of the Secretary of State on the 28th day of October A. D. 1974, as provided by "The Business Corporation Act" of Illinois, in force July 13, A. D. 1933. Now Therefore, I, Michael J. Howlett, Secretary of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate of incorporation and attach thereto a copy of the Articles of Incorporation of the aforesaid corporation. In Testimony Whereof, Thereto set by hand and cause to be affixed the Great Seal of the State of Illinois, Done at the City of Springfield this 28th day of October A. D. 1974 and of the Independence of the United States the one hundred and 99th FORM B C A-47 BEFORE ATTEMPTING TO EXECUTE THESE BLANKS BE SURE TO READ CAREFULLY THE INSTRUCTIONS ON THE BACK THEREOF. (THESE ARTICLES MUST BE FILED IN DUPLICATE) STATE OF NEW YORK SS NEW York COUNTY TO JOHN W. LEWIS, Secretary of State The undersigned, Address Name Number Street City State MARTS KRUZE 277 Park Ave., N.Y., N.Y. JOSEPH A. VITA 277 Park Ave., N.Y., N.Y. FRANK SIMMONS 277 Park Ave., N.Y., N.Y. being one or more natural persons of the age of twenty-one years or more or a corporation, and having subscribed to shares of the corporation to be organized pursuant hereto, for the purpose of forming a corporation under "The Business Corporation Act" of the State of Illinois, do hereby adopt the following Articles of Incorporation: ARTICLE ONE The name of the corporation hereby incorporated is: P. B. QUINCY, Inc. ARTICLE TWO The address of its initial registered office in the State of Illinois is: 208 South La Salle Street, in the City of Chicago ( 60604) County of Cook and the name of its initial Registered Agent at said address is: C T CORPORATION SYSTEM ARTICLE THREE The duration of the corporation is: Perpetual (ILL. -- 114 -- 12/20/71) ARTICLE FOUR The Purpose or purposes for which the corporation is organized are: To manufacture, sell, distribute and otherwise deal in and with chemicals, drugs, fertilizers, pigments, colorants, hardeners, micro-nutrients and related chemical products; to grind mineral products and process ores. ARTICLE FIVE PARAGRAPH 1: The Aggregate number of shares which the corporation is authorized to issue is one hundred divided into ______classes. The designation of each class, the number of shares of each class, and the par value, if any, of the shares of each class, or a statement that the shares of any class are without par value, are as follows: Class Series Number of Par value or statement that Share shares are without par value Common --- 100 Without par value PARAGRAPH 2: The preferences, qualifications, limitations, restrictions and the special or relative rights in respect of the shares of each class are: None ARTICLE SIX The class and number of shares which the corporation proposes to issue without further report to The Secretary of State, and the consideration (expressed in dollars to be received by the corporation therefor, are: Total consideration to Class of Share Number of shares be received therefor: Common 100 $ 1,000 $ ARTICLE SEVEN The corporation will not commence business until at least one thousand dollars has been received as consideration for the issuance of shares. ARTICLE EIGHT The number of directors to be elected at the first meeting of the shareholders is: three (3) ARTICLE NINE PARAGRAPH 1: It is estimated that the value of all property to be owned by the corporation for the following year wherever located will be $ PARAGRAPH 2: It is estimated that the value of the property to be located within the State of Illinois during the following year will be $ PARAGRAPH 3: It is estimated that the gross amount of business which will be transacted by the corporation during the following year will be $ PARAGRAPH 4: It is estimated that the gross amount of business which will be transacted at or from places of business in the State of Illinois during the following year will be $ /s/ Maris Kruze --------------------------- Maris Cruze /s/ Frank Simmons --------------------------- Frank Simmons /s/ Joseph A. Vita --------------------------- Joseph A. Vita NOTE: If all the property of the corporation is to be located in this State and all of its business is to be transacted at or from places of business in this State, or if the incorporators elect to pay the initial franchise tax on the basis of its entire stated capital and paid-in surplus, then the information called for in Article Nine need not be stated. (ILL. -- 114) o NOTE: There may be one or more incorporators. Each incorporator shall be either a corporation, domestic or foreign. or a natural person of the age of twenty-one years or more. If a corporation acts as incorporator, the name of the corporation and state of incorporation shall be shown and the execution must be by its President or Vice-President and verified by him, and the corporate seal shall be affixed and attested by its Secretary or an Assistant Secretary. OATH AND ACKNOWLEDGMENT STATE OF NEW YORK SS NEW YORK County I, FREDERICK FARRAN, A Notary Public, do hereby certify that on the 23rd day of October 1974 JOSEPH A. VITA MARIS KRUZE and FRANK SIMMONS personally appeared before me and being first duly sworn by me acknowledged the signing of the foregoing document in the respective capacities therein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year above written. Place Notarial Seal Here /s/ Frederick Farran ------------------------ Notary Public STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE To all TO whom these presents Shall Come, Greeting: Whereas, Articles of amendment to the Articles of Incorporation duly signed and verified of P. B. Quincy, Inc. have been filed in the Office of the Secretary of State on the 24th day of December A. D. 1974, as provided by "The Business Corporation Act" of Illinois, in force July 13, A. D. 1933. Now Therefore, I, Michael J. Howlett, Secretary of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate of amendment and attach thereto a copy of the Articles of Amendment to the Articles of Incorporation of the aforesaid corporation. In Testimony Whereof, Thereto set my hand and cause to be affixed the Great Seal of the State of Illinois, Done at the City of Springfield this 28th day of October A. D. 1974 and of the Independence of the United States the one hundred and 99th. /s/ Michael J. Howlett ---------------------------- Secretary of State FORM BCA-55 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF P.B. QUINCY, INC. (Exact Corporate Name) To JOHN LEWIS Secretary of State Springfield, Illinois The undersigned corporation, for the purpose of amending its Articles of Incorporation and pursuant to the provisions of Section 55 of "The Business Corporation Act" of the State of Illinois, hereby executes the following Articles of Amendment: ARTICLE FIRST: The name of the corporation is: P.B. QUINCY, INC. ARTICLE SECOND: The following amendment or amendments were adopted in the manner prescribed by "The Business Corporation Act" of the State of Illinois: Resolved, that Article One of the Articles of Incorporation of this corporation be amended to read as follows: "Article One The name of the corporation is THE PRINCE MANUFACTURING COMPANY (ILL. -- 741 -- 11/7/72) ARTICLE THIRD The number of shares of the corporation outstanding at the time of the adoption of said amendment or amendments was One Hundred (100); and the number of shares of each class entitled to vote as a class on the adoption of said amendment or amendments, and the designation of each such class were as follows: Class Number of Shares Common One Hundred (100) ARTICLE FOURTH: The number of shares voted for said amendment or amendments was One Hundred (100) and the number of shares voted against said amendment or amendments was None. The number of shares of each class entitled to vote as a class voted for and against said amendment or amendments, respectively, was: Class Number of Shares Voted For Against N/A Item 1. On the date of the adoption of this amendment, restating the articles of incorporation, the corporation had shares issued, itemized as follows: Class Series Number of Par value per share or statement (If Any) shares that shares are without par value Item 2. On the date of the adoption of this amendment restating the articles of incorporation, the corporation had a stated capital of $__________and a paid-in surplus of $ or a total of $ ARTICLE FIFTH: The manner in which the exchange, reclassification, or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, provided for in, or effected by, this amendment, is as follows: N/A ARTICLE SIXTH: Paragraph 1: The manner in which said amendment or amendments effect a change in the amount of stated capital or the amount of paid-in surplus, or both, is as follows: N/A Paragraph 2: The amounts of stated capital and of paid-in surplus as changed by this amendment are as follows: Before Amendment After Amendment Stated capital $ $ Paid-in surplus $ N/A IN WITNESS WHEREOF, the undersigned corporation has caused these Articles of Amendment to be executed in its name by it Vice President, and its corporate seal to be hereto affixed, attested by its Assistant secretary, this 1st day of November 1974. P.B. QUINCY, INC. (Exact corporate Name) /s/ Morris Bock ----------------------------- Its Vice President ATTEST: /s/ J. C. Bendheim - ----------------------- Its Asst. Secretary STATE OF New York ss. COUNTY OF New York I, , a Notary Public, do hereby certify that on the 1st day of November, 1974 personally appeared before me and, being first duly sworn by me, acknowledged that he signed the foregoing document in the capacity therein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand seal the day and year before written. /s/ --------------- Notary Public Certificate Number 23506 STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE To all to whom these Presents Shall Some, Greeting: Whereas, Articles of amendment to the Articles of Incorporation duly signed and verified of The Prince Manufacturing Company, have been filed in the Office of the Secretary of State on the 3rd day of June A. D. 1975, as provided by "The Business Corporation Act" of Illinois, in force July 13, A. D. 1933. Now Therefore, I, Michael J. Howlett, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate of amendment and attach thereto a copy of the Articles of amendment to the Articles of Incorporation of the aforesaid corporation. In Testimony Whereof, Thereto set my hand and cause to be affixed the Great Seal of the State of Illinois, Done at the City of Springfield this 3rd day of June A. D. 1975 and of the Independence of the United States the one hundred and 99th. /s/ Michael J. Howlett --------------------------- Michael J. Howlett FORM BAC-55 (File in Duplicate) ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE PRINCE MANUFACTURING COMPANY (Exact Corporate Name) To JOHN W. LEWIS Secretary of State Springfield. Illinois The undersigned corporation, for the purpose of amending its Articles of Incorporation and pursuant to the provisions of Section 55 of "The Business Corporation Act" of the State of Illinois, hereby executes the following Articles of Amendment: ARTICLE FIRST: The name of the corporation is: THE PRINCE MANUFACTURING COMPANY ARTICLE SECOND: The following amendment or amendments were adopted in the manner prescribed by "The Business Corporation Act" of the State of Illinois: RESOLVED, that Article "FIVE" of the Articles of Incorporation of this Corporation be amended to read as follows: (See Rider Annexed Hereto and Made a Part Hereof) (ILL. -- 741 -- 11/7/72) ARTICLE THIRD The number of shares of the corporation outstanding at the time of the adoption of said amendment or amendments was One hundred (100) and the number of shares of each class entitled to vote as a class on the adoption of said amendment or amendments, and the designation of each such class were as follows: Class Number of Shares Common One Hundred (100) ARTICLE FOURTH: The number of shares voted for said amendment or amendments was One hundred (100) ; and the number of shares voted against said amendment or amendments was none. The number of shares of each class entitled to vote as a class voted for and against said amendment or amendments, respectively, was: Class Number of Shares Voted For Against n/a Item 1. On the date of the adoption of this amendment, restating the articles of incorporation, the Corporation had shares issued, itemized as follows: Class Series Number of Shares Par value per share or statement that shares are without par value Item 2. On the date of the adoption of this amendment restating the articles of incorporation, the corporation had a stated capital of $ and a paid-in surplus of $ or a total of $ RIDER TO ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE PRINCE MANUFACTURING COMPANY ARTICLE FIVE Paragraph 1: The aggregate number of shares which the corporation is authorized to issue is eleven thousand (11,000) divided into two (2) classes. The designation of each class, the number of shares of each class, and the par value, if any, of the shares of each class, or a statement that the shares of any class are without par value, are as follows: Par Value Per Share Or Series No. of Statement that Shares Are Class (If any) Shares Without Par Value - -------------------------------------------------------------------------------- Common --- 1,000 Without par value Preferred --- 10,000 Par Value $.50 Paragraph 2: The preferences, qualifications, limita tions, restrictions and the special or relative rights in respect of the shares of each class are: (a) Dividends. The holders of preferred shares shall be entitled to receive, out of the surplus of the corporation, or out of the net earnings of the corporation, when and as declared by the Board of Directors of the Corporation, dividends at the rate of, but not exceeding, 6% per annum, from the date of the issuance of the preferred shares, payable quarterly on such dates as shall be determined by the Board of Directors of the corporation, in priority to any dividends on the common shares of the corporation. Such dividends, at the rate of 6% per annum, on the preferred shares shall be non-cumulative. No dividend shall be paid or set apart for payment on the common shares of the corporation in any fiscal year, unless and until full dividends on the preferred shares for the current year either shall have been paid or set apart for payment. (b) Voting Rights. The preferred shares and the common shares shall have full voting rights, each preferred share and each common share to entitle the the holder thereof to one vote. (c) Rights Upon Dissolution. Upon the dissolution of the corporation or upon its liquidation, or upon any distribution of its assets by way of return of capital, the holders of preferred shares shall be entitled to receive and be paid, the sum of $00.50 for each of such preferred shares held by them, and in each case before anything shall be paid to or on account of the common shares of the corporation. The consolidation or merger of the corporation with any other corporation or corporations shall not be deemed a dissolution, liquidation, or distribution of assets of the corporation within the meaning of this paragraph. (d) Limitation. Except as herein provided, the preferred shares shall not be entitled to participate in the earnings or the assets of the corporation. -2- (e) Common Shares. After full dividends on the preferred shares at the rate of 6% per annum for the current and all preceding dividend periods of the current fiscal year shall have been paid or set apart for payment, the holders of common shares shall be entitled to receive dividends from the remaining surplus of the corporation, when and as such dividends shall be declared by the Board of Directors. Upon the dissolution of the corporation or upon its liquidation, or upon any distribution of its assets by way of return of capital, after payment in full to the holders of preferred shares of the corporation of the sums which such holders are in such case entitled to receive, the holders of common shares shall be entitled to receive and be paid all the remaining assets of the corporation (f) Preemptive Rights. No holder of shares in this corporation of any class shall have any preemptive or preferential right of subscription to any shares of any class of the corporation. -3- ARTICLE FIFTH: The manner in which the exchange, reclassification, or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, provided for in, or effected d by, this amendment, is as follows: Each share of outstanding common stock will be exchanged for 1 share of new common stock and 19 shares of preferred stock. ARTICLE SIXTH: Paragraph 1: The manner in which said amendment or amendments effect a change in the amount of stated capital or the amount of paid-in surplus, or both, is as follows. n/a Paragraph 2: The amounts of stated capital and of paid-in surplus as changed by this amendment are as follows: Before Amendment After Amendment Stated capital Paid-in surplus n/a IN WITNESS WHEREOF, the undersigned corporation has caused these Articles of Amendment to be executed in its name by its President, and its corporate seal to be hereto affixed, attested by its Secretary this 29th day of May 1975 THE PRINCE MANUFACTURING COMPANY (Exact Corporate Name) By: /s/ C. H. Bendheim ------------------------- Its President ATTEST /s/ Morris Bock - -------------------------- Its Secretary STATE OF NEW YORK ss. COUNTY OF NEW YORK I, Donald A. Hamburg, a Notary Public, do hereby certify that on the 29th day of May, 1975, C. H. Bendheim personally appeared before me and, being first duly sworn by me, acknowledged that he signed the foregoing document in the capacity therein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Donald A. Hamburg ------------------------ Notary Public STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE Whereas, Articles of Merger of The Prince Manufacturing Company Incorporated under the laws of the State of Illinois have been filed in the Office of the Secretary of State as provided by the Business Corporation Act of Illinois, in force July 1, A.D. 1984. Now therefore, I, George H. Ryan, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate and attach hereto a copy of the Application of the aforesaid corporation. In Testimony Whereof, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, at the City of Springfield, this 7th day of July A. D. 1993 and of the Independence of the United States the two hundred and 18th. /S/ George H. Ryan ------------------------- Secretary of State ARTICLES OF MERGER CONSOLIDATION OR EXCHANGE 1. Names of the corporations proposing to merge, and the state of country of their incorporation: Name of Corporation State or Country of Incorporation Quincy Barge Terminal, Inc. Illinois 5275-405-5 The Prince Manufacturing Company Illinois 5054-087-1 2. The laws of the state or country under which each corporation is incorporated permit such merger, consolidation or exchange. (a) Name of the surviving corporation: The Prince Manufacturing Company (b) it shall be governed by the laws of: Illinois 4. Plan of merger is as follows: See Attachment If not sufficient space to cover this point, add one or more sheets of this size. 5. Plan of merger consolidation exchange was approved, as to each corporation not organized in Illinois, in compliance with the laws of the state under which it is organized. and (b) as to each Illinois corporation as follows: (The following items are not applicable to mergers under ss.11.30--90% owned subsidiary provisions. See Article 7.) (Only "X" one box for each corporation). By the shareholders, a resolution of the board of directors having been duly adopted and submitted to a vote at a meeting of shareholders. Not less than the minimum number of votes required by statute and by the articles of incorporation voted in favor of the action taken. By written consent of the shareholders having not less than the minimum number of votes required by statute and by the articles of incorporation. Shareholders who have consented in writing have been given notice in accordance with By written consent of ALL the shareholders entitled to vote on the action, in accordance with 6. (Not applicable if surviving, new or acquiring corporation is an Illinois corporation) It is agreed that, upon and after the issuance of a certificate of merger, consolidation or exchange by the Secretary of State of the State of Illinois: a. The surviving, new or acquiring corporation may be served with process in the State of Illinois in any proceeding for the enforcement of any obligation of any corporation organized under the laws of the State of Illinois which is a party to the merger, consolidation or exchange and in any proceeding for the enforcement of the rights of a dissenting shareholder of any such corporation organized under the laws of the State of Illinois against the surviving, new or acquiring corporation. b. The Secretary of State of the State of Illinois shall be and hereby is irrevocably appointed as the agent of the surviving, new or acquiring corporation to accept service of process in any such proceedings, and c. The surviving, new, or acquiring corporation will promptly pay to the dissenting shareholders of any corporation organized under the laws of the State of Illinois which is a party to the merger, consolidation or exchange the amount, if any, to which they shall be entitled under the provisions of "The Business Corporation Act of 1983" of the State of Illinois with respect to the rights of dissenting shareholders. PLAN OF MERGER FIRST: (a) The name of the subsidiary corporation to be merged is as follows: Quincy Barge Terminal, Inc. (incorporated in Illinois) (b) The name of the surviving corporation is The Prince Manufacturing Company (incorporated in Illinois), and following the merger its name shall be The Prince Manufacturing Company. SECOND: (a) As to the subsidiary corporation to be merged, the designation and number of outstanding shares of each class, and the number of such shares of each class owned by the surviving corporation, are as follows: Quincy Barge Terminal, Inc. (incorporated in Illinois): 100 shares of common stock outstanding; 100 shares of stock owned by the surviving corporation. (b) The number of shares of the subsidiary corporation outstanding and owned by the surviving corporation, as set forth above in paragraph "SECOND (a)", is not subject to change prior to the effective date of the merger. THIRD: The terms and conditions of the merger are as follows: (a) On the effective date of this Plan, all of the issued and outstanding shares of stock of the subsidiary corporation to be merged hereunder, identified in paragraph "FIRST (a)" hereof, shall be surrendered and cancelled, and each of the certificates evidencing such shares shall be endorsed to indicate their cancellation by reason of merger pursuant to this Plan. (b) The issued and outstanding shares of the surviving corporation, identified in paragraph "FIRST (b)" hereof, shall not be changed in any respect, and no change shall be effected with respect to the provisions of the certificate of incorporation of such surviving corporation. (c) On the effective date of this Plan, the separate existence of the subsidiary corporation identified in paragraph "FIRST (a)" hereof shall cease and such corporation shall be merged into the surviving corporation, and the surviving corporation shall possess all the rights, privileges, powers and franchises of a public and private nature and shall be subject to all the duties of such subsidiary corporation; all of the rights, privileges, powers and franchises of such subsidiary corporation, and all property, real, personal, and mixed (including all debts due to such subsidiary corporation on whatever account) of such subsidiary corporation, shall be vested in the surviving corporation; and all property, rights, privileges, powers, contracts, and franchises and every other interest of such subsidiary corporation shall be thereafter effectively the property of the surviving corporation as they were of the subsidiary corporation; but all rights of creditors and all liens upon any property of such subsidiary corporation shall be preserved unimpaired, and all debts, liabilities and duties of such subsidiary corporation shall thenceforth attach to the surviving corporation and be enforceable against such surviving corporation to the same extent as if such debts, liabilities and duties had been incurred or contracted by the surviving corporation. (d) If, at any time, the surviving corporation shall consider that any further assignments or assurances in law or any other acts or deeds are necessary or desirable to vest in the surviving corporation, according to the terms hereof, the title to any property or rights of the merging subsidiary corporation, the proper officers and directors of such subsidiary corporation shall make and execute all such assignments and assurances and do all things necessary or proper to vest title in such property or rights in the surviving corporation and otherwise to carry out the purposes of this Plan. (e) On the effective date of this Plan, the assets and liabilities of the merging subsidiary corporation shall be carried on the books of the surviving corporation at the amounts at which they are carried on such date on the books of the subsidiary corporation. The capital surplus and earned surplus of the surviving corporation shall be the sum of the capital surpluses and earned surpluses of the merging subsidiary corporation and the surviving corporation, subject in each case to such intercompany or accounting adjustments as may be appropriate. The aggregate amount, if any, of the net assets of the merging subsidiary corporation and the surviving corporation which was legally available for the payment of dividends immediately prior to the merger, to the extent that the value thereof is not transferred to stated capital by the issuance of shares or otherwise, shall continue to be available for payment of dividends by the surviving corporation. (f) The directors and officers of the surviving corporation shall continue in office until the expiration of their terms and the election of their respective successors, or until their earlier death, resignation or removal. (g) The by-laws of the surviving corporation, as they shall exist on the effective date of this merger, shall be and remain the by-laws of the surviving corporation until the same shall be altered, amended or repealed as therein provided. FOURTH: The effective date of this Plan shall be the date on which the Certificate of Merger with respect to the merger is filed by the Secretary of State of Illinois; for accounting purposes, the effective date shall be June 30, 1993. FIFTH: The President, Secretary, and other officers and directors of the surviving corporation are hereby authorized and directed to prepare and execute such agreements, certificates and other documents as may be necessary or appropriate in order to carry out this Plan. SIXTH: Anything herein or elsewhere to the contrary notwithstanding, this Plan may be terminated and abandoned by consent of the Board of Directors of the surviving corporation at any time prior to the effective date of this Plan, if, in the opinion of such Board of Directors, the merger is impractical or undesirable for any reason whatever. 1001 \PBCI LMG 7 (Complete this item if reporting a merger under ss. 11.30--90% owned subsidiary provisions.) a The number of outstanding shares of each class of each merging subsidiary corporation and the number of such shares of each class owned immediately prior to the adoption of the plan of merger by the parent corporation, are: Name of Corporation; Total Number of Shares Outstanding of Each Class; Number of Shares of Each Class Owned Immediately Prior to Merger by the Parent Corporation Quincy Barge Terminal, Inc. Common Stock; 100 shares Common stock; 100 shares b. The date of mailing a copy of the plan of merger and notice of the right to dissent to the shareholders of each merging subsidiary corporation was June 28, 1993. Was written consent for the merger or written waiver of the 30- day period by the holders of all the outstanding shares of all subsidiary corporations received? Yes (If the answer is 'No, "the duplicate copies of the Articles of Merger may not be delivered to the Secretary of State until after 30 days following the mailing of a copy of the plan of merger and of the notice of the right to dissent to the shareholders of each merging subsidiary corporation.) 8. The undersigned corporation has caused these articles to be signed by its duly authorized officers, each of whom affirms, under penalties of perjury, that the facts stated herein are true. Quincy Barge Terminal, Inc. by /s/ Marvin S. Sussman Signature of President Marvin S. Sussman Dated June 28, 1993 ATTEST: /s/ Joseph Katzenstein Joseph Katzenstein The Prince Manufacturing Company by /s/ Marvin S. Sussman Signature of President Marvin S. Sussman Dated June 28, 1993 ATTEST: /s/ Joseph Katzenstein Joseph Katzenstein Dated STATE OF ILLINOIS Office of the Secretary of State hereby certify that this is a true and correct Copy, consisting 26 pages as taken from the original on file this office EXPEDITED SECRETARY OF STATE MAY 1 8 COPY CERT. EX-3.10 10 BY-LAWS OF THE PRINCE MANUFACTURING COMPANY EXHIBIT B P. B. QUINCY, INC. BY-LAWS ARTICLE I OFFICES Section 1. The registered office shall be located in Chicago, Illinois. Section 2. The corporation may also have offices at such other places both within and without the State of Illinois as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II ANNUAL MEETINGS OF SHAREHOLDERS Section 1. All meetings of shareholders for the election of directors shall be held in the City of Quincy, State of Illinois, at such place as may be fixed from time to time by the Board of Directors. Section 2. Annual meetings of shareholders, commencing with the year 1975, shall be held on the __________ if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 A. M., at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written or printed notice or the annual meeting stating the place, day and hour of the meeting shall be delivered not less than ten nor more than forty days before the date of the meeting, either personally or by mail, by or at the direction of the president, or the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. ARTICLE III SPECIAL MEETINGS OF SHAREHOLDERS Section 1. Special meetings of shareholders for any purpose other than the election of directors may be held at such time and place within or without the State of Illinois as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation, may be called by the president, the Board of Directors, or the holders of not less than one-fifth of all the shares entitled to vote at the meeting. Section 3. Written or printed notice of a special meeting stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than forty days before the date of the meeting, either personally or by mail, by or at the direction of the President, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. Section 4. The business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice. ARTICLE IV QUORUM AND VOTING OF STOCK Section 1. The holders of a majority of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the Articles of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 2. If a quorum is present, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the shareholders unless the vote of a greater number of shares of stock is required by law or the articles of incorporation. Section 3. Each outstanding share of stock, having voting power, shall be entitled to one vote on each matter submitted to a vote at a meetings of shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. In all elections for directors every shareholder, entitled to vote, shall have the right to vote, in person or by proxy, the number of shares of stock owned by him, for as many persons as there are directors to be elected, or to cumulate the vote of said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute the votes on the same principle among as many candidates as he may see fit. Section 4. Any action required to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE V DIRECTORS Section 1. The number of directors shall be three. Directors need not be residents of the State of Illinois nor shareholders of the Corporation. The directors, other than the first Board of Directors, shall be elected at the annual meeting of the shareholders, and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected and qualified. The first board of directors shall hold office until the first annual meeting of shareholders. Section 2. Vacancies and newly created directorships resulting from any increase in the number of directors may be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose. A director elected to fill a vacancy, or a newly created directorship, shall hold office until the next succeeding annual meeting of shareholders and until his successor shall have been elected and qualified. Section 3. The business affairs of the Corporation shall be managed by its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these by laws directed or required to be exercised or done by the shareholders. Section 4. The directors may keep the books of the Corporation, except such as are required by law to be kept within the State, outside of the State of Illinois, at such place or places as they may from time to time determine. Section 5. The Board of Directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the Corporation as directors, officers or otherwise. ARTICLE VI MEETINGS OF THE BOARD OF DIRECTORS Section 1. Meetings of the Board of Directors, regular or special, may be held either within or without the State of Illinois. Section 2. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or it my convene at such place and time as shall be fixed by the consent in writing of all the directors. Section 3. Regular meetings of the Board of Directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board. Section 4. Special meetings of the Board of Directors may be called by the President on three days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two directors. Section 5. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. Section 6. A majority of the directors shall constitute a quorum for the transaction of business unless a greater number is required by law or by the Articles of Incorporation. The act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by statute or by the Articles of Incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 7. Unless specifically prohibited by the Articles of Incorporation or these by laws, any action required to be taken at a meeting of the Board of Directors of a corporation, or any other action which may be taken at a meeting of the Board of Directors or the executive committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case my be. ARTICLE VII EXECUTIVE COMMITTEE Section 1. The Board of Directors, by resolution adopted by a majority of the number of directors fixed by the by-laws or otherwise, may designate two or more directors to constitute an executive committee, which committee, to the extent provided in such resolution, shall have and exercise all of the authority of the Board of Directors in the management of the corporation, except as otherwise required by law. Vacancies in the membership of the committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board when required. ARTICLE VIII NOTICES Section 1. Whenever, under the provisions of the statutes or of the Articles of Incorporation or of these by laws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice whatever is required to be given under the provisions of the statutes or under the provisions of the Articles of Incorporation or these bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE IX OFFICERS Section 1. The officers of the Corporation shall be chosen by the Board of Directors and shall be a president, a vice- president, a secretary and a treasurer. The Board of Directors may also choose additional vice presidents, and one or more assistant secretaries and assistant treasurers. Section 2. The Board of Directors at its first meeting after each annual meeting of shareholders shall choose a president, one or more vice presidents, a secretary and a treasurer, none of whom need be a member of the board. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. Section 5. The officers of the Corporation shall hold office until their successors are chosen and quality. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. THE PRESIDENT Section 6. The president shall be the chief executive officer of the Corporation, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. VICE-PRESIDENTS Section 8. The vice president, or if there shall be more than one, the vice presidents in the order determined by the Board of Directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. SECRETARY AND ASSISTANT SECRETARIES Section 9. The secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall have custody of the corporate seal of the Corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. Section 10. The Assistant Secretary, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. Section 12. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 13. If required by the Board of Directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The Assistant Treasurer, or, if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE X CERTIFICATE FOR SHARES Section 1. The shares of the Corporation shall be represented by certificates signed by the President or a vice president and the Secretary or an assistant secretary of the Corporation, and may be sealed with the seal of the Corporation or a facsimile thereof. When the Corporation is authorized to issue shares of more than one class there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the Corporation will furnish to any shareholder upon request and without charge, a full or summary statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued and, if the Corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each such series so far as the same have been fixed and determined and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series. Section 2. The signatures of the officers of the Corporation upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. LOST CERTIFICATES Section 3. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the Board of Directors, In its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the Corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed. TRANSFERS OF SHARES Section 4. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, and the old certificate cancelled and the transaction recorded upon the books of the Corporation. CLOSING OF TRANSFER BOOKS Section 5. For the purpose of determining shareholders entitled to notice of, or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, sixty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days, immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed, the determination of shareholders entitled to notice of, or to vote at, a meeting, or to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution or the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of share holders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. REGISTERED SHAREHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Illinois. LIST OF SHAREHOLDERS Section 7. The officer or agent having charge or the transfer books for shares shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of each and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of the shareholders. ARTICLE XI GENERAL PROVISIONS DIVIDENDS Section 1. Subject to the provisions of the articles of incorporation relating thereto, if any, dividends may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to any provisions of the Articles of Incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SEAL Section 5. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Illinois". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE XII AMENDMENTS Section 1. These by laws may be altered, amended, or repealed or new by laws may be adopted by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the board. EX-3.11 11 CERTIFICATE OF INCORPORATION OF THE PRINCE MANUFACTURING COMPANY COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE MAY 20, 1998 TO ALL WHOM THESE PRESENTS SHALL COME, GREETING: THE PRINCE MANUFACTURING COMPANY I, Yvette Kane, Secretary of the Commonwealth of Pennsylvania do hereby certify that the foregoing and annexed is a true and correct photocopy of Index and Docket Record which appear of record in this department IN TESTIMONY WHEREOF, I have hereunto set my hand and caused the Seal of the Secretary's Office to be affixed, the day and year above written. /s/ Secretary of the Commonwealth DPOS COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE CORPORATION BUREAU In compliance with the requirements or section 204 of the Business Corporation Law. act of May 3 1933 (P.L. 364) (15 P. S. 1204) the undersigned desiring to he incorporated as a business corporation hereby certifies certify that: 1.The name of the corporation is P. B. BOWMANSTOWN, INC. 2.The location and post office address of the initial registered office of the corporation in this Commonwealth is 123 South Broad Street, Philadelphia Pennsylvania 19109, c/o CT Corporation System, County of Philadelphia. 3 The corporation is incorporated under the Business Corporation Law of the Commonwealth of Pennsylvania for the following purpose or purposes: To manufacture sell, distribute and otherwise deal in and with chemicals, drugs, fertilizers, pigments, colorants, hardeners, micro-nutrients and related chemical products to grind mineral products and process ores. 4.The term for which the corporation is to exist is perpetual. 3.The aggregate number of shares which the corporation shall have authority to issue is: 100 shares of Common stock without par value (PA - 1343 12/4/73) 938 30144.42 A.-- 6 The name(s) and post office address(es) of each incorporator(s) and the number and class of shares subscribed by such incorporator(s) is (are): Name Address Number and class of shares ---- ------- -------------------------- Joseph A. VITA 277 Park Ave. N. Y., N.Y. one (1) FRANK Simmons 277 Park Ave. N. Y., N.Y. one (1) IN TESTIMONY WHEREOF. the incorporator(s) has (have) signed and sealed these Articles of Incorporation this 23rd day of October (SEAL) /s/ /s/ /s/ INSTRUCTIONS FOR COMPLETION OF FORM: A. For general instructions relating to the incorporation of business corporations see 19 Pa Code Ch. 35 (relating to business corporations generally instructions relate to such matters as corporate name, stated purposes, term of existence authorized share structure and related authority of the board of directors. inclusion of names of first directors in the Articles of incorporation, optional provisions on cumulative voting for election of directors, etc B. One or more corporations or natural persons of full age may incorporate a business corporation. C. Optional provisions required or authorized bylaw may be added as Paragraphs 7,8, 9 . . etc. D. The following shall accompany this form: (1) Three copies of Form DSCB:BCL--206 (Registry Statement Domestic or Foreign Business Corporation). (2) Any necessary copies of Form DSCB: 17.2 (Consent to Appropriation of Name) or Form DSCB: 17.3 (Consent to Use of Similar Name). (3) Any necessary governmental approvals. E. BCL 205 (15 Pa. S. 1205) requires that the Incorporators shall advertise their intention to file or the corporation shall advertise the filing of articles of incorporation. Proof of publication of such advertising should not be delivered to the Department. but should be filed with the minutes of this corporation. Commonwealth of Pennsylvania 3-1-74.42 939 Department of State Office of the Secretary of the Commonwealth To all to whom these Presents shall come, Greeting: WHEREAS, Under the provisions of the Business Corporation Law, approved the 5th day of May, Anno Domini One thousand nine hundred and thirty-three, P. L. 364, as amended, the Department of State is authorized and required to issue a CERTIFICATE OF INCORPORATION evidencing the incorporation of a business corporation organized under the terms of that law. AND WHEREAS, The stipulations and conditions of that law have been fully complied with by the persons desiring to incorporate as P. B. BOWMANSTOWN, INC. THEREFORE, KNOW YE, That subject to the Constitution of this Commonwealth and under the authority of the Business Corporation Law, I do by these presents, which I have caused to be sealed with the Great Seal of the Commonwealth, create, erect, and incorporate the incorporators of and the subscribers to the shares of the proposed corporation named above, their associates and successors, and also those who may thereafter become subscribers or holders of the shares of such corporation, into a body politic and corporate in deed and in law by the name chosen hereinbefore specified, which shall exist Perpetually and shall be invested with and have and enjoy all the powers, privileges, and franchises incident to a business corporation and be subject to all the duties, requirements, and restrictions specified and enjoined in and by the Business Corporation Law and all other applicable laws of this Commonwealth. GIVEN under my Hand and the Great Seal of the Commonwealth, at the City of Harrisburg, this 28th day of October in the year of our Lord one thousand nine hundred and seventy--four and of the Commonwealth the one hundred and ninety-ninth. /s/ Secretary of the Commonwealth COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE CORPORATION BUREAU In compliance with the requirements of section 806 of the Business Corporation Law, act of May 5, 1933 (P. L. 364) (15 P. S. #1806), the undersigned corporation, desiring to amend its articles does hereby certify THAT 1. The name of the corporation is: P.B. Bowmanstown, Inc. 2. The location of its registered office in this Commonwealth is (the Department of State Is hereby authorized to correct the following statement to conform to the records of the Department): 123 South Broad Street c/o C T Corporation System Philadelphia Pennsylvania 19108 City Zip Code The statute by or under which it was incorporated is: Pennsylvania Business Corporation Law, Act of May 5, 1933 4. The date of its incorporation is: October 28, 1974 5. (Check, and if appropriate, complete one of the following): The meeting of the shareholders of the corporation at which the amendment was adopted was held at the time and place and pursuant to the kind and period of notice herein stated. Place: Kind and period of notice The amendment was adopted by a consent In writing, setting forth the action so taken, signed by all of the shareholders entitled to vote thereon and filed with the treasary of the corporation. 6. At the time of the action of shareholders (a) The total number of shares outstanding was: Three (3) (b) The number of shares entitled to vote was: Three (3) (PA. -- 841 -- 12/~/73) 7. In the action taken by the shareholders (a) The number of shares voted in favor of the amendment Three (3) (b) The number of shares voted against the amendment was: None 8. The amendment adopted by the shareholders set forth in full is as follows: RESOLVED, that Paragraph No. 1 of the Articles of Incorporation of this Corporation be amended to read as follows: 1. The name of the corporation is THE PRINCE MANUFACTURING COMPANY IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer and its corporate seal, duly attested by another such officer, to be hereunto affixed this 1ST day of November, 1974. P.B. BOWMANSTOWN, INC. (name of corporation) By: /s/ Morris Bock ----------------------------- Moris Bock (signature) Vice President (title: president, vice president, etc.) ATTEST: /s/ J.C. Bendheim (signature) - ----------------------------- Asst Secretary (title: secretary, assistant secretary, etc.) INSTRUCTIONS FOR COMPLETION OF FORM A. Any necessary copies of Form DSCB:17.2 (Consent to Appropriation of Name) or Form DSCB:17.3 (Consent to Use of Similar Name) shall accompany Articles of Amendment effecting a change of name. B. Any necessary governmental approvals shall accompany this form. C. Where action is taken by partial written consent pursuant to the Articles, the second alternate of Paragraph 5 should be modified accordingly. D. If the shares of any class were entitled to vote as a class, the number of shares of each class so entitled and the number of shares of all other classes entitled to vote should be set forth in Paragraph 6(b). E. If the shares of any class were entitled to vote as a class, the number of shares of such class and the number of shares of all other classes voted for and against such amendment respectively should be set forth in Paragraphs 7(a) and 7(b). F. BCL 1807 (15 P. S. #1807) requires that the corporation shall advertise its intention to file filing of Articles of Amendment. Proofs of publication of such advertise should not delivered to the Department, but should be filed with the minutes of the corporation. Commonwealth of Pennsylvania Department of State To All To Whom These Presents Shall Come, Greeting: Whereas, in and by Article VIII of the Business Corporation Law, approved the fifth day of May, Anno Domini one thousand nine hundred and thirty- three, P. L. 364, as amended, the Department of State is authorized and required to issue a CERTIFICATE OF AMENDMENT evidencing the amendment of the Articles of Incorporation of a business corporation organized under or subject to the provisions of that Law, and Whereas the stipulations and conditions of that Law pertaining to the amendment of Articles of Incorporation have been fully complied with by P. B. BOWMANSTOWN, INC. name changed to THE PRINCE MANUFACTURING COMPANY Therefore, Know Ye, That subject to the Constitution of this Commonwealth and under the authority of the Business Corporation Law, I do by these presents, which I have caused to be Sealed with the Great Seal of the Commonwealth, extend the rights and powers of the corporation named above; in accordance with the terms and provisions of the Articles of Amendment presented by it to the Department of State, with full power and authority to use and enjoy such rights and powers, subject to all the provisions and restrictions of the Business Corporation Law and all other applicable laws of this Commonwealth. Given under my Hand and the Great Seal of the Commonwealth, at the City of Harrisburg, this 7th day of November in the year of our Lord one thousand nine hundred seventy-four and of the Commonwealth the one hundred and ninety-ninth. /s/ COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE In compliance with the requirements of section 806 of the Business Corporation Law, act of May 5, 1933 (P. L. 364) (13 P. S. *1806), the undersigned corporation desiring to amend its Articles, does hereby certify chat: I. The name of the corporation is: THE PRINCE MANUFACTURING COMPANY 2. The location of its registered office In this Commonwealth is (the Department of State is hereby authorized to correct the following statement to conform to the records of the Department): 123 South Broad Street, c/o C T Corporation System, Philadelphia, Pennsylvania 19108 3. The statute by or under which it was incorporated is: Pennsylvania Business Corporation Law, Act of May 5, 1933 4. The date of its incorporation is: October 28, 1974 5. (Check, and if appropriate, complete one of the following): The meeting of the shareholders of the corporation at which the amendment was adopted was held at the time and place and pursuant to the kind and period of notice herein stated. Time: The day of Place: Kind and period of notice X The amendment was adopted by a consent in writing. setting forth the action so taken, signed by all of the shareholders entitled to vote thereon and filed with the Secretary of the corporation. 6. At the time of the action of shareholders: (a) The total number of shares outstanding was: Three(3) (b) The number of shares entitled to vote was: Three (3) (PA. -- 841 -- 12/5/73) 7. The action taken by the shareholders: (a) The number of shares voted in favor of the amendment Three (3) (b) The number of shares voted against the amendment None 8. The amendment adopted by the shareholders set forth in full is as follows: RESOLVED, that Article 5 of the Articles of Incorporation of this Corporation be amended to read as follows: [See Rider annexed hereto and made a part hereof] IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer and its corporate seal duly attested by another such officer, to be hereunto affixed this 29th day of May, 1975 THE PRINCE MANUFACTURING COMPANY By: /s/ C. H. Bendheim ---------------------------- President ATTEST: /s/ Morris Bock - --------------------------------- Secretary INSTRUCTIONS FOR COMPLETION OF FORM A. Any necessary copies of Form DSCB:17.2 (Consent to Appropriation of Name) or Form DSCB:17.3 (Consent to Use of Similar Name) shall accompany Articles of Amendment effecting a change of name. B. Any necessary governmental approvals shall accompany this form. C. Where action is taken by partial written consent pursuant to the Articles, the second alternate of Paragraph 5 should be modified accordingly. D. If the shares of any class were entitled to vote as a class, the number of shares of each class so entitled and the number of shares of all other classes entitled to vote should be set forth in Paragraph 6(b). E. If the shares of any class were entitled to vote as a class, the number of shares of such class and the number of shares of all other classes voted for and against such amendment respectively should be set forth in Paragraphs 7(a) and 7(b). F. BCL 1807 (15 P. S. 11807) requires that the corporation shall advertise its intention to file or the filing of Articles of Amendment. Proofs of publication of such advertising should not delivered to the Department, but should be filed with the minutes of the corporation. RIDER TO ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE PRINCE MANUFACTURING COMPANY ARTICLE FIVE Paragraph 1: The aggregate number of shares which the corporation is authorized to issue is eleven thousand (11,000) divided into two (2) classes. The designation of each class, the number of shares of each class, and the par value, it any, of the shares of each class, or a statement that the shares of any class are without par value, are as follows: Par Value Per Share Or Series No. of Statement that Shares Are Class (If Any) Shares Without Par Value Common -- 1,000 Without par value Preferred -- 10,000 Par Value $.50 Paragraph 2: The preferences, qualifications, limitations, restrictions and the special or relative rights in respect of the shares of each class are: (a) Dividends. The holders of preferred shares shall be entitled to receive, out of the surplus of the corporation, or out of the net earnings of the corporation, when and as declared by the Board of Directors of the Corporation, dividends at the rate of, but not exceeding, 6% per annum, from the date of the issuance of the preferred shares, payable quarterly on such dates as shall be determined by the Board of Directors of the corporation, in priority to any dividends on the common shares of the corporation. Such dividends, at the rate of 6% per annum, on the preferred shares shall be non-cumulative. No dividend shall be paid or set apart for payment on the common shares of the corporation in any fiscal year, unless and until full dividends on the preferred shares for the current year either shall have been paid or set apart for payment. (b) Voting Rights. The preferred shares and the common shares shall have full voting rights, each preferred share and each common share to entitle the holder thereof to one vote. (c) Rights Upon Dissolution. Upon the dissolution of the corporation or upon its liquidation, or upon any distribution of its assets by way of return of capital, the holders of preferred shares shall be entitled to receive and be paid, the sum of $00.50 for each of such preferred shares held by them, and in each case before anything shall be paid to or on account of the common shares of the corporation. The consolidation or merger of the corporation with any other corporation or corporations shall not be deemed a dissolution, liquidation, or distribution of assets of the corporation within the meaning of this paragraph. (d) Limitation. Except as herein provided, the preferred shares shall not be entitled to participate in the earnings or the assets of the corporation. (e) Common Shares. After full dividends on the preferred shares at the rate of 6% per annum for the current and all preceding dividend periods of the current fiscal year shall have been paid or set apart for payment, the holders of common shares shall be entitled to receive dividends from the remaining surplus of the corporation, when and as such dividends shall be declared by the Board of Directors. Upon the dissolution of the corporation or upon its liquidation, or upon any distribution of its assets by way of return of capital, after payment in full to the holders of preferred shares of the corporation of the sums which such holders are in such case entitled to receive, the holders of common shares shall be entitled to receive and be paid all the remaining assets of the corporation. (f) Preemptive Rights. No holder of shares in this corporation of any class shall have any preemptive or preferential right of subscription to any shares of any class of the corporation. Commonwealth of Pennsylvania Department of State To All To Whom These Presents Shall Come, Greeting: Whereas In and by Article VIII of the Business Corporation Law. approved the fifth day of May, Anno Domini one thousand nine hundred and thirty-three. P. L. .364, as amended, the Department of State is authorized and required to issue a CERTIFICATE OF AMENDMENT evidencing the amendment of the Articles of Incorporation of a business corporation organized under or subject to the provisions of that Law, and Whereas, The stipulations and conditions of that Law pertaining to the amendment of Articles of Incorporation have been fully complied with by THE PRINCE MANUFACTURING COMPANY Therefore Know Ye, That subject to the Constitution of this Commonwealth and under the authority of the Business Corporation Law, I do by these presents, which I have caused to be Sealed with the Great Seal of the Commonwealth, extend the rights and powers of the corporation named above, in accordance with the terms and provisions of the Articles of Amendment presented by it to the Department of State, with full power and authority to use and enjoy such rights and powers subject to all the provisions and restrictions of the Business Corporation Law and all other applicable laws of this Commonwealth. Given under my Hand and the Great Seal of the Commonwealth, at the City of Harrisburg, this 2nd day of June in the year of our Lord one thousand nine hundred and seventy-five and of the Commonwealth the one hundred and ninety-ninth. /s/ Secretary of the Commonwealth Microfilm Number 9119 186 Filed with the Department of State Sep 17 1990 Entity Number 606356 STATEMENT OF CHANGE OF REGISTERED OFFICE BY AGENT In compliance with the requirements of 15 Pa. C.S. 108 (relating to change in location or status of registered office provided by agent), the undersigned person who maintains the registered office of an association and who desires to change the following with respect to such agency hereby states that: 1. The name of the association represented by the undersigned person is: THE PRINCE MANUFACTURING COMPANY 2. The address of the present registered office in this Commonwealth of the above named association is: 123 South Broad Street Philadelphia, PA 19109 3. (If the registered office address is to be changed, complete the following): The address in the same county to which the registered office In this Commonwealth of the above named association is to be changed is: 1635 Market Street, Philadelphia, PA 19103 4. The name of the person in care of the foregoing office is: C T CORPORATION SYSTEM The person named immediately above in this paragraph has been designated in fact as the agent in care of the registered office in the Commonwealth of Pennsylvania of the corporation named in paragraph 2 of this statement. 5. (Check one or more of the following, as appropriate): This statement reflects a change In name of the agent. X The change in registered office set forth in this statement reflects the removal of the place of business of the agent to a new location within the county. The status of the agent as the provider of the registered office of the above named association has been terminated. IN TESTIMONY WHEREOF, the undersigned person has caused this statement to be signed this 10th of September 1990. CT Corporation System By: /s/ Donald Grella --------------------- Assistant Secretary COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF STATE MAY 20, 1998 TO ALL WHOM THESE PRESENTS SHALL COME, GREETING: THE PRINCE MANUFACTURING COMPANY I. Yvette Kane, Secretary of the Commonwealth of Pennsylvania do hereby certify that the foregoing and annexed is a true and correct photocopy of Articles of Incorporation and all Amendments which appear of record in this department IN TESTIMONY WHEREOF, I have hereunto set my hand and caused the Seal of the Secretary's Office to be affixed, the day and year above written. Secretary of the Commonwealth EX-3.12 12 BY-LAWS OF THE PRINCE MANUFACTURING COMPANY EXHIBIT B P.B. BOWMANSTOWN, INC. BY-LAWS ARTICLE I OFFICES Section 1. The registered office shall be located in the City of Philadelphia, Commonwealth of Pennsylvania. Section 2. The corporation may also have offices at such other places both within and without the Commonwealth of Pennsylvania as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. All meetings of the shareholders shall be held at such place within or without the Commonwealth, as may be from time to time fixed or determined by the Board of Directors. One or more shareholders may participate in a meeting of the shareholders by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting may hear each other. Section 2. An annual meeting at the shareholders, commencing with the year 1975, shall be held on the if not a legal holiday and, if a legal holiday, then on the next secular day following at 10:00 A.M., when they shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting. Section 3. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation, may be called at any time by the President, or a majority at the Board of Directors, or the holders of not less than one-fifth of all the shares issued and outstanding and entitled to vote at the particular meeting, upon written request delivered to the Secretary of the Corporation. Such request shall state the purpose or purposes of the proposed meeting. Upon receipt or any such request, it shall be the duty of the Secretary to call a special meeting of the shareholders to be held at such time, not mare than sixty days thereafter, as the Secretary may fix. If the Secretary shall neglect to issue such call, the person or persons making the request my issue the call. Section 4. Written notice of every meeting of the shareholders, specifying the place, date and hour and the general nature of the business of the meeting, shall be served upon or mailed, postage prepaid, at least five days prior to the meeting, unless a greater period of notice is required by statute, to each shareholder entitled to vote thereat. Section 5. The officer having charge of the transfer books for shares of the Corporation shall prepare and make, at least five days before each meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order with the address and the number of shares held by each, which list shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. Section 6. Business transacted at all special meetings of shareholders shall be limited to the purposes stated in the notice. Section 7. The holders of a majority of the issued and outstanding shares entitled to vote, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by statute or by the Articles of Incorporation or by these bylaws. If, however, any meeting of shareholders cannot be organized because a quorum has not attended, the shareholders entitled to vote thereat, present in person or by proxy, shall have power, except as otherwise provided by statute, to adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors such meeting may be adjourned only from day to day or for such longer periods not exceeding fifteen days each as the holders of a majority of the shares present in person or by proxy shall direct, and those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the shares having voting powers, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the Articles of Incorporation or of these bylaws, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 9. Each shareholder shall at every meeting of the shareholders be entitled to one vote in person or by proxy for each share having voting power held by such shareholder, but no proxy shall be voted on after three years from its date, unless coupled with an interest, and, except where the transfer books of the Corporation have been closed or a date has been fixed as a record date for the determination of its shareholders entitled to vote, transferees of shares which are transferred on the books of the Corporation within ten days next preceding the date of such meeting shall not be entitled to Vote at such meeting. Section 10. In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election be not so appointed, the chairman of any such meeting may and, on the request of any shareholder or his proxy, shall make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one or three judges are to be appointed. No person who is a candi date for office shall act as a judge. The judges of election shall do all such acts as may be proper to conduct the election or vote with fairness to all shareholders, and shall make a written report of any matter determined by them and execute a certificate of any fact found by them, if requested by the chairman of the meeting or any shareholder or his proxy. If there be three judges of election the decision, act or certificate of a majority, shall be effective in all respects as the decision, act or certificate of all. Section 11. Any action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation. Section 12. In each election for directors, every shareholder entitled to vote shall have the right to multiply the number of votes to which he my be entitled by the total number of directors to be elected in the same election, and he may cast the whole number of such votes for one candidate or he may distribute them among any two or more candidates. The candidates receiving the highest number of votes up to the number of directors to be elected shall be elected. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be three. The directors shall be elected at the annual meeting of the shareholders, except as provided in Section 2 of this article, and each director shall hold office until his successor is elected and qualified. Directors need not be shareholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the remaining number of the boards though less than a quorum and each person so elected shall be a director until his successor is elected by the shareholders, who may make such election at the next annual meeting of the shareholders or at any special meeting duly called for that purpose and held prior thereto. Section 3. The business of the Corporation stall be managed by its Board of Directors which my exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these bylaws directed or required to be exercised and done by the shareholders. MEETINGS OF THE BOARD OF DIRECTORS Section 4. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the Commonwealth of Pennsylvania. One or more directors may participate in a meeting of the board or of a committee of the board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Section 5. The first meeting of each newly elected board or directors shall be held at such time and place as shall be fixed by the shareholders at the meeting at which such directors were elected and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a majority of the whole board shall be. In the event of the failure of the shareholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the shareholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for such meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the Board of Directors my be held without notice at such time and at such place as shall from time to time be determined by resolution of at least a majority of the board at a duly convened meeting, or by unanimous written consent. Section 7. Special meetings of the board may be called by the President on three days notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two directors. Section 8. At all meeting of the board a majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meting, until a quorum shall be present. Section 9. If all the directors shall severally or collectively consent in writing to any action to be taken by the Corporation, such action shall be as valid a corporate action as though it had been authorized at a meeting of the Board of Directors. COMMITTEES Section 10. The Board of Directors may, by resolu tion adopted by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee to the extent provided in such resolution or in these by-laws, shall have and exercise the authority of the Board of Directors in the management of the business and affairs of the Corporation. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. The committees shall keep regular minutes of the proceedings and report the same to the board when required. COMPENSATION OF DIRECTORS Section 11. Directors, as such shall not receive any stated salary for their services but, by resolution of the board, a fixed sum, and expenses of attendance if any, may be allowed for attendance at each regular or special meeting of the board or at meetings of the executive committee; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE IV NOTICES Section 1. Notices to directors and shareholders shall be in writing and delivered personally or mailed to the directors or shareholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors my also be given by telegram. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the Articles of Incorporation or of these by-laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Vice-president, a Secretary and a Treasurer. The President and Secretary shall be natural persons of full age; the Treasurer may be a corporation but, if a natural person, shall be of full age. The Board of Directors may also choose additional vice presidents and one or more Assistant secretaries and assistant treasurers. Any number of the aforesaid offices may be held by the same person. Section 2. The Board of Directors, immediately after each annual meeting of shareholders shall elect a president who may, but need not be, a director, and the board shall also annually choose a vice president, a secretary and a treasurer who need not be members of the board. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall bold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors. Section 5. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. THE PRESIDENT Section 6. The President shall be the chief executive officer of the Corporation, shall preside at all meetings of tie shareholders and the Board of Directors, shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. THE VICE-PRESIDENT Section 8. The Vice President, or if there shall be more than one, the vice presidents in the order determined by the Board of Directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president, and shall perform such other duties and have such other powers as the Board of Directors may from tine to time prescribe. THE SECRETARY AND ASSISTANT SECRETARIES Section 9. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the executive committee when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as nay be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of an assistant secretary. Section 10. The assistant secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers at the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. The Treasurer shall have the custody at the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. Section 12. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation. Section 13. If required by the Board of Directors, he shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, In case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section l4. The assistant treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI CERTIFICATES OF SHARES Section 1. The certificates of shares of the Corporation shall be numbered and registered in a share register as they are issued. They shall exhibit the name of the registered holder and the number and class of shares and the series, if any, represented thereby and the par value of each share or a statement that such shares are without par value as the case may be. If more than one class of shares is authorized, the certificate shall state that the Corporation will furnish to any shareholder, upon request and without charge a full or summary statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued, and the variations thereof between the shares of each series, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series. Section 2. Every share certificate shall be signed by the President or Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and shall be sealed with the corporate seal which may be facsimile, engraved or printed. Section 3. Where a certificate is signed by a transfer agent or an assistant transfer agent or a registrar, the signature of any such president, vice president, treasurer, assistant treasurer, secretary or assistant secretary my be facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. LOST CERTIFICATES Section 4. The Board of Directors shall direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, destroyed or wrongfully taken, upon the making of an affidavit of that fact by the person claiming the share certificate to be lost, destroyed or wrongfully taken. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, destroyed or wrongfully taken certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost, destroyed or wrongfully taken. TRANSFERS OF SHARES Section 5. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. CLOSING OF TRANSFER BOOKS Section 6. The Board of Directors may fix a time, not more than fifty days, prior to the date of any meeting of shareholders or the date fixed for the payment of any dividend or distribution or the date for the allotment of rights or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the deter mination of the shareholders entitled to notice of and to vote at any such meeting or entitled to receive payment of any such dividend or distribution or to receive any such allotment of rights or to exercise the rights in respect to any such change, conversion or exchange of shares. In such case only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting or to receive payment of such dividend or to receive such allotment of rights or to exercise such rights, as the case my be, notwithstanding any transfer of any shares on the books of the Corporation after any record date so fixed. The board at directors may close the books of the Corporation against transfers of shares during the whole or any part of such period and in such case written or printed notice thereof shall be mailed at least ten days before the closing thereof to each shareholder at record at the address appearing on the records of the Corporation or supplied by him to the Corporation for the purpose at notice. REGISTERED SHAREHOLDERS Section 7. The corporation shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, and shall not be liable for any registration or transfer of shares which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with actual knowledge that a fiduciary or nominee of a fiduciary is committing a breach of trust in requesting such registration or transfer, or with knowledge of such facts that its participation therein amounts to bad faith. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the shares of the Corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in its shares, subject to the provisions of the Articles of Incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. FINANCIAL REPORT TO SHAREHOLDERS Section 3. The directors shall not be required to send, or cause to be sent, to the shareholders, a financial report as of the closing date of the preceding fiscal year. CHECKS Section 4. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. FISCAL YEAR Section 5. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SEAL Section 6. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words Corporate Seal, Pennsylvania". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII AMENDMENTS Section 1. These bylaws may be altered, amended or repealed by a majority vote of the shareholders entitled to vote thereon at any regular or special meeting duly convened after notice to the shareholders of that purpose or by a majority vote of the members of the Board of Directors at any regular or special meeting duly convened after notice to the directors of that purpose, subject always to the power of the shareholders to change such action by the directors. EX-3.13 13 CERTIFICATE OF FORMATION OF MINERAL RESOURCE TECHNOLOGIES, L.L.C. EXHIBIT 3.13 State of Delaware Office of the Secretary of state I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THAT "MINERAL RESOURCE TECHNOLOGIES, L.L.C." IS DULY FORMED UNDER THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL EXISTENCE NOT HAVING BEEN CANCELLED OR REVOKED SO FAR AS THE RECORDS OF THIS OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS. THE FOLLOWING DOCUMENTS HAVE BEEN FILED: CERTIFICATE OF LIMITED LIABILITY COMPANY, FILED THE TWENTY-FIRST DAY OF NOVEMBER, A.D. 1995, AT 9 O'CLOCK A.M. AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID LIMITED LIABILITY COMPANY. AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL TAXES HAVE BEEN PAID TO DATE. /S/ Edward J. Freel - -------------------- Edward J. Freel, Secretary of State State of Delaware Office of the Secretary of state I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED LIABILITY COMPANY OF "MINERAL RESOURCE TECHNOLOGIES, L.L.C.," FILED IN THIS OFFICE ON THE TWENTY-FIRST DAY OF NOVEMBER, A.D. 1995, AT 9 O'CLOCK A.M. /S/ Edward J. Freel - -------------------- Edward J. Freel, Secretary of State CERTIFICATE OF FORMATION OF MINERAL RESOURCE TECHNOLOGIES, L.L.C. This Certificate of Formation of Mineral Resource Technologies, L.L.C. (the "L.L.C.") is being duly executed and filed by MRT Management Corp., an authorized person, to form a limited liability company under the Delaware Limited Liability Company Act. FIRST: The name of the limited liability company formed hereby is Mineral Resource Technologies, L.L.C. SECOND: The address of the registered office of the L.L.C. in the State of Delaware is 32 Lockerman Square, Suite L-100, Dover, Delaware 19904. The L.L.C.'s registered agent for service of process at that address is The Prentice-Hall Corporation System, Inc. IN WITNESS WHEREOF, the undersigned has caused this Certificate of Formation to be duly executed as of November 21, 1995. MRT MANAGEMENT CORP. By: /s/ Nathan Bistricer --------------------- Vice President EX-3.14 14 LIMITED LIABILITY COMPANY AGREEMENT OF MINERAL RESOURCE TECHNOLOGIES, L.L.C. EXHIBIT 3.14 LIMITED LIABILITY COMPANY AGREEMENT OF MINERAL RESOURCE TECHNOLOGIES, L.L.C. THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement"), dated as of November 21, 1995, by and among MRT Management Corp., a Delaware corporation ("MMC"), and the parties whose names are set forth on Schedule A attached hereto, and each other person who shall become party to this Agreement (whether by counterpart, separate signature page or otherwise) as a "Member" of the Company. W I T N E S S E T H: WHEREAS, the Members (as hereinafter defined) desire to enter into an agreement with respect to the organization, management and operation of a Delaware limited liability company established hereby (the "Company"), and to set forth their respective rights and obligations with respect thereto; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 GENERAL PROVISIONS 1.1 Certain Basic Definitions. For purposes of this Agreement: The term "Act" means the Delaware Limited Liability Company Act, as the same may be amended from time to time. The term "affiliate" means with reference to any person, any partner, officer, director, shareholder, trustee, employee or agent of such person or any person directly or indirectly controlling, controlled by or under common control with such person, or any person who is a member of the family of any such partner, officer, director, shareholder, trustee, employee or agent, or a trustee or beneficiary of any trust for the benefit of any such person or any such partner, officer, director, shareholder, employee or agent or any such family member. The term "Certificate" means the Certificate of Formation of the Company filed under the Act, as the same may be amended or restated from time to time. The term "Executive Member" shall mean each individual who shall be admitted to the Company with the designation of, and become a party hereto as, an "Executive Member", and who in each case continues to be a Member hereunder. The term "Employment Agreements" shall mean the respective Employment Agreements, between the Company and each of the respective Executive Members, as the same may be amended or restated from time to time. The term "Member" means each of MMC, those persons whose names are set forth on Schedule A hereto, as the same may be amended from time to time, and each other person, if any, who is admitted as a member of the Company and a party hereto, and acquires a Membership Interest in the Company, with the rights, obligations, preferences and limitations specified herein. The term "Membership Interest" means a Member's aggregate rights in the Company, including, without limitation, the Member's right to shares of various categories of Net Income and Net Loss (as such terms are hereinafter defined), the right to receive distributions from the Company and the right to vote, grant consents and participate in the management of the Company. The term "Phibro-Tech" means Phibro-Tech, Inc., a Delaware corporation. The term "person" means any association, corporation, estate, general partnership, limited partnership, limited liability company, joint venture, natural person, real estate investment trust, business or other trust, custodian, or nominee, or any individual or other entity in its own or any representative capacity. The term "Shannonhouse" means Hugh P. Shannonhouse. 1.2 Formation; Effect (a) The Members hereby form the Company as a limited liability company under the provisions of the Act. This Agreement shall be effective upon the filing of the Certificate under the Act. (b) It is the express intention of the Members that this Agreement shall be the sole source of agreement of the parties, and, except to the extent a provision of this Agreement is expressly prohibited or ineffective under the Act, this Agreement shall govern, even when inconsistent with, or different than, the provisions of the Act. To the extent any provision of this Agreement is prohibited or ineffective under the Act, this Agreement shall be considered amended to the smallest degree possible in order to make it effective under the Act. In the event the Act is -2- subsequently amended or interpreted in such a way to make any provision of this Agreement that was formerly invalid valid, such provision shall be considered to be valid from the effective date of such interpretation or amendment. 1.3 Name. The name of the Company shall be "Mineral Resource Technologies, L.L.C.". The business of the Company may be conducted upon compliance with all applicable laws under any other name designated by the Managing Member(s) (as hereinafter defined). 1.4 Principal Office; Registered Agent and Office. (a) The principal office of the Company shall be located in such place as shall be determined by the Managing Member(s). (b) The registered agent of the Company for the service of process and the registered office of the Company shall be that person and location reflected in the Certificate. The Managing Member(s), may, from time to time, change the registered agent or registered office through appropriate filings with the Secretary of State of Delaware. In the event the registered agent ceases to act as such for any reason or the registered office shall change, the Managing Member(s) shall promptly designate a replacement registered agent or file a notice of change of address as the case may be. (c) The Managing Member(s) are authorized to cause the Company to be qualified, formed or registered under assumed or fictitious name statutes or similar laws in any jurisdiction in which the Company transacts business in which such qualification, formation or registration is required or desirable. The Managing Member(s), as authorized persons within the meaning of the Act, are authorized to execute, deliver and file any certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in a jurisdiction in which the Company may wish to conduct business. 1.5 Purposes. The purposes of the Company are: (a) the providing of management, removal and recycling services for coal fly ash and municipal solid waste ash and related by-products and residues for and/or generated by public utilities and other combustion and mineral by-product producers; (b) to engage in any other lawful act or activity for which limited liability companies may be formed under the Act; and (c) to do any and all other acts and things which may be necessary, appropriate or incidental to the carrying out of such purposes. 1.6 Powers of the Company. The Company shall have the power and authority to take any and all actions necessary, appropriate, proper, advisable, convenient or incidental to or for the furtherance of the purposes set forth in Section 1.5 hereof, including, but not limited to the power: -3- (a) to conduct its business, carry on its operations and have and exercise the powers granted to a limited liability company by the Act in any jurisdiction that may be necessary, convenient or incidental to the accomplishment of the purpose of the Company; (b) to acquire by purchase, lease, contribution of property or otherwise, own, hold, operate, maintain, finance, improve, lease, sell, convey, mortgage, transfer, demolish or dispose of any real or personal property that may be necessary, convenient or incidental to the accomplishment of the purpose of the Company; (c) to enter into, perform and carry out contracts of any kind, including, without limitation, contracts with any Member or any affiliate thereof, or any agent of the Company necessary to, in connection with, convenient to, or incidental to the accomplishment of the purpose of the Company; (d) to purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in or obligations of domestic or foreign corporations, associations, general or limited partnerships; (including, without limitation, the power to be admitted as a partner thereof and to exercise the rights and perform the duties created thereby), trusts, limited liability companies (including, without limitation, the power to be admitted as a member or appointed as a manager thereof and to exercise the rights and perform the duties created thereby), or individuals or direct or indirect obligations of the United States or of any government, state, territory, governmental district or municipality or of any instrumentality of any of them; (e) to lend money for any proper purpose, to invest and reinvest its funds, and to take and hold real and personal property for the payment of funds so loaned or invested; (f) to sue and be sued, complain and defend, and participate in administrative or other proceedings, in its name; (g) to appoint employees and agents of the Company, and define their duties and fix their compensation; (h) to indemnify any Person in accordance with the Act and to obtain any and all types of insurance; (i) to cease its activities and cancel its Certificate; (j) to negotiate, enter into, renegotiate, extend, renew, terminate, modify, amend, waive, execute, acknowledge or take any other action with respect to any lease, contract or other agreement in respect of any assets and/or operations of the Company; -4- (k) to borrow money and issue evidence of indebtedness, and to secure the same by one or more mortgages, pledges or other liens on or of the assets of the Company; (l) to pay, collect, compromise, litigate, arbitrate or otherwise adjust or settle any and all other claims or demands of or against the Company or to hold any proceeds and/or other sums or assets against the payment of contingent liabilities; and (m) to make, execute, acknowledge and file any and all documents or instruments necessary, convenient or incidental to the accomplishment of the purpose of the Company. 1.7 Consolidations and Mergers. The Company may merge with, or consolidate into, another Delaware limited liability company or other business entity (as defined in Section 18-209(a) of the Act) upon the approval of the Managing Member(s). 1.8 Member's Interest. A Member's Membership Interest shall for all purposes be personal property. A Member has no interest in specific Company property. ARTICLE 2 MANAGEMENT 2.1 Meetings of Members. (a) There shall be no requirement that the Company hold annual or other meetings of Members, provided, however, that meetings of Members shall be held to approve all acts which, pursuant to the Act, expressly require the approval of the Members (in their capacities as Members, as opposed to their respective capacities as manager(s) or Managing Member(s)). (b) Except as expressly required by the Act or by this Agreement, no vote, consent or authorization of the Members (acting in their respective capacities as Members as opposed to acting in their respective capacities as managers or as Managing Member(s)) shall be required for the taking of any action on behalf of or with respect to the Company. (c) Meetings of the Members may be called by the Managing Member(s) and shall be held at such place as shall be designated from time to time by the Managing Member(s). (d) Written notice (which need not state the purpose or purposes for which the meeting is called) of any meeting of the Members, stating the place, date and hour of the meeting, shall be mailed or given by or at the direction of the Managing Member(s) to each Member entitled to vote at the meeting at least two days prior to the meeting. -5- (e) At any meeting of the Members, every Member entitled to vote may vote or attend in person or by proxy. (f) For each one percentage point (or fraction thereof) of a Member's Percentage Interest (as hereinafter defined) from time to time, such Member shall be entitled to one vote (or a corresponding fractional vote). (g) Except as otherwise provided in this Agreement, all limited liability company action required to be approved by vote of the Members (acting in their respective capacities as Members as opposed to their respective capacities as managers or Managing Member(s)) shall be authorized if Members whose then Percentage Interests constitute, singly or in the aggregate, a majority of the aggregate Percentage Interests of all the Members at such time (a "Majority in Interest" of all Members) affirmatively vote in favor of or consent to said authorization. Except as provided in Section 4.1 hereof, in every instance where this Agreement requires the consent or authorization of a Majority in Interest of Members or of any particular group of Members, such consent or authorization need not be in writing. 2.2 Managing Member(s). (a) The business and affairs of the Company shall be managed by MMC so long as MMC's Percentage Interest shall constitute a Majority in Interest of all Members, or in the absence thereof, by the Member or the Members acting together whose Percentage Interest(s) constitute a Majority in Interest of all Members, and such Member(s) when so acting shall be deemed to be the manager(s) of the Company (individually or collectively a "Manager") and shall be referred to herein as the "Managing Member" or the "Managing Members", as the case may be. It is expressly acknowledged that, MMC, so long as its Percentage Interest constitutes a Majority in Interest of all Members, is the sole Managing Member. The Managing Member(s) shall, except as expressly provided in this Agreement, have the exclusive power and authority to authorize and cause to be taken any action, in the name of and/or by or on behalf of the Company, of any kind and to authorize and cause to be done anything and everything, in the name of and/or by or on behalf of the Company, which the Managing Member(s) shall deem necessary or appropriate to carry on the business and affairs of the Company. (b) Except as otherwise provided in this Agreement, the Managing Member(s) shall have all of the rights, powers and obligations of a class of managers as provided in the Act and as otherwise provided by law. (c) No Member shall enter into any agreement or transaction or take any action in the name and/or by or on behalf of the Company or otherwise carry on the business or affairs of the Company without the consent or authorization of the Managing Member(s) or unless such Member is itself the Managing Member. -6- (d) Each Managing Member shall be an authorized agent of the Company for the purpose of the Company's business, and all authorized actions of the Managing Member(s) shall bind the Company. (e) The Managing Member(s) shall be entitled to designate one or more persons from time to time to act as authorized officers or agents of the Company, and to execute, deliver and perform agreements, instruments and documents in the name and on behalf of the Company (each an "Authorized Agent"), consistent with the powers and authority of the Managing Member(s). In furtherance of the foregoing, the Managing Member shall be entitled to appoint a Chief Executive Officer, a President and one or more Vice Presidents (including Executive, Senior and/or Assistant Vice Presidents), and such other officers and agents as are desired. The Chief Executive Officer, President and each Vice President shall be an Authorized Agent of the Company and shall have the following powers and authority: (i) The Chief Executive Officer shall be the chief executive officer of the Company. (ii) The President shall be the chief operating officer of the Company. (iii) Each Vice President shall have such powers and perform such duties as the Managing Member(s) may prescribe. Unless the Managing Member(s) shall otherwise determine, in the absence or inability of the President to act, the Vice Presidents (in the order determined by the Managing Member(s), or if there be no such determination, in the order of appointment of Executive Vice Presidents, then of Senior Vice Presidents, then of Vice Presidents, and finally of Assistant Vice Presidents) may perform all the duties and may exercise any of the powers of the President. (f) The Managing Member(s) may remove any Authorized Agent at any time for cause or without cause. (g) Persons dealing with the Company are entitled to rely conclusively upon the power and authority of the Managing Member(s) and/or any Authorized Agent(s), and upon the certificate of the Managing Member(s) and/or any Authorized Agent(s), to the effect that such Managing Member(s) is (are) then acting as manager(s) of the Company or that such Authorized Agent(s) is (are) acting as Authorized Agent(s), as the case may be, with authority to act by and/or in the name or on behalf of the Company. (h) During the continuance of the Company, the Managing Member(s) shall devote such time and effort to the Company as the Managing Member(s) may determine in their sole discretion. Nothing contained in this Section 2.2 or elsewhere in this Agreement shall preclude the Managing Member(s), or any affiliate thereof, from acting as a director, officer or employee of any corporation, member of any limited liability company, a trustee of any trust, an executor or -7- administrator of any estate, a partner of any partnership, or an administrative official of any other entity, or from receiving any compensation or participating in any profits in connection with any of the foregoing. 2.3 Limitations on Personal Liability. (a) The Members shall not have any liability for any obligations or liabilities of the Company whatsoever except if and then only to the extent expressly provided in the Act. (b) No Managing Member, nor any affiliate of any Managing Member, shall have any personal liability to the Company or any of the Members for damages for any breach of duty as a manager of the Company or as a Managing Member or as an Authorized Agent, as the case may be, and/or when acting with the consent of the Managing Member(s); provided that the foregoing provision shall not eliminate or limit the liability of any Managing Member if a judgment or other final adjudication adverse thereto establishes that acts or omissions thereto were in bad faith or involved intentional misconduct or a knowing violation of law or that such person personally gained in fact a financial profit or other advantage to which such person was not legally entitled thereto. (c) No Member or Managing Member shall be personally liable for the return or payment of all or any portion of the capital of or profits allocable to or loans to the Company by any Member (or any successor, assignee or transferee thereof), it being expressly agreed that any such return of capital or payment of profits made pursuant to this Agreement, or any payment or repayment in respect of any such loan, shall be made solely from the assets of the Company (which shall not include any right of contribution from any Member or Managing Member). 2.4 Expenses. The Managing Member(s) shall have the right to incur, or cause the Company to incur, costs, fees and expenses for the Company (including fees and expenses of attorneys and accountants) in connection with the formation, organization, management, financing, administration and operation of the Company, and the Company shall reimburse the Managing Member(s) therefor in accordance with the provisions of Section 6.4 hereof. 2.5 Tax Matters Member. The Managing Member(s) shall be, or may designate from time to time one Member to be, the tax matters partner of the Company for purposes of Subchapter C of Chapter 63 of Subtitle F of the Code. 2.6 Inclusion. Except as otherwise stated, references in this Agreement to one or more Members shall be deemed to include Managing Member(s). -8- ARTICLE 3 CAPITAL; UNITS; PERCENTAGE INTERESTS; INCOME AND LOSSES; DISTRIBUTIONS 3.1 Introductory Provisions. (a) "Basic Units" shall mean those Units designated as "Basic Units" allocated to Members pursuant to this Article 3, whether or not vested at the time. (b) The "Capital Contributions" of a Member shall be the sum of the amounts which such Member contributes to the capital of the Company as provided in Section 3.3 hereof. (c) The "Code" shall mean the Internal Revenue Code of 1986, as amended and as the same may be amended or restated from time to time. (d) A "Company Year" shall mean the fiscal year of the Company for federal income tax purposes. (e) "Contingent Units" shall mean those Units designated as "Contingent Units" allocated to Members pursuant to this Article 3. (f) The term "guaranteed payments" shall mean guaranteed payments within the meaning of Code Section 707(c). (g) The term "Initial Public Offering" shall mean the initial underwritten public offering, pursuant to an effective registration statement under the Securities Act of 1933, of equity securities of the Company, the Corporation (as defined in Section 6.1 hereof) or, if MMC is then the Managing Member, MMC or a Parent Entity of MMC, as the case may be. (h) "Member Compensation" shall mean the amount paid or accrued by the Company to or for any of the Members in connection with their employment with or services to or for the Company, whether pursuant to any of their respective Employment Agreements, Section 6.4 hereof, or otherwise, and whether in the nature of severance or termination of employment compensation or otherwise, which is not treated for income tax purposes as deductible compensation expense or as guaranteed payments. (i) "Net Income" or "Net Loss" for any Company Year shall mean the net income or loss of the Company for such year, determined in accordance with Code Section 703(a), increased by any income exempt from federal income tax and decreased by any expenditure of the Company described in Code Section 705(a)(2)(B), or treated as such pursuant to Regulations Section 1.704- 1(b)(2)(iv)(i). Without limiting the generality of the foregoing, Net Income and Net Loss shall reflect any gains or losses realized by the Company on the sale, exchange or other disposition of -9- Company assets and all deductible Company expenses, including, without limitation, (i) any deduction or amortization of expenses incurred in connection with the formation and organization of the Company, (ii) any guaranteed payments, (iii) any taxes imposed on the Company, (iv) interest payable by the Company, and (v) general operating expenses of the Company. Net Income and Net Loss shall be determined net of items of Company gross income, gain, loss, or deduction specially allocated pursuant to Sections 3.6(a) and 3.10. (j) "NIBT" for any fiscal period shall mean the Company's net income for such fiscal period as determined in accordance with generally accepted accounting principles ("GAAP"), less (i) all Member Compensation paid or accrued for such fiscal period (to the extent not otherwise deducted in computing net income under GAAP), plus (ii), to the extent included in the calculation of such net income for such fiscal period, the sum of the (A) income and franchise taxes, if any, of the Company for such fiscal period plus (B) unusual and non-recurring losses (as determined in accordance with GAAP) of the Company for such fiscal period, minus (C) unusual and non-recurring gains (as determined in accordance with GAAP) of the Company for such fiscal period, in each case under this clause (ii) net of tax effect, if any. (k) A "Parent Entity" of MMC shall mean any corporation owning, directly or through intermediate subsidiaries thereof, at least 50% of the then issued and outstanding shares of capital stock of MMC. (l) The "Percentage Interest" of any Member shall mean from time to time the percentage which the number of Vested Units and Unvested Basic Units then allocated to such Member represents of the aggregate number of Vested Units and Unvested Basic Units then allocated to all Members. (m) "Proportionate Share" of a Member shall mean that proportion which the number of Units then allocated to such Member bears to the aggregate number of Units then allocated to all Members. (n) "Regulations" shall mean the income tax regulations promulgated under the Code, as such regulations may be amended from time to time. (o) "Units" shall mean Vested Basic Units, Unvested Basic Units and/or, as the case may be, Contingent Units. (p) "Unrecovered Capital" shall mean, as to a particular Member at a particular time, the excess, if any, of (i) the aggregate Capital Contributions of such Member pursuant to this Article 3 up to such time over (ii) all amounts theretofore distributed in respect of such Member's interest in the Company pursuant to Section 3.9(b)(iii) hereof. (q) The "Unvested Basic Units" of any Member from time to time shall mean those Basic Units then allocated to such Member which are not and have not become designated Vested Basic Units of such Member pursuant to this Agreement. -10- (r) The "Vested Basic Units" of any Member from time to time shall mean Basic Units allocated to such Member which are or shall become designated as Vested Basic Units pursuant to this Agreement. (s) The "Vested Units" of any Member from time to time shall mean the sum of those Basic Units then allocated to such Member which are or have become designated as Vested Basic Units pursuant to this Agreement plus those Contingent Units of such Member which have become Vested Units of such Member pursuant to this Agreement. 3.2 Issuance, Allocation and Vesting of Units (a) Each Member shall be allocated the respective number of Basic Units and Contingent Units set forth on Schedule A hereto, as the same may be amended from time to time; provided that no Units shall be issued to any of the Executive Members until such time as each of the Executive Members commences full-time employment with the Company pursuant to his respective Employment Agreement. (b) All Basic Units allocated to MMC shall be deemed Vested Basic Units for all purposes. (c) A portion of the Basic Units allocated to a particular Executive Member shall become Vested Basic Units if and only at such time, and only from and after the time, that the Executive Member completes the applicable number of full years of continuous employment service with the Company as indicated below: Portion of Basic Units Which Shall Years of Employment Service Become Vested Basic Units One (1) 33-1/3% Two (2) 70% Three (3) 100% In other words, and by way of example, if an Executive Member completes one (1) year, two (2) years or three (3) years of continuous employment service with the Company, then 33-1/3%, 70% or 100%, respectively, of the Basic Units then allocated to him shall be considered Vested Basic Units, and 70%, 33-1/3% and 0%, respectively, of the Basic Units then allocated to him shall be henceforth considered Unvested Basic Units. (d) If an Executive Member's employment with the Company shall terminate, and such termination shall be a termination for "Cause" (as such term is defined in his Employment -11- Agreement), then all of his Units other than Vested Units shall be deemed canceled, relinquished and terminated. (e) If an Executive Member's employment with the Company shall terminate and such termination shall be a termination due to the Executive's Member's death or "Disability" (as such term is defined in his Employment Agreement), or a termination in the context of "Inadequate Company Performance" (as such term is then defined in his Employment Agreement), then all of his Units other than Vested Units shall be deemed canceled, relinquished and terminated. (f) If an Executive Member shall elect to terminate his employment with the Company (a "Voluntary Termination") prior to the end of the then scheduled expiration date of the "Initial Term" (as such term is then defined under his Employment Agreement), or any then current "Additional Term" (as such term is then defined in his Employment Agreement), then all of his Units other than Vested Units shall be deemed canceled, relinquished and terminated. (g) If an Executive Member's employment with the Company shall be terminated by the Company under any circumstance other than one referred to in paragraph (d), (e) or (f) above, all of his then Unvested Basic Units shall become Vested Basic Units, and all of his Contingent Units which have not previously become Vested Units shall be deemed canceled, relinquished and terminated. (h) In the event any of the Unvested Basic Units or any of the Contingent Units of an Executive Member (other than any of the Units allocated originally to Shannonhouse) shall be canceled, relinquished and terminated under any of the circumstances set forth in clauses (d) through (g) above (the "Terminated Units"), then a number of Unvested Basic Units equal to 50% of the number of said Terminated Units which were Unvested Basic Units, and a number of said Contingent Units equal to 50% of the number of Terminated Units which were Contingent Units, shall be allocated among the then remaining Executive Members who are then in the full-time employ of the Company, in proportion to the respective numbers of Basic Units and the respective numbers of Contingent Units then allocated to such remaining Executive Members. It is expressly understood that no such allocation of Units corresponding to Terminated Units shall be made in the event of the termination of employment of Shannonhouse. Without limiting any rights which MMC or the Managing Member(s) or the Company may have under Section 3.4 hereof, the Managing Member(s) and the Company may elect to reserve for issuance to other or future executives of the Company a number of Units equal to 50% of the aggregate number of Terminated Units (the "Reserved Units"). (i) If NIBT of the Company for a particular Company Year shall be such that it meets any of the NIBT Performance Targets set forth below (and as the same shall be increased as hereinafter provided), the portion of the Contingent Units which are originally allocated to any particular Executive Member who is then in the full-time employ of the Company (and which are not canceled, relinquished or terminated under any of the circumstances set forth above), -12- corresponding to the applicable NIBT Performance Target achieved, shall become Vested Units of such Executive Member in accordance with the following cumulative vesting percentages set forth below, so that once a portion of an Executive Member's Contingent Units become Vested Units, no additional portion of his Contingent Units will become Vested Units unless and until a higher NIBT Performance Target is achieved for a subsequent Company Year, and then only to extent of the additional percentage portion to which such Performance Target shall apply: Cumulative Portion of Contingent NIBT Performance Targets At least $3,000,000, but less than $4,000,000 50% At least $4,000,000, but less than $5,000,000 62.5% At least $5,000,000, but less than $6,000,000 75% At least $6,000,000, but less than $7,000,000 87.5% At least $7,000,000, or more 100% For each Company Year ending on or after June 30, 2001, the NIBT Performance Targets set forth above shall be increased by five percent (5%) of the corresponding NIBT Performance Targets then in effect. By way of example, if NIBT for a Company Year (ending before June 30, 2001) shall equal $5,100,000, then 75% of the Contingent Units originally allocated to a particular Executive Member who is then in the full-time employ of the Company (and which are not canceled, relinquished or terminated) shall be considered Vested Units, and no additional portion of such Contingent Units shall become Vested Units until NIBT for any subsequent Company Year of the Company (ending before June 30, 2001) equals or exceeds $6,000,000 (in which event an additional 12.5% of such original Contingent Units shall become Vested Units); and if, in this example, the subsequent Company Year in question were the Company Year ending June 30, 2002, then no additional portion of such Contingent Units (in excess of said 75%) shall become Vested Units unless for said year NIBT were to equal or exceed $6,615,000. (j) If the Company, or, if MMC is then the Managing Member, MMC or a Parent Entity of MMC, shall consummate an Initial Public Offering prior to the fourth (4th) anniversary of the date hereof and none of the Contingent Units shall then have become Vested Units, then 50% of such Contingent Units then allocated to each of the then Executive Members who shall then be in the full-time employ of the Company (and which were not theretofore canceled, -13- relinquished or terminated) shall become Vested Units, and the remaining balance of all Contingent Units shall be deemed canceled, relinquished and terminated. If the Company, or, if MMC is then the Managing Member, MMC or a Parent Entity of MMC, shall consummate an Initial Public Offering at any other time, or after any of the Contingent Units shall have become Vested Units, then all Contingent Units which shall not have theretofore become Vested Units shall be deemed canceled, relinquished and terminated. (k) If the Company, or, if MMC is then the Managing Member, MMC or a Parent Entity of MMC, shall consummate an Initial Public Offering prior to the third (3rd) anniversary of the date hereof, all Unvested Basic Units then allocated to each of the Executive Members who shall then be in the full-time employ of the Company (and which were not theretofore canceled, relinquished or terminated) shall become Vested Basic Units. (l) Each of the Executive Members shall promptly, and in any event within the election period specified in the Code and the Regulations, make an appropriate and timely election under Section 83(b) of the Code with respect to the Membership Interest issued to him under this Agreement, which election shall be submitted in advance to MMC for its review and shall be in form and substance reasonably satisfactory to MMC. 3.3 Contributions; Member Loans. (a) Provided each of the Executive Members commences full-time employment with the Company as contemplated by their respective Employment Agreements, MMC shall contribute to the capital of the Company and/or lend to the Company (on an interest-free basis) up to $1,000,000, as shall be required, in the reasonable judgment of MMC, in view of the net cash flow of the Company. (b) If, (i) MMC shall (in its sole discretion) have previously contributed to the capital of the Company not less than $2,000,000 in the aggregate (in addition to the $1,000,000 amount of aggregate capital and/or loans referred to in Section 3.3(a) above) (the "Threshold Investment"), and (ii) the aggregate amount of Unrecovered Capital plus the remaining balance of all such interest-free loans referred to in Section 3.3(c) above, shall then equal or exceed $3,000,000, and (iii) MMC shall reasonably determine that funds (in addition to the Threshold Investment), are required by the Company after taking into account such institutional credit facilities as the Company shall be able to obtain without any requirement of personal guarantees by any of the Members or any of their affiliates, MMC shall be entitled to give notice from time to time to the Members setting forth the amount so required (the "Additional Capital") and each such Member shall have within 60 days after the giving of such notice to contribute to the capital of the Company its or his Proportionate Share of such amount. In consideration for such capital contributions, each Member so contributing shall be entitled to receive a number of Vested Basic Units reasonably established by MMC based on the relationship of the aggregate amount to be so contributed in relation to the then fair market value of the Company and the aggregate number of Units then allocated among the -14- Members (any such new Units to be so allocated in respect of such contributions of Additional Capital being referred to herein as "Additional Vested Units"). (c) If a Member fails to contribute his or its Proportionate Share of any Additional Capital (the "Uncontributed Amount") when required under clause (b) above, the other Members (the "Contributing Members") may (but shall not be required to) contribute such Uncontributed Amount and shall be allocated the Additional Vested Units corresponding to such Uncontributed Amount. The fraction of the Uncontributed Amount which may be contributed by any particular Contributing Member shall be determined on the basis of the then Percentage Interest of each Contributing Member in relation to the aggregate Percentage Interests of all such Contributing Members, all as established by notices of election to make such applicable portions of the contributions, followed by the making of the applicable portions of the Additional Contribution within sixty (60) days after the expiration of the original sixty (60) days contribution period. (d) Anything to the contrary contained herein notwithstanding, in lieu of making any contribution of capital, MMC shall be entitled to determine, if it deems appropriate, to advance, or to cause one or more of its affiliates to advance, as loan(s) to the Company such funds, in addition to or in lieu of any Threshold Investment, as it shall reasonably determine the Company to require and as it shall be willing in its discretion to so advance or to have so advanced, each such loan to be on such terms as to repayment and otherwise, and to bear interest at such rate, as MMC shall reasonably establish from time to time, each such loan being herein called a "Member Loan." Notwithstanding the foregoing, the amount of MMC's first Member Loans which in the aggregate, when added to MMC's capital contributions, do not exceed $1,000,000 shall bear no interest, and thereafter, the interest rate charged by MMC to the Company for any Member Loans shall not exceed the highest rate of interest from time to time charged to MMC or any Parent Entity of MMC by any of its then institutional lender(s). (e) The Managing Member(s) shall be entitled, without the consent or approval of any other Member, to amend Schedule A hereto from time to time to reflect any allocations of Units and/or other matters contemplated by this Section 3.3. 3.4 New Members. The Managing Member(s), acting on behalf of the Company, may admit one or more additional Members at any time into the Company. The terms and conditions, including the capital contribution, of each such admission shall be fixed by the Managing Member(s) at the time of such admission; provided, however, that (a) if any Member is admitted to the Company, the terms and conditions of such admission shall not materially reduce the rights and entitlements of any then Member without such Member's consent thereto, unless such reduction is a reduction affecting all the Members on a pro rata basis, and (b) if such Member is or is about to become an executive employee of the Company (a "New Employee Member"), the issuance of a Membership Interest to such New Employee Member (other than the issuance of Membership Interests to Executive Members as contemplated by Schedule A hereto) shall be subject to the approval of Shannonhouse (so long as Shannonhouse shall be an Executive Member) if (i) the effect of such admission is to reduce the aggregate Percentage Interests of the Executive Members and (ii) -15- the Membership Interest issued to such New Employee Member (and the Membership Interest theretofore issued to previously admitted New Employee Members (other than as contemplated by Schedule A hereto)) consists of Units which exceed 50% of the number of Terminated Units. The Managing Member(s) shall be entitled, without the consent or approval of any other Member, to amend Schedule A hereto from time to time to reflect the admission of any additional Members (if such admission is permitted under the provisions of this Agreement) and to reflect any corresponding changes to the Units allocated among the Members. 3.5 Capital Accounts. (a) A separate capital account ("Capital Account") shall be established and maintained for each Member in accordance with the substantial economic effect and special rule provisions of Regulations Sections 1.704-1(b)(2) and 1.704-2. The Members' respective Capital Accounts shall be kept separate and apart from the books in which the Company maintains records of the Company's adjusted tax basis in its assets and the Members' adjusted tax bases in their Company interests. Each Member's Capital Account shall be (i) increased by the amount of such Member's Capital Contributions and any Net Income and items of gross Company income and gain allocated to such Member pursuant to this Article 3 and (ii) reduced by the amount of all distributions made to such Member in respect of its interest in the Company, whether pursuant to this Article 3 or otherwise, and any Net Loss and items of gross Company deduction and loss allocated to such Member pursuant to this Article 3. In addition, the Members' Capital Accounts are to be adjusted in accordance Section 3.5(b) hereof, if applicable. Allocations under Section 3.5(d) hereof shall affect the Members' Capital Accounts only to the extent provided in such Section. Distributions and/or payments to Members constituting guaranteed payments shall not be considered a distribution in respect of such Member's interest in the Company, and will not affect such Member's Capital Account other than by reason of the effect of such guaranteed payments on the Net Income of the Company allocated to such Member. (b) The assets of the Company shall be revalued on the books of the Company to equal their fair market values in accordance with Regulations Section 1.704-1(b)(2)(iv)(f) at the following times: (i) the conversion of any of the Contingent Units into a Vested Unit; (ii) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis contribution to the capital of the Company; (iii) the distribution by the Company to a Member of more than a de minimis amount of Company assets (other than money) as consideration for an interest in the Company; and (iv) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (ii) and (iii) above shall be made only if required by and in the sole discretion of the Managing Member(s). Upon a revaluation of the Company's assets pursuant to this Section 3.5(b), and before giving effect to any of the then applicable events discussed in any of clauses (i) through (iv) above, the fair market values of such assets shall be determined in accordance with Section 3.13 hereof and each Member's Capital Account shall be increased or decreased in accordance with Regulations Section 1.704-1(b)(2)(iv)(f). -16- (c) When property is reflected in the Capital Accounts at a book basis different from the basis of such property for federal income tax purposes, all Net Income, Net Loss and items of gross Company income, gain, deduction and loss with respect to such property shall be determined for purposes of adjusting Capital Accounts based on the book basis of such property in accordance with Regulations Section 1.704-1(b)(2)(iv)(g). (d) For federal income tax purposes, all gain, loss, depreciation or amortization with respect to property which is reflected in the Capital Accounts at a basis different from the tax basis of such property shall be allocated among the Members in a manner that takes into account such difference in accordance with the principles of Code Section 704(c) and Regulations Section 1.704-3. Allocations pursuant to the previous sentence are solely for federal, state, and local income tax purposes and shall not affect or in any way be taken into account in computing a Member's Capital Account or share of distributions pursuant to any provision of this Agreement. Similarly, items of tax credit and tax credit recapture shall be allocated to the Members in accordance with Regulations Section 1.704-1(b)(4)(ii), but shall not be credited or charged to their respective Capital Accounts except to the extent required under Regulations Section 1.704-1(b)(2)(iv)(j). 3.6 Allocations of Net Income. Items of Company gross income (but not gain) and Net Income for each Company Year shall be allocated as follows: (a) First, items of Company gross income (but not gain) shall be allocated to each Member to the extent that the aggregate amount of Member Compensation paid or accrued to such Member for such Company Year and all prior Company Years exceeds the items of Company gross income previously allocated to such Member pursuant to this Section 3.6(a). (b) Second, any Net Income (after giving effect to the allocations under Section 3.6(a) above) shall be allocated to the Members in the ratio of their respective Percentage Interests. 3.7 Allocations of Net Loss. Net Loss for each Company Year shall be allocated as follows: (a) First, to the Members in the ratio of their respective Percentage Interests to the extent of their respective positive Capital Account balances. (b) Second, to the Members in the ratio and to the extent of their respective then outstanding Member Loans (if any). (c) Thereafter, to the Members in the ratio of their respective Percentage Interests. -17- 3.8 Limitation on Net Loss Allocations. Notwithstanding any provisions of this Article 3 to the contrary, and in accordance with Section 1.704-1(b)(2)(ii)(d) of the Regulations, no Member shall be allocated Net Loss to the extent such allocation would cause or increase a deficit balance in such Member's Capital Account in excess of such Member's then Permissible Capital Account Deficit (as defined in Section 3.10(a)(iii) below). Solely for purposes of the limitation in the previous sentence, the Members' Capital Accounts shall be deemed reduced by the reasonably expected adjustments, allocations and distributions described in paragraphs (4), (5), and (6) of Regulations Section 1.704-1(b)(2)(ii)(d). Allocations of Net Loss that would be made to a Member but for such limitation shall be made to the other Members to the extent not inconsistent with such limitation. 3.9 Distributions. (a) Except as provided in clause (b)(i) and clause (b)(ii) of this Section 3.9 or in Article 4 hereof, no distributions, whether in respect of the Net Income of the Company or otherwise, shall be made to the Members, except if, as and then only to the extent, determined from time to time by a Majority in Interest of the Members in the sole and absolute discretion of such Majority in Interest. (b) Distributions, other than distributions upon the liquidation of the Company, and guaranteed payments, if and when made, shall be made as follows and in the following order of priority: (i) To the Members, to the extent of their respective amounts of Member Compensation, it being understood that payments contemplated by any Executive Member's employment agreement, or the providing of benefits to such Executive Member under any employee benefit plan or program, shall be deemed to constitute the distribution of the full amount of the Member Compensation to which such payments or benefits relate (with no separate distribution being required for the amount of Member Compensation attributable to such benefits). (ii) After the end of each calendar year, to the extent permissible pursuant to financing agreements to which the Company is now or hereafter may become a party, the Company shall distribute to each Member the aggregate amount by which (A) federal income taxes that would be payable by an individual in the highest tax bracket applicable from time to time to an individual (and taking into account the character of such income), with respect to the taxable income and gains of the Company allocated to such Member for the Company Year ending in such calendar year and for all prior Company Years, and after giving effect to all deductions and losses of the Company allocated to such Member for such Company Year and prior Company Years, if applicable (and in each case applying such highest applicable tax brackets thereto), exceeds (B) all amounts previously distributed (or deemed distributed) to such Member pursuant to clause (i) above or this clause (ii). Subject to the limitations set forth above, the Company will, where reasonably practicable, make distributions required by this clause (ii) (and not made or deemed made under clause (i) above), to the extent of the greater of (x) 75% thereof, and (y), if for any calendar year Net Income is reasonably expected to exceed by more than 10% the Net Income for the immediately -18- preceding calendar year, and if tax rates are not reduced, 110% of the amount distributed to such Member in respect of such preceding calendar year pursuant to this clause (ii), on a quarterly basis to facilitate the payment of quarterly estimated income taxes by the Members, subject to adjustment at or following the end of such calendar year, as the Company may deem appropriate (including the right of the Company to require prompt repayment of amounts distributed under this sentence in excess of that ultimately determined to be required to be distributed for such calendar year). (iii) Thereafter, distributions to the Members will be made in the ratio of their respective amounts of Unrecovered Capital, up to the amount of each such Member's Unrecovered Capital. (iv) Thereafter, if all Member Loans are repaid in full, distributions to the Members will be made in the ratio of their respective positive Capital Account balances. (c) Distributions in connection with the liquidation of the Company shall be made as provided in Section 4.3 hereof. 3.10 Regulatory Allocations and Related Matters. (a) The following allocations shall be made in accordance with and to the extent required by Regulations Sections 1.704-2(f), 1.704-2(i), and 1.704-1(b)(2)(ii)(d). References in this Section 3.10 to "partner" and "partnership" are intended to relate to the characterization of the Members and the Company, respectively, for federal income tax purposes. (i) If there is a net decrease in partnership minimum gain during a Company Year (determined in accordance with Regulations Section 1.704-2(d)), items of Company gross income and gain shall be allocated to the Members as quickly as possible in the amounts and manner described in Section 1.704-2(f) of the Regulations. This clause (i) is intended to comply with the minimum gain chargeback requirement relating to any nonrecourse liability of the Company set forth in Regulation Section 1.704-2(f) and shall be interpreted consistently therewith. (ii) If there is a net decrease in partner nonrecourse debt minimum gain during a Company Year (determined in accordance with Regulation Section 1.704-2(i)(3)), items of Company gross income and gain shall be allocated as quickly as possible to those Members who had a share of such partner nonrecourse debt minimum gain at the end of the preceding Company Year (determined in accordance with Regulation Section 1.704-2(i)(5)) in the amounts and manner described in Regulation Section 1.704-2(i)(4). This clause (ii) is intended to comply with the minimum gain chargeback requirement relating to nonrecourse debt set forth in Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith. (iii) If a Member unexpectedly receives an adjustment, allocation or distribution described in Section 1.704- 1(b)(2)(ii)(d) of the Regulations which creates or increases a deficit balance in his or its Capital Account in excess of the sum (with respect to each Member, -19- such Member's "Permissible Capital Account Deficit") of (A) such Member's share of the partnership minimum gain (as determined at the end of such Company Year in accordance with Regulation Section 1.704-2(g)), (B) such Member's share of the partner nonrecourse debt minimum gain (as determined at the end of such Company Year in accordance with Regulation Section 1.704-2(i)(3)), and (C) such Member's deficit Capital Account restoration obligation under this Agreement, if any, then items of Company gross income and gain shall be allocated to such Member as quickly as possible to eliminate such excess, as required by Regulation Section 1.704-1(b)(2)(ii)(d), provided that an allocation pursuant to this clause (iii) shall be made only if and to the extent such excess would exist after all other allocations provided for in this Section 3.10 have been tentatively made for such Company Year as if this clause (iii) were not in this Section 3.10. This clause (iii) is intended to comply with the qualified income offset requirement set forth in Regulation Section 1.704- 1(b)(2)(ii)(d) and shall be interpreted consistently therewith. (iv) Notwithstanding anything in this Agreement to the contrary, all items of Company gross deduction and loss attributable to a partner nonrecourse debt (as defined in Regulations Section 1.704-2(b)(4)) shall be allocated to the Member or Members that bear the economic risk of loss for such partner nonrecourse debt in accordance with Regulations Section 1.704- 2(i)(1). (b) The allocations required by Section 3.8 hereof and in clause (a)(iii) of this Section 3.10 (the "QIO Allocations") are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent permissible under the Regulations, all QIO Allocations shall be offset either with other QIO Allocations or with special allocations of other items of Company gross income, gain, loss or deduction pursuant to this clause (b). Therefore, notwithstanding any other provision of this Article 3 (other than clause (a) of this Section 3.10), the Managing Member(s) shall make such offsetting special allocations of Company gross income, gain, loss or deduction in whatever manner the Managing Member(s) shall reasonably determine appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the QIO Allocations were not part of the Agreement and all Company items were allocated pursuant to Sections 3.6 and 3.7 of this Agreement. (c) The provisions of this Agreement shall be amended and the manner in which tax items are allocated shall be modified to the extent necessary to comply with Regulations Sections 1.704-1(b) and 1.704-2; provided, however, that any such amendment shall be made only if it is not likely to have a material effect on the amounts distributable to any Member pursuant to Section 4.3 of the Agreement upon the liquidation of the Company. -20- 3.11 Determination by Managing Member(s) of Certain Matters. (a) All matters concerning the determination and allocation among the Members of the amounts to be determined and allocated pursuant to Article 3 hereof, including the taxes thereon and accounting procedures applicable thereto, shall be determined by the Managing Member(s) in all cases unless expressly otherwise provided for by the provisions of this Agreement. (b) The Managing Member(s) may, without the consent of any other Member, amend the provisions of this Agreement relating to the manner in which tax items are allocated to the extent necessary to comply with Regulations Sections 1.704-1(b) and 1.704-2; provided, however, that any such amendment may be made only if it is not likely to have a material effect on the amounts distributable to any Member pursuant to Article 4 hereof upon the liquidation of the Company. 3.12 No Interest on Capital. Except as provided in this Agreement, no Member shall be entitled to receive any interest on or in respect of any amount allocated to such Member's Capital Account or on or in respect of any distribution or withdrawal therefrom or thereof permitted under this Agreement. 3.13 Withdrawals by Members. Except as provided in this Agreement, no Member shall have the right to withdraw any funds or other assets from the Company or such Member's Capital Account without the prior written consent of the Managing Member(s). 3.14 Fair Market Value Determinations. For purposes of determining the fair market value of securities and other assets pursuant to this Article 3, such securities or assets shall be valued as of the then most recent practicable date prior to the event for which such valuation is made by an appraiser selected by the Managing Member(s). ARTICLE 4 DISSOLUTION 4.1 Grounds. The Company shall be dissolved and its affairs shall be wound up upon the earliest to occur of the following: (a) December 31, 2045, (b) upon the election of the Managing Member(s), (c) except as otherwise provided in this Agreement, the death, insanity, bankruptcy, dissolution or withdrawal of a Managing Member or the occurrence of any other event which terminates the continued membership of a Managing Member in the Company, and (d) subject to the terms of this Agreement, any other event causing the dissolution of the Company under the Act, unless in the case of clauses (c) and (d) immediately above, only, within 90 days after such event, a Majority in Interest of the remaining Members agree in writing to continue the business of the Company. -21- 4.2 No Right to Cause Dissolution. Notwithstanding the provisions of Section 4.1 hereof, no Member shall have the right to retire, resign or withdraw (as such terms are used in the Act, it being understood that this Section 4.2 is not intended to affect any provision of any Employment Agreement) as a Member or otherwise cause, voluntarily or involuntarily, a dissolution of Company other than as expressly permitted pursuant to clause (b) of said Section 4.1, or in connection with a transfer permitted pursuant to Article 5 hereof, and any such action or any such dissolution caused by a Member, other than as so permitted, shall constitute a breach by such Member of its obligations under this Agreement. 4.3 Liquidation. Upon dissolution of the Company, the Managing Member(s) shall (i) within a reasonable time cause the Company's assets to be liquidated in an orderly and business-like manner so as not to involve undue sacrifice, and (ii) take the following actions and make the following distributions out of the assets of the Company in the following manner and order: (a) first, pay or establish adequate reserves for all debts and liabilities of the Company to persons other than Members and expenses of liquidation in the order of priority provided by law; (b) then, establish any reserves which the Managing Member(s) reasonably deems necessary to provide for contingent liabilities or obligations of the Company; provided, however, that, at the expiration of such period of time as the Managing Member(s) may reasonably deem advisable, the balance of any reserves shall be paid or distributed as provided in clauses (c) through (e) of this Section 4.3 (in the order of priority thereof), it being agreed that such reserves may, at the election of the Managing Member(s), be paid over to an independent escrow agent to be held by it as escrowee for the purpose of disbursing such reserves in payment of any of the aforesaid contingencies; (c) then, pay out of the balance of such assets, if any, the outstanding balance of all remaining debts and liabilities of the Company to the Members to whom the same are owed, pro rata; (d) then pay the Members who have Unrecovered Capital, pro rata, to the extent of their respective amounts of Unrecovered Capital, the balance, if any, of such assets; (e) then, pay the Members, pro rata, to the extent of their respective positive Capital Account balances (determined after giving effect to all allocations called for by Article 3 hereof), the balance, if any, of such assets; and (f) then pay the balance, if any, of such assets to the Members in the ratio of their respective Percentage Interests. Except as otherwise expressly provided herein, upon such distribution, no Member shall have any rights or claims against the Company or any other Member with respect to, and notwithstanding any imbalance in, the respective Capital Accounts of the Members. -22- 4.4 Deferral of Distribution. Notwithstanding the provisions of Section 4.3(c) immediately above, if, upon dissolution of the Company, the Managing Member(s) shall reasonably determine that sale of part or all of the Company's assets would cause undue loss to the Members, the Managing Member(s) may, in order to avoid such losses, defer the liquidation of, and withhold from distribution for a reasonable time, any assets of the Company. 4.5 Restoration Obligations. No Member shall have any obligation to restore any deficit balance in its capital account following the "liquidation" (as such term is defined in Regulations Section 1.704-1(b)(2)(ii)(g)) of its interest in the Company; provided, however, that for so long as MMC shall be the sole Managing Member, upon dissolution and termination of the Company, MMC shall be obligated to contribute to the capital of the Company an amount equal to the lesser of (i) the deficit balance, if any, in its Capital Account, or (ii) the excess of 1.01 percent of the total Capital Contributions of the other Members over the aggregate Capital Contributions previously made by MMC to the Company. 4.6 No Right to Partition. The Members, on behalf of themselves and their heirs, personal representatives, successors and assigns, hereby specifically renounce, waive and forfeit all rights, whether arising under contract or statute or by operation of law, to seek, bring or maintain any action in any court of law or equity for partition of the Company, or any interest which is considered to be Company assets, regardless of the manner in which title to any such assets may be held. ARTICLE 5 RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTEREST 5.1 Restrictions on Transfer. A Member shall not have the right to sell, assign, pledge, transfer or otherwise dispose of all or any part of its Membership Interest (each, a "Transfer"), and no Member shall have any right to substitute a transferee in its place as a Member, except as expressly consented to by the Managing Member(s) and then only upon such terms and conditions as the Managing Member(s) shall specify, subject, however to the provisions of this Article 5. Any such unpermitted purported Transfer shall be null and void ab initio and of no force or effect. MMC and any transferees or successors in interest thereto designated by it shall be expressly permitted to Transfer its (their) Membership Interests and to cause any such transferee or successor to be admitted as a Member so long as it complies with the provisions of Section 5.2 below. -23- 5.2 Tag-Along Right and Drag-Along Right in Certain Third Party Sales. (a) If MMC desires to Transfer, in a transaction which shall be a bona fide transaction on arm's length terms, any Minimum Portion (as hereinafter defined) of the Membership Interest held by it, or all of the Membership Interest held by it if such Membership Interest is a Minimum Interest (as hereinafter defined), to a Person other than any of its affiliates (a "Third Party") (such a Transfer being referred to as a "Third Party Sale"), the Executive Members shall have, under the circumstances described below, the right or obligation to participate in such Third Party Sale by selling all or a portion (as applicable) of the Membership Interests held by such Executive Members, in each case on the terms and conditions provided herein. A "Minimum Portion" of MMC's Membership Interest, or a "Minimum Interest," as the case may be, means a portion of, or all of, such Membership Interest corresponding to a number of Vested Units equal to at least 35% of the aggregate number of Vested Units and Unvested Basic Units then allocated to all Members. (b) MMC shall notify the Executive Members as soon as practicable of the intent to engage in a Third Party Sale and shall provide the Executive Members with written notice (a "Sale Notice") at least 15 business days prior to the proposed closing of any Third Party Sale. Such Sale Notice shall set forth: (i) the name and address of the Third Party, (ii) the portion of the Membership Interest proposed (based on the number of Vested Units represented by such portion of Membership Interest) to be sold (such portion being referred to herein as a the "Sale Interest") to the Third Party and the percentage (the "Percentage") that such Sale Interest represents (based on the number of such Vested Units) of the total Membership Interest held by MMC, (iii) whether MMC is exercising its right under this Agreement to require the other Executive Members to sell all or a portion of their Membership Interest in accordance with Section 5.2(d) below, (iv) the proposed amount and form of consideration to be paid for such Sale Interest by the transferee and the terms and conditions of payment, and (v) the proposed closing date for the Third Party Sale. (c) (i) If any Executive Member wishes to sell all or a portion of such Executive Member's Membership Interest in the Third Party Sale (a "Tag-Along Participant"), the Tag-Along Participant shall provide written notice to MMC within 10 business days of the date the Sale Notice is given (the "Tag-Along Acceptance Notice"). The Tag-Along Acceptance Notice shall indicate (A) that the Tag-Along Participant wishes to participate in the Third Party Sale and (B) the portion of the Membership Interest thereof which the Tag-Along Participant proposes to sell in the Third Party Sale. If the Sale Interest represents less than 50% of the aggregate Units allocated to all of the Members, a Tag-Along Participant shall be entitled to sell in the Third Party Sale the portion of his Membership Interest not to exceed (x) the number of Vested Units then allocated to the Tag-Along Participant, multiplied by (y) the Percentage. If the Sale Interest represents 50% or more of the aggregate Units allocated to all of the Members (a "Change of Control Transaction"), a Tag-Along Participant shall be entitled to sell in the Third Party Sale the portion of his Membership Interest equal to 100% of the number of Vested Units and Unvested Basic Units (but not the Contingent Units) then allocated to the Tag-Along Participant. Any sale of the Membership Interests of a Tag-Along Participant in a Third Party Sale shall be first out of such Participant's -24- Vested Units, and, to the extent that the Percentage Interest reflected in the Membership Interest sold by such Tag-Along Participant in such Third Party Sale is of more than the aggregate number of Vested Units of such Tag-Along Participant, shall next shall be out of such Tag-Along Participant's Unvested Basic Units. The sale of a Membership Interest by any Tag-Along Participant in a Third Party Sale shall be for the same consideration per one percentage point unit of Percentage Interest, and on the same other terms and conditions, as the sale of the Sale Interest by MMC to such Third Party; provided, however, that, if such Sale is pursuant to a Change of Control Transaction and the consideration payable includes an installment note obligation of the purchaser, then, the Tag Along Participant shall be entitled to elect in the Tag Along Notice to receive, in lieu thereof, payment in two equal installments, the first at the closing and the second on the first anniversary thereof, in an amount such that the present value of such two payments equals the present value of such installment note obligation, all as reasonably determined by MMC. For purposes of computing present value, the discount factor shall be the then prevailing yield for corporate bonds with a remaining term to maturity similar to the installment note obligation term and a rating similar to that which could reasonably be expected for such installment note obligation if a rating therefor were obtained, as published by The Wall Street Journal or, if not available therein, another recognized source for such information, all as reasonably determined by MMC. (ii) If no Tag-Along Acceptance Notice is received by MMC within the 10 business day period specified above, MMC shall have the right, during the period of 180 days following expiration of such 10 business day period, to Transfer the Sale Interest without any participation by the Executive Members, to the Person(s) identified in the Sale Notice for the Specified Price (as hereafter defined) or any lower price and on the same terms and conditions as set forth in the Sale Notice or any terms which are not economically superior thereto. For purposes of this Section 5.2, the term Specified Price shall mean the sum of (i) the amount of cash consideration per one percentage point unit of Percentage Interest included in the price set forth in the Sale Notice and (ii) the then present market value of any non-cash consideration per one percentage point unit of Percentage Interest included in the price set forth in the Sale Notice (as determined by a nationally recognized accounting or investment banking firm selected by the Managing Member(s)). (iii) If one or more Tag-Along Acceptance Notices are received by MMC within the 10 business day period specified above, then the portion of the Membership Interest which MMC and each Tag-Along Participant shall be entitled to sell at the closing of the Third Party Sale shall be (A) the aggregate Membership Interest the Third Party is willing to purchase, multiplied by (B) a fraction, the numerator of which is equal to the Percentage Interest reflected in the portion of the Membership Interest proposed to be sold by MMC or such Tag-Along Participant, as the case may be, and the denominator of which is equal to the aggregate Percentage Interests reflected in the portion of the Membership Interests proposed to be sold by MMC and all Tag-Along Participants, in each case subject to the fifth sentence of Section 5.2(c)(i) above. (d) MMC, at its option, may require that the Executive Members sell the Percentage of their respective Membership Interests to the Third Party as part of the Third Party Sale. If MMC so requires the Executive Members to sell the Percentage of their respective Membership -25- Interests to the Third Party as part of the Third Party Sale, then such Executive Members shall sell the Percentage of their respective Membership Interests to the Third Party on the same terms and conditions as the sale by MMC of the Sale Interest to such Third Party and as if the fifth sentence of Section 5.2(c)(i) above applied thereto. (e) The closing of a Third Party Sale involving Tag-Along Participants shall take place on such date and at such time as MMC specifies to the Tag-Along Participants on not less than three (3) business days prior notice. (f) At any closing of the Transfer of Membership Interests pursuant to this Agreement by a Executive Member to a Third Party in connection with a Third Party Sale, each party Transferring all or any portion of such party's Membership Interest (each, a "Transferor") shall Transfer, convey and deliver all right, title and interest in and to such Membership Interest being Transferred by such party, which shall constitute (and, at the closing, the Transferor shall certify the same in writing) good and unencumbered title to such Membership Interest, free and clear of all Liens, subject to the restrictions of this Agreement. In addition, each Transferor shall deliver to the party to which such Membership Interest is being Transferred (the "Transferee") at such closing any opinions of counsel (relating to transferability) and certificates that the Transferee may reasonably request. (g) If any Executive Member Transfers all or any portion of such Executive Member's Membership Interest in a Third Party Sale, such Executive Member shall be responsible for their Proportionate Share of the liabilities and obligations (including, for example, liabilities and obligations for indemnification amounts and post-closing purchase price adjustments) of the Executive Members who participate in the Third Party Sale (and which are not paid by the Company), in each case, other than any such liability or obligation which is particular to MMC and from which such Executive Member derives no benefit. In addition, in the event any such Transfer by an Executive Member gives rise (in the opinion of counsel to the Company chosen by the Managing Member(s)) to an obligation on the part of the Company to deduct and withhold income taxes for which the Executive Member is liable as a result of such Transfer, the Company shall have a lien against the proceeds of such Transfer for the amount of such withholding obligations. To the extent the cash proceeds of such Transfer immediately due on such Transfer are insufficient for this purpose, the Company shall be entitled to deduct and withhold the necessary amount from any amounts then and in the future owing to the Executive Member by the Company. 5.3 Participation Right. -26- (a) Subject to the limitations and exceptions set forth herein, if the Managing Member(s) shall determine to allow a Third Party to contribute capital to the Company and become a Member thereof (a "Third Party Contribution"), at least ten (10) days prior to any such proposed Third Party Contribution to which a participation right applies as aforesaid, the Company shall give to each then Executive Member a written notice of such proposed Third Party Contribution, together with particulars thereof, including the proposed amount and form of consideration to be paid for such Membership Interest by the Third Party and the terms and conditions of payment, and, in such notice, the Company shall offer to each then Executive Member, subject to consummation of such proposed contribution, for twenty (20) days commencing on the giving of such notice, at the same price per one percentage point unit of Percentage Interest and on the same terms and conditions, the opportunity to purchase from the Company all or a portion of that Membership Interest as would, if such participation right were exercised, preserve the Percentage Interest of such Executive Member. Anything contained herein to the contrary notwithstanding, the written notice of the proposed Third Party Contribution to which a participation right applies as aforesaid need not be given prior to such proposed Third Party Contribution so long as such offer is sent within five (5) days thereafter and remains open for a twenty (20) day period from receipt thereof. (b) If an Executive Member elects to accept such offer, such Executive Member shall so signify by written notice to the Managing Member(s) given within such ten-day period, indicating the portion of the Membership Interest offered in consideration for the proposed Third Party Contribution which such Executive Member elects to purchase, and deliver the purchase price to the Company upon or within ten (10) days after the proposed closing date of the Third Party Contribution. If the amount of the proposed Third Party Contribution or any of the price or the material terms or conditions thereof is changed, the Company shall notify each then Executive Member of any such change and such Executive Member shall have the later to expire of five (5) days after such Executive Member's receipt of such notice of change or twenty (20) days after receipt of the initial offer within which to accept the initial offer as so changed or to rescind or modify such Executive Member's prior acceptance. (c) The provisions of this Section 5.3 shall not be applicable to the sale or issuance by the Company of (i) Membership Interests and other securities of the Company issued or issuable upon conversion or exercise of any interests, securities, options or rights theretofore sold, issued or granted by the Company, (ii) Membership Interests or other securities issued pursuant to a merger, consolidation or reorganization of the Company, (iii) Membership Interests or other securities of the Company issued for consideration other than cash, (iv) subject to the provisions of Section 3.4(b) hereof, Membership Interests or options, warrants or like securities, granted or issued to employees of or consultants to the Company (or any subsidiary thereof) reflecting the allocation of a number of Units not exceeding 10% of the total number of Units then allocated to all Members, (v) Membership Interests or other securities issued in connection with any split or combination or reclassification of the Membership Interests or other securities of the Company not affecting relative equity interests, or (vi) securities issued in connection with an Initial Public Offering. -27- 5.4 Purchase and Sale of Membership Interests upon Termination of Employment. The following provisions shall be applicable in the event that an Executive Member's employment with the Company is terminated (such terminated Executive Member being referred to herein as a "Terminated Member", with all references in this Section 5.4 to a "Terminated Member" being deemed to include such Terminated Member's guardian or other legal representatives, if any, and transferees under the laws of descent and distribution, if any, unless the context otherwise requires). (a) Right to Purchase Interest. If an Executive Member's employment with the Company shall terminate for any reason whatsoever, the Company shall have the right, but not the obligation, to purchase all, but not less than all, of the Membership Interest of the Terminated Member (such portion being referred to herein as the "Call Interest") at a price equal to its Appraised Value (as hereinafter defined) as of the date such Terminated Member's employment with the Company is terminated (such date being referred to herein as the "Termination Date"). The rights of the Company set forth in this subsection may be exercised by a written notice from the Managing Member(s)to the Terminated Member at any time no later than ninety (90) days following the Termination Date (the "Call Notice"). The Call Notice shall specify the time (which shall not be more than twenty-one (21) days following the determination of the Appraised Value) and place for closing the purchase of the Call Interest. The purchase of such Call Interest shall take place in accordance with, and at the time and place specified in, the Call Notice. (b) Obligation to Purchase Interest. If an Executive Member's employment with the Company shall terminate for any reason other than Cause (as then defined in such Member's Employment Agreement) or a voluntary termination by such Executive Member, the Terminated Member shall have the right, but not the obligation, to cause the Company to purchase all, but not less than all, of the Membership Interest of the Terminated Member (such portion being referred to herein as the "Put Interest") at a price equal to its Appraised Value as of the Termination Date. The rights of the Terminated Member set forth in this subsection may be exercised by a written notice from the Terminated Member to the Company at any time no later than ninety (90) days following the Termination Date (the "Put Notice"). The Put Notice shall specify the time (which shall not be more than twenty-one (21) days following the determination of the Appraised Value) and place for closing the purchase of the Put Interest. The purchase of such Put Interest shall take place in accordance with, and at the time and place specified in, the Put Notice. (c) Determination of Appraised Value; Terms of Payment; Other Provisions. -28- (i) For purposes hereof, the "Appraised Value" of any Call Interest or Put Interest to be purchased and sold pursuant to the provisions of this Section 5.4 shall be equal to the fair value thereof, taking into account only the Vested Units allocated to the Terminated Member, and not attributing any value to any Unvested Basic Units or any Contingent Units theretofore allocated to such Terminated Member, such value to be determined by an independent appraiser mutually agreeable to the Company and the Terminated Member, which appraiser shall be appointed within fifteen (15) days following the date of the Call Notice or Put Notice, as the case may be. The Company and the Terminated Member shall use their best efforts to cause the appraiser to determine the Appraised Value within thirty (30) days from the date of such appointment. If the Company and the Terminated Member are unable to agree upon an independent appraiser, then the Company and the Terminated Member shall each promptly select a recognized independent appraiser, and each of the appraisers so appointed shall be instructed to jointly select, within seven (7) days of their appointment, a third independent appraiser, who shall then be instructed to determine such fair value within fifteen (15) days after his appointment. The determination of Appraised Value in accordance with this Section 5.4 shall be final and binding upon the Company and the Terminated Member. The cost of determining the Appraised Value (A) in the case of the purchase and sale of a Call Interest shall be borne by the Company, and (B) in the case of the purchase and sale of a Put Interest shall be borne 50% by the Company and 50% by the Terminated Member. (ii) The purchase price for the purchase and sale of the Call Interest or the Put Interest, as the case may be, pursuant to the provisions of this Section 5.4 shall be paid out of the net cash flow of the Company to the extent that such purchase price balance plus the purchase price balance resulting from any other purchase by the Company of a Membership Interest does not exceed 50% of such net cash flow. In the event the Company shall have any such purchase price payment obligations to two or more Members, the amount payable out of such net cash flow for any given Company Year shall be allocated pro rata among such Members. The remaining purchase price balance for any such purchase and sale shall be due and payable on the fifth (5th) anniversary of the Option Closing Date, and shall bear interest at a rate equal to the rate announced from the time to time by the principle lending bank to MMC's Parent Entities, as its prime rate, or in the absence thereof at the prime rate published in The Wall Street Journal or an analogous publication selected by MMC. (iii) On the Option Closing Date, such Terminated Member shall pay to the Company any and all liabilities and monetary obligations of the Terminated Member to the Company, and the Company shall be entitled to deduct from the purchase price payable hereunder the full amount of such liabilities and obligations, as well as any income tax which the Company is obligated (in the opinion of counsel chosen by the Managing Member(s)) to deduct and withhold as a result of the subject purchase and sale. At the closing, the Terminated Member shall transfer, convey and deliver all right, title and interest in and to such Call Interest or Put Interest being transferred by such party, which shall constitute (and, at the closing, the Terminated Member shall certify the same in writing) good and unencumbered title to such Call Interest or Put Interest, free and clear of all Liens. In addition, the Terminated Member shall deliver to the Company at such -29- closing any opinions of counsel (relating to transferability) and certificates that the Company may reasonably request. (iv) In each case where the Company is entitled or required to exercise an option to purchase a Call Interest or a Put Interest pursuant to this Section 5.4, each Member (including the Terminated Member) shall, at the request of the Company, take such action as is necessary and lawful to permit the Company's exercise of such option and such purchase, including, but not limited to, the incurrence of indebtedness and, if applicable, the creation of legally available surplus (whether by reduction of capital, revaluation of assets or otherwise). ARTICLE 6 CERTAIN OTHER AGREEMENTS 6.1 Conversion to Corporation. (a) At such time and in such manner as the Managing Member(s) shall determine to be appropriate, the Managing Member(s) shall be entitled to cause the Company to be converted into and reconstituted as a corporation under the laws of the State of Delaware (the "Corporation"), whether by merger, transfer and/or contribution of assets and liabilities of the Company to the Corporation in exchange for shares of capital stock of the Corporation (and distribution of such shares to the Members in liquidation of the Company) or otherwise (a "Conversion", and the actual date of such Conversion being referred to herein as the "Conversion Date"). As of the Conversion Date, each Member shall, to the extent hereinafter provided, be entitled to receive a capital share ownership interest in, and if applicable phantom share grants by, the Corporation substantially equivalent, as reasonably determined by the Managing Member(s), to the Units comprising his or its Membership Interest as of the Conversion Date. Each of the Members hereby agrees to cooperate fully with such Conversion and enter into one or more stockholders' agreements which shall reflect each of their respective rights and obligations as stockholders of the Corporation, which rights and obligations shall be substantially equivalent to the respective rights and obligations of the Members under this Agreement, and with such changes taking account of the differences between the Company and the Corporation and the laws governing the same, as the Managing Member(s) shall reasonably determine (such agreements being hereinafter referred to as the "Stockholders' Agreement"). (b) In furtherance of the foregoing, upon a Conversion, Members shall be issued capital stock interests in the Corporation in accordance with the following: (i) Each Member shall be entitled to receive the following numbers of shares of common stock in the Corporation ("Common Stock"): (i) a number of shares of Common Stock equal to the number of Vested Basic Units allocated to such Member as of the Conversion Date (after giving effect to the provisions of Section 3.2 hereof); and (ii) a number of shares of Common Stock, subject to forfeiture in a manner consistent with the vesting requirements under this Agreement for Unvested Basic Units, equal to the number of Unvested Basic Units then allocated to such Member as of the Conversion Date. -30- (ii) Each Member shall also be issued in respect of the sum of such Member's Unrecovered Capital plus the amount of all adjustments made to such Member's Capital Account pursuant to clause (i), (ii) or (iii) of Section 3.5(b) hereof (such sum being called such Member's "Capital Amount"), preferred stock of the Corporation with an aggregate redemption price and liquidation preference equal in the aggregate to such Capital Amount, and otherwise with such rights, preferences and privileges as in the reasonable judgment of the Managing Member(s) shall be equitable in light of the rights, preferences and privileges to which Members are entitled under this Agreement in respect of their respective Capital Amounts. (c) Upon a Conversion, each Executive Member shall be entitled to be granted in respect of the number of Units then allocated to him which were originally allocated to him as Contingent Units (even if such Contingent Units shall have become Vested Units prior to the Conversion Date) with an equal number of "phantom share units" of the Corporation, containing terms consistent with the provisions of Exhibit A hereto ("Phantom Units"). Phantom Units which correspond to Contingent Units that, as of the Conversion Date, have become Vested Units, if any, will be granted by the Corporation and will be fully vested as of the Conversion Date. Phantom Units which correspond to Contingent Units which have not become Vested Units as of the Conversion Date will vest only at such time as those Contingent Units would have become Vested Units pursuant to the terms of this Agreement had the Company remained a limited liability company. Each Phantom Unit shall, upon the vesting thereof, entitle the grantee thereof to a non-transferable right to receive from the Corporation the following: (i) If, as and when a cash dividend or distribution shall be made to the holders of Common Stock, cash in an amount equal to the per share amount of such dividend or distribution. (ii) Upon the termination of the grantee's employment with the Corporation, or any other event which would entitle the grantee to have his Membership Interest purchased by the Company pursuant to this Agreement (a "Payment Event"), an amount (the "Redemption Amount") equal to the sum of (i) the fair market value per share of Common Stock on the date of issuance thereof (the "Base Value"), plus (ii) the applicable Phantom Unit Percentage (as hereinafter defined), multiplied by the amount, if any, by which the fair market value per share of Common Stock on the date of the Payment Event (the "Payment Event Value"), exceeds the Base Value; provided, however, that if the Base Value exceeds the Payment Event Value, then the Redemption Amount shall be equal to the Payment Event Value; in all cases as appropriately adjusted for stock splits, stock dividends and stock combinations affecting the Common Stock between the date of such issuance and the date of the Payment Event. The fair market value per share of Common Stock on the date in question shall be determined, on a fully diluted basis, treating as if they were issued and outstanding shares of Common Stock all share equivalents of each Phantom Unit and each other phantom share or stock appreciation right that may be granted by the Corporation (that is, reflecting the aggregate number of shares of Common Stock to or upon which each phantom share or stock appreciation right is equivalent or based). Such fair market value shall -31- be determined in a manner consistent with the determination of Appraised Value in Section 5.4(c) hereof, unless the Common Stock is then publicly traded, in which event fair market value will be determined as the most recent closing market price per share of the Common Stock. The "Phantom Unit Percentage" applicable to a particular grantee shall be 108% (or 111% if such grantee is at the time of such payment a full time resident of the State of Georgia). Phantom Units shall be evidenced by written agreements between the Corporation and the grantee thereof consistent with the provisions of Section 6.1(b) and otherwise in form and substance reasonably required by the Corporation. (d) At any time after the Conversion Date, the Corporation shall have the right to convert or to issue in cancellation thereof for all or any portion of any Phantom Units granted by it, shares of Common Stock equal in number to the number of such Phantom Units to be so converted or so canceled. In the event that the conversion or issuance pursuant to this paragraph (d) results in income tax liability to such Executive Member to whom such shares shall be issued, the Corporation will offer to such Executive Member a loan in a principal amount equal to 50% of such tax liability, with the amount of such tax liability being mutually determined by the accountants for the Corporation and the accountants for such Executive Member. Any such loan pursuant to this paragraph (d) shall bear interest at the lowest rate permitted by the Code and the Regulations to avoid the imputation of interest, with all principal thereon being repayable on the earlier of (i) the third anniversary of its issuance and (ii) the termination of such Executive Member's employment with the Corporation, and with accrued interest to be payable quarterly. The terms of such loan and of the notes and instruments evidencing the same shall provide for the grant to the Corporation of a first priority security interest in and pledge of the shares of capital stock of the Corporation issued to the holder of the shares in question as security for the loan, and shall otherwise be in form and substance reasonably required by the Corporation. (e) Notwithstanding the foregoing, the Company may elect to have issued to any Executive Member(s) in respect of all or any portion (as the Company may determine) of the Contingent Units (or Vested Units which were originally Contingent hereto) allocated to such Executive Member(s), in lieu of Phantom Units, a number of shares of Common Stock equal to the number of such Contingent Units (or Vested Units which were originally Contingent Units) allocated to such Executive Member(s). Such shares of Common Stock shall be issued as of the Conversion Date in respect of such Contingent Units which theretofore shall have become Vested Units, and shall be issued in respect of such Contingent Units which are not vested as of the Conversion Date on such date(s) as the corresponding number of such Contingent Units would have become Vested Units pursuant to the terms of this Agreement had the Company remained a limited liability company. In the event that the issuance of shares of Common Stock after the Conversion Date in respect of Contingent Units which were not Vested Units as of the Conversion Date results in income tax liability to the Executive Member to whom such shares are issued, the provisions of paragraph (d) above regarding the availability of a loan to cover a part of such tax liability shall likewise be applicable. 6.2 Exchange for Equity of Public Entity. In the event that MMC is then the Managing Member and in the event that the Board of Directors of any Parent Entity of MMC -32- determines to sell to the public equity securities of MMC or a Parent Entity of MMC (the entity whose equity securities are to be sold being referred to herein as the "Public Entity") pursuant to an Initial Public Offering, then, if the Initial Public Offering shall be consummated, the Executive Members shall have the right and the obligation to exchange their Membership Interests in the Company for common share equity in the Public Entity (the "Exchange") in accordance with the following: (a) In order for the Exchange to be effected at the option of the Executive Members, a Majority in Interest of the Executive Members must give MMC written notice of their intention to effect the Exchange (an "Exchange Notice") within fifteen (15) days following the date that the Executive Members are given written notice from MMC of the expected occurrence of such an Initial Public Offering (an "IPO Notice"). In the Event that a Majority in Interest of the Executive Members elect to effect the Exchange, all of the Executive Members will be required to effect the Exchange. (b) MMC shall have the right to cause the Exchange to occur and to require the Executive Members to effect the Exchange in accordance with this Section 6.2 by setting forth in the IPO Notice its demand that the Executive Members effect the Exchange. (c) Pursuant to the Exchange, each Executive Member shall be entitled to receive in exchange for his Membership Interest that number of shares of common stock of the Public Entity ("Public Entity Stock") that have a fair value which is equivalent to the fair value of the Membership Interest of such Member as of the date of the Exchange (the "Exchange Date"), based upon the fair value per share of the Public Entity Stock and the fair value of such Membership Interest as of the Exchange Date (after giving effect to the provisions of Section 3.2 hereof and to the remaining provisions of this paragraph (c)), as determined by a recognized investment banking firm appointed by MMC and reasonably acceptable to a Majority in Interest of the Executive Members (which may be the lead underwriter retained in connection with the Initial Public Offering). In determining the fair value of an Executive Member's Membership Interest, the fair value of the Company as an entity (net of indebtedness) shall be determined as of the Exchange Date (the "Company Value") and the fair value of the Executive Member's Membership Interest shall be deemed to be the portion of the Company Value which would be allocable and distributable to such Executive Member pursuant Section 4.3 hereto (after giving effect to the provisions of Sections 3.2(j) and 3.2(k) hereof as if the Initial Public Offering had occurred). (d) The closing of the Exchange shall take place on such date and at such time as MMC specifies to the Executive Members on not less than three (3) business days prior notice, and shall only be deemed to be effective if and when the Initial Public Offering giving rise thereto is consummated. (e) Upon the closing of the Exchange, all of the Executive Members' rights under this Agreement shall terminate, and the Executive Members shall no longer be Members of, or have any Membership Interest or any other equity or other interest in, the Company. -33- 6.3 Outside Businesses of MMC. MMC and/or any affiliate thereof may engage in and/or possess interests in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Company (provided, that, for so long as MMC shall be the Managing Member of the Company, such business venture is not directly competitive with a substantial portion of the principal operations of the Company to the extent such operations are within the scope of Section 1.5(a) hereof), and the Company and the Members shall have no rights, by virtue of this Agreement or otherwise, in or to such ventures or interests, or the income or profits derived therefrom, and the pursuit or acquisition of any such venture or interest, shall not be deemed wrongful or improper in any manner. Neither MMC nor any affiliate thereof shall be obligated to present any particular investment or business opportunity to the Company even if such opportunity is of a character that, if presented to the Company, could be taken by or considered a business opportunity of the Company, and MMC or any affiliate thereof shall have the right to take for its own account and benefit (individually or as a partner, shareholder, fiduciary or otherwise) or to recommend to others any such particular venture, investment or business opportunity. 6.4 Relationship with Affiliates. (a) Each of the Members hereby acknowledges and agrees that certain affiliates of MMC may elect to provide various management and support services to the Company, including, without limitation, accounting and financial services, insurance, personnel and human resources services, benefit plan administration, purchasing services, computer support services, shipping and receiving services and safety and health training services (collectively, the "Services"). The Company shall pay the provider(s) of those Services for which costs can reasonably be established a fair allocable portion of such costs, as determined based upon relevant factors, including, without limitation, actual costs attributed to the Company and, where appropriate, the number of employees of the Company or its gross sales in relation to the number of employees or gross sales of those entities sharing such Services with the Company. In addition to and without limiting the foregoing, MMC (or its affiliates) shall be entitled to be paid a continuing fee by the Company, for general management and overhead services for which allocation of costs is not possible, equal to 1.5% of the gross revenues of the Company, such fee to be payable monthly. All determinations as to actual costs, allocations of costs and the amount to be paid by the Company in respect of the Services shall be made in good faith by MMC. (b) Each of the Members hereby acknowledge and agree that the Company shall be entitled to enter into such reasonable commercial relationships with MMC and its affiliates, on such terms and conditions as MMC shall determine. 6.5 Payment of Certain Legal Fees. The Company shall pay 50% of the reasonable fees and expenses of counsel to the Executive Members incurred in connection with the negotiation, execution and delivery hereof and of the Employment Agreements, provided that the amount so payable by the Company in respect of such fees and expenses shall not exceed $14,000 in the aggregate. -34- 6.6 Termination of Certain Rights. The rights granted to the Executive Members pursuant to Sections 5.2, 5.3, 5.4 and 6.2 hereof shall not be applicable to, and shall terminate and be of no further force and effect upon the closing of, an Initial Public Offering. 6.7 Individual Obligations. Each of the respective obligations of the Members or the Executive Members under this Agreement shall be the respective obligations individually of each Member or Executive Member and shall be and remain binding on each such Member or Executive Member notwithstanding the failure of any other Member or Executive Member to comply with such obligation as its applies to him or it. ARTICLE 7 BOOKS AND RECORDS 7.1 Books, Records and Financial Statements. (a) At all times during the continuance of the Company, the Company shall maintain, at its principal place of business, separate books of account for its operations in accordance with generally accepted accounting principles and in accordance with applicable tax accounting principles. (b) The following financial information shall be transmitted by the Company to each Member within four (4) months after the close of each Company Year: (i) balance sheet of the Company as of the beginning and close of such Company Year; (ii) statement of Company profits and losses for such Company Year; (iii) statement of the Members' Capital Accounts as of the close of such Company Year, and changes therein during such Company Year; and (iv) a statement indicating such Member's share of each item of Company income, gain, loss, deduction or credit for such Company Year for income tax purposes. (c) As and when available, the Company shall furnish to each Member on a quarterly basis, unaudited quarterly financial statements of the Company for such quarter. 7.2 Accounting Method. For both financial and tax reporting purposes and for purposes of determining profits and losses, the books and records of the Company shall be kept on the accrual method of accounting. -35- 7.3 Audit. At any time at the sole discretion of the Managing Member(s), the financial statements of the Company may be audited by an independent certified public accountant, selected by the Managing Member(s), with such audit to be accompanied by a report of such accountant containing its opinion. The cost of such audits will be an expense of the Company. A copy of any such audited financial statements and accountant's report will be made available for inspection by the Members. 7.4 Fiscal Year. The fiscal year of the Company shall be calendar year or such other period as shall be determined by the Managing Member(s). ARTICLE 8 MISCELLANEOUS 8.1 Amendments. (a) Except as otherwise provided in this Section 8.1, this Agreement may not be amended except by a writing executed by the Managing Member(s) and by a Majority in Interest of the Executive Members. (b) The Managing Member(s) may amend this Agreement without the consent of any other Member (i) to reflect changes validly made in the membership of the Company and corresponding changes in the terms and provisions of this Agreement necessary to reflect or conform with any such change in membership, (ii) to reflect changes permitted in accordance with this Agreement in the Capital Accounts and/or Percentage Interests of the Members, (iii) to clarify any ambiguities herein or to appropriately adjust any mechanics or procedures set forth herein so long as the rights of the Executive Members are not prejudiced thereby, or (iv) if such amendment is of an inconsequential nature (as reasonably determined by the Managing Member(s)) and does not affect the rights of the Executive Members in any adverse respect. (c) Anything in the foregoing provisions of this Section 8.1 to the contrary notwithstanding, this Agreement shall be amended from time to time (without any required consent of the Members) in each and every manner deemed necessary or appropriate by the Managing Member(s) to comply with the then existing requirements of the Code and the Regulations and the Rulings of the Treasury Department or Internal Revenue Service affecting the Company. 8.2 Specific Performance. The parties hereto agree that money damages or other remedy at law would not be sufficient or adequate remedy for any breach or violation of, or a default under, this Agreement by them and that, in addition to all other remedies available to them, each of them shall be entitled to an injunction restraining such breach, violation or default or threatened breach, violation or default and to any other equitable relief, including without limitation specific performance, without bond or other security being required. -36- 8.3 Entire Agreement. This Agreement sets forth the entire and only agreement or understanding among the parties hereto relating to the subject matter hereof and supersedes and cancels all previous agreements, letters, negotiations, commitments and representations in respect thereof among them, and no party shall be bound by any conditions, definitions, warranties or representations with respect to the subject matter of this Agreement. 8.4 Notices. Any and all notices, demands or requests required or permitted to be given under this Agreement shall be given in writing and addressed to the parties hereto at their addresses as reflected in the records of the Company from time to time and to such other addresses as they may respectively from time to time designate by written notice, given in accordance with the terms of this Section. Notices given as provided in this Section shall be deemed effective: (a) on the date hand delivered; (b) on the first business day following the sending thereof by recognized overnight courier; and (c) on the fifth calendar day (or, if it is not a business day, then the next succeeding business day thereafter) after the depositing thereof into the exclusive custody of the U.S. Postal Service. 8.5 Gender and Number. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, the feminine and the neuter. 8.6 Benefits of Agreement. This Agreement shall be binding upon and inure to the benefit of the respective heirs, personal representatives, successors and permitted assigns of the parties hereto; provided that nothing contained herein shall permit any assignment of any Membership Interests or any rights or obligations under this Agreement except as elsewhere expressly permitted in this Agreement. This Agreement shall not inure to the benefit of or be enforceable by any creditor of the Company or of any Member or be deemed to create or be for the benefit of any person not a party hereto. 8.7 Waivers. No waiver by any party hereto of any failure by any other party hereto to comply with any obligation under this Agreement shall be effective unless in writing and signed by the party granting such waiver, and no such waiver shall be deemed a waiver of any subsequent failure of the same or similar nature. 8.8 Severability. If any provision of this Agreement would be held to be invalid, prohibited or unenforceable in any jurisdiction for any reason, such provision, as to such jurisdiction only, shall be ineffective to the extent of such invalidity, prohibition, unenforceability, without invalidating the remaining provisions of this Agreement, and the validity, legality and enforceability of such remaining provisions shall not be affected in any way thereby. 8.9 Headings. The headings and subheadings of Sections of this Agreement and/or any Schedule hereto are for convenience of reference only and shall not constitute part of or define or limit any of the provisions of this Agreement or such Schedule. -37- 8.10 Counterparts. This Agreement may be executed by the parties hereto in counterparts, or by separate signature page or instrument, each of which shall be considered an original, and all of which shall together constitute but one and the same agreement. 8.11 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to contrary choice of law principles of such State. -38- IN WITNESS WHEREOF, each of the undersigned has duly executed this Agreement as of the date first above written. MRT MANAGEMENT CORP. By: /s/ Nathan Bistricer ---------------------------------- Vice President EXECUTIVE MEMBERS: /s/ Hugh P. Shannonhouse ---------------------------------- Hugh P. Shannonhouse /s/ Richard Basaraba ---------------------------------- Richard Basaraba /s/ David Savage ---------------------------------- David Savage /s/ Robert Styron ---------------------------------- Robert Styron -39- Schedule A Members: Units - -------- Vested Unvested Contingent Basic Units Basic Units Units ----------- ----------- ----- Managing Member: MRT Management Corp. 85 -0- -0- Executive Members: Hugh P. Shannonhouse -0- 6 5-1/3 Richard Basaraba -0- 3 2-2/3 David Savage -0- 3 2-2/3 Robert Styron -0- 3 2-2/3 -40- EX-3.15 15 CERTIFICATE OF INCORPORATION OF MRT MANAGEMENT CORP. EXHIBIT 3.15 State of Delaware PAGE 1 Office of the Secretary of State I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THAT "MRT MANAGEMENT CORP." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE NOT HAVING BEEN CANCELLED OR DISSOLVED SO FAR AS THE RECORDS OF THIS OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS. THE FOLLOWING DOCUMENTS HAVE BEEN FILED: CERTIFICATE OF INCORPORATION, FILED THE SEVENTEENTH DAY OF NOVEMBER, A.D. 1995, AT 9 O'CLOCK A.M. AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION. AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO DATE. AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO DATE. /s/ Edward J. Freel - ------------------- Edward J. Freel, Secretary of State DATE: 05-19-98 State of Delaware Page 1 Office of the Secretary of State I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "MRT MANAGEMENT CORP.", FILED IN THIS OFFICE ON THE SEVENTEENTH DAY OF NOVEMBER, A.D. 1995, AT 9 O'CLOCK A.M. /s/ Edward J. Freel - ------------------- Edward J. Freel, Secretary of State DATE: 05-19-98 CERTIFICATE OF INCORPORATION OF MRT MANAGEMENT CORP. The undersigned, a natural person, for the pwpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified and referred to as the "General Corporation Law of the State of Delaware"), hereby certifies that: FIRST: The name of the corporation (hereinafter called the "corporation") is: MRT Management Corp. SECOND: The address, including street number, city and county, of the registered office of the corporation in the State of Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover, County of Kent; and the name of the registered agent of the corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc. THIRD: The nature of the business and of the purposes to be conducted and promoted by the corporation is: to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the corporation shall have the authority to issue is 1,000 shares of Common Stock, par value $.01 per share. FIFTH: The name and the mailing address of the incorporator are as follows: Andrew M. Singer, Esq. Golenbock, Eiseman, Assor & Bell 437 Madison Avenue New York, New York 10022-7302 SIXTH: The corporation is to have perpetual existence. SEVENTH: In furtherance and not in limitation of the powers conferred upon the stockholders by statute the board of directors of the corporation is expressly authorized to make, alter or repeal the by-laws of the corporation subject to the power of the stockholders to alter or repeal the by-laws made ora ed by the board of directors. EIGHTH: Except as otherwise required in the by-laws of the corporation, election of directors need not be by written ballot. Signed at New York. New York on November 17, 1995. /s/ Andrew M. Singer -------------------- Andrew M. Singer, Esg., Incorporator EX-3.16 16 BY-LAWS OF MRT MANAGEMENT CORP. EXHIBIT 3.16 BY-LAWS OF MRT MANAGEMENT CORP. (A Delaware Corporation) ARTICLE I STOCK AND STOCKHOLDERS 1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the corporation shall be entitled to have a certificate signed by, or in the name of, the corporation by the Chairman of the Board or the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation certifying the number of shares owned by him in the corporation. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Whenever the corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the corporation shall issue any shares of its stock as partly paid stock, the certificate representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares. The corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Board of Directors may require the owner of any lost, stolen, or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft, or destruction of any such certificate or the issuance of any such new certificate. 2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be required to, issue fractions of a share of stock. If the corporation does not issue fractions of a share, it shall (1) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value of fractions of a share of stock as of the time when those entitled to receive such fractions are determined, (3) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but such scrip or warrants shall not unless provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the condition that they shall become void if not exchanged for certificates representing full shares of stock before a specified date, or subject to the condition that the shares of stock for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may determine. 3. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the corporation shall be made only on the stock ledger of the corporation by the registered holder thereof, or by his attorney thereunder authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon. 4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to or dissent from any corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the directors may fix, in advance, a date as the record date for any such determination of stockholders. Such date shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed, the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if -2- notice is waived, at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. When a determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders has been made as provided in this paragraph, such determination shall apply to any adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 5. STOCKHOLDER MEETINGS. - TIME. The annual meeting shall be held on the date and at the time fixed from time to time by the Board of Directors, provided, that the first annual meeting shall be held on a date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date and at the time fixed by the Board of Directors. - PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as the Board of Directors may from time to time fix. Whenever the Board of Directors shall fail to fix such place, the meeting shall be held at the principal executive office of the corporation. - CALL. Annual meetings and special meetings may be called by the Board of Directors, the Chairman of the Board, the President, or any two or more directors, and shall be called by the President or a Vice President or the Secretary at the written demand of the holders of at least one-fourth of all outstanding shares entitled to vote on the action proposed to be taken at such meeting, which demand shall state the purpose or purposes of the proposed meeting. - NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, date, and hour of the meeting and stating the place within the city or other municipality or community at which the list of stockholders of the corporation may be examined. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called. The notice of any meeting shall also include, or be accompanied by, any additional -3- statements, information or documents prescribed by the General Corporation Law. Except as otherwise provided by the General Corporation Law, a copy of the notice of any meeting shall be given, personally or by mail, not less than ten days nor more than sixty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, and directed to each stockholder at his record address or at such other address which he may have furnished by request in writing to the Secretary of the corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States mail. If a meeting is adjourned to another time, not more than thirty days hence, and/or to another place, and if an announcement of the adjourned time and place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice need not be given to any stockholder who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of a person at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. - STOCKHOLDER LIST. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city or other municipality or community where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders. -4- - CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting - the Chairman of the Board, the President, a Vice President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the chairman of the meeting shall appoint a secretary of the meeting. - PROXY REPRESENTATION. Each stockholder entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action without a meeting, may authorize another person or persons to act for him by proxy. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. - INSPECTORS AND JUDGES. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election or judges of the vote, as the case may be, to act at the meeting or any adjournment thereof. If an inspector or inspectors or judge or judges are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors or judges. In case any person who may be appointed as an inspector or judge fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector or judge, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector or judge at such meeting with strict impartiality and according to the best of his ability. The -5- inspectors or judges, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors or judge or judges, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them. - QUORUM. The holders of a majority of the outstanding shares of stock entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders present may adjourn the meeting despite the absence of a quorum. - VOTING. Except as otherwise provided by the General Corporation Law or by the Certificate of Incorporation, each share of stock entitled to vote shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Directors shall be elected by cumulative voting, if and as provided in the Certificate of Incorporation. Any other action shall be authorized by a majority of the votes cast except where the General Corporation Law or these by-laws or the Certificate of Incorporation prescribes a different percentage of votes and/or a different exercise of voting power. In the election of directors, voting need not be by ballot. Voting by ballot shall not be required for any other corporate action except as otherwise provided by the General Corporation Law. 6. STOCKHOLDER ACTION WITHOUT A MEETING. Any action required by the General Corporation Law to be taken or which may be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be -6- delivered to the corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II DIRECTORS 1. FUNCTIONS AND DEFINITION. The business of the corporation shall be managed by or under the direction of the Board of Directors of the corporation. The use of the phrase "whole Board" herein refers to the total number of directors which the corporation would have if there were no vacancies. 2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The initial Board of Directors shall consist of one (1) person. Thereafter the number of directors constituting the whole board shall be not less than one, nor more than seven. Subject to the foregoing limitation and except for the first Board of Directors, such number may be fixed from time to time by action of the stockholders or of the directors, or, if the number is not fixed, the number shall be two. The number of directors may be increased or decreased by action of the stockholders or of the Board. 3. ELECTION AND TERM. The first Board of Directors, unless the members thereof shall have been named in the Certificate of Incorporation, shall be elected by the incorporator or incorporators and shall hold office until the first annual meeting of stockholders and until their successors have been elected and qualified or until their earlier resignation or removal. Thereafter, directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors have been elected and qualified or until their earlier resignation or removal. In the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors and/or for the -7- removal of one or more directors and for the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of a majority of the directors then in office, although less than a quorum, or by the sole remaining director, for the balance of the term thereof, or if the Board of Directors has not filled any such vacancy, it may be filled by vote of the stockholders. 4. MEETINGS. - TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble. - PLACE. Meetings shall be held at such place within or without the State of Delaware as shall be fixed by the Board. - CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the President, the Secretary or any two (2) of the directors in office. - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. The notice of any regular or special meeting shall specify the business to be transacted at the meeting and/or the purpose or purposes for which such meeting is being called, and no other business or purpose may be conducted or considered at such meeting. Notice need not be given to any director who submits a written waiver of notice signed by him before or after the time of the meeting. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he attends a meeting for the sole purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting need be specified in any written waiver of notice. -8- - QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided, that such majority shall constitute at least one-third of the whole Board, except that if the number of directors constituting the whole Board is one, then one director shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as herein otherwise provided, and except as otherwise provided by the General Corporation Law and the Certificate of Incorporation, the act of the Board shall be the act by vote of a majority of the directors present at a meeting at which a quorum is present. - CHAIRMAN OF THE MEETING. The Chairman of the Board shall preside at all meetings. If, for any reason, the Chairman of the Board is not present at any meeting, the President (if a director) shall preside, and if, for any reason, the President is not present or is not a director, any director chosen by the Board shall preside. 5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General Corporation Law or the Certificate of Incorporation, any or all of the directors may be removed for cause or without cause by the holders of a majority of the shares then entitled to vote at an election of directors, provided, however, that, in case of the corporation having cumulative voting, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if voted cumulatively at an election of directors at which the same number of votes were cast and the whole Board were then being elected. 6. COMMITTEES. The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board and except as hereinafter provided, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. No such committee shall have the power or authority to amend the Certificate of Incorporation, adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, declare a dividend, authorize the issuance of stock, elect or remove any officer, amend or repeal any resolution -9- adopted by the Board or take any action prohibited by the General Corporation Law. The notice provisions of these By-Laws pertaining to directors' meetings shall also apply to all committee meetings. 7. ACTION IN WRITING. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. 8. PARTICIPATION BY CONFERENCE PHONE. Members of the Board, or any committee designated by the Board, may participate in a meeting of the Board or committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting. 9. COMPENSATION OF DIRECTORS. The Board, by the affirmative vote of a majority of directors in office and regardless of any personal interest of any of them, may establish reasonable compensation of all directors and of the Chairman of the Board and the President. ARTICLE III OFFICERS 1. DESIGNATION. The directors shall elect a Chairman of the Board, a President and a Secretary, and may elect one or more Vice Presidents (including Executive, Senior and/or Assistant Vice Presidents), a Treasurer, Assistant Secretaries, Assistant Treasurers, and such other officers and agents as are desired. The President may but need not be a director. Any number of offices may be held by the same person, except that no officer shall, in more than one capacity, execute, acknowledge or verify any instrument required by the General Corporation Law or these By-Laws to be executed, acknowledged or verified by two or more officers. 2. TERMS OF OFFICE. Unless otherwise provided in the resolution of election or appointment, each officer shall hold office until the meeting of the Board following the next annual meeting of stockholders and until his successor has been elected and qualified. 3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be the chief executive officer of the corporation and shall preside at all meetings of the Board and of the stockholders, and shall be a member ex officio of all committees of the Board. -10- 4. PRESIDENT. The President shall be the chief operating officer of the corporation, and shall have general and active management, direction and supervision over the business and affairs of the corporation and over its several subordinate officers. 5. VICE PRESIDENTS. Each Vice President shall have such powers and perform such duties as the Board or the President may prescribe. In the absence or inability of the President to act, the Vice Presidents (in the order determined by the President or by the Board, or if there be no such determination, in the order of the election of Executive Vice Presidents, then of Senior Vice Presidents, then of Vice Presidents, and finally of Assistant Vice Presidents) may perform all the duties and may exercise any of the powers of the President. The performance of any such duty by a Vice President shall be conclusive evidence of his power to act. 6. SECRETARY. The Secretary shall have charge of the minutes of all proceedings of the stockholders and of the Board. He or she shall attend to the giving of all notices to stockholders and directors. He or she shall have charge of the seal of the corporation and shall attest the same by his or her signature whenever required. He or she shall have charge of the record of stockholders of the corporation, and of such other books and papers as the Board may direct. He or she shall have all such powers and duties as generally are incident to the position of Secretary or as may be assigned to him or her by the President or the Board. 7. TREASURER. The Treasurer shall have charge of all funds and securities of the Corporation, shall endorse the same for deposit or collection when necessary and shall deposit the same to the credit of the corporation in such banks or depositaries as the President may authorize. He or she may endorse all commercial documents requiring endorsements for or on behalf of the corporation and may sign all receipts and vouchers for payments made to the corporation. He or she shall have all such powers and duties as generally are incident to the position of Treasurer or as may be assigned to him or her by the President or by the Board. 8. ASSISTANT SECRETARIES. In the absence or inability of the Secretary to act, any Assistant Secretary may perform all the duties and exercise all the powers of the Secretary. The performance of any such duty shall be conclusive evidence of his or her power to act. An Assistant Secretary shall also perform such other duties as the President, the Secretary or the Board may assign to him or her. 9. ASSISTANT TREASURERS. In the absence or inability -11- of the Treasurer to act, an Assistant Treasurer may perform all the duties and exercise all the powers of the Treasurer. The performance of any such duty shall be conclusive evidence of his or her power to act. An Assistant Treasurer shall also perform such other duties as the President, the Treasurer or the Board may assign to him or her. 10. REMOVAL. The Board may remove any officer for cause or without cause. ARTICLE IV INDEMNIFICATION 1. LIMITATION OF CERTAIN LIABILITY OF DIRECTORS. To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as director. 2. INDEMNIFICATION AND INSURANCE. (a) Each person who was or is made a party or is threatened to be made a party to or is involved in any action suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or o a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against any expense, liability and loss (including attorneys' fees, judgments, fines, ERISA, excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators provided, however, that, except as provided in paragraph (b) hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such -12- proceeding (or part thereof) was authorized by the Board of Directors of the corporation. The right to indemnification conferred in this Section 2 shall be a contract right and shall including the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including without limitation service to an employee benefit plan) in advance of the final disposition of a proceeding shall be made only upon delivery o the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section 2 or otherwise. The corporation may, by ac&on of its Board of Directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of director and officers. (b) If a claim under paragraph (a) of this Section 2 is not paid in full by the corporation within ninety days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition when the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. 3. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses conferred in this Article 6 shall not be deemed exclusive of any other right to -13- which any person seeking indemnification or payment of expenses may be entitled under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. 4. INSURANCE. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. 5. AMENDMENT. Any future amendment or change in the indemnification and other rights provided for in this Article which has the effect of diminishing such indemnification or rights shall take effect prospectively only and shall not alter, restrict or diminish in any way the rights granted in this Article with respect to any act or occurrence as to which indemnification any other right under this Article is sought which takes place prior to the effective date of such amendment or change. ARTICLE V CONTRACTS, LOANS, CHECKS, NOTES, DRAFTS, ETC. Contracts, checks, notes, drafts, acceptances, bills of exchange and other instruments, orders or obligations for the payment of money shall be signed by the Chairman of the Board, the President or by such officer or officers or person or persons as the Board or the Chairman of the Board or the President shall from time to time determine. ARTICLE VI CORPORATE SEAL The corporate seal shall be in such form as the Board shall prescribe. ARTICLE VII FISCAL YEAR -14- The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board. ARTICLE VIII AMENDMENTS The Board of Directors shall have the power to make, alter or repeal the By-Laws of the corporation subject to the power of the stockholders to alter or repeal the By-Laws made or altered by the Board of Directors. The stockholders shall also have the power to make, alter or repeal the By-Laws of the corporation. EX-3.17 17 CERTIFICATE OF INCORPORATION OF KOFFOLK, INC. EXHIBIT 3.17 State of Delaware PAGE 1 Office of the Secretary of State I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THAT "KOFFOLK, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE NOT HAVING BEEN CANCELLED OR DISSOLVED SO FAR AS THE RECORDS OF THIS OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS. THE FOLLOWING DOCUMENTS HAVE BEEN FILED: CERTIFICATE OF INCORPORATION, FILED THE SIXTH DAY OF FEBRUARY, A.D. 1996, AT 9 O'CLOCK A.M. AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION. AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO DATE. AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO DATE. /s/ Edward J. Freel ------------------- Edward J. Freel, Secretary of State State of Delaware PAGE 1 Office of the Secretary of State I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "KOFFOLK, INC.", FILED IN THIS OFFICE ON THE SIXTH DAY OF FEBRUARY, A.D. 1996, AT 9 O'CLOCK A.M. /s/ Edward J. Freel ------------------- Edward J. Freel, Secretary of State CERTIFICATE OF INCORPORATION 0F KOFFOLK, INC. The undersigned, a natural person, for the purpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified and referred to as the "General Corporation Law of the State of Delaware"), hereby certifies that: FIRST: The name of the corporation (hereinafter called the "corporation") is: Koffolk, Inc. SECOND: The address, including street, number, city and county, of the registered office of the corporation in the State of Delaware is 1013 Centre Street, in the City of Wilmington, County of New Castle; and the name of the registered agent of the corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc. THIRD: The nature of the business and of the purposes to be conducted and promoted by the corporation is: to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the corporation shall have the authority to issue is 1,000 shares of Common Stock, par value $.0l per share. FIFTH: The name and the mailing address of the incorporator are as follows: James R. Gallop, Esq. Golenbock, Eiseman, Assor & Bell 437 Madison Avenue, 35th Floor New York, New York 10022-7302 SIXTH: The corporation shall have power to indemnify and advance expenses to any person to the full extent permitted from time to time by the General Corporation Law of the State of Delaware. The indemnification and advancement of expenses provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SEVENTH: To the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, a director shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as director. EIGHTH: The corporation is to have perpetual existence. NINTH: In furtherance and not in limitation of the powers conferred upon the stockholders by statute, the board of directors of the corporation is expressly authorized to make, alter or repeal the by laws of the corporation, subject to the power of the stockholders to alter or repeal the by--laws made or altered by the board of directors. TENTH: Except as otherwise required in the by laws of the corporation, election of directors need not be by written ballot. Signed at New York, New York on February 6, 1996. /s/ James R. Gallop ------------------- James R. Gallop, Incorporator -2- EX-3.18 18 BY-LAWS OF KOFFOLK, INC. BY-LAWS OF KOFFOLK, INC. * * * * * * * * * * ARTICLE I Offices The registered office of Koffolk, Inc. (the "Cor poration") shall be Prentice Hall Corporation System, Inc. as Registered Agent: the City of Wilmington, County of New Castle, State of Delaware. The Corporation also may have offices at such other places, within or without the State of Delaware, as the Board of Directors (the "Board") determines from time to time or the business of the Corporation requires. ARTICLE II Meetings of Stockholders Section 1. Place of Meetings, etc. Except as otherwise provided in these By-laws, all meetings of the stockholders shall be held at such dates, times and places, within or without the State of Delaware, as shall be determined by the Board or chief executive officer and as shall be stated in the notice of the meeting or in waivers of notice thereof. If the place of any meeting is not so fixed, it shall be held at the registered office of the Corporation in the State of Delaware. Section 2. Annual Meeting. The annual meeting of stockholders for the election of directors and the transaction of such other business as properly may be brought before the meeting shall be held on such date after the close of the Corporation's fiscal year as the Board may from time to time determine. Section 3. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, may be called by the Board or the chief executive officer and shall be called by the chief executive officer or the Secretary upon the written request of a majority of the holders of the outstanding shares of the Corporation's common stock. The request shall state the date, time, place and purpose or purposes of the proposed meeting. Section 4. Notice of Meetings. Except as otherwise required or permitted by law, whenever the stockholders are required or permitted to take any action at a meeting, written notice thereof shall be given, stating the place, date and time of the meeting and, unless it is the annual meeting, by or at whose direction it is being issued. The notice also shall designate the place where the list of stockholders provided for in Section 8 of this Article II is available for examination, unless such list is kept at the place where the meeting is to be held. Notice of a special meeting also shall state the purpose or purposes for which the meeting is called. A copy of the notice of any meeting shall be delivered personally or shall be mailed, not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder of record entitled to vote at the meeting. If mailed, the notice shall be given when deposited in the United States mail, postage prepaid, and shall be directed to each stockholder at his or her address as it appears on the record of stockholders, or to such other address which such stockholder may have furnished by written request to the Secretary of the Corporation. Notice of any meeting of stockholders shall be deemed waived by any stockholder who attends the meeting, except when the stockholder attends the meeting for the express purpose of objecting at the beginning thereof to the transaction of any business because the meeting is not lawfully called or convened. Notice need not be given to any stockholder who submits, either before or after the meeting, a signed waiver of notice. Unless the Board, after the adjournment of a meeting, shall fix a new record date for the adjourned meeting, or unless the adjournment is for more than thirty (30) days, notice of an adjourned meeting need not be given if the place, date and time to which the meeting shall be adjourned is announced at the meeting at which the adjournment is taken. Section 5. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, at all meetings of stockholders the holders of a majority of the outstanding shares of the Corporation entitled to vote at the meeting shall be present in person or by proxy in order to constitute a quorum for the transaction of business. Section 6. Voting. Except as otherwise provided by the Certificate of Incorporation of the Corporation, at any meeting of the stockholders every stockholder of record having the right to vote thereat shall be entitled to one vote for every share of stock 2 standing in his or her name as of the record date and entitling him to so vote. A stockholder may vote in person or by proxy. Except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, any corporate action to be taken by a vote of the stockholders, other than the election of directors, shall be authorized by not less than a majority of the votes cast at a meeting by the stockholders present in person or by proxy and entitled to vote thereon. Directors shall be elected as provided in Section 2 of Article III of these By-laws. Written ballots shall not be required for voting on any matter unless ordered by the Chairman of the meeting. Section 7. Proxies. Every proxy shall be executed in writing by the stockholder or by his or her attorney-in-fact. Section 8. List of Stockholders. At least ten (10) days before every meeting of stockholders, a list of the stockholders (including their addresses) entitled to vote at the meeting and their record holdings as of the record date shall be open for examination by any stockholder, for any purpose germane to the meeting, during ordinary business hours, at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list also shall be kept at and throughout the meeting. Section 9. Conduct of Meetings. At each meeting of the stockholders, the Chairman of the Board or, in his or her absence, the President, shall act as Chairman of the meeting. The Secretary or, in his or her absence, any person appointed by the Chairman of the meeting shall act as Secretary of the meeting and shall keep the minutes thereof. The order of business at all meetings of the stockholders shall be as determined by the Chairman of the meeting. Section 10. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation of the Corporation, any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed, in person or by proxy, by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote thereon were present and voted in person or by proxy and shall be delivered to the Corporation in accordance with the laws of the State of Delaware. Every written consent shall bear the date of signature of each stockholder signing the consent. In no event shall any corporate action referred to in any consent 3 be effective unless written consents signed by a sufficient number of stockholders to take action are duly delivered to the Corporation within sixty (60) days of the earliest dated consent delivered in accordance with the laws of the State of Delaware. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing, but who were entitled to vote on the matter. ARTICLE III Board of Directors Section 1. Number of Board Members. The Board shall consist of one (1) or more members. The number of directors may be reduced or increased from time to time by action of a majority of the entire Board, but no decrease may shorten the term of an incumbent director. When used in these By-laws, the phrase "entire Board" means the total number of directors which the Corporation would have if there were no vacancies. Section 2. Election and Term. The first Board shall be elected by the incorporator or incorporators of the Corporation and the directors shall hold office until their respective successors are duly elected and qualified or until their earlier death, resignation or removal. Thereafter, except as otherwise provided by law or by these By-laws, the directors shall be elected at the annual meeting of the stockholders and the persons receiving a plurality of the votes cast shall be so elected. Subject to his or her earlier death, resignation or removal as provided in Section 3 of this Article III, each director shall hold office until his or her successor shall have been duly elected and shall have qualified. Section 3. Removal. A director may be removed at any time, with or without cause, by action of the Board or the stockholders. Section 4. Resignations. Any director may resign at any time by giving written notice of his or her resignation to the Corporation. A resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt, and, unless otherwise specified therein, the acceptance of a resignation shall not be necessary to make it effective. 4 Section 5. Vacancies. Any vacancy in the Board arising from an increase in the number of directors or otherwise may be filled by the vote of a majority of the directors then in office, though less than a quorum, or by a sole remaining director. Subject to his or her earlier death, resignation or removal as provided in Section 3 of this Article III, each director so elected shall hold office until his or her successor shall have been duly elected and shall have qualified. Section 6. Place of Meetings. Except as otherwise provided in these By-laws, all meetings of the Board shall be held at such places, within or without the State of Delaware, as the Board determines from time to time. Section 7. Annual Meeting. The annual meeting of the Board shall be held either (a) without notice immediately after the annual meeting of stockholders and in the same place, or (b) as soon as practicable after the annual meeting of stockholders on such date and at such time and place as the Board determines. Section 8. Regular Meetings. Regular meetings of the Board shall be held on such dates and at such places and times as the Board determines. Notice of regular meetings need not be given, except as otherwise required by law. Section 9. Special Meetings. Special meetings of the Board may be called by or at the direction of the chief executive officer, and shall be called by the chief executive officer or the Secretary upon the written request of a majority of the directors. The request shall state the date, time, place and purpose or purposes of the proposed meeting. Section 10. Notice of Meetings. Notice of each special meeting of the Board (and of each annual meeting held pursuant to subdivision (b) of Section 7 of this Article III) shall be given, not later than 24 hours before the meeting is scheduled to commence, by the chief executive officer or the Secretary and shall state the place, date and time of the meeting. Notice of each meeting may be delivered to a director by hand or given to a director orally (whether by telephone or in person) or mailed or telegraphed to a director at his or her residence or usual place of business, provided, however, that if notice of less than 72 hours is given it may not be mailed. If mailed, the notice shall be deemed to have been given when deposited in the United States mail, postage prepaid, and if telegraphed, the notice shall be deemed to have been given when the contents of the telegram are transmitted to the telegraph service with instructions that the telegram imme- 5 diately be dispatched. Notice of any meeting need not be given to any director who shall submit, either before or after the meeting, a signed waiver of notice or who shall attend the meeting, except if such director shall attend for the express purpose of objecting at the beginning thereof to the transaction of any business because the meeting is not lawfully called or convened. Notice of any adjourned meeting, including the place, date and time of the new meeting, shall be given to all directors not present at the time of the adjournment, as well as to the other directors unless the place, date and time of the new meeting is announced at the adjourned meeting. Section 11. Quorum. Except as otherwise provided by law or in these By-laws, at all meetings of the Board a majority of the entire Board shall constitute a quorum for the transaction of business, and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another place, date and time. Section 12. Conduct of Meetings. At each meeting of the Board, the chief executive officer or, in his or her absence, a director chosen by a majority of the directors present, shall act as Chairman of the meeting. The Secretary or, in his or her absence, any person appointed by the Chairman of the meeting, shall act as Secretary of the meeting and keep the minutes thereof. The order of business at all meetings of the Board shall be as determined by the Chairman of the meeting. Section 13. Committee of the Board. The Board, by resolution adopted by a majority of the entire Board, may designate an executive committee and other committees, each consisting of one (1) or more directors. Each committee (including the members thereof) shall serve at the pleasure of the Board and shall keep minutes of its meetings and report the same to the Board. The Board may designate one or more directors as alternate members of any committee. Alternate members may replace any absent or disqualified member or members at any meeting of a committee. In addition, in the absence or disqualification of a member of a committee, if no alternate member has been designated by the Board, the members present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of the absent or disqualified member. Except as limited by law, each committee, to the extent provided in the resolution establishing it, shall have and may 6 exercise all the powers and authority of the Board with respect to all matters. Section 14. Operation of Committees. A majority of all the members of a committee shall constitute a quorum for the transaction of business, and the vote of a majority of all the members of a committee present at a meeting at which a quorum is present shall be the act of the committee. Each committee shall adopt whatever other rules of procedure it determines for the conduct of its activities. Section 15. Written Consent to Action in Lieu of A Meeting. Any action required or permitted to be taken at any meeting of the Board or of any committee may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 16. Meetings Held Other Than in Person. Members of the Board or any committee may participate in a meeting of the Board or committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at the meeting. ARTICLE IV Officers Section 1. Executive Officers, etc. The executive officers of the Corporation shall be a President, a Secretary and a Treasurer. The Board also may elect or appoint a Chairman of the Board, one or more Vice Presidents (any of whom may be designated as Executive Vice Presidents or otherwise), and any other officers it deems necessary or desirable for the conduct of the business of the Corporation, each of whom shall have such powers and duties as the Board determines. Any officer may devote less than one hundred percent (100%) of his or her working time to his or her activities as such if the Board so approves. Section 2. Duties. (a) The Chairman of the Board of Directors. The Chairman of the Board, if any, shall be the chief executive officer of the Corporation. The Chairman of the Board shall preside at all meetings of the stockholders and the Board, and shall be ex officio a member of all committees established. 7 (b) The President. The President shall be the chief operating officer of the Corporation. The President shall have general management of the business and affairs of the Corporation, subject to the control of the Board, and shall have such other powers and duties as the Board assigns to him or her. If there is no Chairman, the President shall be the chief executive officer of the Corporation and, as such shall preside at all meetings of the stockholders and the Board and shall be ex officio a member of all committees established. (c) The Vice President. The Vice President or, if there shall be more than one, the Vice Presidents, if any, in the order of their seniority or in any other order determined by the Board, shall perform, in the absence or disability of the President, the duties and exercise the powers of the President and shall have such other powers and duties as the Board or the President assigns to him or to her or to them. (d) The Secretary. Except as otherwise provided in these By-laws or as directed by the Board, the Secretary shall attend all meetings of the stockholders and the Board; shall record the minutes of all proceedings in books to be kept for that purpose; shall give notice of all meetings of the stockholders and special meetings of the Board; and shall keep in safe custody the seal of the Corporation and, when authorized by the Board, shall affix the same to any corporate instrument. The Secretary shall have such other powers and duties as the Board or the President assigns to him or to her. (e) The Treasurer. Subject to the control of the Board, the Treasurer shall have the care and custody of the corporate funds and the books relating thereto; shall perform all other duties incident to the office of Treasurer; and shall have such other powers and duties as the Board or the President assigns to him or her. Section 3. Election; Removal. Subject to his or her earlier death, resignation or removal as hereinafter provided, each officer shall hold his or her office until his or her successor shall have been duly elected and shall have qualified. Any officer may be removed at any time, with or without cause, by the Board. Section 4. Resignations. Any officer may resign at any time by giving written notice of his or her resignation to the Corporation. A resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be 8 specified therein, immediately upon its receipt, and, unless otherwise specified therein, the acceptance of a resignation shall not be necessary to make it effective. Section 5. Vacancies. If an office becomes vacant for any reason, the Board or the stockholders may fill the vacancy, and each officer so elected shall serve for the remainder of his or her predecessor's term. ARTICLE V Provisions Relating to Stock Certificates and Stockholders Section 1. Certificates. Certificates for the Corporation's capital stock shall be in such form as required by law and as approved by the Board. Each certificate shall be signed in the name of the Corporation by the Chairman, if any, or the President or any Vice President and by the Secretary, the Treasurer or any Assistant Secretary or any Assistant Treasurer and shall bear the seal of the Corporation or a facsimile thereof. If any certificate is countersigned by a transfer agent or registered by a registrar, other than the Corporation or its employees, the signature of any officer of the Corporation may be a facsimile signature. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature was placed on any certificate shall have ceased to be such officer, transfer agent or registrar before the certificate shall be issued, it may nevertheless be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. Section 2. Lost Certificates, etc. The Corporation may issue a new certificate for shares in place of any certificate theretofore issued by it, alleged to have been lost, mutilated, stolen or destroyed, and the Board may require the owner of the lost, mutilated, stolen or destroyed certificate, or his or her legal representatives, to make an affidavit of that fact and to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation on account of the alleged loss, mutilation, theft or destruction of the certificate or the issuance of a new certificate. Section 3. Transfers of Shares. Transfers of shares shall be registered on the books of the Corporation maintained for that purpose after due presentation of the stock certificates 9 therefor appropriately indorsed or accompanied by proper evidence of succession, assignment or authority to transfer. Section 4. Record Date. (a) The Board may fix a record date for the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof. The record date fixed for such purpose shall not precede the date upon which the resolution fixing the record date is adopted by the Board and shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting. If the Board does not fix a record date for such purpose, the record date for such purpose shall be at the close of business on the day next preceding the day on which notice is given and, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (b) The Board may fix a record date for the purpose of determining stockholders entitled to consent to action in writing in lieu of a meeting. The record date fixed for such purpose shall not precede the date upon which the resolution fixing the record date is adopted by the Board and shall not be more than ten (10) days after the adoption of such resolution fixing the record date. If the Board does not fix a record date, the record date for the purpose of determining stockholders entitled to consent to action in writing in lieu of a meeting when no prior action by the Board is required by the laws of the State of Delaware or these By-laws, the record date for such purpose shall be the first date on which a signed written consent with respect to the action taken or proposed to be taken is delivered to the Corporation in accordance with the laws of the State of Delaware. If the Board does not fix a record date and prior action by the Board is required by the laws of the State of Delaware or these By-laws, the date for determining stockholders entitled to consent to action in writing in lieu of a meeting shall be at the close of business on the day on which the Board adopts the resolution taking such prior action. (c) The Board may fix a record date for the purpose of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or the purpose of any other action. The record date fixed for such purpose shall not precede the date upon which the resolution fixing the record date is adopted and shall be no more than sixty (60) days prior to such action. If the Board does not fix a record date, the record date for determining the stockholders for any such purpose shall be at the close of business on the date on which the Board adopts the resolution relating thereto. 10 ARTICLE VI General Provisions Section 1. Dividends, etc. To the extent permitted by law, the Board shall have full power and discretion, subject to the provisions of the Certificate of Incorporation of the Corporation and the terms of any other corporate document or instrument binding upon the Corporation, to determine what, if any, dividends or distributions shall be declared and paid or made. Section 2. Seal. The Corporation's seal shall be in such form as is required by law and as shall be approved by the Board. Section 3. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board. Section 4. Voting Shares in Other Corporations. Unless otherwise directed by the Board, shares in other corporations which are held by the Corporation shall be represented and voted only by such individual or individuals as may be appointed by the Board of Directors. ARTICLE VII Amendments By-laws may be made, altered or repealed by the Board, subject to the right of the stockholders to alter or repeal any by-law made by the Board. ARTICLE VIII Indemnification Section 1. Limitation of Certain Liability of Directors. To the fullest extent permitted by the laws of the State of Delaware, a director of the Corporation shall not be liable to the Corporation or the stockholders for monetary damages for breach of fiduciary duty as director. Section 2. Indemnification and Insurance. (a) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of 11 whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the laws of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred in this Section 2 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition, provided, however, that if the laws of the State of Delaware require, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including without limitation service to an employee benefit plan) in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section 2 or otherwise. The Corporation may, by action of the Board, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) If a claim under paragraph (a) of this Section 2 is not paid in full by the Corporation within ninety days after a written claim has been received by the Corporation, the claimant 12 may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the laws of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including the Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the laws of the State of Delaware, nor an actual determination by the Corporation (including the Board's independent legal counsel, or the stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Non-Exclusivity of Rights. The right to indemnification and the payment of expenses conferred in this Article VIII shall not be deemed exclusive of any other right to which any person seeking indemnification or payment of expenses may be entitled under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 4. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the laws of the State of Delaware. 13 * * * * * 14 EX-3.19 19 CERTIFICATE OF INCORPORATION OF PHIBROCHEM, INC. STATE OF NEW JERSEY DEPARTMENT OF STATE FILING CERTIFICATION (CERTIFIED COPY) PHIBROCHEM, INC. I, the Secretary of State of the State of New Jersey, do hereby certify, that the above named business did file and record int his department the below listed document(s) and that the foregoing is a true copy of the Certificate of Incorporate as the same is taken from and compared with the original(s) filed in this office on the date set forth on each instrument and now remaining on file and of record in my office. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my Official Seal at Trenton, this 2nd day of June, 1998 /s/ Lonna R. Hooks - ------------------ Lonna R. Hooks Secretary of State CERTIFICATE OF INCORPORATION OF PHIBROCHEM, INC. TO: The Secretary of State of New Jersey THE UNDERSIGNED, of the age of eighteen years or over, for the purpose of forming a corporation pursuant to the provisions of Title 14A, Corporations, General, of the New Jersey Statutes, do hereby execute the following Certificate of Incorporation: FIRST: The name of the corporation is PHIBROCHEM, INC. SECOND: The purpose or purposes for which the corporation is organized are: To manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description, including but not limited to chemicals, pharmaceuticals and chemical products. In general, to carry on any other business in connection with the foregoing, and to have and exercise all the powers conferred by Title 14A, Corporations, General, Revised Statutes of New Jersey, and to do any or all of the things hereinbefore set forth to the same extent as natural persons might or could do, and in any part of the world. THIRD: The aggregate number of shares which the corporation shall have authority to issue is 2,500 shares without par value. FOURTH: The address of the corporation's initial registered office is 28 West State Street, Trenton, New Jersey 08608, and the name of the corporation's initial registered agent at such address is The Corporation Trust Company. FIFTH: The number of directors constituting the initial board of directors shall be three (3); and the names and addresses of the directors are as follows: NAMES ADDRESSES Charles H. Bendheim 10 Columbus Circle New York, New York 10019 Jack C. Bendheim 10 Columbus Circle New York, New York 10019 Morris Bock 10 Columbus Circle New York, New York 10019 SIXTH: The name and address of the incorporator is as follows: NAME ADDRESS Donald A. Hamburg 230 Park Avenue New York, New York 10169 IN WITNESS WHEREOF, I, the incorporator of the above named corporation, have hereunto signed this Certificate of Incorporation on the 15th day of October, 1986. /s/ Donald A. Hamburg - --------------------- Donald A. Hamburg EX-3.20 20 BY-LAWS OF PHIBROCHEM, INC. EXHIBIT 3.20 BY-LAWS OF PHIBROCHEM, INC. ARTICLE I OFFICES 1.1. Registered Office and Agent. -- The registered office of the Corporation shall be located in Fort Lee, New Jersey. 1.2. Other Places of Business. -- Branch or subordinate places of business or offices may be established at any time by the Board of Directors (the "Board") at any place or places where the Corporation is qualified to do business or where qualification is not required. ARTICLE II SHAREHOLDERS 2.1. Certificates Representing Shares. -- Certificates representing shares shall set forth thereon the statements prescribed by Section 14A:7-11 and, where applicable, by Sections 14A:5-21 and 14A:12-5, of the New Jersey Business Corporation Act and by any other applicable provision of law and shall be signed by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and may be counter-signed by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be sealed with the corporate seal or a facsimile thereof. Any or all other signatures upon a certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar, at the date of its issue. A card which is punched, magnetically coded, or otherwise treated so as to facilitate machine or automatic processing, may be used as a share certificate if it otherwise complies with the provisions of Section 14A:7-11 of the New Jersey Business Corporation Act. The Corporation may issue a new certificate for shares in place of any certificate theretofore issued by it, alleged to have been lost or destroyed, and the Board may require the owner of any lost or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate or the issuance of any such new certificate. 2.2. Fractional Share Interests. -- Unless otherwise provided in its Certificate of Incorporation, the Corporation may, but shall not be obliged to, issue factions of a share and certificates therefor. By action of the Board, the Corporation may, in lieu of issuing fractional shares, pay cash equal to the value of such fractional share or issue scrip in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip aggregating a full share. A certificate for a fractional share shall entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any distribution of assets of the Corporation in the event of liquidation, but scrip shall not entitle the holder to exercise such voting rights, receive dividends or participate in any such distribution of assets unless such scrip shall so provide. All scrip shall be issued subject -2- to the condition that it shall become void if not exchanged for certificates representing full shares before a specified date. 2.3. Share Transfers. -- Upon compliance with provisions restricting the transferability of shares, if any, transfers of shares of the Corporation shall be made only on the share record of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes due thereon, if any. 2.4. Record Date for Shareholders. -- The Board may fix, in advance, a date as the record date for determining the shareholders with regard to any corporate action or event and, in particular, for determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof; to give a written consent to any action without a meeting; or to receive payment of any dividend or allotment of any right. Any such record date shall in no case be more than sixty days prior to the shareholders' meeting or other corporate action or event to which it relates. Any such record date for a shareholders' meeting shall not be than ten days before the date of the meeting. Any such record date to determine shareholders entitled to give a written consent shall not be more than sixty days before the date fixed for tabulation of the consents or, if no date has been fixed for tabulation, more than sixty days before the last day on which consents received may be counted. If no such record date is fixed, the record date for a shareholders' meeting shall be the close of business on the day next preceding the day on which notice is given, or, if -3- no notice is given, the day next preceding the day on which the meeting is held; and the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the resolution of the Board relating thereto is adopted. When a determination of shareholders of record for a shareholders' meeting has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the Board fixes a new record date under this section for the adjourned meeting. 2.5. Meaning of Certain Terms. -- As used herein in respect of the right to notice of a meeting of shareholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "shareholder" or "shareholders" refers to an outstanding share or shares and to a holder or holders of record of outstanding shares when the Corporation is authorized to issue only one class of shares, and said reference is also intended to include any outstanding share or shares and any holder or holders of record of outstanding shares of any class upon which or upon whom the Certificate of Incorporation confers such rights where there are two or more classes or series of shares or upon which or upon whom the New Jersey Business Corporation Act confers such rights notwithstanding that the Certificate of Incorporation may provide for more than one class or series of shares, one or more of which are limited or denied such rights thereunder. 2.6. Annual Meeting. -- The annual meeting of shareholders shall be held upon not less than ten nor more than sixty days written notice of the time, place and purposes of the meeting. The meeting shall be held at the time and at the place within or without the State of New Jersey as determined by the Board. At the meeting, the shareholders shall elect -4- directors and transact any other business that properly comes before the meeting. 2.7. Special Meetings. -- A special meeting of shareholders may be called for any purpose by the President or the Board. The meeting shall be held at the time and at the place within or without the State of New Jersey as determined by the President or the Board. A special meeting shall be held upon not less than ten nor more than sixty days written notice of the time, place, and purposes of the meeting. 2.8. Action Without Meeting. -- The shareholders may act without a meeting by written consent or consents pursuant to Section l4A:5-6 of the New Jersey Business Corporation Act. The written consent or consents shall be filed in the minute book. 2.9. Quorum. -- Except for meetings ordered by the Superior Court to be called and held pursuant to Sections 14A:5-2 and 14A:5-3 of the New Jersey Business Corporation Act, the presence at a meeting in person or by proxy of the holders of shares entitled to cast a majority of the votes of all shares entitled to vote shall constitute a quorum. 2.10. Voting. -- Each share shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect, and no election need be by ballot unless a shareholder demands the same before the voting begins. Any other action shall be authorized by a majority of the votes cast except where the New Jersey Business Corporation Act prescribes a different proportion of votes. 2.11. Presiding Officer. -- The President shall preside at all shareholder meetings unless the Board designates another person to preside. -5- ARTICLE III BOARD OF DIRECTORS 3.1. Number and Term of Office. -- A director need not be a shareholder, a citizen of the United States or a resident of the State of New Jersey. The Board shall consist of not less than two nor more than eleven members. Directors shall be elected by the shareholders at each annual meeting and shall hold office until the next annual meeting of shareholders and until their successors shall have been elected and qualified. 3.2. Regular Meetings. -- A regular meeting of the Board shall be held without notice immediately following and at the same place as the annual shareholders' meeting for the purpose of electing officers and conducting any other business that may come before the meeting. The Board may decide to have additional regular meetings that may be held without notice. 3.3. Special Meetings. -- A special meeting of the Board may be called for any purpose at any time by the President or by two directors. The meeting shall be held upon not less than two days notice if given by telegram, orally (either by telephone or in person), or by facsimile transmission, upon not less than three days notice if given by overnight courier delivery service, or upon not less than five days notice if given by depositing the notice in the United States mails, first class postage prepaid. The notice shall be deemed given at the time it is given orally, the facsimile transmission is originated (and there is no reason to believe it was not received), it is delivered to the overnight courier service, or it is deposited in the United States mails. The notice shall specify the time and place, and may, but need not, specify the purposes, of the meeting. -6- 3.4. Action Without Meeting. -- The Board may act without a meeting if, prior or subsequent to the action, each member of the Board consents in writing to the action. The written consent or consents shall be filed in the minute book. 3.5. Use of Communications Equipment. -- Any director may participate in a meeting of the Board by means of conference telephone or any other means of communication by which all persons participating in the meeting are able to hear each other. 3.6. Quorum. -- The presence at a meeting of persons entitled to cast a majority of the votes of the entire Board shall constitute a quorum for the transaction of business. 3.7. Votes Required. -- Any action approved by a majority of the votes of the entire Board shall be the act of the Board except approval of the following, which shall require the affirmative vote of three- quarters of the votes of the entire Board: (a) any change in the compensation, title, status, or duties of any employee who is also a shareholder; or (b) the issuance of shares of the capital stock of the Corporation; or (c) an increase or decrease in the number of directors of the Corporation; or (d) any amendment to this paragraph 3.7 of the By-Laws. 3.8. Vacancies in Board of Directors. -- Any vacancy in the Board, including a vacancy caused by an increase in the number of directors, may be filled by a majority of the votes of the remaining directors, even though less than a quorum of the Board, or by a sole remaining director. -7- 3.9. Committees. -- The Board of Directors, by resolution adopted by a majority of the entire Board, may appoint from among its members one or more directors to constitute an Executive Committee and one or more other committees, each of which, to the extent provided in the resolution appointing it, shall have and may exercise all of the authority of the Board with the exception of any authority the delegation of which is prohibited by Section 14A:6-9 of the New Jersey Business Corporation Act. Actions taken at a meeting of any such committee shall be reported to the Board at its next meeting following such committee meting; except that, when the meeting of the Board is held within two days after the committee meeting, such report shall, if not made at the first meeting, be made to the Board at its second meeting following such committee meeting. Each director of a committee shall have one vote at meetings of that committee. The participation of directors with the majority of the votes of a committee shall constitute a quorum of that committee for the transaction of business. Any action approved by a majority of the votes of directors of a committee present at a meeting of that committee at which quorum is present shall be the act of the committee unless the New Jersey Business Corporation Act requires a greater proportion. ARTICLE IV WAIVERS OF NOTICE Any notice required by these By-Laws, by the Certificate of Incorporation, or by the New Jersey Business Corporation Act may be waived in writing by any person entitled to notice. The waiver, or waivers, may be executed either before or after the event with respect to which the notice is -8- waived. Each director or shareholder attending a meeting without protesting, prior to its conclusion, the lack of proper notice shall be deemed conclusively to have waived notice of the meeting. ARTICLE V OFFICERS 5.1. Election. -- At its regular meeting following the annual meeting of shareholders, the Board shall elect a President, a Treasurer, a Secretary, and it may elect any other officers, including one or more Vice Presidents, as it shall deem necessary. One person may hold two or more offices. Each officer shall serve at the pleasure of the Board and shall be subject to removal at any time, with or without cause. 5.2. Duties and Authority of President. -- The President shall be chief executive officer of the Corporation. Subject only to the authority of the Board, the President shall have general charge and supervision over, and responsibility for, the business and affairs of the Corporation. Unless otherwise directed by the Board, all other officers shall be subject to the authority and supervision of the President. The President may enter into and execute in the name of the Corporation contracts or other instruments in the regular course of business or contracts or other instruments not in the regular course of business which are authorized, either generally or specifically, by the Board. The President shall have the general powers and duties of management usually vested in the office of President of a business corporation. 5.3. Duties and Authority of Vice Presidents. -- Each Vice President shall perform the duties and have the authority that may be delegated to him or her from time to time by the President or by the Board. -9- In the absence of the President, or in the event of the President's death, inability, or refusal to act (unless the Board determines otherwise) the Vice President designated as successor for these purposes by the Board or, if there is none, the most senior Vice President, shall perform the duties and be vested with the authority of the President. 5.4. Duties and Authority of Treasurer. -- The Treasurer shall have custody of the funds and securities of the Corporation and shall keep or cause to be kept regular books of account for the Corporation. The Treasurer shall perform such other duties and possess such other powers as are incident to the office of Treasurer or as shall be assigned to him or her by the President or the Board. 5.5. Duties and Authority of Secretary. -- The Secretary shall cause notices of all meetings to be served as prescribed in these By-Laws and shall keep or cause to be kept the minutes of all meetings and written consents of the shareholders and the Board. The Secretary shall perform such other duties and possess such other powers as are incident to the office of Secretary or as shall be assigned to him or her by the President or the Board. ARTICLE VI AMENDMENTS TO AND EFFECT OF BY-LAWS 6.1. Force and Effect of By-Laws. -- These By-Laws are subject to the provisions of the New Jersey Business Corporation Act and the Corporation's Certificate of Incorporation, as each may be amended from time to time. If any provision in these By-Laws is inconsistent with a -10- provision in that Act or the Certificate of Incorporation, the provision of that Act or the Certificate of Incorporation shall govern. 6.2. Amendments to By-Laws. -- These By-Laws may be altered, amended, or repealed by the shareholders or the Board. Any by-law adopted or amended by the shareholders may be amended or repealed by the Board, unless the resolution of the shareholders adopting the by-law expressly reserves to the shareholders the right to amend or repeal it. ARTICLE VII INDEMNIFICATION 7.1 Limitation of Certain Liability of Directors. -- To the fullest extent permitted by the New Jersey Business Corporation Law as the same exists or may hereafter be amended, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as director. 7.2 Indemnification and Insurance. -- (a) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless -11- by the corporation to the fullest extent authorized by the New Jersey Business Corporation Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred in this Section 7.2 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the New Jersey Business Corporation Act requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including without limitation service to an employee benefit plan) in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that -12- such director or officer is not entitled to be indemnified under this Section 7.2 or otherwise. The Corporation may, by action of its Board, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) If a claim under paragraph (a) of this Section 7.2 is not paid in full by the Corporation within ninety days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the New Jersey Business Corporation Act for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the New Jersey Business Corporation Act, nor an actual determination by the Corporation (including its Board's independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. -13- 7.3 Non-Exclusivity of Rights. -- The right to indemnification and the payment of expenses conferred in this Article shall not be deemed exclusive of any other right to which any person seeking indemnification or payment of expenses may be entitled under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. 7.4 Indemnification. -- The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the New Jersey Business Corporation Act. 7.5 Amendment. -- Any future amendment or change in the indemnification and other rights provided for in this Article which has the effect of diminishing such indemnification or rights shall take effect prospectively only and shall not alter, restrict or diminish in any way the rights granted in this Article with respect to any act or occurrence as to which indemnification any other right under this Article is sought which takes place prior to the effective date of such amendment or change. ARTICLE VIII -14- CONTRACTS, LOANS, CHECKS, NOTES, DRAFTS, ETC. Contracts, checks, notes, drafts, acceptances, bills of exchange and other instruments, orders or obligations for the payment of money shall be signed by the President or by such officer or officers or person or persons as the Board or the President shall from time to time determine. ARTICLE IX REGISTERED OFFICE, BOOK AND RECORD The address of the initial registered office of the Corporation in the State of New Jersey, and the name of the initial registered agent at said address, are set forth in the original Certificate of Incorporation of the Corporation. The Corporation shall keep books and records of account and minutes of the proceedings of its shareholders, Board, and the Executive Committee and other committee or committees, if any. Such books, records and minutes may be kept within or outside the State of New Jersey. The Corporation shall keep at its principal office, or at the office of its transfer agent, its registered office, a record or records containing the names and addresses of all shareholders, the number, class, and series of shares held by each of the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes, or records may be in written form or in any other form capable of being converted into readable form within a reasonable time. ARTICLE X -15- CORPORATE SEAL The corporate seal shall be in such form as the Board shall prescribe. ARTICLE XI FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board. -16- EX-3.21 21 CERTIFICATE OF INCORPORATION OF PHIBRO CHEMICALS, INC. EXHIBIT 3.21 State of New York ss: Department of State I hereby certify, that the certificate of incorporation of PHIBRO CHEMICALS, INC. was filed on 12/20/1985, with perpetual duration, and that a diligent examination has been made of the index of corporation papers filed in this Department for a certificate, order, or record of a dissolution, and upon such examination, no such certificate, order or record has been found, and that so far as indicated by the records of this Department, such corporation is a subsisting corporation. I further certify the following: A Biennial Statement was filed 01/08/1993. A Biennial Statement was filed 12/10/1993. A Biennial Statement was filed 12/10/1997. I further certify, that no other certificates have been filed by such corporation. Witness my hand and the official seal of the Department of State at the City of Albany, this 18th day of May one thousand nine hundred and ninety-eight. /s/ - --------------------------------- Special Deputy Secretary of State State of New York ss: Department of State I hereby certify that the annexed copy has been compared with the original document in the custody of the Secretary of State and that the same is a true copy of said original. Witness my hand and seal of the Department of State on May 20, 1998 /s/ - --------------------------------- Special Deputy Secretary of State DOS-1266 (5/96) CERTIFICATION OF INCORPORATION OF PHIBRO CHEMICALS, INC. UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW OF THE STATE OF NEW YORK I, DONALD A. HAMBURG, being a natural person over the age of 18 years, for the purpose of forming a corporation pursuant to Section 402 of the Business Corporation Law, do hereby certify as follows: FIRST: The name of the corporation (the "Corporation") is PHIBRO CHEMICALS, INC. SECOND: The purposes for which the Corporation is formed are to engage in any lawful act for which corporations may be organized under the Business Corporation Law, but the Corporation is not formed to engage in any act or activity requiring the consent or approval of any state official, department, board, agency or other body without such consent or approval first being obtained. THIRD: The office of the Corporation is to be located in the City of New York, County of New York, State of New York. FOURTH: The aggregate number of shares which the Corporation shall have authority to issue shall be 200 shares of Common Stock, without par value. FIFTH: The Secretary of State of the State of New York is designated as agent of the Corporation upon whom process against the Corporation may be served. The post office address to which the Secretary of State shall mail a copy of any process against the Corporation served upon him is: c/o Weitzner, Levine, Hamburg, Maley & Walzer, 230 Park Avenue, New York, New York 10169. IN WITNESS WHEREOF, the undersigned has made, signed, and affirmed the truth of the statements contained in this Certificate under the penalty of perjury, this 11th day of December, 1985. /s/ Donald A. Hamburg - --------------------- Name: Donald A. Hamburg Address: 230 Park Avenue New York, New York 10169 EX-3.22 22 BY-LAWS OF PHIBRO CHEMICALS, INC. BY-LAWS of PHIBRO CHEMICALS, INC. (a New York Corporation) ---------- ARTICLE I Shareholders SECTION 1. Place of Meetings. Meetings of shareholders shall be held at such place, either within or without the State of New York, as shall be designated from time to time by the Board of Directors. SECTION 2. Annual Meetings. Annual meetings of shareholders shall be held on such date of each year and at such time as shall be designated from time to time by the Board of Directors. At each annual meeting the shareholders shall elect a Board of Directors by plurality vote and transact such other business as may properly be brought before the meeting. SECTION 3. Special Meetings. Special meetings of the shareholders may be called by the Board of Directors or by the President or the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting. SECTION 4. Notice of Meetings. Written notice of each meeting of the shareholders stating the place, date and hour of the meeting shall be given by or at the direction of the Board of Directors to each shareholder entitled to vote at the meeting at least ten, but not more than fifty, days prior to the meeting. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is called. SECTION 5. Quorum; Adjournments of Meetings. The holders of a majority of the issued and outstanding shares of the capital stock of the corporation entitled to vote at a meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business at such meeting; but, if there be less than a quorum, the holders of a majority of the stock so present or represented may adjourn the meeting to another time or place, from time to time until a quorum shall be present, whereupon the meeting may be held, as adjourned, without further notice, except as required by law, and any business may be transacted thereat which might have been transacted at the meeting as originally called. SECTION 6. Voting. At any meeting of the shareholders every registered owner of shares entitled to vote may vote in person or by proxy and, except as otherwise provided by statute, in the Certificate of Incorporation or these By-Laws, shall have one vote for each such share standing in his name on the books of the corporation. Except as otherwise required by statute, the Certificate of Incorporation or these By-Laws, all corporate action, other than the election of directors, to be taken by vote of the shareholders shall be authorized by a majority of the votes cast at such meeting by the holders of shares entitled to vote thereon, a quorum being present. SECTION 7. List of Shareholders. At least ten (10) days before every meeting of shareholders, a list of the shareholders (including their addresses) entitled to vote at the meeting and their record holdings as of the record date shall be open for examination by any shareholder, for any purpose germane to the meeting, during ordinary business hours, at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list also shall be kept at and throughout the meeting. SECTION 8. Inspectors of Election. The Board of Directors, or, if the Board shall not have made the appointment, the chairman presiding at any meeting of shareholders, shall have power to appoint one or more persons to act as inspectors of election at the meeting or any adjournment thereof, but no candidate for the office of director shall be appointed as an inspector at any meeting for the election of directors. SECTION 9. Chairman of Meetings. The Chairman of the Board, if any, or, in his absence, the President shall preside at all meetings of the shareholders. In the absence of both the Chairman of the Board and the President, a majority of the members of the Board of Directors present in person at such meeting may appoint any other officer or director to act as chairman of the meeting. SECTION 10. Secretary of Meetings. The Secretary of the corporation shall act as secretary of all meetings of the shareholders. In the absence of the Secretary, the chairman of the meeting shall appoint any other person to act as secretary of the meeting. SECTION 11. Consent of Shareholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation of the Corporation, any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed, in person or by proxy, by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote thereon were present and voted in person or by proxy and shall be delivered to the Corporation in accordance with the laws of the State of New York. Every written consent shall bear the date of signature of each shareholder signing the consent. In no event shall any corporate action referred to in any consent be effective unless written consents signed by a sufficient number of shareholders to take action are duly delivered to the Corporation within fifty (50) days of the earliest dated consent delivered in accordance with the laws of the State of New York. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those shareholders who have not consented in writing, but who were entitled to vote on the matter. ARTICLE II 3 Board of Directors SECTION 1. Number of Directors. The number of directors constituting the entire board shall be at least three, except that whenever all shares of the corporation's stock are owned beneficially and of record by less than three shareholders, the number of directors may be less than three but not less than the number of shareholders. The number of directors may be reduced or increased from time to time by action of a majority of the entire Board, but no decrease may shorten the term of an incumbent direc tor. When used in these By-laws, the phrase "entire Board" means the total number of directors which the Corporation would have if there were no vacancies. SECTION 2. Election and Term. The first Board shall be elected by the incorporator of the Corporation and the directors shall hold office until their respective successors are duly elected and qualified or until their earlier death, resignation or removal. Thereafter, except as otherwise provided by law or by these By-Laws, the directors shall be elected at the annual meeting of the shareholders and the persons receiving a plurality of the votes cast shall be so elected. Subject to his earlier death, resignation or removal as provided in Section 3 of this Article II, each director shall hold office until his successor shall have been duly elected and shall have qualified. SECTION 3. Removal. A director may be removed at any time, with or without cause, by action of the Board or the stockholders. SECTION 4. Vacancies. Whenever any vacancy shall occur in the Board of Directors by reason of death, resignation, removal, increase in the number of directors or otherwise, it may be filled by the vote of a majority of directors then in office, although less than a quorum exists, or by the affirmative vote of the holders of stock of the corporation which would be entitled to elect a director to fill such vacancy at an annual meeting of shareholders. SECTION 5. First Meeting. The first meeting of each newly elected Board of Directors, of which no notice shall be necessary, shall be held immediately following the annual meeting 4 of shareholders or any adjournment thereof at the place the annual meeting of shareholders was held at which such directors were elected, or at such other place as a majority of the members of the newly elected Board who are then present shall determine, for the election or appointment of officers for the ensuing year and the transaction of such other business as may be brought before such meeting. SECTION 6. Regular Meetings. Regular meetings of the Board of Directors, other than the first meeting, may be held without notice at such times and places as the Board of Directors may from time to time determine. SECTION 7. Special Meetings. Special meetings of the Board of Directors may be called by order of the Chairman of the Board, if any, the President, the Secretary or any director. Notice of the time and place of each special meeting shall be given by or at the direction of the person or persons calling the meeting by mailing the same at least three days before the meeting or by telephoning, telegraphing or delivering personally the same at least twenty-four hours before the meeting to each director. Except as otherwise specified in the notice thereof, or as required by statute, the Certificate of Incorporation or these By-Laws, any and all business may be transacted at any special meeting. SECTION 8. Organization. Every meeting of the Board of Directors shall be presided over by the Chairman of the Board, if any, or, in his absence, the President. In the absence of the Chairman of the Board and the President, a presiding officer shall be chosen by a majority of the directors present. The Secretary of the corporation shall act as secretary of the meeting, but, in his absence, the presiding officer may appoint any person to act as secretary of the meeting. SECTION 9. Quorum; Vote. Not less than a majority of the members of the entire Board of Directors shall constitute a quorum for the transaction of business or of any specified item of business, and the affirmative vote of not less than a majority of the members of the entire Board of Directors shall be necessary and required for the transaction of business or of any specified item of business. SECTION 10. Action Without Meeting; Telephonic Meetings. Any action required or permitted to be taken by the Board of 5 Directors may be taken without a meeting if all members of the Board of Directors consent in writing to the adoption of a resolution or resolutions authorizing the action, which resolution or resolutions, and the written consent thereto by the members of the Board of Directors, shall be filed with the minutes of the proceedings of the Board of Directors. Any one or more members of the Board of Directors may participate in a meeting of such Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. ARTICLE III Officers SECTION 1. General. The Board of Directors may elect the officers of the corporation, which shall include a President, a Secretary and a Treasurer and such other or additional officers (including, without limitation, a Chairman of the Board, one or more Vice-Chairmen, Vice-Presidents, Assistant Secretaries and Assistant Treasurers) as the Board of Directors may designate. SECTION 2. Term of Office; Removal and Vacancy. Each officer shall hold his office until the meeting of the Board of Directors following the next annual meeting of shareholders and until his successor has been elected and qualified, or until his earlier resignation or removal. Any officer or agent shall be subject to removal with or without cause at any time by the Board of Directors. Vacancies in any office, whether occurring by death, resignation, removal or otherwise, may be filled by the Board of Directors. SECTION 3. Powers and Duties. Each of the officers of the corporation shall, unless otherwise ordered by the Board of Directors, have such powers and duties as generally pertain to their respective offices as well as such powers and duties as from time to time may be conferred upon him by the Board of Directors. Unless otherwise ordered by the Board of Directors after the adoption of these By-Laws, the President shall be the chief executive officer of the corporation and the chief operating officer of the corporation. 6 SECTION 4. Power to Vote Stock. Unless otherwise ordered by the Board of Directors, the Chairman of the Board and the President each shall have full power and authority on behalf of the corporation to attend and to vote at any meeting of shareholders of any corporation in which this corporation may hold stock, and may exercise on behalf of this corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting and shall have power and authority to execute and deliver proxies, waivers and consents on behalf of the corporation in connection with the exercise by the corporation of the rights and powers incident to the ownership of such stock. The Board of Directors, from time to time, may confer like powers upon any other person or persons. ARTICLE IV Shares SECTION 1. Certificates of Stock. Certificates representing shares of stock of the corporation shall be in such form complying with the applicable statute as the Board of Directors may from time to time prescribe and shall be signed by the Chairman of the Board or a Vice-Chairman of the Board or the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. SECTION 2. Transfer of Stock. Shares of capital stock of the corporation shall be transferable on the books of the corporation only by the holder of record thereof, in person or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, with an assignment or power of transfer endorsed thereon or delivered therewith, duly executed, and with such proof of the authenticity of the signature and of authority to transfer, and of payment of transfer taxes, as the corporation or its agents may require. SECTION 3. Ownership of Stock. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the owner thereof in fact and shall not be bound to recognize any equitable or other claim to or interest in such 7 shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. SECTION 4. Record Date (a) The Board may fix a record date for the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof. The record date fixed for such purpose shall not precede the date upon which the resolution fixing the record date is adopted by the Board and shall not be more than fifty (50) days nor less than ten (10) days before the date of such meeting. If the Board does not fix a record date for such purpose, the record date for such purpose shall be at the close of business on the day next preceding the day on which notice is given and, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (b) The Board may fix a record date for the purpose of determining shareholders entitled to consent to action in writing in lieu of a meeting. The record date fixed for such purpose shall not precede the date upon which the resolution fixing the record date is adopted by the Board and shall not be more than ten (10) days after the adoption of such resolution fixing the record date. If the Board does not fix a record date, the record date for the purpose of determining shareholders entitled to consent to action in writing in lieu of a meeting when no prior action by the Board is required by the laws of the State of New York or these By-laws, the record date for such purpose shall be the first date on which a signed written consent with respect to the action taken or proposed to be taken is delivered to the Corporation in accordance with the laws of the State of New York. If the Board does not fix a record date and prior action by the Board is required by the laws of the State of New York or these Bylaws, the date for determining shareholders entitled to consent to action in writing in lieu of a meeting shall be at the close of business on the day on which the Board adopts the resolution taking such prior action. (c) The Board may fix a record date for the purpose of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or the purpose of any other action. The record date fixed for such purpose shall not precede the date upon which the resolution fixing 8 the record date is adopted and shall be no more than fifty (50) days prior to such action. If the Board does not fix a record date, the record date for determining the shareholders for any such purpose shall be at the close of business on the date on which the Board adopts the resolution relating thereto. ARTICLE V Miscellaneous SECTION 1. Corporate Seal. The seal of the corporation shall be circular in form and shall contain the name of the corporation and the year and state of incorporation. SECTION 2. Fiscal Year. The Board of Directors shall have power to fix, and from time to time to change, the fiscal year of the corporation. ARTICLE VI Indemnification SECTION 1. Limitation of Certain Liability of Directors. To the fullest extent permitted by the laws of the State of New York, a director of the Corporation shall not be liable to the Corporation or the shareholders for monetary damages for breach of fiduciary duty as director. SECTION 2. Indemnification and Insurance. (a) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, 9 officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the laws of the State of New York, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred in this Section 2 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition, provided, however, that if the laws of the State of New York require, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including without limitation service to an employee benefit plan) in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section 2 or otherwise. The Corporation may, by action of the Board, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) If a claim under paragraph (a) of this Section 2 is not paid in full by the Corporation within ninety days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any 10 such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the laws of the State of New York for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including the Board, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the laws of the State of New York, nor an actual determination by the Corporation (including the Board's independent legal counsel, or the shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. SECTION 3. Non-Exclusivity of Rights. The right to indemnification and the payment of expenses conferred in this Article VIII shall not be deemed exclusive of any other right to which any person seeking indemnification or payment of expenses may be entitled under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 4. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the laws of the State of New York. 11 ARTICLE VII Amendment The Board of Directors shall have the power to adopt, amend or repeal the By-Laws of the corporation subject to the power of the shareholders to amend or repeal the By-Laws made or altered by the Board of Directors. * * * * * 12 -----END PRIVACY-ENHANCED MESSAGE-----