-----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, PL2ivHoHxoL0TJqJeYpdQtpgIgJcQUtjAV9VsPcvufxBcXPobZhA1cagTXHSVB/G yHmTYLP4nnZjEVj8L08wHQ== /in/edgar/work/0000889812-00-003896/0000889812-00-003896.txt : 20000927 0000889812-00-003896.hdr.sgml : 20000927 ACCESSION NUMBER: 0000889812-00-003896 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 40 FILED AS OF DATE: 20000922 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHILIPP BROTHERS CHEMICALS INC CENTRAL INDEX KEY: 0001069899 STANDARD INDUSTRIAL CLASSIFICATION: [2810 ] IRS NUMBER: 131840497 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-64641 FILM NUMBER: 727361 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 S-4/A 1 0001.txt POST-EFFECTIVE AMENDMENT NO. 1 TO S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 22, 2000 REGISTRATION NO. 333-64641 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ POST EFFECTIVE AMENDMENT NO. 1 TO 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 IDENTIFICATION INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) 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. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. // If this form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /X/ Registration No. 333-64641 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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
PART II INFORMATION NOT REQUIRED IN PROSPECTUS INTRODUCTORY NOTE. This Post Effective Amendment No. 1 is filed pursuant to Rule 462(d) of the Securities Act solely for the purpose of retransmitting in EDGAR format certain exhibits (the "Retransmitted Exhibits") to the Registrant's registration statement on Form S-4, Registration No. 333-64641 (the "Registration Statement"). The Retransmitted Exhibits were not received by the Securities and Exchange Commission (the "Commission") as part of the EDGAR transmission of the Registration Statement as originally filed on September 29, 1998 (the "Original Filing"), due to a transmission error by the Registrant's EDGAR service provider. As indicated by the footnotes to the Exhibit Index below, certain of the Retransmitted Exhibits were amended by amendments to the Registration Statement filed subsequent to the date of the Original Filing. The Registration Statement, as amended, was declared effective by the Commission on December 17, 1998. 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 Schmiedeskamp, Robertson, New & Mitchell regarding the legality of securities being registered* 5.4 Opinion of Martin H. Philip, Esq. 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 1, 1986 and 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** 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.** 10.24 Purchase Agreement, dated as of June 1, 1998, between Jack C. Bendheim and the Company* 10.25 Agreement, dated as of June 1, 1998, by and among Jack C. Bendheim, Phibro-Tech, Inc., MRT Management Corp. and Mineral Resource Technologies, L.L.C.* 10.26 Licensing Agreement, dated January 28, 1980, between Gunness Wharf Limited and BOC Limited+ * 10.27 Agreement, dated January 28, 1980, between BOC Limited and Gunness Wharf Limited+ * 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 PricewaterhouseCoopers DA, certified public accountants* 23.8 Consent of Golenbock, Eiseman, Assor & Bell (included as part of Exhibit 5.1 to this Registration Statement)* 23.9 Consent of Blanc, Williams, Johnston & Kronstadt L.L.C. (included as part of Exhibit 5.2 to this Registration Statement)* 23.10 Consent of Martin H. Philip, Esq. (included as part of Exhibit 5.3 to this Registration Statement)* 23.11 Consent of Schmiedeskamp, Robertson, New & Mitchell (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 as filed on September 29, 1998)* 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** @ - ------------------ * Previously filed. ** Filed herewith solely for the purpose of retransmitting such exhibit, which was not received by the Commission as part of the original filing of this Registration Statement on September 29, 1998 as a result of a transmission error on the part of the Registrant's EDGAR service provider. + A request for confidential treatment has been granted for portions of such document. Confidential portions have been omitted and filed separately with the SEC as required by Rule 406(b). ++ Amended in Pre-Effective Amendment No. 2 to the Registration Statement filed December 14, 1998. @ Amended in Pre-Effective Amendment No. 3 to the Registration Statement filed December 17, 1998. SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. PHILIPP BROTHERS CHEMICALS, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECIVVE AMENDMENT TO 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 21, 2000 - ------------------------- Chief Executive Officer Jack C. Bendheim Principal Executive Officer) /s/ MARVIN S. SUSSMAN* Director September 21, 2000 - ------------------------- Marvin S. Sussman /s/ JAMES O. HERLANDS* Director September 21, 2000 - ------------------------- James O. Herlands /s/ NATHAN Z. BISTRICER* Vice President and Chief Financial September 21, 2000 - ------------------------- Officer (Principal Financial Officer and Nathan Z. Bistricer Principal Accounting Officer)
- ------------------ *Executed pursuant to a power of attorney contained in the Registration Statement SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. C.P. CHEMICALS, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO 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 21, 2000 - ------------------------- (Principal Executive Officer) Jack C. Bendheim /s/ JAMES O. HERLANDS* Director September 21, 2000 - -------------------------- James O. Herlands /s/ NATHAN Z. BISTRICER* Vice President and Chief Financial September 21, 2000 - ------------------------- Officer (Principal Financial Officer Nathan Z. Bistricer and Principal Accounting Officer)
- --------------- *Executed pursuant to a power of attorney contained in the Registration Statement SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. KOFFOLK, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO 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 21, 2000 - ------------------------- Treasurer (Principal Executive Officer, Jack C. Bendheim Principal Financial Officer and Principal Accounting Officer)
SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. 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 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO 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 21, 2000 - ------------------------ Officer, Managing Member (Principal Jack C. Bendheim Executive Officer, Managing Member) /s/ NATHAN Z. BISTRICER* Director, Vice President and Chief September 21, 2000 - ------------------------- Financial Officer, Managing Member Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer) /s/ HUGH P. SHANNONHOUSE* Director, Managing Member September 21, 2000 - ------------------------- Hugh P. Shannonhouse
- ------------------ *Executed pursuant to a power of attorney contained in the Registration Statement SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. MRT MANAGEMENT CORP. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO 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 21, 2000 - ---------------------------- Chief Executive Officer Jack C. Bendheim Principal Executive Officer) /s/ HUGH P. SHANNONHOUSE* Director September 21, 2000 - ---------------------------- Hugh P. Shannonhouse /s/ NATHAN Z. BISTRICER* Director, Vice President and September 21, 2000 - --------------------------- Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
- ------------------ *Executed pursuant to a power of attorney contained in the Registration Statement SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. PHIBROCHEM, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO 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 21, 2000 - --------------------------- Chief Executive Officer Jack C. Bendheim (Principal Executive Officer) /s/ JAMES O. HERLANDS* Director September 21, 2000 - --------------------------- James O. Herlands /s/ NATHAN Z. BISTRICER* Director, Vice President and September 21, 2000 - --------------------------- Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
- ------------------ *Executed pursuant to a power of attorney contained in the Registration Statement SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. PHIBRO CHEMICALS, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO 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 21, 2000 - ------------------------ Chief Executive Officer Jack C. Bendheim (Principal Executive Officer) /s/ JAMES O. HERLANDS* Director September 21, 2000 - ------------------------- James O. Herlands /s/ NATHAN Z. BISTRICER* Director, Vice President and September 21, 2000 - --------------------------- Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
- ------------------ *Executed pursuant to a power of attorney contained in the Registration Statement SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. PHIBRO-TECH, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO 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 21, 2000 - --------------------------- Chief Executive Officer Jack C. Bendheim (Principal Executive Officer) /s/ NATHAN Z. BISTRICER* Director, Senior Vice President September 21, 2000 - ------------------------------ and Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
- ------------------ *Executed pursuant to a power of attorney contained in the Registration Statement SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. PRINCE AGRIPRODUCTS, INC. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO 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 21, 2000 - ------------------------ Officer (Principal Executive Officer) Jack C. Bendheim /s/ MARVIN S. SUSSMAN* Director and President September 21, 2000 - ------------------------- Marvin S. Sussman /s/ NATHAN Z. BISTRICER* Director, Vice President and September 21, 2000 - ------------------------- Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
- ------------------ *Executed pursuant to a power of attorney contained in the Registration Statement SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. THE PRINCE MANUFACTURING COMPANY By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THECAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - -------------------------- --------------------------------------- ------------------ /s/ JACK C. BENDHEIM Director and Chief Executive Officer September 21, 2000 - ------------------------- (Principal Executive Officer) Jack C. Bendheim /s/ MARVIN S. SUSSMAN* Director and President September 21, 2000 - ------------------------- Marvin S. Sussman /s/ NATHAN Z. BISTRICER* Director, Vice President and September 21, 2000 - -------------------------- Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
- ------------------ *Executed pursuant to a power of attorney contained in the Registration Statement SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. THE PRINCE MANUFACTURING COMPANY By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO 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 21, 2000 - --------------------------- (Principal Executive Officer) Jack C. Bendheim /s/ MARVIN S. SUSSMAN* Director and President September 21, 2000 - ---------------------------- Marvin S. Sussman /s/ NATHAN Z. BISTRICER* Director, Vice President and September 21, 2000 - --------------------------- Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
- ------------------ *Executed pursuant to a power of attorney contained in the Registration Statement SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT LEE, NEW JERSEY, ON SEPTEMBER 21, 2000. WESTERN MAGNESIUM CORP. By: /s/ JACK C. BENDHEIM ---------------------------------- Jack C. Bendheim, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST EFFECTIVE AMENDMENT TO 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 21, 2000 - -------------------- Chief Executive Officer Jack C. Bendheim (Principal Executive Officer) /s/ JAMES O. HERLANDS* Director September 21, 2000 - ---------------------- James O. Herlands /s/ NATHAN Z. BISTRICER* Director, Vice President and September 21, 2000 - --------------------------- Chief Financial Officer Nathan Z. Bistricer (Principal Financial Officer and Principal Accounting Officer)
- ------------------ *Executed pursuant to a power of attorney contained in the Registration Statement EXHIBIT INDEX 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 Schmiedeskamp, Robertson, New & Mitchell regarding the legality of securities being registered* 5.4 Opinion of Martin H. Philip, Esq. 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 1, 1986 and 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** 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.** 10.24 Purchase Agreement, dated as of June 1, 1998, between Jack C. Bendheim and the Company* 10.25 Agreement, dated as of June 1, 1998, by and among Jack C. Bendheim, Phibro-Tech, Inc., MRT Management Corp. and Mineral Resource Technologies, L.L.C.* 10.26 Licensing Agreement, dated January 28, 1980, between Gunness Wharf Limited and BOC Limited+* 10.27 Agreement, dated January 28, 1980, between BOC Limited and Gunness Wharf Limited+ * 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 PricewaterhouseCoopers DA, certified public accountants* 23.8 Consent of Golenbock, Eiseman, Assor & Bell (included as part of Exhibit 5.1 to this Registration Statement)* 23.9 Consent of Blanc, Williams, Johnston & Kronstadt L.L.C. (included as part of Exhibit 5.2 to this Registration Statement)* 23.10 Consent of Martin H. Philip, Esq. (included as part of Exhibit 5.3 to this Registration Statement)* 23.11 Consent of Schmiedeskamp, Robertson, New & Mitchell (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 as filed on September 29, 1998)* 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** @ - ------------------ * Previously filed. ** Filed herewith solely for the purpose of retransmitting such exhibit, which was not received by the Commission as part of the original filing of this Registration Statement on September 29, 1998 as a result of a transmission error on the part of Registrant's EDGAR service provider. + A request for confidential treatment has been granted for portions of such document. Confidential portions have been omitted and filed separately with the SEC as required by Rule 406(b). ++ Amended in Pre-Effective Amendment No. 2 to the Registration Statement filed December 14, 1998. @ Amended in Pre-Effective Amendment No. 3 to the Registration Statement filed December 17, 1998. EX-3.23 2 0002.txt CERTIFICATE OF INCORPORATION OF WESTERN MAGNESIUM CORP. EXHIBIT 3.23 State of California SECRETARY OF STATE CORPORATION DIVISION I, BILL JONES, Secretary of State of the State of California, hereby certify: That the annexed transcript was prepared by and in this office from the record on file, of which it purports to be a copy, and that it is full, true and correct. IN WITNESS WHEREOF I execute this certificate and affix the Great Seal of the State of California this May 19, 1998. /s/ Bill Jones - -------------- Bill Jones Secretary of State ARTICLES OF INCORPORATION OF WESTERN MAGNESIUM CORP. ******* FIRST: That the name of the corporation is WESTERN MAGNESIUM CORP. SECOND: That the specific business in which the said corporation will primarily engage is: To engage in the business of purchasing, developing, manufacturing, compounding, refining, distributing, selling, exploiting and using, and in every way deal in, manufacture, distill, treat, prepare, analyze, synthesize and produce chemicals of every kind, chemical materials, substances and products including acids, alkalis, and salts and their compounds. The general purposes and powers of the corporation are: To establish, build, lease as lessee, purchase or otherwise acquire, operate, maintain, improve, sell or otherwise dispose of, convey, mortgage, pledge, and lease as lessor, refineries, factories, mills, shops, offices, laboratories, structures, and works of all kinds. To manufacture, purchase or otherwise acquire, own, mortgage, pledge, sell, assign and transfer, or otherwise dispose of, to invest, trade, deal in and deal with, goods, wares and merchandise and real and personal property of every class and description. To acquire and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation. To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trade-marks and trade names, relating to or useful in connection with any business of this corporation. To acquire, subscribe for, hold, own, pledge and otherwise dispose of and vote shares of stock, bonds and securities of any other corporation, domestic or foreign. To become a promoter, a partner (either general or limited or both), a member, an associate, a joint venture or a manager of other business enterprises or partnerships or ventures, and to enter into agreements of partnership with individuals or other corporations, for the purpose of carrying on any business, which would be proper or convenient in connection with the purposes of the corporation. To enter into, make and perform contracts of every kind and description with any person firm, association, corporation, municipality, county, state, body politic or government or colony or dependency thereof, conducive to the attainment of any of the objects or purposes of the corporation. To borrow money and issue bonds, debentures, notes and evidences of indebtedness and to secure the payment or performance of its obligations by mortgage, deed of trust, pledge or otherwise. To purchase, hold, sell and transfer the shares of its own capital stock so far as may be permitted by the laws of the State of California. To have one or more offices within or without the State of California, to carry on all or any of its operations and business and, without restriction or limit as to amount, to purchase or otherwise acquire, hold, own, mortgage, sell, convey or otherwise dispose of real and personal property of every class arid description in any of the states, districts, territories or colonies of the United States, and in any and a11 foreign countries, subject to the laws of such state, district, territory, colony or country. The foregoing clauses shall be construed both as objects and powers and it is hereby expressly provided that the foregoing enumeration of specific powers shall not be held to limit or restrict in any manner the powers of the corporation. In general, to carry on any other business in connection with the foregoing, and to have and exercise all the powers conferred by the State of California upon corporations formed under the laws of the State of California. THIRD: That the county in which the principal office for the transaction of the business of said corporation is located is San Diego County, State of California. FOURTH: The number of its directors is three (3). The name and address of each person appointed to act as a first director is as follows: NAME ADDRESS MARIS KRUZE 277 Park Avenue, New York, New York 10017 JOHN L. VAUGHAN 277 Park Avenue, New York, New York 10017 FRANK SIMMONS 277 Park Avenue, New York, New York 10017 The number of directors may be changed from time to time by a by-law fixing or changing the number duly adopted by the shareholders. FIFTH: The total number of shares which the corporation is authorized to issue is one thousand (1,000); all of such shares shall be without par value. Such shares may be issued for such consideration as from time to time may be determined by the board of directors. SIXTH: Subject to the right of shareholders to adopt, amend or repeal by-laws, by-laws may be adopted, amended, or repealed by the board of directors, except a by-law or amendment thereof changing the authorized number of directors. SEVENTH: This corporation reserves the right to amend, alter, change or repeal any provision contained in these articles of incorporation in the manner now or hereafter prescribed by statute, and all rights conferred upon shareholders herein are granted subject to this reservation. IN WITNESS WHEREOF, for the purpose of forming this corporation under the laws of the State of California each of the undersigned, including each person appointed to act as a first director of this corporation, has executed these articles of incorporation this 22nd day of December, 1975. /s/ Maris Kruze - --------------- Maris Kruze, Incorporator-Director /s/ John L Vaughan - ------------------ John L. Vaughan. Incorporator-Director /s/ Frank Simmons - ----------------- Frank Simmons, Incorporator-Director STATE OF NEW YORK ss COUNTY OF NEW YORK On this 22nd day of December, 1975, before me, a notary public in and for the county and state aforesaid, personally appeared MARIS KRUZE, JOHN L. VAUGHAN and FRANK SIMMONS, known to me to be the persons whose names are subscribed to and who executed the within instrument, and acknowledged to me that they executed the same. IN WITNESS WHEREOF, I have hereto set my hand and affixed my official seal the day and year above written. /s/ - ------------------------ Notary Public EX-3.24 3 0003.txt BY-LAWS OF WESTERN MAGNESIUM CORP. WESTERN MAGNESIUM CORP. BY-LAWS ARTICLE I OFFICES Section 1. The principal office shall be located in Chula Vista, California. Section 2. The corporation may also have offices at such other places both within and without the State of California 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 Chula Vista, State of California, 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 1977, shall be held on the 15th day of January 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 of the annual meeting stating the place, day and hour of the meeting shall be given to each shareholder entitled to vote thereat not less than ten days before the date of the 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 California 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 meting of shareholders, stating the time, place and purpose or purposes thereof, shall be given to each shareholder entitled to vote thereat, at least five days before the date fixed for the 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 meeting 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 cumu late 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 California 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 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. 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 California, 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 or directors, regular or special, my be held either within or without the State of California. 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 may 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 tine be determined by the board. Section 4. Special meetings of the board of directors my be called by the president on five 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. Any action required or permitted to be taken at a meeting of the directors 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. 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. Any two or more offices, except those of President and Secretary, may be held by the same person. 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 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 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. THE 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. 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 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 my 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 my 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 my 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 end 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 exer cise 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 CERTIFICATES 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 repre senting 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 any adjournment thereof or entitled to receive payment of any dividend, or in order to make a deter mination 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, fifty 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 fifty 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 for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of 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 shareholders 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 California. 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 Bet 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 director 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 date of its incorporation and the words "Corporate Seal, California". ARTICLE XII AMENDMENTS Section 1. These by-laws may be altered, amended or repealed or new by-laws may be adopted (a) at any regular or special meeting of shareholders at which a quorum is present or represented, by the affirmative vote of a majority of the stock entitled to vote, provided notice of the proposed alteration, amendments or repeal be contained in the notice of such meeting, or (b) by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board. The board of directors shall not make or alter any by-law fixing their number. ARTICLE XIII DIRECTORS' ANNUAL REPORT Section 1. The directors shall cause to be sent to the shareholders not later than one hundred twenty days after the close of the fiscal year, a report which shall include a balance sheet as of the closing date of the last fiscal year, and a statement of income or profit and loss, for the year ended on that date, certified by the president, secretary, treasurer or a public accountant. The balance sheet shall set forth the bases employed in stating the valuation of the assets and any changes in such bases during the preceding year; the amount of the surplus, the sources thereof and any changes therein during the past year; the number of shares of each class authorized and outstanding and the number of shares, if any, carried as treasury shares, the cost thereof and the source from which such cost was paid; and the amounts, if any, of loans or advances to or from officers, shareholders and employees. The statement of income or profit and loss shall disclose the amount of income or loss, setting forth in particular the amounts of depreciation, depletion, amortization, interest and extraordinary income or charges, and the amount of income from subsidiary corporations, if any. In case no adequate written or printed statement of its affairs has been given to the shareholders for six months and shareholders holding at least ten percent of the number of outstanding shares make a written request to the secretary, assistant secretary or treasurer of the corporation therefor, a state ment, including a balance sheet as of the end of the preceding calendar month and a statement of income or profit and loss for the period from the end of the preceding fiscal year to the end of the preceding calendar month, shall be delivered to the person or persons making the request within thirty days thereafter and a copy thereof shall be kept on file in the principal office of the corporation for a period of twelve months for inspection by any shareholder demanding an examination thereof or a copy thereof shall be mailed to such shareholder. I, THE UNDERSIGNED, being the secretary of WESTERN MAGNESIUM CORP., DO HEREBY CERTIFY the foregoing to be the by-laws of said corporation, as adopted at a meeting of the directors held on the 13th day of January, 1976. Secretary EX-4.1 4 0004.txt INDENTURE PHILIPP BROTHERS CHEMICALS, INC. as Issuer and The GUARANTORS named herein and THE CHASE MANHATTAN BANK as Trustee ------------------------- INDENTURE Dated as of June 11, 1998 ------------------------- up to $140,000,000 9 7/8% Senior Subordinated Notes due 2008, Series A 9 7/8% Senior Subordinated Notes due 2008, Series B CROSS-REFERENCE TABLE TIA Indenture Section Section - ------- ------- 310(a)(1) ............................................... 7.10 (a)(2) ............................................... 7.10 (a)(3) ............................................... N.A. (a)(4) ............................................... N.A. (a)(5) ............................................... 7.10; 7.11 (b) .................................................. 7.08; 7.10; 11.02 (c) .................................................. N.A. 311(a) .................................................. 7.11 (b) .................................................. 7.11 (c) .................................................. N.A. 312(a) .................................................. 2.05 (b) .................................................. 11.03 (c) .................................................. 11.03 313(a) .................................................. 7.06 (b)(1) ............................................... 7.06 (b)(2) ............................................... 7.06 (c) .................................................. 7.06; 11.02 (d) .................................................. 7.06 314(a) .................................................. 4.06; 4.08; 11.02 (b) .................................................. N.A. (c)(1) ............................................... 7.02; 11.04 (c)(2) ............................................... 7.02; 11.04 (c)(3) ............................................... N.A. (d) .................................................. N.A. (e) .................................................. 11.05 (f) .................................................. N.A. 315(a) .................................................. 7.01(b) (b) .................................................. 7.05; 11.02 (c) .................................................. 7.01(a) (d) .................................................. 6.05; 7.01(c) (e) .................................................. 6.11 316(a)(last sentence) ................................... 2.09 (a)(1)(A) ............................................ 6.05 (a)(1)(B) ............................................ 6.04 (a)(2) ............................................... N.A. (b) .................................................. 6.07 (c) .................................................. 9.04 317(a)(1) ............................................... 6.08 (a)(2) ............................................... 6.09 (b) .................................................. 2.04 318(a) .................................................. 11.01 (c) .................................................. 11.01 - ---------------------- N.A. means Not Applicable -i- NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture. -ii- TABLE OF CONTENTS Page ---- ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions ............................................ ii SECTION 1.02. Incorporation by Reference of TIA ...................... ii SECTION 1.03. Rules of Construction .................................. ii ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating. ....................................... ii SECTION 2.02. Execution and Authentication; Aggregate Principal Amount ii SECTION 2.03. Registrar and Paying Agent ............................. ii SECTION 2.04. Paying Agent To Hold Assets in Trust ................... ii SECTION 2.05. Holder Lists ........................................... ii SECTION 2.06. Transfer and Exchange .................................. ii SECTION 2.07. Replacement Notes ...................................... ii SECTION 2.08. Outstanding Notes ...................................... ii SECTION 2.09. Treasury Notes ......................................... ii SECTION 2.10. Temporary Notes ........................................ ii SECTION 2.11. Cancellation ........................................... ii SECTION 2.12. Defaulted Interest ..................................... ii SECTION 2.13. CUSIP Number ........................................... ii SECTION 2.14. Deposit of Monies ...................................... ii SECTION 2.15. Restrictive Legends .................................... ii SECTION 2.16. Book-Entry Provisions for Global Note .................. ii SECTION 2.17. Registration of Transfers and Exchanges ................ ii SECTION 2.18. Additional Interest Under Registration Rights Agreement ii ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee ..................................... ii SECTION 3.02. Selection of Notes To Be Redeemed ...................... ii SECTION 3.03. Optional Redemption .................................... ii SECTION 3.04. Notice of Redemption ................................... ii SECTION 3.05. Effect of Notice of Redemption ......................... ii SECTION 3.06. Deposit of Redemption Price ............................ ii SECTION 3.07. Notes Redeemed in Part ................................. ii Page ---- ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes. ...................................... iii SECTION 4.02. Maintenance of Office or Agency ........................ iii SECTION 4.03. Corporate Existence .................................... iii SECTION 4.04. Payment of Taxes and Other Claims ...................... iii SECTION 4.05. Maintenance of Properties and Insurance ................ iii SECTION 4.06. Compliance Certificate; Notice of Default .............. iii SECTION 4.07. Compliance with Laws ................................... iii SECTION 4.08. Provision of Financial Statements and Information ...... iii SECTION 4.09. Waiver of Stay, Extension or Usury Laws ................ iii SECTION 4.10. Limitation on Restricted Payments ...................... iii SECTION 4.11. Limitation on Transactions with Affiliates. ............ iii SECTION 4.12. Limitation on Incurrence of Indebtedness. .............. iii SECTION 4.13. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries................... iii SECTION 4.14. Limitation on Designation of Unrestricted Subsidiaries . iii SECTION 4.15. Change of Control ...................................... iii SECTION 4.16. Limitation on Asset Sales .............................. iii SECTION 4.17. Reserved ............................................... iii SECTION 4.18. Limitation on Liens .................................... iii SECTION 4.19. Business Activities .................................... iii SECTION 4.20. Limitation on Guarantees of Indebtedness by Subsidiaries iii SECTION 4.21. Limitation on Incurrence of Senior Subordinated Indebtedness........................................ iii SECTION 4.22. Future Guarantors ...................................... iii SECTION 4.23. Sale and Leaseback Transactions ........................ iii ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Assets ............... iii SECTION 5.02. Successor Corporation Substituted ...................... iii ARTICLE SIX REMEDIES SECTION 6.01. Events of Default ...................................... iii SECTION 6.02. Acceleration. .......................................... iii SECTION 6.03. Other Remedies ......................................... iii SECTION 6.04. Waiver of Past Defaults ................................ iii SECTION 6.05. Control by Majority. ................................... iii SECTION 6.06. Limitation on Suits. ................................... iii SECTION 6.07. Right of Holders To Receive Payment. ................... iv Page ---- SECTION 6.08. Collection Suit by Trustee ............................. iv SECTION 6.09. Trustee May File Proofs of Claim ....................... iv SECTION 6.10. Priorities. ............................................ iv SECTION 6.11. Undertaking for Costs. ................................. iv SECTION 6.12. Restoration of Rights and Remedies. .................... iv ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee ...................................... iv SECTION 7.02. Rights of Trustee ...................................... iv SECTION 7.03. Individual Rights of Trustee ........................... iv SECTION 7.04. Trustee's Disclaimer ................................... iv SECTION 7.05. Notice of Default ...................................... iv SECTION 7.06. Reports by Trustee to Holders .......................... iv SECTION 7.07. Compensation and Indemnity. ............................ iv SECTION 7.08. Replacement of Trustee ................................. iv SECTION 7.09. Successor Trustee by Merger, Etc ....................... iv SECTION 7.10. Eligibility; Disqualification. ......................... iv SECTION 7.11. Preferential Collection of Claims Against the Company .. iv ARTICLE EIGHT SATISFACTION AND DISCHARGE; DEFEASANCE SECTION 8.01. Satisfaction and Discharge of Indenture ................ iv SECTION 8.02. Defeasance or Covenant Defeasance ...................... iv SECTION 8.03. Application of Trust Money. ............................ iv SECTION 8.04. Repayment to the Company. .............................. iv SECTION 8.05. Reinstatement .......................................... iv SECTION 8.06. Acknowledgment of Discharge by Trustee ................. iv ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders ............................. iv SECTION 9.02. With Consent of Holders ................................ iv SECTION 9.03. Compliance with TIA .................................... iv SECTION 9.04. Revocation and Effect of Consents ...................... iv SECTION 9.05. Notation on or Exchange of Notes ....................... iv SECTION 9.06. Trustee To Sign Amendments, Etc. ....................... iv ARTICLE TEN SUBORDINATION SECTION 10.01. Notes Subordinated to Senior Debt ...................... iv SECTION 10.02. Suspension of Payment When Senior Debt Is in Default ... iv SECTION 10.03. Notes Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company ............................................. v Page ---- SECTION 10.04. Holders To Be Subrogated to Rights of Holders of Senior Debt................................................. v SECTION 10.05. Obligations of the Company Unconditional ............... v SECTION 10.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice.................................... v SECTION 10.07. Application by Trustee of Assets Deposited with It ..... v SECTION 10.08. No Waiver of Subordination Provisions .................. v SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination of Notes................................................ v SECTION 10.10. Right of Trustee to Hold Senior Debt ................... v SECTION 10.11. This Article Ten Not To Prevent Events of Default ...... v SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior Debt . v ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. TIA Controls ........................................... v SECTION 11.02. Notices ................................................ v SECTION 11.03. Communications by Holders with Other Holders ........... v SECTION 11.04. Certificate and Opinion as to Conditions Precedent ..... v SECTION 11.05. Statements Required in Certificate or Opinion .......... v SECTION 11.06. Rules by Trustee, Paying Agent, Registrar .............. v SECTION 11.07. Legal Holidays ......................................... v SECTION 11.08. Governing Law .......................................... v SECTION 11.09. No Adverse Interpretation of Other Agreements .......... v SECTION 11.10. No Personal Liability .................................. v SECTION 11.11. Successors ............................................. v SECTION 11.12. Duplicate Originals .................................... v SECTION 11.13. Severability ........................................... v ARTICLE TWELVE GUARANTEE OF NOTES SECTION 12.01. Unconditional Guarantee ................................ v SECTION 12.02. Limitations on Guarantees .............................. v SECTION 12.03. Execution and Delivery of Guarantee .................... v SECTION 12.04. Release of a Guarantor ................................. v SECTION 12.05. Waiver of Subrogation .................................. v SECTION 12.06. No Set-Off ............................................. v SECTION 12.07. Obligations Absolute ................................... v SECTION 12.08. Obligations Continuing ................................. v SECTION 12.09. Obligations Not Reduced ................................ v SECTION 12.10. Obligations Reinstated ................................. v SECTION 12.11. Obligations Not Affected ............................... v SECTION 12.12. Waiver ................................................. vi SECTION 12.13. No Obligation To Take Action Against the Company ....... vi Page ---- SECTION 12.14. Dealing with the Company and Others .................... vi SECTION 12.15. Default and Enforcement ................................ vi SECTION 12.16. Amendment, Etc ......................................... vi SECTION 12.17. Acknowledgment ......................................... vi SECTION 12.18. Costs and Expenses ..................................... vi SECTION 12.19. No Merger or Waiver; Cumulative Remedies ............... vi SECTION 12.20. Survival of Obligations ................................ vi SECTION 12.21. Guarantee in Addition to Other Obligations ............. vi SECTION 12.22. Severability ........................................... vi SECTION 12.23. Successors and Assigns vi ARTICLE THIRTEEN SUBORDINATION OF GUARANTEE SECTION 13.01. Obligations of Guarantors Subordinated to Guarantor Senior Debt.......................................... vi SECTION 13.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default................................... vi SECTION 13.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor.................. vi SECTION 13.04. Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of Guarantor Senior Debt .......... vi SECTION 13.05. Obligations of the Guarantors Unconditional ............ vi SECTION 13.06. Trustee Entitled To Assume Payments Not Prohibited in Absence of Notice.................................... vi SECTION 13.07. Application by Trustee of Assets Deposited with It ..... vi SECTION 13.08. No Waiver of Subordination Provisions .................. vi SECTION 13.09. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations................................ vi SECTION 13.10. Right of Trustee To Hold Guarantor Senior Debt. ........ vi SECTION 13.11. No Suspension of Remedies .............................. vi SECTION 13.12. No Fiduciary Duty of Trustee to Holders of Guarantor Senior Debt.......................................... vi SIGNATURES............................................................... S-1 Exhibit A - Form of Series A Note ....................................... A-1 Exhibit B - Form of Series B Note ....................................... B-1 Exhibit C - Form of Legend for Global Notes ............................. C-1 Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors.................. D-1 Exhibit E - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S......................... E-1 Exhibit F - Form of Guarantee ........................................... F-1 Exhibit G - Certificate to be Delivered upon Exchange or Registration of Transfer of Security....................... G-1 -1- INDENTURE, dated as of June 11, 1998, among Philipp Brothers Chemicals, Inc., a New York corporation (the "Company"), each of the Guarantors named herein, as guarantors, and The Chase Manhattan Bank, as Trustee (the "Trustee"). The Company has duly authorized the creation of an issue of 9 7/8% Senior Subordinated Notes due 2008, Series A, and 9 7/8% Senior Subordinated Notes due 2008, Series B, to be issued in exchange for the 9 7/8% Senior Subordinated Notes due 2008, Series A, pursuant to the Registration Rights Agreement (as defined herein) and, to provide therefor, the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Notes (as defined), when duly issued and executed by the Company, and authenticated and delivered hereunder, the valid obligations of the Company, and to make this Indenture a valid and binding agreement of the Company and each of the Guarantors, have been done. Each party hereto agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders (as defined) of the Company's 9 7/8% Senior Subordinated Notes due 2008, Series A and Series B. ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "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 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" shall have 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. "Agent" means any Registrar, Paying Agent or co-Registrar. "Agent Members" has the meaning provided in Section 2.16. -2- "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. "Asset Sale Offer" has the meaning provided in Section 4.16. "Asset Sale Offer Purchase Date" has the meaning provided in Section 4.16. "Asset Sale Offer Trigger Date" has the meaning provided in Section 4.16. "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). "Authenticating Agent" has the meaning provided in Section 2.02. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal, state or foreign law for the relief of debtors. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in the city of New York are required or authorized by law or other governmental action to be closed. "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. -3- "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 and 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 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 -4- 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 this 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. "Change of Control Offer" has the meaning provided in Section 4.15. "Change of Control Purchase Date" has the meaning provided in Section 4.15. "Commission" means the Securities and Exchange Commission. "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. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means such successor and also includes for the purposes of any provision contained herein and required by the TIA any other obligor on the Notes. "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 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 -5- 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 Section 4.10, 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 -6- intangibles and less accumulated amortization, shown on the most recent balance sheet of such Person, determined on a consolidated basis in accordance with GAAP. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 450 West 33rd Street, New York, New York 10001. "covenant defeasance" has the meaning set forth in Section 8.02. "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 under, 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. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event that is, or after the giving of notice or passage of time or both would be, an Event of Default. "defeasance" has the meaning set forth in Section 8.02. "Depository" means The Depository Trust Company, its nominees and successors. "Designated Senior Debt" means (i) the Indebtedness under the Credit Facility, and (ii) any other Senior Debt permitted to be incurred under this Indenture the principal amount of which is $15.0 million or more (including to a syndicate of lenders or an agent thereof) at the time of the designation of such Senior Debt as "Designated Senior Debt" by the Company in a written instrument delivered to the Trustee. "Designation" has the meaning set forth in Section 4.14. "Designation Amount" has the meaning provided in Section 4.14. -7- "Disposition" means, with respect to any Person, any merger, consolidation or other business combination involving such Person (whether or not such Person is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets. "Disqualified Stock" means (i) any Preferred Stock of any Restricted Subsidiary (other than Preferred Stock owned by the Company or any Wholly Owned Restricted Subsidiary) and (ii) that portion of any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than upon a Change of Control of the Company in circumstances where the holders of the Notes would have similar rights), in whole or in part on or prior to the stated maturity of the Notes. "Dollars" or "$" means lawful money of the United States of America. "Event of Default" has the meaning provided in Section 6.01. "Excess Proceeds" has the meaning provided in Section 4.16. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Notes" means the 9 7/8% Senior Subordinated Notes due 2008, Series B to be issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement or, with respect to Initial Notes issued under this Indenture subsequent to the Issue Date pursuant to Section 2.02, a registration rights agreement substantially identical to the Registration Rights Agreement. "Exchange Offer" has the meaning provided in the Registration Rights Agreement. "Existing Indebtedness" has the meaning provided in Section 4.12. "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 accounting profession in the United States of America, which are applicable as of the Issue Date and consistently applied. "Global Note" has the meaning provided in Section 2.01. -8- "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 this Indenture as a Guarantor. "Holder" means any holder of Notes. "IAI Global Note" has the meaning provided in Section 2.01. "incur" has the meaning set forth in Section 4.12. "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 -9- 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. "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "Initial Notes" means, collectively, (i) the 9 7/8% Senior Subordinated Notes due 2008, Series A, of the Company issued on the Issue Date and (ii) one or more series of 9 7/8% Senior Subordinated Notes due 2008 that are issued under this Indenture subsequent to the Issue Date pursuant to Section 2.02, in each case for so long as such securities constitute Restricted Securities. "Initial Purchaser" means Schroder & Co. Inc. "Institutional Accredited Investor" means an institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "interest" means, when used with respect to any Note, the amount of all interest accruing on such Note, including any applicable defaulted interest pursuant to Section 2.12 and any Additional Interest pursuant to the Registration Rights Agreement. "Interest Payment Date" means the stated maturity of an installment of interest on the Notes. "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 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 Section 4.10, (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 -10- 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 the date on which the Notes are first issued under this Indenture. "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. "Legal Holiday" has the meaning provided in Section 11.07. "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). "Maturity Date" means June 1, 2008. "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 -11- minority interests in such 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. "Notes" means, collectively, the Initial Notes, the Private Exchange Notes, if any, and the Unrestricted Notes, treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms of this Indenture, that are issued pursuant to this Indenture. "obligations" means any principal, interest, penalties, fees, indemnifications, reimbursement obligations, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering Memorandum" means the Final Offering Memorandum dated June 5, 1998 relating to the issuance of the Notes. "Officer" means, with respect to any Person, the Chairman of the Board of Directors, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller or the Secretary of such Person, or any other officer designated by the Board of Directors serving in a similar capacity and, with respect to the Trustee or any agent of the Trustee, a Trust Officer. "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 this Indenture. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee complying with the requirements of Sections 11.04 and 11.05, as they relate to the giving of an Opinion of Counsel. "Other Debt" has the meaning provided in Section 4.20. "Paying Agent" has the meaning provided in Section 2.03. "Payment Blockage Notice" has the meaning provided in Section 10.02. "Payment Blockage Period" has the meaning provided in Section 10.02. "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 (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 -12- 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 Indebtedness" has the meaning provided in Section 4.12. "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 Section 4.16 or any other disposition not constituting an Asset Sale; (vi) Interest Rate Agreement Obligations and Currency Agreement Obligations permitted pursuant to Section 4.12(b); (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. "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 -13- 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 property other than that 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 this 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 Section 4.23; (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 this 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 this Indenture; and (xv) Liens on assets of Foreign Subsidiaries securing Indebtedness permitted by this 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. "Physical Notes" has the meaning provided in Section 2.01. -14- "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. "Private Exchange Notes" shall have the meaning provided in the Registration Rights Agreement. "Private Placement Legend" means the legend initially set forth on the Initial Notes in the form set forth in Exhibit A as the same may be revised from time to time to comply with applicable laws and regulations. "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms of this Indenture, a calculation in accordance with Article 11 of Regulation S-X under the Securities Act. "Public Equity Offering" has the meaning provided in Section 3.03. "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. "QIB Global Note" has the meaning provided in Section 2.01. "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A. "Record Date" means the Record Dates specified in the Notes. "Redemption Date" means, when used with respect to any Note to be redeemed, the date fixed for such redemption pursuant to this Indenture and the Notes. "Redemption Price" means, when used with respect to any Note to be redeemed, the price fixed for such redemption, including principal and premium, if any, pursuant to this Indenture and the Notes. -15- "Redesignation" has the meaning provided in Section 4.14. "refinancing" has the meaning provided in Section 4.12. "Refinancing Indebtedness" has the meaning provided in Section 4.12. "Registrar" has the meaning provided in Section 2.03. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the Issue Date among the Company, the Guarantors and the Initial Purchaser. "Regulation S Global Note" has the meaning provided in Section 2.01. "Regulation S" means Regulation S under the Securities Act. "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. "Representative" means this Indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that (a) if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority of such Designated Senior Debt and (b) the administrative agent (or any successor thereto) shall be a Representative of the lenders under the Credit Facility. "Required Filing Dates" has the meaning provided in Section 4.08. "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 Section 4.12; or (iv) any Restricted Investment. A Permitted Investment is not a Restricted Payment. "Restricted Security" has the meaning assigned to such term in Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security. "Restricted Subsidiary" means each direct or indirect Subsidiary of the Company other than an Unrestricted Subsidiary. -16- "Rule 144A" means Rule 144A under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "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 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 this 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 -17- 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, have more than 50% of the outstanding partnership or similar interests or have 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. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as otherwise provided in Section 9.03. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "Trust Officer" means any officer or assistant officer of the Trustee assigned by the Trustee to administer this Indenture, or in the case of a successor trustee, an officer assigned to the department, division or group performing the corporation trust work of such successor and assigned to administer this Indenture. "U.S. Government Obligations" means direct obligations of, and obligations guaranteed by, the United States of America for the payment of which the full faith and credit of the United States of America is pledged. "U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "Unrestricted Notes" means one or more Notes (other than Private Exchange Notes) that do not and are not required to bear the Private Placement Legend, including, without limitation, the Exchange Notes. "Unrestricted Subsidiary" means any Subsidiary of the Company designated as such pursuant to and in compliance with Section 4.14 and not redesignated a Restricted Subsidiary in compliance with such Section. "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 -18- 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 nominal shares held by a third party to comply with local law) thereof are owned, directly or indirectly, by the Company or a Surviving Person of any Disposition involving the Company, as the case may be. SECTION 1.02. Incorporation by Reference of TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes. "indenture security holder" means a Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on this Indenture securities means the Company or any other obligor on the Notes. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP of any date of determination; (3) "or" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; (5) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (6) any reference to a statute, law or regulation means that statute, law or regulation as amended and in effect from time to time and includes any -19- successor statute, law or regulation; provided, however, that any reference to the Bankruptcy Law shall mean the Bankruptcy Law as applicable to the relevant case. ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating. The Initial Notes, the notation thereon relating to the Guarantees, if any, and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto, provided, that any Initial Notes issued in a public offering shall be substantially in the form of Exhibit B hereto. The Exchange Notes, the notation thereon relating to the Guarantees, if any, and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit B hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or depository rule or usage. The Company and the Trustee shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its issuance and shall show the date of its authentication. Each Note shall have an executed Guarantee endorsed thereon substantially in the form of Exhibit F hereto. The terms and provisions contained in the Notes and the Guarantees, if any, annexed hereto as Exhibits A, B and F, shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company, the Guarantors, if any, and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Notes offered and sold (i) in reliance on Rule 144A, (ii) to Institutional Accredited Investors or (iii) in reliance on Regulation S, unless the applicable Holder requests Notes in the form of Certificated Notes in registered form ("Physical Notes"), which shall be in substantially the form set forth in Exhibit A, shall be issued initially in the form of one or more permanent global Notes in registered form, substantially in the form set forth in Exhibit A (the "Global Note"), deposited with the Trustee, as custodian for the Depository, duly executed by the Company (and having an executed Guarantee endorsed thereon) and authenticated by the Trustee as hereinafter provided, and shall bear the legend set forth in Exhibit C. One or more separate Global Notes shall be issued to represent Notes held by (i) Qualified Institutional Buyers (a "QIB Global Note"), (ii) Institutional Accredited Investors (an "IAI Global Note") and (iii) Persons acquiring Notes in reliance on Regulation S (a "Regulation S Global Note"). The aggregate principal amount of any Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. All Notes offered and sold in reliance on Regulation S shall remain in the form of a Global Note until the consummation of the Exchange Offer pursuant to the Registration Rights Agreement; provided, however, that all of the time periods specified in the Registration Rights Agreement to be complied with by the Company and the Guarantors have been so complied with. SECTION 2.02. Execution and Authentication; Aggregate Principal Amount. -20- Two Officers, or an Officer and an Assistant Secretary of the Company and each Guarantor, shall sign, or one Officer shall sign and one Officer or an Assistant Secretary (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to, the Notes for the Company and the Guarantees for the Guarantors by manual or facsimile signature. If an Officer or Assistant Secretary whose signature is on a Note or a Guarantee was an Officer or Assistant Secretary at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Note, the Note shall nevertheless be valid. A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate (i) Initial Notes for original issue in the aggregate principal amount not to exceed $140,000,000 in one or more series (of which no more than $40,000,000 may be issued after the Issue Date, provided that such subsequent issuance complies with Section 4.12(a) and no Default or Event of Default exists under this Indenture at the time of such subsequent issuance or will result therefrom), (ii) Private Exchange Notes from time to time for issue only in exchange for a like principal amount of Initial Notes, and (iii) Unrestricted Notes from time to time only (A) in exchange for a like principal amount of Initial Notes or (B) in an aggregate principal amount of not more than the excess of $140,000,000 over the sum of the aggregate principal amount of (x) Initial Notes then outstanding, (y) Private Exchange Notes then outstanding and (z) Unrestricted Notes issued in accordance with (iii)(A) above, in each case upon a written order of the Company in the form of an Officers' Certificate of the Company. Each such written order shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated, whether the Notes are to be Initial Notes, Private Exchange Notes or Unrestricted Notes and whether the Notes are to be issued as Physical Notes or Global Notes or such other information as the Trustee may reasonably request. The aggregate principal amount of Notes outstanding at any time may not exceed $140,000,000, except as provided in Section 2.07. In the event that the Company shall issue and the Trustee shall authenticate any Notes issued under this Indenture subsequent to the Issue Date pursuant to clauses (i) and (iii) of the first sentence of the immediately preceding paragraph, the Company shall use its reasonable efforts to obtain the same "CUSIP" number for such Notes as is printed on the Notes outstanding at such time; provided, however, that if any series of Notes issued under this Indenture subsequent to the Issue Date is determined, pursuant to an Opinion of Counsel of the Company in a form reasonably satisfactory to the Trustee to be a different class of security than the Notes outstanding at such time for federal income tax purposes, the Company may obtain a "CUSIP" number for such Notes that is different than the "CUSIP" number printed on the Notes then outstanding. Notwithstanding the foregoing, all Notes issued under this Indenture shall vote and consent together on all matters as one class and no series of Notes will have the right to vote or consent as a separate class on any matter. The Trustee may appoint an authenticating agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate Notes. Unless otherwise provided in the appointment, an Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such -21- Authenticating Agent. An Authenticating Agent has the same rights as an Agent to deal with the Company or with any Affiliate of the Company. The Notes shall be issuable in fully registered form only, without coupons, in denominations of $1,000 and any integral multiple thereof. The Trustee is authorized to enter into a letter of representation with the Depository in the form provided to the Trustee by the Company and to act in accordance with such letter. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency (which shall be located in the Borough of Manhattan in the City of New York, State of New York) where (a) Notes may be presented or surrendered for registration of transfer or for exchange ("Registrar"), (b) Notes may be presented or surrendered for payment ("Paying Agent") and (c) notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more Co-Registrars and one or more additional Paying Agents reasonably acceptable to the Trustee. The term "Paying Agent" or "Registrar" includes any additional Paying Agent or Registrar, as the case may be. The Company may act as its own Paying Agent, except that for the purposes of payments on the Notes pursuant to Sections 4.15 and 4.16, neither the Company nor any Affiliate of the Company may act as Paying Agent. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall incorporate the provisions of the TIA and implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company shall fail to maintain a Registrar or Paying Agent the Trustee shall act as such. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of demands and notices in connection with the Notes, until such time as the Trustee has resigned or a successor has been appointed. Any of the Registrar, the Paying Agent or any other agent may resign upon 30 days' notice to the Company. The Company may change any Paying Agent and Registrar without notice to the Holders. SECTION 2.04. Paying Agent To Hold Assets in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, premium, if any, or interest on, the Notes (whether such assets have been distributed to it by the Company or any other obligor on the Notes), and the Company and the Paying Agent shall notify the Trustee of any Default by the Company (or any other obligor on the Notes) in making any such payment. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent shall have no further liability for such assets. -22- SECTION 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company shall furnish or cause the Registrar to furnish to the Trustee three (3) Business Days (or such shorter period as the Trustee may expressly agree to) before each Record Date and at such other times as the Trustee may request in writing a list as of such date and in such form as the Trustee may reasonably require of the names and addresses of the Holders, which list may be conclusively relied upon by the Trustee, and the Company shall otherwise comply with TIA ss. 312(a). SECTION 2.06. Transfer and Exchange. Subject to Sections 2.16 and 2.17, when Notes are presented to the Registrar or a Co-Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes or other authorized denominations, the Registrar or Co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Notes presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee and the Registrar or Co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes and the Guarantors shall execute Guarantees thereon at the Registrar's or Co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, fee or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Section 2.10, 3.07, 4.15, 4.16 or 9.05, in which event the Company shall be responsible for the payment of such taxes). The Registrar or Co-Registrar shall not be required to register the transfer of or exchange of any Note (i) during a period beginning at the opening of business on the day which is 15 days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Note being redeemed in part. Any Holder of a beneficial interest in a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Notes may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry system. SECTION 2.07. Replacement Notes. If a mutilated Note is surrendered to the Trustee or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note and the Guarantors shall execute a Guarantee thereon if the Trustee's requirements are met. If required by the Trustee or the Company, such Holder must provide an indemnity bond or other indemnity of reasonable tenor, sufficient in the reasonable judgment of the Company, the Guarantors and the Trustee, to protect the Company, the Guarantors, the Trustee or any Agent from any loss which any of them may suffer if a Note is -23- replaced. Every replacement Note shall constitute an obligation of the Company and the Guarantors. SECTION 2.08. Outstanding Notes. Notes outstanding at any time are all the Notes that have been authenticated by the Trustee except those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to the provisions of Section 2.09, a Note does not cease to be outstanding because the Company or any of its Affiliates holds the Note. If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07. If on a Redemption Date or the Maturity Date the Paying Agent holds U.S. Legal Tender sufficient to pay all of the principal, premium, if any, and interest due on the Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes shall be deemed not to be outstanding and interest on them shall cease to accrue. SECTION 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver, consent or notice, Notes owned by the Company or an Affiliate of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Trust Officer of the Trustee actually knows are so owned shall be so considered. The Company shall notify the Trustee, in writing, when either it or, to its knowledge, any of its Affiliates repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired and such other information as the Trustee may reasonably request and the Trustee shall be entitled to rely thereon. SECTION 2.10. Temporary Notes. Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon receipt of a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Notes to be authenticated and the date on which the temporary Notes are to be authenticated. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes and so indicate in the Officers' Certificate. Without unreasonable delay, the Company shall prepare, the Trustee shall authenticate and the Guarantors shall execute Guarantees on, upon receipt of a written order of the Company pursuant to Section 2.02, definitive Notes in exchange for temporary Notes. SECTION 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, at the written direction of the Company, shall -24- dispose, in its customary manner, of all Notes surrendered for transfer, exchange, payment or cancellation. Subject to Section 2.07, the Company may not issue new Notes to replace Notes that it has paid for or delivered to the Trustee for cancellation. If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. The Company will pay interest on overdue principal from time to time on demand at the rate of interest then borne by the Notes. The Company shall, to the extent lawful, pay interest on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the rate of interest then borne by the Notes. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months, and, in the case of a partial month, the actual number of days elapsed. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, to the Persons who are (i) Holders on a subsequent special record date, if it so elects, which special record date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day, or (ii) if the Company does not elect a special record date, Holders on the next Record Date, which payment shall be made on the next regular Interest Payment Date. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment (a "Default Interest Payment Date"), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest as provided in this Section; provided, however, that in no event shall the Company deposit monies proposed to be paid in respect of defaulted interest later than 10:30 a.m. New York City time on the proposed Default Interest Payment Date. At least 15 days before the subsequent special record date, the Company shall mail (or cause to be mailed) to each Holder, as of a recent date selected by the Company, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. Notwithstanding the foregoing, any interest which is paid prior to the expiration of the 30-day period set forth in Section 6.01(i) shall be paid to Holders as of the regular record date for the Interest Payment Date for which interest has not been paid. Notwithstanding the foregoing, the Company may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange. SECTION 2.13. CUSIP Number. The Company in issuing the Notes may use a "CUSIP" number, and, if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided, however, that no representation is hereby deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee of any change in the CUSIP number. -25- SECTION 2.14. Deposit of Monies. Prior to 10:30 a.m. New York City time on each Interest Payment Date, Maturity Date, Redemption Date, Change of Control Purchase Date and Asset Sale Purchase Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Purchase Date and Asset Sale Purchase Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Purchase Date and Asset Sale Purchase Date, as the case may be. SECTION 2.15. Restrictive Legends. Each Global Note and Physical Note that constitutes a Restricted Security shall bear the legend (the "Private Placement Legend") as set forth in Exhibit A (as the same may be revised from time to time to comply with applicable laws and regulations) on the face thereof until after the second anniversary of the later of the Issue Date and the last date on which the Company or any Affiliate of the Company was the owner of such Note (or any predecessor security) (or such shorter period of time as permitted by Rule 144 under the Securities Act or any successor provision thereunder, unless otherwise agreed by the Company and the Holder thereof) (or such longer period of time as may be required under the Securities Act or applicable state securities laws in the opinion of counsel for the Company). Each Global Note shall also bear the legend as set forth in Exhibit C. SECTION 2.16. Book-Entry Provisions for Global Note. (a) The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository, and (iii) bear the legend as set forth in Exhibit C. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Notes, and the Depository may be treated by the Company, the Trustee and any Agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any Agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfers of a Global Note shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.17. In addition, Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in a Global Note if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Global Notes and a successor depository is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depository to issue Physical Notes. -26- (c) In connection with any transfer or exchange of a portion of the beneficial interest in a Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, the Guarantors shall execute Guarantees on, and the Trustee shall authenticate and deliver, one or more Physical Notes of like tenor and amount. (d) In connection with the transfer of an entire Global Note to beneficial owners pursuant to paragraph (b) of this Section 2.16, such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, the Guarantors shall execute Guarantees on and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Note, an equal aggregate principal amount of Physical Notes of authorized denominations. (e) Any Physical Note constituting a Restricted Security delivered in exchange for an interest in a Global Note pursuant to paragraph (b) or (c) of this Section 2.16 shall, except as otherwise provided by paragraphs (d) and (f) of Section 2.17, bear the Private Placement Legend. (f) The Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.17. Registration of Transfers and Exchanges. (a) Transfer and Exchange of Physical Notes. When Physical Notes are presented to the Registrar or Co-Registrar with a request: (i) to register the transfer of the Physical Notes; or (ii) to exchange such Physical Notes for an equal number of Physical Notes of other authorized denominations, the Registrar or Co-Registrar shall register the transfer or make the exchange as requested if the requirements under this Indenture as set forth in this Section 2.17 for such transactions are met; provided, however, that the Physical Notes presented or surrendered for registration of transfer or exchange: (I) shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Registrar or Co-Registrar, duly executed by the Holder thereof or his attorney-in-fact duly authorized in writing; and (II) in the case of Physical Notes the offer and sale of which have not been registered under the Securities Act, such Physical Notes shall be accompanied, in the sole discretion of the Company, by the following additional information and documents, as applicable: a. if such Physical Note is being delivered to the Registrar or Co-Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (substantially in the form of Exhibit G hereto); or -27- b. if such Physical Note is being transferred to a Qualified Institutional Buyer in accordance with Rule 144A, a certification to that effect (substantially in the form of Exhibit G hereto); or c. if such Physical Note is being transferred to an Institutional Accredited Investor, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and a Transferee Certificate for Institutional Accredited Investors substantially in the form of Exhibit D hereto and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or d. if such Physical Note is being transferred in reliance on Regulation S, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and a Transferee Certificate for Regulation S Transfers substantially in the form of Exhibit E hereto and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or e. if such Physical Note is being transferred in reliance on Rule 144 under the Securities Act, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or f. if such Physical Note is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (substantially in the form of Exhibit G hereto) and an Opinion of Counsel reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act. (b) Restrictions on Transfer of a Physical Note for a Beneficial Interest in a Global Note. Unless otherwise agreed to by the Company, a Physical Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Registrar or Co-Registrar of a Physical Note, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Registrar or Co-Registrar, together with: a. certification, substantially in the form of Exhibit G hereto, that such Physical Note is being transferred (I) to a Qualified Institutional Buyer, (II) to an Institutional Accredited Investor or (III) in reliance on Regulation S and, in the case of (II), a Transferee Certificate for Institutional Accredited Investors substantially in the form of Exhibit D hereto and, in the case of (III), a Transferee Certificate for Regulation S Transfers substantially in the form of Exhibit E hereto and in each case an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; and b. written instructions from the Company directing the Registrar or Co-Registrar to make, or to direct the Depository to make, an endorsement on the applicable Global Note to reflect an increase in the aggregate amount of the Notes represented by the Global Note, -28- then the Registrar or Co-Registrar shall cancel such Physical Note and cause, or direct the Depository to cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or Co-Registrar, the principal amount of Notes represented by the applicable Global Note to be increased accordingly. If no Global Note representing Notes held by Qualified Institutional Buyers, Institutional Accredited Investors or Persons acquiring Notes in reliance on Regulation S, as the case may be, is then outstanding, the Company shall issue and the Trustee shall, upon written instructions from the Company in accordance with Section 2.02, authenticate such a Global Note in the appropriate principal amount. (c) Transfer and Exchange of Global Notes. The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depository therefor. Upon receipt by the Registrar or Co-Registrar of written instructions, or such other instruction as is customary for the Depository, from the Depository or its nominee, requesting the registration of transfer of an interest in a QIB Global Note, an IAI Global Note or a Regulation S Global Note, as the case may be, to another type of Global Note, together with the applicable Global Notes (or, if the applicable type of Global Note required to represent the interest as requested to be transferred is not then outstanding, only the Global Note representing the interest being transferred), the Registrar or Co-Registrar shall cause, or direct the Depository to cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or Co-Registrar, the principal amount of Notes represented by the applicable Global Notes involved in such transfer or exchange to be adjusted accordingly to reflect the applicable increase and decrease of the principal amount of Notes represented by such types of Global Notes, giving effect to such transfer. If the applicable type of Global Note required to represent the interest as requested to be transferred is not outstanding at the time of such request, the Company shall issue and the Trustee shall, upon written instructions from the Company in accordance with Section 2.02, authenticate a new Global Note of such type in principal amount equal to the principal amount of the interest requested to be transferred. Any such transfer or exchange of Global Notes or beneficial interests therein shall be effected through the Depository in accordance with this Indenture (including the restrictions on transfer as contemplated herein) and the procedure of the Depository therefor. Unless otherwise agreed to by the Company, any request for the registration of the transfer of an interest in a QIB Global Note, an IAI Global Note or a Regulation S Global Note to another type of Global Note must be accompanied by a certificate from the transferor, substantially in the form of Exhibit G hereto, that the transferee is either (i) a Qualified Institutional Buyer in accordance with Rule 144A, (ii) an Institutional Accredited Investor, or (iii) relying on Regulation S, and in the case of (ii), a Transferee Certificate for Institutional Accredited Investors substantially in the form of Exhibit D hereto and, in the case of (iii), a Transferee Certificate for Regulation S Transfers substantially in the form of Exhibit E hereto and in each case an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act. (d) Transfer of a Beneficial Interest in a Global Note for a Physical Note. (i) Any Person having a beneficial interest in a Global Note may upon request exchange such beneficial interest for a Physical Note. Upon receipt by the Registrar or Co-Registrar of written instructions, or such other form of instructions as is customary for the Depository, from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Note and upon receipt by the Trustee of a written order or such other form of instructions as is customary for the Depository or the Person designated -29- by the Depository as having such a beneficial interest containing registration instructions and, in the case of any such transfer or exchange of a beneficial interest in Notes the offer and sale of which have not been registered under the Securities Act, the following additional information and documents: a. if such beneficial interest is being transferred to the Person designated by the Depository as being the beneficial owner, a certification from such Person to that effect (substantially in the form of Exhibit G hereto); or b. if such beneficial interest is being transferred to a Qualified Institutional Buyer in accordance with Rule l44A, a certification to that effect (substantially in the form of Exhibit G hereto); or c. if such beneficial interest is being transferred to an Institutional Accredited Investor, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and a Certificate for Institutional Accredited Investors substantially in the form of Exhibit D hereto and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or d. if such beneficial interest is being transferred in reliance on Regulation S, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and a Transferee Certificate for Regulation S Transfers substantially in the form of Exhibit E hereto and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or e. if such beneficial interest is being transferred in reliance on Rule 144 under the Securities Act, delivery of a certification to that effect (substantially in the form of Exhibit G hereto) and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or f. if such beneficial interest is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (substantially in the form of Exhibit G hereto) and an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act, then the Registrar or Co-Registrar will cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or Co-Registrar, the aggregate principal amount of the applicable Global Note to be reduced and, following such reduction, the Company will execute and, upon receipt of an authentication order in the -30- form of an Officers' Certificate in accordance with Section 2.02, the Trustee will authenticate and deliver to the transferee a Physical Note. (ii) Notes issued in exchange for a beneficial interest in a Global Note pursuant to this Section 2.17(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Registrar or Co-Registrar in writing. The Registrar or Co-Registrar shall deliver such Physical Notes to the Persons in whose names such Physical Notes are so registered. (e) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding any other provisions of this Indenture, a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or by any such nominee to a successor Depository or a nominee of such successor Depository. (f) Private Placement Legend. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar or Co-Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar or Co-Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) the requested transfer is after the second anniversary of the Issue Date (provided, however, that neither the Company nor any Affiliate of the Company has held any beneficial interest in such Note, or portion thereof, at any time prior to or on the second anniversary of the Issue Date unless otherwise agreed by the Company) and (ii) there is delivered to the Registrar or Co-Registrar a certificate and/or, if requested, an Opinion of Counsel, each reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (g) General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.16 or this Section 2.17. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time during the Registrar's normal business hours upon the giving of reasonable written notice to the Registrar. (h) Transfers of Notes Held by Affiliates. Any certificate (i) evidencing a Note that has been transferred to an Affiliate of the Company within two years after the Issue Date, as evidenced by a notation on the Assignment Form for such transfer or in the representation letter delivered in respect thereof or (ii) evidencing a Note that has been acquired from an Affiliate (other than by an Affiliate) in a transaction or a chain of transactions not involving any public offering, shall, until two years after the last date on which the Company or any Affiliate of the Company was an owner of such Note, in each case, bear the Private Placement Legend, unless otherwise agreed by the Company (with written notice thereof to the Trustee). -31- SECTION 2.18. Additional Interest Under Registration Rights Agreement. Under certain circumstances, the Company shall be obligated to pay certain Additional Interest to the Holders, all as set forth in Section 4 of the Registration Rights Agreement. The terms thereof are hereby incorporated herein by reference. ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to Paragraph 5 of the Notes, it shall notify the Trustee and the Paying Agent in writing of the Redemption Date and the principal amount of the Notes to be redeemed. The Company shall give each notice to the Trustee provided for in this Section 3.01 45 days before the Redemption Date (unless a shorter notice period shall be satisfactory to the Trustee), together with an Officers' Certificate stating that such redemption shall comply with the conditions contained herein and in the Notes. Any such notice may be canceled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. SECTION 3.02. Selection of Notes To Be Redeemed. 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, however, that Notes redeemed in part shall only be redeemed in integral multiples of $1,000; 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 depository), 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. SECTION 3.03. 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 -32- date of redemption, if redeemed during the twelve-month period beginning on 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 Redemption Date; provided, however, 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 (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. SECTION 3.04. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption by first class mail to each Holder of Notes to be redeemed at its registered address, with a copy to the Trustee and any Paying Agent. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. The Company shall provide such notices of redemption to the Trustee at least five days before the intended mailing date (unless a shorter period shall be satisfactory to the Trustee). Each notice of redemption shall identify (including the CUSIP number) the Notes to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) the subparagraph of the Notes pursuant to which such redemption is being made; -33- (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any; (6) that, unless the Company defaults in making the redemption payment, interest on Notes or applicable portions thereof called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price plus accrued interest as of the Redemption Date, if any, upon surrender to the Paying Agent of the Notes redeemed; (7) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date, and upon surrender of such Note, a new Note or Notes in the aggregate principal amount equal to the unredeemed portion thereof will be issued; and (8) if fewer than all the Notes are to be redeemed, the identification of the particular Notes of such Holder (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes. SECTION 3.05. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.04, such notice of redemption shall be irrevocable and Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price plus accrued interest as of such date, if any. Upon surrender to the Trustee or Paying Agent, such Notes called for redemption shall be paid at the Redemption Price plus accrued interest thereon to the Redemption Date, but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant record dates referred to in the Notes. Interest shall accrue on or after the Redemption Date and shall be payable only if the Company defaults in payment of the Redemption Price. SECTION 3.06. Deposit of Redemption Price. On or before the Redemption Date and in accordance with Section 2.14, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued interest, if any, of all Notes to be redeemed on that date. The Paying Agent shall promptly return to the Company any U.S. Legal Tender so deposited which is not required for that purpose, except with respect to monies owed as obligations to the Trustee pursuant to Article Seven. Unless the Company fails to comply with the preceding paragraph and defaults in the payment of such Redemption Price plus accrued interest, if any, interest on the Notes to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Notes are presented for payment. SECTION 3.07. Notes Redeemed in Part. -34- Upon surrender of a Note that is to be redeemed in part, the Trustee shall authenticate for the Holder a new Note or Notes equal in principal amount to the unredeemed portion of the Note surrendered. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes. (a) The Company shall pay the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture. (b) An installment of principal of or interest on the Notes shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Company or any of its Affiliates) holds, prior to 10:30 a.m. New York City time on that date, U.S. Legal Tender designated for and sufficient to pay the installment in full and is not prohibited from paying such money to the Holders pursuant to the terms of this Indenture or the Notes. (c) The Company shall pay, to the extent such payments are lawful, interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the rate borne by the Notes. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. (d) Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, or shall cause the Trustee to, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder. SECTION 4.02. Maintenance of Office or Agency. The Company shall maintain the office or agency required under Section 2.03. The Company shall give prior written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02. SECTION 4.03. Corporate Existence. Except as otherwise permitted by Article Five, the Company shall do or cause to be done, at its own cost and expense, all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of each such Restricted Subsidiary and the material rights (charter and statutory) and franchises of the Company and each such Restricted Subsidiary; provided, however, that the Company shall not be required to preserve, with respect to itself, any material right or franchise and, with respect to any of its Restricted Subsidiaries, any such existence, material right or franchise, if the Board of Directors of the Company (or if such -35- existence is with respect to any Restricted Subsidiary which is not a Significant Subsidiary, by the appropriate Officers of the Company) shall determine in good faith that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole. SECTION 4.04. Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before penalties attach, (i) all material taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon it or any of its Restricted Subsidiaries or properties of it or any of its Restricted Subsidiaries and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of the Company or any of its Restricted Subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate negotiations or proceedings properly instituted and conducted for which adequate reserves, to the extent required under GAAP, have been taken. SECTION 4.05. Maintenance of Properties and Insurance. (a) The Company shall, and shall cause each of the Restricted Subsidiaries to, maintain all material properties used in the conduct of its business in working order and condition (subject to ordinary wear and tear) and make all necessary repairs, renewals, replacements, additions, betterments and improvements thereto and actively conduct and carry on its business; provided, however, that nothing in this Section 4.05 shall prevent the Company or any of the Restricted Subsidiaries of the Company from discontinuing the operation and maintenance of any of its properties, if such discontinuance is (i) in the ordinary course of business pursuant to customary business terms or (ii) in the good faith judgment of the respective Boards of Directors or other governing body of the Company or Restricted Subsidiary, as the case may be, desirable in the conduct of their respective businesses and would not be reasonably likely to cause a material adverse effect upon the business, operations, assets, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole. (b) The Company shall provide or cause to be provided, for itself and each of the Restricted Subsidiaries of the Company, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the good faith judgment of the Company, are customary for companies in the conduct of the business of the Company and its Restricted Subsidiaries, with reputable insurers or with the Government of the United States of America or any agency or instrumentality thereof (if not through self-insurance). SECTION 4.06. Compliance Certificate; Notice of Default. (a) The Company shall deliver to the Trustee, within 120 days after the end of each of the Company's fiscal years, an Officers' Certificate (provided, however, that one of the signatories to each such Officers' Certificate shall be the Company's principal executive officer, principal financial officer or principal accounting officer), as to such Officers' knowledge, without independent investigation, of the Company's compliance with all conditions and covenants under this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and in the event any Default of the Company's exists, such Officers' Certificate shall specify the -36- nature of such Default. Each such Officers' Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year-end. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual financial statements delivered pursuant to Section 4.08 shall be accompanied by a written report of the Company's independent certified public accountants (who shall be a firm of established national reputation) stating (A) that their audit examination has included a review of the terms of this Indenture and the form of the Notes as they relate to accounting matters, and (B) whether, in connection with their audit examination, any Default or Event of Default has come to their attention and if such a Default or Event of Default has come to their attention, specifying the nature and period of existence thereof; provided, however, that, without any restriction as to the scope of the audit examination, such independent certified public accountants shall not be liable by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit examination conducted in accordance with generally accepted auditing standards. (c) (i) If any Default or Event of Default has occurred and is continuing or (ii) if any Holder seeks to exercise any remedy hereunder with respect to a claimed Default under this Indenture or the Notes, the Company shall deliver to the Trustee, at its address set forth in Section 11.02, by registered or certified mail or by facsimile transmission followed by hard copy by registered or certified mail an Officers' Certificate specifying such event, notice or other action promptly upon its becoming aware of such occurrence. SECTION 4.07. Compliance with Laws. The Company shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as would not singly or in the aggregate reasonably be expected to have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole. SECTION 4.08. 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 Company shall file with 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 were so subject; provided the Commission will accept such filings. The Company shall 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 at the expense of the Company, 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 -37- 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. SECTION 4.09. Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.10. Limitation on Restricted Payments. (a) The Company shall not, and shall 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 Section 4.12; 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 -38- 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. (b) Section 4.10(a) shall 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 this 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 this Indenture or other agreement or instrument pursuant to which such Subordinated Indebtedness was issued or any refinancing of Subordinated Indebtedness permitted by this 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 Section 4.15 or (y) in the case of an Asset Sale, has applied the Net Proceeds from such Asset Sale in accordance with Section 4.16; (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); -39- (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" in the Offering Memorandum (other than the Potential Acquisition (as defined in the Offering Memorandum), other acquisitions and general corporate purposes) in the Offering Memorandum pursuant to which the Notes are offered and sold. (c) For purposes of Section 4.10(a)(iii), 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. (d) Not later than thirty (30) days after the end of any fiscal quarter of the Company during which any Restricted Payment or Restricted Investment has been made, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment or Restricted Investment complies with this Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon the Company's latest available internal quarterly financial statements. SECTION 4.11. Limitation on Transactions with Affiliates. (a) The Company shall not, and shall 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 -40- 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. (b) Section 4.11(a) shall 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 Section 4.10(b), (iv) transactions permitted by, and complying with, the provisions described under Section 5.01, and (v) any transaction described under the caption "Use of Proceeds" in the Offering Memorandum. SECTION 4.12. Limitation on Incurrence of Indebtedness. (a) The Company shall not, and shall 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. (b) The foregoing limitations shall 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 Exchange 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 -41- 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 this 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 Section 4.12 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, 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; -42- (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 this 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. (c) 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. (d) 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 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. SECTION 4.13. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company shall not, and shall 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 -43- 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 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 this 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 Section 4.16; 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 this 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) this 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. SECTION 4.14. Limitation on Designation of Unrestricted Subsidiaries. (a) The Company shall 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 this Indenture (a "Designation") unless: (i) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (ii) 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 Section 4.12; and (iii) the Company would not be prohibited under this Indenture from making an Investment at the time of Designation in an amount (the "Designation Amount") equal to -44- 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 Section 4.10 for all purposes of this Indenture in an amount equal to the Designation Amount. (b) The Company shall not designate an Unrestricted Subsidiary as a Restricted Subsidiary (a "Redesignation"), unless: (i) no Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation; and (ii) 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 this 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 Section 4.10. (c) 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. SECTION 4.15. Change of Control. (a) 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 this 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"). (b) On or before the 30th day following the occurrence of any Change of Control, the Company shall mail to each holder of Notes, with a copy to the Trustee, 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 -45- "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) that Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the second Business Day prior to the Change of Control Purchase Date, (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Change of Control Purchase Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased, (vii) that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered; provided, however, that each Note purchased and each new Note issued shall be in an original principal amount of $1,000 or integral multiples thereof, (viii) the circumstances and relevant facts regarding such Change of Control, and (ix) such other information as may be required by applicable laws and regulations. (c) On or prior to 10:00 a.m. (Eastern Standard Time) on the Change of Control Purchase Date, the Company shall (i) accept for payment all Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay 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 shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date. (d) The Company shall 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 this Indenture to the extent such compliance is in conflict with such covenants. SECTION 4.16. Limitation on Asset Sales. (a) The Company shall not, and shall 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 -46- 75% of such consideration consists of either cash or Cash Equivalents; provided, however, that for purposes of this Section 4.16, "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). (b) 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." (c) 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 this 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. (d) Notice of an Asset Sale Offer shall be mailed via first-class mail postage prepaid 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) -47- 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 payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Offer Purchase Date, (v) that Holders electing to have a Note purchased pursuant to a Asset Sale Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Asset Sale Offer Purchase Date, (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Asset Sale Offer Purchase Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased, (vii) that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered; provided, however, that each Note purchased and each new Note issued shall be in an original principal amount of $1,000 or integral multiples thereof, and (viii) such other information as may be required by applicable laws and regulations. (e) On the Asset Sale Offer Purchase Date, the Company shall (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 this 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. (f) This Section 4.16 shall not apply to a transaction consummated in compliance with Article Five. (g) The Company shall 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 this Indenture to the extent such compliance is in conflict with such covenants. SECTION 4.17. Reserved. -48- SECTION 4.18. Limitation on Liens. The Company shall not, and shall 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. SECTION 4.19. Business Activities. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any business other than a Related Business. SECTION 4.20. Limitation on Guarantees of Indebtedness by Subsidiaries. In the event that any Restricted Subsidiary guarantees any Indebtedness of the Company other than the Notes (the "Other Debt"), the Company shall cause such Restricted Subsidiary to concurrently guarantee the Company's obligations under this 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 this Indenture (which subordination will be substantially identical to the subordination provisions of this 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 Section 4.20 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 this 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 this Indenture, as described under Section 4.22. SECTION 4.21. Limitation on Incurrence of Senior Subordinated Indebtedness. The Company (i) shall 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) shall not, directly or indirectly, permit any Guarantor to incur, create, issue, assume, -49- 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. SECTION 4.22. Future Guarantors. The Company and each Guarantor shall cause each Restricted Subsidiary of the Company (other than any Foreign Subsidiary) which, after the date of this Indenture (if not then a Guarantor), becomes a Restricted Subsidiary to execute and deliver an indenture supplemental to this Indenture and thereby become a Guarantor which shall be bound by the Guarantee of the Notes in the form set forth in this Indenture (without such future Guarantor being required to execute and deliver the Guarantee endorsed on the Notes). SECTION 4.23. Sale and Leaseback Transactions. The Company shall not, and shall 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 Section 4.12(a) or (2) clause (xiv) of the definition of the term "Permitted Indebtedness" and (ii) incurred a Lien to secure such Indebtedness pursuant to Section 4.18 and (b) the sale portion of such sale and leaseback transaction complies with Section 4.16, and the net proceeds from such sale are applied in accordance with such Section 4.16 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. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Assets. (a) 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 -50- obligations), this 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 Section 4.12(a). 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, this Indenture, the Notes and the Registration Rights Agreement. (b) In connection with any such consolidation, merger, amalgamation, transfer, lease or disposition, the Company or such Person shall have delivered to the Trustee (i) an Officers' Certificate and an Opinion of Counsel (pertaining only to 5.01(i) and 5.01(ii)), each in form and substance reasonably satisfactory to the Trustee, stating that such consolidation, amalgamation, merger, sale, assignment, conveyance, transfer, lease or disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Indenture and that all conditions precedent therein provided for relating to such transaction have been complied with, and (ii) if a supplemental indenture is required in connection with such transaction, an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, that such supplemental indenture constitutes the legal, valid, binding and enforceable obligation of the Surviving Person. (c) For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. SECTION 5.02. Successor Corporation Substituted. Upon any consolidation, amalgamation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company in accordance with Section 5.01, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Indenture, with the same effect as if such successor had been named as the Company in this Indenture; and thereafter, the Company shall be discharged from all obligations and covenants under this Indenture and the Notes. ARTICLE SIX REMEDIES -51- SECTION 6.01. Events of Default. "Events of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (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 this Indenture); (ii) a default in the payment when due of principal on any Note (whether or not prohibited by the subordination provisions of this 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 this 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) the Company or any Significant Subsidiary shall (A) commence a voluntary case or proceeding under any Bankruptcy Law with respect to itself, (B) consent to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding under any Bankruptcy Law, (C) consent to the appointment of a Custodian of it or for substantially all of its property, (D) consent to or acquiesce in the institution of a bankruptcy or an insolvency proceeding against it, (E) make a general assignment for the benefit of its creditors, (F) admit in writing its inability to pay its debts as they become due, or (G) take any corporate action to authorize or effect any of the foregoing; (vii) a court of competent jurisdiction shall enter a judgment, decree or order for relief in respect of the Company or any Significant Subsidiary in an involuntary case or proceeding under any Bankruptcy Law which shall (A) approve as properly filed a petition seeking reorganization, arrangement, adjustment or composition in respect of the Company or any Significant Subsidiary, (B) appoint a Custodian of the Company or any Significant Subsidiary or for substantially all of its property or (C) order the winding-up or liquidation of its affairs; and such judgment, decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or -52- (viii) any Guarantee of a Significant Subsidiary ceases to be in full force and effect (other than as expressly provided for under this 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 this Indenture or the release of any such Guarantee in accordance with this Indenture). The Company shall provide an Officers' Certificate to the Trustee within five days of the occurrence of any Default or Event of Default (provided, however, that pursuant to Section 4.06 hereof the Company shall provide such certification at least annually whether or not they know of any Default or Event of Default) that has occurred and, if applicable, describe such Default or Event of Default and the status thereof. SECTION 6.02. Acceleration. (a) If any Event of Default (other than as specified in clause (vi) or (vii) of Section 6.01 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 written 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) or (vii) of Section 6.01 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. (b) At any time after a declaration of acceleration, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of a majority in principal amount of the Notes outstanding, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (i) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all sums paid or advanced by the Trustee and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (B) all overdue interest (including any interest accrued subsequent to an Event of Default specified in clause (vi) or (vii) of Section 6.01 hereof) on all Notes, (C) the principal of and premium, if any, on any Notes which have become due otherwise than by such declaration or occurrence of acceleration and interest thereon at the rate borne by the Notes, and (D) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Notes; and (ii) all Events of Default, other than the non-payment of principal of Notes which have become due solely by such declaration or occurrence of acceleration, have been cured or waived; and (iii) the rescission would not conflict with any judgment, order or decree of any court of competent jurisdiction. (c) The Holders of a majority in aggregate principal amount of the Notes then outstanding by written notice to the Trustee may, on behalf of the Holders of all of the Notes, waive any existing Default or Event of Default and its consequences under this 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 be waived only with the consent of each Holder of Notes affected), or (ii) in respect of a covenant or provision which under this Indenture cannot be modified or amended without the consent of the Holder of each Note outstanding. -53- SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of the principal of, premium, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. All rights of action and claims under this Indenture or the Notes may be enforced by the Trustee even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. Prior to the declaration of acceleration of the Notes, the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding by written notice to the Trustee may, on behalf of the Holders of all the Notes, waive any existing Default or Event of Default and its consequences under this Indenture, except a Default or Event of Default specified in Section 6.01(i) or (ii) or in respect of any provision hereof which cannot be modified or amended without the consent of the Holder so affected pursuant to Section 9.02. When a Default or Event of Default is so waived, it shall be deemed cured and shall cease to exist. This Section 6.04 shall be in lieu of ss. 316(a)(1)(B) of the TIA and such ss. 316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA. SECTION 6.05. Control by Majority. Subject to Section 2.09, the Holders of the Notes may not enforce this Indenture or the Notes except as provided in this Article Six and under the TIA. The Holders of not less than a majority in aggregate principal amount of the outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided, however, that the Trustee may refuse to follow any direction (a) that conflicts with any rule of law or this Indenture, (b) that the Trustee determines, in its sole discretion, may be unduly prejudicial to the rights of another Holder, or (c) that may expose the Trustee to personal liability for which reasonable indemnity provided to the Trustee against such liability shall be inadequate; provided, further, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction or this Indenture. This Section 6.05 shall be in lieu of ss. 316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA. SECTION 6.06. Limitation on Suits. No Holder of any Notes shall have any right to institute any proceeding with respect to this Indenture or the Notes or any remedy hereunder, unless the Holders of at least 25% in aggregate principal amount of the outstanding Notes have made written request, and offered reasonable indemnity satisfactory to the Trustee, to the Trustee to institute such proceeding as Trustee under the Notes and this Indenture, the Trustee has failed to institute such proceeding within 45 days after receipt of such notice, request and offer of indemnity and the Trustee, within -54- such 45-day period, has not received directions inconsistent with such written request by Holders of not less than a majority in aggregate principal amount of the outstanding Notes. The foregoing limitations shall not apply to a suit instituted by a Holder of a Note for the enforcement of the payment of the principal of, premium, if any, or interest on, such Note on or after the respective due dates expressed or provided for in such Note. A Holder may not use this Indenture to prejudice the rights of any other Holders or to obtain priority or preference over such other Holders. SECTION 6.07. Right of Holders To Receive Payment. Notwithstanding any other provision in this Indenture, the right of any Holder of a Note to receive payment of the principal of, premium, if any, and interest on such Note, on or after the respective due dates expressed or provided for in such Note, or to bring suit for the enforcement of any such payment on or after the respective due dates, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in clause (i) or (ii) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company, or any other obligor on the Notes for the whole amount of the principal of, premium, if any, and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum provided for by the Notes and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents, counsel, accountants and experts) and the Holders allowed in any judicial proceedings relative to the Company or Restricted Subsidiaries (or any other obligor upon the Notes), their creditors or their property and shall be entitled and empowered to participate as a member, voting or otherwise, of any official committee of creditors appointed in such matter and to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. The Company's payment obligations under this Section 6.09 shall be secured in accordance with the provisions of Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. Priorities. -55- If the Trustee collects any money pursuant to this Article Six it shall pay out such money in the following order: First: to the Trustee for amounts due under Section 7.07; Second: to Holders for interest accrued on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest; Third: to Holders for the principal amounts (including any premium) owing under the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for the principal (including any premium); and Fourth: the balance, if any, to the Company or any other obligor on the Notes, as their interests may appear, or as a court of competent jurisdiction may direct. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may in its discretion require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to any suit by the Trustee, any suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in aggregate principal amount of the outstanding Notes. SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Note and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee may exercise such of the rights and powers vested in it by this Indenture and shall use the same degree of care and skill in its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. -56- (b) Except during the continuance of an Event of Default: (1) The Trustee need perform only those duties as are specifically set forth in this Indenture and no duties, covenants or obligations of the Trustee shall be implied in this Indenture. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy or mathematical calculations or other facts stated therein or otherwise verify the contents thereof). (c) Notwithstanding anything to the contrary herein contained, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.02, 6.04 or 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01 and Section 7.02. (f) The Trustee shall not be liable for interest on any money or assets received by it except as the Trustee may agree in writing with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. (g) The Trustee may refuse to perform any duty or exercise any right or power hereunder unless (i) it is provided adequate funds to enable it to do so and (ii) it receives indemnity satisfactory to it, in its sole discretion, against any loss, liability, fee or expense. SECTION 7.02. Rights of Trustee. Subject to Section 7.01: -57- (a) The Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not and shall not be required to investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may consult with counsel of its selection and may require an Officers' Certificate or an Opinion of Counsel, or both, which shall conform to Sections 11.04 and 11.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action that it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. (e) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Company, to examine the books, records, and premises of the Company, personally or by agent or attorney and to consult with the officers and representatives of the Company, including the Company's accountants and attorneys. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which may be incurred by it in compliance with such request, order or direction. (g) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. (h) Delivery of reports, information and documents to the Trustee under Section 4.08 is for informational purposes only and the Trustee's receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of their covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). (i) The permissive right of the Trustee to act hereunder shall not be construed as a duty. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, any of their Subsidiaries, or their -58- respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, and it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture or any document entered into or issued in connection with the issuance and sale of the Notes or any statement in the Notes other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Default. If a Default or an Event of Default occurs and is continuing and if it is known to a Trust Officer, the Trustee shall mail to each Holder notice of the uncured Default or Event of Default within 90 days after obtaining knowledge thereof. Except in the case of a Default or an Event of Default in payment of principal of, or interest on, any Note, including an accelerated payment, a Default in payment on the Change of Control Purchase Date pursuant to a Change of Control Offer or on the Asset Sale Purchase Date pursuant to a Asset Sale Offer and a Default in compliance with Article Five hereof, the Trustee may withhold the notice if and so long as its Board of Directors, the executive committee of its Board of Directors or a committee of its directors and/or Trust Officers in good faith determines that withholding the notice is in the interest of the Holders. The foregoing sentence of this Section 7.05 shall be in lieu of the proviso to ss. 315(b) of the TIA and such proviso to ss. 315(b) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA. SECTION 7.06. Reports by Trustee to Holders. Within 60 days after April 15 of each year beginning with 1999, the Trustee shall, to the extent that any of the events described in TIA ss. 313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss.ss. 313(b), (c) and (d). A copy of each report at the time of its mailing to Holders shall be mailed to the Company and filed with the Commission and each stock exchange, if any, on which the Notes are listed. The Company shall promptly notify the Trustee if the Notes become listed on any stock exchange and the Trustee shall comply with TIA ss. 313(d). SECTION 7.07. Compensation and Indemnity. The Company and the Guarantors, jointly, shall pay to the Trustee from time to time such compensation for its services as has been agreed to in writing signed by the Company and the Trustee. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company and the Guarantors, jointly and severally, shall reimburse the Trustee upon request for all reasonable out-of-pocket disbursements, advances or expenses incurred or made by it in connection with the performance of its duties under this Indenture. Such expenses shall include the reasonable fees and expenses of the Trustee's agents, counsel, accountants and experts. -59- The Company and the Guarantors, jointly and severally, shall indemnify each of the Trustee (or any predecessor Trustee) and its agents, employees, stockholders, Affiliates and directors and officers for, and hold them each harmless against, any and all loss, liability, damage, claim or expense (including reasonable fees and expenses of counsel), including taxes (other than taxes based on the income of the Trustee) incurred by any of them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their rights, powers or duties hereunder. The Trustee shall notify the Company and the Guarantors promptly of any claim asserted against the Trustee for which it may seek indemnity, provided, however, that failure to so notify the Company and the Guarantors shall not release the Company and the Guarantors of their obligations hereunder unless and to the extent such failure results in the forfeiture by the Company and the Guarantors of any substantial rights or defenses. At the Trustee's sole discretion, the Company and the Guarantors shall defend the claim and the Trustee shall cooperate and may participate in the defense; provided, however, that any settlement of a claim shall be approved in writing by the Trustee (such approval not to be unreasonably withheld) if such settlement would result in an admission of liability by the Trustee or if such settlement would not be accompanied by a full release of the Trustee for all liability arising out of the events giving rise to such claim. Alternatively, the Trustee may at its option have separate counsel of its own choosing and the Company shall pay the reasonable fees and expenses of such counsel; provided that the Company will not be required to pay such fees and expenses if it assumes the Trustee's defense and there is no conflict of interest between the Company and the Trustee in connection with such defense as reasonably determined by the Trustee. The Company need not pay for any settlement made without its written consent, which consent will not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Company and the Guarantors' payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Notes on all assets or money held or collected by the Trustee (subject to the subordination provisions of Article Ten hereof), in its capacity as Trustee, except assets or money held in trust to pay principal of or premium, if any, or interest on particular Notes. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(vi) or (vii) occurs, such expenses and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Law. The provisions of this Section 7.07 shall survive the resignation or removal of the Trustee and the discharge or termination of this Indenture. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company in writing at least 30 days in advance of such resignation; provided, however, that no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee and -60- appoint a successor Trustee with the Company's consent, by so notifying the Company and the Trustee. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail notice of such successor Trustee's appointment to each Holder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in aggregate principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding any resignation or replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee; provided, however, that such corporation shall be otherwise qualified and eligible under this Article Seven. SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirement of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee (or, in the case of a Trustee that is a corporation included in -61- a bank holding company system, the related bank holding company) shall have a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition, and have a Corporate Trust Office in the City of New York. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of such bank holding company, shall meet the capital requirements of TIA ss. 310(a)(2). The Trustee shall comply with TIA ss. 310(b); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. The provisions of TIA ss. 310 shall apply to the Company, as obligor of the Notes. SECTION 7.11. Preferential Collection of Claims Against the Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. The provisions of TIA ss. 311 shall apply to the Company, as obligor of the Notes. ARTICLE EIGHT SATISFACTION AND DISCHARGE; DEFEASANCE SECTION 8.01. Satisfaction and Discharge of Indenture. (a) This Indenture shall be discharged and shall cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Notes herein expressly provided for) as to all outstanding Notes and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: (i) either (1) Notes theretofore authenticated and delivered (other than (x) Notes which have been lost, stolen or destroyed and which have been replaced or paid as provided in Section 2.07 hereof and (y) Notes with respect to which payment therefor has theretofore been deposited in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation; or (2) all Notes not theretofore delivered to the Trustee for cancellation (other than (x) Notes which have been lost, stolen or destroyed and which have been replaced or paid as provided in Section 2.07 hereof and (y) Notes with respect to which payment therefor has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been called for redemption pursuant to the terms of this Indenture or have otherwise become due and payable, and the Company, in each case, has irrevocably deposited or caused to be deposited with the Trustee in trust for the purpose U.S. Legal Tender sufficient to pay and discharge the entire -62- indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for the principal of, premium, if any, and interest to the date of such deposit; (ii) the Company has paid or caused to be paid all other sums payable hereunder 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 herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. (b) Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 7.07 hereof shall survive and, if money shall have been deposited with the Trustee pursuant to clause (a)(i)(2) of this Section 8.01, the obligations of the Trustee under Sections 8.03 and 8.04 shall survive. SECTION 8.02. Defeasance or Covenant Defeasance. (a) Subject to the satisfaction of the conditions in Section 8.02(c) hereof, the Company may, at its option by Board Resolution, at any time, with respect to the Notes, elect to have the obligations of the Company discharged with respect to the outstanding Notes ("defeasance"). Upon such defeasance, the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.04 hereof and the other Sections of and matters under this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Notes and this Indenture, except for the following, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of Notes to receive solely from the trust fund described in Section 8.02(c) and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (ii) the Company's obligations under Sections 2.03, 2.05, 2.06, 2.07, 2.10 and 4.02, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder, including, without limitation, the Trustee's rights under Section 7.07, and (iv) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02(a) notwithstanding the prior exercise of its option under Section 8.02(b) with respect to the Notes. (b) Subject to the satisfaction of the conditions in Section 8.02(c) hereof, the Company may, at its option by Board Resolution, at any time, elect to effect covenant defeasance ("covenant defeasance"). On and after the date such conditions are satisfied, (i) the Company shall be released from its obligations under any covenant or provision contained in Sections 4.03 (but only as to Restricted Subsidiaries), 4.04, 4.05, 4.06, 4.07, 4.08 and 4.10 through 4.23, (ii) clauses (iii) through (vi) of Section 6.01 hereof shall not apply, and (iii) the provisions of Articles Five and Ten shall not apply, and the Notes shall thereafter be deemed to be not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants and the provisions of Articles Five and Ten, but shall continue to be deemed "outstanding" for all other purposes hereunder and subject to any mandatory requirements of the TIA. For this purpose, such covenant defeasance means that, with respect to the Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or Article, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or Article or by reason -63- of any reference in any such Section or Article to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under clauses (iii) through (vi) of Section 6.01 hereof, but, except as specified above, the remainder of this Indenture shall be unaffected thereby. (c) In order to effect defeasance or covenant defeasance, the following conditions must be satisfied: (i) the Company shall have irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10 hereof who agrees to comply with the provisions of this Article Eight applicable to it), as trust funds in trust, for the benefit of the Holders of such Notes, U.S. Legal Tender, U.S. Government Obligations or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants or a nationally recognized investment banking firm, as evidenced by a written report, without consideration of reinvestment of interest of such U.S. Government Obligations, to pay the principal of, premium, if any, and interest on the outstanding Notes (except lost, stolen or destroyed Notes which have been replaced or paid) to maturity or redemption, as the case may be, and the Company shall have irrevocably instructed the Trustee (or such other trustee) to apply such U.S. Legal Tender or U.S. Government Obligations to said payments in respect of the Notes; (ii) the Company shall have delivered to the Trustee one or more Opinions of Counsel in the United States (which counsel or counsels shall be independent of the Company) to the effect that: (A) 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 (which opinion, in the case of defeasance, shall be based upon a ruling of the Internal Revenue Service or a change in applicable Federal income tax law occurring after the Issue Date); (B) the trust funds will not be subject to any rights of holders of Indebtedness of the Company (other than Holders of the Notes); and (C) 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; (iii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or, in the case of Section 6.01(vi) or (vii), at any time during the period ending on the 91st day after the date of such 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 material agreement or instrument to which the Company is a party or by which it is bound; and (v) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent (other than -64- conditions requiring the passage of time) 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 of the Company would result therefrom. Opinions required to be delivered under this Section may have qualifications customary for opinions of the type required. SECTION 8.03. Application of Trust Money. The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S. Government Obligations deposited with it pursuant to Section 8.01 or 8.02, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of the principal of and interest on the Notes. The Trustee shall be under no obligation to invest said U.S. Legal Tender or U.S. Government Obligations except as it may agree in writing with the Company. The Company shall pay, and indemnify the Trustee against, any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or U.S. Government Obligations deposited pursuant to Section 8.01 or 8.02 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of outstanding Notes. SECTION 8.04. Repayment to the Company. Subject to Sections 8.01 and 8.02, the Trustee and the Paying Agent shall promptly pay to the Company upon written request any excess U.S. Legal Tender or U.S. Government Obligations held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for one year; provided, however, that the Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Company cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person. SECTION 8.05. Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.01 or 8.02 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01 or 8.02, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.01 or 8.02, as the case may be; provided, however, that if the Company has made any payment of interest on or principal of any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive -65- such payment from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent. SECTION 8.06. Acknowledgment of Discharge by Trustee. After (i) the conditions of Section 8.01 or 8.02(a) have been satisfied, (ii) the Company has paid or caused to be paid all other sums payable hereunder 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 referred to in clause (i), above, relating to the satisfaction and discharge or defeasance of this Indenture have been complied with, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified in Section 8.01 or 8.02, as the case may be. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. The Company, when authorized by a Board Resolution, and the Trustee, together, may amend or supplement this Indenture or the Notes without notice to or consent of any Holder: (i) to cure any ambiguity, defect or inconsistency; provided, however, that such amendment or supplement does not adversely affect the rights of any Holder; (ii) to effect the assumption by a successor Person of all obligations of the Company under the Notes, this Indenture and, if still in effect, the Registration Rights Agreement in the event of any Disposition involving the Company in which the Company is not the Surviving Person; (iii) to provide for uncertificated Notes in addition to or in place of certificated Notes; (iv) to comply with any requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; (v) to make any change that would provide any additional benefit or rights to the Holders; (vi) to provide for issuance of the Exchange Notes (which will have terms substantially identical in all material respects to the Initial Notes except that the transfer restrictions contained in the Initial Notes will be modified or eliminated, as appropriate), and which will be treated together with any outstanding Initial Notes, as a single issue of securities; or (vii) to make any other change that does not adversely affect the rights of any Holder under this Indenture; -66- provided, however, that the Company has delivered to the Trustee an Opinion of Counsel stating that such amendment or supplement complies with the provisions of this Section 9.01. SECTION 9.02. With Consent of Holders. (a) Subject to Section 6.07, the Company, when authorized by a Board Resolution, and the Trustee, together, with the written consent of the Holder or Holders of not less than 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), may amend or supplement this Indenture or the Notes without notice to any other Holder. Subject to Section 6.02 and 6.07, the Holder or Holders of not less than a majority in aggregate principal amount of the then outstanding Notes may waive compliance by the Company with any provision of this Indenture or the Notes without notice to any other Holder. (b) Notwithstanding Section 9.02(a) hereof, no amendment, supplement or waiver, including a waiver pursuant to Section 6.04, shall, without the prior written consent of each Holder of each Note affected thereby: (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 this Indenture relating to the rights of Holders to waive past Defaults or Events of Default or the rights of Holders to receive payments of principal of, or premium, if any, or interest on, the Notes; or (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 Change of Control or modify any of the provisions or definitions with respect thereto in a manner adverse to the Holders with respect to such Change of Control, or following the occurrence of an Asset Sale, amend, 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 with respect to such Asset Sale. -67- (c) It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. (d) After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. Compliance with TIA. Every amendment, waiver or supplement of this Indenture or the Notes shall comply with the TIA as then in effect; provided, however, that this Section 9.03 shall not of itself require that this Indenture or the Trustee be qualified under the TIA or constitute any admission or acknowledgment by any party hereto that any such qualification is required prior to the time this Indenture and the Trustee are required by the TIA to be so qualified. SECTION 9.04. Revocation and Effect of Consents. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. Subject to the following paragraph, any such Holder or subsequent Holder may revoke the consent as to such Holder's Note or portion of such Note by notice to the Trustee or the Company received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. An amendment, supplement or waiver becomes effective upon receipt by the Trustee of such Officers' Certificate and evidence of consent by the Holders of the requisite percentage in principal amount of outstanding Notes. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which record date shall be at least 30 days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the second sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes any change described in Section 9.02(b), in which case, the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note; provided, however, that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of and interest on a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.05. Notation on or Exchange of Notes. -68- If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder of such Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. SECTION 9.06. Trustee To Sign Amendments, Etc. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided, however, that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture. Such Opinion of Counsel shall not be an expense of the Trustee or the Holders. ARTICLE TEN SUBORDINATION SECTION 10.01. Notes Subordinated to Senior Debt. The Company covenants and agrees, and each Holder of the Notes, by its acceptance thereof, likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article Ten; and each Person holding any Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that the payment of all obligations on the Notes by the Company shall, to the extent and in the manner herein set forth, be subordinated and junior in right of payment to the prior payment in full, in cash in the case of the Credit Facility, or in cash or in Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, of all obligations on Senior Debt, including, without limitation, the Company's obligations under the Credit Facility; that the subordination is for the benefit of, and shall be enforceable directly by, the holders of Senior Debt, and that each holder of Senior Debt whether now outstanding or hereafter created, incurred, assumed or guaranteed shall be deemed to have acquired Senior Debt in reliance upon the covenants and provisions contained in this Indenture and the Notes. SECTION 10.02. Suspension of Payment When Senior Debt Is in Default. (a) The Company shall not make any payment upon or in respect of the Notes (except from the trust created pursuant to Section 8.02) 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 this Indenture, shall be -69- 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 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. In no event shall a Payment Blockage Period extend beyond 179 days from the date of the receipt of the Payment Blockage Notice. Any number of notices of a nonpayment default may be given during a Payment Blockage Period; provided, however, that no such notice shall extend such Payment Blockage Period beyond 179-day limit. (b) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when, and after the Trustee has been notified that, such payment is prohibited by Section 10.02(a), such payment shall be held for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Senior Debt, if any, received from the holders of such Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives after written request therefor, from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of Senior Debt. Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided that all Senior Debt thereafter due or declared to be due shall first be paid in full, in cash in the case of the Credit Facility, or in cash or in Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, before the Holders are entitled to receive any payment of any kind or character with respect to obligations on the Notes. SECTION 10.03. Notes Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company. (a) Upon any direct or indirect payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors -70- or marshaling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its property, whether voluntary or involuntary, all obligations due or to become due upon all Senior Debt shall first be paid in full, in cash in the case of the Credit Facility, or in cash or in Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any obligations on the Notes, or for the acquisition, repurchase, redemption or defeasance of any of the Notes for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any direct or indirect payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Notes or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full, in cash in the case of the Credit Facility, or in cash or in Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. (b) To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment has not occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 10.03(c), such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full, in cash in the case of the Credit Facility, or in cash or in Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt. (d) The consolidation of the Company with, or the merger of the Company with or into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms -71- and conditions provided in Article Five hereof and as long as permitted under the terms of the Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume the Company's obligations hereunder in accordance with Article Five hereof. SECTION 10.04. Holders To Be Subrogated to Rights of Holders of Senior Debt. Subject to the payment in full, in cash in the case of the Credit Facility, or in cash or in Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, of all Senior Debt, the Holders of the Notes shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Debt until the Notes shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Company or by or on behalf of the Holders by virtue of this Article Ten which otherwise would have been made to the Holders shall, as between the Company and the Holders of the Notes, be deemed to be a payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Article Ten are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes, on the one hand, and the holders of the Senior Debt, on the other hand. Each Holder by purchasing or accepting a Note waives any and all notice of the creation, modification, renewal, extension or accrual of any Senior Debt of the Company and notice of or proof of reliance by any holder or owner of Senior Debt of the Company upon this Article Ten and the Senior Debt of the Company shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Article Ten, and all dealings between the Company and the holders and owners of the Senior Debt of the Company shall be deemed to have been consummated in reliance upon this Article Ten. SECTION 10.05. Obligations of the Company Unconditional. Nothing contained in this Article Ten or elsewhere in this Indenture or in the Notes is intended to or shall impair, as between the Company and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Ten of the holders of Senior Debt in respect of cash, property or Notes of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets or securities of the Company referred to in this Article Ten, the Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any liquidation, dissolution, winding-up or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee or agent or other Person making any payment or distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or -72- amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten. Nothing in this Article Ten shall apply to the claims of, or payments to, the Trustee under or pursuant to Section 7.07. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Debt (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Debt or a trustee or representative on behalf of any such holder. In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article Ten, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Ten, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 10.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Ten. Regardless of anything to the contrary contained in this Article Ten or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from the Company, or from a holder of Senior Debt or a Representative therefor, together with proof satisfactory to the Trustee of such holding of Senior Debt or of the authority of such Representative, and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist. Nothing contained in this Section 10.06 shall limit the right of the holders of Senior Debt to recover payments as contemplated by this Article Ten. SECTION 10.07. Application by Trustee of Assets Deposited with It. U.S. Legal Tender or U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall be for the sole benefit of the Holders of the Notes and, to the extent allocated for the payment of Notes, shall not from and after the time of such deposit be subject to the subordination provisions of this Article Ten. Otherwise, any deposit of assets or securities by or on behalf of the Company with the Trustee or any Paying Agent (whether or not in trust) for the payment of principal of or interest on any Notes shall be subject to the provisions of this Article Ten; provided, however, that if prior to the second Business Day preceding the date on which by the terms of this Indenture any such assets may become distributable for any purpose (including, without limitation, the payment of either principal of or interest on any Note) the Trustee or such Paying Agent shall not have received with respect to such assets any notice provided for in Section 10.06, then the Trustee or such Paying Agent shall have full power and authority to receive such assets and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary received by it on or after such date. The foregoing shall not apply to the Paying Agent if the Company or any Subsidiary or Affiliate of the Company is acting as Paying Agent. Nothing -73- contained in this Section 10.07 shall limit the right of the holders of Senior Debt to recover payments as contemplated by this Article Ten. SECTION 10.08. No Waiver of Subordination Provisions. (a) No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without limiting the generality of subsection (a) of this Section 10.08, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article Ten or the obligations hereunder of the Holders of the Notes to the holders of Senior Debt, do any one or more of the following: (1) change the manner, place, terms or time of payment of, or renew, refinance, replace or alter, Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (3) release any Person liable in any manner for the collection or payment of Senior Debt; and (4) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination of Notes. Each Holder of the Notes by such Holder's acceptance thereof authorizes and expressly directs the Trustee on his behalf to take such action as may be necessary or appropriate to effect the subordination provisions contained in this Article Ten, and appoints the Trustee such Holder's attorney-in-fact for such purpose, including, in the event of any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company tending towards liquidation or reorganization of the business and assets of the Company, the immediate filing of a claim for the unpaid balance of such Holder's Notes in the form required in said proceedings and cause said claim to be approved. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then any of the holders of the Senior Debt or any Representative thereof is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Notes. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. SECTION 10.10. Right of Trustee to Hold Senior Debt. The Trustee and any agent of the Company or the Trustee shall be entitled to all the rights set forth in this Article Ten with respect to any Senior Debt which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Debt and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder. -74- Whenever a distribution is to be made or a notice given to holders or owners of Senior Debt, the distribution may be made and the notice may be given to their Representative, if any. SECTION 10.11. This Article Ten Not To Prevent Events of Default. The failure to make a payment on account of principal of or interest on the Notes by reason of any provision of this Article Ten will not be construed as preventing the occurrence of an Event of Default. Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Article Six or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article Ten of the holders, from time to time, of Senior Debt. SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior Debt. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and it undertakes to perform or observe such of its covenants and obligations as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be liable to any such holders (other than for its willful misconduct or gross negligence) if it shall pay over or deliver to the Holders of Notes or the Company or any other Person money or assets in compliance with the terms of this Indenture. Nothing in this Section 10.12 shall affect the obligation of any Person other than the Trustee to hold such payment for the benefit of, and to pay such payment over to, the holders of Senior Debt or their Representative. ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. TIA Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control; provided, however, that this Section 11.01 shall not of itself require that this Indenture or the Trustee be qualified under the TIA or constitute any admission or acknowledgment by any party hereto that any such qualification is required prior to the time this Indenture and the Trustee are required by the TIA to be so qualified. SECTION 11.02. Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier or overnight courier guaranteeing next-day delivery or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: -75- if to the Company or any Guarantor: PHILIPP BROTHERS CHEMICALS, INC. One Parker Plaza Fort Lee, NJ 07024 Facsimile: (201) 944-6245 Attn: Chief Executive Officer with a copy to: Golenbock, Eiseman, Assor & Bell 437 Madison Avenue 35th Floor New York, NY 10022 Facsimile: (212) 754-0330 Attn: Nathan E. Assor, Esq. -76- if to the Trustee: THE CHASE MANHATTAN BANK 450 West 33rd Street New York, New York 10001 Attention: Global Trust Services Each of the Company and the Trustee by written notice to the other may designate additional or different addresses for notices to such Person. Any notice or communication to the Company or the Trustee shall be deemed to have been given or made as of the date so delivered if hand delivered; when answered back, if telexed; when receipt is acknowledged, if faxed; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that (i) the Trustee shall not be deemed to have knowledge of such notice nor shall any time period within which the Trustee is required to act as a result of such notice commence until the Trustee actually receives the notice in question and (ii) a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Holder shall be mailed by first class mail, certified or registered return receipt requested, or by overnight courier guaranteeing next-day delivery to its address as it appears on the registration books of the Registrar. Any notice or communication shall be mailed to any Person as described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. Communications by Holders with Other Holders. Holders may communicate pursuant to TIA ss. 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA ss. 312(c). SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall if the Trustee shall so request furnish to the Trustee: (1) an Officers' Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with; and/or (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent to be performed by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with (which counsel, as to factual matters, may rely on an Officers' Certificate). -77- SECTION 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.06, shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is reasonably necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with; provided, however, that with respect to such matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificate of public officials, and provided, further, that an Opinion of Counsel may have qualifications for opinions of the type required. SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. The Trustee may make reasonable rules in accordance with the Trustee's customary practices for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 11.07. Legal Holidays. A "Legal Holiday" used with respect to a particular place of payment is a Saturday, a Sunday or a day on which banking institutions in New York, New York or at such place of payment are not required to be open. If a payment date is a Legal Holiday at such place, payment may be made at such place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 11.08. Governing Law. THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Each of the parties hereto agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Indenture. SECTION 11.09. No Adverse Interpretation of Other Agreements. -78- This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.10. No Personal Liability. No director, officer, employee, incorporator, direct or indirect controlling person, stockholder, member, partner or affiliate, as such, of the Company or any Guarantor, or any successor entity, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, this Indenture, the Guarantees or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note, and the Trustee, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. SECTION 11.11. Successors. All agreements of the Company in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Duplicate Originals. All parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together shall represent the same agreement. SECTION 11.13. Severability. In case any one or more of the provisions in this Indenture or in the Notes shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. ARTICLE TWELVE GUARANTEE OF NOTES SECTION 12.01. Unconditional Guarantee. Subject to the provisions of this Article Twelve, each Guarantor, if any, hereby, jointly and severally, unconditionally and irrevocably guarantees (such guarantee to be referred to herein as a "Guarantee") to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of, premium, if any, and interest on the Notes (and any Additional Interest payable thereon) shall be duly and punctually paid in full when due, whether at maturity, upon redemption at the option of Holders pursuant to the provisions of the Notes relating thereto, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Notes and all other obligations of the Company or the Guarantors to the Holders or the Trustee hereunder or thereunder (including amounts due the Trustee under Section 7.07) shall be promptly paid in full or performed, all in accordance with -79- the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Company to the Holders under this Indenture or under the Notes, for whatever reason, each Guarantor shall be obligated to pay, or to perform or cause the performance of, the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under this Guarantee, and shall entitle the Holders of Notes to accelerate the obligations of the Guarantors hereunder in the same manner and to the same extent as the obligations of the Company. Each of the Guarantors hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a Guarantee is affixed to any particular Note, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each of the Guarantors hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and this Guarantee. This Guarantee is a guarantee of payment and not of collection. If any Holder or the Trustee is required by any court or otherwise to return to the Company or to any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (a) subject to this Article Twelve, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. No director, officer, employee, incorporator, direct or indirect controlling person, stockholder, member, partner or affiliate, as such, of any Guarantor, or any successor entity, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, this Indenture, the Guarantees or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note, and the Trustee, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. Each Guarantor that makes a payment or distribution under its Guarantee shall be entitled to a contribution from each other Guarantor in an amount pro rata, based on the net assets of each Guarantor, determined in accordance with GAAP. SECTION 12.02. Limitations on Guarantees. -80- The obligations of each Guarantor under its Guarantee will be limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under this Indenture, will result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. SECTION 12.03. Execution and Delivery of Guarantee. To further evidence the Guarantee set forth in Section 12.01, each Guarantor hereby agrees that a notation of such Guarantee, substantially in the form of Exhibit F hereto, shall be endorsed on each Note authenticated and delivered by the Trustee. Such Guarantee shall be executed on behalf of each Guarantor by either manual or facsimile signature of two Officers, or an Officer and an Assistant Secretary, of each Guarantor, each of whom, in each case, shall have been duly authorized to so execute by all requisite corporate action. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Note. Each of the Guarantors hereby agrees that its Guarantee set forth in Section 12.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. If an Officer of a Guarantor whose signature is on this Indenture or a Guarantee no longer holds that office at the time the Trustee authenticates the Note on which such Guarantee is endorsed or at any time thereafter, such Guarantor's Guarantee of such Note shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Indenture on behalf of each Guarantor. SECTION 12.04. Release of a Guarantor. (a) So long as no Event of Default shall have occurred and be continuing upon the sale or disposition (whether by merger, stock purchase, asset 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 this Indenture, such Guarantor shall be deemed released from all its obligations under its Guarantee of the Notes and under this 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 this Indenture. (b) The Trustee shall deliver an appropriate instrument evidencing the release of a Guarantor upon receipt of a request by the Company or such Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel certifying as to the compliance with this Section 12.04. -81- The Trustee shall execute any documents reasonably requested by the Company or a Guarantor in order to evidence the release of such Guarantor from its obligations under its Guarantee endorsed on the Notes and under this Article Twelve. Except as set forth in Articles Four and Five and this Section 12.04, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. SECTION 12.05. Waiver of Subrogation. Until this Indenture is discharged and all of the Notes are discharged and paid in full, each Guarantor hereby irrevocably waives and agrees not to exercise any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of the Company's obligations under the Notes or this Indenture and such Guarantor's obligations under this Guarantee and this Indenture, in any such instance including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of the Holders against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and any amounts owing to the Trustee or the Holders of Notes under the Notes, this Indenture, or any other document or instrument delivered under or in connection with such agreements or instruments, shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Trustee or the Holders and shall forthwith be paid to the Trustee for the benefit of itself or such Holders to be credited and applied to the obligations in favor of the Trustee or the Holders, as the case may be, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 12.05 is knowingly made in contemplation of such benefits. SECTION 12.06. No Set-Off. Each payment to be made by a Guarantor hereunder in respect of its obligations hereunder shall be payable in the currency or currencies in which such obligations are denominated, and shall be made without set-off, counterclaim, reduction or diminution of any kind or nature. SECTION 12.07. Obligations Absolute. Except as otherwise provided in this Indenture, the obligations of each Guarantor hereunder are and shall be absolute and unconditional and any monies or amounts expressed to be owing or payable by each Guarantor hereunder which may not be recoverable from such Guarantor on the basis of a Guarantee shall be recoverable from such Guarantor as a primary obligor and principal debtor in respect thereof. SECTION 12.08. Obligations Continuing. -82- Except as otherwise provided in this Indenture, the obligations of each Guarantor hereunder shall be continuing and shall remain in full force and effect until all the obligations have been paid and satisfied in full. Each Guarantor agrees with the Trustee that, if requested, it will from time to time deliver to the Trustee suitable acknowledgments of this continued liability hereunder and under any other instrument or instruments in such form as counsel to the Trustee may advise and as will prevent any action brought against it in respect of any default hereunder being barred by any statute of limitations now or hereafter in force and, in the event of the failure of a Guarantor so to do, it hereby irrevocably appoints the Trustee the attorney and agent of such Guarantor to make, execute and deliver such written acknowledgment or acknowledgments or other instruments as may from time to time become necessary or advisable, in the judgment of the Trustee on the advice of counsel, to fully maintain and keep in force the liability of such Guarantor hereunder. SECTION 12.09. Obligations Not Reduced. The obligations of each Guarantor hereunder shall not be satisfied, reduced or discharged solely by the payment of such principal, premium, if any, interest, fees and other monies or amounts as may at any time prior to discharge of this Indenture pursuant to Article Eight be or become owing or payable under or by virtue of or otherwise in connection with the Notes or this Indenture. SECTION 12.10. Obligations Reinstated. The obligations of each Guarantor hereunder shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment which would otherwise have reduced the obligations of any Guarantor hereunder (whether such payment shall have been made by or on behalf of the Company or by or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy, liquidation or reorganization of the Company or any Guarantor or otherwise, all as though such payment had not been made. If demand for, or acceleration of the time for, payment by the Company is stayed upon the insolvency, bankruptcy, liquidation or reorganization of the Company, all such Indebtedness otherwise subject to demand for payment or acceleration shall nonetheless be payable by each Guarantor as provided herein. SECTION 12.11. Obligations Not Affected. Except as otherwise provided in this Indenture, the obligations of each Guarantor hereunder shall not be affected, impaired or diminished in any way by any act, omission, matter or thing whatsoever, occurring before, upon or after any demand for payment hereunder (and whether or not known or consented to by any Guarantor or any of the Holders) which, but for this provision, might constitute a whole or partial defense to a claim against any Guarantor hereunder or might operate to release or otherwise exonerate any Guarantor from any of its obligations hereunder or otherwise affect such obligations, whether occasioned by default of any of the Holders or otherwise, including, without limitation: (a) any limitation of status or power, disability, incapacity or other circumstance relating to the Company or any other person, including any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, winding up or other proceeding involving or affecting the Company or any other person; -83- (b) any irregularity, defect, unenforceability or invalidity in respect of any Indebtedness or other obligation of the Company or any other person under this Indenture, the Notes or any other document or instrument; (c) any failure of the Company, whether or not without fault on its part, to perform or comply with any of the provisions of this Indenture or the Notes, or to give notice thereof to a Guarantor; (d) the taking or enforcing or exercising or the refusal or neglect to take or enforce or exercise any right or remedy from or against the Company or any other Person or their respective assets or the release or discharge of any such right or remedy; (e) the granting of time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person; (f) any change in the time, manner or place of payment of, or in any other term of, any of the Notes, or any other amendment, variation, supplement, replacement or waiver of, or any consent to departure from, any of the Notes or this Indenture, including, without limitation, any increase or decrease in the principal amount of or premium, if any, or interest on any of the Notes; (g) any change in the ownership, control, name, objects, businesses, assets, capital structure or constitution of the Company or a Guarantor; (h) any merger, consolidation or amalgamation of the Company or a Guarantor with any Person or Persons; (i) the occurrence of any change in the laws, rules, regulations or ordinances of any jurisdiction by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the obligations under the Notes and this Indenture or the obligations of a Guarantor under its Guarantee; and (j) any other circumstance (other than by complete, irrevocable payment or a release made pursuant to Section 12.04) that might otherwise constitute a legal or equitable discharge or defense of the Company under this Indenture or the Notes or of a Guarantor in respect of its Guarantee hereunder. SECTION 12.12. Waiver. Without in any way limiting the provisions of Section 12.01 hereof, each Guarantor hereby waives notice of acceptance hereof, notice of any liability of any Guarantor hereunder, notice or proof of reliance by the Holders upon the obligations of any Guarantor hereunder, and diligence, presentment, demand for payment on the Company, protest, notice of dishonor or non-payment of any of the obligations under the Notes or this Indenture, or other notice or formalities to the Company or any Guarantor of any kind whatsoever. SECTION 12.13. No Obligation To Take Action Against the Company. -84- Neither the Trustee nor any other Person shall have any obligation to enforce or exhaust any rights or remedies or to take any other steps under any security for the obligations under the Notes or this Indenture or against the Company or any other Person or any property of the Company or any other Person before the Trustee is entitled to demand payment and performance by any or all Guarantors of their liabilities and obligations under their Guarantees or under this Indenture. SECTION 12.14. Dealing with the Company and Others. The Holders, without releasing, discharging, limiting or otherwise affecting in whole or in part the obligations and liabilities of any Guarantor hereunder and without the consent of or notice to any Guarantor, may (a) grant time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person; (b) take or abstain from taking security or collateral from the Company or from perfecting security or collateral of the Company; (c) release, discharge, compromise, realize, enforce or otherwise deal with or do any act or thing in respect of (with or without consideration) any and all collateral, mortgages or other security given by the Company or any third party with respect to the obligations or matters contemplated by this Indenture or the Notes; (d) accept compromises or arrangements from the Company; (e) apply all monies at any time received from the Company or from any security upon such part of the obligations under the Notes or this Indenture as the Holders may see fit or change any such application in whole or in part from time to time as the Holders may see fit; and (f) otherwise deal with, or waive or modify their right to deal with, the Company and all other Persons and any security as the Holders or the Trustee may see fit. SECTION 12.15. Default and Enforcement. If any Guarantor fails to pay in accordance with Section 12.01 hereof, the Trustee may proceed in its name as trustee hereunder in the enforcement of the Guarantee of any such Guarantor and such Guarantor's obligations thereunder and hereunder by any remedy provided by law, whether by legal proceedings or otherwise, and to recover from such Guarantor the obligations. SECTION 12.16. Amendment, Etc. No amendment, modification or waiver of any provision of this Indenture relating to any Guarantor or consent to any departure by any Guarantor or any other Person from any such provision will in any event be effective unless it is signed by such Guarantor and the Trustee. SECTION 12.17. Acknowledgment. -85- Each Guarantor hereby acknowledges communication of the terms of this Indenture and the Notes and consents to and approves of the same. SECTION 12.18. Costs and Expenses. Each Guarantor shall pay on demand by the Trustee any and all costs, fees and expenses (including, without limitation, legal fees) incurred by the Trustee, its agents, advisors and counsel or any of the Holders in enforcing any of their rights under any Guarantee in the same manner as the Company shall be requested to pay the Trustee's fees. SECTION 12.19. No Merger or Waiver; Cumulative Remedies. No Guarantee shall operate by way of merger of any of the obligations of a Guarantor under any other agreement, including, without limitation, this Indenture. No failure to exercise and no delay in exercising, on the part of the Trustee or the Holders, any right, remedy, power or privilege hereunder or under this Indenture or the Notes, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under this Indenture or the Notes preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges in the Guarantee and under this Indenture, the Notes and any other document or instrument between a Guarantor and/or the Company and the Trustee are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. SECTION 12.20. Survival of Obligations. Without prejudice to the survival of any of the other obligations of each Guarantor hereunder, the obligations of each Guarantor under Section 12.01 shall survive the payment in full of the obligations under this Indenture and the Notes and shall be enforceable against such Guarantor without regard to and without giving effect to any defense, right of offset or counterclaim available to or which may be asserted by the Company or any Guarantor. SECTION 12.21. Guarantee in Addition to Other Obligations. The obligations of each Guarantor under its Guarantee and this Indenture are in addition to and not in substitution for any other obligations to the Trustee or to any of the Holders in relation to this Indenture or the Notes and any guarantees or security at any time held by or for the benefit of any of them. SECTION 12.22. Severability. Any provision of this Article Twelve which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction unless its removal would substantially defeat the basic intent, spirit and purpose of this Indenture and this Article Twelve. SECTION 12.23. Successors and Assigns. Each Guarantee shall be binding upon and inure to the benefit of each Guarantor and the Trustee and the other Holders and their respective successors and permitted assigns, except -86- that no Guarantor may assign any of its obligations hereunder or thereunder other than as otherwise provided herein. ARTICLE THIRTEEN SUBORDINATION OF GUARANTEE SECTION 13.01. Obligations of Guarantors Subordinated to Guarantor Senior Debt. Anything in Article Twelve or elsewhere herein to the contrary notwithstanding, each of the Guarantors, for itself and its successors, and the Trustee and each Holder, by his or her acceptance of Guarantees, agrees that the payment of all obligations under the Notes or this Indenture owing to the Holders in respect of its Guarantee (collectively, as to any Guarantor, its "Guarantee Obligations") is subordinated, to the extent and in the manner provided in this Article Thirteen, to the prior payment in full, in cash in the case of the Credit Facility, or in cash or in Cash Equivalents (other than clause (vi) of the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt incurred by such Guarantor, or such payment duly provided for to the satisfaction of the holders of Senior Debt incurred by such Guarantor, of all obligations on Senior Debt incurred by such Guarantor, including without limitation, the Guarantors' obligations under or in connection with or as guarantors in respect of the Credit Facility; that such subordination is for the benefit of, and shall be enforceable directly by, any holder of Senior Debt incurred by such Guarantor, and that each holder of Senior Debt incurred by such Guarantor whether now outstanding or hereafter created, incurred, assumed or guaranteed shall be deemed to have acquired Senior Debt incurred by such Guarantor in reliance upon the covenants and provisions contained in this Indenture and the Notes. This Article Thirteen shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Debt incurred by a Guarantor, and such provisions are made for the benefit of the holders of Senior Debt incurred by a Guarantor and such holders are made obligees hereunder and any one or more of them may enforce such provisions. SECTION 13.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default. (a) A Guarantor shall not make any payment upon or in respect of the Notes (except from the trust created pursuant to Section 8.02) 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 a Payment Blockage Notice from the Representative of any holder(s) of Designated Senior Debt that a nonpayment default has occurred and is continuing with respect to such Designated Senior Debt that permits any of such holder(s) 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 this 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 th 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, -87- unless the maturity of any Designated Senior Debt has been accelerated and the Company or any Guarantor has defaulted with respect to the payment of such Designated Senior Debt, or (c) the date on which such Payment Blockage Period shall have been terminated by written notice to the Company, the Guarantor 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 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. In no event shall a Payment Blockage Period extend beyond 179 days from the date of the receipt of the Payment Blockage Notice. Any number of notices of a nonpayment default may be given during a Payment Blockage Period; provided, however, that no such notice shall extend such Payment Blockage Period beyond the 179-day limit. (b) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder from such Guarantor when such payment is prohibited by Section 13.02(a), such payment shall be held for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt incurred by such Guarantor with respect to such Guarantor (pro rata to such holders on the basis of the respective amount of such Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts then due and owing on such Senior Debt, if any, received from the holders of such Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives after written request therefor, from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of such Senior Debt. Nothing contained in this Article Thirteen shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided that all Senior Debt incurred by a Guarantor thereafter due or declared to be due shall first be paid in full, in cash in the case of the Credit Facility, or in cash or Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, before the Holders are entitled to receive any payment of any kind or character with respect to obligations on the Notes or any of the Guarantees. SECTION 13.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor. (a) Upon any direct or indirect payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to such Guarantor or its property, whether voluntary or involuntary, all obligations due or to become due upon all Senior Debt incurred by such Guarantor shall first be paid in full, in cash in the case of the Credit Facility, or in cash or in -88- Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, or such payment duly provided for to the satisfaction of the holders of such Senior Debt, before any payment or distribution of any kind or character is made on account of any obligations on the Guarantee of such Guarantor, or for the acquisition, repurchase, redemption or defeasance of the Guarantee of such Guarantor for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any direct or indirect payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities, to which the Holders of the Guarantee of such Guarantor or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of such Senior Debt (pro rata to such holders on the basis of the respective amounts of such Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of such Senior Debt remaining unpaid until all such Senior Debt has been paid in full, in cash in the case of the Credit Facility, or in cash or in Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. (b) To the extent any payment of Senior Debt incurred by a Guarantor (whether by or on behalf of any Guarantor, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, such Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment has not occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 13.03(c), such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of such Senior Debt incurred by such Guarantor (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of such Senior Debt remaining unpaid until all such Senior Debt has been paid in full, in cash in the case of the Credit Facility, or in cash or in Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt. (d) The consolidation of any Guarantor with, or the merger of any Guarantor with or into, another corporation or the liquidation or dissolution of any Guarantor following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Article Five hereof and as long as permitted under the terms of the Senior Debt incurred by such Guarantor shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such -89- consolidation, merger, conveyance or transfer, assume such Guarantor's obligations hereunder in accordance with Article Five hereof. SECTION 13.04. Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of Guarantor Senior Debt. Subject to the payment in full, in cash in the case of the Credit Facility, or in cash or Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, or such payment duly provided for to the satisfaction of the holders of Senior Debt incurred by a Guarantor, of all such Senior Debt, the Holders of Guarantee Obligations of a Guarantor shall be subrogated to the rights of the holders of such Senior Debt incurred by such Guarantor to receive payments or distributions of assets of such Guarantor applicable to such Senior Debt until all amounts owing on or in respect of the Guarantee Obligations shall be paid in full, in cash in the case of the Credit Facility, or in cash or Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of any other Senior Debt, and for the purpose of such subrogation no payments or distributions to the holders of such Senior Debt by or on behalf of such Guarantor, or by or on behalf of the Holders by virtue of this Article Thirteen, which otherwise would have been made to the Holders shall, as between such Guarantor and the Holders, be deemed to be payment by such Guarantor to or on account of such Senior Debt, it being understood that the provisions of this Article Thirteen are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of such Senior Debt, on the other hand. If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article Thirteen shall have been applied, pursuant to the provisions of this Article Thirteen, to the payment of all amounts payable under such Senior Debt, then the Holders shall be entitled to receive from the holders of such Senior Debt any such payments or distributions received by such holders of such Senior Debt in excess of the amount sufficient to pay all amounts payable under or in respect of such Senior Debt in full, in cash in the case of the Credit Facility, or in cash or Cash Equivalents (other than clause (vi) in the definition of Cash Equivalents or investments in money market funds thereto) in the case of other Senior Debt, or such payment duly provided for to the satisfaction of the holders of such Senior Debt. Each Holder by purchasing or accepting a Note waives any and all notice of the creation, modification, renewal, extension or accrual of any Senior Debt incurred by the Guarantors and notice of or proof of reliance by any holder or owner of Senior Debt incurred by the Guarantors upon this Article Thirteen and the Senior Debt incurred by the Guarantors shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Article Thirteen, and all dealings between the Guarantors and the holders and owners of the Senior Debt incurred by the Guarantors shall be deemed to have been consummated in reliance upon this Article Thirteen. SECTION 13.05. Obligations of the Guarantors Unconditional. Nothing contained in this Article Thirteen or elsewhere in this Indenture or in the Guarantees is intended to or shall impair, as between the Guarantors and the Holders, the obligation of the Guarantors, which is absolute and unconditional, to pay to the Holders all amounts due and payable under the Guarantees as and when the same shall become due and -90- payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Guarantors other than the holders of Senior Debt incurred by a Guarantor, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Thirteen, of the holders of such Senior Debt in respect of cash, property or securities of the Guarantors received upon the exercise of any such remedy. Upon any payment or distribution of assets of any Guarantor referred to in this Article Thirteen, the Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any liquidation, dissolution, winding-up or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee or agent or other Person making any payment or distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Debt and other Indebtedness incurred by any Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Thirteen. Nothing in this Article Thirteen shall apply to the claims of, or payments to, the Trustee under or pursuant to Section 7.07. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Debt incurred by a Guarantor (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Debt or a trustee or representative on behalf of any such holder. In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt incurred by a Guarantor to participate in any payment or distribution pursuant to this Article Thirteen, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt incurred by a Guarantor held by such Person, the extent to which such Person is enti tled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Thirteen, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 13.06. Trustee Entitled To Assume Payments Not Prohibited in Absence of Notice. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Thirteen. Regardless of anything to the contrary contained in this Article Thirteen or elsewhere in this Indenture. The Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Senior Debt incurred by a Guarantor or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from the Company or the Guarantor, or from a holder of such Senior Debt or a Representative therefor, together with proof satisfactory to the Trustee of such holding of Senior Debt or of the authority of such Representative, and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist. SECTION 13.07. Application by Trustee of Assets Deposited with It. -91- U.S. Legal Tender or U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall be for the sole benefit of Holders of the Notes and, to the extent allocated for the payment of Notes, shall not from and after the time of such deposit be subject to the subordination provisions of this Article Thirteen. Otherwise, any deposit of assets or securities by or on behalf of a Guarantor with the Trustee or any Paying Agent (whether or not in trust) for payment of the Guarantees shall be subject to the provisions of this Article Thirteen; provided, however, that if prior to the second Business Day preceding the date on which by the terms of this Indenture any such assets may become distributable for any purpose (including, without limitation, the payment of either principal of or interest on any Note) the Trustee or such Paying Agent shall not have received with respect to such assets any notice provided for in Section 13.06, then the Trustee or such Paying Agent shall have full power and authority to receive such assets and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary received by it on or after such date. The foregoing shall not apply to the Paying Agent if the Company or any Subsidiary or Affiliate of the Company is acting as Paying Agent. Nothing contained in this Section 13.07 shall limit the right of the holders of Senior Debt incurred by a Guarantor to recover payments as contemplated by this Article Thirteen. SECTION 13.08. No Waiver of Subordination Provisions. (a) No right of any present or future holder of any Senior Debt incurred by a Guarantor to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Guarantor or by any act or failure to act, by any such holder, or by any non-compliance by any Guarantor with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without limiting the generality of subsection (a) of this Section 13.08, the holders of Senior Debt incurred by a Guarantor may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article Thirteen or the obligations hereunder of the Holders of the Notes to the holders of Senior Debt, do any one or more of the following: (1) change the manner, place, terms or time of payment of, or renew, refinance, replace or alter, Senior Debt incurred by a Guarantor or any instrument evidencing the same or any agreement under which Senior Debt incurred by a Guarantor is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt incurred by a Guarantor; (3) release any Person liable in any manner for the collection or payment of Senior Debt incurred by a Guarantor; and (4) exercise or refrain from exercising any rights against the Guarantors and any other Person. SECTION 13.09. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations. Each Holder of the Guarantee Obligations by its acceptance thereof authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effect the subordination provisions contained in this Article Thirteen, and appoints the Trustee its attorney-in-fact for such purpose, including, in the event of any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of any Guarantor tending towards liquidation or reorganization of the business and assets of any Guarantor, the immediate filing of a claim for the unpaid balance under its or his Guarantee Obligations in the -92- form required in said proceedings and cause said claim to be approved. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then any of the holders of the Senior Debt incurred by a Guarantor or their Representative is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Guarantee Obligations. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Debt incurred by a Guarantor or their Representative to authorize or consent to or accept or adopt on behalf of any holder of Guarantee Obligations any plan of reorganization, arrangement, adjustment or composition affecting the Guarantee Obligations or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Debt incurred by a Guarantor or their Representative to vote in respect of the claim of any holder of Guarantee Obligations in any such proceeding. SECTION 13.10. Right of Trustee To Hold Guarantor Senior Debt. The Trustee shall be entitled to all of the rights set forth in this Article Thirteen in respect of any Senior Debt incurred by a Guarantor at any time held by it to the same extent as any other holder of Senior Debt incurred by a Guarantor, and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. SECTION 13.11. No Suspension of Remedies. The failure to make a payment in respect of the Guarantees by reason of any provision of this Article Thirteen shall not be construed as preventing the occurrence of a Default or an Event of Default under Section 6.01. Nothing contained in this Article Thirteen shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Article Six or to pursue any rights or remedies hereunder or under applicable law, subject to the rights under this Article Thirteen of the holders, from time to time, of Senior Debt incurred by a Guarantor. SECTION 13.12. No Fiduciary Duty of Trustee to Holders of Guarantor Senior Debt. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt incurred by a Guarantor, and it undertakes to perform or observe such of its covenants and obligations as are specifically set forth in this Article Thirteen, and no implied covenants or obligations with respect to the Senior Debt incurred by a Guarantor shall be read into this Indenture against the Trustee. The Trustee shall not be liable to any such holders (other than for its willful misconduct or gross negligence) if it shall pay over or deliver to the holders of Guarantee Obligations or the Guarantors or any other Person, money or assets in compliance with the terms of this Indenture. Nothing in this Section 13.12 shall affect the obligation of any Person other than the Trustee to hold such payment for the benefit of, and to pay such payment over to, the holders of Senior Debt incurred by a Guarantor or their Representative. -93- SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. PHILIPP BROTHERS CHEMICALS, INC. By: /s/ Jack C. Bendheim ----------------------------- Name: J. C. Bendheim Title: President CP CHEMICALS, INC., as Guarantor By: /s/ Nathan Bistricer ----------------------------- Name: Nathan Bistricer Title: Vice President PHIBRO-TECH, INC., as Guarantor By: /s/ Nathan Bistricer ----------------------------- Name: Nathan Bistricer Title: Vice President MRT MANAGEMENT CORP., as Guarantor By: /s/ Nathan Bistricer ----------------------------- Name: Nathan Bistricer Title: Vice President -94- MINERAL RESOURCE TECHNOLOGIES, L.L.C., as Guarantor By: MRT Management Corp., Managing Member By: /s/ Nathan Bistricer ----------------------------- Name: Nathan Bistricer Title: Vice President PRINCE AGRIPRODUCTS, INC., as Guarantor By: /s/ Nathan Bistricer ----------------------------- Name: Nathan Bistricer Title: Vice President PHIBROCHEM, INC., as Guarantor By: /s/ Nathan Bistricer ----------------------------- Name: Nathan Bistricer Title: Vice President PHIBROCHEMICALS, INC., as Guarantor By: /s/ Nathan Bistricer ----------------------------- Name: Nathan Bistricer Title: Vice President WESTERN MAGNESIUM CORP., as Guarantor By: /s/ Nathan Bistricer ----------------------------- Name: Nathan Bistricer Title: Vice President THE PRINCE MANUFACTURING COMPANY, as Guarantor -95- By: /s/ Nathan Bistricer ----------------------------- Name: Nathan Bistricer Title: Vice President THE PRINCE MANUFACTURING COMPANY, as Guarantor By: /s/ Nathan Bistricer ----------------------------- Name: Nathan Bistricer Title: Vice President THE CHASE MANHATTAN BANK, as Trustee By: /s/ Sheik Wiltshire ----------------------------- Name: Sheik Wiltshire Title: Second Vice President EXHIBIT A [FORM OF SERIES A NOTE] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. A-1 CUSIP No.: PHILIPP BROTHERS CHEMICALS, INC. 9 7/8% SENIOR SUBORDINATED NOTE DUE 2008, SERIES A No. $ PHILIPP BROTHERS CHEMICALS, INC., a New York corporation (the "Company," which term includes any successor entities), for value received promises to pay to or registered assigns the principal sum of Dollars on June 1, 2008. Interest Payment Dates: June 1 and December 1, commencing 1998. Record Dates: May 15 and November 15. Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. PHILIPP BROTHERS CHEMICALS, INC. By: Name: Title: By: Name: Title: Dated: A-2 Certificate of Authentication This is one of the 9 7/8% Senior Subordinated Notes due 2008, Series A, referred to in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By: Authorized Signatory Date of Authentication: A-3 (REVERSE OF SECURITY) 9 7/8% Senior Subordinated Note due 2008, Series A Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Indenture, dated as of June 11, 1998 (the "Indenture"), and as amended from time to time, by and among Philipp Brothers Chemicals, Inc., a New York corporation (the "Company"), the Guarantors named therein and The Chase Manhattan Bank, as trustee (the "Trustee"). (1) Interest. The Company promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Notes will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from June 11, 1998. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing December 1, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed. The Company shall pay interest on overdue principal and on overdue installments of interest from time to time on demand at the rate borne by the Notes and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. (2) Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are canceled on registration of transfer or registration of exchange (including pursuant to an Exchange Offer (as defined in the Registration Rights Agreement)) after such Record Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal and premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay principal and premium, if any, and interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. (3) Paying Agent and Registrar. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. (4) Indenture. The Company issued the Notes under the Indenture. This Note is one of a duly authorized issue of Notes of the Company designated as its 9 7/8% Senior Subordinated Notes due 2008, Series A (the "Initial Notes"), limited in aggregate principal amount to $140,000,000, which may be issued under the Indenture; provided the principal amount of Initial Notes issued on the Issue Date will not exceed $100,000,000. The Notes include the Initial Notes, the Private Exchange Notes and the Unrestricted Notes, as defined below, issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement. The Initial Notes, the Private Exchange Notes and the Unrestricted Notes are treated as a single class of securities under the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa- 77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the A-4 contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such terms. The Notes are general unsecured obligations of the Company. Payment on each Note is guaranteed on a senior subordinated basis by the Guarantors pursuant to Articles Twelve and Thirteen of the Indenture. Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time in accordance with its terms. (5) Redemption. The Notes are redeemable, at the Company's option, in whole or in part, at any time on and after June 1, 2003 at the redemption prices (expressed as percentages of the principal amount of the Notes) if redeemed during the twelve-month period commencing on June 1 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the Redemption Date: A-5 Year Percentage ---- ---------- 2003 104.938% 2004 103.292% 2005 101.646% 2006 and thereafter 100.000% The Notes are not entitled to the benefit of any sinking fund. Notwithstanding the foregoing, 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 Redemption Date; provided, however, 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 (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. (6) Notice of Redemption. Notice of redemption will be mailed at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part. Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, the Notes called for redemption will cease to bear interest from and after such Redemption Date and the only right of the Holders of such Notes will be to receive payment of the Redemption Price plus accrued interest, if any. (7) Offers to Purchase. Sections 4.15 and 4.16 of the Indenture provide that, upon the occurrence of a Change of Control and after certain Asset Sales, and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. (8) Registration Rights. Pursuant to the Registration Rights Agreement among the Company, the Guarantors and the Initial Purchaser, the Company and the Guarantors will be obligated to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note for the Company's 9 7/8% Senior Subordinated Notes due 2008, Series B (the "Unrestricted Notes"), which will be registered under the Securities Act, in like principal amount and having terms identical in all material respects as the Initial Notes. The Holders of the Initial Notes shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and A-6 upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. (9) Denominations; Transfer; Exchange. The Notes are in registered form, without coupons, and in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as required by law or as permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption except for the unredeemed portion of any Note being redeemed in part. (10) Persons Deemed Owners. The registered Holder of a Note shall be treated as the owner of it for all purposes. (11) Unclaimed Money. If money for the payment of principal or interest remains unclaimed for one year, the Trustee and the Paying Agent will pay the money back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. (12) Discharge Prior to Redemption or Maturity. If the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Notes (including certain covenants, but including, under certain circumstances, their obligation to pay the principal of and interest on the Notes but without affecting the rights of the Holders to receive such amounts from such deposits). (13) Amendment; Supplement; Waiver. Subject to certain exceptions set forth in the Indenture, the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding, and any past Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes, comply with any requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA or comply with Article Five of the Indenture or make any other change that does not adversely affect the rights of any Holder of a Note in any material respect. (14) Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and the Restricted Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of its Capital Stock or certain Indebtedness, make certain Investments, create or incur liens, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Restricted Subsidiaries, and on the ability of the Company to merge or consolidate with any other Person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company's and its Restricted Subsidiaries' assets or adopt a plan of liquidation. A-7 Such limitations are subject to a number of important qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the Company must annually report to the Trustee on compliance with such limitations. (15) Subordination. The Notes are subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all obligations on Senior Debt of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes. (16) Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes and the Indenture, the predecessor, subject to certain exceptions, will be released from those obligations. (17) Defaults and Remedies. Except as set forth in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of not less than 25% in principal amount of Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Notes may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest when due, including defaults in payments to be made pursuant to a Change of Control Offer or Asset Sale Offer, for any reason or a Default in compliance with Article Five of the Indenture) if it determines that withholding notice is in their interest. (18) Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. (19) No Recourse Against Others. No director, officer, employee, incorporator, direct or indirect controlling person, stockholder, member, partner or affiliate, as such, of the Company or any Guarantor, or successor entity, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture, the Guarantees or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note, and the Trustee, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. (20) Guarantees. This Note will be entitled to the benefits of certain Guarantees, if any, made for the benefit of the Holders. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders. A-8 (21) Authentication. This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note. (22) Governing Law. This Note and the Indenture shall be governed by and construed in accordance with the laws of the State of New York, as applied to contracts made and performed within the State of New York, without regard to principles of conflict of laws. Each of the parties hereto and the Holders agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Note. (23) Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). (24) CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders of the Notes. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon. The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture, which has the text of this Note. Requests may be made to: PHILIPP BROTHERS CHEMICALS, INC., One Fort Lee Plaza, Fort Lee, New Jersey 07024. A-9 ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to: ---------------------------------------------------------------------- (Print or type name, address and zip code and social security or tax ID number of assignee) and irrevocably appoint _______________________________________, agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated: _____________________ Signed:___________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: Signature must be guaranteed by an "eligible guarantor institution," that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-10 [OPTION OF HOLDER TO ELECT PURCHASE] If you want to elect to have this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate box: Section 4.15 [ ] Section 4.16 [ ] If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you elect to have purchased: $_______________________ Dated: _________________ _________________________________________ NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever and be guaranteed. Signature Guarantee: __________________________ A-11 EXHIBIT B CUSIP No.: [ ] PHILIPP BROTHERS CHEMICALS, INC. 9 7/8% SENIOR SUBORDINATED NOTE DUE 2008, SERIES B No. $ PHILIPP BROTHERS CHEMICALS, INC., a New York corporation (the "Company," which term includes any successor entities), for value received promises to pay to or registered assigns the principal sum of Dollars on June 1, 2008. Interest Payment Dates: June 1 and December 1, commencing December 1, 1998. Record Dates: May 15 and November 15. Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. PHILIPP BROTHERS CHEMICALS, INC. By:__________________________ Name: Title: Dated: B-1 Certificate of Authentication This is one of the 9 7/8% Senior Subordinated Notes due 2008, Series B, referred to in the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By: Authorized Signatory Date of Authentication: B-2 (REVERSE OF SECURITY) 9 7/8% Senior Subordinated Note due 2008, Series B Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Indenture, dated as of June 11, 1998 (the "Indenture"), and as amended from time to time, by and among Philipp Brothers Chemicals, Inc., a New York corporation (the "Company"), the Guarantors named therein and The Chase Manhattan Bank, as trustee (the "Trustee"). (1) Interest. The Company promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Notes will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from June 11, 1998. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing December 1, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed. The Company shall pay interest on overdue principal and on overdue installments of interest from time to time on demand at the rate borne by the Notes and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. (2) Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are canceled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal and premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay principal and premium, if any, and interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. (3) Paying Agent and Registrar. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or Co-Registrar without notice to the Holders. (4) Indenture. The Company issued the Notes under the Indenture. This Note is one of a duly authorized issue of Exchange Notes of the Company designated as its 9 7/8 % Senior Subordinated Notes due 2008, Series B (the "Unrestricted Notes"), limited in aggregate principal amount to $140,000,000, which may be issued under the Indenture; provided the principal amount of Initial Notes issued on the Issue Date will not exceed $100,000,000. The Notes include the 9 7/8% Senior Subordinated Notes due 2008, Series A (the "Initial Notes"), the Private Exchange Notes, and the Unrestricted Notes, issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement. The Initial Notes, the Private Exchange Notes and B-3 the Unrestricted Notes are treated as a single class of securities under the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such terms. The Notes are general unsecured obligations of the Company. Payment on each Note is guaranteed on a senior subordinated basis by the Guarantors pursuant to Articles Twelve and Thirteen of the Indenture. Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time in accordance with its terms. (5) Redemption. The Notes are redeemable, at the Company's option, in whole or in part, at any time on and after June 1, 2003 at the redemption prices (expressed as percentages of the principal amount of the Notes) if redeemed during the twelve-month period commencing on June 1 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the Redemption Date: B-4 Year Percentage ---- ---------- 2003 104.938% 2004 103.292% 2005 101.646% 2006 and thereafter 100.000% The Notes are not entitled to the benefit of any striking sinking fund. Notwithstanding the foregoing, 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 Redemption Date; provided, however, 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 (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. (6) Notice of Redemption. Notice of redemption will be mailed at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part. Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, the Notes called for redemption will cease to bear interest from and after such Redemption Date and the only right of the Holders of such Notes will be to receive payment of the Redemption Price plus accrued interest, if any. (7) Offers to Purchase. Sections 4.15 and 4.16 of the Indenture provide that, upon the occurrence of a Change of Control and after certain Asset Sales, and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. (8) Denominations; Transfer; Exchange. The Notes are in registered form, without coupons, and in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith B-5 as required by law or as permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption, except for the unredeemed portion of any Note being redeemed in part. (9) Persons Deemed Owners. The registered Holder of a Note shall be treated as the owner of it for all purposes. (10) Unclaimed Money. If money for the payment of principal or interest remains unclaimed for one year, the Trustee and the Paying Agent will pay the money back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. (11) Discharge Prior to Redemption or Maturity. If the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Notes (including certain covenants, including, under certain circumstances, their obligation to pay the principal of and interest on the Notes but without affecting the rights of the Holders to receive such amounts from such deposit). (12) Amendment; Supplement; Waiver. Subject to certain exceptions set forth in the Indenture, the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding, and any past Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes, comply with any requirements of the Commission in order to effect or maintain the qualificaqualification of the Indenture under the TIA or comply with Article Five of the Indenture or make any other change that does not adversely affect the rights of any Holder of a Note in any material respect. (13) Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and the Restricted Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of its Capital Stock or certain Indebtedness, make certain Investments, create or incur liens, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Restricted Subsidiaries, and on the ability of the Company to merge or consolidate with any other Person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company's and its Restricted Subsidiaries' assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the Company must annually report to the Trustee on compliance with such limitations. B-6 (14) Subordination. The Notes are subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all obligations on Senior Debt of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes. (15) Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes and the Indenture, the predecessor, subject to certain exceptions, will be released from those obligations. (16) Defaults and Remedies. Except as set forth in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of not less than 25% in principal amount of Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Notes may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest when due, including defaults in payments to be made pursuant to a Change of Control Offer or Asset Sale Offer, for any reason or a Default in compliance with Article Five of the Indenture) if it determines that withholding notice is in their interest. (17) Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. (18) No Recourse Against Others. No director, officer, employee, incorporator, direct or indirect controlling person, stockholder, member, partner or affiliate, as such, of the Company or any Guarantor, or successor entity, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Indenture, the Guarantees or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note, and the Trustee, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. (19) Guarantees. This Note will be entitled to the benefits of certain Guarantees, if any, made for the benefit of the Holders. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders. B-7 (20) Authentication. This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note. (21) Governing Law. This Note and the Indenture shall be governed by and construed in accordance with the laws of the State of New York, as applied to contracts made and performed within the State of New York, without regard to principles of conflict of laws. Each of the parties hereto and the Holders agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Note. (22) Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). (23) CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders of the Notes. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon. The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture, which has the text of this Note. Requests may be made to: PHILIPP BROTHERS CHEMICALS, INC., One Fort Lee Plaza, Fort Lee, New Jersey, 07024. B-8 ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to: ________________________________________________________________________________ (Print or type name, address and zip code and social security or tax ID number of assignee) and irrevocably appoint _______________________________________, agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated: _____________________ Signed: __________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: Signature must be guaranteed by an "eligible guarantor institution," that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. B-9 [OPTION OF HOLDER TO ELECT PURCHASE] If you want to elect to have this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate box: Section 4.15 [ ] Section 4.16 [ ] If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you elect to have purchased: $_______________________ Dated: _________________ _____________________________________________ NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever and be guaranteed. Signature Guarantee: _______________________ B-10 EXHIBIT C UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE. C-1 EXHIBIT D Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ___________ __, ____ The Chase Manhattan Bank, as Registrar 450 West 33rd Street New York, New York 10001 Attn.: Corporate Trust Department Ladies and Gentlemen: In connection with our proposed purchase of 9 7/8% Senior Subordinated Notes due 2008 (the "Notes") of PHILIPP BROTHERS CHEMICALS, INC. (the "Company"), we confirm that: i. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture relating to the Notes (the "Indenture") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"), and all applicable State securities laws. ii. We understand that the offer and sale of the Notes have not been registered under the Securities Act or any other applicable securities law, and that the Notes may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Notes, we will do so only (i) to the Company or any subsidiary thereof, (ii) inside the United States in accordance with Rule 144A under the Securities Act to a person who we reasonably believe is a "qualified institutional buyer" (as defined in Rule 144A promulgated under the Securities Act), (iii) inside the United States to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the Trustee (as defined in the Indenture) a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Notes (the form of which letter can be obtained from the Trustee), (iv) outside the United States in accordance with Rule 904 of Regulation S promulgated under the Securities Act, (v) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), or (vi) pursuant to an effective registration statement under the Securities D-1 Act, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. iii. We understand that, on any proposed resale of any Notes, we will be required to furnish to the Trustee, the Company such certification, legal opinions and other information as the Trustee and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. iv. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be. v. We are acquiring the Notes purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. vi. We acknowledge that we have had access to such financial and other information, have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto as we deem necessary in connection with our decision to purchase the Notes and we have reviewed the "Transfer Restrictions" section from the Company's Final Offering Memorandum dated June 5, 1998. You, the Company, the Trustee, the Initial Purchaser and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: Name: Title: D-2 EXHIBIT E Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S ______________ __, ____ The Chase Manhattan Bank, as Registrar 450 West 33rd Street New York, New York 10001 Attn: Corporate Trust Department Re: PHILIPP BROTHERS CHEMICALS, INC. (the "Company") 9 7/8% Senior Subordinated Notes due 2008 (the "Notes") ------------------------------------------ Ladies and Gentlemen: In connection with our proposed sale of $__________ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither we nor any person acting on our behalf knows that the transaction has been prearranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the Notes. E-1 You, the Company and counsel for the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferee] By: Authorized Signature E-2 EXHIBIT F GUARANTEE For value received, the undersigned hereby unconditionally guarantees, as principal obligor and not only as a surety, to the Holder of this Note the cash payments in United States dollars of principal of, premium, if any, and interest on this Note (and including Additional Interest payable thereon) in the amounts and at the times when due and interest on the overdue principal, premium, if any, and interest, if any, of this Note, if lawful, and the payment or performance of all other obligations of the Company under the Indenture or the Notes, to the Holder of this Note and the Trustee, all in accordance with and subject to the terms and limitations of this Note, Articles Twelve and Thirteen of the Indenture and this Guarantee. This Guarantee will become effective in accordance with Article Twelve of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Note. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of June 11, 1998, among Philipp Brothers Chemicals, Inc., a New York corporation, the Guarantors named therein and The Chase Manhattan Bank, as trustee (the "Trustee"), as amended or supplemented (the "Indenture"). The obligations of the undersigned to the Holders of Notes and to the Trustee pursuant to this Guarantee and the Indenture are expressly set forth in Article Twelve and Thirteen of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee and all of the other provisions of the Indenture to which this Guarantee relates. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. Each Guarantor hereby agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Guarantee. This Guarantee is subject to release upon the terms set forth in the Indenture. F-1 IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be duly executed. Date: ____________________ [NAME OF GUARANTOR], as Guarantor By: ______________________________ Name: Title: By: ______________________________ Name: Title: F-2 EXHIBIT G CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF SECURITIES Re: 9 7/8% Senior Subordinated Notes due 2008, Series A, and 9 7/8% Senior Subordinated Notes due 2008, Series B (the "Notes"), of Philipp Brothers Chemicals, Inc. ------------------------------------------------- This Certificate relates to $________ principal amount of Notes held in the form of *_________ a beneficial interest in a Global Note or *_________ Physical Notes by ___________ (the "Transferor"). The Transferor:* |_| has requested by written order that the Registrar deliver in exchange for its beneficial interest in the Global Note held by the Depository a Physical Note or Physical Notes in definitive, registered form of authorized denominations and an aggregate number equal to its beneficial interest in such Global Note (or the portion thereof indicated above); or |_| has requested by written order that the Registrar exchange or register the transfer of a Physical Note or Physical Notes. In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above-captioned Notes and the restrictions on transfers thereof as provided in Section 2.17 of such Indenture, and that the transfer of this Note does not require registration under the Securities Act of 1933, as amended (the "Act"), because*: |_| Such Note is being acquired for the Transferor's own account, without transfer (in satisfaction of Section 2.17(a)(II)(A) or Section 2.17(d)(i)(A) of the Indenture). |_| Such Note is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A. |_| Such Note is being transferred to an institutional "accredited investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Act). |_| Such Note is being transferred in reliance on Regulation S under the Act. G-1 |_| Such Note is being transferred in reliance on Rule 144 under the Act. |_| Such Note is being transferred in reliance on and in compliance with an exemption from the registration requirements of the Act other than Rule 144A or Rule 144 or Regulation S under the Act to a person other than an institutional "accredited investor." _________________________________ [INSERT NAME OF TRANSFEROR] By: ____________________________ [Authorized Signatory] Date: _____________________ *Check applicable box. G-2 EX-10.1 5 0005.txt REGISTRATION RIGHTS AGREEMENT Exhibit 10.1 ================================================================================ REGISTRATION RIGHTS AGREEMENT Dated as of June 11, 1998 by and among PHILIPP BROTHERS CHEMICALS, INC., THE GUARANTORS NAMED HEREIN and SCHRODER & CO. INC., as Initial Purchaser $100,000,000 9 7/8% Senior Subordinated Notes due 2008 ================================================================================ TABLE OF CONTENTS ----------------- Page ---- 1. Definitions............................................................. 1 2. Exchange Offer.......................................................... 6 3. Shelf Registration...................................................... 11 4. Additional Interest..................................................... 13 5. Registration Procedures................................................. 15 6. Registration Expenses................................................... 26 7. Indemnification......................................................... 27 8. Rules 144 and 144A...................................................... 31 9. Underwritten Registrations.............................................. 32 10. Miscellaneous.......................................................... 32 (a) No Inconsistent Agreements...................................... 32 (b) Adjustments Affecting Registrable Notes......................... 33 (c) Amendments and Waivers.......................................... 33 (d) Notices......................................................... 33 (e) Successors and Assigns.......................................... 34 (f) Counterparts.................................................... 34 (g) Headings........................................................ 34 (h) Governing Law................................................... 34 (i) Severability.................................................... 35 (j) Securities Held by the Company or their Affiliates.................................................... 35 (k) Third Party Beneficiaries....................................... 35 (l) Attorneys' Fees................................................. 35 (m) Entire Agreement................................................ 35 -i- -1- REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is dated as of June 11, 1998, by and among PHILIPP BROTHERS CHEMICALS, INC., a New York corporation (the "Company"), the subsidiaries of the Company listed on the signature pages hereto as guarantors (the "Guarantors") and together with the Company (the "Issuers"), and SCHRODER & CO. INC. (the "Initial Purchaser"). This Agreement is entered into in connection with the Purchase Agreement, dated as of June 5, 1998, among the Company, the Guarantors and the Initial Purchaser (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchaser of $100,000,000 aggregate principal amount of the Company's 9 7/8% Senior Subordinated Notes due 2008, guaranteed on a senior subordinated basis by the Guarantors (the "Notes"). In order to induce the Initial Purchaser to enter into the Purchase Agreement, the Issuers have agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchaser and any subsequent holder or holders of the Notes. The execution and delivery of this Agreement is a condition to the Initial Purchaser's obligation to purchase the Notes under the Purchase Agreement. The parties hereby agree as follows: Section 1. Definitions As used in this Agreement, the following terms shall have the following meanings: "Additional Interest" shall have the meaning set forth in Section 4(a) hereof. "Advice" shall have the meaning set forth in Section 5 hereof. "Agreement" shall have the meaning set forth in the introductory paragraphs hereto. "Applicable Period" shall have the meaning set forth in Section 2(b) hereof. "Business Day" shall mean a day that is not a Legal Holiday. -2- "Company" shall have the meaning set forth in the preamble of this Agreement and shall also include the Company's permitted successors and assigns. "Commission" shall mean the Securities and Exchange Commission. "Effectiveness Date" shall mean, (i) with respect to the Exchange Offer Registration Statement, the 180th day after the Issue Date and (ii) with respect to any other Registration Statement, the 60th day after the Filing Date with respect thereto, but in no event prior to the 180th day after the Issue Date. "Effectiveness Period" shall have the meaning set forth in Section 3(a) hereof. "Event Date" shall have the meaning set forth in Section 4(b) hereof. "Exchange Act" shall mean Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Notes" shall have the meaning set forth in Section 2(a) hereof. "Exchange Offer" shall have the meaning set forth in Section 2(a) hereof. "Exchange Offer Registration Statement" shall have the meaning set forth in Section 2(a) hereof. "Filing Date" shall mean, (A) if no Registration Statement has been filed by the Issuers pursuant to this Agreement, the 120th day after the Issue Date; provided, however, that if a Shelf Filing Event shall have occurred within 10 days of the Filing Date, then the Filing Date with respect to the Initial Shelf Registration shall be the 15th calendar day after the occurrence of the Shelf Filing Event, but in no event prior to the 120th day after the Issue Date; and (B) in each other case (which may be applicable notwithstanding the consummation of the Exchange Offer), the 120th day after the occurrence of the Shelf Filing Event. "Holder" shall mean any holder of a Registrable Note or Registrable Notes. -3- "Indemnified Person" shall have the meaning set forth in Section 7(c) hereof. "Indemnifying Person" shall have the meaning set forth in Section 7(c) hereof. "Indenture" shall mean the Indenture, dated as of June 11, 1998, by and between the Company, the Guarantors and The Chase Manhattan Bank, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof. "Initial Purchaser" shall have the meaning set forth in the preamble hereof. "Initial Shelf Registration" shall have the meaning set forth in Section 3(a) hereof. "Inspectors" shall have the meaning set forth in Section 5(n) hereof. "Issue Date" shall mean June 11, 1998, the date of original issuance of the Notes. "Issuers" shall have the meaning set forth in the preamble hereof. "Legal Holiday" shall mean a Saturday, a Sunday or a day on which banking institutions in New York, New York are required by law, regulation or executive order to remain closed. "NASD" shall have the meaning set forth in Section 5(s) hereof. "Notes" shall have the meaning set forth in the preamble hereof. "Participant" shall have the meaning set forth in Section 7(a) hereof. "Participating Broker-Dealer" shall mean any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer or any other person with similar prospectus delivery requirements for use in connection with any resale of Exchange Notes. -4- "Person" shall mean an individual, trustee, corporation, partnership, joint stock company, trust, unincorporated association, union, business association, firm, government or agency or political subdivision thereof or other legal entity. "Private Exchange" shall have the meaning set forth in Section 2(b) hereof. "Private Exchange Notes" shall have the meaning set forth in Section 2(b) hereof. "Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Purchase Agreement" shall have the meaning set forth in the introductory paragraphs hereof. "Records" shall have the meaning set forth in Section 5(n) hereof. "Registrable Notes" shall mean each Note, upon original issuance thereof, and at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, until in the case of any such Note, Exchange Note or Private Exchange Note, as the case may be, the earliest to occur of (i) the date on which any such Note has been exchanged by a person other than a Participating Broker-Dealer for an Exchange Note (other than with respect to an Exchange Note as to which Section 2(c)(iv) hereof applies) pursuant to the Exchange Offer, (ii) with respect to Exchange Notes received by Participating Broker-Dealers in the Exchange Offer, the earlier of (x) the date on which such Exchange Note has been sold by such Participating Broker-Dealer by means of the Prospectus contained in the Exchange Offer Registration Statement and (y) the date on which the Exchange Offer Registration Statement has been effective under the Securities Act for a period of 180 days after the date that the -5- Exchange Offer has been consummated, (iii) a Shelf Registration covering such Note, Exchange Note or Private Exchange Note has been declared effective by the Commission and such Note, Exchange Note or Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Shelf Registration, (iv) the date on which such Note, Exchange Note or Private Exchange Note, as the case may be, is eligible for distribution to the public without volume or manner of sale restrictions pursuant to Rule 144(k) or (v) the date on which such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture or any other indenture under which such Exchange Note or Private Exchange Note was issued. "Registration Statement" shall mean any appropriate registration statement of the Company and/or the Guarantors covering any of the Registrable Notes pursuant to the provisions of this Agreement, including, but not limited to, the Exchange Offer Registration Statement, filed with the Commission under the Securities Act, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Rule 144" shall mean Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the Commission providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. "Rule 144A" shall mean Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the Commission. "Rule 415" shall mean Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. -6- "Shelf Filing Event" shall have the meaning set forth in Section 2(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 3(b) hereof. "Subsequent Shelf Registration" shall have the meaning set forth in Section 3(b) hereof. "TIA" shall mean the Trust Indenture Act of 1939, as amended. "Trustee" shall mean the trustee under the Indenture and the trustee (if any) under any indenture governing the Exchange Notes and Private Exchange Notes. "Underwritten registration or underwritten offering" shall mean a registration in which securities of the Issuers are sold to an underwriter for reoffering to the public. Section 2. Exchange Offer (a) The Issuers shall file with the Commission, no later than the Filing Date, a Registration Statement (the "Exchange Offer Registration Statement") on an appropriate registration form with respect to a registered offer (the "Exchange Offer") to exchange any and all of the Registrable Notes for a like aggregate principal amount of notes, guaranteed on a senior subordinated basis by the Guarantors of the Company (the "Exchange Notes"), that are identical in all material respects to the Notes except that the Exchange Notes shall contain no restrictive legend thereon. The Exchange Offer shall comply with all applicable tender offer rules and regulations under the Exchange Act and other applicable law. The Issuers shall use their best efforts to (x) cause the Exchange Offer Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20 Business Days (or longer if required by applicable law) after the date on which the Exchange Offer Registration Statement is declared effective; and (z) on or prior to the 30th day following the date on which the Exchange Offer Registration Statement is declared effective by the Commission, issue Exchange Notes for Notes tendered in the Exchange Offer. For purposes of this Section 2(a) only, if after the Exchange Offer Registration Statement is initially declared effective by the Commission, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, or injunction or other order of the Commission or any other governmental agency or -7- court, the Exchange Offer Registration Statement shall be deemed not to have become effective for purposes of this Agreement. Each Holder that participates in the Exchange Offer will be required to represent to the Issuers in writing (which may be contained in the applicable letter of transmittal) that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes in violation of the provisions of the Securities Act, (iii) that such Holder is not an affiliate of any of the Issuers within the meaning of the Securities Act or, if such Holder is such an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act applicable to it, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes and (v) if such Holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making or other trading activities, that it will deliver a prospectus in connection with any resale of such Exchange Notes. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply, mutatis mutandis, solely with respect to Registrable Notes that are Private Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and Exchange Notes held by Participating Broker-Dealers (as defined), and the Issuers shall have no further obligation to register Registrable Notes (other than Private Exchange Notes, if required and other than in respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof. No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement. (b) The Issuers and the Initial Purchaser acknowledge that the staff of the Commission has taken the position that any broker-dealer that elects to exchange Notes that were acquired by such broker-dealer for its own account as a result of market-making or other trading activities for Exchange Notes in the Exchange Offer (a "Participating Broker-Dealer") may be deemed to be an "underwriter" within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes (other than a resale of an unsold allotment resulting from the original offering of the Notes). -8- The Issuers and the Initial Purchaser also acknowledge that it is the Commission staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Notes, without naming the Participating Broker- Dealers or specifying the amount of Exchange Notes owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligations under the Securities Act in connection with resales of Exchange Notes for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act. In light of the foregoing, if requested by a Participating Broker-Dealer (a "Requesting Participating Broker- Dealer"), the Issuers agree (w) to use their best efforts to keep the Exchange Offer Registration Statement continuously effective for a period of up to 180 days after the date on which the Exchange Registration Statement is declared effective, or such longer period if extended pursuant to the last paragraph of Section 5 hereof (such period, the "Applicable Period"), or such earlier date as all Requesting Participating Broker-Dealers shall have notified the Issuers in writing that such Requesting Participating Broker-Dealers have resold all Exchange Notes acquired in the Exchange Offer, (x) to comply with the provisions of Section 5 of this Agreement, as they relate to the Exchange Offer and the Exchange Offer Registration Statement, (y) to use reasonable commercial efforts to deliver to such Requesting Participating Broker-Dealer a "cold comfort" letter of the independent public accountants of the Issuers and a legal opinion as to matters reasonably requested by such Requesting Participating Broker-Dealer relating to the Exchange Offer Registration Statement and the related Prospectus and any amendments or supplements thereto, and (z) include a plan of distribution in such Exchange Offer Registration Statement that meets the requirements set forth in the preceding paragraph. The Initial Purchaser shall have no liability to any Requesting Participating Broker-Dealer with respect to any request made pursuant to this Section 2(b). In connection with the Exchange Offer, the Issuers shall: (1) mail to each Holder entitled to participate in the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; -9- (2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; (3) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last Business Day on which the Exchange Offer shall remain open; and (4) otherwise comply in all material respects with all applicable laws, rules and regulations to which it is subject pertaining to the Exchange Offer. If, prior to consummation of the Exchange Offer, any Holder (including the Initial Purchaser) holds any Notes acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or if any Holder is not entitled to participate in the Exchange Offer, the Issuers upon the request of any such Holder shall simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to any such Holder, in exchange (the "Private Exchange") for such Notes held by any such Holder, a like principal amount of notes, guaranteed on a senior subordinated basis by the Guarantors of the Company (the "Private Exchange Notes"), that are identical in all material respects to the Exchange Notes. As soon as practicable after the close of the Exchange Offer and the Private Exchange, if any, the Issuers shall: (1) accept for exchange all Notes or portions thereof validly tendered and not validly withdrawn pursuant to the Exchange Offer and the Private Exchange; (2) deliver, or cause to be delivered, to the Trustee for cancellation all Notes so accepted for exchange; and (3) issue, cause the Trustee to authenticate and deliver promptly to each Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange. The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than that (i) the Exchange Offer or Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the Commission, (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental -10- agency which might materially impair the ability of the Issuers to proceed with the Exchange Offer or the Private Exchange, and no material adverse development shall have occurred in any existing action or proceeding with respect to the Issuers and (iii) all governmental approvals shall have been obtained, which approvals the Issuers deem necessary for the consummation of the Exchange Offer or Private Exchange. The Exchange Notes and the Private Exchange Notes shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture (in either case, with such changes as are necessary to comply with any requirements of the Commission to effect or maintain the qualification thereof under the TIA) and which, in either case, has been qualified under the TIA and shall provide that the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter. The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. (c) If, (i) because of any applicable interpretations of the staff of the Commission, the Issuers are not permitted to file the Exchange Offer Registration Statement or to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 210 days of the Issue Date, (iii) the Initial Purchaser so requests with respect to Notes not eligible to be exchanged for Exchange Notes in the Exchange Offer, (iv) any Holder of a Note notifies the Issuers that (A) due to a change in law or policy it is not entitled to participate in the Exchange Offer, (B) due to a change in law or policy it may not resell Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such holder or (C) it owns Notes (including the Initial Purchaser if it holds Notes as part of an unsold allotment from the original offering of the Notes) acquired directly from an Issuer or an affiliate of an Issuer or (v) any holder of Private Exchange Notes so requests after the consummation of the Private Exchange (each such event referred to in clauses (i) through (v) of this sentence, a "Shelf Filing Event"), then the Issuers (x) shall promptly deliver to the Holders and the Trustee written notice thereof in the case of clause (i) or (ii) and (y) at their own expense shall file a Shelf Registration pursuant to Section 3 hereof. -11- Section 3. Shelf Registration If at any time a Shelf Filing Event shall occur, then: (a) Shelf Registration. The Issuers shall file with the Commission a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable (the "Initial Shelf Registration"). The Issuers shall use their best efforts to file with the Commission the Initial Shelf Registration as promptly as practicable, but in no event earlier than 120 days after the Issue Date. The Initial Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Notes to be included in the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below). The Issuers shall use their best efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act for the period ending on the date which is two years from the Issue Date, subject to extension pursuant to the last paragraph of Section 5 hereof (the "Effectiveness Period"), or such shorter period ending when (i) all Registrable Notes covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf Registration covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration has been declared effective under the Securities Act; provided, however, that the Effectiveness Period in respect of the Initial Shelf Registration shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the Securities Act and as otherwise provided herein; provided, further, that the Issuers may suspend the effectiveness of a Shelf Registration Statement by written notice to the Holders for a period not to exceed 60 days in any calendar year if, (i) an event occurs and is continuing as a result of which the Shelf Registration Statement would, in the Issuers' good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading and (ii) (a) the Issuers determine in good faith that -12- the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Company and its subsidiaries, taken as a whole, or (b) the disclosure otherwise relates to a previously undisclosed pending material business transaction, the disclosure of which would impede the Issuers' ability to consummate such transaction. (b) Subsequent Shelf Registrations. If the Initial Shelf Registration or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Issuers shall use their best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall as soon as practicable after such cessation amend the Initial Shelf Registration in a manner to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers shall use their reasonable best efforts to cause the Subsequent Shelf Registration to be declared effective under the Securities Act as soon as practicable after such filing and to keep such Registration Statement continuously effective until the expiration of the Effectiveness Period. As used herein the term "Shelf Registration" means the Initial Shelf Registration and any Subsequent Shelf Registration. (c) Supplements and Amendments. The Issuers shall promptly supplement and amend the Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes. Section 4. Additional Interest (a) The Issuers and the Initial Purchaser agree that the Holders will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Issuers agree to pay, as liquidated damages and not as a penalty, additional interest on the Notes ("Additional Interest") under the circumstances and to the extent -13- set forth below (each of which shall be given independent effect): (i) if (A) neither the Exchange Offer Registration Statement nor the Initial Shelf Registration has been filed on or prior to the applicable Filing Date or (B) notwithstanding that the Issuers have consummated or will consummate the Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not filed on or prior to the Filing Date applicable thereto, then, commencing on the day after any such Filing Date, Additional Interest shall accrue on the principal amount of the Notes at a rate of 0.50% per annum for the first 90 days immediately following each such Filing Date, and such Additional Interest rate shall increase by an additional 0.25% per annum at the beginning of each subsequent 90-day period; or (ii) if (A) neither the Exchange Offer Registration Statement nor the Initial Shelf Registration is declared effective by the Commission on or prior to the relevant Effectiveness Date or (B) notwithstanding that the Issuers have consummated or will consummate the Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not declared effective by the Commission on or prior to the Effectiveness Date in respect of such Shelf Registration, then, commencing on the day after such Effectiveness Date, Additional Interest shall accrue on the principal amount of the Notes at a rate of 0.50% per annum for the first 90 days immediately following the day after such Effectiveness Date, and such Additional Interest rate shall increase by an additional 0.25% per annum at the beginning of each subsequent 90-day period; or (iii) if (A) the Issuers have not exchanged Exchange Notes for all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to the 210th day following the Issue Date or (B) the Exchange Offer Registration Statement or the Shelf Registration is declared effective but thereafter ceases to be effective at any time during the Effectiveness Period (except as permitted by Section 10(a) hereof) for a period of 15 consecutive days without being succeeded immediately by an additional Exchange Offer Registration Statement or Shelf Registration Statement, as the case may be, filed and declared effective, then Additional Interest shall accrue on the principal amount of the Notes at a rate of 0.50% per annum for the first 90 days commencing on the (x) 210th day after the Issue Date, in the case of (A) above, or (y) the 16th day after such Shelf -14- Registration ceases to be effective in the case of (B) above, and such Additional Interest rate shall increase by an additional 0.25% per annum at the beginning of each such subsequent 90-day period; provided, however, that the Additional Interest rate on the Notes may not exceed at any one time in the aggregate 1.0% per annum; provided, further, however, that (1) upon the filing of the applicable Exchange Offer Registration Statement or the applicable Shelf Registration as required hereunder (in the case of clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange Offer Registration Statement or the applicable Shelf Registration Statement as required hereunder (in the case of clause (ii) of this Section 4), or (3) upon the exchange of the applicable Exchange Notes for all Notes tendered (in the case of clause (iii)(A) of this Section 4), or upon the effectiveness of the applicable Exchange Offer Registration Statement or Shelf Registration Statement which had ceased to remain effective (in the case of (iii)(B) of this Section 4), Additional Interest on the Notes in respect of which such events relate as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) The Issuers shall notify the Trustee within one Business Day after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). Any amounts of Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash semi-annually on the interest payment dates specified in the Indenture (to the holders of record as specified in the Indenture), commencing with the first such interest payment date occurring after any such Additional Interest commences to accrue. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Registrable Notes, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. Section 5. Registration Procedures In connection with the filing of any Registration Statement pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection -15- with any Registration Statement filed by the Issuers hereunder the Issuers shall: (a) Prepare and file with the Commission prior to the applicable Filing Date, a Registration Statement or Registration Statements as prescribed by Sections 2 or 3 hereof, and use their best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall furnish to and afford the Holders of the Registrable Notes covered by such Registration Statement or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five Business Days prior to such filing). The Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object, and shall have no liability or obligation to do so. (b) Prepare and file with the Commission such amendments and post-effective amendments to each Shelf Registration Statement or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to each of them with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a -16- Participating Broker-Dealer covered by any such Prospectus, in each case, in accordance with the intended methods of distribution set forth in such Registration Statement or Prospectus, as so amended. The Issuers shall be deemed not to have used their best efforts to keep a Registration Statement effective during the Effective Period or the Applicable Period, as the case may be, relating thereto if the Issuers voluntarily take any action that would result in selling Holders of the Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period unless such action is required by applicable law (subject to the last paragraph of Section 5 as it pertains to the events described in Section 5(c)(v) and 5(c)(vi)). (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, as promptly as possible, and, if requested by any such Person, confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Issuers, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers the representations and warranties of the Issuers contained in any agreement (including any underwriting agreement) contemplated by Section 5(m) hereof cease to be true and correct in all material respects, (iv) of the receipt by the Issuers of any notification with respect to the suspension of the -17- qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or any information becoming known to the Issuers that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the Issuers determination that a post-effective amendment to a Registration Statement would be appropriate. (d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use their best efforts to obtain the withdrawal of any such order at the earliest practicable moment. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwriter or underwriters (if any), the Holders of a majority in aggregate principal amount of the Registrable Notes being sold in connection with an underwritten offering or any Participating Broker-Dealer, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as -18- the managing underwriter or underwriters (if any), such Holders or any Participating Broker-Dealer (based upon advice of counsel) determine is reasonably necessary to be included therein, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Issuers have received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; provided, however, that the Issuers shall not be required to take any action hereunder that would, in the written opinion of counsel to the Issuers, violate applicable laws, and (iii) supplement or make amendments to such Registration Statement (based upon advice of counsel). (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes and to each such Participating Broker-Dealer who so requests and to counsel and each managing underwriter, if any, at the sole expense of the Issuers, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their respective counsel, and the underwriters, if any, at the sole expense of the Issuers, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable -19- Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their best efforts to register or qualify, and to cooperate with the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of, such Registrable Notes for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request; provided, however, that where Exchange Notes held by Participating Broker-Dealers or Registrable Notes are offered other than through an underwritten offering, the Issuers agree to cause the Issuers counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; provided, however, that none of the Issuers shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as -20- the managing underwriter or underwriters, if any, or Holders may request at least two Business Days prior to any sale of such Registrable Notes. (j) Use their best efforts to cause the Registrable Notes covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be reasonably necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Notes, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case the Issuers will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the Commission, at the sole expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes. (m) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Notes and take -21- all such other actions as are reasonably requested by the managing underwriter or underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Company and its subsidiaries (including any acquired business, properties or entity, if applicable) and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Notes, and confirm the same in writing if and when requested; (ii) use their reasonable best efforts to obtain the written opinions of counsel to the Issuers and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings; (iii) unless not permitted to be issued under an applicable Statement of Accounting Standards, use their reasonable best efforts to obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by any of the Issuers for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement and the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (n) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is -22- required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by a representative of any selling Holder of such Registrable Notes being sold, or each such Participating Broker-Dealer, as the case may be, and all underwriters participating in any such disposition of Registrable Notes, if any, and all attorneys, accountants or other agents retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, (the "Inspector"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments of the Company and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by such Inspector in connection with such Registration Statement and Prospectus. Such Inspector shall agree in writing that it will not disclose any records that the Issuers determine, in good faith, to be confidential and that it notifies the Inspectors in writing are confidential unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or Prospectus, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, relating to, or involving this Agreement or the Purchase Agreement, or any transactions contemplated hereby or thereby or arising hereunder or thereunder, or (iv) the information in such Records has been made generally available to the public; provided, however, that such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector. (o) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a) hereof, as the case may be, to be qualified under the TIA not later than the effective date of the first Registration Statement relating to the Registrable Notes; -23- and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Notes, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable such indenture to be so qualified in a timely manner. (p) Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its securityholders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (q) Upon consummation of the Exchange Offer or a Private Exchange, use their reasonable best efforts to obtain an opinion of counsel to the Issuers, in a form customary for underwritten transactions, addressed to the Trustee for the benefit of all Holders of Registrable Notes participating in the Exchange Offer or the Private Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes, as the case may be, and the related indenture constitute legal, valid and binding obligations of the Issuers, enforceable against each of the Issuers in accordance with its respective terms, subject to customary exceptions and qualifications. (r) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied. -24- (s) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). (t) Use their reasonable best efforts to take all other steps necessary or advisable to effect the registration of the Exchange Notes and/or Registrable Notes covered by a Registration Statement contemplated hereby. The Issuers may require each seller of Registrable Notes as to which any registration is being effected to furnish to the Issuers such information regarding such seller and the distribution of such Registrable Notes as the Issuers may, from time to time, reasonably request. The Issuers may exclude from such registration the Registrable Notes of any seller so long as such seller fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such seller not materially misleading. If any such Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Issuers, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Issuers, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon actual receipt of any notice from the Issuers of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith -25- discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be, until such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until it is advised in writing (the "Advice") by the Issuers that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event that the Issuers shall give any such notice, each of the Effectiveness Period and the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice. Section 1. Registration Expenses All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers shall be borne by the Issuers, whether or not the Exchange Offer Registration Statement or any Shelf Registration is filed or becomes effective or the Exchange Offer is consummated, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the holders of Registrable Notes are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or in respect of Registrable Notes or Exchange Notes to be sold by any Participating Broker-Dealer during the Applicable Period, as the case may be, -26- (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Issuers and reasonable fees and disbursements of one special counsel for all of the sellers of Registrable Notes (exclusive of any counsel retained pursuant to Section 7 hereof), (v) fees and disbursements of all independent certified public accountants of the Issuers referred to in Section 5(m)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) Securities Act liability insurance, if the Issuers desire such insurance, (vii) fees and expenses of all other Persons retained by the Issuers, (viii) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Issuers performing legal or accounting duties), (ix) the expense of any annual audit by the Issuers, (x) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, and the obtaining of a rating of the securities, in each case, if applicable, and (xi) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, indentures and any other documents necessary in order to comply with this Agreement. Notwithstanding the foregoing or anything to the contrary, each Holder shall pay all underwriting discounts and commissions of any underwriters with respect to any Registrable Notes sold by or on behalf of it. Section 2. Indemnification (a) The Issuers agree, jointly and severally, to indemnify and hold harmless each Holder of Registrable Notes and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, the officers and directors of each such Person, and each Person, if any, who controls any such Person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from and against any and all losses, claims, damages and liabilities (including, without limitation, the reasonable legal fees and other expenses actually incurred in connection with any suit, action or proceeding or any claim asserted) caused by, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus in the light of the circumstances under which they -27- were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant furnished to the Issuers in writing by or on behalf of such Participant expressly for use therein; provided, however, that the foregoing indemnity with respect to any preliminary prospectus shall not inure to the benefit of any Participant from whom the Person asserting such losses, claims, damages or liabilities purchased Registrable Notes if (x) it is established in the related proceeding that such Participant failed to send or give a copy of the Prospectus (as amended or supplemented if such amendment or supplement was furnished to such Participant prior to the written confirmation of such sale) to such Person with or prior to the written confirmation of such sale, if required by applicable law, and (y) the untrue statement or omission or alleged untrue statement or omission was corrected in the Prospectus (as amended or supplemented if amended or supplemented as aforesaid) and such Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission that was the subject matter of the related proceeding. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless the Issuers, its directors, its officers and each Person who controls any Issuer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent (but on a several, and not joint, basis) as the foregoing indemnity from the Issuers to each Participant, but only with reference to information relating to such Participant furnished to the Issuers in writing by such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "Indemnified Person") shall promptly notify the Persons against whom such indemnity may be sought (the "Indemnifying Persons") in writing, and the Indemnifying Persons, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Persons may reasonably designate in such proceeding and shall pay the fees and expenses actually incurred by such counsel related to such proceeding; provided, however, that the failure to so notify the Indemnifying Persons shall not relieve any of them of any obligation or liability which any of them may have hereunder or -28- otherwise except to the extent of a showing of actual prejudice. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Persons and the Indemnified Person shall have mutually agreed to the contrary, (ii) the Indemnifying Persons shall have failed within a reasonable period of time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both any Indemnifying Person and the Indemnified Person or any affiliate thereof and representation of both parties by the same counsel would be inappropriate due to differing interests between them. It is understood that, unless there exists a conflict among Indemnified Persons, the Indemnifying Persons shall not, in connection with any one such proceeding or separate but substantially similar related proceeding in the same jurisdiction arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed promptly as they are incurred. Any such separate firm for the Participants and such control Persons of Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes and Exchange Notes sold by all such Participants and shall be reasonably acceptable to the Issuers and any such separate firm for the Issuers, their respective directors, their respective officers and such control Persons of any of the Issuers shall be designated in writing by the Issuers and shall be reasonably acceptable to the Holders. The Indemnifying Persons shall not be liable for any settlement of any proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or delayed), but if settled with such consent or if there be a final judgment for the plaintiff for which the Indemnified Person is entitled to indemnification pursuant to this Agreement, each of the Indemnifying Persons agrees to indemnify and hold harmless each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Person shall, without the prior written consent of the Indemnified Persons (which consent shall not be unreasonably withheld or delayed), effect any settlement or compromise of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional written release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of such Indemnified Person. -29- (d) If the indemnification provided for in the first and second paragraphs of this Section 7 is for any reason unavailable to, or insufficient to hold harmless, an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect (i) the relative benefits received by the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other from the offering of the Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative benefits received by the Issuers on the one hand and the Participants on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of discounts and commissions but before deducting expenses) of the Notes received by the Issuers bears to the total proceeds received by such Participant from the sale of Registrable Notes or Exchange Notes, as the case may be. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers on the one hand or such Participant or such other Indemnified Person, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. (e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in -30- connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the amount of any damages that such Participant has otherwise been required to pay or has paid by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) Any losses, claims, damages, liabilities or expenses for which an Indemnified Person is entitled to indemnification or contribution under this Section 7 shall be paid by the Indemnifying Person to the Indemnified Person as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 7 and the representations and warranties of the Issuers set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Holder or any person who controls a Holder, any of the Issuers, their respective directors or officers or any person controlling any of the Issuers, and (ii) any termination of this Agreement. (g) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. Section 3. Rules 144 and 144A Each of the Issuers covenants that it will use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, if at any time such Issuer is not required to file such reports, it will, upon the request of any Holder or beneficial owner of Registrable Notes, make available such information necessary to permit sales pursuant to Rule 144A under the Securities Act. Each of the Issuers further covenants that it will take such further action as any Holder of Registrable Notes may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Notes without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule -31- 144(k) and Rule 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require any of the Issuers to register any of its securities pursuant to the Exchange Act. Section 4. Underwritten Registrations If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and shall be reasonably acceptable to the Issuers. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. Section 5. Miscellaneous (a) No Inconsistent Agreements. None of the Issuers has, as of the date hereof, and none of the Issuers shall, after the date of this Agreement, enter into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not conflict with and are not inconsistent with, in any material respect, the rights granted to the holders of any of the Issuers' other issued and outstanding securities under any such agreements. None of the Issuers has entered and will not enter into any agreement with respect to any of its securities which will grant to any Person piggy-back registration rights with respect to any Registration Statement. (b) Adjustments Affecting Registrable Notes. None of the Issuers shall, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement. -32- (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given except pursuant to a written agreement duly signed and delivered by (I) the Issuers and (II)(A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes and (B) in circumstances that would adversely affect the Participating Broker-Dealers, the Participating Broker-Dealers holding not less than a majority in aggregate principal amount of the Exchange Notes held by all Participating Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may not be amended, modified or supplemented except pursuant to a written agreement duly signed and delivered by each Holder and each Participating Broker-Dealer (including any person who was a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to any Registration Statement) affected by any such amendment, modification or supplement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold pursuant to such Registration Statement. (d) Notices. All notices and other communications (including, without limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopier: (i) if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture. (ii) if to the Issuers, at the address as follows: Philipp Brothers Chemicals, Inc. One Parker Plaza Fort Lee, NJ 07024 Facsimile No.: (201) 944-6245 Attention: Chief Executive Officer -33- (iii) if to the Initial Purchaser, as provided in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by the recipient's telecopier machine, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, the Holders and the Participating Broker-Dealers; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Notes. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. Specified times of day refer to New York City time. -34- (i) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Securities Held by any of the Issuers or their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by any of the Issuers or any of its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (k) Third Party Beneficiaries. Holders and beneficial owners of Registrable Notes and Participating Broker-Dealers are intended third party beneficiaries of this Agreement, and this Agreement may be enforced by such Persons. (l) Attorneys' Fees. As between the parties to this Agreement, in any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to its costs and expenses and any other available remedy. (m) Entire Agreement. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Holders on the one hand and the Issuers on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby. -35- IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. PHILIPP BROTHERS CHEMICALS, INC. By: /s/ Jack C. Bendheim ----------------------- Name: Jack C. Bendheim Title: Pres. -36- The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. SCHRODER & CO. INC. By: /s/ William T. Clay -------------------------- Name: William T. Clay, IV Title: Director -37- Each of the subsidiaries of the Company specified below agrees to become a party to this Registration Rights Agreement as a Guarantor as of the date hereof: CP CHEMICALS, INC. By: /s/ Nathan Bistricer ---------------------- Name: Nathan Bistricer Title: V.P. PHIBRO-TECH, INC. By: /s/ Nathan Bistricer ---------------------- Name: Nathan Bistricer Title: V.P. MRT MANAGEMENT CORP. By: MRT Management Corp., Managing Member By: /s/ Nathan Bistricer ---------------------- Name: Nathan Bistricer Title: V.P. MINERAL RESOURCE TECHNOLOGIES, L.L.C. By: /s/ Nathan Bistricer ---------------------- Name: Nathan Bistricer Title: V.P. -38- PRINCE AGRIPRODUCTS, INC. By: /s/ Nathan Bistricer ---------------------- Name: Nathan Bistricer Title: V.P. PHIBROCHEM, INC. By: /s/ Nathan Bistricer ---------------------- Name: Nathan Bistricer Title: V.P. PHIBROCHEMICALS, INC. By: /s/ Nathan Bistricer ---------------------- Name: Nathan Bistricer Title: V.P. WESTERN MAGNESIUM CORP. By: /s/ Nathan Bistricer ---------------------- Name: Nathan Bistricer Title: V.P. THE PRINCE MANUFACTURING COMPANY By: /s/ Nathan Bistricer ---------------------- Name: Nathan Bistricer Title: V.P. -39- THE PRINCE MANUFACTURING COMPANY By: /s/ Nathan Bistricer ---------------------- Name: Nathan Bistricer Title: V.P. EX-10.2 6 0006.txt REVOLVING CREDIT, ACQUISITION TERM LOAN AND SECURITY AGREEMENT REVOLVING CREDIT, ACQUISITION TERM LOAN AND SECURITY AGREEMENT dated August 19, 1998 * among PHILIPP BROTHERS CHEMICALS, INC., as Borrower and PHIBRO-TECH, INC., C P CHEMICALS, INC., THE PRINCE MANUFACTURING COMPANY THE PRINCE MANUFACTURING COMPANY, PRINCE AGRIPRODUCTS, INC., MINERAL RESOURCE TECHNOLOGIES, L.L.C., MRT MANAGEMENT CORP., KOFFOLK, INC., PHIBRO-CHEM, INC., PHIBROCHEMICALS, WESTERN MAGNESIUM CORP. as Guarantors and PNC BANK, NATIONAL ASSOCIATION, as Agent and Lender and Other Lenders Listed on Signature Page as Lenders LIST OF EXHIBITS AND SCHEDULES EXHIBITS Exhibit 2.1(a) Revolving Credit Note Exhibit 2.2(b) Acquisition Term Note Exhibit 5.5(b) Financial Projections Exhibit 8.1(aa) Power of Attorney Exhibit 8.1(i) Financial Condition Certificate Exhibit 16.3 Commitment Transfer Supplement SCHEDULES Schedule 1.2A Leasehold Interests Schedule 1.2B Permitted Encumbrances Schedule 4.5 Equipment and Inventory Locations Schedule 4.15(c) Location of Executive Offices Schedule 4.19 Real Property Schedule 4.19(g) Certain Locations Subject to Environmental Remediation Schedule 5.2(a) States of Qualification and Good Standing Schedule 5.2(b) Subsidiaries Schedule 5.4 Federal Tax Identification Number Schedule 5.6 Prior Names Schedule 5.7 Environmental Schedule 5.8(b) Litigation Schedule 5.8(d) Plans Schedule 5.10 Licenses and Permits Schedule 5.14 Labor Disputes Schedule 5.25 Schedule of Other Billing Locations Schedule 7.3 Guarantees INDEX
Page ---- I DEFINITIONS..........................................................................................1 1.1 Accounting Terms............................................................................. 1 1.2 General Terms.................................................................................1 1.3 Uniform Commercial Code Terms............................................................... 15 1.4 Certain Matters of Construction..............................................................15 II ADVANCES, CONDITIONS, PAYMENTS......................................................................16 2.1 Revolving Advances/Individual Revolving Advances.............................................16 Discretionary Rights.........................................................................16 Use of Revolving Advances....................................................................16 2.2 Acquisition Term Loan........................................................................17 Use of Acquisition Term Loans................................................................17 2.3 Procedure for Revolving Advances Borrowing...................................................17 2.4 Disbursement of Advance Proceeds.............................................................19 2.5 Acquisition of Acquired Persons..............................................................19 2.6 Maximum Advances.............................................................................20 2.7 Repayment of Advances........................................................................21 2.8 Repayment of Excess Advances.................................................................21 2.9 Statement of Account.........................................................................21 2.10 Letters of Credit............................................................................21 2.11 Issuance of Letters of Credit................................................................22 2.12 Requirements for Issuance of Letters of Credit...............................................22 2.13 Additional Payments..........................................................................23 2.14 Manner of Borrowing and Payment..............................................................23 2.15 Mandatory Prepayments........................................................................25 2.16 Use of Proceeds..............................................................................25 2.17 Defaulting Lender............................................................................25 III INTEREST AND FEES...................................................................................26 3.1 Interest.....................................................................................26 3.2 Letter of Credit Fees........................................................................26 3.3 Closing Fee/Facility Fee.....................................................................26 3.4 Collateral Monitoring Fee....................................................................27 3.5 Computation of Interest and Fees.............................................................27 3.6 Maximum Charges..............................................................................27 3.7 Increased Costs..............................................................................27 3.8 Basis for Determining Interest Rate Inadequate or Unfair.....................................28 3.9 Capital Adequacy.............................................................................28 IV COLLATERAL: GENERAL TERMS...........................................................................29 4.1 Security Interest in the Collateral..........................................................29 4.2 Perfection of Security Interest..............................................................29 4.3 Disposition of Collateral....................................................................29 4.4 Preservation of Collateral...................................................................29
4.5 Ownership of Collateral......................................................................30 4.6 Defense of Agent's and Lenders' Interests....................................................30 4.7 Books and Records............................................................................30 4.8 Financial Disclosure.........................................................................31 4.9 Compliance with Laws.........................................................................31 4.10 Inspection of Premises.......................................................................31 4.11 Insurance....................................................................................31 4.12 Failure to Pay Insurance.....................................................................32 4.13 Payment of Taxes.............................................................................32 4.14 Payment of Leasehold Obligations.............................................................32 4.15 Receivables..................................................................................33 4.16 Inventory....................................................................................35 4.17 Maintenance of Equipment.....................................................................35 4.18 Exculpation of Liability.....................................................................35 4.19 Environmental Matters........................................................................35 4.20 Financing Statements.........................................................................37 4.21 Guaranty.....................................................................................37 V REPRESENTATIONS AND WARRANTIES......................................................................37 5.1 Authority....................................................................................37 5.2 Formation and Qualification..................................................................37 5.3 Survival of Representations and Warranties...................................................38 5.4 Tax Returns..................................................................................38 5.5 Financial Statements.........................................................................38 5.6 Corporate Name...............................................................................39 5.7 O.S.H.A. and Environmental Compliance........................................................39 5.8 Solvency; No Litigation, Violation, Indebtedness or Default..................................39 5.9 Patents, Trademarks, Copyrights and Licenses.................................................40 5.10 Licenses and Permits.........................................................................41 5.11 Default of Indebtedness......................................................................41 5.12 No Default...................................................................................41 5.13 No Burdensome Restrictions...................................................................41 5.14 No Labor Disputes............................................................................41 5.15 Margin Regulations...........................................................................41 5.16 Investment Company Act.......................................................................41 5.17 Disclosure...................................................................................41 5.18 Swaps........................................................................................42 5.19 Conflicting Agreements.......................................................................42 5.20 Application of Certain Laws and Regulations..................................................42 5.21 Business and Property of Borrower............................................................42 5.22 Year 2000....................................................................................42 5.23 Section 20 Subsidiaries......................................................................42 5.24 Interest Expense Allocation..................................................................42 5.25 Other Billing Locations......................................................................42
VI AFFIRMATIVE COVENANTS...............................................................................43 6.1 Payment of Fees..............................................................................43 6.2 Conduct of Business and Maintenance of Existence and Assets..................................43 6.3 Violations...................................................................................43 6.4 Government Receivables.......................................................................43 6.5 Domestic Net Worth...........................................................................43 6.6 Interest Coverage Ratio......................................................................44 6.7 Execution of Supplemental Instruments........................................................44 6.8 Payment of Indebtedness......................................................................44 6.9 Standards of Financial Statements............................................................44 6.10 Domestic Debt Service Ratio..................................................................44 VII NEGATIVE COVENANTS..................................................................................44 7.1 Merger, Consolidation, Acquisition and Sale of Assets........................................45 7.2 Creation of Liens............................................................................45 7.3 Guarantees...................................................................................45 7.4 Investments..................................................................................45 7.5 Loans........................................................................................46 7.6 Capital Expenditures.........................................................................46 7.7 Dividends....................................................................................46 7.8 [Indebtedness]...............................................................................47 7.9 Nature of Business...........................................................................47 7.10 Transactions with Affiliates.................................................................48 7.11 Partnership, Joint Ventures..................................................................48 7.12 Subsidiaries.................................................................................48 7.13 Fiscal Year and Accounting Changes...........................................................48 7.14 Intentionally left blank.....................................................................48 7.15 Amendment of Articles of Incorporation, Bylaws...............................................48 7.16 Compliance with ERISA........................................................................48 7.17 Prepayment of Indebtedness...................................................................49 7.18 Subordinated Debt Payments...................................................................49 7.19 Interest Expense Allocation..................................................................49 VIII CONDITIONS PRECEDENT................................................................................49 8.1 Conditions to Initial Advances...............................................................49 8.2 Conditions to Each Advance...................................................................52 IX INFORMATION AS TO BORROWERS.........................................................................53 9.1 Disclosure of Material Matters...............................................................53 9.2 Schedules....................................................................................53 9.3 Environmental Reports........................................................................53 9.4 Litigation...................................................................................53 9.5 Material Occurrences.........................................................................53 9.6 Government Receivables.......................................................................54 9.7 Annual Financial Statements..................................................................54 9.8 Quarterly Financial Statements...............................................................54 9.9 Monthly Financial Statements.................................................................55 9.10 Other Reports................................................................................55
9.11 Additional Information.......................................................................55 9.12 Projected Operating Budget...................................................................55 9.13 Variances From Operating Budget..............................................................55 9.14 Notice of Suits, Adverse Events..............................................................55 9.15 ERISA Notices and Requests...................................................................56 9.16 Additional Documents.........................................................................56 X EVENTS OF DEFAULT...................................................................................56 XI LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..........................................................58 11.1 Rights and Remedies..........................................................................58 11.2 Agent's Discretion...........................................................................59 11.3 Setoff.......................................................................................59 11.4 Rights and Remedies not Exclusive............................................................59 XII WAIVERS AND JUDICIAL PROCEEDINGS....................................................................59 12.1 Waiver of Notice.............................................................................59 12.2 Delay........................................................................................60 12.3 Jury Waiver..................................................................................60 XIII EFFECTIVE DATE AND TERMINATION......................................................................60 13.1 Term.........................................................................................60 13.2 Termination..................................................................................60 XIV REGARDING AGENT.....................................................................................61 14.1 Appointment..................................................................................61 14.2 Nature of Duties.............................................................................61 14.3 Lack of Reliance on Agent and Resignation....................................................61 14.4 Certain Rights of Agent......................................................................62 14.5 Reliance.....................................................................................62 14.6 Notice of Default............................................................................62 14.7 Indemnification..............................................................................63 14.8 Agent in its Individual Capacity.............................................................63 14.9 Delivery of Documents........................................................................63 14.10 Borrowers' Undertaking to Agent..............................................................63 XV MISCELLANEOUS.......................................................................................63 15.1 Governing Law................................................................................63 15.2 Entire Understanding.........................................................................64 15.3 Successors and Assigns; Participations; New Lenders..........................................65 15.4 Application of Payments......................................................................66 15.5 Indemnity....................................................................................66 15.6 Notice.......................................................................................67 15.7 Survival.....................................................................................67 15.8 Severability.................................................................................68 15.9 Expenses.....................................................................................68 15.10 Injunctive Relief............................................................................68 15.11 Consequential Damages........................................................................68
15.12 Captions.....................................................................................68 15.13 Counterparts; Telecopied Signatures..........................................................68 15.14 Construction.................................................................................68 15.15 Confidentiality; Sharing Information.........................................................68 15.16 Publicity....................................................................................69
REVOLVING CREDIT, ACQUISITION TERM LOAN AND SECURITY AGREEMENT Revolving Credit, Acquisition Term Loan and Security Agreement dated August 19, 1998 among PHILIPP BROTHERS CHEMICALS, INC., a corporation organized under the laws of the State of New York, ("Borrower"), Phibro-Tech, Inc., a corporation organized under the laws of the State of Delaware, C P Chemicals, Inc., a corporation organized under the laws of the State of New Jersey, The Prince Manufacturing Company, a corporation organized under the laws of the State of Pennsylvania, The Prince Manufacturing Company, a corporation organized under the laws of the State of Illinois, Prince Agriproducts, Inc., a corporation organized under the laws of the State of Delaware, Mineral Resource Technologies, L.L.C., a limited liability company organized under the laws of the State of Delaware, MRT Management Corp., a corporation organized under the laws of the State of Delaware, Koffolk, Inc., a corporation organized under the laws of the State of Delaware, Phibro-Chem, Inc., a corporation organized under the laws of the State of New Jersey, PhibroChemicals, Inc., a corporation organized under the laws of the State of New York, and Western Magnesium Corp., a corporation organized under the laws of the State of California (each a "Guarantor" and collectively "Guarantors"), the financial institutions which are now or which hereafter become a party hereto (collectively, the "Lenders" and individually a "Lender") and PNC BANK, NATIONAL ASSOCIATION, a national banking association ("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent"). IN CONSIDERATION of the mutual covenants and undertakings herein contained, Borrower, Guarantors, Lenders and Agent hereby agree as follows: I. DEFINITIONS. 1.1. Accounting Terms. As used in this Agreement, the Note, or any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings given to them under GAAP; provided, however, whenever such accounting terms are used for the purposes of determining compliance with financial covenants in this Agreement, such accounting terms shall be defined in accordance with GAAP as applied in preparation of the audited financial statements of Obligors for the fiscal year ended June 30, 1998. 1.2. General Terms. For purposes of this Agreement the following terms shall have the following meanings: "Accountants" shall have the meaning set forth in Section 9.7 hereof. "Acquired Person" shall mean any partnership, corporation, limited liability company or other legal business entity whereby Control of which will be acquired by the Borrower with the use of the Acquisition Term Loan or by a domestic Subsidiary of the Borrower with the use of Revolving Advances. For the purposes of this definition, the term "Control" shall be defined to mean the power, direct or indirect, (x) to vote fifty percent (50%) or more of the securities having ordinary voting power for the election of directors or managers of such Person or (y) to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Acquisition Term Note" shall mean, collectively, the promissory notes described in Section 2.2 hereof. "Acquisition Term Loan" shall mean the Advances made pursuant to Section 2.2 hereof. "Acquisition Term Loan Rate" shall mean an interest rate per annum equal to (a) the sum of the Base Rate plus three-quarters of one percent (3/4%) with respect to Domestic Rate Loans, and (b) the sum of the Eurodollar Rate plus two and one-half percent (2 1/2%) with respect to Eurodollar Rate Loans. "Advances" shall mean and include the Revolving Advances, Letters of Credit, as well as the Acquisition Term Loan. "Advance Rates" shall have the meaning set forth in Section 2.1(a) hereof. "Affiliate" of any Person shall mean (a) any Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person, or (b) any Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 50% or more of the securities having ordinary voting power for the election of directors or managers of such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agent" shall have the meaning set forth in the preamble to this Agreement and shall include its successors and assigns. "Agreement" shall mean this Revolving Credit, Acquisition Term Loan and Security Agreement and all exhibits and schedules annexed hereto, all as from time to time be amended, supplemented, extended and/or restated. "Applicable Margin" shall mean, initially, two percent (2%), but shall reduce automatically commencing on July 1, 1999, to the percentage (%) set forth below in column "B" upon the Obligors obtaining and maintaining the Interest Coverage Ratio set forth in column "A": A B Interest Coverage Ratio % ----------------------- ----- 1.50:1 to 2.49:1 2% 2.50:1 to 3.49:1 1 3/4% 3.50:1 to 4.49:1 1 1/2% 4.50:1 and above 1 1/4% Performance with respect to the foregoing grid shall be tested on a quarterly basis for the prior four quarters, but not before July 1, 1998 and the Applicable Margin shall become effective five (5) Business Days after delivery of the quarterly financial statement of the Borrower as well as a covenant calculation. "Authority" shall have the meaning set forth in Section 4.19(d). "Base Rate" shall mean the base commercial lending rate of PNC as publicly announced to be in effect from time to time, such rate to be adjusted automatically, without notice, on the effective date of any change in such rate. This rate of interest is determined from time to time by PNC as a means of pricing some loans to its customers and is neither tied to any external rate of interest or index nor does it necessarily reflect the lowest rate of interest actually charged by PNC to any particular class or category of customers of PNC. "Blocked Accounts" shall have the meaning set forth in Section 4.15(h). "Borrower" shall have the meaning set forth in the preamble to this Agreement and shall extend to all permitted successors and assigns of such Persons. "Borrower's Account" shall have the meaning set forth in Section 2.8. "Business Day" shall mean, with respect to Eurodollar Rate Loans, any day on which commercial banks are open for domestic and international business, including dealings in Dollar deposits in London, England and New York, New York and with respect to all other matters, any day other than a day on which commercial banks in New York are authorized or required by law to close. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. "9601 et seq. "Change of Control" shall mean (a) the occurrence of any event (whether in one or more transactions) which results in a transfer of control of a Person to a Person who is not an Original Owner or (b) any merger or consolidation of or with such Person or sale of all or substantially all of the property or assets of such Persons. For purposes of this definition, "control of such Person" shall mean the power, direct or indirect (x) to vote 50% or more of the securities having ordinary voting power for the election of directors of such Person or (y) to direct or cause the direction of the management and policies of such Person by contract or otherwise. "Charges" shall mean all taxes, charges, fees, imposts, levies or other assessments, including, without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation and property taxes, custom duties, fees, assessments, liens, claims and charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other authority, domestic or foreign (including, without limitation, the Pension Benefit Guaranty Corporation or any environmental agency or superfund), upon the Collateral, any Obligor or any of its Affiliates. "Closing Date" shall mean August 19, 1998 or such other date as may be agreed to by the parties hereto. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time and the regulations promulgated thereunder. "Collateral" shall mean and include: (a) all Receivables; (b) all Inventory; (c) all of each Obligor's right, title and interest in and to, to the extent that the following directly relate to (a) or (b) above, (i) its respective goods including, but not limited to, all merchandise returned or rejected by Customers; (ii) all of each Obligor's rights as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or other similar lienor, including stoppage in transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all additional amounts due to any Obligor from any Customer with respect to the sale of Inventory or relating to Receivables; and (iv) warranty claims relating to any Inventory, (d) all proceeds and products of (a) or (b) above in whatever form, including, but not limited to: cash, deposit accounts (whether or not comprised solely of proceeds), certificates of deposit, insurance proceeds (including hazard, flood and credit insurance), negotiable instruments and other instruments for the payment of money, chattel paper, security agreements, documents, eminent domain proceeds, condemnation proceeds and tort claim proceeds; and (e) any other goods, personal property or real property now owned or hereafter acquired in which any Obligor expressly grants a security interest to secure the Obligations by a separate agreement, or in any amendment or supplement hereto or thereto. Notwithstanding the foregoing, Collateral shall not include (except to the extent a security interest is specifically granted to secure the Obligations by a separate agreement or in any amendment or supplement hereto or thereto) Equipment, General Intangibles, Real Property and Intellectual Property. "Commitment Percentage" of any Lender shall mean the percentage set forth below such Lender's name on the signature page hereof as same may be adjusted upon any assignment by a Lender pursuant to Section 15.3(b) hereof. "Commitment Transfer Supplement" shall mean a document in the form of Exhibit 16.3 hereto, properly completed and otherwise in form and substance satisfactory to Agent by which the Purchasing Lender purchases and assumes a portion of the obligation of Lenders to make Advances under this Agreement. "Consents" shall mean all filings and all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and other third parties, domestic or foreign, necessary to carry on any Obligor's business, including, without limitation, any Consents required under all applicable federal, state or other applicable law. "Contract Rate" shall mean, as applicable, the Revolving Interest Rate or the Term Loan Rate. "Controlled Group" shall mean all domestic members of a controlled group of corporations and all domestic trades or businesses (whether or not incorporated) under common control which, together with any Obligor, are treated as a single employer under Section 414 of the Code. "Customer" shall mean and include the account debtor with respect to any Receivable and/or the purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into any contract or other arrangement with any Obligor, pursuant to which such Obligor is to deliver any Inventory or perform any services. "Default" shall mean an event which, with the giving of notice or passage of time or both, would constitute an Event of Default. "Default Rate" shall have the meaning set forth in Section 3.1 hereof. "Defaulting Lender" shall have the meaning set forth in Section 2.16(a) hereof. "Depository Accounts" shall have the meaning set forth in Section 4.15(h) hereof. "Documents" shall have the meaning set forth in Section 8.1(c) hereof. "Dollar" and the sign "$" shall mean lawful money of the United States of America. "Domestic Debt Service Coverage" shall be defined as EBITDA of the Borrower and all of its domestic Subsidiaries, on a consolidated basis, divided by all scheduled principal and interest payments during the periods in question with respect to all Funded Indebtedness of the Borrower and all of its domestic Subsidiaries, on a consolidated basis. "Domestic Rate Loan" shall mean any Advance that bears interest based upon the Base Rate. "Early Termination Date" shall have the meaning set forth in Section 13.1 hereof. "Earnings Before Interest and Taxes" shall mean for any period the sum of (i) net income (or loss) of Obligors on a consolidated basis for such period (excluding extraordinary gains and including extraordinary losses), plus (ii) all interest expense of Obligors on a consolidated basis for such period, plus (iii) all charges against income of Obligors on a consolidated basis for such period for federal, state and local taxes. Notwithstanding the foregoing, for the purpose of calculating the financial covenants set forth herein, those losses resulting from charges for the fiscal year ending 1998 as described as "Restructuring and Other Charges" in the Offering Memorandum dated June 5, 1998 with respect to $100,000,000 Philipp Brothers Chemicals, Inc. 9 7/8% Senior Subordinated Notes due 2008, shall not be included as part of or deducted in computing net income in calculating Earnings Before Interest and Taxes. "EBITDA" shall mean for any period the sum of (i) Earnings Before Interest and Taxes for such period plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period. Interest income shall be included in calculating EBITDA. "Eligible Inventory" shall mean and include Inventory located within the Continental United States of America excluding work in process, with respect to each Obligor valued at the lower of cost or market value, determined on a first-in-first-out basis, which is not, in Agent's reasonable opinion, obsolete, slow moving or unmerchantable and which Agent, in its reasonable discretion, shall not deem ineligible Inventory, based on such considerations as Agent may from time to time deem reasonably appropriate including, without limitation, whether the Inventory is subject to a perfected, first priority security interest in favor of Agent and whether the Inventory conforms to all standards imposed by any governmental agency, division or department thereof which has regulatory authority over such goods or the use or sale thereof. "Eligible Receivables" shall mean and include with respect to each Obligor, each Receivable of such Obligor arising in the ordinary course of such Obligor's business and which Agent, in its reasonable credit judgment, shall deem to be an Eligible Receivable, based on such considerations as Agent may from time to time reasonably deem appropriate. A Receivable shall not be deemed eligible unless such Receivable is subject to Agent's first priority perfected security interest and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other documentary evidence reasonably satisfactory to Agent. In addition, no Receivable shall be an Eligible Receivable if: (a) it arises out of a sale made by any Obligor to an Affiliate of any Obligor or to a Person controlled by an Affiliate of any Obligor; (b) with respect to sales to Customers not outside the continental United States of America, Hawaii or Puerto Rico, it is due or unpaid more than ninety (90) days after the original invoice date, and with respect to sales to Customers outside the continental United States of America, Hawaii or Puerto Rico, it is due or unpaid more than one hundred eighty (180) days after the invoice date and is further excluded pursuant to subparagraph (f) below; (c) twenty-five percent (25%) or more of the Receivables from such Customer are not deemed Eligible Receivables hereunder. Such percentage may, in Agent's reasonable discretion, be increased or decreased from time to time; (d) any covenant, representation or warranty contained in this Agreement with respect to such Receivable has been breached; (e) the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or call a meeting of its creditors, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing; (f) the sale is to a Customer outside the continental United States of America, Hawaii or Puerto Rico, unless the sale is on letter of credit, guaranty or acceptance terms or the sale is subject to credit insurance, in each case acceptable to Agent in its sole discretion; (g) the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper; (h) Agent believes, in its reasonable judgment, that collection of such Receivable is insecure or that such Receivable may not be paid by reason of the Customer's financial inability to pay; (i) the Customer is the United States of America, any state or any department, agency or instrumentality of any of them, unless the applicable Obligor assigns its right to payment of such Receivable to Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other applicable statutes or ordinances; (j) the goods giving rise to such Receivable have not been shipped and delivered to and accepted by the Customer or the services giving rise to such Receivable have not been performed by the applicable Obligor and accepted by the Customer or the Receivable otherwise does not represent a final sale; (k) the Receivables of the Customer exceed a credit limit determined by Agent, in its reasonable discretion, to the extent such Receivable exceeds such limit; (l) the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim, the Customer is also a creditor or supplier of a Obligor or the Receivable is contingent in any respect or for any reason; (m) the applicable Obligor has made any agreement with any Customer for any deduction therefrom, except for discounts, allowances or rebates made in the ordinary course of business, all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto and all of which rebates are reasonably estimated from time to time on a monthly basis; (n) shipment of the merchandise or the rendition of services has not been completed; (o) any return, rejection or repossession of the merchandise has occurred; (p) such Receivable is not payable to a Obligor; (q) more than fifty percent (50%) in dollar value of the aggregate Receivables due from a Customer are past due; or (r) such Receivable is not otherwise satisfactory to Agent as determined in good faith by Agent in the exercise of its discretion in a reasonable manner. "Environmental Complaint" shall have the meaning set forth in Section 4.19(d) hereof. "Environmental Laws" shall mean all federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto. "Equipment" shall mean and include goods (other than Inventory) whether now owned or hereafter acquired and wherever located including, without limitation, all equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all replacements and substitutions therefor or accessions thereto. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and the rules and regulations promulgated thereunder. "Eurodollar Rate" shall mean with respect to any Eurodollar Rate Loan for any Interest Period, the interest rate per annum determined by the Agent by dividing (the resulting quotient rounded upward to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by the Agent in accordance with its usual procedures (which determination shall be conclusive and binding upon the Borrower, absent manifest error on the part of the Agent) to be equal to the offered rates for deposits in Dollars for the applicable Interest Period which appear on Page 3750 of the TELERATE rate reporting system or other similar system as of approximately 11:00 a.m., Greenwich Mean Time, two (2) Business Days prior to the first day of such Interest Period for an amount comparable to such Eurodollar Rate Loan and having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus the Reserve Percentage. The Eurodollar Rate may also be expressed by the following formula: Offered rate on TELERATE page 3750 Eurodollar Rate = ---------------------------------- 1.00 - Reserve Percentage If more than one offered rate appears on page 3750 of the TELERATE rate reporting system or similar system, the rate will be the arithmetic mean of such offered rates. "Eurodollar Rate Loan" shall mean an Advance at any time that bears interest based on the Eurodollar Rate. "Fee Letter" shall mean that certain letter agreement between the Agent and the Borrower regarding certain fees. "Event of Default" shall mean the occurrence and continuance of any of the events set forth in Article X hereof. "Fixed Charge Coverage Ratio" shall mean the ratio of (a) EBITDA minus unfinanced capitalized expenditures and cash taxes made during the period being tested to (b) all scheduled principal and interest payments on all Funded Indebtedness during the period being tested. "Funded Indebtedness" shall mean (i) all indebtedness of such Person for borrowed money or which is evidenced by a note, bond, indenture 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 nine (9) months after the placing of such property in service or taking delivery and title thereto, (iii) all capitalized leases of such Person, (iv) all obligations of such Person with respect to letters of credit, 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 any interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and other agreements or arrangements designed to protect such Person against fluctuations in interest rates; (vi) to the extent not otherwise included in this definition, all net obligations of such Person under all foreign exchange contracts, currency swap agreements, and other similar agreements or arrangements to protect such Person against fluctuations in currency values and (vii) any other debt or obligation of such Person bearing interest (whether paid or imputed). "Formula Amount" shall have the meaning set forth in Section 2.1(a). "GAAP" shall mean generally accepted accounting principles in the United States of America in effect from time to time. "General Intangibles" shall mean and include as to each Obligor all of such Obligor's general intangibles, whether now owned or hereafter acquired including, without limitation, all chooses in action, causes of action, corporate or other business records (including, but not limited to, ledger sheets, ledger cards, files, correspondence, records, books of account, business papers, computers, computer software (owned by any Obligor or in which it has an interest), tapes and disks), equipment formulations, manufacturing procedures, quality control procedures, goodwill, registrations, licenses, franchises, customer lists, tax refunds, tax refund claims, computer programs, all claims under guaranties, security interests or other security held by or granted to such Obligor, all rights of indemnification and all other intangible property of every kind and nature (other than Receivables). "Governmental Body" shall mean any nation or government, any state or other political subdivision thereof or any entity exercising the legislative, judicial, regulatory or administrative functions of or pertaining to a government. "Guarantor" shall mean Phibro-Tech, Inc., C P Chemicals, Inc., The Prince Manufacturing Co., The Prince Manufacturing Co., Prince Agriproducts, Inc., Mineral Resource Technologies, L.L.C., MRT Management Corp., Koffolk, Inc., PhibroChem, Inc., PhibroChemicals, Inc., and Western Magnesium Corp. and any other Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations and "Guarantors" means collectively all such Persons. "Guaranty" shall mean the Continuing Unlimited and Collateralized Guaranty and any other guaranty of the obligations of Borrower executed by a Guarantor in favor of Agent for the ratable benefit of Lenders. "Hazardous Discharge" shall have the meaning set forth in Section 4.19(d) hereof. "Hazardous Substance" shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, N.J.S.A. 58:10-23.11(b)(K) and N.J.A.C. 7:1E-1.7 or any other applicable Environmental Law and in the regulations adopted pursuant thereto. "Hazardous Wastes" shall mean all waste materials subject to regulation under CERCLA, RCRA or applicable state law, and any other applicable Federal and state laws now in force or hereafter enacted relating to hazardous waste disposal. "Inactive Subsidiaries" shall mean Phibrochemicals, Inc., Phibrochem, Inc. and Western Magnesium Corp. "Indebtedness" of a Person at a particular date shall mean all obligations of such Person which in accordance with GAAP would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise) and in any event, without limitation by reason of enumeration, shall include all debt and other similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any, due at the required prepayment dates of such Indebtedness, and all Indebtedness secured by a Lien on assets owned by such Person, whether or not such Indebtedness actually shall have been created, assumed or incurred by such Person, provided, however, if the obligations secured by a Lien (other than a Permitted Encumbrance not securing any liability that would itself constitute Indebtedness) or 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. In addition, Indebtedness shall not include a government grant and any guarantee of an Obligor required by such grant which obligates the Obligor 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 Obligor becomes obligated to repay such grant, the grant shall be deemed Indebtedness which is incurred at the time such obligation to repay is triggered. Redeemable preferred securities of any Person shall not be deemed Indebtedness for the purposes hereof unless carried as a liability on the balance sheet of such Person in accordance with GAAP. "Indenture" shall mean a certain Indenture dated June 11, 1998 with respect to the issuance by Philipp Brothers Chemicals, Inc. of up to $140,000,000 of its 9-7/8% Senior Subordinated Notes due 2008, Series A, and 9-7/8% Senior Subordinated Notes due 2008, Series B, of which the aggregate principal amount presently outstanding is $100,000,000. "Ineligible Security" shall mean any security which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. section 24, Seventh), as amended. "Intellectual Property" all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, copyrights, copyright applications, design rights, trade names, assumed names, trade secrets, licenses, know-how, formulae, techniques, operational methods and strategies owned and/or utilized by the Obligors. "Interest Coverage Ratio" shall mean EBITDA of Borrower on a consolidated basis (including all direct and indirect domestic and foreign Subsidiaries) divided by interest on all Funded Indebtedness of the Borrower on a consolidated basis (including all direct and indirect domestic and foreign Subsidiaries). "Interest Period" shall mean the period provided for any Eurodollar Rate Loan pursuant to Section 2.2(b). "Inventory" shall mean and include as to each Obligor all of such Obligor's now owned or hereafter acquired goods and merchandise wherever located, to be furnished under any contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in such Obligor's business or used in selling or furnishing such goods and merchandise and all documents of title or other documents representing them. "Inventory Advance Rate" shall have the meaning set forth in Section 2.1(a)(y)(ii) hereof. "Issuer" shall mean any Person who issues a Letter of Credit and/or accepts a draft pursuant to the terms hereof. "Leasehold Interests" shall mean all of each Obligor's right, title and interest in and to the premises set forth on Schedule 1.2A. "Lender" and "Lenders" shall have the meaning ascribed to such term in the preamble to this Agreement and shall include each Person which becomes a transferee, successor or assign of any Lender. "Letter of Credit Fees" shall have the meaning set forth in Section 3.2. "Letters of Credit" shall have the meaning set forth in Section 2.10. "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), charge, claim or encumbrance, or priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever including, without limitation, any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction. "Material Adverse Effect" shall mean a material adverse effect on (a) the condition, operations, assets, business of the Obligors taken as a whole (b) the Obligors' ability to pay the Obligations in accordance with the terms thereof, (c) the value of the Collateral, or Agent's Liens on the Collateral or the priority of any such Lien or (d) the practical realization of the benefits of Agent's and each Lender's rights and remedies under this Agreement and the Other Documents. "Maximum Loan Amount" shall mean $60,000,000. "Maximum Revolving Advance Amount" shall mean $35,000,000. "Monthly Advances" shall have the meaning set forth in Section 3.1 hereof. "Multiemployer Plan" shall mean a "multiemployer plan" as defined in Sections 3(37) and 4001(a)(3) of ERISA. "Net Worth" at a particular date, shall mean (a) the aggregate amount of all assets of Obligors on a consolidated basis as may properly be classified as such in accordance with GAAP consistently applied and such other assets as are properly classified as "intangible assets", less (b) the aggregate amount of all Indebtedness of Obligors. "Note" shall mean collectively, the Acquisition Term Note and the Revolving Credit Note. "Obligations" shall mean and include any and all of each Obligor's Indebtedness and/or liabilities to Agent or Lenders or any corporation that directly or indirectly controls or is controlled by or is under common control with Agent or any Lender, arising out of or in connection with this Agreement or any Other Document, of every kind, nature and description, direct or indirect, secured or unsecured, joint, several, joint and several, absolute or contingent, due or to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such Indebtedness or liabilities arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument. "Obligor" or "Obligors" shall mean the Borrower and the Guarantors. "Original Owners" shall mean (i) Jack Bendheim, (ii) each of his spouses, siblings, and sisters, descendants (whether by blood, marriage or adoption and including stepchildren) and the spouses, siblings, and sisters and descendants thereof (whether by blood, marriage or adoption, and including stepchildren) of each 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 (iii) all Affiliates controlled by the individual named in clause (i) above. "Other Billing Location" shall mean each location not owned by such Person from which billing originates and/or at which books, records and backup documentation exists with respect to Accounts and Inventory, to the extent that same does not originate out of or exist at such Person's Chief Executive Office. "Other Documents" shall mean the Note, the Guaranty, the Power of Attorney and any and all other agreements, instruments and documents, including, without limitation, guaranties, pledges, powers of attorney, consents, and all other writings heretofore, now or hereafter executed by any Obligor and/or delivered to Agent or any Lender by any Obligor in respect of the transactions contemplated by this Agreement, and all as amended, supplemented, modified, extended and/or restated from time to time. "Parent" of any Person shall mean a corporation or other entity owning, directly or indirectly at least 50% of the shares of stock or other ownership interests having ordinary voting power to elect a majority of the directors of the Person, or other Persons performing similar functions for any such Person. "Participant" shall mean each Person who shall be granted the right by any Lender to participate in any of the Advances and who shall have entered into a participation agreement in form and substance satisfactory to such Lender. "Payment Office" shall mean initially Two Tower Center Boulevard, East Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any, which it may designate by notice to Borrower and to each Lender to be the Payment Office. "PBGC" shall mean the Pension Benefit Guaranty Corporation. "Permitted Encumbrances" shall mean (a) Liens in favor of Agent for the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other governmental charges not delinquent or being contested in good faith and by appropriate proceedings and with respect to which proper reserves have been taken by Obligors in accordance with GAAP; provided, that, the Lien shall have no effect on the priority of the Liens in favor of Agent or the value of the assets in which Agent has such a Lien and a stay of enforcement of any such Lien shall be in effect; (c) Liens disclosed in the financial statements referred to in Section 5.5; (d) deposits or pledges to secure obligations under worker's compensation, social security or similar laws, or under unemployment insurance; (e) deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the ordinary course of any Obligor's business; (f) judgment Liens that have been stayed or bonded and mechanics', workers', materialmen's or other like Liens arising in the ordinary course of any Obligor's business with respect to obligations which are not due or which are being contested in good faith by the applicable Borrower; (g) Liens placed upon assets (including additions and substitutions therefor and proceeds thereof) hereafter acquired to secure a portion of the purchase price thereof, provided that (x) any such lien shall not encumber any other property of the Obligors and (y) the aggregate amount of Indebtedness secured by such Liens incurred as a result of such purchases during any fiscal year shall not exceed the amount provided for in Section 7.6; and (h) Liens disclosed on Schedule 1.2B; (i) Liens arising with respect to capital leases, as permitted by Section 7.6 hereof, (j) Liens on property of foreign Subsidiaries acquired with the proceeds of the Revolving Loans provided that such Liens do not extend to any property of any domestic Obligor; (k) Liens in favor of customs and revenue authorities arising as a matter of the law to secure the payment of customs and duties in connection with the importation of goods (l) Liens securing obligations arising from statutory, regulatory, contractual or warranty requirements of any of the Obligors, including the performance of statutory obligations, surety or appeal bonds or performance bonds or Landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's or any other like Liens, in any case incurred in the ordinary course of business provided that the foregoing does not apply to Receivables or Inventory; (m) Liens securing Indebtedness of a Person existing at the time that such person is merged into or consolidated with the Borrower or a 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: (n) Liens on property acquired by Borrower or a 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 or consolidated with Borrower or such Subsidiary; (o) Liens in respect of interest rate agreement obligations and currency agreement obligations entered into the ordinary course of business; (p) Liens in favor of Borrower or any Subsidiary; (q) leases or subleases granted to others that do not materially interfere with the ordinary course of business of Borrower and its Subsidiaries; (r) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (s) Liens securing Indebtedness incurred to amend, modify, renew, refund, replace or refinance Indebtedness that has been secured by a Lien permitted under this Agreement, provided that (1) and such Lien not extend to or cover any assets or property not securing the Indebtedness so refinanced and (2) the refinancing Indebtedness secured by such Lien shall have been permitted to be incurred under this Agreement and (t) pursuant to Section 7.07 of the Indenture, liens on moneys held by the trustee under the Indenture securing fees due to the Trustee. "Person" shall mean any individual, sole proprietorship, partnership, corporation, business trust, joint stock company, trust, unincorporated organization, association, limited liability company, institution, public benefit corporation, joint venture, entity or government (whether Federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof). "Plan" shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA, maintained for employees of Obligors or any member of the Controlled Group or any such Plan to which any Obligor or any member of the Controlled Group is required to contribute on behalf of any of its employees. "Power of Attorney" shall mean each Power of Attorney executed by each Obligor in favor of Agent for the ratable benefit of Lenders. "Pro Forma Balance Sheet" shall have the meaning set forth in Section 5.5(a) hereof. "Pro Forma Financial Statements" shall have the meaning set forth in Section 5.5(b) hereof. "Projections" shall have the meaning set forth in Section 5.5(b) hereof. "Purchasing Lender" shall have the meaning set forth in Section 16.3 hereof. "RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C. " 6901 et seq., as same may be amended from time to time. "Real Property" shall mean all of each Borrower's right, title and interest in and to the owned and leased premises identified on Schedule 4.19 hereto. "Receivables" shall mean and include, as to each Obligor, all of such Obligor's accounts, contract rights, instruments (including those evidencing Indebtedness owed to Obligors by their Affiliates), documents, chattel paper, drafts and acceptances, and all other forms of obligations owing to such Obligor arising out of or in connection with the sale or lease of Inventory or the rendition of services, all guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to Agent hereunder. "Receivables Advance Rate" shall have the meaning set forth in Section 2.1(a)(y)(i) hereof. "Release" shall have the meaning set forth in Section 5.7(c)(i) hereof. "Reportable Event" shall mean a reportable event described in Section 4043(b) of ERISA or the regulations promulgated thereunder. "Required Lenders" shall mean Lenders holding at least Sixty-Six and 2/3 percent (66-2/3%) of the Advances and, if no Advances are outstanding, shall mean Lenders holding Sixty-Six and 2/3 percent (66-2/3%) of the Commitment Percentages. "Reserve Percentage" shall mean the maximum effective percentage in effect on any day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to euroccurency funding. "Revolving Advances" shall mean Advances made other than Letters of Credit and the Acquisition Term Loan. "Revolving Credit Note" shall have the meaning set forth in Section 2.1(a) hereof. "Revolving Interest Rate" shall mean an interest rate per annum equal to (a) the sum of the Base Rate with respect to Domestic Rate Loans, and (b) the sum of the Eurodollar Rate plus the Applicable Margin with respect to Eurodollar Rate Loans. "Section 20 Subsidiary" shall mean the Subsidiary of the bank holding company controlling any Lender, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities. "Senior Subordinated Notes" shall mean all notes issued pursuant to the Indenture. "Settlement Date" shall mean the Closing Date and thereafter Wednesday of each week unless such day is not a Business Day in which case it shall be the next succeeding Business Day. "Shareholders Agreement" shall mean (i) the Shareholders Agreement dated December 29, 1987, by and between Marvin S. Sussman and the Borrower; (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 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 date hereof and as hereafter amended, except for any amendment subsequent to the date hereof which causes the terms of such Agreement to be less favorable to an Obligor, each as amended and in effect on the date hereof, and as thereafter amended, except for any amendment subsequent to the date hereof which causes the terms of such agreement to be less favorable to an Obligor. "Subordinated Debt Payments" shall mean and include all cash actually expended to make payments of principal and interest pursuant to the Indenture. "Subsidiary" shall mean a corporation or other entity of whose shares of stock or other ownership interests having ordinary voting power (other than stock or other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person. "Term" shall have the meaning set forth in Section 13.1 hereof. "Termination Event" shall mean (i) a Reportable Event with respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Obligor or any member of the Controlled Group from a Plan or Multiemployer Plan during a plan year in which such entity was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any event or condition (a) which would constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any Obligor or any member of the Controlled Group from a Multiemployer Plan. "Toxic Substance" shall mean and include any material present on the Real Property or the Leasehold Interests which has been shown to have significant adverse effect on human health or which is subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C.: 2601 et seq., applicable state law, or any other applicable Federal or state laws now in force or hereafter enacted relating to toxic substances. "Toxic Substance" includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints. "Transactions" shall have the meaning set forth in Section 5.5 hereof. "Transferee" shall have the meaning set forth in Section 15.3(b) hereof. "Undrawn Availability" at a particular date shall mean an amount equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance Amount, minus (b) the sum of (i) the outstanding amount of Advances (other than the Acquisition Term Loan) plus (ii) all amounts due and owing to Obligors' trade creditors which are outstanding sixty (60) days beyond normal trade terms, all as determined by the Agent. "Week" shall mean the time period commencing with the opening of business on a Wednesday and ending on the end of business the following Tuesday. 1.3. Uniform Commercial Code Terms. All terms used herein and defined in the Uniform Commercial Code as adopted in the State of New Jersey shall have the meaning given therein unless otherwise defined herein. 1.4. Certain Matters of Construction. The terms "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. Wherever appropriate in the context, terms used herein in the singular also include the plural and vice versa. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. Unless otherwise provided, all references to any instruments or agreements to which Agent is a party, including, without limitation, references to any of the Other Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof. II. ADVANCES, CONDITIONS, PAYMENTS. 2.1. (a) Revolving Advances. Subject to the terms and conditions set forth in this Agreement, each Lender, severally and not jointly, will make Revolving Advances to Borrower in aggregate amounts outstanding at any time equal to such Lender's Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the aggregate amount of outstanding Letters of Credit or (y) an amount equal to the sum of: (i) 85%, subject to the provisions of Section 2.1(b) hereof ("Receivables Advance Rate"), of Eligible Receivables, plus (ii) the lesser of (A) 60%, subject to the provisions of Section 2.1(b) hereof ("Inventory Advance Rate"), of the value of the Eligible Inventory (the Receivables Advance Rate and the Inventory Advance Rate shall be referred to collectively, as the "Advance Rates") or (B) $15,000,000 in the aggregate at any one time, minus (iii) the aggregate amount of outstanding Letters of Credit, minus (iv) such reserves as Agent may reasonably deem proper and necessary from time to time. The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii) minus (y) Section 2.1 (a)(y) (iv) at any time and from time to time shall be referred to as the "Formula Amount". The Revolving Advances shall be evidenced by the secured promissory note ("Revolving Credit Note") substantially in the form attached hereto as Exhibit 2.1(a). (b) Discretionary Rights. The Advance Rates may be increased or decreased by Agent at any time and from time to time in the exercise of its reasonable discretion. Borrower consents to any such increases or decreases and acknowledges that decreasing the Advance Rates or increasing the reserves may limit or restrict Advances requested by Borrower. (c) Use of Revolving Advances. Revolving Advances may be utilized for Borrower's working capital purposes and, so long as the provisions of Section 2.5(b)(i), (ii) and (iii) are satisfied, to make loans to domestic Subsidiaries of the Obligors, which shall also be or become Obligors; provided that Revolving Advances lent by the Borrower to domestic Subsidiaries of the Obligors, which shall also be Obligors, to be utilized to fund the acquisition of an Acquired Person by such domestic Subsidiary, shall be limited such that: (x) the aggregate principal amount of such Revolving Advances do not exceed $25,000,000, (y) there exists an Undrawn Availability after giving effect to such acquisition of at least $10,000,000, and (z) the Borrower satisfies the conditions set forth in Section 2.5(b) hereof. Notwithstanding any contained hereto the contrary, at no time shall Revolving Advances lent by the Borrower to any domestic Subsidiary of the Obligor, which shall also be Obligors, exceed the Formula Amount of said domestic Subsidiary, provided, however, funds lent to a domestic Subsidiary of an Obligor, which shall also be or become an Obligor, may utilize said proceeds to fund the acquisition of an Acquired Person (subject to the limitations described herein) or for any other purpose, including distributing or otherwise transferring said funds to a parent of such domestic Subsidiary, other than in satisfaction of such debt, or any other Obligor (without regard to the Formula Amount referred above, since said Formula Amount has already been satisfied upon the initial loan of the Revolving Advance made by the Borrower to the original domestic Subsidiary). 2.2 (a) Acquisition Term Loan. Subject to the terms and conditions set forth in this Agreement, each Lender, severally and not jointly, will make Acquisition Term Loans to Borrower, from time to time during the period commencing on the Closing Date and ending on August 20, 2000, in aggregate principal amounts outstanding at any time equal to such Lender's Commitment Percentage of up to $25,000,000. (b) Use of Acquisition Term Loans. Acquisition Term Loans may only be utilized to fund the acquisition of an Acquired Person, subject to satisfaction of the conditions set forth in Section 2.5(a) hereof, and each Acquisition Term Loan shall be evidenced by an Acquisition Term Note substantially in the form of Exhibit 2.2(b), provided: (x) the Acquired Person is organized and maintains its principal place of business in the United States, (y) no Acquisition Term Loan shall be in an amount greater than $10,000,000, (z) the amount of each Acquisition Term Loan shall be limited to the value, as determined by the Lenders, of the assets of Acquired Person, (aa) each Acquisition Term Loan shall be fully secured by all assets of the Acquired Person, (bb) evidence, in form and substance reasonably satisfactory to the Agent and the Required Lenders, must be delivered to the Agent showing that the Borrower, on a consolidated basis (including all direct and indirect domestic but not foreign Subsidiaries), twelve (12) months before the acquisition, has maintained a Fixed Charge Coverage Ratio of at least 1.25 to 1.00, (cc) evidence, in form and substance reasonably satisfactory to the Agent and the Required Lenders, is delivered to the Agent showing that the Acquired Company, has maintained for the prior twelve months and is reasonably expected to maintain a Fixed Charge Coverage Ratio of at least 1.25 to 1.00, and (dd) the Chief Financial Officer of the Borrower shall deliver a certification to the Required Lenders on behalf of the Borrower indicating that the Borrower and the Acquired Company, on a consolidated basis, will continue to maintain a Fixed Charge Coverage Ratio of at least 1.25 to 1.00 (the Fixed Charge Coverage Ratio to be calculated under (bb), (cc) and (dd) with respect to said twelve (12) month period shall be determined on an annual basis), (ee) there exist at the time of said Acquisition Term Loan, after giving effect to such acquisition, Undrawn Availability of at least $10,000,000 under the Revolving Loan and (ff) no Acquisition Term Loan shall be utilized to fund the acquisition of a foreign person without the prior written consent of the Agent and all Lenders, which consent shall be in their sole and absolute discretion. Notwithstanding anything contained herein to the contrary, no proceeds of any Acquisition Term Loan or those of any Revolving Advances may be utilized collectively to fund the acquisition of the same Acquired Person. 2.3. Procedure for Obtaining Advances. (a) Borrower may notify Agent prior to 11:00 a.m. on a Business Day of Borrower's request to incur, on that day, a Revolving Advance hereunder. Should any amount required to be paid as interest hereunder, or as fees or other charges under this Agreement or any other agreement with Agent or Lenders, or with respect to any other Obligation, become due, same shall be deemed a request for a Revolving Advance as of the date such payment is due and are not paid, in the amount required to pay in full such interest, fee, charge or Obligation under this Agreement or any other agreement with Agent or Lenders, and such request shall be irrevocable. (b) Notwithstanding the provisions of (a) above, in the event any Borrower desires to obtain a Eurodollar Rate Loan, Borrower shall give Agent at least three (3) Business Days' prior written notice, specifying (i) the date of the proposed borrowing (which shall be a Business Day), (ii) the type of borrowing and the amount on the date of such Advance to be borrowed, which amount shall be an integral multiple of $1,000,000, and (iii) the duration of the first Interest Period therefor. Eurodollar Rate Loans shall be for one, two or three months; provided, if an Interest Period would end on a day that is not a Business Day, it shall end on the next succeeding Business Day unless such day falls in the next succeeding calendar month in which case the Interest Period shall end on the next preceding Business Day. No Eurodollar Rate Loan shall be made available to Borrower during the continuance of a Default or an Event of Default. (c) Each Interest Period of a Eurodollar Rate Loan shall commence on the date such Eurodollar Rate Loan is made and shall end on such date as Borrower may elect as set forth in (b)(iii) above provided that the exact length of each Interest Period shall be determined in accordance with the practice of the interbank market for offshore Dollar deposits and no Interest Period shall end after the last day of the Term. Borrower shall elect the initial Interest Period applicable to a Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to Section 2.3(b) or by its notice of conversion given to Agent pursuant to Section 2.3(d), as the case may be. Borrower shall elect the duration of each succeeding Interest Period by giving irrevocable written notice to Agent of such duration not less than three (3) Business Days prior to the last day of the then current Interest Period applicable to such Eurodollar Rate Loan. If Agent does not receive timely notice of the Interest Period elected by Borrower, Borrower shall be deemed to have elected to convert to a Domestic Rate Loan subject to Section 2.3(d) hereinbelow. (d) Provided that no Event of Default shall have occurred and be continuing, Borrower may, on the last Business Day of the then current Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any Business Day with respect to Domestic Rate Loans, convert any such loan into a loan of another type in the same aggregate principal amount provided that any conversion of a Eurodollar Rate Loan shall be made only on the last Business Day of the then current Interest Period applicable to such Eurodollar Rate Loan. If Borrower desires to convert a loan, Borrower shall give Agent not less than three (3) Business Days' prior written notice to convert from a Domestic Rate Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written notice to convert from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying the date of such conversion, the loans to be converted and if the conversion is from a Domestic Rate Loan to any other type of loan, the duration of the first Interest Period therefor. (e) At its option and upon three (3) Business Days' prior written notice, Borrower may prepay the Eurodollar Rate Loans in whole at any time or in part from time to time, without premium or penalty, but with accrued interest on the principal being prepaid to the date of such repayment. Borrower shall specify the date of prepayment of Advances which are Eurodollar Rate Loans and the amount of such prepayment. In the event that any prepayment of a Eurodollar Rate Loan is required or permitted on a date other than the last Business Day of the then current Interest Period with respect thereto, such Borrower shall indemnify Agent and Lenders therefor in accordance with Section 2.3(f) hereof. (f) Borrower shall indemnify Agent and Lenders and hold Agent and Lenders harmless from and against any and all losses or expenses that Agent and Lenders may sustain or incur as a consequence of any prepayment, conversion of or any default by Borrower in the payment of the principal of or interest on any Eurodollar Rate Loan or failure by Borrower to complete a borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof has been given, including, but not limited to, any interest payable by Agent or Lenders to lenders of funds obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Agent or any Lender to Borrower shall be presumptive evidence absent manifest error. (g) Notwithstanding any other provision hereof, if any new applicable law, treaty, regulation or directive, or any change in any new or existing law, treaty, regulation or directive or in the interpretation or application thereof, shall make it unlawful for any Lender (for purposes of this subsection (g), the term "Lender" shall include any Lender and the office or branch where any Lender or any corporation or bank controlling such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans hereunder, shall forthwith be canceled and Borrower shall, if any affected Eurodollar Rate Loans are then outstanding, promptly upon request from Agent, either pay all such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into loans of another type. If any such payment or conversion of any Eurodollar Rate Loan is made on a day that is not the last day of the Interest Period applicable to such Eurodollar Rate Loan, Borrower shall pay Agent, upon Agent's request, such amount or amounts as may be necessary to compensate Lenders for any loss or expense sustained or incurred by Lenders in respect of such Eurodollar Rate Loan as a result of such payment or conversion, including (but not limited to) any interest or other amounts payable by Lenders to lenders of funds obtained by Lenders in order to make or maintain such Eurodollar Rate Loan. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Lenders to Borrower shall be presumptive evidence absent manifest error. 2.4. Disbursement of Advance Proceeds. All Advances shall be disbursed from whichever office or other place in the United States of America Agent may designate from time to time and, together with any and all other Obligations of Borrower to Agent or Lenders, shall be charged to Borrower's Account on Agent's books. During the Term, Borrower may use the Revolving Advances by borrowing, prepaying and reborrowing, all in accordance with the terms and conditions hereof. The proceeds of each Revolving Advance requested by Borrower or deemed to have been requested by Borrowers under Section 2.2(a) hereof shall, with respect to requested Revolving Advances to the extent Lenders make such Revolving Advances, be made available to the Borrower on the day so requested by way of credit to such Borrower's operating account at PNC, or such other bank as Borrower may designate following notification to Agent, in immediately available federal funds or other immediately available funds or, with respect to Revolving Advances deemed to have been requested by Borrower, be disbursed to Agent to be applied to the outstanding Obligations giving rise to such deemed request. 2.5. Acquisition of Acquired Persons. (a) The Lenders agree to extend the Acquisition Term Loans, subject to the provisions of Section 2.2, and provided further that: (i) the Borrower provides the Agent with at least thirty (30) days notice of its request for said Acquisition Term Loan ; and (ii) the Borrower provides the Agent with documentation and information relative to the Acquired Person and the proposed acquisition in form and substance reasonably satisfactory to the Agent and its counsel; and (iii) the Borrower delivers to Agent, in form and substance reasonably satisfactory to the Agent, (i) evidence that the Agent has received a first and only perfected security interest in substantially all the assets of the Acquired Person and (ii) landlords' waivers and consents for the chief executive office and each Other Billing Location of said Acquired Person and each location of the Acquired Person where assets borrowed against are located; and (iv) each Acquired Person shall deliver a Guaranty to the Agent, in the form and substance reasonably satisfactory to the Agent, which Guaranty shall be secured by substantially all assets of the Acquired Company. Notwithstanding anything contained herein to the contrary, the Agent and the Lenders reserve the right to perform such due diligence as they deem necessary prior to including any Acquired Assets in the Advance Formula, which shall not, in any case, include the assets of any foreign Acquired Person. (b) The Lenders agree to extend Revolving Advances which may be relent to domestic Subsidiaries of the Borrower, which are Obligors, to be utilized to fund the acquisition of Acquired Persons, subject to the provisions of Subsection 2.1 hereof, and further provided that: (i) each domestic Subsidiary of an Obligor (including any new formed domestic Subsidiary of an Obligor, including any domestic Acquired Person) shall have executed and delivered to the Borrower a grid note in the amount of $35,000,000, in form and substance satisfactory to the Bank, each of which grid note shall be assigned and delivered to the Agent; and (ii) each time such Revolving Advance is made, the amount of such Revolving Advance shall be noted on the applicable grid note; and (iii) the Borrower and each domestic Obligor shall deliver to the Agent, on a monthly basis, a Borrowing Base Certificate in accordance with Section 9.9 hereof; and (iv) each newly formed domestic Subsidiary of an Obligor created to acquire an Acquired Person and each domestic Acquired Person shall deliver to the Agent a Guaranty, in the form and substance reasonably satisfactory to the Agent, which Guaranty shall be secured by substantially all of the assets of said domestic Subsidiary or Acquired Person; and (v) each newly formed domestic Subsidiary of the Borrower created to acquire an Acquired Person and each domestic Acquired Person shall deliver to Agent, in form and substance satisfactory to the Agent, (i) evidence that the Agent has received a first and only perfected security interest in substantially all the assets of said domestic Subsidiary and/or Acquired Person and (ii) landlords' waivers and consents for the chief executive office and Other Billing Location of said Acquired Person and each location of said domestic Subsidiary to the extent that the Inventory of such domestic Subsidiary is to be considered Eligible Inventory. 2.6. Maximum Advances. The aggregate balance of Revolving Advances outstanding at any time shall not exceed the lesser of (a) Maximum Revolving Advance Amount or (b) the Formula Amount. The aggregate amount outstanding of the Acquisition Term Loan shall not exceed $25,000,000 and no single Advance shall be in an amount of more than $10,000,000 without prior written consent of the Agent and the Required Lenders, in their sole and absolute discretion. 2.7. Repayment of Advances. (a) The Revolving Advances shall be due and payable in full on the last day of the Term subject to earlier prepayment as herein provided. Each Advance under the Acquisition Term Loan shall be repaid based upon a five-year amortization of principal and interest with a final payment due and payable on the last day of the Term. (b) Borrower recognizes that the amounts evidenced by checks, notes, drafts or any other items of payment relating to and/or proceeds of Collateral may not be collectible by Agent on the date received. In consideration of Agent's agreement to conditionally credit Borrower's Account as of the Business Day on which Agent receives those items of payment, Borrower agrees that, in computing the charges under this Agreement, all items of payment shall be deemed applied by Agent on account of the Obligations one (1) Business Day after the Business Day Agent receives such payments via wire transfer or electronic depository check. Agent is not, however, required to credit Borrower's Account for the amount of any item of payment which is unsatisfactory to Agent and Agent may charge Borrower's Account for the amount of any item of payment which is returned to Agent unpaid. (c) All payments of principal, interest and other amounts payable hereunder, or under any of the related agreements shall be made to Agent at the Payment Office not later than 1:00 P.M. (New York Time) on the due date therefor in lawful money of the United States of America in federal funds or other funds immediately available to Agent. Agent shall have the right to effectuate payment on any and all Obligations due and owing hereunder by charging Borrower's Account or by making Advances as provided in Section 2.3 hereof. (d) Borrower shall pay principal, interest, and all other amounts payable hereunder, or under any related agreement, without any deduction whatsoever, including, but not limited to, any deduction for any setoff or counterclaim. 2.8. Repayment of Excess Advances. The aggregate balance of Advances outstanding at any time in excess of the maximum amount of Advances permitted hereunder shall be immediately due and payable without the necessity of any demand, at the Payment Office, whether or not a Default or Event of Default has occurred. 2.9. Statement of Account. Agent shall maintain, in accordance with its customary procedures, a loan account ("Borrower's Account") in the name of Borrower in which shall be recorded the date and amount of each Advance made by Agent and the date and amount of each payment in respect thereof; provided, however, the failure by Agent to record the date and amount of any Advance shall not adversely affect Agent or any Lender. Each month, Agent shall send to Borrower a statement showing the accounting for the Advances made, payments made or credited in respect thereof, and other transactions between Agent and Borrower, during such month. The monthly statements shall be deemed correct and binding upon Borrower in the absence of manifest error and shall constitute an account stated between Lenders and Borrower unless Agent receives a written statement of Borrower's specific exceptions thereto within thirty (30) days after such statement is received by Borrower. The records of Agent with respect to the loan account shall be presumptive evidence absent manifest error of the amounts of Advances and other charges thereto and of payments applicable thereto. 2.10. Letters of Credit. Subject to the terms and conditions hereof, Agent shall (a) issue or cause the issuance of Letters of Credit ("Letters of Credit") on behalf of Borrower; provided, however, that Agent will not be required to issue or cause to be issued any Letters of Credit to the extent that the face amount of such Letters of Credit would then cause the sum of (i) the outstanding Revolving Advances plus (ii) outstanding Letters of Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount or (y) the Formula Amount. The maximum amount of outstanding Letters of Credit shall not exceed $7,500,000 in the aggregate at any time. All disbursements or payments related to Letters of Credit shall be deemed to be Revolving Advances and shall bear interest at the applicable Contract Rate; Letters of Credit that have not been drawn upon shall not bear interest. 2.11. Issuance of Letters of Credit. (a) Borrower, may request Agent to issue or cause the issuance of a Letter of Credit by delivering to Agent at the Payment Office, Agent's form of Letter of Credit Application (the "Letter of Credit Application") completed to the satisfaction of Agent; and, such other certificates, documents and other papers and information as Agent may reasonably request. Borrower also has the right to give instructions and make agreements with respect to any application, any applicable letter of credit and security agreement, any applicable letter of credit reimbursement agreement and/or any other applicable agreement, any letter of credit and the disposition of documents, disposition of any unutilized funds, and to agree with Agent upon any amendment, extension or renewal of any Letter of Credit. (b) Each Letter of Credit shall, among other things, (i) provide for the payment of sight drafts or acceptances of usance drafts when presented for honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein and (ii) have an expiry date (subject to any renewal) not later than twelve (12) months after such Letter of Credit's date of issuance and in no event later than the last day of the Term. Each Letter of Credit shall be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, and any amendments or revision thereof adhered to by the Issuer and, to the extent not inconsistent therewith, the laws of the State of New Jersey. (c) Agent shall use its reasonable efforts to notify Lenders of the request by Borrower for a Letter of Credit hereunder. 2.12. Requirements For Issuance of Letters of Credit. (a) In connection with the issuance of any Letter of Credit, Borrower shall indemnify, save and hold Agent, each Lender and each Issuer harmless from any loss, cost, expense or liability, including, without limitation, payments made by Agent, any Lender or any Issuer and expenses and reasonable attorneys' fees incurred by Agent, any Lender or Issuer arising out of, or in connection with, any Letter of Credit to be issued or created for Borrower. Borrower shall be bound by Agent's or any Issuer's regulations and good faith interpretations of any Letter of Credit issued or created for Borrower's Account, although this interpretation may be different from its own; and, neither Agent, nor any Lender, nor any Issuer nor any of their correspondents shall be liable for any error, negligence, or mistakes, whether of omission or commission, in following Borrower's instructions or those contained in any Letter of Credit or of any modifications, amendments or supplements thereto or in issuing or paying any Letter of Credit, except for Agent's, any Lender's, any Issuer's or such correspondents' willful misconduct or gross negligence. (b) Borrower shall authorize and direct any Issuer to name the Borrower or any Obligor as the "Applicant" or "Account Party" of each Letter of Credit. If Agent is not the Issuer of any Letter of Credit, Borrower shall authorize and direct the Issuer to deliver to Agent all instruments, documents, and other writings and property received by the Issuer pursuant to the Letter of Credit and to accept and rely upon Agent's instructions and agreements with respect to all matters arising in connection with the Letter of Credit, the application therefor or any acceptance therefor. (c) In connection with all Letters of Credit issued or caused to be issued or created by Agent under this Agreement, Borrower hereby appoints Agent, or its designee, as its attorney, with full power and authority, (i) to sign and/or endorse Borrower's name upon any warehouse or other receipts, letter of credit applications and acceptances; (ii) to sign Borrower's name on bills of lading; (iii) to clear Inventory through the United States of America Customs Department ("Customs") in the name of Borrower or Agent or Agent's designee, and to sign and deliver to Customs officials powers of attorney in the name of such Borrower for such purpose; and (iv) to complete in Borrower's name or Agent's, or in the name of Agent's designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof. Neither Agent nor its attorneys will be liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except for Agent's or its attorney's willful misconduct or gross negligence. This power, being coupled with an interest, is irrevocable as long as any Letters of Credit remain outstanding. (d) Each Lender shall to the extent of the percentage amount equal to the product of such Lender's Commitment Percentage times the aggregate amount of all unreimbursed reimbursement obligations arising from disbursements made or obligations incurred with respect to the Letters of Credit be deemed to have irrevocably purchased an undivided participation in each such unreimbursed reimbursement obligation. In the event that at the time a disbursement is made the unpaid balance of Revolving Advances exceeds or would exceed, with the making of such disbursement, the lesser of the Maximum Revolving Advance Amount or the Formula Amount, and such disbursement is not reimbursed by Borrower within two (2) Business Days, Agent shall promptly notify each Lender and upon Agent's demand each Lender shall pay to Agent such Lender's proportionate share of such unreimbursed disbursement together with such Lender's proportionate share of Agent's unreimbursed costs and expenses relating to such unreimbursed disbursement. Upon receipt by Agent of a repayment from any Borrower of any amount disbursed by Agent for which Agent had already been reimbursed by Lenders, Agent shall deliver to each Lender that Lender's pro rata share of such repayment. Each Lender's participation commitment shall continue until the last to occur of any of the following events: (A) Agent ceases to be obligated to issue or cause to be issued Letters of Credit hereunder; (B) no Letter of Credit issued hereunder remains outstanding and uncancelled or (C) all Persons (other than the Borrower) have been fully reimbursed for all payments made under or relating to Letters of Credit. 2.13. Additional Payments. Any sums expended by Agent or any Lender due to Borrower's failure to perform or comply with its obligations under this Agreement or any Other Document including, without limitation, Borrower's obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrower's Account as a Revolving Advance and added to the Obligations. 2.14. Manner of Borrowing and Payment. (a) Each borrowing of Revolving Advances shall be advanced according to the applicable Commitment Percentages of Lenders. The Acquisition Term Loan shall be advanced according to the Commitment Percentages of Lenders. (b) Each payment (including each prepayment) by Borrower on account of the principal of and interest on the Revolving Advances, shall be applied to the Revolving Advances pro rata according to the applicable Commitment Percentages of Lenders. Each payment (including each prepayment) by Borrower on account of the principal of and interest on the Acquisition Term Note, shall be made from or to, or applied to that portion of the Acquisition Term Loan evidenced by the Acquisition Term Note pro rata according to the Commitment Percentages of Lenders. Except as expressly provided herein, all payments (including prepayments) to be made by any Borrower on account of principal, interest and fees shall be made without set off or counterclaim and shall be made to Agent on behalf of the Lenders to the Payment Office, in each case on or prior to 1:00 P.M., New York time, in Dollars and in immediately available funds. (c) (i) Notwithstanding anything to the contrary contained in Sections 2.14(a) and (b) hereof, commencing with the first Business Day following the Closing Date, each borrowing of Revolving Advances shall be advanced by Agent and each payment by Borrower on account of Revolving Advances shall be applied first to those Revolving Advances advanced by Agent. On or before 1:00 P.M., New York time, on each Settlement Date commencing with the first Settlement Date following the Closing Date, Agent and Lenders shall make certain payments as follows: (I) if the aggregate amount of new Revolving Advances made by Agent during the preceding Week (if any) exceeds the aggregate amount of repayments applied to outstanding Revolving Advances during such preceding Week, then each Lender shall provide Agent with funds in an amount equal to its applicable Commitment Percentage of the difference between (w) such Revolving Advances and (x) such repayments and (II) if the aggregate amount of repayments applied to outstanding Revolving Advances during such Week exceeds the aggregate amount of new Revolving Advances made during such Week, then Agent shall provide each Lender with funds in an amount equal to its applicable Commitment Percentage of the difference between (y) such repayments and (z) such Revolving Advances. (ii) Each Lender shall be entitled to earn interest at the applicable Contract Rate on outstanding Advances which it has funded. (iii) Promptly following each Settlement Date, Agent shall submit to each Lender a certificate with respect to payments received and Advances made during the Week immediately preceding such Settlement Date. Such certificate of Agent shall be conclusive in the absence of manifest error. (d) If any Lender or Participant (a "benefitted Lender") shall at any time receive any payment of all or part of its Advances, or interest thereon, or receive any Collateral in respect thereof (whether voluntarily or involuntarily or by set-off) in a greater proportion than any such payment to and Collateral received by any other Lender, if any, in respect of such other Lender's Advances, or interest thereon, and such greater proportionate payment or receipt of Collateral is not expressly permitted hereunder, such benefitted Lender shall purchase for cash from the other Lenders a participation in such portion of each such other Lender's Advances, or shall provide such other Lender with the benefits of any such Collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such Collateral or proceeds ratably with each of Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. Each Lender so purchasing a portion of another Lender's Advances may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. (e) Unless Agent shall have been notified by telephone, confirmed in writing, by any Lender that such Lender will not make the amount which would constitute its applicable Commitment Percentage of the Advances available to Agent, Agent may (but shall not be obligated to) assume that such Lender shall make such amount available to Agent on the next Settlement Date and, in reliance upon such assumption, make available to Borrower a corresponding amount. Agent will promptly notify Borrower of its receipt of any such notice from a Lender. If such amount is made available to Agent on a date after such next Settlement Date, such Lender shall pay to Agent on demand an amount equal to the product of (i) the daily average Federal Funds Rate (computed on the basis of a year of 360 days) during such period as quoted by Agent, times (ii) such amount, times (iii) the number of days from and including such Settlement Date to the date on which such amount becomes immediately available to Agent. A certificate of Agent submitted to any Lender with respect to any amounts owing under this paragraph (e) shall be conclusive, in the absence of manifest error. If such amount is not in fact made available to Agent by such Lender within three (3) Business Days after such Settlement Date, Agent shall be entitled to recover such an amount, with interest thereon at the rate per annum then applicable to such Revolving Advances hereunder, on demand from Borrower; provided, however, that Agent's right to such recovery shall not prejudice or otherwise adversely affect Borrower's rights (if any) against such Lender. 2.15. Mandatory Prepayments. (a) When any Obligor sells or otherwise disposes of any Collateral other than Inventory in the ordinary course of business, Borrowers shall repay the Advances in an amount equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable costs of such sales or other dispositions), such repayments to be made promptly but in no event more than one (1) Business Day following receipt of such net proceeds, and until the date of payment, such proceeds shall be held in trust for Agent. The foregoing shall not be deemed to be implied consent to any such sale otherwise prohibited by the terms and conditions hereof. Such repayments shall be applied first, ratably to the outstanding principal installments on the Acquisition Term Loan in the inverse order of the maturities thereof and, second, to the remaining Advances in such order as Agent may determine, subject to Borrower's ability to reborrow Revolving Advances in accordance with the terms hereof. 2.16. Use of Proceeds. Borrowers shall apply the proceeds of Advances for the purposes set forth in Sections 2.1(c) and 2.2(b). 2.17. Defaulting Lender. (a) Notwithstanding anything to the contrary contained herein, in the event any Lender (x) has refused (which refusal constitutes a breach by such Lender of its obligations under this Agreement) to make available its portion of any Advance or (y) notifies either Agent or Borrower that it does not intend to make available its portion of any Advance (if the actual refusal would constitute a breach by such Lender of its obligations under this Agreement) (each, a "Lender Default"), all rights and obligations hereunder of such Lender (a "Defaulting Lender") as to which a Lender Default is in effect and of the other parties hereto shall be modified to the extent of the express provisions of this Section 2.17 while such Lender Default remains in effect. (b) Advances shall be incurred pro rata from Lenders (the "Non-Defaulting Lenders") which are not Defaulting Lenders based on their respective Commitment Percentages, and no Commitment Percentage of any Lender or any pro rata share of any Advances required to be advanced by any Lender shall be increased as a result of such Lender Default. Amounts received in respect of principal of any type of Advances shall be applied to reduce the applicable Advances of each Lender pro rata based on the aggregate of the outstanding Advances of that type of all Lenders at the time of such application; provided, that, such amount shall not be applied to any Advances of a Defaulting Lender at any time when, and to the extent that, the aggregate amount of Advances of any Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage of all Advances then outstanding. (c) A Defaulting Lender shall not be entitled to give instructions to Agent or to approve, disapprove, consent to or vote on any matters relating to this Agreement and the Other Documents. All amendments, waivers and other modifications of this Agreement and the Other Documents may be made without regard to a Defaulting Lender and, for purposes of the definition of "Required Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have Advances outstanding. (d) Other than as expressly set forth in this Section 2.17, the rights and obligations of a Defaulting Lender (including the obligation to indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in this Section 2.17 shall be deemed to release any Defaulting Lender from its obligations under this Agreement and the Other Documents, shall alter such obligations, shall operate as a waiver of any default by such Defaulting Lender hereunder, or shall prejudice any rights which Borrower, Agent or any Lender may have against any Defaulting Lender as a result of any default by such Defaulting Lender hereunder. (e) In the event a Defaulting Lender retroactively cures to the satisfaction of Agent the breach which caused a Lender to become a Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as a Lender under this Agreement. III. INTEREST AND FEES. 3.1. Interest. Interest on Advances shall be payable in arrears on the last day of each month with respect to Domestic Rate Loans and, with respect to Eurodollar Rate Loans, at the end of each Interest Period. Interest charges shall be computed on the actual principal amount of Advances outstanding during the month (the "Monthly Advances") at a rate per annum equal to (i) with respect to Revolving Advances, the Revolving Interest Rate and (ii) with respect to the Acquisition Term Loan, the Acquisition Term Loan Rate (as applicable, the "Contract Rate"). Whenever, subsequent to the date of this Agreement, the Base Rate is increased or decreased, the applicable Contract Rate for Domestic Rate Loans shall be similarly changed without notice or demand of any kind by an amount equal to the amount of such change in the Base Rate during the time such change or changes remain in effect. The Eurodollar Rate shall be adjusted with respect to Eurodollar Rate Loans without notice or demand of any kind on the effective date of any change in the Reserve Percentage as of such effective date. Upon and after the occurrence of an Event of Default, and during the continuation thereof, the Obligations shall bear interest at the applicable Contract Rate plus two (2%) percent per annum, (the "Default Rate"). 3.2. Letter of Credit Fees. (a) Borrower shall pay (x) to Agent, for the benefit of Lenders, fees for each Letter of Credit for the period from and excluding the date of issuance of same to and including the date of expiration or termination, equal to the average daily face amount of each outstanding Letter of Credit multiplied by two percent (2%) per annum with respect to Standby Letters of Credit and by one-half of one percent (1/2%) with respect to Documentary Letters of Credit, such fees to be calculated on the basis of a 360-day year for the actual number of days elapsed and to be payable monthly in arrears on the first day of each month and on the last day of the Term and (y) to the Issuer, any and all customary fees and expenses as agreed upon by the Issuer and the Borrower in connection with any Letter of Credit, including, without limitation, in connection with the opening, amendment or renewal of any such Letter of Credit and any acceptances created thereunder and shall reimburse Agent for any and all customary fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing fees, the "Letter of Credit Fees"). All such charges shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or proration upon the termination of this Agreement for any reason. Any such charge in effect at the time of a particular transaction shall be the charge for that transaction, notwithstanding any subsequent change in the Issuer's prevailing charges for that type of transaction. 3.3. Facility Fee. If, for any month during the Term, the average daily unpaid balance of the Advances for each day of such month does not equal the Maximum Loan Amount, then Borrower shall pay to Agent for the ratable benefit of Lenders a fee at a rate equal to 3/8 of one percent (3/8%) per annum on the amount by which the Maximum Loan Amount exceeds such average daily unpaid balance. Such fee shall be payable to Agent in arrears on the last day of each month. 3.4 Fee Letter. The Borrower shall pay to the Agent all fees set forth in the Fee Letter. 3.5. Computation of Interest and Fees. Interest and fees hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed. If any payment to be made hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable at the applicable Contract Rate during such extension. 3.6. Maximum Charges. In no event whatsoever shall interest and other charges charged hereunder exceed the highest rate permissible under law. In the event interest and other charges as computed hereunder would otherwise exceed the highest rate permitted under law, such excess amount shall be first applied to any unpaid principal balance owed by Borrower, and if the then remaining excess amount is greater than the previously unpaid principal balance, Lenders shall promptly refund such excess amount to Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate. 3.7. Increased Costs. In the event that any new applicable law, treaty or governmental regulation, or any change in any new or existing law, treaty, regulation or directive or in the interpretation or application thereof, or compliance by any Lender (for purposes of this Section 3.7, the term "Lender" shall include Agent or any Lender and any corporation or bank controlling Agent or any Lender) and the office or branch where Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any request or directive (whether or not having the force of law) from any central bank or other financial, monetary or other authority, shall: (a) subject Agent or any Lender to any tax of any kind whatsoever with respect to this Agreement or any Other Document or change the basis of taxation of payments to Agent or any Lender of principal, fees, interest or any other amount payable hereunder or under any Other Documents (except for changes in the rate of tax on the net income of Agent or any Lender by any jurisdiction in which it maintains its principal office); (b) impose, modify or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of, advances or loans by, or other credit extended by, any office of Agent or any Lender, including (without limitation) pursuant to Regulation D of the Board of Governors of the Federal Reserve System; or (c) impose on Agent or any Lender or the London interbank Eurodollar market any other condition with respect to this Agreement or any Other Document; and the result of any of the foregoing is to increase the cost to Agent or any Lender of making, renewing or maintaining its Advances hereunder by an amount that Agent or such Lender reasonably deems to be material or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any of the Advances by an amount that Agent or such Lender reasonably deems to be material, then, in any case Borrower shall promptly pay Agent or such Lender, upon its demand, such additional amount as will compensate Agent or such Lender for such additional cost or such reduction, as the case may be. Agent or such Lender shall certify the amount of such additional cost or reduced amount to Borrower, and such certification shall be presumptive evidence absent manifest error. 3.8. Basis For Determining Interest Rate Inadequate or Unfair. In the event that Agent or any Lender shall have determined that: (a) reasonable means do not exist for ascertaining the Eurodollar Rate applicable pursuant to Section 2.3 hereof for any Interest Period; or (b) Dollar deposits in the relevant amount and for the relevant maturity are not available in the London interbank Eurodollar market, with respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan; then Agent shall give Borrower prompt written, telephonic or telegraphic notice of such determination. If such notice is given, (i) any such requested Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrower shall notify Agent no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the date of such proposed borrowing, that its request for such borrowing shall be canceled or made as an unaffected type of Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to an affected type of Eurodollar Rate Loan shall be continued as or converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the proposed conversion, shall be maintained as an unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the last Business Day of the then current Interest Period applicable to such affected Eurodollar Rate Loan, shall be converted into an unaffected type of Eurodollar Rate Loan, on the last Business Day of the then current Interest Period for such affected Eurodollar Rate Loans. Until such notice has been withdrawn, Lenders shall have no obligation to make an affected type of Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and Borrower shall have the right to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate Loan. 3.9. Capital Adequacy. (a) In the event that Agent or any Lender shall have determined that any new applicable law, rule, regulation or guideline regarding capital adequacy, or any change in any new or existing law, rule, regulation or guideline regarding capital adequacy, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Agent or any Lender (for purposes of this Section 3.9, the term "Lender" shall include Agent or any Lender and any corporation or bank controlling Agent or any Lender) and the office or branch where Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on Agent or any Lender's capital as a consequence of its obligations hereunder to a level below that which Agent or such Lender could have achieved but for such adoption, change or compliance (taking into consideration Agent's and each Lender's policies with respect to capital adequacy) by an amount reasonably deemed by Agent or any Lender to be material, then, from time to time, Borrower shall pay upon demand to Agent or such Lender such additional amount or amounts as will compensate Agent or such Lender for such reduction. In determining such amount or amounts, Agent or such Lender may use any reasonable averaging or attribution methods. The protection of this Section 3.9 shall be available to Agent and each Lender regardless of any possible contention of invalidity or inapplicability with respect to the applicable law, regulation or condition. (b) A certificate of Agent or such Lender setting forth such amount or amounts as shall be necessary to compensate Agent or such Lender with respect to Section 3.9(a) hereof when delivered to Borrower shall be presumptive evidence absent manifest error. IV. COLLATERAL AND GUARANTY: GENERAL TERMS 4.1. Security Interest in the Collateral. To secure the prompt payment and performance to Agent and each Lender of the Obligations, each Obligor hereby assigns, pledges and grants to Agent for the ratable benefit of each Lender a continuing security interest in and to all of its Collateral, whether now owned or existing or hereafter acquired or arising and wheresoever located. Each Obligor shall mark its books and records as may be necessary or appropriate to evidence, protect and perfect Agent's security interest and shall cause its financial statements to reflect such security interest. 4.2. Perfection of Security Interest. Each Obligor shall take all action that may be necessary or desirable, or that Agent may request, so as at all times to maintain the validity, perfection, enforceability and priority of Agent's security interest in the Collateral or to enable Agent to protect, exercise or enforce its rights hereunder and in the Collateral, including, but not limited to, (i) immediately discharging all Liens other than Permitted Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii) delivering to Agent, endorsed or accompanied by such instruments of assignment as Agent may specify, and stamping or marking, in such manner as Agent may specify, any and all chattel paper, instruments, letters of credits and advices thereof and documents evidencing or forming a part of the Collateral, (iv) entering into warehousing, lockbox and other custodial arrangements satisfactory to Agent, and (v) executing and delivering financing statements, instruments of pledge, mortgages with respect to Collateral, notices and assignments, in each case in form and substance reasonably satisfactory to Agent, relating to the creation, validity, perfection, maintenance or continuation of Agent's security interest under the Uniform Commercial Code or other applicable law. Agent is hereby authorized to file financing statements signed by Agent instead of Borrower in accordance with Section 9-402(2) of Uniform Commercial Code as adopted in the State of New Jersey. All charges, expenses and fees Agent may incur in doing any of the foregoing, and any local taxes relating thereto, shall be charged to Borrower's Account as a Revolving Advance of a Domestic Rate Loan and added to the Obligations, or, at Agent's option, shall be paid to Agent for the ratable benefit of Lenders immediately upon demand. 4.3. Disposition of Collateral. Each Obligor will safeguard and protect all Collateral for Agent's general account and make no disposition thereof whether by sale, lease or otherwise except the sale of Inventory in the ordinary course of business. 4.4. Preservation of Collateral. In addition to the rights and remedies set forth in Section 11.1 hereof, Agent, to the extent the Agent deems it reasonably necessary to protect the Agent's interest in and to preserve the Collateral: (a) may hire of such security guards or place other security protection measures as Agent may deem reasonably appropriate; (b) may employ and maintain at any Obligor's premises a custodian who shall have full authority to do all acts necessary to protect Agent's interests in the Collateral; (c) may lease warehouse facilities to which Agent may move all or part of the Collateral; (d) may use any Obligor's owned or leased lifts, hoists, trucks and other facilities or equipment for handling or removing the Collateral; and (e) shall have, and is hereby granted, a right of ingress and egress to the places where the Collateral is located, and may proceed over and through any of Obligor's owned or leased property. Each Obligor shall cooperate fully with Agent's efforts to preserve the Collateral and will take such actions to preserve the Collateral as Agent may reasonably direct. All of Agent's expenses of preserving the Collateral, including any expenses relating to the bonding of a custodian, shall be charged to Obligor's Account as a Revolving Advance of a Domestic Rate Loan and added to the Obligations. 4.5. Ownership of Collateral. With respect to the Collateral, at the time the Collateral becomes subject to Agent's security interest: (a) each Obligor shall be the sole owner of and fully authorized and able to sell, transfer, pledge and/or grant a first priority security interest in each and every item of the its respective Collateral to Agent, subject to Permitted Encumbrances, and, except for Permitted Encumbrances, the Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b) each document and agreement executed by each Obligor or delivered to Agent or any Lender in connection with this Agreement shall be true and correct in all material respects; (c) all signatures and endorsements of each Obligor that appear on such documents and agreements shall be genuine and each Obligor shall have full capacity to execute same; and (d) each Obligor's Inventory shall be located as set forth on Schedule 4.5 and shall not be removed from such location(s) without prior written notice to Agent except with respect to the sale, manufacture or processing of Inventory in the ordinary course of business, provided, however, that no such removal shall be effected before all filings required to preserve the first priority security interest of the Agent in the Inventory shall have been made and landlord's waivers and/or warehousemen's waivers, in form and substance satisfactory to the Agent, for such new locations shall have been delivered to the Agent to the extent that such Inventory is to be considered Eligible Inventory. 4.6. Defense of Agent's and Lenders' Interests. Until (a) payment and satisfaction in full of all payment Obligations (whether in the form of principal, interest, reimbursement obligations, fees, charges, expenses, penalties or otherwise) with the exception of indemnification obligations arising under this Agreement for which no claim subject thereto has been made and has not been terminated, satisfied released or withdrawn and (b) termination of this Agreement, Agent's interests in the Collateral shall continue in full force and effect. During such period no Obligor shall, without Agent's prior written consent, pledge, sell (except Inventory in the ordinary course of business to the extent permitted in Section 4.3 hereof), assign, transfer, create or suffer to exist a Lien upon or encumber or allow or suffer to be encumbered in any way except for Permitted Encumbrances, any part of the Collateral. Each Obligor shall defend Agent's interests in the Collateral against any and all Persons whatsoever. At any time following demand by Agent in accordance with the terms hereof for payment of all Obligations, Agent shall have the right to take possession of the indicia of the Collateral and the Collateral in whatever physical form contained, including without limitation: labels, stationery, documents, instruments and advertising materials. If Agent exercises this right to take possession of the Collateral, Obligors shall, upon demand, assemble it in the best manner possible and make it available to Agent at a place reasonably convenient to Agent. In addition, with respect to all Collateral, Agent and Lenders shall be entitled to all of the rights and remedies set forth herein and further provided by the Uniform Commercial Code or other applicable law. Each Obligor shall, and Agent may, at its option, instruct all suppliers, carriers, forwarders, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver same to Agent and/or subject to Agent's order and if they shall come into any Obligor's possession, they, and each of them, shall be held by such Borrower in trust as Agent's trustee, and such Obligor will immediately deliver them to Agent in their original form together with any necessary endorsement. 4.7. Books and Records. Each Obligor shall (a) keep proper books of record and account in which full, true and correct entries will be made of all dealings or transactions of or in relation to its business and affairs; (b) set up on its books accruals with respect to all taxes, assessments, charges, levies and claims; and (c) on a reasonably current basis set up on its books, from its earnings, allowances against doubtful Receivables, advances and investments and all other proper accruals (including without limitation by reason of enumeration, accruals for premiums, if any, due on required payments and accruals for depreciation, obsolescence, or amortization of properties), which should be set aside from such earnings in connection with its business. All determinations pursuant to this subsection shall be made in accordance with, or as required by, GAAP consistently applied in the opinion of such independent public accountant as shall then be regularly engaged by Obligors. 4.8. Financial Disclosure. Each Obligor hereby irrevocably authorizes and directs all accountants and auditors employed by such Obligor at any time during the Term to exhibit and deliver to Agent and each Lender, at the request of Agent and/or such Lenders, copies of any of any Obligor's financial statements, trial balances or other accounting records of any sort in the accountant's or auditor's possession, and to disclose to Agent and each Lender any information such accountants may have concerning such Obligor's financial status and business operations. Each Obligor hereby authorizes all federal, state and municipal authorities to furnish to Agent and each Lender copies of reports or examinations relating to such Obligor, whether made by such Obligor or otherwise; however, Agent and each Lender will attempt to obtain such information or materials directly from such Obligor prior to obtaining such information or materials from such accountants or such authorities. 4.9. Compliance with Laws. Each Obligor shall comply with all acts, rules, regulations and orders of any legislative, administrative or judicial body or official applicable to its respective Collateral or any part thereof or to the operation of such Borrower's business the non-compliance with which could reasonably be expected to have a Material Adverse Effect. The Collateral at all times shall be maintained in accordance with the requirements of all insurance carriers which provide insurance with respect to the Collateral so that such insurance shall remain in full force and effect. 4.10. Inspection of Premises. At all reasonable times Agent and each Lender shall have full access to and the right to audit, check, inspect and make abstracts and copies from each Obligor's books, records, audits, correspondence and all other papers relating to the Collateral and the operation of each Obligor's business. Agent, any Lender and their agents may enter upon any of Obligor's premises at any time during business hours and at any other reasonable time, and from time to time, for the purpose of inspecting the Collateral and any and all records pertaining thereto and the operation of such Obligor's business. 4.11. Insurance. Each Obligor shall bear the full risk of any loss of any nature whatsoever with respect to the Collateral. At each Obligor's own cost and expense in amounts and with carriers reasonably acceptable to Agent, each Borrower shall (a) keep all its material insurable properties and properties in which each Obligor has an interest insured against the hazards of fire, flood (where customary or if required by law), sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to such Obligor's including, without limitation, business interruption insurance;, (b) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to such Obligor insuring against larceny, embezzlement or other criminal misappropriation of insured's officers and employees who may either singly or jointly with others at any time have access to the assets or funds of such Obligor either directly or through authority to draw upon such funds or to direct generally the disposition of such assets; (c) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others as is customary in the case of entities engaged in businesses similar to such Obligor; (d) maintain all such worker's compensation or similar insurance as may be required under the laws of any state or jurisdiction in which such Obligor is engaged in business; (e) furnish Agent with (i) copies of all policies and evidence of the maintenance of such policies by the renewal thereof at least thirty (30) days before any expiration date, and (ii) appropriate loss payable endorsements in form and substance reasonably satisfactory to Agent, naming Agent as lender loss payee with respect to all insurance coverage referred to in clause (a) above as it relates to the Collateral and an additional insured with respect to all insurance coverage referred to in clause (c) above, and providing (A) that all proceeds thereunder (except proceeds of insurance referred to in clause (a) above not relating to the Collateral, proceeds of insurance referred to in clause (a) above relating to the Collateral to the extent said proceeds are less than $50,000 and proceeds of insurance referred to in clause (c) provided said proceeds are paid to the party seeking damages such that neither the Agent nor any Lender shall have any liability to said party) shall be payable to Agent, (B) no such insurance shall be affected by any act or neglect of the insured or owner of the property described in such policy, and (C) that such policy and lender loss payable and additional insured clauses may not be canceled, amended or terminated unless at least thirty (30) days' prior written notice is given to Agent. Except as provided for in (A) above, in the event of any loss or claim the carriers named therein hereby are directed by Agent and the applicable Obligor to make payment for such loss to Agent and not to such Obligor and Agent jointly. If any such insurance losses are paid by check, draft or other instrument payable to any Obligor and Agent jointly, Agent may endorse such Obligor's name thereon and do such other things as Agent may deem advisable to reduce the same to cash. Agent is hereby authorized to adjust and compromise claims under insurance coverage referred to in clauses (a) and (b) above. Except as hereinafter provided, all loss recoveries received by Agent upon any Collateral may be applied to the Obligations, in such order as Agent in its sole discretion shall determine. Any surplus shall be paid by Agent to Obligors or applied as may be otherwise required by law. Any deficiency thereon shall be paid by Obligors to Agent, on demand. 4.12. Failure to Pay Insurance. If any Obligor fails to obtain insurance as hereinabove provided, or to keep the same in force, Agent, if Agent so elects, may obtain such insurance and pay the premium therefor on behalf of Borrower, and charge Obligors' Account therefor as a Revolving Advance of a Domestic Rate Loan and such expenses so paid shall be part of the Obligations. 4.13. Payment of Taxes. Each Obligor will pay, when due, all taxes, assessments and other Charges lawfully levied or assessed upon such Obligor or any of the Collateral including, without limitation, real and personal property taxes, assessments and charges and all franchise, income, employment, social security benefits, withholding, and sales taxes, except if being contested in good faith and by appropriate proceedings and with respect to which proper reserves have been taken by the Obligors. If any tax by any governmental authority is or may be imposed on or as a result of any transaction between any Obligor and Agent or any Lender which Agent or any Lender may be required to withhold or pay or if any taxes, assessments, or other Charges remain unpaid after the date fixed for their payment, or if any claim shall be made which, in Agent's or any Lender's reasonable opinion, may create a valid Lien on the Collateral, Agent may without notice to Obligors pay the taxes, assessments or other Charges and each Obligor hereby indemnifies and holds Agent and each Lender harmless in respect thereof. Agent will not pay any taxes, assessments or Charges to the extent that any Obligor has contested or disputed those taxes, assessments or Charges in good faith, by expeditious protest, administrative or judicial appeal or similar proceeding provided that any related tax lien is stayed and sufficient reserves are established to the reasonable satisfaction of Agent to protect Agent's security interest in or Lien on the Collateral. The amount of any payment by Agent under this Section 4.13 shall be charged to Borrower's Account as a Revolving Advance and added to the Obligations and, until Borrower shall furnish Agent with an indemnity therefor (or supply Agent with evidence satisfactory to Agent that due provision for the payment thereof has been made), Agent may hold without interest any balance standing to Borrower's credit and Agent shall retain its security interest in any and all Collateral held by Agent. 4.14. Payment of Leasehold Obligations. Each Obligor shall at all times pay, when and as due, its rental obligations under all leases under which it is a tenant, and shall otherwise comply, in all material respects, with all other terms of such leases and keep them in full force and effect and, at Agent's request will provide evidence of having done so, where the failure to so pay, comply or keep in full force and effect could reasonably be expected to have a Material Adverse Effect. 4.15. Receivables. (a) Nature of Receivables. Each of the Eligible Receivables shall be a bona fide and valid account representing a bona fide Indebtedness incurred by the Customer therein named, for a fixed sum as set forth in the invoice relating thereto (provided immaterial or unintentional invoice errors shall not be deemed to be a breach hereof) with respect to an absolute sale or lease and delivery of goods upon stated terms of a Obligor, or work, labor or services theretofore rendered by a Obligor as of the date each Receivable is created. Same shall be due and owing in accordance with the applicable Obligor's standard terms of sale without dispute, setoff or counterclaim except as may be stated on the accounts receivable schedules delivered by Obligors to Agent. (b) Solvency of Customers. Each Customer, to the best of each Obligor's knowledge, as of the date each Eligible Receivable is created, is and is expected to be solvent and able to pay all Eligible Receivables on which the Customer is obligated in full when due or with respect to such Customers of any Obligor who are not solvent such Obligor has set up on its books and in its financial records bad debt reserves adequate to cover such Receivables in accordance with GAAP. (c) Locations of Borrower. Each Obligor's chief executive office is located at the addresses set forth on Schedule 4.15(c) hereto. Until written notice is given to Agent by Borrower of any Other Billing Location at which any Obligor keeps its records pertaining to Receivables, all such records shall be kept at such executive office. No Obligor shall change its chief executive office or Other Billing Location without prior written notice to the Agent, provided, however, that no such change shall be effected before all filings required to preserve the first priority security interest of the Agent in the Collateral shall have been made and landlord waivers and/or warehousemen's waivers, as the case may be, in form and substance reasonably satisfactory to the Agent, for such new location shall have been delivered to the Agent. (d) Collection of Receivables. Until any Obligor's authority to do so is terminated by Agent (which notice Agent may give at any time following the occurrence of an Event of Default or a Default or when Agent in its reasonable discretion deems it to be in Lenders' best interest to do so), each Obligor will, at such Obligor's sole cost and expense, but on Agent's behalf and for Agent's account, collect as Agent's property and in trust for Agent all amounts received on Receivables, and shall not commingle such collections with any Obligor's funds or use the same except to pay Obligations. Each Obligor shall, upon request, deliver to Agent, or deposit in the Blocked Account, in original form and on the date of receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and other evidences of Indebtedness received in respect of Receivables. (e) Notification of Assignment of Receivables. Agent shall have the right (at any time following the occurrence and during the continuance of an Event of Default or a Default or when Agent in its reasonable discretion deems it to be in Lenders' best interest to do so) to send notice of the assignment of, and Agent's security interest in, the Receivables to any and all Customers or any third party holding or otherwise concerned with any of the Collateral. Thereafter, Agent shall have the sole right to collect the Receivables, take possession of the Collateral, or both. Agent's actual collection expenses, including, but not limited to, stationery and postage, telephone and telegraph, secretarial and clerical expenses and the salaries of any collection personnel used for collection, may be charged to Borrowers' Account and added to the Obligations. (f) Power of Agent to Act on Obligors' Behalf. Agent shall have the right to receive, endorse, assign and/or deliver in the name of Agent or any Obligor any and all checks, drafts and other instruments for the payment of money relating to the Receivables, and each Obligor hereby waives notice of presentment, protest and non-payment of any instrument so endorsed. Each Obligor hereby constitutes Agent or Agent's designee as such Obligor's attorney with power (i) to endorse such Obligor's name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment or Collateral; (ii) to sign such Obligor's name on any invoice or bill of lading relating to any of the Receivables, drafts against Customers, assignments and verifications of Receivables; (iii) to send verifications of Receivables to any Customer; (iv) to sign such Obligor's name on all financing statements or any other documents or instruments deemed necessary or appropriate by Agent to preserve, protect, or perfect Agent's interest in the Collateral and to file same; (v) to demand payment of the Receivables; (vi) to enforce payment of the Receivables by legal proceedings or otherwise; (vii) to exercise all of Borrowers' rights and remedies with respect to the collection of the Receivables and any other Collateral; (viii) to settle, adjust, compromise, extend or renew the Receivables; (ix) to settle, adjust or compromise any legal proceedings brought to collect Receivables; (x) to prepare, file and sign such Obligor's name on a proof of claim in bankruptcy or similar document against any Customer; (xi) to prepare, file and sign such Obligor's name on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Receivables; and (xii) to do all other acts and things necessary to carry out this Agreement; provided that with respect to items (v) through (xii) above, said power shall be exercised by the Agent at any time following the occurrence and during the continuance of an Event of Default or a Default or when Agent in its reasonable discretion deems it to be in the Lenders' best interests to do so. No power of Attorney shall be utilized by the Agent in a manner contrary to the foregoing provisions. All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or of law, unless done maliciously or with gross (not mere) negligence; this power being coupled with an interest is irrevocable while any of the Obligations remain unpaid. Agent shall have the right at any time to change the address for delivery of mail addressed to any Obligor to such address as Agent may designate and to receive, open and dispose of all mail addressed to any Obligor. (g) No Liability. Neither Agent nor any Lender shall, under any circumstances or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Receivables or any instrument received in payment thereof, or for any damage resulting therefrom. Agent may, without notice or consent from any Obligor, sue upon or otherwise collect, extend the time of payment of, compromise or settle for cash, credit or upon any terms any of the Receivables or any other securities, instruments or insurance applicable thereto and/or release any obligor thereof. At any time following the occurrence and during an Event of Default or a Default or when Agent in its reasonable discretion deems it to be in the Lenders' best interest to do so, Agent is authorized and empowered to accept the return of the goods represented by any of the Receivables, without notice to or consent by any Obligor, all without discharging or in any way affecting any Borrower's liability hereunder. (h) Establishment of a Lockbox Account, Dominion Account. All proceeds of Collateral shall, at the direction of Agent, be deposited by Obligors into a lockbox account, dominion account or such other "blocked account" maintained with the Agent ("Blocked Accounts"). All funds deposited in such "blocked account" shall immediately become the property of Agent. Neither Agent nor any Lender assumes any responsibility for such "blocked account" arrangement, including without limitation, any claim of accord and satisfaction or release with respect to deposits accepted by any bank thereunder. Alternatively, notwithstanding the foregoing, until such time as the Undrawn Availability is less than $10,000,000 or an Event of Default has occurred, the Borrower shall establish with the Agent (i) its primary operating accounts ("Operating Accounts") and (ii) depository accounts ("Depository Accounts") and Obligors shall deposit all proceeds of Collateral or cause same to be deposited, in kind, in such Depository Accounts. (i) Adjustments. No Obligor will, without Agent's consent, compromise or adjust any Receivables (or extend the time for payment thereof) or accept any returns of merchandise or grant any additional discounts, allowances or credits thereon except for those compromises, adjustments, returns, discounts, credits and allowances as have been heretofore customary in the business of such Obligor. 4.16. Inventory. To the extent Inventory held for sale or lease has been produced by any Obligor, it has been and will be produced by such Obligor materially in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders thereunder. 4.17. Maintenance of Equipment. The Equipment shall be maintained in good operating condition and repair (reasonable wear and tear excepted) and all necessary replacements of and repairs thereto shall be made so that all Equipment materially necessary for each Obligor to properly operate and conduct its business shall be maintained and preserved in all material respects. No Obligor shall use or operate the Equipment in violation of any law, statute, ordinance, code, rule or regulation where such use or operation could reasonably be expected have a Material Adverse Effect. Each Obligor shall have the right to sell Equipment in the ordinary course of its business so long as the sale of such Equipment could not reasonably be expected to have a Material Adverse Effect. 4.18. Exculpation of Liability. Nothing herein contained shall be construed to constitute Agent or any Lender as any Obligor's agent for any purpose whatsoever, nor shall Agent or any Lender be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof. Neither Agent nor any Lender, whether by anything herein or in any assignment or otherwise, assume any of any Obligor's obligations under any contract or agreement assigned to Agent or such Lender, and neither Agent nor any Lender shall be responsible in any way for the performance by any Obligor of any of the terms and conditions thereof. 4.19. Environmental Matters. (a) Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, Obligors shall ensure that the Real Property remains in compliance in all material respects with all Environmental Laws and they shall not place or permit to be placed any Hazardous Substances on any Real Property except as not prohibited by applicable law or appropriate governmental authorities. (b) Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, Obligors shall establish and maintain a system to assure and monitor continued compliance in all material respects with all applicable Environmental Laws which system shall include periodic reviews of such compliance. (c) Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, obligors shall (i) employ in connection with the use of the Real Property appropriate technology necessary to maintain compliance with any applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste generated at the Real Property only at facilities and with carriers that maintain valid permits under RCRA and any other applicable Environmental Laws. Except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, obligors shall use their best efforts to obtain required certificates of disposal, such as hazardous waste manifest receipts, from all treatment, transport, storage or disposal facilities or operators employed by Obligors in connection with the transport or disposal of any Hazardous Waste generated at the Real Property. (d) In the event any Obligor obtains, gives or receives notice of any Release or threat of Release of a reportable quantity of any Hazardous Substances at the Real Property (any such event being hereinafter referred to as a "Hazardous Discharge") or receives any notice of violation, request for information or notification that it is potentially responsible for investigation or cleanup of environmental conditions at the Real Property, demand letter or complaint, order, citation, or other written notice with regard to any Hazardous Discharge or violation of Environmental Laws affecting the Real Property or any Obligor's interest therein (any of the foregoing is referred to herein as an "Environmental Complaint") from any Person, including any state agency responsible in whole or in part for environmental matters in the state in which the Real Property is located or the United States Environmental Protection Agency (any such person or entity hereinafter the "Authority"), and the facts and circumstances surrounding such Hazardous Discharge or Environmental Complaint could reasonably be expected to have a Material Adverse Effect, then Borrower shall, within five (5) Business Days, give written notice of same to Agent detailing facts and circumstances of which any Obligor is aware giving rise to the Hazardous Discharge or Environmental Complaint. Such information is not intended to create nor shall it create any obligation upon Agent or any Lender with respect thereto. (e) Obligors shall promptly forward to Agent copies of any request for information, notification of potential liability, demand letter relating to potential responsibility with respect to the investigation or cleanup of Hazardous Substances which could be reasonably be expected to have a Material Adverse Effect at any other site owned, operated or used by any Obligor to dispose of Hazardous Substances and shall continue to forward copies of correspondence between any Borrower and the Authority regarding such claims to Agent until the claim is settled. Obligors shall promptly forward to Agent copies of all documents and reports concerning a Hazardous Discharge at the Real Property that any Borrower is required to file under any Environmental Laws which could be reasonably be expected to have a Material Adverse Effect . Such information is to be provided solely to allow Agent to protect Agent's security interest in the Collateral. (f) Obligors shall respond promptly to any Hazardous Discharge or Environmental Complaint ifthe facts and circumstances surrounding said Hazardous Discharge or Environmental Complaint could reasonably be expected to have a Material Adverse Effect and take all necessary action in order to safeguard the health of any Person and to avoid subjecting the Collateral or Real Property to any Lien (other than Permitted Encumbrances). If any Obligor shall fail to respond promptly to any Hazardous Discharge or Environmental Complaint and the facts and circumstances surrounding said Hazardous Discharge or Environmental Complaint could reasonably be expected to have a Material Adverse Effect or any Obligor shall fail to comply with any of the requirements of any Environmental Laws and failure could reasonably be expected to have a Material Adverse Effect, Agent on behalf of Lenders may, but without the obligation to do so, for the sole purpose of protecting Agent's interest in Collateral: (A) give such notices or (B) enter onto the Real Property (or authorize third parties to enter onto the Real Property) and take such actions as Agent (or such third parties as directed by Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or otherwise deal with any such Hazardous Discharge or Environmental Complaint. All reasonable costs and expenses incurred by Agent and Lenders (or such third parties) in the exercise of any such rights, including any sums paid in connection with any judicial or administrative investigation or proceedings, fines and penalties, together with interest thereon from the date expended at the Default Rate for Domestic Rate Loans constituting Revolving Advances shall be paid upon demand by Borrower, and until paid shall be added to and become a part of the Obligations secured by the Liens created by the terms of this Agreement or any other agreement between Agent, any Lender and any Obligor. (g) Promptly upon the written request of Agent and after the occurrence of a Default, Obligors shall provide Agent, at Obligors' expense, with an environmental site assessment or environmental audit report prepared by an environmental engineering firm acceptable in the reasonable opinion of Agent, to assess with a reasonable degree of certainty the existence of a Hazardous Discharge and the potential costs in connection with abatement, cleanup and removal of any Hazardous Substances found on, under, at or within the Real Property. Any report or investigation of such Hazardous Discharge proposed and acceptable to an appropriate Authority that is charged to oversee the clean-up of such Hazardous Discharge shall be acceptable to Agent. Except with respect to the amounts and locations disclosed on Schedule 4.19(g) hereof, if such estimates, individually or in the aggregate, exceed $1,000,000, Agent shall have the right to require Obligors to post a bond, letter of credit or other security reasonably satisfactory to Agent to secure payment of these costs and expenses. (h) Obligors shall defend and indemnify Agent and Lenders and hold Agent, Lenders and their respective employees, agents, directors and officers harmless from and against all loss, liability, damage and expense, claims, costs, fines and penalties, including attorney's fees, suffered or incurred by Agent or Lenders under or on account of any Environmental Laws, including, without limitation, the assertion of any Lien thereunder, with respect to any Hazardous Discharge, the presence of any Hazardous Substances affecting the Real Property, whether or not the same originates or emerges from the Real Property or any contiguous real estate, including any loss of value of the Real Property as a result of the foregoing except to the extent such loss, liability, damage and expense is attributable to any Hazardous Discharge resulting from actions on the part of Agent or any Lender. Borrowers' obligations under this Section 4.19 shall arise upon the discovery of the presence of any Hazardous Substances at the Real Property, whether or not any federal, state, or local environmental agency has taken or threatened any action in connection with the presence of any Hazardous Substances. Obligors' obligation and the indemnifications hereunder shall survive the termination of this Agreement. (i) For purposes of Section 4.19 and 5.7, all references to Real Property shall be deemed to include all of Obligors' right, title and interest in and to its owned and leased premises. 4.20. Financing Statements. Except as respects the financing statements filed by Agent and the financing statements described on Schedule 1.2, no financing statement covering any of the Collateral or any proceeds thereof is on file in any public office. 4.21 Guaranty. The Guarantors shall guaranty the Obligations of the Borrower and to secure said guaranty, shall assign, pledge and grant to the Agent for the ratable benefit of each Lender a continuing security interest in and to all of their Collateral, whether now owned or existing or hereafter acquired or arising and wheresoever located. V. REPRESENTATIONS AND WARRANTIES. Each Obligor represents and warrants as follows: 5.1. Authority. Each Obligor has full power, authority and legal right to enter into this Agreement and the Other Documents and to perform all its respective Obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and of the Other Documents (a) are within such Obligor's corporate powers, have been duly authorized, are not in contravention of law or the terms of such Obligor's bylaws, certificate of incorporation or other applicable documents relating to such Obligor's formation or to the conduct of such Obligor's business or of any material agreement or undertaking to which such Obligor is a party or by which such Obligor is bound, and (b) will not conflict with nor result in any breach in any of the provisions of or constitute a default under or result in the creation of any Lien except Permitted Encumbrances upon any asset of such Obligor under the provisions of any agreement, charter document, instrument, by-law, or other instrument to which such Obligor or its property is a party or by which it may be bound. 5.2. Formation and Qualification. (a) Each Obligor is duly incorporated and in good standing (other than Inactive Subsidiaries) under the laws of the state listed on Schedule 5.2(a) and is qualified to do business and is in good standing in the states listed on Schedule 5.2(a) which constitute all states in which qualification and good standing are necessary for such Obligor to conduct its business and own its property and where the failure to so qualify could reasonably be expected to have a Material Adverse Effect. Each Obligor has delivered to Agent true and complete copies of its certificate of incorporation and by-laws and will promptly notify Agent of any amendment or changes thereto. (b) As of the date of this Agreement, the only Subsidiaries of each Obligor are listed on Schedule 5.2(b). The Obligors shall supplement said Schedule upon the formation of any new Subsidiaries, as permitted by the terms hereof. 5.3. Survival of Representations and Warranties. All representations and warranties of such Obligor contained in this Agreement and the Other Documents shall be true at the time of such Obligor's execution of this Agreement and the Other Documents, and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto. 5.4. Tax Returns. Each Obligor's federal tax identification number is set forth on Schedule 5.4. Each Borrower has filed all federal, state and local tax returns and other material reports each is required by law to file and has paid all taxes, assessments, fees and other governmental charges that are due and payable. Federal, state and local income tax returns of each Obligor have been examined and reported upon by the appropriate taxing authority or closed by applicable statute and satisfied for all fiscal years prior to and including the fiscal year ending June 30, 1997. The provision for taxes on the books of each Obligor are adequate in all material respects for all years not closed by applicable statutes, and for its current fiscal year, and no Borrower has any knowledge of any material deficiency or additional material assessment in connection therewith not provided for on its books. 5.5. Financial Statements. (a) The pro forma balance sheet of Obligors on a consolidated and consolidating basis (the "Pro Forma Balance Sheet") heretofore furnished to Agent reflects the consummation of the transactions contemplated under this Agreement (the "Transactions") and fairly reflects the financial condition of Obligors on a consolidated and consolidating basis as of the Closing Date after giving effect to the Transactions, and has been prepared in accordance with GAAP, consistently applied. The Pro Forma Balance Sheet has been certified as fairly reflecting the financial condition of the Obligors, on behalf of the Obligors by the Chief Financial Officer of Borrower. All financial statements referred to in this subsection 5.5(a), including the related schedules and notes thereto, have been prepared, in accordance with GAAP, except for the absence of year-end and normal audit adjustments and notes thereto and as may be disclosed in such financial statements. (b) The twelve-month cash flow projections of the Obligors on a consolidated and consolidating basis and their projected balance sheets as of the Closing Date, copies of which are annexed hereto as Exhibit 5.5(b) (the "Projections") were prepared on behalf of the Obligors by the Chief Financial Officer of Borrower, are based on underlying assumptions which are believed to provide a reasonable basis for the projections contained therein and reflect Obligors' judgment based on present circumstances of the most likely set of conditions and course of action for the projected period. The cash flow Projections together with the Pro Forma Balance Sheet, are referred to as the "Pro Forma Financial Statements". (c) The consolidated and consolidating balance sheets of the Obligors, and such other Persons described therein as of December 31, 1997, and the related statements of income, changes in stockholder's equity, and changes in cash flow for the period ended on such date, all (except for consolidating statements) accompanied by reports thereon containing opinions without qualification by independent certified public accountants, copies of which have been delivered to Agent, have been prepared in accordance with GAAP, consistently applied (except for changes in application in which such accountants concur and present fairly the financial position of the Obligors at such date and the results of their operations for such period. Since December 31, 1997 there has been no change in the condition, financial or otherwise, of Obligors as shown on the consolidated balance sheet as of such date and no change in the aggregate value of machinery, equipment and Real Property owned by Obligors, except changes in the ordinary course of business, none of which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. 5.6. Corporate Name. No Obligor has been known by any other corporate name in the past five years and does not sell Inventory under any other name except as set forth on Schedule 5.6, nor has any Obligor been the surviving corporation of a merger or consolidation or acquired all or substantially all of the assets of any Person during the preceding five (5) years. 5.7. O.S.H.A. and Environmental Compliance. Except as disclosed on Schedule 5.7 hereto: (a) Each Obligor has duly complied with, and its facilities, business, assets, property, leaseholds and Equipment are in compliance in all respects with, the provisions of the Federal Occupational Safety and Health Act, the Environmental Protection Act, RCRA and all other Environmental Laws except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect; there have been no outstanding citations, notices or orders of non-compliance issued to any Obligor or relating to its business, assets, property, leaseholds or Equipment under any such laws, rules or regulations except where the facts and circumstances surrounding said citations, notices or notices could not reasonably be expected to have a Material Adverse Effect. (b) Each Obligor has been issued all required federal, state and local licenses, certificates or permits relating to all applicable Environmental Laws where the failure to be so issued could reasonably be expected to have a Material Adverse Effect. (c) (i) There are no visible signs of releases, spills, discharges, leaks or disposal (collectively referred to as "Releases") of Hazardous Substances at, upon, under or within any Real Property or any premises leased by any Obligor where said Releases could reasonably be expected to have a Material Adverse Effect; (ii) there are no underground storage tanks or polychlorinated biphenyls on the Real Property or any premises leased by any Obligor, except in all material respects in accordance with applicable laws; (iii) neither the Real Property nor any premises leased by any Obligor have ever been used as a treatment, storage or disposal facility of Hazardous Waste, except in all material respects in accordance with applicable laws; and (iv) no Hazardous Substances are present on the Real Property or any premises leased by Borrower, excepting such quantities as are handled in accordance with all applicable manufacturer's instructions and governmental regulations and in proper storage containers and as are necessary for the operation of the commercial business of any Obligor or of its tenants, except in each case where the failure to do so could not reasonably be expected to have a Material Adverse Effect. 5.8. Solvency; No Litigation, Violation, Indebtedness or Default. (a) Obligors are solvent, able to pay their debts as they mature, have capital sufficient to carry on their business and all businesses in which they are about to engage, and (i) as of the Closing Date, the fair present saleable value of their assets, calculated on a going concern basis, is in excess of the amount of their liabilities and (ii) subsequent to the Closing Date, the fair saleable value of their assets (calculated on a going concern basis) will be in excess of the amount of their liabilities. (b) Except as disclosed in Schedule 5.8(b), no Obligor has (i) any pending or, to Obligors' knowledge, threatened litigation, arbitration, actions or proceedings which involve the possibility of having a Material Adverse Effect, and (ii) any liabilities nor Indebtedness for borrowed money other than the Obligations. (c) No Obligor is in violation of any applicable statute, regulation or ordinance in any respect which could reasonably be expected to have a Material Adverse Effect, nor is any Obligor in violation of any order of any court, governmental authority or arbitration board or tribunal which could reasonably be expected to have a Material Adverse Effect. (d) No Obligor nor any member of the Controlled Group maintains or contributes to any domestic Plan other than those listed on Schedule 5.8(d) hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any "accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or not waived, and each Obligor and each member of the Controlled Group has met all applicable minimum funding requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan which is intended to be a qualified plan under Section 401(a) of the Code as currently in effect has been determined by the Internal Revenue Service to be qualified under Section 401(a) of the Code and the trust related thereto is exempt from federal income tax under Section 501(a) of the Code, (iii) no Obligor nor any member of the Controlled Group has incurred any material liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due which are unpaid, (iv) no Plan has been terminated by the plan administrator thereof nor by the PBGC, and there is no occurrence which would cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Plan, (v) at this time, the current value of the assets of each Plan exceeds the present value of the accrued benefits and other liabilities of such Plan and no Obligor nor any member of the Controlled Group knows of any facts or circumstances which would materially change the value of such assets and accrued benefits and other liabilities, (vi) no Obligor nor any member of the Controlled Group has breached any of the responsibilities, obligations or duties imposed on it by ERISA with respect to any Plan, (vii) no Obligor nor any member of a Controlled Group has incurred any significant liability for any excise tax arising under Section 4972 or 4980B of the Code, and no fact exists which could give rise to any such liability, (viii) no Obligor nor any member of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged in a "prohibited transaction" described in Section 406 of the ERISA or Section 4975 of the Code nor taken any action which would constitute or result in a Termination Event with respect to any such Plan which is subject to ERISA, (ix) each Obligor and each member of the Controlled Group has made all contributions due and payable with respect to each Plan, (x) there exists no event described in Section 4043(b) of ERISA, for which the thirty (30) day notice period contained in 29 CFR '2615.3 has not been waived, (xi) no Obligor nor any member of the Controlled Group has any fiduciary responsibility for investments with respect to any plan existing for the benefit of persons other than employees or former employees of any Borrower and any member of the Controlled Group, and (xii) no Obligor nor any member of the Controlled Group has withdrawn, completely or partially, from any Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan Amendments Act of 1980. 5.9. Patents, Trademarks, Copyrights and Licenses. The Obligors own or have the right to use all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, copyrights, copyright applications, design rights, trade names, assumed names, trade secrets and licenses owned or utilized by any Obligor which are necessary for the operation of its business and where the failure to do so could reasonably be expected to have a Material Adverse Effect; there is no objection to or pending challenge to the validity of any such material patent, trademark, copyright, design right, trade name, trade secret or license and no Obligor is aware of any grounds for any challenge where such objection or challenge could reasonably be expected to have a Material Adverse Effect. Each patent, patent application, patent license, trademark, trademark application, trademark license, service mark, service mark application, service mark license, copyright, copyright application and copyright license owned or held by any Obligor and all trade secrets used by any Obligor consist of original material or property developed by such Obligor or was lawfully acquired or licensed by such Obligor, except where the failure to do so or to have done so could not reasonably be expected to have a Material Adverse Effect. Each of such items has been maintained so as to preserve the value thereof from the date of creation or acquisition thereof. 5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each Obligor (a) is in compliance with and (b) has procured and is now in possession of, all material licenses or permits required by any applicable federal, state, or local law or regulation for the operation of its business in each jurisdiction wherein it is now conducting or proposes to conduct business and where the failure to comply with or procure such licenses or permits could have a Material Adverse Effect. 5.11. Default of Indebtedness. No Obligor is in default in the payment of the principal of or interest on any Indebtedness, which individual and/or collectively aggregates $250,000 or more, or under any instrument or agreement under or subject to which any Indebtedness, which individual and/or collectively aggregates [$250,000] or more, has been issued and no event has occurred under the provisions of any such instrument or agreement which with or without the lapse of time or the giving of notice, or both, constitutes or would constitute an event of default thereunder. 5.12. No Default. No Obligor is in default in the payment or performance of any of its contractual obligations where such default could reasonably be expected to have a Material Adverse Effect. 5.13. No Burdensome Restrictions. No Obligor is party to any contract or agreement the performance of which could reasonably be expected to have a Material Adverse Effect. No Obligor has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien which is not a Permitted Encumbrance. 5.14. No Labor Disputes. No Obligor is involved in any labor dispute; there are no strikes or walkouts or union organization of any Obligor's employees threatened or in existence and no labor contract is scheduled to expire during the Term other than as set forth on Schedule 5.14 hereto. 5.15. Margin Regulations. No Obligor is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U or Regulation G of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. No part of the proceeds of any Advance will be used for "purchasing" or "carrying" "margin stock" as defined in Regulation U of such Board of Governors. 5.16. Investment Company Act. No Obligor is an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, nor is it controlled by such a company. 5.17. Disclosure. No representation or warranty made by any Obligor in this Agreement or in any financial statement, report, certificate or any other document furnished in connection herewith contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no fact known to Obligors or which reasonably should be known to Obligors which Obligors have not disclosed to Agent in writing with respect to the transactions contemplated by this Agreement which could reasonably be expected to have a Material Adverse Effect. 5.18. Swaps. No Obligor is a party to, nor will it be a party to, any swap agreement whereby such Obligor has agreed or will agree to swap interest rates or currencies unless same provides that damages upon termination following an event of default thereunder are payable on an unlimited "two-way basis" without regard to fault on the part of either party. 5.19. Conflicting Agreements. No provision of any material mortgage, indenture, contract, agreement, judgment, decree or order binding on any Obligor or affecting the Collateral materially conflicts with, or requires any Consent which has not already been obtained to, or would in any way prevent the execution, delivery or performance of, the terms of this Agreement or the Other Documents. 5.20. Application of Certain Laws and Regulations. No Obligor nor any domestic Affiliate of any Obligor is subject to any statute, rule or regulation which regulates the incurrence of any Indebtedness, including without limitation, statutes or regulations relative to common or interstate carriers or to the sale of electricity, gas, steam, water, telephone, telegraph or other public utility services. 5.21. Business and Property of Borrower. Upon and after the Closing Date, Obligors do not propose to engage in any business other than manufacturing and marketing specialty and industrial chemicals and activities necessary to conduct or reasonably related or complementary to the foregoing. On the Closing Date, each Obligor will own all the property and possess all of the rights and Consents necessary for the conduct of the business of such Obligor where the failure to so own and/or possess could reasonably be expected to have a Material Adverse Effect. 5.22. Year 2000. The Obligors and their Subsidiaries have reviewed the areas within their business and operations which could be materially and adversely affected by, and have developed or are developing a program to address on a timely basis, the risk that certain computer applications used by the Obligors, or their Subsidiaries (or any of their respective material suppliers, customers or vendors) may be unable to recognize and perform properly date-sensitive functions involving dates prior to and after December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem will not have a Material Adverse Effect. 5.23. Section 20 Subsidiaries. The Borrower does not intend to use and shall not use any portion of the proceeds of the Advances, directly or indirectly, to purchase during any underwriting period, or for 30 days thereafter, Ineligible Securities being underwritten by a Section 20 Subsidiary. 5.24. Interest Expense Allocation. Interest expense with respect to the Indenture will be allocated to the Borrower and each Obligor based upon that portion of Indebtedness evidenced by the Senior Subordinated Notes being assigned to the same parties in accordance with GAAP. 5.25. Other Billing Locations. Other than the chief executive offices of the Obligors, and except as disclosed on Schedule 5.25 attached hereto, there are no Other Billing Locations. 5.26. Western Magnesium Corporation does not presently and shall not in the future conduct any business activity in any State. VI. AFFIRMATIVE COVENANTS. Unless the prior written consent of the Required Lenders shall have been obtained, each Obligor shall, until payment and satisfaction in full of all payment Obligations (whether in the form of principal, interest, reimbursement obligations, fees, penalties, charges, expenses or otherwise) with the exception indemnification obligations under this Agreement for which no claim recited thereunder has arisen) and termination of this Agreement: 6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees and expenses which Agent incurs in connection with (a) the forwarding of Advance proceeds and (b) the establishment and maintenance of any Blocked Accounts or Depository Accounts as provided for in Section 4.15(h). Agent may, without making demand, charge Obligors' Account for all such fees and expenses. 6.2. Conduct of Business and Maintenance of Existence and Assets. (a) Conduct continuously and operate actively its business and maintain all of its properties in good working order and condition (reasonable wear and tear excepted and except as may be disposed of as permitted by with the terms of this Agreement), including, without limitation, all licenses, patents, copyrights, design rights, trade names, trade secrets and trademarks and take all actions necessary to enforce and protect the validity of any intellectual property right or other right, where the failure to so operate or maintain could reasonably be expected to have a Material Adverse Effect; (b) keep in full force and effect its existence and comply in all material respects with the laws and regulations governing the conduct of its business where the failure to do so could reasonably be expected to have a Material Adverse Effect; and (c) make all such reports and pay all such franchise and other taxes and license fees and do all such other acts and things as may be lawfully required to maintain its rights, licenses, leases, powers and franchises under the laws of the United States or any political subdivision thereof, where the failure to do so could reasonably be expected to have a Material Adverse Effect. 6.3. Violations. Promptly notify Agent in writing of any violation of any law, statute, regulation or ordinance of any Governmental Body, or of any agency thereof, applicable to any Obligor which could reasonably be expected to have a Material Adverse Effect. 6.4. Government Receivables. Except to the extent not included as part of the Formula Amount, take all steps necessary to protect Agent's interest in the Collateral under the Federal Assignment of Claims Act or other applicable state or local statutes or ordinances and deliver to Agent appropriately endorsed, any instrument or chattel paper connected with any Receivable arising out of contracts between any Obligor and the United States, any state or any department, agency or instrumentality of any of them. 6.5. Domestic Net Worth. Maintain with respect to the Borrower and each of its direct and indirect domestic Subsidiaries, at all times, to be tested monthly, minimum Net Worth in an amount not less than the Net Worth on the Closing Date of the Borrower and all direct and indirect domestic Subsidiaries of the Borrower, to increase annually by fifty percent (50%) of the net earnings of the Borrower and all said domestic Subsidiaries (before equity pick-up from earnings of foreign Subsidiaries), and no event less than the prior years' ending said Net Worth (except that during the course of year, said Net Worth may temporarily decline below the prior years ending Net Worth but no event less than the following percentages of said prior years ending Net Worth): Year 1 50% Year 2 65% Year 3 thru 5 75% In no event may the Borrower and any of direct or indirect domestic Subsidiaries, on a consolidated basis, sustain any annual net loss. Furthermore, in calculating the Net Worth of the Borrower and each of its direct and indirect subsidiaries all foreign assets owned by said entities and foreign liabilities and operations shall be excluded from the calculation of their Net Worth. 6.6. Interest Coverage Ratio. Maintain at all times a Interest Coverage Ratio of not less than 1.5 to 1.0, to be tested on a rolling four (4) quarters basis. 6.7. Execution of Supplemental Instruments. Execute and deliver to Agent from time to time, upon demand, such supplemental agreements, statements, assignments and transfers, or instructions or documents relating to the Collateral, and such other instruments as Agent may request, in order that the full intent of this Agreement may be carried into effect. 6.8. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or before maturity (subject, where applicable, to specified grace periods and, in the case of the trade payables, to normal payment practices) all its obligations and liabilities of whatever nature, except when the failure to do so could not reasonably be expected to have a Material Adverse Effect or when the amount or validity thereof is currently being contested in good faith by appropriate proceedings and each Obligor shall have provided for reserves in accordance with GAAP, subject at all times to any applicable subordination arrangement in favor of Lenders. 6.9. Standards of Financial Statements. Cause all financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to which GAAP is applicable to fairly present in all material respects (subject, in the case of interim financial statements, to normal year-end audit adjustments) the financial condition of such companies and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as concurred in by such reporting accountants or officer, as the case may be, and disclosed therein). 6.10. Domestic Debt Service Ratio. In the event that the Borrower utilizes the Acquisition Line, maintain at all such times a Domestic Debt Service Coverage of not less than 1.20 to 1.00, to be tested on a rolling four quarter basis. 6.11 Movement of Inventory. If at any time the value of the Inventory is located within the States of Illinois, South Carolina, California, Pennsylvania, New Jersey, Texas and Delaware is less than eighty percent (80%) of the Inventory for all of the Obligors or the chief executive office of any Obligor is changed to another state, the Obligors shall, if requested by the Agent, deliver such opinions of counsel, in form and substance reasonably satisfactory to the Agent, stating that the Agent has a perfected security interest in all Collateral which has been moved to such jurisdictions or has been affected by such move. VII. NEGATIVE COVENANTS. Without the prior written consent of the Required Lenders, no Obligor shall, until satisfaction in full of the payment Obligations (whether in the form of principal, interest, reimbursement obligations, fees, penalties, charges, expenses or otherwise) with the exception of indemnification obligations under this Agreement for which no claim subject thereto has been made and has not been terminated, satisfied released or withdrawn) and termination of this Agreement: 7.1. Merger, Consolidation, Acquisition and Sale of Assets. (a) Enter into any merger, consolidation or other reorganization with or into any other Person or acquire all or a substantial portion of the assets or stock of any Person or permit any other Person to consolidate with or merge with it, except as permitted by the terms of Sections 2.1(c) and 2.2(b) hereof, and except that (i) Obligors may acquire or form a foreign Subsidiary without the use of the proceeds of either Revolving Advances or Acquisition Term Loans provided that, said Obligors shall provide the Agent with evidence, in form and substance reasonably satisfactory to the Agent, of the source of funds for said acquisition or formation and at the time of said acquisition or formation no Default or Event of Default has occurred and is continuing and (ii) Obligors may acquire or form domestic Subsidiaries without the use of the proceeds of either Revolving Advances or Acquisition Term Loans, provided that (A) said Obligors cause said domestic Subsidiary to execute and deliver to the Agent a guaranty, in form and substance reasonably satisfactory to the Agent, which guaranty shall be secured by those assets of the domestic Subsidiary consisting of Collateral, said Obligors shall provide the Agent with evidence, in form and substance satisfactory to the Agent, of the source of funds for said acquisition or formation and at the time of said acquisition or formation no Default or Event of Default has occurred and is continuing or (B) said Obligors receive the written consent of the Agent and the Required Lenders, which consent shall be granted if to the satisfaction of the Agent and the Required Lenders (i) inventory and receivables of said domestic Subsidiary shall not be deemed Eligible Inventory or Eligible Receivables, (ii) said domestic Subsidiary shall be prohibited from receiving from any Obligor advances, loans, extensions of credit, guarantees, funds or other personal property unless otherwise specifically permitted hereunder with respect to an unaffiliated party of such Obligor, (iii) said domestic Subsidiary shall be treated as an unaffiliated party of each Obligor with respect to the Obligors' rights and obligations hereunder, including all financial covenants set forth herein, (iv) the Obligors shall provide for adjustments to all financial statements and other reporting requirements hereunder to account for said domestic Subsidiary's status as an unaffiliated party, and (v) such other requirements are satisfied, as requested by the Required Lenders. (b) Sell, lease, transfer or otherwise dispose of any of its properties or assets, except (1) in the case of properties or assets constituting Collateral (i) in the ordinary course of its business and (ii) out of the ordinary course of business up to $250,000 per fiscal year provided that the proceeds received from said sales out of the ordinary course of business shall be utilized to prepay the outstanding principal amount of Revolving Advances and/or Acquisition Term Loans and (2) in the case of properties or assets not constituting Collateral where the disposition thereof could not reasonably be expected to have a Material Adverse Effect. 7.2. Creation of Liens. Create or suffer to exist any Lien or transfer upon or against any of its property or assets now owned or hereafter acquired, except Permitted Encumbrances. 7.3. Guaranties. Become liable upon the obligations of any Person by assumption, endorsement or guaranty thereof or otherwise (other than to Lenders) except (i) as contemplated by the terms hereof, (ii) as disclosed on Schedule 7.3,(iii) the endorsement of checks in the ordinary course of business, (iv) guaranties by the Obligors with respect to any of their or their Subsidiaries' obligations, provided that said guaranties are unsecured; and (v) to the extent any said assumption, endorsement or guarantee otherwise qualifies as a Permitted Encumbrance. 7.4. Investments. Purchase or acquire obligations or stock of, or any other interest in, any Person, except (a) obligations issued or guaranteed by the United States of America or any agency thereof, (b) commercial paper with maturities of not more than 180 days and a published rating of not less than A-1 or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers' acceptances having maturities of not more than 180 days and repurchase agreements backed by United States government securities of a commercial bank if (i) such bank has a combined capital and surplus of at least $500,000,000, or (ii) its debt obligations, or those of a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating) by a nationally recognized investment rating agency, (d) U.S. money market funds that invest solely in obligations issued or guaranteed by the United States of America or an agency thereof, (e) investments in any Subsidiary of an Obligor, whether foreign or domestic and (f) non-majority interests in any corporation or other entity involved in a business related to that of any Obligor; so long as the aggregate amount per fiscal year invested shall not exceed, together with the limitations imposed under Section 7.11 with respect to contributions to Partnerships, Joint Ventures, $3,000,000 provided that to the extent in any given fiscal year the Obligors invest less than said $3,000,000 amount, said unused portion may be carried forward for one additional year, provided that no more than $6,000,000 is utilized for the purposes hereof in any fiscal year, (g) any investment in or in securities of a Person engaged in a related business (an "Invested Person") if, as a result of such investment, (i) the Invested Person, subject to the provisions of Section 7.1 hereof, becomes a wholly owned Subsidiary, or (ii) the Invested Person either (1) is merged, consolidated or amalgamated with or into an Obligor and an Obligor is the surviving person, or (2) transfers or conveys substantially all of its assets to, or is liquidated into, an Obligor; (h) any notes, obligations or other securities received in connection with an asset sale that complies with Section 7.1(b) above; and (i) interest rate agreement obligations and currency agreement obligations permitted pursuant to Section 7.8; (j) investments in or acquisitions of capital stock or similar interests in Persons 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. 7.5. Loans. Make advances, loans or extensions of credit to any Person, including without limitation, any Parent, Subsidiary or Affiliate except with respect to (a) the extension of commercial trade credit in connection with the sale of Inventory in the ordinary course of its business, (b) loans to its employees in the ordinary course of business not to exceed the aggregate amount of $500,000 at any time outstanding, (c) advances, loans or extensions of credit to Subsidiaries of the Obligors (whether domestic or foreign) and (d) as otherwise permitted by the terms of Section 7.4 hereof. 7.6. Capital Expenditures. Contract for, purchase or make any expenditure or commitments for fixed or capital assets (including capitalized leases, but excluding acquisitions permitted under Section 7.1 hereof) in an amount in excess of $15,000,000 for any fiscal year provided that to the extent in any given fiscal year, the Obligors utilize less than $15,000,000, said unused portion, up to $5,000,000, may be carried forward for one additional year provided that no more than $20,000,000 is utilized for the purposes hereof in any fiscal year. 7.7. Dividends. Declare, pay or make any dividend or distribution on any shares of the common stock or preferred stock of any Obligor (other than dividends or distributions payable in its stock, or split-ups or reclassifications of its stock) or apply any of its funds, property or assets to the purchase, redemption or other retirement of any common or preferred stock, or of any options to purchase or acquire any such shares of common or preferred stock of any Obligor, except for (a) dividends or distributions to the Borrower or any other Obligor; (b) up to fifty percent (50%) of the net earnings (minus those net earnings utilized pursuant to Section 7.7(b) hereof) per fiscal year of the Borrower and all of its domestic Subsidiaries, but in no event more than $2,000,000 per fiscal year, provided that if more than $1,000,000 is to be distributed from said net earnings there must exist at said time at least $5,000,000 of Undrawn Availability after giving affect to said dividends and/or distributions; (c) to pay the redemption price of stock being redeemed pursuant to the Shareholders Agreement, provided that during the Term the aggregate amount of all said redemptions shall not exceed $5,000,000 plus up to 50% of the net earnings (minus those net earnings utilized in Section 7.7(b) hereof) per fiscal year of the Borrower and all of its domestic Subsidiaries, and each time said redemption occurs there shall exist at least $2,500,000 of Undrawn Availability after giving effect to said redemption; (d) to pay the redemption price of stock being redeemed to the extent that said redemption is funded by insurance proceeds; and (e) to pay shareholders' "S" corporation or members' limited liability company tax liability associated with the income derived from the respective Obligor. 7.8. Indebtedness. Create, incur, assume or suffer to exist any Funded Indebtedness (exclusive of trade debt) except in respect of (i) Funded Indebtedness to Lenders; (ii) Funded Indebtedness incurred for capital expenditures permitted under Section 7.6 hereof; (iii) Funded Indebtedness due under the Indenture; (iv) any other Funded Indebtedness so long as the aggregate principal amount of the same outstanding at any time does not exceed $5,000,000; (v) Funded Indebtedness representing the redemption price of stock being redeemed pursuant to the Shareholders Agreement to the extent that payment thereof is restricted by the terms of Section 7.7(c) hereof, (vi) Indebtedness owned or issued by any Subsidiary to Borrower or to another Subsidiary, or owed or issued by Borrower to any Subsidiary; provided, however, that any such Indebtedness shall at all times be held by a Person which is either Borrower or a Subsidiary; provided, further, however, that upon either (a) the transfer or other disposition of any such Indebtedness to a Person other than Borrower or another Subsidiary or (b) the sale, lease, transfer or other disposition of shares of capital stock (including by consolidation or merger) of any such Subsidiary to a Person other than the Borrower or another Subsidiary, the incurrence of such Indebtedness shall be deemed to be an incurrence that is not permitted by this clause; (vii) Indebtedness 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 this Agreement to be outstanding or with respect to any receivable or liability the payment of which is determined by reference to a foreign currency; (viii) Indebtedness represented by performance, completion, guarantee, surety and similar bonds and assurances provided by or for Borrower or any Subsidiary in the ordinary course of business; (ix) 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 or permitted under this Agreement ("Refinancing Indebtedness"); provided, however, that (a) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount (or accreted amount, if less, 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); and (b) the obligor on such Refinancing Indebtedness shall be the obligor on the Indebtedness being refinanced or the Borrower; (x) Indebtedness 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 Borrower at any one time outstanding; (xi) commodity agreements entered into in the ordinary course of business to protect against fluctuations in the price of raw materials and not for speculative purposes; and (xii) Indebtedness incurred by Borrower or any 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. 7.9. Nature of Business. Substantially change the nature of the business in which it is presently engaged, which shall not prohibit any Obligor from engaging in any business that is reasonably related to or complementary to its present business, nor except as specifically permitted hereby, purchase or invest, directly or indirectly, in any assets or property other than in the ordinary course of business for assets or property which are useful in, necessary for and are to be used in such business. 7.10. Transactions with Affiliates. Directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise deal with, any Affiliate, except transactions disclosed in the ordinary course of business, on an arm's-length basis on terms no less favorable than terms which would have been obtainable from a Person other than an Affiliate, and except (i) employment agreements or compensation or employee benefit arrangements with any officer, director or employee of Borrower or any of its 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 Borrower or one of its Subsidiaries with one or more Subsidiaries of Borrower, (iii) any transaction permitted by Section 7.5, 7.7 or 7.11, (iv) transactions permitted by, and complying with, the provisions described under Section 7.1, and (v) any transactions described under the caption "Use of Proceeds" in the Offering Memorandum delivered in connection with the Senior Subordinated Notes. 7.11 Partnership, Joint Ventures. Enter into any partnership, joint venture or similar arrangement, except for a joint venture and/or joint ventures which do not in aggregate require commitments, contributions and/or transfers of moneys or assets, together with the limitations imposed under Section 7.4 with respect to Investments, in excess of $3,000,000 per fiscal year (provided the Obligors may carry forward the unutilized portion of said $3,000,000 for one year additional fiscal year, provided that no more than $6,000,000 is utilized for said purposes in any fiscal year), provided that (i) no such commitment, contribution and/or transfer shall involve any of the Collateral and (ii) notwithstanding the foregoing Intellectual Property of MRT may be contributed or licensed to joint ventures. 7.12. Subsidiaries. Form any domestic Subsidiary unless (i) such Subsidiary expressly joins in this Agreement as a borrower or guarantor and becomes jointly and severally liable for the obligations of Obligors hereunder, under the Note, and under any other agreement between any Obligor and Lenders and (ii) Agent shall have received all documents, including legal opinions, it may reasonably require to establish compliance with each of the foregoing conditions. 7.13. Fiscal Year and Accounting Changes. Change its fiscal year from June 30 or make any significant change without providing the Agent at least thirty (30) days prior written notice (i) in accounting treatment and reporting practices except as required by GAAP or (ii) in tax reporting treatment except as required by law, provided that Obligors shall cooperate with and agree to such amendments to the Loan Documents as is reasonably required by the Agent to take into account such changes and make the Loan Documents, including the financial covenants, consistent with the parties original intentions. 7.14. Intentionally left blank. 7.15. Amendment of Articles of Incorporation, Bylaws. Amend, modify or waive any term or material provision of its Articles of Incorporation or Bylaws unless required by law in any manner which could reasonably be expect to have a Material Adverse Effect on such Obligor. 7.16. Compliance with ERISA. In each case if the failure to do so could be reasonably expected to have a Material Adverse Effect, (i) (x) Maintain, or permit any member of the Controlled Group to maintain, or (y) become obligated to contribute, or permit any member of the Controlled Group to become obligated to contribute, to any Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or permit any member of the Controlled Group to engage, in any non-exempt "prohibited transaction", as that term is defined in section 406 of ERISA and Section 4975 of the Code, (iii) incur, or permit any member of the Controlled Group to incur, any "accumulated funding deficiency", as that term is defined in Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any member of the Controlled Group to terminate, any Plan where such event could result in any liability of any Obligor or any member of the Controlled Group or the imposition of a lien on the property of any Obligor or any member of the Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the Controlled Group to assume, any obligation to contribute to any Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any member of the Controlled Group to incur, any withdrawal liability to any Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any Termination Event, (viii) fail to comply, or permit a member of the Controlled Group to fail to comply, with the requirements of ERISA or the Code or other applicable laws in respect of any Plan, (ix) fail to meet, or permit any member of the Controlled Group to fail to meet, all minimum funding requirements under ERISA or the Code or postpone or delay or allow any member of the Controlled Group to postpone or delay any funding requirement with respect of any Plan. 7.17. Prepayment of Indebtedness. Except as permitted pursuant to Section 7.18 hereof, , directly or indirectly, prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire or otherwise acquire any Indebtedness of any Obligor if a Default or an Event of Default would result therefrom or at such time there exists a Default or an Event of Default. 7.18. Subordinated Debt Payments. At any time, directly or indirectly, pay, prepay, repurchase, redeem, retire or otherwise acquire, or make any payment on account of any principal of, interest on or premium payable in connection with the repayment or redemption of the Subordinated Debt Payment, except as expressly permitted by the terms of the Indenture as in effect on the Closing Date. 7.19 Interest Expense Allocation. At any time, change the interest expense allocation with respect to the Indenture other than in accordance with Subsection 5.24. VIII. CONDITIONS PRECEDENT. 8.1. Conditions to Initial Advances. The agreement of Lenders to make the initial Advance requested to be made on the Closing Date is subject to the satisfaction, or waiver by Lenders, immediately prior to or concurrently with the making of such Advance, of the following conditions precedent: (a) Note. Agent shall have received the Note duly executed and delivered by an authorized officer of each Borrower; (b) Filings, Registrations and Recordings. Each document (including, without limitation, any Uniform Commercial Code financing statement) required by this Agreement, any related agreement or under law or reasonably requested by the Agent to be filed, registered or recorded in order to create, in favor of Agent, a perfected security interest in or lien upon the Collateral shall have been properly filed, registered or recorded in each jurisdiction in which the filing, registration or recordation thereof is so required or requested, and Agent shall have received an acknowledgment copy, or other evidence satisfactory to it, of each such filing, registration or recordation and satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto; (c) Corporate Proceedings of Obligors. Agent shall have received a copy of the resolutions in form and substance reasonably satisfactory to Agent, of the Board of Directors of each Obligor authorizing (i) the execution, delivery and performance of this Agreement, the Note, the Guaranty, the Power of Attorney, and any related agreements, (collectively the "Documents") and (ii) the granting by each Obligor of the security interests in and liens upon the Collateral in each case certified on behalf of such Obligor by the Secretary or an Assistant Secretary of such Obligor as of the Closing Date; and, such certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate; (d) Incumbency Certificates of Obligors. Agent shall have received a certificate of the Secretary or an Assistant Secretary on behalf of each Obligor, dated the Closing Date, as to the incumbency and signature of the officers of such Obligor executing this Agreement, any certificate or other documents to be delivered by it pursuant hereto, together with evidence of the incumbency of such Secretary or Assistant Secretary; (e) Certificates. Agent shall have received a copy of the Articles or Certificate of Incorporation of each Obligor, and all amendments thereto, certified on behalf of each Obligor by the Secretary of State or other appropriate official of its jurisdiction of incorporation together with copies of the By-Laws of each Obligor and all agreements of each Obligor's shareholders certified on behalf of such Obligor as accurate and complete by the Secretary of such Obligor; (f) Good Standing Certificates. Agent shall have received good standing certificates for each Obligor dated not more than 30 days prior to the Closing Date, issued by the Secretary of State or other appropriate official of each Obligor's jurisdiction of incorporation and each jurisdiction where the conduct of each Borrower's business activities or the ownership of its properties necessitates qualification; (g) Legal Opinion. Agent shall have received the executed legal opinion of Golenbock, Eiseman, Assor & Bell in form and substance satisfactory to Agent which shall cover such matters incident to the transactions contemplated by this Agreement, the Note, and related agreements as Agent may reasonably require and each Obligor hereby authorizes and directs such counsel to deliver such opinions to Agent and Lenders; (h) No Litigation. Except as disclosed on the schedules attached to this Agreement: (i) No litigation, investigation or proceeding before or by any arbitrator or Governmental Body shall be continuing or threatened against any Obligor or against the officers or directors of any Obligor (A) in connection with the Other Documents or any of the transactions contemplated thereby and which, in the reasonable opinion of Agent, is deemed material or (B) which could, in the reasonable opinion of Agent, have a Material Adverse Effect; and (ii) no injunction, writ, restraining order or other order of any nature materially adverse to any Obligor or the conduct of its business or inconsistent with the due consummation of the Transactions shall have been issued by any Governmental Body; (i) Financial Condition Certificates. Agent shall have received an executed Financial Condition Certificate in the form of Exhibit 8.1(i). (j) Collateral Examination. Agent shall have completed Collateral examinations and received appraisals, the results of which shall be satisfactory in form and substance to Lenders, of the Receivables, Inventory, and General Intangibles, of each Obligor and all books and records in connection therewith; (k) Fees. Agent shall have received all fees payable to Agent and Lenders on or prior to the Closing Date pursuant to Article III hereof; (l) Pro Forma Financial Statements. Agent shall have received a copy of the Pro Forma Financial Statements; (m) Guaranties, Other Documents. Agent shall have received executed Guaranties and all Other Documents; (n) Insurance. Agent shall have received in form and substance reasonably satisfactory to Agent, certified copies of Obligors' casualty insurance policies, together with loss payable endorsements on Agent's standard forms of loss payee endorsement naming Agent as loss payee to the extent required by Section 4.11, and certified copies of Borrowers' liability insurance policies, together with endorsements naming Agent as a additional insured; (o) Power of Attorney. Agent shall have received executed Powers of Attorney from each Obligor in the form of Exhibit 8.1(aa); and (p) Payment Instructions. Agent shall have received written instructions from Obligors directing the application of proceeds of the initial Advances made pursuant to this Agreement; (q) Blocked Accounts. Agent shall have received duly executed agreements establishing the Blocked Accounts or Depository Accounts with financial institutions acceptable to Agent for the collection or servicing of the Receivables and proceeds of the Collateral; (r) Consents. Agent shall have received any and all Consents necessary to permit the effectuation of the transactions contemplated by this Agreement and the Other Documents; and, Agent shall have received such Consents and waivers of such third parties (excluding landlords' and warehousemen's waivers) as might assert claims with respect to the Collateral, as Agent and its counsel shall deem necessary; (s) No Adverse Material Change. (i) Since December 31, 1997, there shall not have occurred any event, condition or state of facts which could reasonably be expected to have a Material Adverse Effect and (ii) no representations made or written information supplied to Agent shall have been proven to be inaccurate or misleading in any material respect; (t) Leasehold Agreements. Agent shall have received landlord, mortgagee or warehouseman agreements satisfactory to Agent with respect to all premises leased by Obligors which is the chief executive office or Other Billing Location of any Obligor or where Inventory is located to the extent such Inventory is to be considered Eligible Inventory; (u) Indenture. Agent shall have received final executed copies of the Indenture which shall contain such terms and provisions including, without limitation, subordination terms, satisfactory to Agent; (v) Net Worth. Agent shall have received an audited Balance Sheet of the Borrower and all of its domestic Subsidiaries as of June 30, 1998, within forty-five (45) days of the date hereof, reflecting a Net Worth for the Borrower and all direct and indirect domestic Subsidiaries of the Borrower excluding the Subordinated Indebtedness after giving effect to the Transactions of at least $2,000,000 (for purposes of calculating the financial covenants hereunder said actual Net Worth reflected on said Balance Sheet shall be utilized); (w) Contract Review. Agent shall have reviewed all material contracts of Obligors including, without limitation, leases, union contracts, labor contracts, vendor supply contracts, license agreements and distributorship agreements and such contracts and agreements shall be satisfactory in all respects to Agent; (x) Closing Certificate. Agent shall have received a closing certificate signed on behalf of each Obligor by the Chief Financial Officer of such Obligor dated as of the date hereof, stating that (i) all representations and warranties set forth in this Agreement and the Other Documents are true and correct in all material respects on and as of such date, (ii) Obligors are on such date in compliance in all material respects with all the terms and provisions set forth in this Agreement and the Other Documents and (iii) on such date no Default or Event of Default has occurred or is continuing; (y) Borrowing Base. Agent shall have received evidence from Obligors that the aggregate amount of Eligible Receivables and Eligible Inventory is sufficient in value and amount to support as contemplated by Section 2.1(c) hereof, Revolving Advances and the advances of the same to domestic Subsidiaries of the Borrower to be made on the Closing Date; (z) Undrawn Availability. After giving effect to the initial Advances hereunder, Obligors shall have Undrawn Availability of at least $10,000,000; (aa) Landlord's and Warehousemen's Waivers. Landlords waivers and warehousemen's waivers, in form and substance reasonably satisfactory to the Agent, with respect to each location leased or warehoused by any Obligor which location is the chief executive office or Other Billing Location of any Obligor or where Inventory is maintained to the extent that said Inventory is to be considered Eligible Inventory. (bb) Grid Notes and Assignments. Grid notes from each domestic Subsidiary of the Borrower and assignments thereof to the Bank, as contemplated by Section 2.5(b) hereof. (cc) Other. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the Transactions shall be reasonably satisfactory in form and substance to Agent and its counsel. 8.2. Conditions to Each Advance. The agreement of Lenders to make any Advance requested to be made on any date (including, without limitation, the initial Advance), is subject to the satisfaction of the following conditions precedent as of the date such Advance is made: (a) Representations and Warranties. Each of the representations and warranties made by any Obligor in or pursuant to this Agreement and any related agreements to which it is a party, and each of the representations and warranties contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement or any Other Document shall be true and correct in all material respects on and as of such date as if made on and as of such date, except for changes or other matters permitted under this Agreement; (b) No Default. No Event of Default or Default shall have occurred and be continuing on such date, or would exist after giving effect to the Advances requested to be made, on such date; provided, however that Lenders, in their sole discretion, may continue to make Advances notwithstanding the existence of an Event of Default or Default and that any Advances so made shall not be deemed a waiver of any such Event of Default or Default; and (c) Maximum Advances. In the case of any Advances requested to be made, after giving effect thereto, the aggregate Advances shall not exceed the maximum amount of Advances permitted under Section 2.1 hereof. Each request for an Advance by any Obligor hereunder shall constitute a representation and warranty by each Obligor as of the date of such Advance that the conditions contained in this subsection shall have been satisfied. IX. INFORMATION AS TO OBLIGORS. Each Obligor shall, until satisfaction in full of the payment Obligations (whether in the form of principal, interest, reimbursement obligations, fees, penalties, charges, expenses or otherwise) with the exception of indemnification obligations under this Agreement for which no claim recited thereunder has arisen) and the termination of this Agreement: 9.1. Disclosure of Material Matters. Immediately upon learning thereof, report to Agent all matters materially affecting the value, enforceability or collectibility of any portion of the Collateral including, without limitation, any Obligor's reclamation or repossession of, or the return to any Obligor of, a material amount of goods or claims or disputes asserted by any Customer or other obligor. 9.2. Schedules. Deliver to Agent on or before the twentieth (20th) day of each month as and for the prior month (a) accounts receivable ageings, (b) accounts payable schedules and (c) Inventory reports. In addition, each Obligor will deliver to Agent at such intervals as Agent may require: (i) confirmatory assignment schedules, (ii) copies of Customer's invoices, (iii) evidence of shipment or delivery, and (iv) such further schedules, documents and/or information regarding the Collateral as Agent may require including, without limitation, trial balances and test verifications. Agent shall have the right to confirm and verify all Receivables by any reasonable manner and through any medium it considers advisable and do whatever it may deem reasonably necessary to protect its interests hereunder. The items to be provided under this Section are to be in form satisfactory to Agent and executed by each Obligor and delivered to Agent from time to time solely for Agent's convenience in maintaining records of the Collateral, and any Obligor's failure to deliver any of such items to Agent shall not affect, terminate, modify or otherwise limit Agent's Lien with respect to the Collateral. 9.3. Environmental Reports. Furnish Agent, concurrently with the delivery of the financial statements referred to in Sections 9.7 and 9.8, with a certificate signed on behalf of each Obligor by an Executive Officer of each Obligor stating, to the best of his knowledge, that each Obligor is in compliance in all respects with all federal, state and local laws relating to environmental protection and control and occupational safety and health, except where the failure to be in compliance could not reasonably be expected to have a Material Adverse Effect. To the extent any Obligor is not in compliance with the foregoing laws as discussed above, the certificate shall set forth with specificity all areas of non-compliance and the proposed action such Obligor will implement in order to achieve full compliance. 9.4. Litigation. Promptly notify Agent in writing of any litigation, suit or administrative proceeding affecting any Obligor, whether or not the claim is covered by insurance, and of any suit or administrative proceeding, which in any such case could reasonably be expected to have a Material Adverse Effect. 9.5. Material Occurrences. Promptly notify Agent in writing upon the occurrence of (a) any Event of Default or Default; (b) any event of default under the Indenture; (c) any event which with the giving of notice or lapse of time, or both, would constitute an event of default under the Indenture; (d) any event, development or circumstance whereby any financial statements or other reports furnished to Agent fail in any material respect to present fairly, in accordance with GAAP consistently applied, the financial condition or operating results of any Obligor as of the date of such statements; (e) any accumulated retirement plan funding deficiency which, if such deficiency continued for two plan years and was not corrected as provided in Section 4971 of the Code, could subject any Obligor to a tax imposed by Section 4971 of the Code; (f) each and every default by any Obligor which might result in the acceleration of the maturity of any Indebtedness, which when added to all other such Indebtedness aggregates $500,000 or more, including the names and addresses of the holders of such Indebtedness with respect to which there is a default existing or with respect to which the maturity has been or could be accelerated, and the amount of such Indebtedness; and (g) any other development in the business or affairs of any Obligor which could reasonably be expected to have a Material Adverse Effect; in each case describing the nature thereof and the action Obligors propose to take with respect thereto. 9.6. Government Receivables. Notify Agent immediately if any of its Receivables included in the Formula Amount arise out of contracts between any Obligor and the United States, any state, or any department, agency or instrumentality of any of them. 9.7. Annual Financial Statements. Furnish Agent within ninety (90) days after the end of each fiscal year of Obligors, financial statements of the Borrower and all of its direct and indirect Subsidiaries, and financial statements of the Borrower and all of its domestic Subsidiaries, all on a consolidating and consolidated basis including, but not limited to, statements of income and stockholders' equity and cash flow from the beginning of the current fiscal year to the end of such fiscal year and the balance sheet as at the end of such fiscal year, all prepared in accordance with GAAP applied on a basis consistent with prior practices, and in reasonable detail and reported upon (except for the consolidating statements) without qualification by an independent certified public accounting firm selected by Obligors and satisfactory to Agent (the "Accountants"). The report of the Accountants shall be accompanied by a statement of the Accountants certifying that (i) they have caused the Loan Agreement to be reviewed, (ii) in making the examination upon which such report was based either no information came to their attention which to their knowledge constituted an Event of Default or a Default under this Agreement or any related agreement or, if such information came to their attention, specifying any such Default or Event of Default, its nature, when it occurred and whether it is continuing, and such report shall contain or have appended thereto calculations which set forth Obligors' compliance with the requirements or restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6 and 7.11 hereof. In addition, the reports shall be accompanied by a certificate on behalf of each Obligor by its Chief Financial Officer which shall state that, based on an examination sufficient to permit him to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by such Obligor with respect to such event, and such certificate shall have appended thereto calculations which set forth Obligors' compliance with the requirements or restrictions imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof. 9.8. Quarterly Financial Statements. Furnish Agent within 45 days after the end of each fiscal quarter, an unaudited balance sheet of the Borrower and all of its direct and indirect Subsidiaries, and an unaudited balance sheet statement of the Borrower and all of its domestic Subsidiaries, all on a consolidated and consolidating basis and unaudited statements of income and stockholders' equity and cash flow of for each of the same, on a consolidated and consolidating basis reflecting results of operations from the beginning of the fiscal year to the end of such quarter and for such quarter, prepared on a basis consistent with prior practices and fairly present, in all material respects such financial condition, subject to normal year end and audit adjustments. The reports shall be accompanied by a certificate on behalf of each Obligor by the Chief Financial Officer of such Obligor, which shall state that, based on an examination sufficient to permit him to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Obligors with respect to such default and, such certificate shall have appended thereto calculations which set forth Obligors' compliance with the requirements or restrictions imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof. 9.9. Monthly Financial Statements and Borrowing Base Certificates. Furnish Agent within thirty (30) days after the end of each month, an unaudited statement of profit and loss of the Borrower and all of its direct and indirect Subsidiaries and of the Borrower and all of its domestic Subsidiaries, all on a consolidated and consolidating basis reflecting results of operations from the beginning of the fiscal year to the end of such month and for such month, prepared on a basis consistent with prior practices and fairly present, in all material respects such financial condition, subject to normal year end and audit adjustments. The reports shall be accompanied by a certificate on behalf of each Obligor by the Chief Financial Officer of such Obligor, which shall state that, based on an examination sufficient to permit it to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Obligors with respect to such event and, such certificate shall have appended thereto calculations which set forth Obligors' compliance with the requirements or restrictions imposed by Sections 6.5, 6.6, 7.6 and 7.11 hereof. Furnish Agent within three (3) days after the end of each month a Borrowing Base Certificate for the Borrower and its domestic Subsidiaries, on a consolidated basis, and for each domestic Obligor, in form and reasonably satisfactory to the Agent. 9.10. Other Reports. Furnish Agent as soon as available, but in any event within ten (10) days after the issuance thereof, (i) with copies of such financial statements, reports and returns as each Obligor shall send to its stockholders and (ii) copies of all notices sent pursuant to the Indenture. 9.11. Additional Information. Furnish Agent with such additional information as Agent shall reasonably request in order to enable Agent to determine whether the terms, covenants, provisions and conditions of this Agreement and the Note have been complied with by Obligors including, without limitation and without the necessity of any request by Agent, (a) copies of all materially adverse environmental audits and reviews, (b) at least thirty (30) days prior thereto, notice of any Obligor's opening of any new office or place of business or any Borrower's closing of any existing office or place of business, and (c) promptly upon any Borrower's learning thereof, notice of any labor dispute to which any Obligor may become a party, any strikes or walkouts relating to any of its plants or other facilities, and the expiration of any labor contract to which any Obligor is a party or by which any Obligor is bound. 9.12. Projected Operating Budget. Furnish Agent, no later than thirty (30) days prior to the beginning of each Borrower's fiscal years commencing with fiscal year 1998, a quarter by quarter projected operating budget and cash flow of Obligors on a consolidated and consolidating basis for such fiscal year (including an income statement for each quarter and a balance sheet as at the end of the last quarter), such projections to be accompanied by a certificate signed on behalf of Obligors by the President or Chief Financial Officer of each Obligor to the effect that such projections have been prepared on the basis of reasonable financial planning practice. 9.13. Variances From Operating Budget. Furnish Agent, concurrently with the delivery of the financial statements referred to in Section 9.7 and each quarterly report, a written report summarizing all material variances from budgets submitted by Obligors pursuant to Section 9.12 and a discussion and analysis by management with respect to such variances. 9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt notice of (i) any lapse or other termination of any Consent issued to any Obligor by any Governmental Body or any other Person that is material to the operation of any Borrower's business, (ii) any refusal by any Governmental Body or any other Person to renew or extend any such Consent; and (iii) copies of any periodic or special reports filed by any Obligor with any Governmental Body or Person, if such reports indicate any material change in the business, operations, affairs or condition of any Obligor, or if copies thereof are requested by Lender, and (iv) copies of any material notices and other communications from any Governmental Body or Person which specifically relate to any Obligor. 9.15. ERISA Notices and Requests. Furnish Agent with immediate written notice in the event, which event could reasonably be expected to have a Material Adverse Effect, that (i) any Borrower or any member of the Controlled Group knows or has reason to know that a Termination Event has occurred, together with a written statement describing such Termination Event and the action, if any, which such Obligor or member of the Controlled Group has taken, is taking, or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor or PBGC with respect thereto, (ii) any Obligor or any member of the Controlled Group knows or has reason to know that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has occurred together with a written statement describing such transaction and the action which such Obligor or any member of the Controlled Group has taken, is taking or proposes to take with respect thereto, (iii) a funding waiver request has been filed with respect to any Plan together with all communications received by any Borrower or any member of the Controlled Group with respect to such request, (iv) any increase in the benefits of any existing Plan or the establishment of any new Plan or the commencement of contributions to any Plan to which any Obligor or any member of the Controlled Group was not previously contributing shall occur, (v) any Obligor or any member of the Controlled Group shall receive from the PBGC a notice of intention to terminate a Plan or to have a trustee appointed to administer a Plan, together with copies of each such notice, (vi) any Obligor or any member of the Controlled Group shall receive any unfavorable determination letter from the Internal Revenue Service regarding the qualification of a Plan under Section 401(a) of the Code, together with copies of each such letter; (vii) any Obligor or any member of the Controlled Group shall receive a notice regarding the imposition of withdrawal liability, together with copies of each such notice; (viii) any Obligor or any member of the Controlled Group shall fail to make a required installment or any other required payment under Section 412 of the Code on or before the due date for such installment or payment; (ix) any Obligor or any member of the Controlled Group knows that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan. 9.16. Additional Documents. Execute and deliver to Agent, upon request, such documents and agreements as Agent may, from time to time, reasonably request to carry out the purposes, terms or conditions of this Agreement. X. EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an "Event of Default": 10.1. failure by any Obligor to pay any principal or interest on the Obligations when due, whether at maturity or by reason of acceleration pursuant to the terms of this Agreement or by notice of intention to prepay, or by required prepayment or failure to pay any other liabilities or make any other payment, fee or charge provided for herein when due or in any Other Document; 10.2. any representation or warranty made or deemed made by any Obligor in this Agreement or any related agreement or in any certificate, document or financial or other statement furnished at any time in connection herewith or therewith shall prove to have been misleading in any material respect on the date when made or deemed to have been made; 10.3. failure by any Obligor to (i) furnish financial information within fifteen (15) days of when due, or (ii) permit the inspection of its books or records; 10.4. issuance of a notice of Lien (other than Permitted Encumbrances), levy, assessment, injunction or attachment against a material portion of any Obligor's property, which within thirty (30) days of receipt by any Obligor of such notice is not either satisfied, stayed, fully bonded or discharged of record; 10.5. except as otherwise provided for in Sections 10.1 and 10.3, failure or neglect of any Obligor to perform, keep or observe any term, provision, condition, covenant herein contained, or contained in any other agreement or arrangement, now or hereafter entered into between any Obligor and Agent or any Lender; 10.6. any judgment or judgments are rendered or judgment liens filed against any Obligor for an aggregate amount in excess of $$1,000,000 which within thirty (30) days of such rendering or filing is not either satisfied, stayed, fully bonded or discharged of record; 10.7. any Obligor shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing; 10.8. any Obligor shall admit in writing its inability, or be generally unable, to pay its debts as they become due or, with the exception of Inactive Subsidiaries, cease operations of its present business; 10.9. Intentionally Omitted. 10.10. any change in any Obligor's condition or affairs (financial or otherwise) which in Agent's opinion has a Material Adverse Effect; 10.11. any Lien created hereunder or provided for hereby or under any related agreement for any reason ceases to be or is not a valid and perfected Lien having a first priority interest (subject to Permitted Encumbrances); 10.12. an event of default has occurred and been declared under the Indenture which default shall not have been cured or waived within any applicable grace period; 10.13. a default by one or more Obligors or by any foreign Subsidiary of any Obligor with respect to Indebtedness, individually or collectively aggregating $500,000 or more, or a default of the obligations of any Obligor or any foreign Subsidiary of any Obligor under any other agreement to which it is a party shall occur which in the reasonable judgment of Agent, would have a Material Adverse Effect, which defaults are not cured within any applicable grace period; 10.14. termination or breach of any Guaranty or similar agreement executed and delivered to Agent in connection with the Obligations of any Obligor, or if any Guarantor attempts to terminate, challenges the validity of, or its liability under, any such Guaranty or similar agreement; 10.15. any Change of Control shall occur; 10.16. any material provision of this Agreement shall, for any reason, cease to be valid and binding on any Obligor, or any Obligor shall so claim in writing to Agent; 10.17. (i) any Governmental Body shall (A) revoke, terminate, suspend or adversely modify any license, permit, patent trademark or trade name of any Obligor, the continuation of which is material to the continuation of any Obligor's business, or (B) commence proceedings to suspend, revoke, terminate or adversely modify any such license, permit, trademark, trade name or patent and such proceedings shall not be dismissed or discharged within sixty (60) days, or (c) schedule or conduct a hearing on the renewal of any license, permit, trademark, trade name or patent necessary for the continuation of any Obligor's business and the staff of such Governmental Body issues a report recommending the termination, revocation, suspension or material, adverse modification of such license, permit, trademark, trade name or patent; (ii) any agreement which is necessary or material to the operation of any Borrower's business shall be revoked or terminated and not replaced by a substitute acceptable to Agent within thirty (30) days after the date of such revocation or termination, and such revocation or termination and non-replacement would reasonably be expected to have a Material Adverse Effect on any Obligor; 10.18. any portion of the Collateral shall be seized or taken by a Governmental Body, or any Obligor or the title and rights of any Obligor or any Original Owner which is the owner of any material portion of the Collateral shall have become the subject matter of litigation which is reasonably likely, in the reasonable opinion of Agent, upon final determination, result in impairment or loss of the security provided by this Agreement or the Other Documents; 10.19. the operations of any Obligor's manufacturing facility are interrupted which interruption could reasonably be expected to have a Material Adverse Effect; or 10.20. an event or condition specified in Sections 7.16 or 9.15 hereof shall occur or exist with respect to any Plan and, as a result of such event or condition, together with all other such events or conditions, any Obligor or any member of the Controlled Group shall incur a liability to a Plan or the PBGC (or both) which, in the reasonable judgment of Agent, would have a Material Adverse Effect. XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT. 11.1. Rights and Remedies. Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 all Obligations shall be immediately due and payable and this Agreement and the obligation of Lenders to make Advances shall be deemed terminated; and, (ii) any of the other Events of Default and at any time thereafter (such default not having previously been cured), at the option of Required Lenders all Obligations shall be immediately due and payable and Lenders shall have the right to terminate this Agreement and to terminate the obligation of Lenders to make Advances and (iii) a filing of a petition against Obligor in any involuntary case under any state or federal bankruptcy laws, the obligation of Lenders to make Advances hereunder shall be terminated other than as may be required by an appropriate order of the bankruptcy court having jurisdiction over any Obligor. Upon the occurrence of any Event of Default, Agent shall have the right to exercise any and all other rights and remedies provided for herein, under the Uniform Commercial Code and at law or equity generally, including, without limitation, the right to foreclose the security interests granted herein and to realize upon any Collateral by any available judicial procedure and/or to take possession of and sell any or all of the Collateral with or without judicial process. Agent may enter any of Obligor's premises or other premises without legal process and without incurring liability to any Obligor therefor, and Agent may thereupon, or at any time thereafter, in its discretion without notice or demand, take the Collateral and remove the same to such place as Agent may deem advisable and Agent may require Obligors to make the Collateral available to Agent at a convenient place. With or without having the Collateral at the time or place of sale, Agent may sell the Collateral, or any part thereof, at public or private sale, at any time or place, in one or more sales, at such price or prices, and upon such terms, either for cash, credit or future delivery, as Agent may elect. Except as to that part of the Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Agent shall give Obligors reasonable notification of such sale or sales, it being agreed that in all events written notice mailed to Obligors at least five (5) days prior to such sale or sales is reasonable notification. At any public sale Agent or any Lender may bid for and become the purchaser, and Agent, any Lender or any other purchaser at any such sale thereafter shall hold the Collateral sold absolutely free from any claim or right of whatsoever kind, including any equity of redemption and such right and equity are hereby expressly waived and released by each Obligor. The proceeds realized from the sale of any Collateral shall be applied as follows: first, to the reasonable costs, expenses and attorneys' fees and expenses incurred by Agent for collection and for acquisition, completion, protection, removal, storage, sale and delivery of the Collateral; second, to interest due upon any of the Obligations and any fees payable under this Agreement; and, third, to the principal of the Obligations. If any deficiency shall arise, Obligors shall remain liable to Agent and Lenders therefor. The Agent shall return any surplus to the Obligors, subject to any duty imposed by law upon the Agent and/or Lenders, including but not limited to any duty owed to the holder of a subordinated security interest in any Collateral. Each Obligor hereby assigns, transfers and conveys to the Agent, for the benefit of the Lenders, effective upon the occurrence of any Event of Default hereunder, the right and license to use all Intellectual Property, Equipment and General Intangibles owned or used by such Obligor to the extent necessary to enable the Agent to dispose of the Inventory, for the purpose of completing the manufacturing of unfinished goods, collecting Receivables or to otherwise liquidate, transfer or realize on the Collateral. Such right and license is granted free of charge, without requirement of any monetary payment whatsoever to be made to any Obligor by the Agent. The Obligors shall cooperate with all reasonable directions of and execute and deliver all documentation reasonably requested by the Agent for the purpose of implementing the foregoing provisions. 11.2. Agent's Discretion. Agent shall have the right in its sole discretion to determine which rights, Liens, security interests or remedies Agent may at any time pursue, relinquish, subordinate, or modify or to take any other action with respect thereto and such determination will not in any way modify or affect any of Agent's or Lenders' rights hereunder. 11.3. Setoff. In addition to any other rights which Agent or any Lender may have under applicable law, upon the occurrence of an Event of Default hereunder, Agent and such Lender shall have a right to apply any Obligor's property held by Agent and such Lender to reduce the Obligations. 11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any right or remedy shall not preclude the exercise of any other right or remedies provided for herein, in any Guaranty or otherwise provided by law, all of which shall be cumulative and not alternative. XII. WAIVERS AND JUDICIAL PROCEEDINGS. 12.1. Waiver of Notice. Each Obligor hereby waives notice of non-payment of any of the Receivables, demand, presentment, protest and notice thereof with respect to any and all instruments, notice of acceptance hereof, notice of loans or advances made, credit extended, Collateral received or delivered, or any other action taken in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein. 12.2. Delay. No delay or omission on Agent's or any Lender's part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any default. 12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. XIII. EFFECTIVE DATE AND TERMINATION. 13.1. Term. This Agreement, which shall inure to the benefit of and shall be binding upon the respective successors and permitted assigns of each Obligor, Agent and each Lender, shall become effective on the date hereof and shall continue in full force and effect until August 19, 2003 (the "Term") unless sooner terminated as herein provided. Borrower may terminate this Agreement at any time upon sixty (60) days' prior written notice upon payment in full of the payment Obligations (whether in the form of principal, interest, reimbursement obligations, fees, penalties, charges, expenses or otherwise) with the exception of indemnification obligations under this Agreement for which no claim recited thereunder has arisen) . In the event the Obligations are prepaid in full prior to third anniversary date of the Closing Date (the date of such prepayment hereinafter referred to as the "Early Termination Date"), Borrower shall pay to Agent for the benefit of Lenders an early termination fee in an amount equal to $350,000 if the Early Termination Date occurs on or after the Closing Date to and including the date immediately preceding the third anniversary of the Closing Date. 13.2. Termination. The termination of the Agreement shall not affect any Obligor's, Agent's or any Lender's rights, or any of the Obligations having their inception prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into, rights or interests created or Obligations have been fully disposed of, concluded or liquidated. The security interests, Liens and rights granted to Agent and Lenders hereunder and the financing statements filed hereunder shall continue in full force and effect, notwithstanding the termination of this Agreement or the fact that Borrower's Account may from time to time be temporarily in a zero or credit position, until all of the payment Obligations (whether in the form of principal, interest, reimbursement obligations, fees, penalties, charges, expenses or otherwise) with the exception of indemnification obligations under this Agreement for which no claim subject thereto has been made and has not been terminated, satisfied released or withdrawn) of each Obligor have been paid and satisfied in full after the termination of this Agreement or each Obligor has furnished Agent and Lenders with an indemnification satisfactory to Agent and Lenders with respect thereto. Accordingly, each Obligor waives any rights which it may have under Section 9-404(1) of the Uniform Commercial Code to demand the filing of termination statements with respect to the Collateral, and Agent shall not be required to send such termination statements to each Obligor, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all payment Obligations (whether in the form of principal, interest, reimbursement obligations, fees, penalties, charges, expenses or otherwise) with the exception of indemnification obligations under this Agreement for which no claim subject thereto has been made and has not been terminated, satisfied released or withdrawn) paid in full in immediately available funds. All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until all Obligations are paid or performed in full. Notwithstanding anything contained herein to the contrary all indemnification obligations under this Agreement shall survive termination of this Agreement. XIV. REGARDING AGENT. 14.1. Appointment. Each Lender hereby designates PNC to act as Agent for such Lender under this Agreement and the Other Documents. Each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and the Other Documents and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto and Agent shall hold all Collateral, payments of principal and interest, fees (except the fees set forth in Sections 3.2(a), charges and collections (without giving effect to any collection days) received pursuant to this Agreement, for the ratable benefit of Lenders. Agent may perform any of its duties hereunder by or through its agents or employees. As to any matters not expressly provided for by this Agreement (including without limitation, collection of the Note) Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding; provided, however, that Agent shall not be required to take any action which exposes Agent to liability or which is contrary to this Agreement or the Other Documents or applicable law unless Agent is furnished with an indemnification reasonably satisfactory to Agent with respect thereto. 14.2. Nature of Duties. Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the Other Documents. Neither Agent nor any of its officers, directors, employees or agents shall be (i) liable for any action taken or omitted by them as such hereunder or in connection herewith, unless caused by their gross (not mere) negligence or willful misconduct, or (ii) responsible in any manner for any recitals, statements, representations or warranties made by any Obligor or any officer thereof contained in this Agreement, or in any of the Other Documents or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any of the Other Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, or any of the Other Documents or for any failure of any Obligor to perform its obligations hereunder. Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any of the Other Documents, or to inspect the properties, books or records of any Borrower. The duties of Agent as respects the Advances to Borrower shall be mechanical and administrative in nature; Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement except as expressly set forth herein. 14.3. Lack of Reliance on Agent and Resignation. Independently and without reliance upon Agent or any other Lender, each Lender has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Obligor in connection with the making and the continuance of the Advances hereunder and the taking or not taking of any action in connection herewith, and (ii) its own appraisal of the creditworthiness of each Obligor. Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before making of the Advances or at any time or times thereafter except as shall be provided by any Obligor pursuant to the terms hereof. Agent shall not be responsible to any Lender for any recitals, statements, information, representations or warranties herein or in any agreement, document, certificate or a statement delivered in connection with or for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any Other Document, or of the financial condition of any Obligor, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, the Note, the Other Documents or the financial condition of any Borrower, or the existence of any Event of Default or any Default. Agent may resign on sixty (60) days' written notice to each of Lenders and Borrower and upon such resignation, the Required Lenders will promptly designate a successor Agent reasonably satisfactory to Borrower. Any such successor Agent shall succeed to the rights, powers and duties of Agent, and the term "Agent" shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent. After any Agent's resignation as Agent, the provisions of this Article XIV shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 14.4. Certain Rights of Agent. If Agent shall request instructions from Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any Other Document, Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from the Required Lenders; and Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, Lenders shall not have any right of action whatsoever against Agent as a result of its acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders. 14.5. Reliance. Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, order or other document or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to this Agreement and the Other Documents and its duties hereunder, upon advice of counsel selected by it. Agent may employ agents and attorneys-in-fact and shall not be liable for the default or misconduct of any such agents or attorneys-in-fact selected by Agent with reasonable care. 14.6. Notice of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder or under the Other Documents, unless Agent has received notice from a Lender or a Obligor referring to this Agreement or the Other Documents, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that Agent receives such a notice, Agent shall give notice thereof to Lenders. Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of Lenders. 14.7. Indemnification. To the extent Agent is not reimbursed and indemnified by Obligors, each Lender will reimburse and indemnify Agent in proportion to its respective portion of the Advances (or, if no Advances are outstanding, according to its Commitment Percentage), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent in performing its duties hereunder, or in any way relating to or arising out of this Agreement or any Other Document; provided that, Lenders shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent's gross (not mere) negligence or willful misconduct. 14.8. Agent in its Individual Capacity. With respect to the obligation of Agent to lend under this Agreement, the Advances made by it shall have the same rights and powers hereunder as any other Lender and as if it were not performing the duties as Agent specified herein; and the term "Lender" or any similar term shall, unless the context clearly otherwise indicates, include Agent in its individual capacity as a Lender. Agent may engage in business with any Obligor as if it were not performing the duties specified herein, and may accept fees and other consideration from any Obligor for services in connection with this Agreement or otherwise without having to account for the same to Lenders. 14.9. Delivery of Documents. To the extent Agent receives financial statements required under Sections 9.7, 9.8, and 9.9 from any Obligor pursuant to the terms of this Agreement, Agent will promptly furnish such documents and information to Lenders. 14.10. Borrower's Undertaking to Agent. Without prejudice to their respective obligations to Lenders under the other provisions of this Agreement, Borrower hereby undertakes with Agent to pay to Agent from time to time on demand all amounts from time to time due and payable by it for the account of Agent or Lenders or any of them pursuant to this Agreement to the extent not already paid. Any payment made pursuant to any such demand shall pro tanto satisfy the relevant Borrower's obligations to make payments for the account of Lenders or the relevant one or more of them pursuant to this Agreement. XV. MISCELLANEOUS. 15.1. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey applied to contracts to be performed wholly within the State of New Jersey. Any judicial proceeding brought by or against any Borrower with respect to any of the Obligations, this Agreement or any related agreement may be brought in any court of competent jurisdiction in the State of New Jersey, United States of America, and, by execution and delivery of this Agreement, each Obligor accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Each Obligor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to Borrower at its address set forth in Section 15.6 shall be deemed completed five (5) days after the same shall have been so deposited in the mails of the United States of America. Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Agent or any Lender to bring proceedings against any Obligor in the courts of any other jurisdiction. Each Obligor waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Any judicial proceeding by any Obligor against Agent or any Lender involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Agreement or any related agreement, shall be brought only in a federal or state court located in the County of Middlesex, State of New Jersey. 15.2. Entire Understanding. (a) This Agreement and the documents executed concurrently herewith contain the entire understanding between each Obligor, Agent and each Lender and supersedes all prior agreements and understandings, if any, relating to the subject matter hereof. Any promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in writing, signed by each Obligor's, Agent's and each Lender's respective officers. Neither this Agreement nor any portion or provisions hereof may be changed, modified, amended, waived, supplemented, discharged, canceled or terminated orally or by any course of dealing, or in any manner other than by an agreement in writing, signed by the party to be charged. Each Obligor acknowledges that it has been advised by counsel in connection with the execution of this Agreement and Other Documents and is not relying upon oral representations or statements inconsistent with the terms and provisions of this Agreement. (b) The Required Lenders, Agent with the consent in writing of the Required Lenders, and Borrower may, subject to the provisions of this Section 15.2 (b), from time to time enter into written supplemental agreements to this Agreement or the Other Documents executed by Obligors, for the purpose of adding or deleting any provisions or otherwise changing, varying or waiving in any manner the rights of Lenders, Agent or Obligors thereunder or the conditions, provisions or terms thereof of waiving any Event of Default thereunder, but only to the extent specified in such written agreements; provided, however, that no such supplemental agreement shall, without the consent of all Lenders: (i) increase the Commitment Percentage or Commitment Amount of any Lender. (ii) extend the maturity of any Note or the due date for any amount payable hereunder, or decrease the rate of interest or reduce any fee payable by Obligors to Lenders pursuant to this Agreement. (iii) alter the definition of the term Required Lenders or alter, amend or modify this Section 15.2(b). (iv) release any Collateral during any calendar year (other than in accordance with the provisions of this Agreement) having an aggregate value in excess of $1,000,000. (v) change the rights and duties of Agent. (vi) permit any Revolving Advance to be made if after giving effect thereto the total of Advances outstanding hereunder would exceed the Formula Amount for more than sixty (60) consecutive Business Days or exceed one hundred and ten percent (110%) of the Formula Amount. (vii) increase the Advance Rates above the Advance Rates in effect on the Closing Date. (viii) increase the Maximum Revolving Advance Amount or permit any Revolving Advance to be made if after giving effect thereto the total of Revolving Advances outstanding hereunder would exceed the Formula Amount for more than sixty (60) consecutive Business Days or exceed one hundred ten percent (110%) of the Formula Amount. Any such supplemental agreement shall apply equally to each Lender and shall be binding upon Obligor, Lenders and Agent and all future holders of the Obligations. In the case of any waiver, Obligors, Agent and Lenders shall be restored to their former positions and rights, and any Event of Default waived shall be deemed to be cured and not continuing, but no waiver of a specific Event of Default shall extend to any subsequent Event of Default (whether or not the subsequent Event of Default is the same as the Event of Default which was waived), or impair any right consequent thereon. In the event that Agent requests the consent of a Lender in writing pursuant to this Section 15.2 and such Lender shall not respond or reply to Agent in writing within ten (10) days of delivery of such request, such Lender shall be deemed to have consented to matter that was the subject of the request. In the event that Agent requests the consent of a Lender pursuant to this Section 15.2 and such consent is denied, then PNC may, at its option, require such Lender to assign its interest in the Advances to PNC or to another Lender or to any other Person designated by the Agent (the "Designated Lender"), for a price equal to the then outstanding principal amount thereof plus accrued and unpaid interest and fees due such Lender, which interest and fees shall be paid when collected from Borrower. In the event PNC elects to require any Lender to assign its interest to PNC or to the Designated Lender, PNC will so notify such Lender in writing within forty five (45) days following such Lender's denial, and such Lender will assign its interest to PNC or the Designated Lender no later than five (5) days following receipt of such notice pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the Designated Lender, as appropriate, and Agent. 15.3. Successors and Assigns; Participations; New Lenders. (a) This Agreement shall be binding upon and inure to the benefit of Obligors, Agent, each Lender, all future holders of the Obligations and their respective successors and assigns, except that no Obligor may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Agent and each Lender. (b) Each Obligor acknowledges that in the regular course of commercial banking business one or more Lenders may at any time and from time to time sell participating interests in the Advances to other financial institutions (each such transferee or purchaser of a participating interest, a "Transferee"). Each Transferee may exercise all rights of payment (including without limitation rights of set-off) with respect to the portion of such Advances held by it or other Obligations payable hereunder as fully as if such Transferee were the direct holder thereof provided that Obligors shall not be required to pay to any Transferee more than the amount which it would have been required to pay to Lender which granted an interest in its Advances or other Obligations payable hereunder to such Transferee had such Lender retained such interest in the Advances hereunder or other Obligations payable hereunder and in no event shall Obligors be required to pay any such amount arising from the same circumstances and with respect to the same Advances or other Obligations payable hereunder to both such Lender and such Transferee. Each Obligor hereby grants to any Transferee a continuing security interest in any deposits, moneys or other property actually or constructively held by such Transferee as security for the Transferee's interest in the Advances. (c) Any Lender may with the consent of Agent which shall not be unreasonably withheld or delayed sell, assign or transfer all or any part of its rights under this Agreement and the Other Documents to one or more additional banks or financial institutions and one or more additional banks or financial institutions may commit to make Advances hereunder (each a "Purchasing Lender"), in minimum amounts of not less than $5,000,000, pursuant to a Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent and delivered to Agent for recording. Upon such execution, delivery, acceptance and recording, from and after the transfer effective date determined pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Lender thereunder with a Commitment Percentage as set forth therein, and (ii) the transferor Lender thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from its obligations under this Agreement, the Commitment Transfer Supplement creating a novation for that purpose. Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents. Obligors hereby consent to the addition of such Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents. Obligors shall execute and deliver such further documents and do such further acts and things in order to effectuate the foregoing. (d) Agent shall maintain at its address a copy of each Commitment Transfer Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Advances owing to each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and Obligors, Agent and Lenders may treat each Person whose name is recorded in the Register as the owner of the Advance recorded therein for the purposes of this Agreement. The Register shall be available for inspection by Obligors or any Lender at any reasonable time and from time to time upon reasonable prior notice. Agent shall receive a fee in the amount of $3,500 payable by the applicable Purchasing Lender upon the effective date of each transfer or assignment to such Purchasing Lender. (e) Obligors authorize each Lender to disclose, on a confidential basis, to any Transferee or Purchasing Lender and any prospective Transferee or Purchasing Lender any and all financial information in such Lender's possession concerning Obligors which has been delivered to such Lender by or on behalf of Obligors pursuant to this Agreement or in connection with such Lender's credit evaluation of Obligors. 15.4. Application of Payments. Agent shall have the continuing and exclusive right to apply or reverse and re-apply any payment and any and all proceeds of Collateral to any portion of the Obligations. To the extent that any Obligor makes a payment or Agent or any Lender receives any payment or proceeds of the Collateral for any Obligor's benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the Obligations or part thereof intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Agent or such Lender. 15.5. Indemnity. Each Obligor shall indemnify Agent, each Lender and each of their respective officers, directors, Affiliates, employees and agents from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, fees and disbursements of counsel) which may be imposed on, incurred by, or asserted against Agent or any Lender in any litigation, proceeding or investigation instituted or conducted by any governmental agency or instrumentality or any other Person with respect to any aspect of, or any transaction contemplated by, or referred to in, or any matter related to, this Agreement or the Other Documents, whether or not Agent or any Lender is a party thereto, except to the extent that any of the foregoing arises out of the willful misconduct or gross negligence of the party being indemnified. 15.6. Notice. Any notice or request hereunder may be given to any Obligor or to Agent or any Lender at their respective addresses set forth below or at such other address as may hereafter be specified in a notice designated as a notice of change of address under this Section. Any notice or request hereunder shall be given by (a) hand delivery, (b) overnight courier, (c) registered or certified mail, return receipt requested, (d) telex or telegram, subsequently confirmed by registered or certified mail, or (e) telecopy to the number set out below (or such other number as may hereafter be specified in a notice designated as a notice of change of address) with electronic confirmation of its receipt. Any notice or other communication required or permitted pursuant to this Agreement shall be deemed given (a) when personally delivered to any officer of the party to whom it is addressed, (b) on the earlier of actual receipt thereof or three (3) days following posting thereof by certified or registered mail, postage prepaid, or (c) upon actual receipt thereof when sent by a recognized overnight delivery service or (d) upon actual receipt thereof when sent by telecopier to the number set forth below with electronic confirmation of its receipt, in each case addressed to each party at its address set forth below or at such other address as has been furnished in writing by a party to the other by like notice: (A) If to Agent or PNC Bank, National Association PNC at: Two Tower Center Boulevard East Brunswick, New Jersey 08816 Attention: Peter R. Schryver, Sr. Vice President Telephone: 732-220-4334 Telecopier: 732-220-4399 with a copy to: Wilentz, Goldman & Spitzer 90 Woodbridge Center Driver Woodbridge, New Jersey 07095 Attention: Stuart A. Hoberman, Esq. Telephone: 732-855-6052 Telecopier: 732-855-6117 (B) If to a Lender other than Agent, as specified on the signature pages hereof (C) If to Obligors at: Philipp Brothers Chemicals, Inc. One Parker Plaza Fort Lee, New Jersey 07024 Attention: Nathan Bistricer, CFO Telephone: 201-944-6020 Telecopier: 201-944-6425 with a copy to: Golenbock, Eiseman, Assor & Bell 437 Madison Avenue New York, New York 10022 Attention: Nathan E. Assor, Esq. Telephone: 212-907-7300 Telecopier: 212-754-0330 15.7. Survival. The obligations of Borrowers under Sections 2.3(f), 3.7, 3.8, 3.9, 4.19(h), 14.7 and 15.5 shall survive termination of this Agreement and the Other Documents and payment in full of the Obligations. 15.8. Severability. If any part of this Agreement is contrary to, prohibited by, or deemed invalid under applicable laws or regulations, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible. 15.9. Expenses. All costs and expenses including, without limitation, reasonable attorneys' fees (including the allocated costs of in house counsel) and disbursements incurred by Agent, Agent on behalf of Lenders and Lenders (a) in all efforts made to enforce payment of any Obligation or effect collection of any Collateral, or (b) in connection with the entering into, modification, amendment, administration and enforcement of this Agreement or any consents or waivers hereunder and all related agreements, documents and instruments, or (c) in instituting, maintaining, preserving, enforcing and foreclosing on Agent's security interest in or Lien on any of the Collateral, whether through judicial proceedings or otherwise, or (d) in defending or prosecuting any actions or proceedings arising out of or relating to Agent's or any Lender's transactions with any Obligor, or (e) in connection with any advice given to Agent or any Lender with respect to its rights and obligations under this Agreement and all related agreements, may be charged to Borrower's Account and shall be part of the Obligations. 15.10. Injunctive Relief. Each Obligor recognizes that, in the event any Obligor fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy at law may prove to be inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving that actual damages are not an adequate remedy. 15.11. Consequential Damages. Neither Agent nor any Lender, nor any agent or attorney for any of them, shall be liable to any Obligor for consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations. 15.12. Captions. The captions at various places in this Agreement are intended for convenience only and do not constitute and shall not be interpreted as part of this Agreement. 15.13. Counterparts; Telecopied Signatures. This Agreement may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto. 15.14. Construction. The parties acknowledge that each party and its counsel have reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments, schedules or exhibits thereto. 15.15. Confidentiality; Sharing Information. (a) Agent, each Lender and each Transferee shall hold all non-public information obtained by Agent, such Lender or such Transferee pursuant to the requirements of this Agreement in accordance with Agent's, such Lender's and such Transferee's customary procedures for handling confidential information of this nature; provided, however, Agent, each Lender and each Transferee may disclose such confidential information (a) to its examiners, affiliates, outside auditors, counsel and other professional advisors, (b) to Agent, any Lender or to any prospective Transferees and Purchasing Lenders, and (c) as required or requested by any Governmental Body or representative thereof or pursuant to legal process; provided, further that (i) unless specifically prohibited by applicable law or court order, Agent, each Lender and each Transferee shall use its best efforts prior to disclosure thereof, to notify the applicable Obligor of the applicable request for disclosure of such non-public information (A) by a Governmental Body or representative thereof (other than any such request in connection with an examination of the financial condition of a Lender or a Transferee by such Governmental Body) or (B) pursuant to legal process and (ii) in no event shall Agent, any Lender or any Transferee be obligated to return any materials furnished by any Obligor other than those documents and instruments in possession of Agent or any Lender in order to perfect its Lien on the Collateral once the Obligations have been paid in full and this Agreement has been terminated. (b) Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to such Obligor or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and each Obligor hereby authorizes each Lender to share any information delivered to such Lender by such Obligor and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of such Lender, it being understood that any such Subsidiary or Affiliate of any Lender receiving such information shall be bound by the provision of Section 15.15 as if it were a Lender hereunder. Such authorization shall survive the repayment of the other Obligations and the termination of the Loan Agreement. 15.16. Publicity. Agent may, with the prior written consent of the Borrower, which consent shall not be unreasonably withheld, make appropriate announcements of the financial arrangement entered into among Obligors, Agent and Lenders, including, without limitation, announcements which are commonly known as tombstones, in such publications and to such selected parties designated by Agent. Each of the parties has signed this Agreement as of the day and year first above written. PHILIPP BROTHERS CHEMICALS, INC. ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------ Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President One Parker Plaza Fort Lee, N.J. 07024 PHIBRO-TECH, INC. ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ----------------------------------- Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President One Parker Plaza Fort Lee, N.J. 07024 C P CHEMICALS, INC. ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------ Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President One Parker Plaza Fort Lee, N.J. 07024 THE PRINCE MANUFACTURING COMPANY (PA) ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------- Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President 700 Lehigh Street Bowmanstown, P.A. 18030 THE PRINCE MANUFACTURING COMPANY (IL) ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------- Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President One Prince Plaza P.O. Box 1009 Quincy, Il. 62306 PRINCE AGRIPRODUCTS, INC. ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------- Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President One Prince Plaza P.O. Box 1009 Quincy, Il. 62306 MINERAL RESOURCE TECHNOLOGIES, L.L.C. By: MRT MANAGEMENT CORP., as Managing Member ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------- Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President 120 Interstate North Parkway East Suite 440 Atlanta, G.A. 30339 MRT MANAGEMENT CORP. ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------- Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President 120 Interstate North Parkway East Suite 440 Atlanta, G.A. 30339 KOFFOLK, INC. ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------- Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President One Parker Plaza Fort Lee, N.J. 07024 PHIBRO-CHEM, INC. ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------- Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President One Parker Plaza Fort Lee, N.J. 07024 PHIBROCHEMICALS, INC. ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------- Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President One Parker Plaza Fort Lee, N.J. 07024 WESTERN MAGNESIUM CORP. ATTEST: BY: /s/ Joseph M. Katzenstein By: /s/ Nathan Z. Bistricer --------------------------------- ------------------------------- Joseph M. Katzenstein, Secretary Nathan Z. Bistricer, Vice President One Parker Plaza Fort Lee, N.J. 07024 PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent By: /s/ Peter J. Mardaga ------------------------------- Name: PETER J. MARDAGA Title: VICE PRESIDENT Two Tower Center Boulevard East Brunswick, New Jersey 08816 Commitment Percentage: 100% EX-10.3 7 0007.txt MANUFACTURING AGREEMENT CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. MANUFACTURING AGREEMENT This Manufacturing Agreement (hereinafter the "Agreement"), made and effective as of the 15th day of May, 1994, by and between Merck & Co., Inc., a corporation incorporated under the laws of the State of New Jersey, U.S.A., having its office at One Merck Drive, Whitehouse Station, New Jersey 08889, U.S.A. (hereinafter referred to as "MERCK") and Koffolk, Ltd. and Philipp Brothers Chemicals, Inc., companies organized and existing under the laws of Israel and New York, respectively and having offices at P. 0. Box 1098, 61010 Tel Aviv, Israel and One Parker Plaza, Fort Lee, New Jersey 07024, U.S.A., respectively (hereinafter collectively referred to as "KOFFOLK'). WITNESSETH: WHEREAS, KOFFOLK has experience MANUFACTURING quantities of Amprolium; and WHEREAS, MERCK desires to engage the facilities and services of KOFFOLK to MANUFACTURE, as defined below, for MERCK; and WHEREAS, KOFFOLK is willing to undertake MANUFACTURE of the PRODUCT, as defined below, for MERCK in accordance with the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants of the parties hereinafter set forth, the parties hereto agree as follows: The following terms are used in this Agreement and shall have the meanings set forth in this Section: 1.1 The term "PRODUCT" shall mean Amprolium, which is to be MANUFACTURED in strict accordance with current GOOD MANUFACTURING PRACTICES and the KNOW-HOW, defined below, which is to meet the specifications set forth in Schedule A and which is to be packaged as set forth in Schedule B. Schedule A may be modified from time to time by MERCK in consultation with KOFFOLK 1.2 The term "MANUFACTURE/MANUFACTURING/MANUFACTURED" except as may otherwise be agreed in writing by the parties hereto, shall mean all operations in the production, packaging, quality control testing and storage of the PRODUCT and storage of all raw materials and packaging components for PRODUCT. 1.3 The term "KNOW-HOW' shall mean information and data which MERCK has determined to be necessary to MANUFACTURE the PRODUCT, whenever disclosed to KOFFOLK, including but not limited to the information contained in the designated binders referred to as "Technical Know-How Package" listed in Schedule C, which may be modified by MERCK at any time. "KNOW-HOW' is covered within the definition of "INFORMATION" in Section 3.1 below and is subject to the terms of that Section. 1.4 The term "AGENCY" shall mean any applicable Israeli government regulatory authority involved in granting approvals for the MANUFACTURING of the PRODUCT in Israel. 1.5 The term "CALENDAR QUARTER" shall mean the period of each three consecutive calendar months ending on March 31, June 30, September 30 or December 31, as the case may be. 1.6 The term "CALENDAR YEAR" shall mean the period from January 1 through December 31 in a given year. 1.7 The term "AFFILIATE" shall mean (i) any corporation, company or other business entity, fifty percent (50%) or more of the voting stock of which is owned directly or indirectly by MERCK or KOFFOLK, (ii) any corporation, company or business entity, which owns, directly or indirectly, fifty percent (50%) or more of the voting stock of MERCK or KOFFOLK or (iii) any corporation, company or other business entity under the direct or indirect control of a corporation, company or business entity described in (i) or (ii). 1.8 The term "FACILITY" shall mean KOFFOLK's facility located at Plant 04, Ramat Chovav, Israel, and all KOFFOLK facilities at that location used for the MANUFACTURING and storage of PRODUCT, raw materials and packaging components. 1 9 "IMMEDIATE/IMMEDIATELY" shall mean within forty-eight (48) hours. 1.10 "PROMPT/PROMPTLY' shall mean within thirty (30) days. 1.11 The term "current GOOD MANUFACTURING PRACTICES" shall mean all laws and regulations which have jurisdiction over the MANUFACTURE of the PRODUCT at the time of MANUFACTURE, including but not limited to the Good Manufacturing Practices as specified in the United States Code of Federal Regulations, the EEC Good Manufacturing Guidelines and any other applicable laws, guidelines and/or regulations. 1.12 The term "INTERMEDIATES" shall mean isolated chemical compounds in the MANUFACTURE of the PRODUCT as stated in the KNOW-HOW. 2. APPOINTMENTS 2.1 (a) MERCK hereby appoints KOFFOLK to act for and on behalf of MERCK to MANUFACTURE the PRODUCT at KOFFOLK's FACILITY subject to the conditions and terms set forth herein, and KOFFOLK accepts such appointment to MANUFACTURE the PRODUCT and to do such other acts as are herein authorized. All PRODUCT MANUFACTURED in accordance with this Agreement shall be the exclusive property of MERCK and shall be supplied to MERCK or any person or entity that MERCK shall designate in writing. (b) During the term of this Agreement: (i) KOFFOLK shall not use the KNOW-HOW or any other information, data or material provided by MERCK hereunder or in connection with this Agreement, either in whole or part, for any purpose other than to MANUFACTURE PRODUCT for MERCK hereunder and (ii) KOFFOLK shall not sell or otherwise provide PRODUCT or any material made using any KNOW-HOW to anyone except MERCK, provided that KOFFOLK may sell INTERMEDIATES to a third party who shall agree to refrain from using such INTERMEDIATES to produce any product containing Amprolium and from providing such INTERMEDIATES to anyone else for such use. (c) Upon termination or natural expiration of this Agreement, and continuing for the duration of KOFFOLK's obligations of confidentiality and non-use set forth in Section 3 below and in the Confidentiality Agreement referred to in Section 3.1(h) below, KOFFOLK shall cease using the KNOW-HOW for any purpose, unless otherwise agreed to in writing by MERCK. 2.2 The appointment of KOFFOLK to MANUFACTURE is exclusive for the PRODUCT. However, MERCK 2 shall be able to (i) manufacture PRODUCT itself up to January 1, 1996, and (ii) make other arrangements for the manufacture of PRODUCT if at any time KOFFOLK is unable to fill orders placed by MERCK under Section 7 below for three (3) consecutive months. Also, this Agreement has no effect on MERCK's right to sell its inventory of Amprolium. 2.3 (a) The parties agree to comply with all laws and regulations of any regulatory authority necessary for MANUFACTURING of PRODUCT. KOFFOLK shall be responsible for obtaining all the necessary permits and licenses for the MANUFACTURE of PRODUCT. KOFFOLK agrees to prepare and file Type I and Type II Drug Master Files with the U. S. Food and Drug Administration to allow for the sale of PRODUCT in the U.S. MERCK will provide reasonable assistance to KOFFOLK in the preparation of the Type I and II Drug Master Files. KOFFOLK shall also undertake any actions to keep those Drug Master Files updated. KOFFOLK will fully cooperate with MERCK in connection with any filings that MERCK makes with regulatory authorities outside of the United States relating to the PRODUCT. KOFFOLK agrees to comply with all applicable regulations in order to allow for sale of PRODUCT in any market in which it may be sold. (b) During the term of this Agreement KOFFOLK agrees to permit MERCK to reference those Drug Master Files in connection with MERCK's filing of any supplement with the FDA, or as otherwise needed by MERCK. (c) During the term of this Agreement and thereafter KOFFOLK shall not permit anyone other than MERCK to reference or otherwise use the Type II Drug Master Files referred to in Section 2.3(a) above without the prior written consent of MERCK 2.4 The obligations of MERCK hereunder may be fulfilled either by MERCK or an AFFILIATE. 3. CONFIDENTIALITY 3.1 KOFFOLK agrees that any and all KNOW-HOW or other information or data, whether written, graphic or oral which may be provided by MERCK to KOFFOLK (including any analysis, materials, product or conclusions drawn or derived therefrom) or which may be derived from or related to any visits by KOFFOLK personnel to MERCK or may be otherwise known to KOFFOLK through its visits or contact with MERCK (hereinafter individually and collectively referred to as"INFORMATION") shall be disclosed by MERCK and used by KOFFOLK subject to the following terms and conditions: (a) KOFFOLK shall keep all INFORMATION in confidence and will not, without MERCK's prior written consent, disclose said INFORMATION to any person or entity, except those of KOFFOLK's officers and employees who directly require said INFORMATION for fulfillment of the purpose of this Agreement. Each officer or employee to whom INFORMATION is to be disclosed shall be advised by KOFFOLK of, and be bound by the terms of this Agreement. KOFFOLK shall take all reasonable precautions to prevent INFORMATION from being disclosed to any unauthorized person or entity. (b) KOFFOLK shall not use, either directly or indirectly, any INFORMATION for any purpose other than to MANUFACTURE PRODUCT for MERCK hereunder without MERCK's prior written consent. (c) KOFFOLK's obligations of confidentiality set forth herein shall not apply to any INFORMATION which is: (i) possessed by KOFFOLK prior to receipt from MERCK, other than through prior disclosure by MERCK, as evidenced by KOFFOLK's written records; 3 (ii) published or available to the general public other than through a breach of this Agreement or other obligation of confidentiality by KOFFOLK; or (iii) obtained by KOFFOLK from a third party with a valid right to disclose such INFORMATION, provided that said third party is not under a confidentiality obligation to MERCK or the disclosing party if other than MERCK. Any combination of features or disclosures shall not be deemed to fall within the foregoing exclusions merely because individual features are published or available to the general public or in the rightful possession of KOFFOLK unless the combination itself and principle of operation are published or available to the general public or in the rightful possession of KOFFOLK. (d) All INFORMATION, without limitation, shall remain the personal and proprietary property of MERCK. KOFFOLK shall not acquire any license or other intellectual property interest in any INFORMATION disclosed to it by MERCK. Further, disclosure of INFORMATION shall not result in any obligation to grant KOFFOLK any right in and to said INFORMATION. (e) Any and all discoveries and/or inventions by KOFFOLK, whether or not patentable, resulting from KOFFOLK's use of INFORMATION shall be the sole and exclusive property of MERCK. Within thirty (30) calendar days of any discovery or invention, KOFFOLK shall notify MERCK, in writing, of the event and shall assist MERCK in protecting MERCK's proprietary rights to said discovery or invention. (f) Upon request by MERCK, KOFFOLK shall immediately return to MERCK all INFORMATION, all notes which may have been made regarding the INFORMATION, and all copies thereof, except that KOFFOLK may retain one copy of each item of INFORMATION provided that said copy shall be retained and used solely for compliance purposes and shall be held in KOFFOLK's confidential legal files. (g) In the event that KOFFOLK is required by judicial or administrative process to disclose any or all of the INFORMATION, KOFFOLK shall promptly notify MERCK and allow MERCK a reasonable time to oppose such process before disclosing any INFORMATION. (h) The obligations of confidentiality and non-use created herein shall be binding upon KOFFOLK, its successors and assigns with respect to each successive disclosure of INFORMATION and, with respect to each disclosure, shall continue for fifteen (15) years from the date of said disclosure. The obligations of confidentiality and non-use under the Confidentiality Agreement between the parties last dated September 6, 1993 shall also continue for fifteen (15) years from the date of any disclosure under that Confidentiality Agreement. 4. FACILITY 4.1 KOFFOLK hereby undertakes to MANUFACTURE PRODUCT at its FACILITY and store raw materials and packaging components at that FACILITY. The Facility shall meet current GOOD MANUFACTURING PRACTICES. KOFFOLK shall not change the location at which it MANUFACTURES PRODUCT without the prior written approval of MERCK. KOFFOLK may change the location at which it stores raw materials and packaging components provided that any such storage location meets current GOOD MANUFACTURING PRACTICES. 5. EQUIPMENT 5.1 KOFFOLK agrees, at its cost, to operate the FACILITY and all equipment and machinery used, directly or 4 indirectly, to MANUFACTURE PRODUCT in accordance with current GOOD MANUFACTURING PRACTICES and in accordance with applicable regulatory agency requirements, and to maintain said FACILITY, equipment and machinery in an acceptable state of repair and operating efficiency so as to meet specifications as set forth in Schedule A and the KNOW-HOW and all regulatory requirements. KOFFOLK will be responsible for validating the equipment and all processes and procedures involving production, cleaning, packaging and any other appropriate steps performed at the FACILITY. Such validation by KOFFOLK must meet the validation criteria set forth in the KNOW-HOW and all applicable regulatory requirements and receive all required regulatory approvals. 5.2 During the term of this Agreement, the FACILITY shall be dedicated solely to MANUFACTURING PRODUCT. However, if under Section 7.1 below MERCK places binding orders in any CALENDAR YEAR for less than [ ] of PRODUCT, KOFFOLK shall have the option to use the FACILITY to manufacture another product provided (i) KOFFOLK may not manufacture any other product without providing written notice to MERCK in advance in order to permit MERCK to consider any potential question of cross-contamination; (ii) if MERCK identifies a potential problem of cross-contamination, the parties will meet to attempt to resolve the problem and (iii) KOFFOLK shall not manufacture any product in the FACILITY which MERCK considers to present cross-contamination problems. KOFFOLK will supply MERCK PROMPTLY with a copy of all governmental and/or regulatory submissions associated with the FACILITY. KOFFOLK will IMMEDIATELY notify MERCK in the event that it becomes aware of any risks of contamination associated with MANUFACTURING PRODUCT at the FACILITY. 6. SUPPLY OF MATERIALS 6.1 KOFFOLK shall purchase all necessary raw materials and packaging components in adequate quantities which are required for MANUFACTURING and shipping the PRODUCT and shall perform all quality control testing on those raw materials and packaging components as set forth in the KNOW-HOW. All such packaging components and raw materials shall meet the requirements set forth in Schedule B and the KNOW-HOW, respectively. MERCK reserves the right to approve all raw materials and packaging components and shall not unreasonably withhold such approval. For the purpose of approval by MERCK, KOFFOLK will also inform MERCK in writing prior to any changes to sources of supply. KOFFOLK warrants that all packaging components and raw materials supplied hereunder shall meet the requirements of Schedule B and the KNOW-HOW, respectively, and of the applicable regulatory agencies relative to such components and materials. 7 FORECASTING, PLACING AND SCHEDULING OF ORDERS 7.1 In order that KOFFOLK may forecast production planning needs, MERCK shall submit to KOFFOLK within one hundred and twenty (120) days of each CALENDAR QUARTER a non-binding estimate of its marketing requirements of PRODUCT for that CALENDAR QUARTER. MERCK shall, at least sixty (60) days before the beginning of each month, place a binding order with KOFFOLK for the quantity of PRODUCT required by MERCK for that month and which KOFFOLK shall have ready for delivery under Section 12 below for that month. MERCK's current non-binding estimate of its yearly requirements of PRODUCT is between [ ]. As soon as possible after execution of the Agreement, MERCK will provide KOFFOLK with a non-binding estimate of its marketing requirements of PRODUCT for the following four (4) months and shall also provide its binding order of PRODUCT required by MERCK for the following two (2) months. Unless otherwise agreed to by the parties, MERCK shall place its orders in full container loads. MERCK will make its best effort to place its orders for a CALENDAR YEAR in approximately equal quarterly amounts. Notwithstanding the foregoing, KOFFOLK shall make every effort to comply with changes that MERCK wishes to make to a binding order, but shall not be held liable for its inability to do so. 5 8. QUALITY 8.1 The rights conferred by this Agreement are conditioned upon KOFFOLK undertaking the MANUFACTURE of PRODUCT strictly in accordance with the KNOW-HOW, current GOOD MANUFACTURING PRACTICES and all applicable regulatory requirements. KOFFOLK recognizes the serious nature of this Agreement and warrants that it will fully comply with the undertaking set forth in the preceding sentence. 8.2 KOFFOLK may not change the process by which PRODUCT is MANUFACTURED without prior written consent of MERCK. 8.3 KOFFOLK hereby agrees that MERCK or an AFFILIATE shall have the right to have reasonable access to the FACILITY during normal business hours in order to ascertain compliance by KOFFOLK with the terms of this Agreement, including but not limited to, inspection of MANUFACTURE of PRODUCT, storage facilities for PRODUCT, raw materials and packaging components, all equipment and machinery and all records relating to such MANUFACTURE, storage, equipment and machinery. Observations and conclusions of any MERCK audit will be discussed with and then issued to KOFFOLK, and corrective action shall be agreed upon by MERCK and KOFFOLK within twenty (20) days after MERCK delivers its audit report to KOFFOLK. Such corrective action will be implemented by KOFFOLK within forty-five (45) days of MERCK and KOFFOLK having agreed to the corrective action, unless otherwise agreed by the parties. 8.4 KOFFOLK hereby agrees to advise MERCK IMMEDIATELY of any proposed or unannounced visit or inspection of the FACILITY or relating to the PRODUCT or its MANUFACTURE by any regulatory authority and will permit MERCK to be present. If MERCK is not present during such a visit or inspection KOFFOLK shall IMMEDIATELY prepare and provide MERCK with a full report, in English, of the visit or inspection. KOFFOLK shall also IMMEDIATELY provide MERCK with copies of any letters, reports or other documents issued by any regulatory authority relative to such inspection. KOFFOLK shall prepare a response to any inspection report from a regulatory authority and shall submit it to MERCK for review and concurrence prior to submission to the regulatory authority. KOFFOLK shall also advise MERCK of any regulatory issues regarding any other product made, handled or stored at any other plant at KOFFOLK's Ramat Chovav operation which would affect MANUFACTURE of the PRODUCT. 8.5 KOFFOLK shall provide MERCK, at the cost and expense of KOFFOLK, samples in reasonable quantities and with relevant documentation from each production lot of PRODUCT. KOFFOLK and MERCK shall concurrently perform, at their respective quality control laboratories, such quality control tests as are indicated in the KNOW-HOW. KOFFOLK shall make the results of its quality control tests available to MERCK as directed. MERCK shall initiate all required quality control tests within fourteen (14) days of receipt of samples and MERCK shall advise KOFFOLK of the results without undue delay. Until such time as MERCK is satisfied that KOFFOLK's quality control laboratories are routinely achieving accurate test results within tolerance limits specified in MERCK's control procedures for the PRODUCT, no production lot of PRODUCT shall be released for delivery unless specific approval has been given in writing by MERCK. KOFFOLK is responsible for obtaining and retaining [ ] required for quality control release testing as indicated in the KNOW-HOW. KOFFOLK will perform annual stability testing at its cost in accordance with the specifications contained in the KNOW-HOW. When MERCK is satisfied that KOFFOLK routinely is reporting accurate test results within the approved tolerance limits, MERCK may inform KOFFOLK in writing that thereafter, until further notice, the PRODUCT may be released for delivery if KOFFOLK's tests, performed in accordance with procedures supplied by MERCK, show the PRODUCT to meet MERCK's acceptable quality standards. However, even after waiving such prior quality control approval, MERCK shall have the right to request representative samples of PRODUCT and KOFFOLK shall satisfy such requests. Any such 6 waiver may be revoked at any time and shall not constitute a waiver of or affect in any way KOFFOLK obligations hereunder. KOFFOLK shall at all times ensure that PRODUCT is in conformity with the standards of quality currently applied by MERCK, and that the labels affixed to the PRODUCTS are those duly approved by MERCK and the relevant government authorities, where necessary, and shall bear the appropriate identification as may from time to time be determined by MERCK. 8.6 MERCK will specify all required labeling as agreed by the relevant government authorities, as necessary on the PRODUCT and all components and containers. KOFFOLK will comply with all specified labeling and use only labeling which has been approved in writing by MERCK in advance. 8.7 Should any production lot fail to meet the specifications set forth in Schedule A, such lot shall not be released. The loss resulting from such deficiency and the cost to dispose of or return the lot shall be borne by the party who is at fault, which shall be determined by MERCK's technical staff. If KOFFOLK does not agree with MERCK's determination of fault, the parties shall meet to attempt to resolve their differences. If the parties are unable to resolve their differences as to fault, then either party may refer the matter for final decision to a specialized firm of international reputation acceptable to both parties hereto. The decision of such firm shall be binding on both parties hereto. If MERCK is found to be at fault, it shall pay KOFFOLK the fee which it would have otherwise paid for the MANUFACTURE of the lot. If KOFFOLK is found to be at fault, it shall bear all costs for the lot. The party at fault shall pay the cost for the above-referenced specialized firm. 8.8 No PRODUCT or material made hereunder shall be re-worked unless such rework is permitted under the U.S. NADA for the PRODUCT. 8.9 KOFFOLK shall provide MERCK with quality control release certificates related to the PRODUCT for each batch. At MERCK's request, KOFFOLK shall provide MERCK with other MANUFACTURING records. 9. RECALL 9.1 In the event MERCK or an AFFILIATE shall be required or shall voluntarily decide to recall any PRODUCT MANUFACTURED by KOFFOLK pursuant to this Agreement, then KOFFOLK shall fully cooperate with MERCK or its AFFILIATE in connection with the recall. If such recall is initiated because of a defect in the PRODUCT resulting from KOFFOLK's negligence in the MANUFACTURE or delivery of the PRODUCT, KOFFOLK will credit MERCK for the price it invoiced MERCK for all PRODUCT returned and, in addition, KOFFOLK will reimburse MERCK for all reasonable recall expenses in connection therewith. 9.2 KOFFOLK agrees to abide by all decisions of MERCK or an AFFILIATE to recall a PRODUCT and both parties shall fully cooperate with each other in the event of any recall of PRODUCT MANUFACTURED under this Agreement. 10. COMPLAINTS 10.1 KOFFOLK and MERCK shall notify each other IMMEDIATELY if either receives any notice of a serious adverse reaction pertaining to the PRODUCT. KOFFOLK shall report monthly to MERCK all information concerning a complaint of any kind relating to the PRODUCT MANUFACTURED hereunder, its components or packaging, including but not limited to any PRODUCT quality complaint, or any side effect, injury, toxicity or sensitivity reaction. 10.2 MERCK and KOFFOLK will maintain complaint files regarding components for packaging, including but 7 not limited to any PRODUCT quality complaints. MERCK and KOFFOLK will notify each other IMMEDIATELY of any health hazards with respect to the PRODUCT which have impacted or may impact the employees involved in the production proce11. PURCHASES AND COMPENSATION 11.1 From the date of this Agreement through January 31, 1995, the price that MERCK shall pay for each kilogram of PRODUCT MANUFACTURED by KOFFOLK for MERCK hereunder shall be [ ]. From February 1, 1995 through December 31, 1995, the price that MERCK shall pay for [ ]. The period from the date of this Agreement through December 31, 1995 shall be referred to herein as the "INITIAL PERIOD". During said INITIAL PERIOD MERCK shall purchase [ ] of PRODUCT. 11.2 (a) Upon termination of the INITIAL PERIOD, and for the remainder of the term of this Agreement, the price that MERCK shall pay for [ ]. (b) If as of December 31, 1995, [ ]. (c) Commencing with the 4th CALENDAR QUARTER of 1996 and every subsequent 4th CALENDAR QUARTER during the term of the Agreement, the parties shall jointly review any changes in [ ]. (d) If under paragraph 11.2(c) above, the parties jointly determine that [ ]. (e) Except as provided below, commencing January 1, 1997, and any subsequent January 1 during the term of this Agreement, [ 8 ]. (f) During the first CALENDAR QUARTER of 1997 and any subsequent first CALENDAR QUARTER during the term of this Agreement, the parties shall jointly review [ ]. 11.3 KOFFOLK shall submit an invoice covering each kilogram of PRODUCT MANUFACTURED by KOFFOLK for MERCK hereunder on the date that the PRODUCT is delivered under Section 12.3 below, and such invoice shall be accompanied by appropriate documentation evidencing performance of the invoiced activity. MERCK will pay such invoices with appropriate documentation within forty-five (45) days of MERCK's receipt of the PRODUCT. 11.4 KOFFOLK agrees that it shall keep accurate records in sufficient detail to enable the amounts due to KOFFOLK hereunder to be determined and, upon MERCK's request shall permit an independent chartered accountant, selected and paid for by MERCK, except one to whom KOFFOLK has reasonable objection, to have access during ordinary business hours to such of KOFFOLK's records as may be necessary to determine the correctness of any payment made or to be made under this Agreement. This right of audit shall apply to [ ] as described in Sections 11.1 and 11.2 above. Said accountant shall not disclose to MERCK any information other than information relating to the accuracy of reports and payments made under this Agreement, and in no event are the quantities and prices to individual customers or the names of those customers to be disclosed to MERCK. In the event of a determination by the independent chartered accountant that there has been an inaccurate calculation or payment, an appropriate adjustment shall be made to the next payment by MERCK. In the event that the adjustment requires payment from KOFFOLK to MERCK, subsequent payments by MERCK shall be reduced until no further payments are due from KOFFOLK. 11.5 Commencing January 1, 1996, if during any CALENDAR YEAR of this Agreement [ ]. 11.6 If through no fault of KOFFOLK withdrawal of PRODUCT is required by regulatory bodies in United States, France and the United Kingdom prior to January 1, 1996, MERCK and KOFFOLK will agree to negotiate in good faith, compensation for KOFFOLK's efforts. 11.7 If KOFFOLK is unable to obtain any license, permit or certificate which is necessary for it to perform its obligations hereunder or if MERCK is unable to supplement its registration for the PRODUCT in the United States, France or the United Kingdom in order to allow KOFFOLK to be MANUFACTURER of PRODUCT, the parties shall meet to determine in good faith whether the Agreement should be terminated and what, if any, compensation should be due to either party. 12. STORAGE AND DELIVERY OF PRODUCT 12.1 KOFFOLK shall, in accordance with the KNOW-HOW, maintain adequate storage accommodations for all the raw materials, packaging components and PRODUCT. 9 12.2 PRODUCT which has received quality control release shall be stored by KOFFOLK in a separate segregated area. 12.3 KOFFOLK shall deliver the PRODUCT to the port and under the terms identified by MERCK. 12.4 Claims that any shipment of PRODUCT does not meet the specifications contained in Schedule A or the indicated quantity shall be made by MERCK to KOFFOLK in writing within sixty (60) days following receipt thereof. Upon the receipt of a claim from MERCK, KOFFOLK shall assay its retained sample of PRODUCT. If KOFFOLK agrees with MERCK's claim and the defect is the fault of KOFFOLK, KOFFOLK shall replace the PRODUCT. If the parties are unable to resolve their differences, then either party may refer the matter for final analysis to a specialized firm of international reputation acceptable to both parties. The analysis of such firm shall be binding on both parties hereto. The party at fault shall pay the cost for such specialized firm and any costs associated with the disposal of PRODUCT. 13. RECORDS 13.1 All records relating to MANUFACTURING of any PRODUCT shall be retained by KOFFOLK for a period of not less than seven (7) years from the date of MANUFACTURE of each lot of PRODUCT to which said records pertain. KOFFOLK shall provide MERCK with copies of the appropriate documents for each production lot, as requested by MERCK. 14. TERM 14.1 The term of this Agreement shall begin on the date first written above and shall continue for a period of [ ], unless terminated sooner as provided for below. At least six (6) months prior to the termination date of this Agreement, the parties shall decide whether the Agreement will be extended, and if so, on what terms. 15. TERMINATION 15.1 MERCK shall have the right to terminate this Agreement in whole or in part, in the event KOFFOLK fails to fill orders placed by MERCK under Section 7 above for three (3) consecutive months. 15.2 Either party shall have the right to terminate this Agreement if the other party files a petition in bankruptcy, or enters into an agreement with its creditors, or applies for or consents to the appointment of a receiver or trustee, or makes an assignment for the benefit of creditors, or suffers or permits the entry of an order adjudicating it to be bankrupt or insolvent. 15.3 If either party materially breaches any of the provisions of this Agreement, and such breach is not cured within ninety (90) days after the giving of written notice by the other party specifying such breach, the other party shall have the right to terminate this Agreement without penalty upon a further sixty (60) days' written notice. 15.4 INFORMATION exchanged between MERCK and KOFFOLK for the MANUFACTURE of the PRODUCT shall be PROMPTLY returned to the disclosing party upon termination or natural expiration of the AGREEMENT or, at any time, upon request by the disclosing party. 15.5 In the event of the sale of the controlling interest of the business of KOFFOLK, other than through a public offering of stock for which a registration is filed with the applicable regulatory authority, or the assignment or delegation by either party of its rights or obligations hereunder in violation of Section 20 below, KOFFOLK, in the event of such sale, or either party, in the event of such assignment, shall be required to 10 provide IMMEDIATE notice to the other party and said other party shall have the right to terminate this Agreement within forty-five (45) days of receipt of such notice. Any notice of termination must be in writing and shall give rise to immediate termination of the Agreement. Furthermore, no penalty shall be due either party if the other party terminates pursuant to this Paragraph. 15.6 KOFFOLK shall not be entitled in connection with the termination or natural expiration of this Agreement, in accordance with its terms, to claim any indemnity, reimbursement or compensation for alleged losses of clientele, good will, loss of profits on anticipated sales or the like, and MERCK shall have no liability for losses or damages which might result from said termination or natural expiration of the Agreement. KOFFOLK acknowledges that it had decided and will decide on all investment expenditures and commitments in full awareness of the possibility of losses or damages resulting from termination or natural expiration of the Agreement and is willing to bear the risk thereof. 15.7 Upon termination of this Agreement, the provisions of Sections 2.1(c), 2.3(c), 3, 9, 10, 11.4, 12.4, 13, 15.4, 15.6, 15.7, 18, 21, 22, 23-27, 29 and 30 shall survive. The definitions in Section 1 above needed for the above surviving provisions shall also survive. 16. AMENDMENTS 16.1 No modifications, changes, alterations, or additions to this Agreement shall be effective unless in writing, properly executed by authorized representatives of both parties, and identified as an Amendment to this Agreement. 17. FORCE MAJEURE 17.1 Unless expressly provided for within this Agreement, neither party shall be responsible for any failure to comply with the terms of this Agreement where such failure is due to force majeure, which shall include, without limitation, fire, flood, explosion, strike, labor disputes, labor shortages, picketing, lockout, transportation embargo, or failures or delays in transportation, strikes or labor disputes affecting supplies, or acts of God, civil riot or insurrection, war, acts of the Government or any agency thereof judicial action or other reason of a like nature not the fault of the party delayed in performing work or doing acts required under the terms of this Agreement. Specifically excluded from this definition are those acts of Government (of the U.S. or Israel) or any agency thereof or judicial action which could have been avoided by compliance with such laws or regulations, publicly available and reasonably expected to be known by KOFFOLK or MERCK 17.2 Paragraph 17.1 shall not be available, however, to any party who fails to use reasonable diligence to remedy, remove or mitigate such cause and the effects thereof in an adequate manner and with all reasonable dispatch. The requirement that any force majeure hereunder and the effects thereof be remedied, removed or mitigated with all reasonable dispatch shall not require the settlement of strikes or labor controversies by acceding to the demands of the opposing party or parties. 17.3 The party affected by any such force majeure shall promptly notify the other, explaining the nature, details and expected duration thereof Such party shall also advise the other from time to time as to when the other can expect the affected party to resume performance in whole or in part of its obligations hereunder, as well as notify the other at the expiration of any such force majeure. If a party anticipates that force majeure may occur, including but not limited to a strike, that party shall also promptly notify the other explaining the nature, details and expected duration thereof Should any force majeure excusing performance hereunder result in a delay in performance or nonperformance in whole or in part which extends for a period exceeding ninety (90) days, either party may terminate this Agreement after such ninety (90) days on fifteen (15) days prior written notice. 11 18. INDEMNITY 18.1 KOFFOLK shall indemnify and hold MERCK and its AFFILIATES harmless from and against any and all claims, losses, liabilities and expenses (including but not limited to reasonable lawyers' fees and other litigation costs) arising out of or resulting from KOFFOLK's (i) negligence or failure to follow the KNOW-HOW, including but not limited to the specifications contained therein, in the MANUFACTURE of PRODUCT; (ii) use of raw materials and packaging components, storage and disposal of PRODUCT, raw materials or packaging components in the MANUFACTURE of PRODUCT; or (iii) sale or provision of INTERMEDIATES to third parties under Section 2.1(b) above. MERCK shall indemnify and hold KOFFOLK and its AFFILIATES harmless from and against any and all claims, losses, liabilities and expenses (including but not limited to reasonable lawyers' fees and other litigation costs) arising out of or resulting from MERCK's negligence hereunder. 18.2 Each party agrees to give the other prompt written notice of any claims made, for which the other might be liable under the foregoing indemnification, together with the opportunity to defend, negotiate, and settle such claims. The party seeking indemnification under this Agreement shall provide the other party with all information in its possession, authority, and assistance to enable the indemnifying party to carry on the defense of such suit. 18.3 Neither party shall be responsible or bound by any settlement made without its prior written consent. 19. COOPERATION 19.1 Each party agrees to execute such further papers, agreements, documents, instruments and the like as may be necessary to effect the purpose of this Agreement and to carry out its provisions. 19.2 At MERCK's written request, KOFFOLK shall cooperate with MERCK and provide such information as may be necessary to secure a duty suspension for the PRODUCT or any formulation derived from or a precursor to the PRODUCT in any jurisdiction where duty suspensions are allowed by law, regulation or authorized procedures. Any cost reductions derived from the award of any such duty suspension shall inure solely to MERCK. 20. ASSIGNMENT/DELEGATION 20.1 This Agreement shall not be assignable by KOFFOLK, other than to an AFFILIATE, nor shall the obligations of KOFFOLK be delegatable without the prior written consent of MERCK, which consent shall not be unreasonably withheld. Any such attempted assignment or delegation by KOFFOLK without such prior written consent shall be void. If approved in writing by an authorized representative of MERCK, then once assigned or delegated, all of the provisions of this Agreement and all rights and obligations of the parties hereunder shall be binding upon and inure to the benefit of and be enforceable by and against the successors and assigns of KOFFOLK. In addition, in the event KOFFOLK seeks and obtains MERCK's consent to assign or delegate its rights or obligations to another party, the obligations of the assignee or transferee must be guaranteed in writing by KOFFOLK. At the sole discretion of MERCK, this guarantee of obligations may include the posting of a performance bond or establishment of an escrow account to guarantee performance. 20.2 MERCK retains the right to assign its rights or delegate its obligations under this Agreement to a third party without the consent of KOFFOLK. In the event of such an assignment or delegation, all of the provisions of this Agreement and all rights and obligations of the parties hereunder shall be binding upon and inure to the benefit of and be enforceable by and against the successors and assigns of MERCK 12 21. RELATIONSHIP CREATED 21.1 The relationship between KOFFOLK and MERCK is that of an independent contractor and a customer, respectively, and under no circumstances shall either party, its agents or employees be deemed agents or representatives of the other party. Neither party shall have the right to enter into any contracts or commitments in the name of or on behalf of the other party in any respect whatsoever. In addition, neither party shall hold itself out to anyone, or otherwise represent, that it has any such authority vis-a-vis the other party. 21.2 Nothing herein shall be construed as granting any license or right under any patent, trademark or KNOW-HOW or other right of either party, by implication or otherwise, to the other. 22. INSURANCE 22.1 During the term of this Agreement KOFFOLK will maintain general/comprehensive liability including products liability insurance in an amount not less than one million dollars per occurrence and five million dollars in the aggregate. Such policy shall name Merck & Co., Inc. as an "Additional Insured". KOFFOLK shall provide Certificates of Insurance evidencing said insurance, which will be placed with insurers acceptable to MERCK, and KOFFOLK shall provide written notice to MERCK at least thirty (30) days prior to cancellation, non-renewal or material change in such insurance. 23. JURISDICTION 23.1 This Agreement shall be governed by, interpreted and construed, and all claims and disputes, whether in tort, contract or otherwise be resolved in accordance with the substantive laws of the State of New York, United States of America, without reference to any rules of conflict of laws or renvoi. In the event of any controversy or claim arising our of or relating to this Agreement, performance hereunder, termination hereof, or relationship created hereby, each party irrevocably submits to the exclusive jurisdiction of the courts of the Supreme Court of the State of New York and the U.S. District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Agreement or transactions contemplated hereby. Each party irrevocably and unconditionally waives any objection to the laying of venue in the courts of New York as stated above and that any such action was brought in an inconvenient forum. Notwithstanding the foregoing, in the event of a threatened disclosure in violation of this Agreement, MERCK shall have the right to seek injunctive relief from any competent court in the jurisdiction where the disclosure is threatened to prevent such disclosure pending resolution of the merits of the dispute. 24. HEADINGS 24.1 The headings used in this Agreement are intended for convenience only and shall not be considered part of the written understanding between the parties and shall not affect the construction of the Agreement. 25. ENTIRE AGREEMENT 25.1 This Agreement and the attached Schedules constitute the entire Agreement between the parties relating to the subject matter hereof and all prior proposals, discussions, and writings by and between the parties and relating to the MANUFACTURING of the PRODUCT are superseded, except that the Confidentiality Agreement between the parties last dated September 6,1993 and the Letter Agreement between MERCK and Philipp Brothers Chemicals, Inc. last dated February 7,1994 shall continue in effect for all information communicated by MERCK under those Agreements. As set forth in Section 3.1(h) above, the term of confidentiality and non-use in the Confidentiality Agreement has been changed to fifteen (15) years from 13 disclosure. 25.2 All work performed by KOFFOLK for MERCK shall be subject to the provisions of this AGREEMENT and attached Schedules and shall not be subject to the terms and conditions contained in any purchase order of MERCK or confirmation of KOFFOLK except insofar as any such purchase order or confirmation provides the identity of PRODUCT, delivery date and place of delivery and labeling or packaging changes. 26. WAIVER 26.1 Failure by MERCK or KOFFOLK at any time to enforce any of the terms or conditions of this Agreement shall not affect or impair such terms or conditions in any way, or the right of MERCK or KOFFOLK at any time to avail itself of such remedies as it may have for any breach of such terms or conditions under the provisions of this Agreement, in equity or at law. 27. SEVERABILITY 27.1 If any term or provision of this Agreement shall be held invalid or unenforceable, the remaining terms hereof shall not be affected but shall be valid and enforced to the fullest extent permitted by law. The parties hereto shall use best efforts to substitute a valid, legal and enforceable provision which, in so far as practical, implements the purpose hereof. 28. WASTE 28.1 KOFFOLK shall assume responsibility for disposing of all waste and rejected raw material, components, or PRODUCT generated during the performance of this Agreement in accordance with all applicable governmental laws, rules and regulations. 29. ENVIRONMENTAL 29.1 KOFFOLK will comply with all applicable governmental laws, rules and regulations as well as any other applicable laws, rules and regulations, including but not limited to those relating to the protection of human health and the environment. 29.2 KOFFOLK agrees to indemnify, defend, and hold harmless MERCK, its employees, agents, heirs and assigns from and against any and all damage, claim, liability, or loss, including reasonable attorneys' and other fees, arising out of or in any way connected to (1) any condition in, on, or near the FACILITY; or (2) any condition caused by KOFFOLK, its employees or agents or arising out of or in any way connected to any act or omission whatsoever of KOFFOLK, and/or with KOFFOLK's operations, employees or agents. KOFFOLK's duty of indemnification shall include, but not be limited to, damage, liability, or loss pursuant to any applicable government's environmental laws; or pursuant to claims for injury to person or damage to property including natural resources and further including claims for environmental investigation and/or remediation of property at or around the FACILITY or any off-site location where material from the FACILITY may have been transported or otherwise came to be located. This provision will not be construed, nor interpreted as an assumption of acknowledgment by KOFFOLK of any obligation to any person or entity other than MERCK. KOFFOLK has the option of selecting the attorneys for the defense of claims under this provision. MERCK may elect to have its own attorneys as additional counsel, in which case MERCK shall be responsible for the fees of said attorneys. KOFFOLK shall have a continuing obligation to fully cooperate with MERCK in the defense of any such claim. If MERCK's negligence is the sole cause of the referred damage, claim, liability or loss, KOFFOLK shall not be required to indemnify MERCK. 14 30. NOTICE 30.1 All notices and demands required or permitted to be provided under the terms of this Agreement shall be in writing and in English unless otherwise expressly provided in this Agreement and shall be conclusively presumed for all purposes of this Agreement to be given or made at the time the same is received by one of the parties via certified mail, return receipt requested with sufficient first-class postage, prepaid, addressed as follows: If to KOFFOLK: Koffolk, Ltd. P.0. Box 1098 61010 Tel Aviv, Israel Telephone: (011) 972-3-921-9961 Panafax: (011) 972-3-923-0341 Attention: Avraham Raz Philipp Brothers Chemicals, Inc. One Parker Plaza Fort Lee, New Jersey 07024 U.S.A. Telephone: (201) 944-6020 Panafax: (201) 944-5937 Attention: Jack C. Bendheim If to MERCK: Merck & Co., Inc. One Merck Drive Whitehouse Station, New Jersey 08889 U.S.A. Telephone: (908) 423-3068 Panafax: (908) 735-1106 Attention: Vice President, Business Affairs, Merck Manufacturing Division IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their representatives duly authorized as of the day and year first above written. MERCK & CO. By: /s/ --- Title: V.P. KOFFOLK, LTD. By: /s/ --- Title: G.M. PHILIPP BROTHERS CHEMICALS, INC. By: /s/ Jack C. Bendheim -------------------- Title: President 15 Schedule A Specifications - -------------- CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] Schedule B Packaging - --------- CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] Schedule C Technical Know-How Package - -------------------------- CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] Schedule D Raw Material Costs - ------------------ CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] EX-10.4 8 0008.txt CONTRACT OF DISTRIBUTION CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. LAWYERS AND MERCHANTS TRANSLATION BUREAU INC. Legal, Financial, Scientific, Technical and Patent Translations 11 Broadway New York, NY 10004 Certificate of Accuracy Translation from Portuguese into English State of New York SS: County of New York On this day personally appeared before me A. S. Drane who, after being duly sworn, deposes and states: That he is a translator of the Portuguese and English languages by profession and as such connected with the LAWYERS & MERCHANTS' TRANSLATION BUREAU; That he has carefully made the attached translation from the original document written in the Portuguese language; and That the attached translation is a true and correct English version of such original, to the best of his knowledge and belief. SUBSCRIBED AND SWORN TO BEFORE ME THIS SEP 14 1998 /S/ A.S. DRANE - ---------------- /S/ SUSAN TAPLEY - ---------------- Notary Public CONTRACT OF DISTRIBUTION AND OTHER AGREEMENTS By this private instrument made between PLANALQUIMICA INDUSTRIAL LTDA., with registered office in Braganca Paulista - SP, at Rua 23 No. 555 - Distrito Industrial 4, registered in the CGC/MF [tax roll] under No. 00.641.670/0001-97, represented herein by RAUL CUNHA FREIRE, hereinafter referred to as the MANUFACTURER, of the one part, and ELANCO QUIMICA LTDA., with registered office in this capital, at Av. Morumbi No. 8,264, registered in the CGC/MF under No. 43.940.618/0001-44, and subsidiary in Cosmopolis-SP, where it is established at Rodovia Gal. Milton Tavares de Souza Km 135, represented herein by MARIO FRANCA CAMARGO, hereinafter referred to as the DISTRIBUTOR, of the other part, having regard to the fact that: a) the MANUFACTURER manufactures the product for veterinary use "Nicarmix Premix 25%" - hereinafter referred to as the "PRODUCT" used to combat coccidiosis, and wishes to expand its business as regards the promotion and sale of the PRODUCT in Brazil, Uruguay and Paraguay; b) the DISTRIBUTOR sells various veterinary products in the anti- coccidian line and, as a result of this, is knowledgeable about potential markets for the promotion and sale of the PRODUCT, and has the necessary client technical support services, as required by the MANUFACTURER; the following is established and agreed: CLAUSE I - OBJECT I.1. The MANUFACTURER grants to the distributor, who accepts, with effect from 03.01.96, exclusivity in the promotion and sale of the PRODUCT, throughout the territory of Brazil, Paraguay and Uruguay. I.1.1. The technical characteristics defining the PRODUCT are detailed in Annex I hereof. I.2. Independently of the activities to be performed by the DISTRIBUTOR hereunder, during the term of this agreement it may continue to devote itself to any other activities of a commercial or industrial nature, whether present or future. I.3. For the purposes of the sale referred to in point I.1., the MANUFACTURER shall sell and deliver to the DISTRIBUTOR, at the address of the subsidiary shown in the preamble hereof, the quantities of the PRODUCT manufactured by it as requested by the DISTRIBUTOR, under the terms of the agreement which both parties shall from time to time sign, as established in clause III hereinafter. I.3.1. The PRODUCT shall be delivered to the DISTRIBUTOR fully 2 finished and packaged, ready for sale. I.4. Within the limits of this contract, the DISTRIBUTOR may organize and plan freely its commercial policy in such a way as to develop harmoniously the interests of the contracting parties. CLAUSE II - EXCLUSIVITY AND PREFERENCE II.1. The rights of promotion and sale of the PRODUCT are granted by the MANUFACTURER to the DISTRIBUTOR exclusively, for all of the territories indicated in clause I, while observing the clauses and conditions of this contract. II.2. By virtue of that exclusivity, the MANUFACTURER is under an obligation to supply the PRODUCT, destined for sale in the territories mentioned, exclusively to the DISTRIBUTOR. II.3. Only those sales which the MANUFACTURER shall make, directly, [ ], shall be expressly excluded from that exclusivity, and [ ] shall not purchase the product in the same formulation as Nicarmix. II.4. The MANUFACTURER shall give preference to supplying the PRODUCT to the DISTRIBUTOR and, this being the case, is prohibited from supplying it to other potential buyers until it has met the 3 quantities ordered by the DISTRIBUTOR. CLAUSE III - ORDERS AND PERIODIC AGREEMENTS III.1. Every 30 (thirty) days, the DISTRIBUTOR shall forward in writing to the MANUFACTURER the orders of the PRODUCT and respective delivery schedule, and such orders and schedule shall only be altered by written request up to 05 (five) days prior to the date set for delivery, provided that this be technically possible. III.2. Periodically, every 03 (three) months, the parties shall meet to fix, jointly and by mutual agreement, forecasts of quantities and other periodic conditions which shall govern this contract. III.2.1. When the parties are agreed as to the aspects mentioned they shall enter into a written agreement which shall be incorporated into this contract as Annex II - Periodic Conditions. III.3. Unforeseeable market changes shall give rise to the joint revision of the terms and conditions hereof. CLAUSE IV - TERM AND RENEWAL IV.1. This contract shall run for a period of [ 4 ], commencing on 03.01.96. IV.2. The contract shall be automatically renewed, for an indefinite period, unless the party interested in not renewing the agreement communicates that intention in writing, at least 90 (ninety) days prior to the end of the contractual period. CLAUSE V - STOCKS AND GUARANTEE OF UNINTERRUPTED SUPPLY V. For the purposes of achieving the object of this contract, the MANUFACTURER undertakes to keep in stock, ready for supply to the DISTRIBUTOR, a minimum quantity of the product, so that the supply is continuous, even in the event of a strike, breakdown of equipment and/or any other foreseeable situation. CLAUSE VI - INFORMATION AND CONFIDENTIALITY VI.1. During the performance of this contract the DISTRIBUTOR shall inform the MANUFACTURER of the list of clients acquiring the PRODUCT and the respective quantities. Every three months the DISTRIBUTOR shall also advise the average price of the product charged during that period. VI.2. The MANUFACTURER further undertakes to supply the DISTRIBUTOR with the technical information, respective manuals and other necessary information in relation to the PRODUCT and the 5 performance of the agreement. VI.3. It is established as of now that any information passed on by one party to the other as a result of this agreement shall be treated as commercial and industrial secrets and shall, as such, be confidential information, which shall not be disclosed to third parties without the prior written consent of the party which provided the information. Such prohibition shall remain even after this contract has expired, in which case the only exception shall be the list of clients who acquired the PRODUCT. CLAUSE VII - RESPONSIBILITY FOR THE PRODUCT VII.1. In its capacity as a producer of veterinary products, the MANUFACTURER is technically responsible for the PRODUCT, and is obliged to comply with all applicable laws including, but not limited to, matters concerning licenses required for the manufacture and sale of the PRODUCT, and shall supply to the DISTRIBUTOR any supporting documents necessary for the performance of this contract. VII.2. The MANUFACTURER is responsible for repairing any damage caused to consumers as a result of the quality of the PRODUCT, and shall also be liable for such defects as it may contain, and undertakes to exempt the DISTRIBUTOR from any liability as regards such aspects, with the sole exception of facts 6 caused by the DISTRIBUTOR itself. VII.3. The MANUFACTURER shall display on the sales packaging sufficient clear information on the PRODUCT, specifying the quantity, characteristics, composition and quality, and on the risks which it presents, and any other necessary information, bearing in mind the need to comply with the applicable rules and regulations on the manufacture and sale of the PRODUCT. CLAUSE VIII - DEFAULT AND RESCISSION VIII.1. If either of the parties fails to fulfill any one of the terms or conditions of this agreement, such that it prejudices the interests of the other, the other party must notify the defaulting party in writing of the default, with a view to settling the claim amicably. VIII.2. If the default persists for more than 30 (thirty) days after the notification is sent, the notifying party may consider this contract automatically rescinded, independently of any other formality and without prejudice to any applicable damages as a result of such default. VIII.3. This contract shall be rescinded by operation of law in cases of bankruptcy, composition with creditors or insolvency of either of the parties, independently of notice or prior 7 notification. CLAUSE IX - LIABILITY EXCLUSION Neither of the parties shall be liable towards the other for any indirect or consequential loss or damage, even if such losses and damage result from loss of profits, loss of production or loss of products. CLAUSE X - TAXES All taxes, duties and contributions of any kind existing now or in the future in respect of this contract shall be paid by the party legally liable, and on no account shall any inversion of obligations take place. CLAUSE XI - GENERAL CONDITIONS XI.1. The promotions, events and marketing activities designed to promote sales of the PRODUCT such as, inter alia, advertisements, leaflets, congresses, etc., shall be carried out for the account and at the discretion of the MANUFACTURER, and shall be assessed by the parties so as to establish in advance the conditions for their execution. XI.2. This contract does not generate any kind of company with 8 its own legal personality, and each party shall retain its own. This instrument does not, therefore, imply any merger, integration, incorporation or succession of one party by the other. XI.3. This contract corresponds to the full agreement of the parties on the contractual object, expressly revoking any previous documents and understandings on the matter. XI.4. Neither of the parties shall assign or in any way transfer the rights and obligations arising out of this contract without the prior written authorization of the other. XI.5. Failure to exercise any right or power of the parties shall not imply waiver or novation, and shall be regarded as mere liberality, which shall not prevent the party from exercising it at any moment. XI.6. The parties are obligated for themselves and their successors and elect the central jurisdiction of the District of Sao Paulo-SP, for questions arising out of this contract, excluding any other, however privileged. CLAUSE XII - ANNEXES The documents listed below, initialed by the parties or by their authorized representatives, form an integral part of this 9 instrument as "ANNEXES" and shall be fully valid, except insofar as they contradict the provisions of this contract, in which case the contract shall prevail: ANNEX I - TECHNICAL CHARACTERISTICS OF THE PRODUCT ANNEX II - PERIODIC AGREEMENT And being in full agreement, they sign this contract, with two witnesses, in four copies of identical form and content. Sao Paulo, March 1, 1996. /s/ PLANALQUIMICA INDUSTRIAL LTDA. /s/ ELANCO QUIMICA LTDA. WITNESSES: /s/ ACS/JOR /s/ 10 ANNEX I TECHNICAL CHARACTERISTICS OF THE PRODUCT CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] ANNEX II 1. PRICE AND DEADLINE CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] 2. ELANCO SELLING PRICE CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] EX-10.5 9 0009.txt ASSET PURCHASE AND TRADEMARK ASSIGNMENT AGREEMENT CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. ASSET PURCHASE AND TRADEMARK ASSIGNMENT AGREEMENT ASSET PURCHASE AND TRADEMARK ASSIGNMENT AGREEMENT entered between KOFFOLK, Inc., a Delaware corporation ("Purchaser"), having an address at One Parker Plaza, Fort Lee, New Jersey 07024, U.S. and MERCK & CO., INC., a New Jersey corporation ("Seller"), having an address at One Merck Drive, Whitehouse Station, New Jersey 08889 and having an Effective Date of August 5, 1996. ARTICLE 1 -- DEFINITIONS The following terms as used in this Agreement shall have the meanings set forth below: SECTION 1.1 "Acquired Assets" means the United States ("U.S.") trademark NICARB(R), as set forth in Schedule A, and United States Food and Drug Administration New Animal Drug Application for the Products, as set forth in Schedule B, but specifically excluding all Excluded Assets. SECTION 1.2 "Affiliate" means with respect to a party to this Agreement (i) any corporation or business entity fifty (50%) percent or more of the voting stock of which is owned directly or indirectly by a party; or (ii) any corporation or business entity which directly or indirectly owns fifty (50%) percent or more of the voting stock of a party; or (iii) any corporation or business entity under the direct or indirect control of a corporation or business entity as described in clause (i) or (ii). SECTION 1.3 "Agreement" or "this Agreement" means this Asset Purchase and Trademark Assignment Agreement, including all Schedules hereto. SECTION 1.4 "Assumed Liabilities" means the liabilities to be assumed by Purchaser pursuant hereto, namely all claims and complaints (including, without limitation, all damages, losses, expenses and liabilities), relating to any or all of the Acquired Assets, following the Effective Date including, without limitation, (i) all liabilities arising out of the sale, purchase, consumption or use of the Products following the Effective Date and (ii) all liabilities arising out of any generation, treatment, storage, transportation, disposal or release, of any hazardous material, substance, waste, or any toxic or other material regulated by any federal, state, or local environmental statute, rule or regulation following the Effective Date. SECTION 1.5 "Excluded Assets" means all assets of Seller other than the Acquired Assets, including without limitation, the animal drug Applications for nicarbazin and trademark NICARB(R) as registered by Seller outside of the U.S., and any other trademark, tradename, New Drug and/or New Animal Drug Application, product registration, intellectual property, information, know-how and other assets of Seller. SECTION 1.6 "Excluded Liabilities" means the liabilities retained by Seller pursuant hereto, namely all claims and complaints (including, without limitation, all damages, losses, expenses and liabilities), relating to any or all of the Acquired Assets, prior to the Effective Date including, without limitation, (i) all liabilities arising out of the sale, purchase, consumption or use of the Products prior to the Effective Date and (ii) all liabilities arising out of any generation, treatment, storage, transportation, disposal or release, of any hazardous material, substance, waste or any toxic or other material regulated by any federal, state or local environmental statute, rule or regulation prior to the Effective Date. SECTION 1.7 "Execution Date" means the date as provided in Section 3.1. SECTION 1.8 "Liens and Encumbrances" means, with respect to the Acquired Assets, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, including, without limitation, the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. SECTION 1.9 "New Animal Drug Applications" and "NADAs" mean the applications for the Product prepared in conformance with applicable U.S. Food and Drug Administration ("FDA") regulations for filing with the FDA for marketing authorization of the Products within the United States, as described in Schedule B. SECTION 1.10 "Person" means an individual, a corporation, a partnership, an association, a trust, or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. SECTION 1.11 "Product" or "Products" means the nicarbazin based products for treatment of coccidiosis in poultry marketed by Seller in the U.S. under the trademark NICARB(R). SECTION 1.12 "Trademark" or "Trademarks" means the trademark and trademark registrations for the Products as set forth in Schedule A. ARTICLE II -- PURCHASE AND SALE SECTION 2.1 Purchase and Sale. On the terms and conditions set forth in this Agreement, Seller agrees to sell, convey, assign and transfer to Purchaser, and Purchaser agrees to purchase, on the Effective Date, the Acquired Assets, subject only to Seller's retained right to use any information within the Acquired Assets to the extent it relates to the Excluded Assets or to any products hereinafter developed by Seller. The Purchaser shall not acquire pursuant hereto any assets or rights of any kind or nature, real or personal, tangible or intangible, other than the Acquired Assets and such rights as may be set forth herein, and Seller shall retain all other assets, including, with ut limitation, the Excluded Assets. 2 SECTION 2.2 Assumption of Liabilities. On the terms and subject to the conditions of this Agreement, the Purchaser agrees to assume the Assumed Liabilities. The parties understand and agree that Purchaser does not and should not assume or become liable for any liabilities, obligations, commitments or debts, contingent or otherwise, of Seller, including without limitation, any claims arising from the sale, purchase, consumption, or use of Products sold by Seller prior to the Execution Date. However, nothing in this Section 2.2 shall restrict, reduce or in any way affect the obligations of Purchaser pursuant to Section 8.3 of this Agreement. SECTION 2.3 Purchase Price. (a) Purchaser shall pay to Seller, in consideration for the Acquired Assets [ ]: [ ] [ ] (b) [ ] by federal wire funds according to the wire transfer fund instructions above. SECTION 2.4 Personal Guaranty. On the Execution Date, Purchaser will deliver to Seller a Letter and Personal Guaranty, in the form attached hereto as Schedule C from its owner, guaranteeing all of Purchaser's payments required under this Agreement. SECTION 2.5 Interest on Late Payments/Acceleration of Payments. In the event that any payment by Purchaser under this Agreement is made thirty (30) or more days later than when due, Purchaser shall pay interest to Seller, on all such payments, in the amount of the prime rate reported in the Wall Street Journal on the payment due date, plus one percentage point, such interest to be accrued on a daily basis. Purchaser shall indemnify Seller for all costs and expenses (including but not limited to attorney's fees) incurred in attempt(s) to collect any payments due under this Agreement. In the event Purchaser fails to make any payment required under this Agreement within sixty (60) days of the date when due, Seller shall provide notice to Purchaser of its default in payment, and shall permit Purchaser an additional sixty (60) days from the date of such notice within which to make all payments then due to Seller, together with any interest owed. If Purchaser fails within that period to make the requisite payment(s), Seller shall be entitled to [ ]. 3 SECTION 2.6 Breach; Notice. Except as provided in Section 2.5, in the event that either party breaches its obligations under this Agreement, the non-breaching party shall provide notice of the breach to the breaching party and shall permit the breaching party sixty (60) days in which to cure the breach. ARTICLE III -- EXECUTION SECTION 3.1 The Execution. (a) The Execution cf this Agreement shall take place on July 17, 1996 ("Execution Date"). Purchaser and Seller shall on that date sign two (2) originals, one (1) fully executed original to be provided to each party. (b) On the Execution Date, Seller shall provide to Purchaser an appropriately executed and authenticated Trademark Assignment to the Purchaser, in the form of Schedule D hereto. Purchaser shall hold the Trademark Assignment in escrow for filing with the U.S. Patents and Trademarks Office on or after August 5,1996. (c) Purchaser shall pay to Seller the [ ] by wire transfer in federal funds available to Seller on August 2, 1996, payable to such entities as designated in Section 2.3(b). (d) Seller shall pay or cause to be paid any and all transfer, stamp, sales or other similar taxes or duties payable in connection with the sale or transfer of the Acquired Assets to Purchaser. (e) Purchaser shall pay or cause to be paid any and all costs and expenses relating to the transfer and assignment to Purchaser of the Trademarks, including, without limitation, all costs and taxes with respect to recordation of transfer. Recordation of transfer and assignment of the Trademarks shall be the responsibility of Purchaser. (f) At any time or from time to time after the closing, Seller shall, at the request of Purchaser and Purchaser's expense, execute and deliver any further instruments or documents and take such further action as Buyer may reasonably request in order to accomplish consummation of the transactions contemplated hereby. ARTICLE IV -- SELLER'S REPRESENTATIONS AND WARRANTIES Seller represents and warrants that: SECTION 4.1 Corporate Existence and Authorization; Contravention. (a) Seller is a corpolation duly organized, validly existing and in good standing under the laws of the State of New Jersey. (b) The execution, delivery and performance by Seller of this 4 Agreement is within Seller's corporate power, have been duly authorized by all necessary corporate action and do not contravene or constitute a default under any provision of the certificate of incorporation or by-laws of Seller or any provision of applicable law or regulation or of any judgment, injunction, order or decree binding upon Seller or to which any Acquired Asset is subject, or any indenture, bank loan, credit, or other agreement binding upon Seller or to which the Acquired Assets are subject. This Agreement is a legal, valid and binding agreement of Seller enforceable in accordance w th its terms. (c) Except for the requirement that both Purchaser and Seller provide written notice, in the form attached hereto as Schedule E, of the transfer of title to the NADA from Seller to Purchaser, the execution, delivery and performance by Seller of this Agreement, and the consummation by Seller of the transactions contemplated hereby, require no action by or in respect of, or filing with, any gvernmental body, agency or official or any other consent of any person, firm or other entity. SECTION 4.2 Title to Acquired Assets. (a) Seller has good title to all of the Acquired Assets, free and clear of all Liens and Encumbrances. (b) (i) To the best of Seller's knowledge, no product, formula, formulation, Trademark, process, method, substance, or other material (an "Item") which is part of the Acquired Assets infringes any rights owned or held by any other person other than Seller, and (ii) to the best of Seller's knowledge no Item currently being manufactured, distributed, sold or used by any person infringes any rights of Seller to the Acquired Assets. SECTION 4.3 Litigation. (a) There are no private or governmental proceedings, claims, actions, or investigations in the United States of America against Seller relating to the Products pending or, to the knowledge of Seller, threatened, which are likely (either individually or in the aggregate) to result in an adverse decision imposing a judgment, fine or penalty. (b) There are no judgments, decrees or orders of any court or other governmental body in the United States of America binding upon Seller relating to the Products. SECTION 4.4 Compliance with Laws. (i) Seller is in compliance in all material respects with all applicable U.S. federal, state or local laws, regulations or orders or other requirements of any governmental, regulatory or administrative agency or authority or court or other tribunal in the United States of America relating to the Products (including, without limitation, the U.S. Food, Drug & Cosmetic Act, as amended, the regulations thereunder, and the transfer of the Acquired Assets pursuant to this Agreement is in compliance therewith), and (ii) Seller is not now charged with, and to the best of the knowledge of Seller is not now under investigation with respect to, any violation of any applicable law, regulation, order or requirements in the United States of America which relate to the Products. Seller has filed all reports relating to the Products required to be filed with any governmental, regulatory or 5 administrative agency or authority in the United States of America if failure to file such report would result in a fine or a penalty. SECTION 4.5 Sufficiency of Transfer. The Acquired Assets and the rights transferred under this Agreement include all assets used or held by Seller for use primarily in connection with the Products as of the date hereof, except for the Excluded Assets. Upon consummation of the transactions contemplated hereby, Purchaser will have acquired good title in and to the Acquired Asset in each case free and clear of all Liens and Encumbrances. SECTION 4.6 Transfer Document. The assignments and transfer documents to be delivered to Purchaser pursuant to Section 3.1 will be in appropriate form and sufficient to convey, transfer and assign to Purchaser good title to the Acquired Assets. SECTION 4.7 NADA Review. Seller has provided Purchaser with the opportunity to review the true, accurate and complete NADAs for the Products, which include information concerning any side effects, injury, toxicity or sensitivity reaction, or any unexpected incidents, whether or not serious or unexpected, relating to the Products ("Adverse Experiences"), which Seller has reported to the FDA during the three (3) years immediately preceding the Execution Date. Any additional information regarding Adverse Experiences received by Seller before the Effective Date but not yet reported to the FDA, will be provided to Purchaser within fourteen (14) days after Effective Date. For purposes of this Section 4.7, "serious" is deemed to have the meaning set forth in Section 6.4 of this Agreement. Additionally, Seller has allowed Purchaser to meet with officials of the Food and Drug Administration, Centers for Veterinary Medicine to review the approval status of the NADAs for the Products. SECTION 4.8 Disclosure. No representation or warranty by Seller in this Agreement contains any untrue statement of material facts. ARTICLE V -- PURCHASER'S REPRESENTATIONS AND WARRANTIES Purchaser represents and warrants that: SECTION 5.1 Corporate Existence and Authorization; Contravention. Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware. The execution, delivery and performaiice by Purchaser of this Agreement are within Purchaser's power, have been duly authorized by all necessary action and do not contravene or constitute a default under the constitutive documents of Purchaser or of applicable law or regulation or of any agreement, judgment, injunction, order, decree or other instrument binding upon Purchaser. This Agreement is a legal, valid and binding agreement of Purchaser enforceable in accordance with its terms. To the best of Purchaser's knowledge, except for the requirement that both Purchaser arid Seller provide written notice, in the form attached hereto as Schedule E, of the transfer of title to the NADA from Seller to Purchaser, the execution, delivery and performance by Purchaser of this Agreement require no action by or in respect of, or filing with, any governmental body, agency or official, or any other consent. SECTION 5.2 Solvency. Purchaser is financially sound and fully solvent and has no reason to anticipate any inability to perform, or material difficulty performing, any of its 6 obligations set forth in this Agreement. SECTION 5.3 Disclosure. No representation or warranty by Purchaser in this Agreement contains any untrue statement of material fact. ARTICLE VI -- SELLER'S COVENANTS Seller agrees that: SECTION 6.1 Filings. Seller will use its reasonable efforts in good faith to file or cause to be filed with the FDA, by the Effective Date, the notice (substantially in the form of Schedule E attached hereto), required to be filed by it in connection with its sale of the NADA and to make promptly any further filings pursuant thereto as may be necessary to consummate the transactions contemplated hereby. SECTION 6.2 No Encumbrances. Any Liens and Encumbrances with respect to any of the Acquired Assets represented, created or secured by a mortgage, deed of trust, security agreement or similar instrument shall be satisfied of record on or prior to the Execution Date by Seller. SECTION 6.3 Confidentiality. For a period often (10) years following the Execution Date, Seller will, and will cause each of its Affiliates and employees to, preserve the confidentiality of all confidential, proprietary and trade secret information used or held for use primarily in connection with the Acquired Assets, provided that (i) Seller may use and disclose any such information which has been publicly disclosed (other than by Seller or any Affiliate thereof in breach of its obligations under this Section) or as otherwise permitted under this Agreement; or to the extent such information related to Excluded Assets, provided that, if such information relates to both Acquired Assets and Excluded Assets, Seller will maintain its confidentiality only to the extent that maintenance of its confidentiality does not unreasonably interfere with Seller's ability to use, market or sell any or all of the Excluded Assets; and (ii) to the extent that Seller or any Affiliate thereof may become legally compelled to disclose any of such information. Seller or such Affiliate may (to the extent so compelled) disclose such information if they shall have first used reasonable efforts in good faith, and shall have afforded Purchaser the opportunity, to obtain an appropriate protective order, or other satisfactory assurance of confidential treatment, for the information required to be so disclosed. SECTION 6.4 Adverse Reaction Reporting. Seller shall notify Purchaser of any information concerning any side effect, injury, toxicity, sensitivity reaction, or any incidents, whether or not serious or unexpected, relating to the Products, of which Seller receives notice on or after the Execution Date, including providing copies of all such adverse experience reports within two (2) weeks of Seller's receipt of such reports. For purposes of this Section 6.4 and for purposes of Section 7.7, "serious" means an experience which is (1) one resulting in severe disability or death of one or more animals, (2) one that is life threatening to man, or (3) one involving a large number of animals; and "unexpected" means a condition or development not listed in the then-current FDA-approved labeling for the Product, and includes those experiences that show a significant increase in incidence or severity over what appears on the labeling of the Product or in NADA trials or that are a failure of the Product to achieve claimed activity. 7 ARTICLE VII -- PURCHASER'S COVENANTS Purchaser agrees that: SECTION 7.1 Confidentiality. For a period of ten (10) years following the Execution Date, Purchaser will, and will cause each of its Affiliates and employees to, preserve the confidentiality of all confidential, proprietary and trade secret information and material included within the Acquired Assets, or disclosed hereunder, which relates to any Excluded Assets, provided that (i) Purchaser may use and disclose any such information which has been publicly disclosed (other than by Purchaser or an" Affiliate thereof in breach of its obligations under this Section) or as otherwise permitted under this Agreement; or to the extent such information relates to the Acquired Assets, provided that, if such information relates to both Acquired Assets and Excluded Assets, Purchaser will maintain its confidentiality only to the extent that maintenance of its confidentiality does not unreasonably interfere with Purchaser's ability to use, market, or sell units of the Products in the ordinary course of business; and (ii) to the extent that Purchaser or any Affiliate thereof may become legally compelled to disclose any of such information, Purchaser or such Affiliate may (to the extent so compelled) disclose such information if they shall have first used reasonable efforts in good faith, and shall have afforded Seller the opportunity to obtain an appropriate protective order, or other satisfactory assurance of confidential treatment, for the information required to be so disclosed. SECTION 7.2 FDA Filings. Purchaser will use its reasonable efforts in good faith to file or cause to be filed with the FDA, by August 5,1996, the notice, documents and/or other materials required to be filed by it in connection with its purchase of the Acquired Assets and to make promptly any further filings and take any actions required of it as may be necessary to consummate the transactions contemplated hereby. SECTION 7.3 Post-Closing; Use of Names. Beginning on the Effective Date Purchaser will mark clearly all units of the Products manufactured to indicate Purchaser's ownership of the Products and will not use the words, names or combined letters "Merck", "Merck & Co., Inc.", "Merck AgVet", "MSD AGVTR", "MMD", "Merck Sharp & Dohme", or any variation thereof or other word, name or letter combination substantially similar thereto, or any other trade name or trademark of Seller in connection with the Products, or as part of the name of the Purchaser or any Affiliate, after the Execution Date, except to the extent necessary to comply with its obligations pursuant to the Toll Manufacturing Agreement relating to the Products entered into between Purchaser and Seller effective August 5,1996. SECTION 7.4 Cooperation in Litigation. From and after the Effective Date, Purchaser agrees that in the defense of any litigation, hearing, regulatory proceeding or investigation or other similar matter relating to tho Acquired Assets, Purchaser will make available to Seller during normal business hours, but without unreasonably disrupting its business, all personnel and records as to the Acquired Assets held by Purchaser and reasonably necessary to permit the effective defense or investigation of such matters. 8 SECTION 7.5 Adverse Reaction Reporting. Effective on the Effective Date, Purchaser shall be responsible for reporting adverse experiences with respect to the Products in conformance with all applicable laws, rules and regulations and shall send to Seller, throughout the term of this Agreement, copies of all such adverse experience reports, with all serious and unexpected adverse experiences (and government forms) sent within two (2) weeks of Purchaser's receipt, and all non-serious adverse experiences (and government forms) sent to Seller on a quarterly basis addressed to Seller. SECTION 7.6 Resale; Abandonment. Purchaser agrees not to resell or abandon the NADA for the Products, or effect any substantial change in ownership or control of Purchaser, on or before payments required under Section 2.3 are made. If Purchaser resells or abandons such NADA, or effects such a substantial change of ownership or control after payment in full of the payments required under Section 2.3, Purchaser agrees to provide advance written notice of same to Seller. Notwithstanding the foregoing, Purchaser shall be entitled to transfer the Acquired Assets or any interest in Purchaser to an Affiliate of Purchaser without violating the provisions of this section, provided that no such transfer shall operate to release Purchaser from any of its obligations hereunder. In the event of Purchaser's breach of this Section 7.8, in addition to all other remedies available to Seller in law or equity, Seller is entitled to accelerate and receive immediate payment by Purchaser of all payments required under this Agreement during the term of this Agreement, whether or not such payments are yet due. SECTION 7.7 Territorial Limitation; Other Products. Purchaser agrees to sell units of the Products only within the United States. Except for submissions to be made by Purchaser in connection with CODEX/JECFA, Purchaser further agrees that it will use the information and data contained within the NADA(s) for the Product solely for maintaining the registration(s) for Product in the United States arid will make no use whatsoever of the information and data contained in the NADA(s) outside of the United States. SECTION 7.8 Authorization for Manufacture of the Products. Purchaser agrees that Seller shall continue to toll manufacture the Products after the Effective Date pursuant to the terms of the Toll Manufacturing Agreement entered between the parties effective August 5, 1996. SECTION 7.9 Change in Corporate Status/Ownership or Control of Purchaser. Except as provided for in Section 7.6, in the event of any substantial change in the status, ownership or control of Purchaser, Seller is entitled to accelerate and receive immediate payment by Purchaser of all payments required under this Agreement during the term of this Agreement, regardless of whether or not such payments are yet due. ARTICLE VIII -- SURVIVAL; INDEMNIFICATION 9 SECTION 8.1 Survival: Remedy for Breach. All representations, warranties and indemnities of the parties contained herein shall survive the Execution Date forever. The covenants and agreements of Seller and Purchaser hereunder that require by their terms performance or compliance on and after the Execution Date shall continue in force thereafter in accordance with their terms. SECTION 8.2 Indemnification by Seller. Seller shall indemnify Purchaser against and defend Purchaser against any and all damage, loss, liability and expense (including, without limitation, reasonable expense s of investigation and attorneys' fees and expenses in connection with any action, suit or proceeding brought against Purchaser and/or its Affiliate(s) and penalties and the cost of remedial action under applicable laws and regulations) incurred or suffered by Purchaser arising out of (i) any misrepresentation or breach of covenant, agreement, representation or warranty of Seller contained in this Agreement or (ii) any Excluded Liability, provided, however, that Purchaser shall not be entitled to any indemnification under this Section 8.2, except for claims under sections 4.2 and 4.5, unless and until the amount of claims for which Purchaser is entitled to be indemnified exceeds in the aggregate $100,000 (the "Deductible"), in which event Purchaser is entitled to receive with respect to such claims the entire amount of the Deductible. SECTION 8.3 Indemnification by Purchaser. (a) Purchaser shall indemnify Seller against and agrees to hold Seller harmless from any and all damage, loss, liability and expense (including without limitation, reasonable expenses of investigation and attorneys' fees and expenses in connection with any action, suit or proceeding brought against Seller and/or its Affiliate(s)) and suffered by Seller and/or its Affiliate(s) arising out of (i) any misrepresentation or breach of covenant, agreement, representation or warranty of Purchaser contained in this Agreement, or (ii) any Assumed Liability. (b) If Seller or any Affiliate thereof has retained any liability which would otherwise be an Assumed Liability as a result of the failure to obtain the consent of a third party to transfer such liability to Purchaser, Purchaser shall indemnify Seller against and agrees to hold Seller harmless from any such liability incurred with respect to any period beginning on or after the Execution Date, provided that Seller notifies Purchaser of the existence of such failure to obtain consent in a notice expressly referring to this Section 8.3 (b). SECTION 8.4 Indemnification; Notice and Settlements. A party seeking indemnification pursuant to Section 8.2 or 8.3 (an "indemnified party") shall give prompt notice to the party from whom such indemnification is sought (the "indemnifying party") of the assertion of any claim, or the commencement of any action or proceeding, in respect of which indemnity may be sought hereunder. The indemnifying party shall have the right to, and shall at the request of the indemnified party, assume the defense, with counsel reasonably satisfactory to the indemnified party, or any such suit, action or proceeding at its own expense. An indemnifying party shall not be liable under Section 8.2 or 8.3 for any settlement effected without its consent of any claim, litigation or proceeding in respect of which indemnity may be sought hereunder, which consent shall not be unreasonably withheld. 10 ARTICLE IX -- MISCELLANEOUS SECTION 9.1 Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be given: if to Seller to: Merck & Co., Inc. P.O. Box 2000 Rahway, New Jersey 0706 3 Attention: President Merck AgVet Division if to Purchaser to: Koffolk, Inc. One Parker Plaza Fort Lee, New Jersey 07024 Attention: President or such other address as such party may hereafter specify by written notice to the other party. Each such notice, request or other communication shall be effective when received at the address specified in this Section 9.1 SECTION 9.2 Expenses. All legal and other costs and expenses incurred in connection herewith and the transactions contemplated hereby shall (except as otherwise provided herein) be paid by the party incurring such expenses. SECTION 9.3 Bulk Sales Statutes. Purchaser hereby waives compliance by Seller with any applicable bulk sales statutes in any jurisdiction in connection with the transactions under this Agreement. SECTION 9.4 Limitation on Sellers Representations and Warranties. PURCHASER ACKNOWLEDGES THAT EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, SELLER HAS MADE NO REPRESENTATION OR WARRANTY WHATSOEVER AND PURCHASER HAS NOT RELIED ON ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, EXCEPT THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, PURCHASER ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, PURCHASER IS ACQUIRING THE ACQUIRED ASSETS WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES AS TO THE FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR CONDITION OF THE ACQUIRED ASSETS OR AS TO ANY 11 OTHER MATTER. SECTION 9.5 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns; provided that this Agreement may not be assigned by either party without the written consent of the other party hereto. SECTION 9.6 Entire Agreement; Amendment. This Agreement, including, without limitation, the Schedules hereto, embodies the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements with respect thereto. This Agreement may be amended, and any provisions hereof waived, but only in writing signed by both parties. SECTION 9.7 Captions; Construction. Captions herein are inserted for convenience of reference only and shall be ignored in the construction or interpretation of this Agreement. Unless otherwise specified, the words "herein", "hereof" and terms of like import shall be deemed to refer to the Agreement as a whole and not merely to a single part thereof. SECTION 9.8 Public Announcement. No press release, public announcement, confirmation or other information regarding this Agreement or related matters shall be made by either party without the prior written consent of the other party (other than as necessary to perform the provisions of this Agreement or to its employees or as may be required by law or by any applicable rules of any stock exchange; provided that disclosure to employees shall not result in a requirement of public disclosure under such applicable law or rules). SECTION 9.9 Returned Products. For purposes of this Section 9.9, "Returned Products" means any Products sold by Seller before the Execution Date and returned to Purchaser. Purchaser shall notify Seller of receipt of any Returned Products and shall immediately remit all such Returned Products to Seller at: Merck & Co., Inc., Branch Operations, 4545 Oleatha Ave. St. Louis, Missouri 63115, at the sole expense of Seller. All credits and/or reimbursements that may be due customers for Returned Products shall be the sole responsibility of Seller. SECTION 9.10 Governing Law; Jurisdiction. This Agreement shall be governed by, interpreted and construed, and all claims and disputes, whether in tort, contract or otherwise be resolved in accordance with the substantive laws of the State of New York, United States of America without reference to any rules of conflict or laws or renvoi. In the event of any controversy or claim arising out of or relating to this Agreement, performance hereunder, termination hereof, or relationship created hereby, each party irrevocably submits to the exclusive jurisdiction of the courts of the Supreme Court of the State of New York and the U.S. District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Agreement or transactions contemplated hereby. Each party irrevocably and unconditionally waives any objection to the laying of venue in the courts of New York as stated above and that any such action was brought in an inconvenient forum. Notwithstanding the foregoing, in the event of a threatened disclosure in violation of this Agreement, MERCK shall have the right to seek injunctive relief from any competent court in the jurisdiction where the disclosure is threatened to prevent such disclosure pending resolution 12 of the merits of the dispute. SECTION 9.11 Cooperation. Each party agrees to execute such further papers, agreements, documents, instruments and the like as may be reasonably necessary or desirable to effect the purpose of this Agreement and to carry out its provisions. SECTION 9.11 Waiver. No waiver by any party in one or more instances of any of the provisions of this Agreement or the breach thereof shall establish a precedent for any other instance with respect to that or any other provision. Furthermore, in case of waiver of a particular provision, all other provisions of this Agreement will continue in full force and effect. SECTION 9.13 Severance. If any provision of this Agreement is held to be invalid or unenforceable, all other provisions shall nevertheless continue in full force and effect. IN WITNESS WHEREOF, this Agreement has been signed by authorized representatives on behalf of each of the parties hereto as of the day and year first above written. MERCK & CO., INC. KOFFOLK, INC. By: /s/ John M. Preston By: /s/ Jack C. Bendheim ------------------- -------------------- Dr. John M. Preston Jack C. Bendheim President President Merck AgVet Division 13 SCHEDULE A TRADEMARKS ---------- TRADEMARK REG. NO./LOCATION REG. DATE NICARB(R) 631617/United States July 31, 1956 July 31, 1976 (renewed) SCHEDULE B U.S. NEW ANIMAL DRUG APPLICATION NADA # ------ CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] SCHEDULE C Personal Guaranty Merck & Co., Inc. One Merck Drive P.O. Box 100 Whitehouse Station, NJ 08889-0100 Gentlemen: I understand that Koffolk, Inc., a wholly-owned subsidiary of Phillips Brothers, is indebted to you by virtue of an Asset Purchase and Trademark Transfer Agreement ("Agreement") entered into between Merck & Co., Inc. and Koffolk and effective as of August 5, 1996. I further understand that it is your desire to obtain a personal guarantee of the payments under this Agreement by me. I also understand that as consideration for your executing this Agreement, this personal guarantee of payment by me is required by you. Therefore, I have determined that it is in my best interests as the owner of Koffolk, Inc. to personally guarantee payment of the payment obligations of Koffolk, Inc. to you under this Agreement. I agree as follows: CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] By: ____________________ Jack C. Bendheim State of __________________ County of ________________ Subscribed and sworn to before me this ____ day of _______ 1996 - --------------------------------- Notary Public SCHEDULE D U.S. TRADEMARK ASSIGNMENT WHEREAS, MERCK & CO., INC., a New Jersey corporation, having its principal offices at One Merck Drive, Whitehouse Station, New Jersey 08889-0100, has adopted, used, is using and is the owner of the following trademarks now registered in the United States Patent and Trademark Office: TRADEMARK REGISTRATION NO. DATE OF REGISTRATION - --------- ---------------- -------------------- NICARB(R) 631617 July 31, 1956 July 31, 1976 (renewed) WHEREAS, Koffolk, Inc., a Delaware corporation having its principal offices at One Parker Plaza, Fort Lee, New Jersey 07024, U.S.A., is desirous of acquiring said registered trademarks, NOW, THEREFORE, in consideration of the sum of One ($1.00) Dollar and other good and valuable consideration, the receipt of which is hereby acknowledged, MERCK & CO., INC., as of August 5,1996 hereby assigns to Koffolk, Inc. all right, title and interest in the United States in and to said trademarks together with the goodwill of the business symbolized by said trademarks and registrations thereof. Signed this 17th day of July, 1996 MERCK & CO., INC. By: ______________________________ Dr. John M. Preston President Merck AgVet Division State of ss. County of Subscribed and sworn to before me this day of 1996. - -------------------- Notary Public SCHEDULE E Food and Drug Administration 5600 Fishers Lane Rockville, MD 20857 Dear _____________ Pursuant to 21 CFR 514.106, we are notifying you that as of August 5,1996, Merck Research Laboratories is transferring ownership and all rights and responsibilities for [ ] to Koffolk, Inc. Please direct questions or need for additional information concerning the transfer of these NADAs to Ms. Rosalind Dunn, Associate Director, Regulatory Affairs, Coordination and Planning, Merck & Co., Inc. (Phone (908)594-4624/Fax (908)594-4395). Beginning today, August 5,1996, all communication to the sponsor should be addressed to: Koffolk, Inc. One Parker Plaza Fort Lee, New Jersey 07024 Attn: Jack C. Bendheim President Sincerely yours, Rosalind S. Dunn Associate Director Regulatory Affairs Coordination & Planning Certified No. EX-10.6 10 0010.txt DISTRIBUTORSHIP AGREEMENT CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. DISTRIBUTORSHIP AGREEMENT THIS AGREEMENT, dated as of the 5th day of August, 1996, by and between Merck & Co., Inc., a corporation duly organized and existing under the laws of the state of New Jersey having an address at One Merck Drive, Whitehouse Station, New Jersey 08889 and operating through its Merck AgVet Division, (hereinafter referred to as "MERCK") AND Koffolk, Inc., a business entity duly organized and existing under the laws of the state of Delaware having an address at One Parker Plaza, Fort Lee, New Jersey 07024 (hereinafter referred to as "KOFFOLK"). WITNESSETH: WHEREAS, MERCK is the inventor, developer and supplier of products used for animal health purposes; and WHEREAS, KOFFOLK desires to distribute, promote, advertise and sell certain of such products for animal health purposes in the United States in accordance with the Food and Drug Administration registration obtained by MERCK; and WHEREAS, KOFFOLK shall maintain the necessary sales force and organization to properly service the territory; NOW, THEREFORE, in consideration of the premises and of the performance of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. DEFINITIONS Each term defined below shall, for the purpose of this Agreement, have the following meaning and shall include the singular and the plural: (a) "Product" or "Products" shall mean the finished animal health products containing amprolium as the active ingredient [ ]. (b) "Territory" shall mean the United States of America, excluding its territories and possessions. (c) "Trademark(s)" shall mean the trademarks AMPROL, AMPROL Plus or other appropriate trademarks designated by Merck AgVet, which are licensed to KOFFOLK in the Territory by MERCK pursuant to the Trademark License Agreement of even date. (d) "Exclusive Distribution Period" shall mean that period of [ ] from the Effective Date of the Agreement and any applicable renewal periods. (e)"Affiliate" shall mean with respect to a party to this Agreement (i) any corporation or business entity, fifty percent (50%) or more of the voting stock of which is owned directly or indirectly by a party; (ii) any corporation or business entity which directly or indirectly owns fifty percent (50%) or more of the voting stock of a party; or (iii) any corporation or business entity under the direct or indirect control of a corporation or business entity as described in clause (i) or (ii). (f)"Promotional Literature" shall mean all Products-related or disease-related material, or similar material with respect to competitive Products, written, oral, graphic or other prepared for distribution to or use with the veterinary or allied professions, sales representatives, the trade, and/or consumers. (g) "Calendar Year" shall mean that twelve (12) month period commencing January 1st and ending December 31st of each year of the Agreement. (h) "License Agreement" shall mean the Trademark License Agreement of even date between MERCK and KOFFOLK. (i) "Marketing Plan" shall mean that document prepared by KOFFOLK on an annual basis and submitted to MERCK that contains sales forecasts and promotional efforts of KOFFOLK for sale of the Product for the succeeding Calendar Year. (j) "Effective Date" shall mean August 5,1996. (k) "Like Kind Exchange" shall mean an arrangement whereby MERCK divests itself of Product via a non-cash exchange for a third party's product(s) or rights to market and/or distribute a third party's product(s). (l) "Promotional Efforts" shall mean the expense, not including salaries and related overhead expenses, associated with the planning, production, publication and distribution of Product support material, market support trials, meetings, merchandising allowance funds, and market research necessary to facilitate the marketing effort. 2. APPOINTMENT OF KOFFOLK (a) Subject to [ ], MERCK hereby appoints KOFFOLK as an exclusive distributor in the Territory for the Products. (b) KOFFOLK shall sell the Products for its own account. All orders by KOFFOLK's customers shall be promptly filled by KOFFOLK and KOFFOLK shall assume all credit risks. 3. PURCHASE OF PRODUCTS (a) MERCK shall sell, and KOFFOLK shall purchase, the Products from MERCK at the product supply price specified in Schedule B. Product supply prices are [ ]. All orders shall be subject to acceptance by MERCK or such Affiliate and all sales shall be subject to the then current Terms and Conditions of Sale. To the extent there is any inconsistency in the Terms and Conditions of Sale and this Agreement, this Agreement shall govern. (b) KOFFOLK shall make payment to MERCK for the Product within ninety (90) days of the date of the invoice, in the currency stated on the invoice. (c) KOFFOLK shall provide MERCK with a [ ] forecast of its expected requirements of Products, updated on a monthly basis, divided into [ ] of Products by pack size as of the beginning of each [ ]. Purchase orders shall be in writing and submitted by 2 KOFFOLK to MERCK by January 15 of each Calendar Year and shall specify by product the [ ]. [ ]. Delivery shall be made as close to such requested dates as possible. The terms of such purchase order shall be consistent with the provisions of this Agreement and where inconsistent, this Agreement shall govern. (d) MERCK shall use reasonable efforts to fill orders that are in excess of the quantity forecasts provided by KOFFOLK, giving consideration to the quantity of the Products available at the time, the requirements of other customers and the capacity of the production facility. (e) KOFFOLK shall inspect the Products and shall inform MERCK in writing of any complaints regarding the quantity or quality of the same within three (3) days of receipt of the Products by KOFFOLK. In the event that a quality defect is not discoverable by reasonable inspection, such claim for the quality defect shall be made in writing within three (3) days of discovery. No quantity of the Products shall be returned to MERCK without MERCK's express written permission, which permission shall not be unreasonably withheld. Once permission has been given, Product will be returned to MERCK and, at MERCK's option, either subsequently replaced within ninety (90) days at no charge to KOFFOLK or a credit for the amount of defective Product will be provided to KOFFOLK within thirty (30) days of its return. 4. CERTAIN SPECIFIC RESPONSIBILITIES OF KOFFOLK (a) KOFFOLK shall prepare and submit to MERCK on an annual basis, a written marketing plan for the Products which shall include sales forecasts and promotional efforts for the year. The marketing plan for Calendar Year 1997 shall be provided by December 1,1996. Thereafter, the marketing plan for each succeeding Calendar Year shall be provided by KOFFOLK to MERCK by September 1st of the preceding Calendar Year. (b) KOFFOLK shall actively promote and distribute and use its best efforts to expand the sales of the Products in the Territory by all appropriate means available through the maintenance of its sales organization. (c) KOFFOLK shall [ ] CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. (d) If in any two (2) consecutive Calendar Years, KOFFOLK fails to meet the Guaranteed Amounts, MERCK may terminate this Agreement upon sixty (60) days notice to KOFFOLK. (e) KOFFOLK shall keep MERCK informed on a quarterly basis, in writing, of the Promotional Efforts it will be making in connection with the Products. Thereafter, KOFFOLK's expenditure for Promotional Efforts for each subsequent Calendar Year shall be contained in the Marketing Plan as developed by KOFFOLK. MERCK reserves the right to request, and KOFFOLK shall provide, documentation to substantiate the amount spent by KOFFOLK on Promotional Efforts in each Calendar Year of the Agreement. (f) KOFFOLK shall maintain sufficient stocks of the Products to satisfy the demand for them in the Territory. Specifically, its inventory shall, at any given time, not fall below the equivalent of the total estimated sales for each Product in the upcoming two (2) months. The Products shall be handled and stored in accordance with instructions provided by MERCK. (g) KOFFOLK acknowledges that it is aware of the terms of MERCK's Ethical Business Practices 3 Policy, a copy of which is attached hereto as Attachment I and made part of this Agreement. KOFFOLK agrees to comply fully with the requirements of said Policy and agrees to indemnify and hold MERCK harmless from and against any and all liabilities resulting from the violation of said policy by KOFFOLK, or any third party that KOFFOLK has instructed to act on its behalf. (h) KOFFOLK agrees to develop at its own expense Promotional Literature to be used in conjunction with the sale of the Products in the Territory. All Promotional Literature must be consistent with the safety and efficacy data supplied by MERCK and reviewed and approved by MERCK according to the following provisions prior to its use: (i) All Promotional Literature relating to the Products must be submitted for approval to publish shall be addressed to: Merck & Co., Inc. Merck Ag Vet Division Mr. Steve Vandeberg Associate Director, Marketing Communications U.S. Operations P.O. Box 2000, WBF-224 Rahway, NJ 07065-0912 (ii) Within twenty (20) working days of receipt, MERCK will either approve or reject the submission. No Promotional Literature may be printed, published or put into use until a signed approval is received from MERCK by KOFFOLK. Facsimile transmission will be deemed acceptable. (iii) Approval of each promotional text is valid for one (1) year unless new Product information or new regulations affecting the Products or text become available. In the absence of any such changes, approved literature may be printed, reprinted, used and distributed during this period. (iv) An approved text may not be changed for publication without the written authority of MERCK. This applies to all Promotional Literature covered by this procedure. If even the most minor change of an approved literature piece is required, the revised text must be submitted for MERCK's approval. (v) KOFFOLK shall submit, within five (5) days of production, ten (10) printed specimens of each approved literature piece for after-the-fact review, accompanied by a confirmation from an authorized representative of KOFFOLK that it is worded exactly as was approved by MERCK. Specimens and confirmations should be addressed to: Merck & Co., Inc. Merck AgVet Division Mr. Steve Vandeberg Associate Director, Marketing Communications U.S. Operations P.O. Box 2000, WBF-224 Rahway, NJ 07065-0912 (vi) Pricing information or bulletins for KOFFOLK's internal use only that contain no safety, efficacy or other Products-related claims are excluded from review under this procedure. (i) KOFFOLK shall provide MERCK with a quarterly report of (i) all sales of Products by package size and (ii) and inventory status of the Products which report shall be provided by the twentieth (20th) day of the 4 month immediately following the close of the quarterly period. Additionally, KOFFOLK shall keep MERCK advised on a regular basis of general market, economic and regulatory developments which may affect the promotion and sale of the Products in the Territory. (j) KOFFOLK shall not make any claim, either orally or in writing, with respect to the safety or effectiveness of the Products that is inconsistent with and/or goes beyond approved claims for the Products, nor shall KOFFOLK recommend the combination of the Products with any other products, without MERCK's prior written consent. (k) KOFFOLK shall do nothing which will jeopardize the goodwill of MERCK or any of its Affiliates or the reputation of the Products. The appointment of KOFFOLK as a distributor hereunder shall not create a joint venture, or principal-agency relationship, or franchise relationship and nothing hereunder shall be deemed to authorize KOFFOLK to act for, represent, or bind MERCK or any of its Affiliates, unless specific authority to act on MERCK's behalf is granted to KOFFOLK in writing. (l) Both parties agree to comply with all laws and regulations and other requirements in the Territory governing the performance of their activities under an agreement such as this. (m) KOFFOLK shall be responsible for ensuring that its customers obtain approval of form FDA 1900 with the FDA. In order to ensure that existing customers of the Products have obtained such approvals, MERCK shall provide KOFFOLK, within forty-five (45) days of the Effective Date, with copies of all forms FDA 1900 (or Forms FDA 1800, if applicable) covering the Products which it has in its possession. (n) Except as required by law, neither party shall make any public announcement in connection with the subject matter of this Agreement without the prior approval of the other party. 5. PROMOTIONAL AND MARKETING EXPENSES (a) KOFFOLK agrees to pay for all promotional, selling and marketing costs of Products, including but not limited to customer feed assay costs, advertising expenses, freight and distribution costs and carrying costs of accounts receivable. (b) MERCK agrees to provide customer feed assays to KOFFOLK in 1996 [ ]. 6. CONFIDENTIALITY (a) For the term of this Agreement plus five (5) years thereafter all information which is received by KOFFOLK or MERCK from the other party during the term of this Agreement shall be maintained in strict confidence by the receiving party. All information whether generated by KOFFOLK or MERCK shall be disclosed only to MERCK or KOFFOLK employees and consultants who have been instructed to treat such information in strict confidence and on a "need to know" basis. This information shall be protected from disclosure to third parties with at least the same degree of care used by such employees when dealing with their employer's confidential information. Further, such information shall not be disclosed to any other person, firm, or agency, governmental or private, or used for purposes other than set forth herein without the prior written consent of the disclosing party. (b) With respect to tangible materials provided by MERCK to KOFFOLK under this Agreement, including samples of Products, KOFFOLK agrees to (i) not provide such materials to third parties, (ii) not conduct demonstration trials or protocols for the promotional use of the product except with the prior written permission of MERCK, and (iii) return unused portions of such materials to MERCK. 5 (c) In the event KOFFOLK desires to disclose to MERCK any information considered confidential and proprietary to KOFFOLK ("KOFFOLK Confidential Information") during the course of this Agreement, KOFFOLK shall first provide MERCK with notice of KOFFOLK's intent to disclose KOFFOLK Confidential Information, then for the term of this Agreement plus three (3) years thereafter, MERCK shall keep KOFFOLK Confidential Information confidential by not disclosing to any third party, and shall not use for any purpose other than pursuant to this Agreement. (d) The foregoing obligations shall not apply when and to the extent such information:(I)is or becomes a part of the public domain without the breach of this Agreement;(ii)is already known to the receiving party prior to its disclosure or development hereunder(iii)can be shown to have been independently developed by or on behalf of MERCK without reference or access to KOFFOLK Confidential Information as evidenced by MERCK's written records; or(iv)is disclosed to the receiving party by an independent third party not under an obligation of confidence to the disclosing party with respect thereto. (e) This Agreement shall not supersede any existing Confidentiality Agreement between MERCK and KOFFOLK and/or its Affiliates with respect to any information already or hereafter disclosed between the parties, and shall be deemed additive to those confidentiality obligations that may have already been assumed. 7. PRODUCT REGISTRATION Registrations for the Products with the Food and Drug Administration shall be maintained by MERCK. All fees and other expenses in connection with the registration of the Products shall be for the account of MERCK. Product registrations shall be in the name of MERCK or a designated Affiliate under the separate Trademarks as owned by MERCK as set forth in Paragraph 8 and listed in Schedule A. All product registrations so obtained shall be and remain the property of MERCK or such Affiliate. Any registrations required pursuant to state law to allow for distribution of the Products by KOFFOLK in each state in the Territory, including distribution licenses, shall be applied for, maintained by, be the property of, and for the account of KOFFOLK only. 8. PACKAGING AND LABELING KOFFOLK will promote and market the Products under labeling and package design approved by MERCK. All packages will bear the name and logo of MERCK, and shall identify that the Products are manufactured by MERCK. 9. TRADEMARKS (a) [ ], KOFFOLK shall have the exclusive right to use the Trademarks in the Territory pursuant to the terms of this Agreement and the Trademark License Agreement of even date annexed as Attachment 2. (b) Except as provided by this Agreement and/or the Trademark License Agreement, nothing in this Agreement shall be construed as granting to KOFFOLK any right, title, interest, or license under or to any intellectual property of MERCK relating to the Product. 10. REGULATORY MATTERS (a) The Product covered by this Agreement is registered with the Center for Veterinary Medicine of the Food and Drug Administration (FDA). (b) (i) KOFFOLK agrees that it shall undertake in accordance with applicable FDA regulations, and any other applicable laws or regulations, the submitting of periodic drug experience reports to MERCK. 6 (ii) KOFFOLK further agrees to report to MERCK in writing all adverse experience and adverse physical occurrence information of which it becomes aware associated with the Products relating to hazards, contraindications, side effects, injuries, toxicity, sensitivity reactions, Product defects and mix-ups, whether or not the adverse experience or physical occurrence is determined to be causally related to the Products. This reporting obligation shall be in full compliance with the MERCK Policy and Procedure No. 4, "Reporting Adverse Experiences and Adverse Physical Occurrences for Animal Health Products," a copy of which is attached as Attachment 3 and incorporated herein by reference. KOFFOLK shall submit a copy of such report to MERCK within five (5) working days after learning of the adverse experience or physical occurrence using the required RA 1932 Form, a blank copy of which is attached as Attachment 4. (iii) When complete information is not available within the five-day period, KOFFOLK shall submit any available information within the five-day period, and also submit a supplement as soon as further details become available. MERCK shall be authorized to submit such adverse experience or physical occurrence information to government authorities as it considers appropriate. KOFFOLK agrees to permit MERCK to audit KOFFOLK's files for adverse drug experience or physical occurrence on a routine basis as determined necessary by MERCK. If MERCK becomes aware of adverse experiences or physical occurrences which in its opinion may require a change in label content, MERCK shall provide KOFFOLK with all information relating to such adverse experiences or physical occurrences. (iv) KOFFOLK agrees to provide a signed statement identifying the category of its operation (i.e., wholesaler, retailer) and stating that it will distribute the Products only under labeling provided for in the new animal drug application for Product and approved by MERCK; that any other labeling or advertising for the drug will prescribe, recommend and/or suggest its use only under the conditions stated in the labeling provided for in the application; and that it is regularly and lawfully engaged in the distribution of Product. (v) KOFFOLK will advise MERCK immediately concerning any FDA inspections, notices, or enforcement action with respect to the Product. 11. FORCE MAJEURE Neither of the parties hereto shall be liable or be in breach of any provision hereof for any failure or delay on its part to perform any obligation (other than the obligation to make payments when due) under any provision of this Agreement because of force majeure, including, but not limited to, war, riot, fire, explosion, flood, sabotage, accident or breakdown of machinery; unavailability of fuel, labor, containers, or transportation facilities; accidents of navigation or breakdown or damage of vessels, or other conveyances for air, land or sea; other impediments or hindrances to transportation; strike or other labor disturbances; government restraints or any other cause beyond the control of the party thus failing to perform or whose performance is thus delayed. 12. TERM AND TERMINATION (a) This Agreement shall have an Effective Date as defined herein, and unless sooner terminated as provided herein, shall remain in full force and effect for a period of [ ] from the Effective Date subject to the terms and conditions set forth herein. Thereafter the Agreement shall be renewed for successive one (1) year periods upon mutual agreement of the parties expressed in writing at least ninety (90) days prior to expiration of this Agreement and each successive renewal term. (b) Should either MERCK or KOFFOLK cease to do business or be adjudicated as bankrupt or make an assignment for the benefit of creditors or become involved in any insolvency proceeding or receivership proceeding, this Agreement shall terminate immediately. (c) This Agreement may also be terminated by MERCK on one hundred and eighty (180) days prior 7 written notice to KOFFOLK in the event that maintenance of the Product registration or manufacture of the Product becomes infeasible as reasonably determined by MERCK or MERCK divests Product via a Like Kind Exchange arrangement with a third party. (d) Either party may terminate the Agreement in case of material breach by the other party, such termination to be effected by sixty (60) days prior written notice which specifically identifies the breach and provides the opportunity for the breach to be cured within that sixty (60) day period. By way of example without limitation, failure by KOFFOLK to follow and comply with Paragraph 4(h) (promotional material) and Paragraph 10 (regulatory matters) shall be considered a material breach. (e) MERCK may terminate this Agreement upon thirty (30) days written notice upon a change in management or in the event that a majority of the stock, assets or control of KOFFOLK is acquired by any other party(s) which MERCK determines, in its sole judgment, is prejudicial to its interests. In the event of such-change in management or control, notwithstanding the provisions of Paragraph 13, MERCK shall have the right in its sole discretion to purchase back any and all remaining inventory of Products at KOFFOLK's full purchase price. (f) Upon termination of this Agreement in accordance with its terms, KOFFOLK shall make no claim or request compensation of any kind because of such termination. KOFFOLK agrees to waive any statutory amount which may be allowable or imposed for such termination such as liquidated damages or other such statutory payments, if any. (g) Termination shall not extinguish obligations and liabilities of the parties accrued prior to termination or non-renewal. 13. TRANSITION PERIOD At the conclusion of the Exclusive Distribution Period, or in the event of earlier termination under Paragraph 12 with the exception of Paragraph 12 (e), KOFFOLK shall have the right to sell any remaining MERCK product bearing the Product label in its inventory for a period not to exceed three (3) months from the conclusion of the Exclusive Distribution Period or the date of termination. KOFFOLK shall notify MERCK in writing of its existing inventory of Products at the beginning of that three (3) month period. KOFFOLK shall exercise its best efforts to sell existing inventory of Products during this three (3) month period. KOFFOLK further agrees to take all reasonable steps necessary to minimize the amount of product inventory bearing the Product label remaining on the first day immediately following conclusion of the Exclusive Distribution Period. The parties' respective rights and obligations under the Agreement shall remain in full force and effect during the Transition Period. 14. RECALL (a) In the event MERCK shall be required or shall voluntarily decide to recall any Product distributed by KOFFOLK pursuant to this Agreement, then KOFFOLK shall fully cooperate with MERCK in connection with the recall. If such recall is initiated because of the negligence or failure of MERCK to comply with the terms of this Agreement, then MERCK will credit KOFFOLK for the price it invoiced KOFFOLK for all Product returned and, in addition, MERCK will reimburse KOFFOLK for all reasonable recall expenses in connection therewith. If such recall is initiated because of the negligence or failure of KOFFOLK to comply with the terms of this Agreement, then KOFFOLK will reimburse MERCK for all reasonable recall expenses in connection therewith. (b) KOFFOLK agrees to abide by all decisions of MERCK to recall Product and both parties shall fully cooperate with each other in the event of any recall of Product under this Agreement. 15. JURISDICTION/CHOICE OF LAW 8 This Agreement shall be governed by, interpreted and construed, and all claims and disputes, whether in tort, contract or otherwise be resolved in accordance with the substantive laws of the State of New York, United States of America, without reference to any rules of conflict of laws or renvois. In the event of any controversy or claim arising out of or relating to this Agreement, performance hereunder, termination hereof, or relationship created hereby, each party irrevocably submits to the exclusive jurisdiction of the courts of the Supreme Court of the State of New York and the U.S. District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of this Agreement or transactions contemplated hereby. Each party irrevocably and unconditionally waives any objection to the laying of venue in the courts of New York as stated above and that any such action was brought in an inconvenient forum. Notwithstanding the foregoing, in the event of a threatened disclosure in violation of this Agreement, MERCK shall have the right to seek injunctive relief from any competent court in the jurisdiction where the disclosure is threatened to prevent such disclosure pending resolution of the merits of the dispute. 16. PRODUCT WARRANTIES AND INDEMNIFICATION (a) MERCK warrants that the Products shall meet the ingredient specifications contained on the label and conform to MERCK's specifications for the Products when it leaves MERCK's control. MERCK makes no other warranties, either express or implied, including warranties of merchantability or of fitness for a particular use. (b) MERCK shall defend and indemnify KOFFOLK against all expenses, claims, demands, liabilities or money judgments, including recall, incurred by KOFFOLK arising from the negligence or fault of MERCK or from MERCK's failure to comply with the terms of this Agreement, except to the extent that said expenses, claims, demands, liability or money judgments are caused by the negligence or fault on the part of KOFFOLK or KOFFOLK's failure to comply with the terms of this Agreement. (c) KOFFOLK shall defend and indemnify MERCK against all expenses, claims, demands, liabilities or money judgments, including recall, incurred by MERCK arising from the negligence or fault of KOFFOLK or from KOFFOLK's failure to comply with the terms of this Agreement, except to the extent that said expenses, claims, demands, liability or money judgments are caused by the negligence or fault on the part of MERCK or MERCK's failure to comply with the terms of this Agreement. 17. ENTIRE AGREEMENT This Agreement and Trademark License Agreement of even date comprises the entire Agreement between the parties and merges all prior agreements between them relative to the Products hereunder. This Agreement may not be amended except in writing, signed by both parties referencing this Agreement. 18. NOTICES All notices hereunder required to be in writing shall be sufficient if sent by certified mail, return receipt requested, postage prepaid, addressed as follows: If to MERCK: Merck & Co., Inc. P.O. Box 2000 Rahway, NJ 07065-0912 Attention: President Merck AgVet Division If to KOFFOLK: Koffolk, Inc. One Parker Plaza Fort Lee, New Jersey 07024 9 Attn: President 19. SEVERABILITY In the event that any one or more of the provisions contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions contained in this Agreement. If any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to time, duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with applicable law. 20. TITLES The titles to each paragraph of this Agreement are for reference only and shall not be used to interpret said paragraph. All interpretations of the meaning of each paragraph to this Agreement shall rely solely upon the wording of the Agreement and shall not incorporate the paragraph titles for its interpretation. 21. AMENDMENT Except as otherwise expressly stated herein, this Agreement cannot be amended or modified except by a written instrument which shall state that it is an amendment or modification of this Agreement and which shall be signed and dated by the parties hereto. 22. WAIVER Failure by MERCK or KOFFOLK at any time to enforce any of the terms or conditions of this Agreement shall not be deemed a continuing waiver as to such terms or conditions, and shall not affect the right of MERCK or KOFFOLK to later avail itself of such remedies as it may have for any subsequent breach of such terms or conditions under the provisions of this Agreement in equity or at law. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers or representatives as of the day and year first above written. KOFFOLK, INC. By: /s/ J.C. Bendheim ----------------- Name: J. C. Bendheim Title: Pres. MERCK & CO, INC. By: /s/ John M. Preston ------------------- Name: John M. Preston Title: President 10 SCHEDULE A CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] [ ] [ ] [ ] [ ] SCHEDULE B MINIMUM SUPPLY PRICES CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] [ ] [ ] [ ] [ ] SCHEDULE C GUARANTEED PURCHASES CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] ATTACHMENT 1 ETHICAL BUSINESS PRACTICES KOFFOLK agrees to comply with Merck & Co., Inc.'s Ethical Business Practices policy which reflects the highest standard of corporate and individual behavior. KOFFOLK shall adhere to business practices which are in accordance with the letter and spirit of applicable laws and ethical principles. KOFFOLK agrees that all transactions in connection with MERCK's business will be accurately reflected in its books and records, and that no funds or other assets shall be paid directly or indirectly to government officials or persons acting on their behalf for the purpose of influencing government decisions or actions with respect to MERCK's business. Violation of this policy on the part of KOFFOLK, its employees, or representatives, shall result in the immediate termination of this Agreement. ATTACHMENT 2 TRADEMARK LICENSE AGREEMENT AGREEMENT, effective as of August 5, 1 996 by and between MERCK & CO., INC., a corporation organized and existing under the laws of the State of New Jersey, U.S.A., with an office at Whitehouse Station, New Jersey, U.S.A. (hereinafter "Licensor"), and KOFFOLK, INC. (including its affiliates and subsidiaries), a business entity duly organized and existing under the laws of Delaware (hereinafter "Licensee"). WHEREAS, Licensor is the owner in the United States of America and its territories (hereinafter the "Territory") of the right, title and interest in and to the trademarks, AMPROL(R) (amprolium) and AMPROL(R) Plus and the applications for registration and registrations thereof (hereinafter "Trademarks'); and WHEREAS, Licensee desires the right and license to use the Trademarks, in the Territory on and in association with the sale of certain pharmaceutical preparations containing amprolium as an active ingredient [ ] (hereinafter "Products") pursuant to the Distributorship Agreement dated August 5, 1996 between Merck AgVet, a division of Merck & Co., Inc. and KOFFOLK, USA (hereinafter "Distributorship Agreement"); NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties herein agree as follows: 1. Licensor hereby grants to Licensee, for the term of the Distributorship Agreement, and Licensee accepts, an exclusive, royalty-free, non-sublicensable, non-assignable license to use the Trademarks in the Territory solely in connection with the packaging, promotion, and sale of the Products. 2. Licensee shall use the Trademarks only for the Products supplied by Licensor. From time to time, upon request of Licensor, Licensee shall submit samples of any of the Products to Licensor or its duly appointed agent to insure compliance with Licensor's storage and handling specifications. Licensor, or its duly appointed agent, shall have the right to inspect the premises of Licensee, and Licensee shall permit such inspection, at any reasonable time, to confirm that Licensee is adhering to Licensor's standards and specifications used in the repackaging, storage and sale of the Products, pursuant to the Distributorship Agreement under which Licensee is licensed herein to use the Trademarks. Licensee shall not sell or otherwise dispose of, any of the Products under the Trademarks that fail to comply with the standards and specifications of Licensor as determined by Licensor. Any economic loss resulting from the failure of Product to conform to Licensor's quality control standards and requirements, caused by an action or failure to act by Licensee pursuant to the terms of the Distributorship Agreement, shall be borne by Licensee. 3. Licensee shall use the Trademarks only in such form and manner as shall be approved in writing from time to time by Licensor. Licensee undertakes to comply with all laws pertaining to the Trademarks in force at any time in the Territory including, but not limited to, compliance with marking requirements. Use of the Trademarks by Licensee on labels and packaging or on other printed material shall be presented as AMPROL and AMPROL(R)Plus accompanied by an appropriate statement that such trademarks are "Licensed Trademarks", or such other appropriate legend as Licensor shall direct. The Trademarks shall always be given distinctive typographical treatment when used by Licensee. Copies of all labels, packaging and other printed material on which the Trademarks is used shall be submitted to Licensor for approval prior to use in accordance with the terms of the Distributorship Agreement. Licensee shall not use the Trademarks in any manner whatsoever which may jeopardize the significance, distinctiveness or validity thereof. 4. The Trademarks shall at all times remain the exclusive property of Licensor and all use of the Trademarks hereunder shall inure to the benefit of Licensor. Nothing in this Agreement shall be construed as granting or transferring to Licensee any right, title or interest in and to the Trademarks either by operation of law or otherwise except the right to use the same during the term of this Agreement, as provided in this Agreement and in the Distributorship Agreement. 5. Licensee agrees that it shall not use the Trademarks in combination with any other trademark or trade name of its own or any third party or as a component of its business name or to characterize its business in any other way; and that it will use the Trademarks only on, or in connection with, the Products, and will not use or permit use of the Trademarks in connection with goods other than the Products; and that the Trademarks and the goodwill associated therewith, are and shall continue to be the exclusive property of Licensor. 6. Licensor agrees to maintain the trademark registrations for the Trademarks. However, if the Trademarks are not in use in a particular jurisdiction of the Territory, Licensor may allow the registration to expire. Licensee agrees to cooperate with Licensor in providing information, specimens, and documentation that may be useful or required in order to effect trademark registrations, or for maintenance and renewal of trademark registrations for the Trademarks. 7. Licensee shall, at all times, execute any documents reasonably required by Licensor to record Licensee as a registered user or licensee of the Trademarks. Licensee agrees to cooperate as requested by Licensor in arranging for such recordings and/or entries, or in maintaining, varying or canceling such recordings and/or entries in the event of amendment to, or termination of, this Agreement for any reason. 8. In the event that Licensee learns of any infringement or threatened infringement of the Trademarks, or any passing-off, Licensee shall immediately notify Licensor or its authorized representative in writing giving particulars thereof and Licensee shall provide necessary information and assistance to Licensor or its authorized representatives in the event that Licensor decides that proceedings should be commenced or defended. The commencement, strategies, termination and settlement of any action relating to the validity and/or infringement of the Trademarks shall be decided. by Licensor. Any such proceedings shall be at the expense of Licensor, and any recoveries shall be to the benefit of Licensor. Nothing herein, however, shall be deemed to require Licensor to enforce the Trademarks against others. 9. Licensee shall promptly notify Licensor of any claims arising out of the use of the Trademarks, and Licensor will provide for the defense thereof with counsel of its own selection and will pay all costs and expenses incurred in so defending against such claims, provided such use of the Trademarks by Licensee was in accordance with the terms of this Agreement and the Distributorship Agreement. Licensee shall also have the right to participate in the defense of any such claim with attorneys of its own selection, at its own expense, however, the extent to which any such claim shall be prosecuted, defended or settled, will be solely within the discretion of Licensor. Licensor hereby indemnifies and shall hold harmless Licensee from and against the cost and expenses of any claims, demands, causes of action, judgments, damages or liabilities, arising out of the use by Licensee of the Trademarks in accordance with the terms of this Agreement, provided that written notice of such claim, demand or cause of action is promptly given to Licensor and Licensee cooperates fully with Licensor in the defense of such claim, demand or cause of action. 10. Licensee agrees to indemnify and hold Licensor harmless from and against any and all claims and agrees to reimburse Licensor for any and all losses, damages, costs, fees, expenses, liabilities and obligations of any kind (including reasonable attorney's fees and other reasonable legal costs and expenses) that Licensor may at any time suffer or incur, or become subject to as a result of or arising from the unauthorized use of the Trademarks by Licensee. Licensee shall have the right to defend any such action or proceeding with attorneys of its own selection, and Licensor shall have the right to be represented by attorneys of its selection. 11. This Agreement shall be effective as of the date first written above and shall continue in force for as long as the Distributorship Agreement remains in effect, and shall terminate upon termination of the Distributorship Agreement. 12. This Agreement shall terminate immediately and automatically in the event that Licensee makes any assignment for the benefit of creditors or shall file for, or have filed against it, a petition for bankruptcy; or if Licensee is dissolved or loses its charter by forfeit or otherwise or if a trustee or receiver is appointed for Licensee or for any of its property in any proceeding, or if any court takes jurisdiction of the property of Licensee by foreclosure or otherwise. 13. In the event that Licensee defaults or breaches any of the provisions of this Agreement, Licensor shall have the right to terminate this Agreement upon thirty(30) days written notice to Licensee, provided, however, that if Licensee, within the said thirty (30) day period, cures the default or breach to the satisfaction of Licensor, the Agreement shall continue in full force and effect. 14. Upon termination of this Agreement for whatever reason, Licensee shall promptly discontinue any further use of the Trademarks, and shall not use any trademark which, in the reasonable opinion of Licensor, is confusingly similar to the Trademarks, except that after termination of this Agreement, Licensee may for a period of twelve (12) months immediately following termination, sell existing stocks of the Products bearing the Trademarks without removing the Trademarks provided that such Products comply with the standards and specifications of Licensor, in force at the time of termination. 15. The failure of a party to require the performance of any term of this Agreement or the waiver by a party of any breach of this Agreement shall not prevent a subsequent enforcement of such term nor be deemed a waiver of any subsequent breach. 16. Should Licensee be or become aware of any applicable laws or regulations which are inconsistent with the provisions of this Agreement, Licensee shall promptly notify Licensor of such inconsistency. 17. The remedies provided for in this Agreement are not exclusive of other remedies available to the parties. 18. This Agreement may be assigned by Licensor to an affiliate without approval, otherwise it may be assigned by either party only with the written approval of the other party. 19. This Agreement shall be binding upon and inure to the benefit of any successors in interest of each party. 20. All notices provided for herein shall be deemed sufficient if in writing and delivered or sent by pre-paid registered or certified mail, facsimile, cablegram or telex to the party hereto at its address specified in Paragraph 18 of the Distributorship Agreement or to such other business address as may have been furnished in writing by the intended recipient to the sender. The date of mailing, faxing, cabling or telexing shall be deemed to be the date on which such notice or request has been given. 21. This Agreement, and its construction, interpretation, performance and breach shall be governed according to the laws of the State of New Jersey. 22. This Agreement and the Distributorship Agreement constitute the entire agreement and understanding between the parties and supersedes all previous agreements between them concerning the matters covered herein, whether written, oral or implied. This Agreement may only be changed or modified by written agreement signed by both parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives. KOFFOLK, INC. By: /s/ J.C. Bendheim ----------------- Name: J. C. Bendheim Title: Pres. MERCK & CO, INC. By: /s/ John M. Preston ------------------- Name: John M. Preston Title: President MERCK AGVET DIVISION POLICY AND PROCEDURE REPORTING ADVERSE EXPERIENCES AND ADVERSE PHYSICAL OCCURRENCES FOR ANIMAL HEALTH PRODUCTS Date: 03/01/94 Supercedes: 10/30/92 CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] EX-10.7 11 0011.txt LICENSE AGREEMENT CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. LICENSE AGREEMENT THIS AGREEMENT is effective this 30th day of May, 1996 and is by and between MICHIGAN TECHNOLOGICAL UNIVERSITY, a body corporate organized and existing under the laws of the State of Michigan located in Houghton, Michigan (hereinafter referred to as MTU) and doing business as the INSTITUTE OF MATERIALS PROCESSING one of its Research Institutes (hereinafter referred as IMP) arid MINERAL RESOURCE TECHNOLOGIES, LLC a limited liability company organized and existing under the laws of the State of Delaware and having a place of business in Atlanta, Georgia (hereinafter referred to as MRT). WHEREAS, MTU is the owner of the entire right, title and interest in and to the LICENSED PATENTS (hereinafter defined) and further represents that it has the right and power to grant licenses of the scope herein granted; and WHEREAS, MTU has the facilities, personnel and expertise to conduct research in the area of fly ash recovery and processing of recovered fly ash and to cooperate in the commercial development of the results of that research; and WHEREAS, MRT has the facilities, personnel and expertise to conduct research in the area of fly ash recovery and processing of recovered fly ash including producing salable products, made from recovered fly ash; and WHEREAS, MRT has the facilities, personnel and expertise to construct and operate installations for the commercial exploitation of fly ash recovery and processing of recovered fly ash including producing salable products made from recovered, fly ash; and WHEREAS, MRT wishes to secure and MTU is willing to grant to MRT an exclusive license under the LICENSED PATENTS; and WHEREAS, MRT and MTU wish to cooperate in future research in the area of fly ash recovery and processing of recovered fly ash including producing salable products, made from recovered fly ash; and WHEREAS, MRT and MTU wish to cooperate in the construction and operation of installations for the commercial exploration of fly ash recovery and processing of recovered fly ash including producing salable products made from recovered fly ash. NOW, THEREFORE, MTU and MRT hereby agree and covenant as follows: I. LICENSED PATENTS 1. For purposes of this Agreement, LICENSED PATENTS shall mean [ ], including reissues, divisions, continuations or extensions thereof and future patents as provided for hereinafter and applicable to the manufacture, use and/or sale of research services, processing equipment and products as contemplated by this Agreement. II. GRANT 1. (a) MTU hereby grants and MRT hereby accepts an exclusive right and license under the LICENSED PATENTS to manufacture, use, and/or sell processes, equipment and/or product, throughout the United States of America, its territories and possession. As applications for letters patent are filed and letters patent become effective in countries foreign to the United States under paragraph V-1(d), the grant of this license shall, extend to those foreign countries. (b) MTU shall retain the right to do research coming within the scope of the LICENSED PATENTS. III. ROYALTIES AND PAYMENTS 1. Upon execution of this Agreement, [ ]. Thereafter and in order to maintain the exclusivity of the license granted herein, MRT shall pay MTU either as earned royalties under paragraph III-4 or in lieu thereof a minimum royalty payment per Agreement Year in the following amounts: CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] For purposes of this Agreement, an "Agreement Year" shall be the twelve (12) months beginning with the effective date of this Agreement and with each annual anniversary date of the effective date. After the second Agreement Year, in the event the earned royalties under paragraph III-4 do not equal the above minimum amounts in a particular Agreement Year, MTU shall have the option of notifying MRT that the license under this Agreement will be reduced to non-exclusive license. If within the immediately following Agreement Year MRT makes a payment to MTU in an amount equal to the difference between the minimum payment due for the prior Agreement Year and the amount of earned royalties actually paid in that prior Agreement Year ("shortfall payment') this Agreement shall continue as an exclusive, if the shortfall payment is not made within that time period this Agreement shall reduce to a non-exclusive in accordance with the notice. 2. The payments of paragraph III-1 due beginning with the second Agreement Year shall be payable [ ]. 3. [ ]. 4. MRT shall pay MTU a royalty based on the Net Selling Price of product on the following schedule: Net Selling Price Royalty as percent of Per Ton of product Net Selling Price CONFIDENTIAL TREATMENT REQUESTED FOR ALL BRACKETED ([ ]) INFORMATION. THE CONFIDENTIAL PORTION HAS BEEN SO OMITTED AND FILED SEPARATELY WITH THE COMMISSION. [ ] 2 For the first eighteen (18) months of the sale of product from a facility operating pursuant to this Agreement, [ ]. 5. If patents issue as provided for in Article V in which an employee of MRT is named as sole inventor or joint inventor with an employee of MTU and i. the claimed subject matter of such patent is used in production of product as contemplated by this Agreement, and ii. the claimed subject matter results in a value added to the product and an increase in the Net Selling Price per ton of product (incremental increase in Net Selling Price), then [ ]. 6. In the event MRT sells process technology and/or equipment to an entity which will in turn operate its own facility and/or manufacture and sell product using the LICENSED PATENTS, MTU shall be compensated by one of either: [ ] 7. For purposes of this Agreement, Net Selling Price shall mean the invoice price of products less transportation. 8. If MRT makes a sale to an Associated Company on which a royalty would be payable, the same royalty shall be paid as if the same quantity had been sold to a third party. The Net Selling Price of the same Quantity of product from the last arm's length sale to a third party shall be used in computing the royalty. 9. Product shall be considered as sold when invoiced, or if not invoiced, when delivered, shipped or mailed, whichever occurs first. 10. MRT is to deliver yearly to MTU four written reports, in duplicate, pertaining to MRT's manufacture, use and/or sale of product or facilities under this Agreement, and shall specifically set forth any freight deductions. Each report shall relate to a calendar quarter and shall be delivered within the months of July, October, January, and April. The first report shall be delivered within thirty (30) days after the end of the calendar quarter current when this Agreement becomes effective. Payments due under paragraphs III-4 or III-6-ii shall accompany the reports under this paragraph III-10. 11. The reports provided for in paragraph III-11 shall contain all necessary data commensurate to accounting in accordance with the true intent of this Agreement; if in any quarter MRT has not made, used and/or sold any product or sold any facilities for which royalties are payable, it shall so report. 12. MRT is to keep true and correct books of account of its production, use and sale of product under this Agreement in sufficient detail to enable an accountant to determine the correctness of the reports submitted by MRT, which books of account shall be open at all reasonable business hours for inspection by an independent certified public accountant (CPA) mutually acceptable to MRT and MTU who shall have the right to examine said books. It is the intent of the parties to this Agreement that the certified public accountant shall not disclose to MTU any business details which may be found in the books of MRT while making such inspection except as needed to verify the reports. MRT shall have the right to refuse acceptance of the CPA if the CPA does not execute a Confidentiality Agreement with MRT relating to the books of account which are to be inspected. Acceptance of the 3 CPA will not be unreasonably withheld by either party. MTU shall be responsible for the expense of the inspection contemplated by this paragraph III-12; provided, however, if the inspection shows the amounts paid as being at least ten percent (10%) less than that actually owed then MRT shall be responsible for the cost of the inspection. MTU may exercise this right of inspection once in each Agreement Year and once in the two (2) years immediately following termination. IV. RESEARCH 1. [ ] of the earned royalties paid to MTU pursuant to paragraph 111-4, but not minimums paid pursuant to paragraph III-1, shall be distributed to IMP. In the first Agreement Year that a royalty is paid, IMP will allocate [ ] of that amount to fly ash research, and MRT and MTU shall jointly direct that fly ash research. The [ ] allocated shall reduce by [ ] in each successive Agreement Year, that is in the second Agreement Year after royalty payments commence, the allocation shall be [ ]. [ ] 2. Immediately after signing this Agreement and to the extent that MTU is legally permitted to do so, MTU will make available and provide copies to MRT of the results of research conducted under DOE contracts and in the area of fly ash drying and beneficiation. Any printed material will be transmitted as copies to MRT, any results not in printed form shall be delivered to MRT at IMP in Houghton, Michigan. In addition and to the extent permissible under the particular DOE contracts, MTU shall make available to MRT any results of research conducted after the effective date of this Agreement with respect to fly ash drying and beneficiation under DOE contracts in existence as of the effective date of this Agreement. 3. (a) After signing this Agreement, MTU and MRT will jointly pursue a DOE grant for [ ] (b) [ ]. (c) If the DOE grant is received, the principal investigators or other responsible individuals of MTU and MRT shall confer at least once within each calendar half-year to apprise the other of the progress and direction and of their respective efforts under the grant. MRT and MTU will furnish each other with copies of any reports which are generated relating to efforts under the grant these report copies shall be furnished within ten (10) days of completion. (d) If MRT, in its sole discretion decides to fund additional fly ash research, [ ] may be credited against future royalties under paragraph III-5 but not the fees of paragraph III-1. If the research funding by MRT is at MTU's request, the amount of the credit against future royalties shall be [ ]. V. FUTURE IMPROVEMENTS AND PAYMENT 4 1. (a) MTU and MRT shall each keep the other currently advised of all future improvements or developments made jointly or solely by either of them without joint inventorship of the other's personnel, or others on behalf of either MTU or MRT, relating to the results of activities under the DOE grant or research sponsored by MRT. If such improvements or developments involve or include patentable subject matter. MTU and MRT will jointly decide whether to pursue patent protection, in which case MTU will file for and attempt to obtain letters patent thereon in the United States. Such letters patent shall be the property of MTU and shall be included within this Agreement the same as a LICENSED PATENT and shall be effective to extend the term of this Agreement. (b) If either party concludes that a patent application should not be filed in the United States, the other party may proceed at it's own expense and any patent to issue will be owned by MTU and come under this Agreement as a Licensed Patent. If the filing party is MRT, MRT shall be entitled to credit the costs involved against future earned royalties. (c) Subject to MRT's credit under subparagraph (b) above, the party filing in the U.S. shall be responsible for the cost of filing and prosecuting applications for letters patent in the United States, and for maintaining any such issued letters patent in the United States. (d) MTU and MRT shall decide in which countries foreign to the United States to file patent applications based on any U.S. patent application, and any patents issuing thereon shall come under this Agreement as a LICENSED PATENT and shall be effective to extend the term of this Agreement with respect to the particular country involved. The cost of filing and prosecuting any agreed upon foreign patent applications shall be shared equally by MTU and MRT, for each filing corresponding to a U.S. patent application MRT's share shall not exceed Fifteen Thousand Dollars ($15,000.00). (e) Costs and fees incurred in maintaining a foreign patent application, an issued foreign letters patent, and, in the case of the European Patent Office, the cost of individual country validation shall be shared equally by MTU and MRT, fifty percent (50%) to each; provided, however, that either MTU and MRT may decide not to participate in such cost the effect of which shall be: (i) in the case of MRT, it shall relinquish license rights in any patent property in which it elects not to participate, arid (ii) in the case of MTU, it shall relinquish the right to receive royalties attributable to activity under any patent property in which it elects not to participate. (f) Any costs incurred by MRT under this paragraph V-l(d) and (e) may be credited against royalty payments due MTU from royalty payments attributable to activity of MRT outside of the United States. As with other credits, this credit shall not exceed [ ]. (g) Suits to enjoin or recover for infringement of a LICENSED PATENT, may be instituted and prosecuted jointly by the parties hereto and in such event the cost and expense thereof and all sums recovered therein shall be shared equally by them. MTU may elect, in its sole discretion, to take the lead role in any such suit. If MTU does not elect to take the lead role MRT may do so. Either party may, however, elect not to join or share in the expense or cost of any such suit, or having once elected to join, may thereafter elect to withdraw and in either such event the other party may proceed therewith at its own expense and shall be entitled to all sums recovered therein or in settlement thereof; provided, however, that if either party at any time elects not to share in such Suit, such party agrees to be made a nominal party to the suit but only at the expense of the other party. (h) If either MTU or MRT becomes aware of the apparent infringement of a LICENSED PATENT, it shall promptly notify the other in writing and in reasonable detail. 5 (i) In the event that any of the claims of a LICENSED PATENT shall be held invalid or shall be awarded to a third party as a result of a decision or a decree of a competent court that becomes final, no royalties shall be payable by MRT after said date on apparatus covered only by such claim or claims. A decision shall not be considered to be final as long as a party to a suit has recourse to the United States Supreme Court. As of the effective date of the decision or decree of the competent court, MRT may suspend all royalty payments and minimum payments. If the decision or decree is reversed by an appellate court, MRT shall pay MTU all suspended payments and resume royalty payments and minimum commitments, suspended payments will be made in the interest calculated at two (2) percentage points above prime. (j) MTU does not warrant that the use of the rights granted MRT under this Agreement will not infringe letters patent of a third party; provided, however, that MTU does represent that it does not have any present knowledge of letters patent that would be infringed. 2. MRT shall have the right of first refusal to include in this Agreement any letters patent obtained by MTU and relating to ash derived products and technology provided, however, that the letters patent are not the result of externally funded research and MTU is free to do so. In the exercise of this right. MTU shall promptly advise MRT of the filing of an application for letters patent and MRT shall have sixty (60) days in which to affirmatively exercise this right of first refusal, in which case any letters patent issuing from the application shall come under this Agreement as a LICENSED PATENT and shall be effective to extend the term of this Agreement. If MRT declines to exercise this option within the sixty (60) day period or does not respond within the sixty (60) day period, MTU shall be free to pursue said patent application without any further obligation to MRT. VI. TERM AND TERMINATION 1. (a) MRT may terminate this Agreement without cause between twenty-four (24) and thirty-six (36) months from the effective date of the Agreement. Termination under this paragraph VI-1 can only be exercised by MRT giving MTU six (6) months prior written notice. (b) The respective rights and obligations of MTU and MRT under the DOE grant shall survive termination under paragraph VI-1(a) with respect to sharing results of activities under the DOE grant and MTU ownership of any improvements, patentable or unpatentable, resulting therefrom; provided, however, MRT shall relinquish any license rights in those patents. 2. (a) Either MTU or MRT may terminate this Agreement in the event of breach or default thereof by the other, without waiver of any other remedy, by service on the other of notice of termination effective not less than 60 days after service specifying the particulars of the others breach or default. If within 60 days following notice the breach or default is remedied, the license shall continue in full force and effect, otherwise it shall terminate in accordance with the notice. (b) In the event of termination under paragraph VI-2(a) due to MRT's breach, MRT shall relinquish its license rights under this Agreement. (c) In the event of termination under paragraph VI-2(a) due to MTU's breach, MRT's license rights shall be converted to a royalty free, non-exclusive license effective as of the date of termination. 3. In the event enactment of any federal law renders impossible performance by MRT under this Agreement, MRT may terminate this Agreement for the United States by written notice of an intent to terminate and such termination shall be effective as of receipt of that notice by MTU. 4. Subject to paragraph III-3, the term of this Agreement shall be for the last to expire of the LICENSED PATENTS; provided, however, MRT shall be obligated to pay royalties only with respect to such of 6 the LICENSED PATENTS as have not expired. 5. Termination of this Agreement shall be without prejudice to MTU's right to recover any royalty sums due at the time of such termination, or to any cause of action or claim accrued or to accrue on account of any such breach or default arid the license granted hereunder shall cease at the time of such termination. 6. Waiver by MTU or MRT of any particular breach or default by the other shall be considered as applicable only to such particular case and shall not be construed as a waiver of any provision of this Agreement or of any subsequent breach, violation or default. VII. MISCELLANEOUS 1. In case MRT files a petition in bankruptcy, or in case a petition in bankruptcy is filed against MRT, and such petition is not dismissed within 90 days thereafter, or if MRT is adjudged bankrupt or shall make a general assignment of the benefit of its creditors or any assignment in the nature of such a general assignment, or in case a receiver is appointed for its business, this Agreement may be terminated at MTU's option. 2. MRT shall have the right to use MTU's name and that of its Institute of Minerals Processing and any applicable MTU trademarks; provided, however, such use shall be subject to written approval by MTU prior to any such usage. MTU shall have the right to approve the form and content of any material using such names or trademarks. MRT may also use the name of individual MTU employees; provided, however, the prior written consent of the individual is obtained by MRT. 3. Notices under this Agreement shall be in writing and shall be sufficient' if sent by registered mail. Notices and reports under this Agreement shall be addressed as follows: For MRT: Mr. Hugh P. Shannonhouse Mineral Resource Technologies, LLC 120 Interstate North Parkway East Suite 440 Atlanta, GA 30339 Copy to: Jody H. Armstrong, Esq. Killworth, Gottman, Hagan & Schaeff One Dayton Centre One South Main Street, Suite 500 Dayton, Ohio 45402-2023 For MTU: Dr. Jian-Yang Hwang Institute of Minerals Processing Michigan Technological University 1400 Townsend Drive Houghton, MI 49931 copies to: 7 Ms. Sandra Gayk Intellectual Property Office Michigan Technological University 1400 Townsend Drive Houghton, MI 49931 Joseph A. Gemignani Michael, Best & Friedrich 100 East Wisconsin Avenue Milwaukee, WI 53202 4. If calculation of royalties due involves foreign currencies, the Net Selling Price and royalty due shall be converted to U.S. Dollars at the time the royalties are paid. 5. This Agreement may not be assigned by either party without the prior written consent of the other party except MRT may assign this Agreement as a part of sale of at least that portion of its business to which this Agreement relates by giving MTU ninety (90) days notice thereof. 6. This Agreement constitutes the complete agreement between the parties and no modifications shall be binding upon the party against whom enforcement of such modification is sought unless it is made in writing referring to this Agreement and is signed on behalf of such party by one of its officers. 7. This Agreement shall be interpreted in accordance with the laws of the State of Michigan and shall be binding on each of the legal representatives of the parties hereto. 8. If any of the terms and conditions of this Agreement are invalid, in whole or in part, such invalidity shall not affect the remaining terms and conditions hereof, and this Agreement shall be construed as though such terms and conditions held to have been invalid and never been included herein. In such cases, this Agreement shall be supplemented by a provision which, as far is legally possible, comes nearest to the mutual intent of the parties as reflected in the text of this Agreement. IN WITNESS WHEREOF, this Agreement has been executed on behalf of the parties by their duly authorized representative as of the day and year first written above. MINERAL RESOURCE TECHNOLOGIES, INC. By: /s/ Hugh P. Shannonhouse ------------------------- Hugh P. Shannonhouse President Witness: /s/ - --- MICHIGAN TECHNOLOGICAL UNIVERSITY By: /s/ Frederick J. Dobney ----------------------- Frederick J. Dobney Executive Vice President Witness: /s/ - --- 8 EX-10.8 12 0012.txt LEASE BETWEEN PHILIPP BROTHERS CHEMICALS, INC. AND 400 KELBY ASSOCIATES, AS AMENDED LEASE 400 KELBY ASSOCIATES, Landlord TO PHILIPP BROTHERS CHEMICALS INC., Tenant Premises: Parker Plaza, 400 Kelby Street, Fort Lee, New Jersey The Land affected by the Within Instrument Lies in Block 4502 on the Tax Map of the Borough of Fort Lee, County of Bergen (Tax Lots 1 and 2). INDEX
Article Caption Page - ------- ------- ---- 1. Demise, Premises, Term, Rents................................................................1 2. Use..........................................................................................3 3. Completion of Renovation of the Building and Preparation of the Demised Premises.............................................................................4 4. When Demised Premises Ready for Occupancy....................................................6 5. Adjustments of Rent..........................................................................7 6. Deleted Prior to Execution..................................................................15 7. Subordination, Notice to Lessors and Mortgagees.............................................15 8. Quiet Enjoyment.............................................................................17 9. Assignment and Subletting...................................................................17 10. Compliance with Laws and Requirements of Public Authorities.................................24 11. Insurance...................................................................................25 12. Rules and Regulations.......................................................................28 13. Tenant's Changes............................................................................28 14. Tenant's Property...........................................................................31 15. Repairs and Maintenance.....................................................................32 16. Electricity.................................................................................33 17. Heat, Ventilation and Air Conditioning......................................................39 18. Landlord's Other Services...................................................................40 19. Access, Changes in Building Facilities, Name................................................41 20. Notices of Accidents........................................................................43 21. Non-Liability and Indemnification...........................................................43 22. Destruction or Damage.......................................................................44 23. Eminent Domain..............................................................................45 24. Surrender...................................................................................47 25. Conditions of Limitation....................................................................48 26. Re-Entry by Landlord........................................................................49 27. Damages.....................................................................................50 28. Waiver......................................................................................52 29. No Other Waivers or Modifications...........................................................53 30. Curing Tenant's Defaults, Additional Rent...................................................53 31. Broker......................................................................................55
-(i)- 32. Notices.....................................................................................55 33. Estoppel Certificate, Memorandum............................................................55 34. Arbitration.................................................................................56 35. No Other Representations, Construction, Governing Law, Consents.............................57 36. Parties Bound...............................................................................57 37. Certain Definitions and Construction........................................................58 38. Adjacent Excavation and Construction-Shoring................................................58 39. Supplemental Air Conditioning System........................................................59 Testimonium and Signatures..................................................................60 Acknowledgments.............................................................................61 Exhibit A - Description.....................................................................62 Exhibit 3 - Floor Plan......................................................................63 Exhibit C - Work Letter.....................................................................64 Exhibit D - Rules and Regulations...........................................................75 Exhibit E - Definitions.....................................................................78 Exhibit F - Cleaning Specifications.........................................................80
This index is included only as a matter of convenience of reference and shall not be deemed or construed in any way to define or limit the scope of the following lease or the intent of any provision thereof. -(ii)- LEASE LEASE dated July 25, 1986, between 400 KELBY ASSOCIATES, a New Jersey limited partnership having an office at 104-70 Queens Boulevard, P.O. Box 400, Forest Hills, New York 11375 (hereinafter referred to as "Landlord") and PHILIPP BROTHERS CHEMICALS, INC., a New York corporation having an office at 10 Columbus Circle, New York, New York 10019 (hereinafter referred to as "Tenant"). W I T N E S S E T H: ARTICLE I Demise, Premises, Term, Rents 1.01 Landlord hereby leases to Tenant, and Tenant hereby hires from Landlord, the premises hereinafter described, in the building located at 400 Kelby Street; in the Borough of Fort Lee, County of Bergen, State of New Jersey (the "Building"), on the parcel of land more particularly described in Exhibit A (the "Land"), for the term hereinafter stated, for the rents hereinafter reserved and upon and subject to the conditions (including limitations, restrictions and reservations) and covenants hereinafter provided. Each party hereby expressly covenants and agrees to observe and perform all of the conditions and covenants herein contained on its part to be observed and performed. 1.02 The premises hereby leased to Tenant is the entire fourteenth (14th) floor of the Building, as shown on the floor plan annexed hereto as Exhibit B. Said premises together with all fixtures and equipment which at the commencement, or during the term, of this lease are thereto attached (except items not deemed to be included therein and removable by Tenant as provided in Article 14) constitute and are hereinafter referred to as the "Demised Premises". 1.03 The term of this lease, for which the Demised Premises are hereby leased, shall commence on a date (herein referred to as the "Commencement Date") which shall be (i) the later of (a) October 1, 1986 or (b) the day on which the Demised Premises are ready for occupancy (as defined in Article 4) or (ii) the day Tenant, or anyone claiming under or through Tenant, first occupies the Demised Premises for business, whichever occurs earlier, and shall end at noon of the last day of the calendar month in which occurs the day preceding the tenth (10th) anniversary of the Commencement Date, which ending date is hereinafter referred to as the "Expiration Date", or shall end on such earlier date upon which said term may expire or be cancelled or terminated pursuant to any of the conditions or covenants of this lease or pursuant to law. Promptly following the Commencement Date the parties hereto (hereinafter sometimes referred to as the "parties") shall enter into a recordable supplementary agreement fixing the dates of the Commencement Date and the Expiration Date and if they cannot agree thereon within fifteen (15) days after Landlord's request therefor, such dates shall be determined by arbitration in the manner provided in Article 34. 1.04 The "rents" reserved under this lease, for the term thereof, shall be and consist of: (a) "fixed rent" of (i) $477,351.00 per year ($39,779.25 per month) from the Commencement Date through the day preceding the first anniversary of the Commencement Date; (ii) $488,716.50 per year ($40,726.38 per month) from the first anniversary of the Commencement Date through the day preceding the second anniversary of the Commencement Date; (iii) $511,447.50 per year ($42,620.63 per month) from the second anniversary of the Commencement Date through the day preceding the third anniversary of the Commencement Date; (iv) $522,813.00 per year ($43,567.75 per month) from the third anniversary of the Commencement Date through the day preceding the fourth anniversary of the Commencement Date; (v) $545,544.00 per year ($45,462.00 per month) from the fourth anniversary of the Commencement Date through the day preceding the fifth anniversary of the Commencement Date; and (vi) $636,468.00 per year ($53,039.00 per month) from the fifth anniversary of the Commencement Date and continuing thereafter for the remainder of the term of this lease, which shall be payable in equal monthly installments in advance on the first day of each and every calendar month during the term of this lease (except that Tenant shall pay, upon the execution and delivery of this lease by Tenant, the sum of $39,779.25 to be applied against the first rents becoming due under this lease); and (b) "additional rent" consisting of all such other sums of money as shall become due from and payable by Tenant to Landlord hereunder (for default in payment of which Landlord shall have the same remedies as for a default in payment of fixed rent), all to be paid to Landlord at its office, or such other place, or to such agent and at such place, as Landlord may designate by notice to Tenant, in lawful money of the United States of America. 1.05 Tenant shall pay the fixed rent and additional rent herein reserved promptly as and when the same shall become due and payable, without demand therefor and without any abatement, deduction or setoff whatsoever except as expressly provided in this lease. 1.06 If the Commencement Date occurs on a day other than the first day of a calendar month, the fixed rent for such calendar month shall be prorated and the balance of the first month's fixed rent theretofore paid shall be credited against the next monthly installment of fixed rent. ARTICLE 2 Use 2.01 Tenant shall use and occupy the Demised Premises for executive and general offices and for no other purpose. Additionally, subject to, and in accordance with, the laws and requirements of public authorities, and only if, and to the extent that the same is permitted under the Certificate of Occupancy for the Demised Premises or for the Building and subject to the following conditions, Tenant may use portions of the Demised Premises for the following specific purposes: (a) installation, maintenance and operation of a kitchen and cafeteria not exceeding 400 square feet in aggregate area containing equipment for the warming (as opposed to the cooking) of food for use exclusively by Tenant, any permitted subtenants of Tenant and their respective employees and business invitees solely in conjunction with the conduct of the business of Tenant; (b) installation, maintenance and operation of a pantry and kitchen not exceeding 150 square feet in aggregate area containing equipment for the warming (as opposed to the cooking) of food for use exclusively by Tenant, any permitted subtenants of Tenant and their respective employees and business invitees solely in conjunction with the conduct of the business of Tenant; (c) installation, maintenance and operation of a computer room furnished with computers and peripheral related equipment, not exceeding 700 square feet in aggregate area, for the sole use of Tenant, any permitted subtenants of Tenant and their respective employees solely in conjunction with the conduct of the business of Tenant; and (d) installation, maintenance and operation of an exercise room furnished with nautilus, universal or other comparable exercise equipment and peripheral related equipment together with one (1) shower and -2- one (1) bathroom for men and one (1) shower and one (1) bathroom for women, not exceeding 500 square feet in aggregate area, for the sole use of Tenant, any permitted subtenants of Tenant and their respective employees. Notwithstanding the foregoing, however, Tenant shall immediately discontinue using portions of the Demised Premises for any one or more of the above-listed specific purposes listed in Subdivisions (a), (b) and (d) above if the same shall materially interfere with the use and/or occupancy of all or a part of the common areas of the Building or of any space in the Building leased to other tenants until such interference is abated. 2.02 If any governmental license or permit, other than a Certificate of Occupancy, shall be required for the proper and lawful conduct of Tenant's business in the Demised Premises, or any part thereof, and if failure to secure such license or permit would in any way affect Landlord, Tenant, at its expense, shall duly procure and thereafter maintain such license or permit and submit the same for inspection by Landlord. Tenant shall at all times comply with the terms and conditions of each such license or permit. Landlord represents that no other licenses or permits, other than a Certificate of Occupancy, shall be required for the occupancy of the Demised Premises merely as executive and general offices, without regard to the nature of Tenant's business or particular manner of use. 2.03 Tenant shall not at any time use or occupy, or suffer or permit anyone to use or occupy, the Demised Premises, or do or permit anything to be done in the Demised Premises, in violation of the Certificate of Occupancy for the Demised Premises or for the Building. ARTICLE 3 Completion of Construction of the Building and Preparation of the Demised Premises 3.01 Landlord shall use reasonable speed and diligence in completing the construction of the Building and in preparing the Demised Premises for Tenant's occupancy. In the event that the Premises are not ready for occupancy in accordance with the provisions of Article 4 hereof by August 1, 1987 (the "Outside Cancellation Date") or within such period after the Outside Cancellation Date as shall equal the aggregate period Landlord may have been delayed in doing so due to any of the reasons set forth in Section 4.02 hereof, then Tenant shall have the right to cancel and terminate this lease by giving written notice to Landlord within twenty (20) days after the applicable date to the effect that this lease will be deemed terminated on a designated date which shall be at least thirty (30) days from the date of such notice. Upon the designated date set forth in the aforesaid notice, this lease shall fully expire and be deemed terminated, Landlord shall pay Tenant any sums previously paid to Landlord under Section 1.04 of this lease and Tenant shall be fully released of all obligations of this lease unless prior to such designated date, the Demised Premises shall have been made ready for occupancy in accordance with the provisions of Article 4 hereof, in which event, the notice of termination shall be rendered null and void and the lease shall not so expire and be deemed terminated but shall continue in full force and effect and binding upon the parties hereto. The right of cancellation herein provided shall be Tenant's exclusive remedy under this lease in the event of Landlord's failure to comply with the provisions of this Section 3.01, subject, however, to "Landlord's Reimbursement Obligation" as set forth in Section 3.04 hereof. 3.02 Landlord shall complete the construction of the Building so as to include all the features and facilities required by this lease without change therefrom, except: (a) as may be consented to in writing by Tenant (which consent shall not be unreasonably withheld or delayed); or (b) as may be necessary to comply with any applicable law or requirement of public authority and will not (i) materially and adversely affect any of the services to be rendered by Landlord to Tenant pursuant to this lease, (ii) materially and adversely affect (A) the layout, (B) the utility of the Demised Premises, or (C) the usable area of the Demised Premises. -3- 3.03 The Demised Premises shall be completed and prepared for Tenant's occupancy in the manner, and subject to the terms, conditions and covenants, set forth in Exhibit C. The facilities, materials and work so to be furnished, installed and performed in the Demised Premises by Landlord at its expense are hereinafter and in Exhibit C referred to as "Landlord's Work". Such other installations, materials and work which may be undertaken by or for the account of Tenant to equip, decorate and furnish the Demised Premises for Tenant's occupancy, are hereinafter and in Exhibit C referred to as "Tenant's Work." 3.04 In the event the Demised Premises are not ready for Tenant's occupancy by February 1, 1987, as such date may be extended by the number of days of any delay due to any of the causes set forth in Sections 4.02 or 21.03 of this lease (the "Outside Completion Date"), due to the failure of Landlord or any of its employees, agents, contractors to substantially complete Landlord's Work and that portion of Tenant's Work to be performed by Landlord on or before the Outside Completion Date, then Landlord shall reimburse Tenant for any rent paid by Tenant (on a per diem basis) from the Commencement Date through the date (the "Tenant's Prior Lease Obligation Date") of the calendar month in which the Commencement Date shall occur in connection with an extension or holding over of or under those certain leases dated (i) October 1, 1976, (ii) March 30, 1979 and (iii) May 1, 1979 by and between Triborough Bridge and Tunnel Authority, as Landlord and Tenant ("Tenant's Prior Lease") for a portion of the fourteenth (14th) floor of the building known as 10 Columbus Circle, New York, New York ("Landlord's Reimbursement Obligation"). (For example, if the Outside Completion Date is February 1, 1987 and the Commencement Date is February 16, 1987, then Landlord shall reimburse Tenant for 15 days of rent for February, 1987.) If (i) Landlord is incorrect in estimating a date for Tenant's occupancy, as set forth in Section 4.01, (ii) the Demised Premises are not ready for Tenant's occupancy, on the date set forth in the preliminary notice as provided therein (the "Preliminary Notice Date"), unless such failure shall be due to any of the reasons set forth in Section 4.02 hereof, and (iii) Tenant, or anyone claiming through or under Tenant, shall not have occupied the Demised Premises for business, then Landlord will, in addition, reimburse Tenant for any rent paid by Tenant (on a per diem basis) from the Preliminary Notice Date through the Tenant's Prior Lease Obligation Date. Except as specifically set forth in this Section 3.04, Landlord shall have no liability whatsoever to Tenant for Landlord's failure to substantially complete Landlord's Work and that portion of Tenant's Work to be performed by Landlord on or before the Outside Completion Date, and Landlord's Reimbursement Obligation shall constitute Tenant's exclusive remedy under this lease in the event of such failure by Landlord, subject, however, to Tenant's right of cancellation as set forth in Section 3.01 hereof. ARTICLE 4 When Demised Premises Ready For Occupancy 4.01 The Demised Premises shall be deemed ready for Occupancy on the earliest date on which all of the following conditions have been met: (a) a Certificate of Occupancy (temporary or final) has been issued by the governmental authority having jurisdiction over the Building, permitting Tenant's use of the Demised Premises for the purposes for which the same have been leased; (b) Landlord's Work has been substantially completed; and it shall be so deemed notwithstanding the fact that minor or insubstantial details of construction, mechanical adjustment, or decoration remain to be performed, the noncompletion of which does not materially interfere with Tenant's use of the Demised Premises; (c) reasonable means of access and facilities necessary to Tenant's use and occupancy of the Demised Premises, including corridors, elevators and stairways and heating, ventilating, Air Conditioning, sanitary, water, and electrical facilities, have been installed and are in reasonably good operating order and available to Tenant; and (d) at such time when that portion of Tenant's Work, to be performed by Landlord, has been substantially completed; and it shall be so deemed notwithstanding the fact that (i) there is a delay in the completion of such work for any of the reasons set forth in Part F of Exhibit C, provided that Landlord, promptly after -4- Landlord learns of such delay, has given Tenant reasonable notice of such delay, in which event the provisions of Section 4.02 and Part F of Exhibit C shall apply, and (ii) minor or insubstantial details of construction, mechanical adjustment, or decoration remain to be performed, the noncompletion of which does not materially interfere with Tenant's use of the Demised Premises. Landlord shall give Tenant a preliminary notice, estimating when the conditions listed in Subsections (a) through (d) above will be met, on a date which shall be at least thirty (30) days prior to the estimated date set forth in such preliminary notice. Subject to the provisions of Section 3.04, any variance between the date so estimated and the date such conditions are met shall be of no consequence. 4.02 If the occurrence of any of the conditions listed in Section 4.01, and thereby the making of the Demised Premises ready for occupancy, shall be delayed due to: (a) any act or omission of Tenant or any of its employees, agents or contractors or any failure (not due to any act or omission of Landlord or any of its employees, agents or contractors) to plan or execute Tenant's Work diligently and expeditiously, which shall continue after Landlord shall have given Tenant reasonable notice that such act, omission or failure would result in delay, and such delay shall have been unavoidable by Landlord in the exercise of reasonable diligence and prudence, (b) the nature of any items of Tenant's Work that Landlord undertakes to perform for the account of Tenant (including any delays incurred by Landlord, after making reasonable efforts, in procuring any materials, equipment or fixtures of a kind or nature not used by Landlord as part of its standard construction and provided that Landlord, promptly after Landlord learns of such delay, has given Tenant reasonable notice of such delay), then the Demised Premises shall be deemed ready for occupancy on the date when they would have been ready but for such delay. 4.03 If and when Tenant shall take actual possession of the Demised Premises, it shall be conclusively presumed that the same were in satisfactory condition (except for latent defects) as of the date of such taking of possession, unless within one (1) year after the Commencement Date Tenant shall give Landlord notice specifying the respects in which the Demised Premises were not in satisfactory condition. ARTICLE 5 Adjustments Of Rent 5.01 Tax Escalation. For the purpose of Sections 5.01-5.06: (a) "Taxes" shall mean the real estate taxes and assessments and special assessments imposed upon the Building and the Land. If any assessments or special assessments are payable in installments without the imposition of interest or penalty, Taxes shall only include those installments becoming due during the term of this lease for the Tax Year in which such installments are payable, whether or not such assessments or special assessments were levied or imposed before or during the term hereof. If at any time during the term of this lease the methods of taxation prevailing at the commencement of the term hereof shall be altered so that in lieu of or as an addition to or as a substitute for the whole or any part of the taxes, assessments, levies, impositions or charges now levied, assessed or imposed on real estate and the improvements thereon, there shall be levied, assessed or imposed (i) a tax, assessment, levy, imposition or charge wholly or partially as capital levy or otherwise on the rents received therefrom, or (ii) a tax, assessment, levy, imposition or charge measured by or based in whole or in part upon the Demised Premises and imposed upon Landlord, or (iii) a license fee measured by the rents payable by Tenant to Landlord, then all such taxes, assessments, levies, impositions or charges, or the part thereof so measured or based, shall be deemed to be included within the term "Taxes" for the purposes hereof; Landlord and Tenant hereby agree that in the event and to the extent that the Taxes payable upon the Land and Building are increased solely as a result of the addition of rentable area of or to the Building (hereinafter referred to as "additions"), Tenant shall have no obligation to pay Tenant's Proportionate -5- Share of such increase on account of additions, unless (i) Tenant shall have first approved of the additions in writing, or (ii) such additions were requested by Tenant or generally benefit all tenants of the Building. (b) Base Tax Rate" shall mean $475,000.00; (c) "Tax Year" shall mean the fiscal year (presently a calendar year) for which Taxes are levied by the governmental authority; (d) "Tenant's Proportionate Share" shall mean for purposes of this lease and all calculations in connection herewith seven and 8/10 percent (7.8%), which has been computed on the basis of a fraction, the numerator of which is the agreed rentable square foot area of the Demised Premises as set forth below (which rentable square foot area is hereinafter sometimes referred to as the "Multiplication Factor") and the denominator of which is the agreed rentable square foot area of the Building above grade level as set forth below. The parties agree that the rentable square foot area of the Demised Premises shall be deemed to be 22,731 square feet and that the agreed rentable square foot area of the Building shall be deemed to 291,504 square feet (hereinafter referred to as the "Building Area"). (e) "Tenant's Projected Share of Taxes" shall mean either (i) for any Tax Year where no Tax Payment (as hereinafter defined) shall have been payable by Tenant for the immediately preceding Tax Year, the product of (x) six (6%) percent of The Base Tax Rate, multiplied by (y) Tenant's Proportionate Share, or (ii) for any Tax Year where a Tax Payment shall have been payable by Tenant for the immediately preceding Tax Year, the Tax Payment, payable by Tenant for the immediately prior Tax Year in each case divided by twelve (12) and payable monthly by Tenant to Landlord as additional rent. 5.02 Subject to the terms of Section 5.06 hereof, if the Taxes for any Tax Year shall be more than the Base Tax Rate, Tenant shall pay, as additional rent for such Tax Year, an amount equal to Tenant's Proportionate Share of the amount by which the Taxes for such Tax Year are greater than the Base Tax Rate. (The amount payable by Tenant is hereinafter referred to as the "Tax Payment".) The Tax Payment and the Base Tax Rate shall be appropriately prorated, if necessary, to correspond with that portion of a Tax Year occurring within the Term of this lease. The Tax Payment shall be payable by Tenant within ten (10) days after receipt of a demand from Landlord therefor, which demand shall be accompanied by a copy of the tax bill together with Landlord's computation of the Tax Payment. If the Taxes for any Tax Year are payable to the taxing authority on an installment basis, Landlord may serve such demands upon, and the Tax Payment for such Tax Year shall be payable by Tenant, on a corresponding installment basis. 5.03 Notwithstanding the fact that the increase in rent is measured by an increase in Taxes, such increase is additional rent and shall be paid by Tenant as provided herein regardless of the fact that Tenant may be exempt, in whole or in part, from the payment of any taxes by reason of Tenant's diplomatic or other tax exempt status or for any other reason whatsoever. 5.04 Only Landlord shall be eligible to institute tax reduction or other proceedings to reduce the assessed valuation of the Land and Building. Should Landlord be successful in any such reduction proceedings and obtain a rebate or a reduction in assessment for periods during which Tenant has paid or is obligated to pay Tenant's Proportionate Share of increases in Taxes then either (a) Landlord shall, in the event a rebate is obtained, return Tenant's Proportionate Share of such rebate to Tenant after deducting Landlord's expenses, including without limitation, attorneys' fees and disbursements in connection with such rebate (such expenses incurred with respect to a rebate or reduction in assessment being hereinafter referred to as "Tax Expenses"), provided, however, that Tenant shall not be required to pay any amount to Landlord on account of Tax Expenses in excess of Tenant's Proportionate Share of such rebate, or, (b) if a reduction in assessment is obtained prior to the date Tenant would be required to pay Tenant's Proportionate Share of such increase in Taxes, Tenant shall pay to Landlord, upon written request, Tenant's Proportionate Share of such Tax Expenses, provided, however, that with respect to subdivision (b), Tax Expenses shall not exceed the amount that such reduction in assessment would have reduced Taxes, had such reduction been obtained after the date Tenant would be required to pay Tenant's Proportionate Share of such increase in Taxes. -6- 5.05 Within sixty (60) days after the expiration of any Tax Year, Landlord shall furnish Tenant with a statement setting forth Tenant's Proportionate Share of Taxes. The statement furnished under this Section 5.05 is hereinafter referred to as a "Tax Statement". 5.06 (a) Commencing with the first Tax Year after Landlord shall be entitled to receive a Tax Payment, Tenant shall pay to Landlord, as additional rent for the then Tax Year, Tenant's Projected Share of Taxes. Upon each date that a Tax Payment or an installment on account thereof shall be due from Tenant pursuant to the terms of Section 5.02 hereof, Landlord shall apply the aggregate of the installments of Tenant's Projected Share of Taxes then on account with Landlord against the Tax Payment or installment thereof then due from Tenant. In the event that such aggregate amount shall be insufficient to discharge such Tax Payment or installment, Landlord shall so notify Tenant in a demand served upon Tenant pursuant to the terms of Section 5.02, and the amount of Tenant's payment obligation with respect to such Tax Payment or installment pursuant to Section 5.02 shall be equal to the amount of the insufficiency. If, however, such aggregate amount shall be greater than the Tax Payment or installment, Landlord shall forthwith either (a) pay the amount of excess directly to Tenant concurrently with the notice or (b) permit Tenant to credit the amount of such excess against the next payment of Tenant's Projected Share of Taxes due hereunder and, if the credit of such payment is not sufficient to liquidate the entire amount of such excess, Landlord shall then pay the amount of any difference to Tenant; (b) Anything in this Article 5 to the contrary notwithstanding, in the event that the holder of any superior mortgage or the lessor of any superior lease (as such terms are defined in Section 7.01 hereof) shall require advance payments from the Landlord on account of Taxes, then Tenant will pay Tenant's Proportionate Share of any amounts required to be paid in advance by Landlord with the holder of the superior mortgage or the lessor of the superior lease to the extent that such payments made by Landlord exceed the Base Tax Rate. Such payments, to be made by Tenant, shall not exceed Tenant's Projected Share of Taxes. Any payments to be made by Tenant under this Section 5.06(b) shall be made ten (10) days prior to the date Landlord is required to make such payments to the holder of the superior mortgage or the lessor of the superior lease; (c) Anything in Sections 5.01 through 5.06 to the contrary notwithstanding, in no event whatsoever shall the fixed rent be reduced below the fixed rent initially set forth in Section l.04(a) hereof as same may be increased by provisions of this lease other than Sections 5.01 through 5.06; and (d) Notwithstanding the provisions of Sections 5.01 through 5.06, there will be no Tax Payment or payments on account of Tenant's Projected Share of Taxes for any increases in Taxes attributable to the twelve (12) month period commencing on the Commencement Date. 5.07 Expense Escalation. For purposes of this Article: (a) "Operating Expenses" shall mean any and all expenses incurred by Landlord in connection with the operation of the Building including all expenses incurred as a result of Landlord's compliance with any of its obligations hereunder other than Landlord's Work and such expenses shall include: (i) salaries, wages, medical, surgical and general welfare benefits, (including group life insurance) pension payments and other fringe benefits of employees of Landlord engaged in the operation and maintenance of the Building (the salaries and other benefits aforesaid of such employees servicing the Building shall be comparable to those of employees servicing buildings similar to the Building, located in the Borough of Fort Lee); (ii) payroll taxes, workmen's compensation, uniforms and dry cleaning for the employees referred to in subdivision (i); (iii) the cost of all charges for steam, heat, ventilation, Air Conditioning and water (including sewer rental) furnished to the Building and/or used in the operation of all of the service facilities of the Building and the cost of all charges for electricity furnished to the public and service areas of the Building and/or used in the operation of all of the service facilities of the Building including any taxes on any of such utilities; (iv) the cost of all charges for rent, casualty, war risk insurance (if obtainable from the United States government) and of liability insurance for the Building to the extent that such insurance is required to be carried by Landlord under any superior lease or superior mortgage or if not required under any superior lease or superior mortgage then to the extent such insurance is carried by owners of Buildings comparable to the Building; (v) the cost of all building and cleaning supplies for the common areas of the Building and charges for telephone for the Building; -7- (vi) the cost of all charges for management, window cleaning and service contracts for the Building (if no managing agent is employed by Landlord or an affiliate of Landlord is engaged as managing agent, there shall be included in Operating Expenses a sum equal to 5.0% of all rents, additional rents and other charges collected from tenants or other permitted occupants of the Building); and (vii) the cost of rentals of capital equipment designed to result in savings or reductions in Operating Expenses. Operating Expenses shall not include (viii) administrative wages and salaries; (ix) renting commissions; (x) franchise taxes or income taxes of Landlord; (xi) Taxes on the Land and Building; (xii) costs of performing work or making installations, painting and decorating for any occupant's space; (xiii) interest and amortization under mortgages; (xiv) expenditures for capital improvements except (1) those which under generally applied real estate practice are expenses or regarded as deferred expenses and (2) for capital improvements required by law or (3) for capital improvements which are designed to result in a saving in the amount of Operating Expenses, in any of such cases the cost thereof shall be included in Operating Expenses for the Operational Year in which the costs are incurred and subsequent Operational Years, on a straight-line basis, to the extent that such items are amortized over an appropriate period, but not more than ten years, with an interest factor equal to two (2%) percent above the prime rate of Chase Manhattan Bank, N.A. at the time of Landlord's having incurred said expenditure; (xv) costs of services provided to other tenants of the Building to the extent that such services shall exceed the services provided to Tenant hereunder without additional expense to Tenant; (xvi) the cost of any items for which Landlord is reimbursed by payments by Tenant, by any other tenant(s) or occupant(s) of the Building (except under rent adjustment provisions similar to those contained in this Article 5), by any other third party or parties, or by insurance proceeds or condemnation awards; (xvii) salaries of executives who maintain an equity interest in Landlord; and (xviii) the cost of completing construction of the Building. Operating Expenses shall be subject to adjustment based upon the Occupancy Adjustment for each Operational Year (as such terms are hereinafter defined) in which less than ninety (90%) percent of the Building shall be occupied (on a rentable square foot basis) during the term of this lease. (b) "Operational Year" shall mean each calendar year or part thereof occurring during the Term of this lease excluding the Initial Operational Year; (c) "Base Operating Expenses" shall mean $982,000.00; (d) "Adjusted Base Operating Expenses" shall mean Base Operating Expenses multiplied by a fraction (i) the numerator of which is the number of days between the Commencement Date and the expiration of the Initial Operational Year (as hereinafter defined) and (ii) the denominator of which is 360; (e) "Initial Operational Year" shall mean the calendar year in which the Commencement Date occurs; (f) "Initial Operating Period" shall mean that portion of the Initial Operational Year between the Commencement Date and the expiration of the Initial Operational Year; (g) "Actual Initial Operating Expense Differential" shall mean the actual difference between the Operating Expenses incurred by Landlord for the Initial Operating Period (i.e., the Initial Operating Expenses (as hereinafter defined) multiplied by a fraction, the numerator of which is the number of days between the Commencement Date and the expiration of the Initial Operational Period, and the denominator of which is the number of days between the day Landlord opens the Building for occupancy by Tenants and the expiration of the Initial Operating Period) and the Adjusted Base Operating Expense; (h) "Tenant's Initial Projected Share of Operating Expense Increase" shall mean one-twelfth (1/12th) of the product of (i) Tenant's Operational Proportionate Share multiplied by (ii) the Actual Initial Operating Expense Differential annualized to reflect a full calendar year; (i) "Tenant's Initial Actual Proportionate Share of Operating Expense Increase" shall mean the Actual Initial Operating Expense Differential multiplied by Tenant's Operational Proportionate Share; -8- (j) "Initial Operating Expenses" shall mean the actual amount of Operating Expenses incurred by Landlord during the Initial Operational Year; (k) "Tenant's Operational Proportionate Share" shall mean 7.8%; (l) "Actual Operating Expense Differential" shall mean the amount by which the Operating Expenses actually incurred by Landlord for the recently expired Operational Year actually exceeded the Base Operating Expenses; (m) "Tenant's Projected Share of Operating Expense Increase" shall mean one-twelfth (1/12th) of the product of (i) Tenant's Operational Proportionate Share, multiplied by (ii) the Actual Operating Expense Differential for the recently expired Operational Year; (n) "Tenant's Actual Share of Operating Expense Increase" shall mean the product of (i) the Actual Operating Expense Differential multiplied by (ii) Tenant's Operational Proportionate Share; and (o) "Occupancy Adjustment shall mean the amount by which Operating Expenses shall be deemed to be increased to reflect ninety (90%) percent occupancy (on a rentable square foot basis) of the Building during any Operational Year in which the Building is less than ninety (90%) percent occupied (on a rentable square foot basis). 5.08 (a) After the expiration of the Initial Operational Year, Landlord shall furnish Tenant with a written detailed statement (the "Initial Operating Statement") indicating (i) Initial Operating Expenses, (ii) Actual Initial Operating Expense Differential, (iii) Adjusted Base Operating Expenses, (iv) Tenant's Initial Actual Proportionate Share of Operating Expense, and (v) Landlord's computation of Tenant's Initial Projected Share of Operating Expense Increase for the upcoming Operational Year; (b) After the expiration of the first Operational Year after the Initial Operational Year and each Operational Year thereafter, Landlord shall furnish Tenant with a written detailed statement (a "Subsequent Operating Statement") indicating (i) actual amount of Operating Expenses for the recently expired Operational Year, (ii) Landlord's computation of Tenant's Projected Share of Operating Expense Increase for the upcoming Operational Year, and (iii) the amount of any discrepancy between Tenant's Actual Share of Operating Expense Increase and Tenant's Initial Projected Share of Operating Expense Increase or Tenant's Projected Share of Operating Expense Increase, as the case may be, for the recently expired Operational Year. (c) Payments of rental in accordance with the Initial Operating Statement and Subsequent Operating Statements shall be made at the times specified in Section 5.09. 5.09 (a) Tenant shall pay to Landlord as additional rent for the Initial Operating Period, Tenant's Initial Actual Proportionate Share of Operating Expense Increase within ten (10) days after receipt of the Initial Operating Statement; (b) Tenant shall pay to Landlord, as additional rent during the first Operational Year after the Initial Operational Period, Tenant's Initial Projected Share of Operating Expense Increase, which shall be payable in equal monthly installments, the first payment representing the payments retroactive to the first day of the current Operational Year and including the current month shall be made ten (10) days after Tenant receives the Initial Operating Statement, and thereafter normal monthly payments shall be made on the first day of each month throughout the upcoming Operational Year and thereafter until receipt of the first Subsequent Operating Statement. If the first Subsequent Operating Statement furnished by Landlord to Tenant for the recently expired Operational Year shall indicate that Tenant's Initial Projected Share of Operating Expense Increase exceeded Tenant's Actual Share of Operating Expense Increase, Landlord shall forthwith either (a) pay the amount of excess directly to Tenant concurrently with the first Subsequent Operating Statement or (b) permit Tenant to credit the amount of such excess against the subsequent payments of rent due hereunder. If, however, the first Subsequent Operating Statement shall -9- indicate that Tenant's Actual Share of Operating Expense Increase exceeded Tenant's Initial Projected Share of Operating Expense Increase, Tenant shall, within ten (10) days, pay the amount of such excess to Landlord as additional rent; (c) Tenant shall pay to Landlord, as additional rent during each subsequent Operational Year, Tenant's projected Share of Operating Expense Increase, which shall be payable in equal monthly installments, the first payment representing the payments retroactive to the first day of the current Operational Year and including the current month after crediting Tenant with payments made for the current Operational Year but prior to the receipt of a Subsequent Operating Statement, and which shall be made ten (10) days after Tenant receives a Subsequent Operating Statement, and thereafter normal monthly payments shall be made on the first day of each month throughout the upcoming Operational Year and thereafter until receipt of the next Subsequent Operating Statement. If a Subsequent Operating Statement furnished by Landlord to Tenant for a recently expired Operational Year shall indicate that Tenant's Projected Share of Operating Expense Increase exceeded Tenant's Actual Share of Operating Expense Increase, Landlord shall forthwith either (a) pay the amount of excess directly to Tenant concurrently with the Subsequent Operating Statement or (b) permit Tenant to credit the amount of such excess against the subsequent payments of rent due hereunder. If, however, the Subsequent Operating Statement shall indicate that Tenant's Actual Share of Operating Expense Increase exceeded Tenant's Projected Share of Operating Expense Increase, Tenant shall, within ten (10) days, pay the amount of such excess to Landlord as additional rent; (d) Anything in Sections 5.07 through 5.10 to the contrary notwithstanding, in no event whatsoever shall the fixed rent be reduced below the fixed rent initially set forth in Section 1.04(a) hereof as same may be increased by provisions of this lease other than Sections 5.07 through 5.10. The amounts payable pursuant to Sections 5.07 through 5.10 shall be prorated, if necessary, to correspond with that portion of an Operational Year occurring within the term of this lease; and (e) Notwithstanding the provisions of Sections 5.07 through 5.10, Tenant shall not be required to pay either (i) Tenant's Actual Share of Operating Expense Increase or (ii) Tenant's Initial Projected Share of Operating Expense Increase or Tenant's Projected Share of Operating Expense Increase, as the case may be, attributable to the twelve (12) month period commencing on the Commencement Date. 5.10 The Initial Operating Statement and every Subsequent Operating Statement given by Landlord shall be conclusive and binding upon Tenant unless Tenant shall (a) notify Landlord within ninety (90) days after its receipt of such statement that it disputes the correctness thereof, specifying the item or items with respect to which Tenant desires to conduct its audit as hereinafter provided which, in Tenant's sole judgment, may be incorrect and (b) conduct an audit, upon reasonable advance notice to Landlord, solely with respect to those items which Tenant specifies in its notice as set forth in Subsection (a) hereof. If such dispute cannot be settled by agreement between Landlord and Tenant within sixty (60) days after the completion of Tenant's audit, Tenant may submit its dispute to arbitration within thirty (30) days after the expiration of such sixty (60) day period. Pending the resolution of such dispute by agreement or arbitration as aforesaid, Tenant shall, within ten (10) days after receipt of such disputed Initial Operating Statement or Subsequent Operating Statement, as the case may be, pay any additional rent due in accordance therewith, but such payment shall be without prejudice to Tenant's right to dispute such statement. If the dispute shall be resolved in Tenant's favor, Landlord shall, within ten (10) days after Tenant's demand, pay Tenant the amount of the overpayment, if any, resulting from Tenant's compliance with the disputed Initial Operating Statement or Subsequent Operating Statement. Landlord agrees to grant Tenant reasonable access to Landlord's books and records for the purpose of verifying the specified items of Operating Expenses and to make copies of any and all bills and vouchers relating thereto. 5.11 Landlord's failure during the lease term to prepare and deliver any of the tax bills, statements, notice or bills set forth in this Article 5, or Landlord's failure to make a demand, shall not in any way cause Landlord to forfeit or surrender its rights to collect any of the foregoing items of additional rent which may have become due during the term of this lease. Tenant's liability for the amounts due under this Article 5 shall survive the expiration of the Term. -10- ARTICLE 6 Deleted Prior to Execution ARTICLE 7 Subordination, Notice To Lessors And Mortgagees 7.01 This lease, and all rights of Tenant hereunder, are and shall be subject and subordinate in all respects to all ground leases, overriding leases and underlying leases of the Land and/or the Building now or hereafter existing and to all mortgages which may now or hereafter affect the Land and/or the Building and/or any of such leases, whether or not such mortgages shall also cover other lands and/or buildings, to each and every advance made or hereafter to be made under such mortgages, and to all renewals, modifications, replacements and extensions of such leases and such mortgages and spreaders and consolidations of such mortgages. This Section shall be self-operative and no further instrument of subordination shall be required. In confirmation of such subordination, Tenant shall promptly execute and deliver any instrument that Landlord, the lessor of any such lease or the holder of any such mortgage or any of their respective successors in interest may reasonably request to evidence such subordination. The leases to which this lease is, at the time referred to, subject and subordinate pursuant to this Article are hereinafter sometimes referred to as "superior leases" and the mortgages to which this lease is, at the time referred to, subject and subordinate are hereinafter sometimes referred to as "superior mortgages" and the lessor of a superior lease or its successor in interest at the time referred to is sometimes hereinafter referred to as a "lessor". 7.02 In the event of any act or omission of Landlord which would give Tenant the right, immediately or after lapse of a period of time, to cancel or terminate this lease, or to claim a partial or total eviction, Tenant shall not exercise such right (i) until it has given written notice of such act or omission to the holder of each superior mortgage and the lessor of each superior lease whose name and address shall previously have been furnished to Tenant in writing, and (ii) unless such act or omission shall be one which is not capable of being remedied by Landlord or such mortgage holder or lessor within a reasonable period of time, until a reasonable period for remedying such act or omission shall have elapsed following the giving of such notice and following the time when such holder or lessor shall have become entitled under such superior mortgage or superior lease, as the case may be, to remedy the same (which reasonable period shall in no event be less than the period to which Landlord would be entitled under this lease or otherwise, after similar notice, to effect such remedy), provided such holder or lessor shall with due diligence give Tenant written notice of intention to, and commence and continue to remedy such act or omission. 7.03 If the holder of a superior mortgage shall succeed to the rights of Landlord under this lease, whether through possession or foreclosure action or delivery of a new lease or deed, then at the request of such patty so succeeding to Landlord's rights (herein sometimes referred to as "successor landlord") and upon successor landlord's written agreement to accept Tenant's attornment, Tenant shall attorn to and recognize such successor landlord as Tenant's landlord under this lease, and shall promptly execute and deliver any instrument that such successor landlord may reasonably request to evidence such attornnent. Upon such attornment this lease shall continue in full force and effect as, or as if it were, a direct lease between the successor landlord and Tenant upon all of the terms, conditions and covenants as are set forth in this lease and shall be applicable after such attornment except that the successor landlord shall not: (a) be liable for any previous act or omission of Landlord under this lease; (b) be subject to any offset, not expressly provided for in this lease, which shall have theretofore accrued to Tenant against Landlord; (c) be bound by any previous modification of this lease, not expressly provided for in this lease, or by any previous prepayment of more than one month's fixed rent, unless such modification or prepayment shall have been expressly approved in writing by the lessor of the superior lease or the holder of the -11- superior mortgage through or by reason of which the successor landlord shall have succeeded to the rights of Landlord under this lease. 7.04 The subordination of this lease to ground, overriding or underlying leases in accordance with Section 7.01 is subject to the express condition that, so long as this lease shall be in full force and effect in the event of termination of the term of any such ground, overriding or underlying lease by reentry, notice, summary proceedings or other action or proceeding or if the term of such ground, overriding or underlying lease shall otherwise terminate or expire before the termination or expiration of the term of this lease, (a) Tenant shall not be made a party to any action or proceeding to remove or evict Tenant or to disturb its possession by reason of or based upon such termination or expiration of the term of such ground, overriding or underlying lease, and (b) this lease shall continue in full force and effect as a direct lease between Tenant and the then owner of the fee or lessor of such ground, overriding or underlying lease, as the case may be, upon all of the obligations of this lease, except that said owner or lessor shall not: (i) be liable for any previous act or omission of Landlord under this lease, (ii) be subject to any offset, not expressly provided for in the lease documents (as such term is hereinafter defined), that shall have theretofore accrued to Tenant against Landlord, (iii) be bound by any previous modification of this lease, not expressly provided for in this lease, or by any previous prepayment of more than one month's fixed rent or any additional rent then due, unless such modification or prepayment shall have been expressly approved in writing by the lessor of the superior lease through or by reason of which said owner or lessor shall have succeeded to the rights of Landlord under this lease. 7.05 Landlord agrees that upon written notice from Tenant, it will request a non-disturbance agreement for the benefit of Tenant from the holders of any superior mortgages now existing or hereafter created during the term of this lease. Such non-disturbance agreement shall provide, in effect, that so long as Tenant is not in default in the payment of rent or any other covenant or condition of this lease for longer than the respective periods provided in Article 25 hereof and provided Tenant attorns as herein specified (i) its rights as tenant hereunder shall not be affected or terminated, (ii) its possession of the Demised Premises shall not be disturbed, (iii) no action or proceeding shall be commenced to remove or evict Tenant and (iv) this lease shall at all times continue in full force and effect notwithstanding the foreclosure of the superior mortgage. The inability of Landlord to obtain such non-disturbance agreement referred to in the preceding sentence shall not be deemed a default on Landlord's part of its obligations hereunder, or impose any claim in favor of Tenant against Landlord by reason thereof or affect the validity of this lease. ARTICLE 8 Quiet Enjoyment 8.01 So long as Tenant pays all of the fixed rent and additional rent due hereunder and performs all of Tenant's other obligations hereunder, Tenant shall peaceably and quietly have, hold and enjoy the Demised Premises subject, nevertheless, to the obligations of this lease and, as provided in Article 7, to the superior leases and the superior mortgages. ARTICLE 9 Assignment And Sublettinq 9.01 Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, nor suffer, nor permit the Demised Premises or any part thereof to be used or occupied by others, without the prior written consent of Landlord in each instance, if this lease be assigned, or if the Demised Premises or any part thereof be underlet or occupied by anybody other than Tenant, Landlord may, after default by Tenant, collect rent from the -12- assignee, undertenant or occupant, and apply the net amount collected to the rent herein reserved, but no assignment, underletting, occupancy or collection shall be deemed a waiver of the provisions hereof, the acceptance of the assignee, undertenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Landlord to an assignment or underletting shall not in any wise be construed to relieve Tenant from obtaining the express consent in writing of Landlord to any further assignment or underletting. In no event shall any permitted sublessee assign or encumber its sublease or further sublet all or any portion of its sublet space, or otherwise suffer or permit the sublet space or any part thereof to be used or occupied by others, without Landlord's prior written consent in each instance. 9.02 If Tenant shall at any time or times during the term of this lease desire to assign this lease or sublet all or part of the Demised Premises, Tenant shall give notice thereof to Landlord, which notice shall be accompanied by (a) a conformed or photostatic copy of the proposed assignment or sublease, the effective or commencement date of which shall be not less than 30 nor more than 180 days after the giving of such notice, (b) a statement setting forth in reasonable detail the identity of the proposed assignee or subtenant, the nature of its business and its proposed use of the Demised Premises, and (c) current financial information with respect to the proposed assignee or subtenant, including, without limitation, its most recent financial report, if available. Such notice shall be deemed an offer from Tenant to Landlord whereby Landlord (or Landlord's designee) may, at its option, (i) sublease such space (hereinafter referred to as the "Leaseback Space") from Tenant upon the terms and conditions hereinafter set forth (if the proposed transaction is a sublease of all or part of the Demised Premises), (ii) terminate this lease (if the proposed transaction is an assignment or a sublease of all or substantially all of the Demised Premises), or (iii) terminate this lease with respect to the Leaseback Space (if the proposed transaction is a sublease of part of the Demised Premises). Said options may be exercised by Landlord by notice to Tenant at any time within 30 days after such notice has been given by Tenant to Landlord; and during such 30 day period Tenant shall not assign this lease nor sublet such space to any person. 9.03 If Landlord exercises its option to terminate this lease in the case where Tenant desires either to assign this lease or sublet all or substantially all of the Demised Premises, then, this lease shall end and expire on the date that such assignment or sublet was to be effective or commence, as the case may be, and the fixed rent and additional rent shall be paid and apportioned to such date. 9.04 If Landlord exercises its option to terminate this lease in part in any case where Tenant desires to sublet part of the Demised Premises, then, (a) this Lease shall end and expire with respect to such part of the Demised Premises on the date that the proposed sublease was to commence; (b) from and after such date the fixed rent and additional rent shall be adjusted, based upon the proportion that the rentable area of the Demised Premises remaining bears to the total rentable area of the Demised Premises; and (c) Tenant shall pay to Landlord, upon demand, the costs incurred by Landlord in physically separating such part of the Demised Premises from the balance of the Demised Premises and in complying with any laws and requirements of any public authorities relating to such separation, except that, to the extent that Landlord makes a profit from the reletting of such part of the Demised Premises (that is, rents, additional charges and other consideration payable under and as consideration for the execution of the new lease(s) of the Demised Premises for what would be the balance of the term of this lease shall be greater than the rents, additional charges and other consideration that would be payable under this lease for the same space during such balance, had this lease not been terminated, which is hereinafter referred to as Landlord's Reletting Profit"), such costs shall be borne by Landlord. 9.05 If Landlord exercises its option to sublet the Leaseback Space, such sublease to Landlord or its designee (as subtenant) shall be at the lower of (i) the rental rate per rentable square foot of fixed rent and additional rent then payable pursuant to this lease or (ii) the rentals set forth in the proposed sublease, and shall be for the same term as that of the proposed subletting, and such sublease shall: (a) be expressly subject to all of the covenants, agreements, terms, provisions and conditions of this lease except such as are irrelevant or inapplicable, and except as otherwise expressly set forth to the contrary in this Section; -13- (b) be upon the same terms and conditions as those contained in the proposed sublease, except such as are irrelevant or inapplicable and except as otherwise expressly set forth to the contrary in this Section; (c) give the sublessee the unqualified and unrestricted right, without Tenant's permission, to assign such sublease or any interest therein and/or to sublet the Leaseback Space or any part or parts of the Leaseback Space and to make any and all changes, alterations, and improvements in the space covered by such sublease and if the proposed sublease will result in all or substantially all of the Demised Premises being sublet, grant Landlord or its designee the option to extend the term of such sublease for the balance of the term of this lease less one (1) day; (d) provide that any assignee or further subtenant, of Landlord or its designee, may, at the election of Landlord, be permitted to make alterations, decorations and installations in the Leaseback Space or any part thereof and shall also provide in substance that any such alterations, decorations and installations in the Leaseback Space therein made by any assignee or subtenant of Landlord or its designee may be removed, in whole or in part, by such assignee or subtenant, at its option, prior to or upon the expiration or other termination of such sublease provided that such assignee or subtenant, at its expense, shall repair any damage and injury to that portion of the Leaseback Space so sublet caused by such removal; and (e) also provide that (i) the parties to such sublease expressly negate any intention that any estate created under such sublease be merged with any other estate held by either of said parties, (ii) any assignment or subletting by Landlord or its designee (as the subtenant) may be for any purpose or purposes that Landlord, in Landlord's uncontrolled discretion, shall deem suitable or appropriate, (iii) Tenant, at Tenant's expense, shall and will at all times provide and permit reasonably appropriate means of ingress to and egress from the Leaseback Space so sublet by Tenant to Landlord or its designee, (iv) Landlord, at Tenant's expense, may make such alterations as may be required or deemed necessary by Landlord to physically separate the Leaseback Space from the balance of the Demised Premises and to comply with any laws and requirements of public authorities relating to such separation, except that, to the extent that Landlord makes Landlord's Reletting Profit from the reletting of the Leaseback Space, the cost of such alterations and physical separation shall be borne by Landlord, and (v) that at the expiration of the term of such sublease, Tenant will accept the space covered by such sublease in its then existing condition, subject to the obligations of the sublessee to make such repairs thereto as may be necessary to preserve the premises demised by such sublease in good order and condition. 9.06 (a) If Landlord exercises its option to sublet the Leaseback Space, Landlord shall indemnify and save Tenant harmless from all obligations under this lease as to the Leaseback Space during the period of time it is so sublet to Landlord; (b) Performance by Landlord, or its designee, under a sublease of the Leaseback Space shall be deemed performance by Tenant of any similar obligation under this lease and any default under any such sublease shall not give rise to a default under a similar obligation contained in this Lease, nor shall Tenant be liable for any default under this lease or deemed to be in default hereunder if such default is occasioned by or arises from any act or omission of the Tenant under such sublease or is occasioned by or arises from any act or omission of any occupant holding under or pursuant to any such sublease; and (c) Tenant shall have no obligation, at the expiration or earlier termination of the term of this lease, to remove any alteration, installation or improvement made in the Leaseback Space by Landlord. 9.07 In the event Landlord does not exercise an option provided to it pursuant to Section 9.02 and providing that Tenant is not in default of any of Tenant's obligations under this lease after notice and the expiration of any applicable grace period, Landlord's consent (which must be in writing and in form reasonably satisfactory to Landlord) to the proposed assignment or sublease shall not be unreasonably withheld or delayed, provided and upon condition that: -14 (a) Tenant shall have complied with the provisions of Section 9.02 and Landlord shall not have exercised any of its options under said Section 9.02 within the time permitted therefor; (b) In Landlord's reasonable judgment the proposed assignee or subtenant is engaged in a business and the Demised Premise; or the relevant part thereof, will be used in a manner which (i) is in keeping with the then standards of the Building, (ii) is limited to the use expressly permitted under this lease, and (iii) will not violate any negative covenant as to use contained in any other lease of space in the Building; (c) The proposed assignee or subtenant is a reputable person of good character and with sufficient financial worth considering the responsibility involved, and Landlord has been furnished with reasonable proof thereof; (d) Provided that there shall be comparable space available, or becoming available within one (1) year, for lease in the Building, neither (i) the proposed assignee or sublessee nor (ii) any person which, directly or indirectly, controls, is controlled by, or is under common control with, the proposed assignee or sublessee or any person who controls the proposed assignee or sublessee, is then an occupant of any part of the Building; (e) The proposed assignee or sublessee is not a person with whom Landlord is then negotiating to lease space in the Building; (f) The form of the proposed lease shall be in form reasonably satisfactory to Landlord and shall comply with the applicable provisions of this Article; (g) There shall not be more than three (3) subtenants (including Landlord or its designee) of the Demised Premises other than "Affiliates" (as such term is hereinafter defined); (h) Deleted prior to execution. (i) Tenant shall not have (i) advertised or publicized in any way the availability of the Demised Premises without prior notice to and approval by Landlord, which shall not be unreasonably withheld nor shall any advertisement state the name (as distinguished from the address) of the Building or the proposed rental, (ii) listed the Premises for subletting or assignment, with a broker, agent or representative other than the then managing agent of the Building or other agent designated by Landlord, or otherwise at a rental rate less than the fixed rent and additional rent at which Landlord is then offering to lease other space in the Building, and Landlord agrees, upon reasonable notice from Tenant, to provide Tenant with such offering rental rate; (j) The sublease shall not allow the use of the Demised Premises or any part thereof for (i) the preparation and/or sale of food for on or off premises consumption other than the existing kitchen in the Demised Premises which may be used only by the subtenant(s) and its employees or (ii) for use by a foreign or domestic governmental agency. Except for any subletting by Tenant to Landlord or its designee pursuant to the provisions of this Article, each subletting pursuant to this Article shall be subject to all of the covenants, agreements, terms, provisions and conditions contained in this lease. Notwithstanding any such subletting to Landlord or any such subletting to any other subtenant and/or acceptance of rent or additional rent by Landlord from any subtenant, Tenant shall and will remain fully liable for the payment of the fixed rent and additional rent due and to become due hereunder and for the performance of all the covenants, agreements, terms, provisions and conditions contained in this lease on the part of Tenant to be performed and all acts and omissions of any licensee or subtenant or anyone claiming under or through any subtenant which shall be in violation of any of -15- the obligations of this lease, and any such violation shall be deemed to be a violation by Tenant. Tenant further agrees that notwithstanding any such subletting, no other and further subletting of the Premises by Tenant or any person claiming through or under Tenant (except as provided in Section 9.05) shall or will be made except upon compliance with and subject to the provisions of this Article. If Landlord shall decline to give its consent to any proposed assignment or sublease, or if Landlord shall exercise any of its options under Section 9.02, Tenant shall indemnify, defend and hold harmless Landlord against and from any and all loss, liability, damages, costs and expenses (including reasonable counsel fees) resulting from any claims that may be made against Landlord by the proposed assignee or sublessee or by any brokers or other persons claiming a commission or similar compensation in connection with the proposed assignment or sublease. If Landlord shall decline to give its consent to any proposed assignment or sublease and Landlord shall not have exercised any of its options under Section 9.02, Landlord shall, promptly after Tenant's request, provide Tenant with a statement setting forth in reasonable detail the reason(s) for such denial. (k) Tenant shall reimburse Landlord on demand for any reasonable costs that may be incurred by Landlord in connection with any proposed assignment or sublease, including, without limitation, the costs of making investigations as to the acceptability of the proposed assignee or subtenant, and legal costs incurred in connection with the granting of any requested consent. 9.08 In the event that (a) Landlord fails to exercise any of its options under Section 9.02 and consents to a proposed assignment or sublease, and (b) Tenant fails to execute and deliver the assignment or sublease to which Landlord consented within 90 days after the giving of such consent, then, Tenant shall again comply with all of the provisions and conditions of Section 9.02 before assigning this lease or subletting all or part of the Demised Premises. 9.09 With respect to each and every sublease or subletting authorized by Landlord under the provisions of this lease, it is further agreed: (a) no subletting shall be for a term ending later than one day prior to the expiration date of this lease; (b) no sublease shall be valid, and no subtenant shall take possession of the Demised Premises or any part thereof, until an executed counterpart of such sublease has been delivered to Landlord; (c) each sublease shall provide that it is subject and subordinate to this lease and to the matters to which this lease is or shall be subordinate, and that in the event of termination, reentry or dispossess by Landlord under this lease Landlord may, at its option, take over all of the right, title and interest of Tenant, as sublessor, under such sublease, and such subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not (i) be liable for any previous act or omission of Tenant under such sublease, (ii) be subject to any offset, not expressly provided in such sublease, which theretofore accrued to such subtenant against Tenant, or (iii) be bound by any previous modification of such sublease or by any previous prepayment of more than one month's rent. 9.10 If the Landlord shall give its consent to any assignment of this lease or to any sublease, Tenant shall in consideration therefor, pay to Landlord, as additional rent: (a) in the case of an assignment, fifty (50%) percent of an amount equal to all sums and other considerations paid to Tenant by the assignee for or by reason of such assignment (including, but not -16- limited to, sums paid for the sale to the assignee or an affiliate thereof of Tenant's fixtures, leasehold improvements, equipment, furniture, furnishings or other personal property, less, in the case of a sale thereof, the then net unamortized or undepreciated cost thereof determined on the basis of Tenant's federal income tax returns); and (b) in the case of a sublease, fifty (50%) percent of any rents, additional charge or other consideration payable under the sublease to Tenant by the subtenant which is in excess of the fixed rent and additional rent accruing during the term of the sublease in respect of the subleased space (at the rate per square foot payable by Tenant hereunder) pursuant to the terms hereof (including, but not limited to, sums paid for the sale or rental to the sublessee or an affiliate thereof of Tenant's fixtures, leasehold improvements, equipment, furniture or other personal property, less, in the case of the sale or rental thereof, the then net unamortized or undepreciated cost thereof determined on the basis of Tenant's Federal income tax returns). The sums payable under this Section 9.10(b) shall be paid to Landlord as and when payable by the subtenant to tenant. 9.11 If Tenant is a corporation, the provisions of Section 9.01 shall apply to a transfer (by one or more transfers) of a majority of the stock of Tenant (other than transfers of stock among Charles H. Bendheim and his direct lineal descendants or his or their spouses) as if such transfer of a majority of the stock of Tenant were an assignment of this lease, but said provisions shall not apply to transactions with any of the following entities (an "Affiliate"): (a) a corporation into or with which Tenant is merged or consolidated or to which substantially all of Tenant's assets are transferred, or (b) any corporation which controls or is controlled by Tenant or is under common control with Tenant or which is controlled by Charles H. Bendheim or his direct lineal descendants or his or their spouses, or (c) any trust for the benefit of Charles H. Bendheim or his direct lineal descendants or his or their spouses, provided that in any of such events (i) the successor to Tenant has a net worth computed in accordance with generally accepted accounting principles at least equal to the greater of (1) the net worth of Tenant immediately prior to such merger, consolidation or transfer, or (2) the net worth of Tenant herein named on the date of this lease, and (ii) proof satisfactory to Landlord of such net worth shall have been delivered to Landlord at least 10 days prior to the effective date of any such transaction. For purposes of this Section 9.11, with respect to a corporation, the term "control" shall mean the ownership, or common ownership, as the case may be, of at least 51% of the voting stock of the corporation involved. Landlord agrees that Tenant may sublet, without obtaining Landlord's consent, all or a portion of the Demised Premises to an Affiliate provided that Tenant shall have complied with the provisions of Section 9.09 hereof (and the provisions of Sections 9.02 and 9.10 shall not apply thereto). 9.12 Any assignment or transfer, whether made with Landlord's consent pursuant to Section 9.01 or without Landlord's consent pursuant to Section 9.11, shall be made only if, and shall not be effective until, the assignee shall execute, acknowledge and deliver to Landlord an agreement in form and substance satisfactory to Landlord whereby the assignee shall assume the obligations of this lease on the part of Tenant to be performed or observed and whereby the assignee shall agree that the provisions in Section 9.01 shall, notwithstanding such assignment or transfer, continue to be binding upon it in respect of all future assignments and transfers. The original named Tenant covenants that, notwithstanding any assignment or transfer, whether or not in violation of the provisions of this lease, and notwithstanding the acceptance of fixed rent and/or additional rent by Landlord from an assignee, transferee, or any other party, the original named Tenant shall remain fully liable for the payment of the fixed rent and additional rent and for the other obligations of this lease on the part of Tenant to be performed or observed. 9.13 The joint and several liability of Tenant and any immediate or remote successor in interest of Tenant and the due performance of the obligations of this lease on Tenant's part to be performed or observed shall not be discharged, released or impaired in any respect by any agreement or stipulation made by Landlord extending the time of or modifying any of the obligations of, this lease, or by any waiver or failure of Landlord to enforce any of the obligations of this lease. 9.14 The listing of any name other than that of Tenant, whether on the doors of the Premises or the Building directory, or otherwise, shall not operate to vest any right or interest in this lease or in the Premises, -17- nor shall it be deemed to be the consent of Landlord to any assignment or transfer of this lease or to any sublease of the Premises or to the use or occupancy thereof by others. ARTICLE 10 Compliance With Laws And Requirements of Public Authorities 10.01 Tenant shall give prompt notice to Landlord of any notice it receives of the violation of any law or requirement of public authority, and at its expense shall comply with all laws and requirements of public authorities which shall, with respect to the Demised Premises or the use and occupation thereof, or the abatement of any nuisance, impose any violation, order or duty on Landlord or Tenant, arising from (i) Tenant's use of the Demised Premises other than Tenant's mere occupancy of the Demised Premises for executive and general office purposes, (ii) the manner of conduct of Tenant's business or operation of its installations, equipment or other property therein, (iii) any cause or condition created by or at the instance of Tenant, other than by Landlord's performance of any work for or on behalf of Tenant, or (iv) breach of any of Tenant's obligations hereunder. However, Tenant shall not be so required to make any structural or other substantial change in the Demised Premises unless the requirement arises from a cause or condition referred to in clause (ii), (iii) or (iv) above. Furthermore, Tenant need not comply with any such law or requirement of public authority so long as Tenant shall be contesting the validity thereof, or the applicability thereof to the Demised Premises, in accordance with Section 10.02. Landlord, at its expense, shall comply with all other such laws and requirements of public authorities as shall affect the Demised Premises, but may similarly contest the same subject to conditions reciprocal to Subsections (a), (b) and (d) of Section 10.02. 10.02 Tenant may, at its expense (and if necessary, in the name of but without expense to Landlord) contest, by appropriate proceedings prosecuted diligently and in good faith, the validity, or applicability to the Demised Premises, of any law or requirement of public authority, and Landlord shall cooperate with Tenant in such proceedings, provided that: (a) Landlord shall not be subject to criminal penalty or to prosecution for a crime nor shall the Demised Premises or any part thereof be subject to being condemned or vacated, by reason of non-compliance or otherwise by reason of such contest; (b) Tenant shall defend, indemnify and hold harmless Landlord against all liability, loss or damage which Landlord shall suffer by reason of such noncompliance or contest, including reasonable attorney's fees and other expenses reasonably incurred by Landlord; (c) such non-compliance or contest shall not constitute or result in any violation of any superior lease or superior mortgage, or if such superior lease and/or superior mortgage shall permit such non-compliance or contest on condition of the taking of action or furnishing of security by Landlord, such action shall be taken and such security shall be furnished at the expense of Tenant; and (d) Tenant shall keep Landlord advised as to the status of such proceedings. Without limiting the application of Subsection (a) above thereto, Landlord shall be deemed subject to prosecution for a crime within the meaning of said Subsection, if Landlord, or any officer of Landlord individually, is charged with a crime of any kind or degree whatever, whether by service of a summons or otherwise, unless such charge is withdrawn before Landlord or such officer (as the case may be) is required to plead or answer thereto. ARTICLE 11 Insurance -18- 11.01 Tenant shall not violate, or permit the violation of, any condition imposed by the standard fire insurance policy then issued for office buildings in the Borough of Fort Lee, County of Bergen, and shall not do, or permit anything to be done, or keep or permit anything to be kept in the Demised Premises which would subject Landlord to any liability or responsibility for personal injury or death or property damage, or which would increase the fire or other casualty insurance rate on the Building or the property therein over the rate which would otherwise then be in effect (unless Tenant pays the resulting premium as provided in Section 11.03) or which would result in insurance companies of good standing refusing to insure the Building or any of such property in amounts reasonably satisfactory to Landlord. 11.02 Tenant covenants to provide on or before the Commencement Date and to keep in force during the term hereof the following insurance coverage: (a) for the benefit of Landlord and Tenant a comprehensive policy of liability insurance protecting Landlord and Tenant against any liability whatsoever occasioned by accident on or about the Demised Premises or any appurtenances thereto. Such policy is to be written by good and solvent insurance companies authorized to do business in the State of New Jersey and the limits of liability thereunder shall not be less than the amount of Three Million ($3,000,000.00) Dollars combined single limit coverage on a per occurrence basis. Such insurance may be carried under a blanket policy covering the Demised Premises and other locations of Tenant, if any; (b) Fire and Extended coverage in an amount adequate to cover the cost of replacement of all personal property, fixtures, furnishing and equipment, including Tenant's Work located in the Demised Premises. Such policy shall be written by good and solvent insurance companies authorized to do business in the State of New Jersey. Prior to the time such insurance is first required to be carried by Tenant and thereafter, at least thirty (30) days prior to the expiration of any such policies, Tenant agrees to deliver to Landlord either duplicate originals of the aforesaid policies or certificates evidencing such insurance, provided said certificate contains an endorsement that such insurance may not be modified or cancelled except upon thirty (30) days' notice to Landlord, together with evidence of payment for the policy. Tenant's failure to provide and keep in force the aforementioned insurance shall be regarded as a material default hereunder, entitling Landlord to exercise any or all of the remedies as provided in this lease in the event of Tenant's default. 11.03 Landlord and Tenant shall each endeavor to secure an appropriate clause in, or an endorsement upon, each fire or extended coverage policy obtained by it and covering the Building, the Demised Premises or the personal property, fixtures and equipment located therein or thereon, pursuant to which the respective insurance companies waive subrogation or permit the insured, prior to any loss, to agree with a third party to waive any claim it might have against said third party. The waiver of subrogation or permission for waiver of any claim hereinbefore referred to shall extend to the agents of each party and its employees and, in the case of Tenant, shall also extend to all other persons and entities occupying or using the Demised Premises in accordance with the terms of this lease. If and to the extent that such waiver or permission can be obtained only upon payment of an additional charge then, except as provided in the following two paragraphs, the party benefitting from the waiver or permission shall pay such charge upon demand, or shall be deemed to have agreed that the party obtaining the insurance coverage in question shall be free of any further obligations under the provisions hereof relating to such waiver or permission. In the event that Landlord shall be unable at any time to obtain one of the provisions referred to above in any of its insurance policies, at Tenant's option Landlord shall cause Tenant to be named in such policy or policies as one of the assured, but if any additional premium shall be imposed for the inclusion of Tenant as such as assured, Tenant shall pay such additional premium upon demand. In the event that Tenant shall have been named as one of the assured in any of Landlord's policies in accordance with the foregoing, Tenant shall endorse promptly to the order of Landlord, without recourse, any check, draft or order for the payment of money representing the proceeds of any such policy or any other payment growing out of or connected with said policy and Tenant hereby irrevocably waives any and all rights in and to such proceeds and payments. -19- In the event that Tenant shall be unable at any time to obtain one of the provisions referred to above in any of its insurance policies, Tenant shall cause Landlord to be named in such policy or policies as one of the assured, but if any additional premium shall be imposed for the inclusion of Landlord as such an assured, Landlord shall pay such additional premium upon demand or Tenant shall be excused from its obligations under this paragraph with respect to the insurance policy or policies for which such additional premiums would be imposed. In the event that Landlord shall have been named as one of the assured in any of Tenant's policies in accordance with the foregoing, Landlord shall endorse promptly to the order of Tenant, without recourse, any check, draft or order for the payment of money representing the proceeds of any such policy or any other payment growing out of or connected with said policy and Landlord hereby irrevocably waives any and all rights in and to such proceeds and payments. Subject to the foregoing provisions of this Section 11.03, and insofar as may be permitted by the terms of the insurance policies carried by it, each party hereby releases the other with respect to any claim (including a claim for negligence) which it might otherwise have against the other party for loss, damages or destruction with respect to its property by fire or other casualty (including rental value or business interruption, as the case may be) occurring during the term of this lease. 11.04 If, by reason of a failure of Tenant to comply with the provisions of Section 10.01 or Section 11.01, the rate of fire insurance with extended coverage on the Building or equipment or other property of Landlord shall be higher than it otherwise would be, Tenant shall reimburse Landlord, on demand, for that part of the premiums for fire insurance and extended coverage paid by Landlord because of such failure on the part of Tenant. 11.05 If any dispute shall arise between Landlord and Tenant with respect to the incurrence or amount of any additional insurance premium referred to in Section 11.03, the dispute shall be determined by arbitration. 11.06 A schedule or makeup of rates for the Building or the Demised Premises, as the case may be, issued by the New Jersey Fire Insurance Rating Organization or other similar body making rates for fire insurance and extended coverage for the premises concerned, shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rate with extended coverage then applicable to such premises. ARTICLE 12 Rules And Regulations 12.01 Tenant and its employees and agents shall faithfully observe and comply with the Rules and Regulations annexed hereto as Exhibit D, and such reasonable changes therein (whether by modification, elimination or addition) as Landlord at any time or times hereafter may make and communicate in writing to Tenant, which do not unreasonably affect the conduct of Tenant's business in the Demised Premises except as required by any governmental law, rule, regulation, ordinance or similar decree; provided, however, that in case of any conflict or inconsistency between the provisions of this lease and any of the Rules and Regulations as originally promulgated or as changed, the provisions of this lease shall control. 12.02 Nothing in this lease contained shall be construed to impose upon Landlord any duty or obligation to Tenant to enforce the Rules and Regulations or the terms, covenants or conditions in any other lease, as against any other tenant, and Landlord shall not be liable to Tenant for violation of the same by any other tenant or its employees, agents or visitors. However, Landlord shall not enforce any of the Rules and Regulations in such manner as to discriminate against Tenant or anyone claiming under or through Tenant. ARTICLE 13 Tenant's Changes 13.01 Tenant may from time to time during the term of this lease, at its expense, make such other alterations, additions, installations, substitutions, improvements and decorations (hereinafter collectively referred to as "changes" and, as applied to changes provided for in this Article, "Tenant's Changes") in and to the Demised Premises, -20- excluding structural changes, as Tenant may reasonably consider necessary for the conduct of its business in the Demised Premises, on the following conditions: (a) the outside appearance or the strength of the Building or of any of its structural parts shall not be affected; (b) no part of the Building outside of the Demised Premises shall be physically affected; (c) the proper functioning of any of the mechanical, electrical, sanitary and other service systems of the Building shall not be adversely affected or the usage of such systems by Tenant shall not be increased; (d) in performing the work involved in making such changes, Tenant shall be bound by and observe all of the conditions and covenants contained in the following Sections of this Article; (e) before proceeding with any Tenant's Changes, Tenant will advise Landlord thereof and shall submit to Landlord proof reasonably satisfactory of the cost thereof and shall submit the names of the contractors or subcontractors who will be performing Tenant's Changes for Landlord's approval, which approval shall not be unreasonably withheld or delayed. Additionally, before proceeding with any Tenant's Changes, Tenant shall submit to Landlord plans and specifications and all changes and revisions thereto, for the work to be done for Landlord's approval and Tenant shall, upon demand of Landlord, pay to Landlord the reasonable costs incurred by Landlord for the review of such plans and specifications and all changes and revisions thereto by its architect, engineer and other consultants. Landlord may as a condition of its approval require Tenant to make revisions in and to the plans and specifications and to post a bond or other security reasonably satisfactory to Landlord to insure the completion of such change. Notwithstanding the foregoing, Landlord's approval of plans and specifications shall not be required in connection with any non-structural change, the estimated cost of which, in the aggregate, does not exceed $25,000.00 (exclusive of the costs of decorating work and items constituting Tenant's Property, as defined in Article 14, and any architect's and engineer's fees). 13.02 Tenant, at its expense, shall obtain all necessary governmental permits and certificates for the commencement and prosecution of Tenant's Changes and for final approval thereof upon completion and shall furnish copies thereof to Landlord, and shall cause Tenant's Changes to be performed in compliance therewith and with all applicable laws and requirements of public authorities, and with all applicable requirements of insurance bodies, and in good and workmanlike manner, using new materials and equipment at least equal in quality and class to the original installations in the Building. Tenant's Changes shall be performed in such manner as not to unreasonably interfere with or delay and (unless Tenant shall indemnify Landlord therefor to the latter's reasonable satisfaction) as not to impose any additional expense upon, Landlord in the construction, maintenance or operation of the Building or any portion thereof. Throughout the performance of Tenant's Changes, Tenant, at its expense, shall carry, or cause to be carried, workmen's compensation insurance in statutory limits and general liability insurance for any occurrence in or about the Building as set forth in Section 11.02 hereof, in which Landlord and its agents shall be named as parties insured, in such limits as Landlord may reasonably prescribe, with insurers reasonably satisfactory to Landlord. Tenant shall furnish Landlord with satisfactory evidence that such insurance is in effect at or before the commencement of Tenant's Changes and, on request, at reasonable intervals thereafter during the continuance of Tenant's Changes. If any of Tenant's Changes shall involve the removal of any fixtures, equipment or other property in the Demised Premises which are not Tenant's Property (as defined in Article 14), such fixtures, equipment or other property shall be promptly replaced, at Tenant's expense, with new fixtures, equipment or other property (as the case may be) of like utility and at least equal value unless Landlord shall otherwise expressly consent in writing and Tenant shall, upon Landlord's request, store and preserve, at Tenant's sole cost and expense, any such fixtures, equipment or property so removed and shall return same to Landlord upon the expiration or sooner termination of this lease. All electrical and plumbing work in connection with Tenant's changes shall be performed by contractors or subcontractors licensed therefor by all governmental agencies having or asserting jurisdiction. Upon the completion of Tenant's Changes, Tenant shall furnish to Landlord a complete set of "as built" plans and specifications. -21- 13.03 Tenant, at its expense, and with diligence and dispatch, shall procure the cancellation or discharge of all notices of violation arising from or otherwise connected with Tenant's Changes which shall be issued by the Department of Buildings or any other public or quasi-public authority having or asserting jurisdiction. Tenant shall defend, indemnify and save harmless Landlord against any and all mechanic's and other liens filed in connection with Tenant's Changes, including the liens of any security interest in, conditional sales of, or chattel mortgages upon, any materials, fixtures or articles so installed in and constituting part of the Demised Premises and against all costs, expense and liabilities incurred in connection with any such lien, security interest, conditional sale or chattel mortgage or any action or proceeding brought thereon. Tenant, at its expense, shall procure the satisfaction or discharge of all such liens within fifteen (15) days after Landlord makes written demand therefor. However, nothing herein contained shall prevent Tenant from contesting, in good faith and at its own expense, any such notice of violation, provided that Tenant shall comply with the provisions of Section 10.02. 13.04 Tenant agrees that the exercise of its rights pursuant to the provisions of this Article 13 or any other provision of this lease shall not be done in a manner which would create any work stoppage, picketing, labor disruption or dispute or violate Landlord's union contracts affecting the Land and/or Building nor interference with the business of Landlord or any Tenant or occupant of the Building. In the event of the occurrence of any condition described above arising from the exercise by Tenant of its right pursuant to the provisions of this Article 13 or any other provision of this lease, Tenant shall, immediately upon notice from Landlord, cease the manner of exercise of such right giving rise to such condition. In the event Tenant fails to cease such manner of exercise of its rights as aforesaid, Landlord, in addition to any rights available to it under this lease and pursuant to law, shall have the right to injunction without notice. With respect to Tenant's Changes, Tenant shall make all arrangements for, and pay all expenses incurred in connection with, use of the freight elevators servicing the Demised Premises. ARTICLE 14 Tenant's Property 14.01 All fixtures, equipment, improvements and appurtenances attached to or built into the Demised Premises at the commencement of or during the term of this lease, whether or not by or at the expense of Tenant, shall be and remain a part of the Demised Premises, shall be deemed the property of Landlord and shall not be removed by Tenant, except as hereinafter in this Article expressly provided. 14.02 All paneling, movable partitions, lighting fixtures, special cabinet work, other business and trade fixtures, machinery and equipment, communications equipment and office equipment, whether or not attached to or built into the Demised Premises, which are installed in the Demised Premises by or for the account of Tenant, without expense to Landlord, and can be removed without permanent structural damage to the Building, and all furniture, furnishings and other articles of movable personal property owned by Tenant and located in the Demised Premises, all of which are sometimes referred to as "Tenant's Property", shall be and shall remain the property of Tenant and may be removed by it at any time during the term of this lease; provided that if any of Tenant's Property is removed, Tenant or any party or person entitled to remove same shall repair or pay the cost of repairing any damage to the Demised Premises or to the Building resulting from such removal. Any equipment or other property for which Landlord shall have granted any allowance or credit to Tenant or which has replaced such items originally provided by Landlord at Landlord's expense shall not be deemed to have been installed by or for the account of Tenant, without expense to Landlord, and shall not be considered Tenant's Property. 14.03 At or before the Expiration Date, or the date of any earlier termination of this lease, or as promptly as practicable after such an earlier termination date, Tenant at its expense, shall remove from the Demised Premises all of Tenant's Property except such items thereof as Tenant shall have expressly agreed in writing with Landlord were to remain and to become the property of Landlord, and shall fully repair any damage to the Demised Premises or the Building resulting from such removal. Tenant's obligation herein shall survive the termination of the lease. Tenant shall not be required to remove pipes, wires and the like from the walls, ceilings or floors, provided that Tenant properly cuts, disconnects and caps such pipes and wires and seals them off, if necessary, in a safe and lawful manner. -22- 14.04 Any other items of Tenant's Property (except money, securities and other like valuables) which shall remain in the Demised Premises after the Expiration Date or after a period of fifteen (15) days following an earlier termination date, may, at the option of the Landlord, be deemed to have been abandoned, and in such case either may be retained by Landlord as its property or may be disposed of, without accountability, at Tenant's expense in such manner as Landlord may see fit. -23- ARTICLE 15 Repairs And Maintenance 15.01 Tenant shall take good care of the Demised Premises, provided, however, that such obligation shall not be deemed to require Tenant to make any repairs other than those set forth in this Section 15.01. Tenant, at its expense, shall promptly make all repairs, ordinary or extraordinary, interior or exterior, structural or otherwise, in and about the Demised Premises and the Building as shall be required by reason of (i) the performance or existence of Tenant's Work not performed by Landlord or Tenant's Changes, (ii) the installation, use or operation of Tenant's Property in the Demised Premises, (iii) the moving of Tenant's Property in or out of the Building, or (iv) the misuse or neglect of Tenant or any of its employees, agents or contractors; but Tenant shall not be responsible for any of such repairs as are required by reason of Landlord's neglect or other fault in the manner of performing any of Tenant's Work or Tenant's Changes which may be undertaken by Landlord for Tenant's account or are otherwise required by reason of neglect or other fault of Landlord or its employees, agents or contractors. Except if required by the neglect or other fault of Landlord or its employees, agents or contractors, Tenant, at its expense, shall replace all scratched, damaged or broken doors or other glass (other than exterior windows) in or about the Demised Premises and shall be responsible for all repairs, maintenance and replacement of wall and floor coverings in the Demised Premises and, for the repair and maintenance of all lighting fixtures therein. 15.02 (a) Landlord, at its expense, shall keep and maintain the Building and its fixtures, appurtenances, systems, exterior windows and facilities serving the Demised Premises, in good working order, condition and repair and shall make all repairs, structural and otherwise, interior and exterior, as and when needed in or about the Demised Premises, except for those repairs for which Tenant is responsible pursuant to any other provisions of this lease. (b) During the first (1st) year of the term of this lease, Landlord at its expense, shall promptly make all repairs, in and about the Demised Premises as shall be required by reason of any defects in the performance or existence of Landlord's Work, or Tenant's Work performed by Landlord, unless such defect or any damage is caused by reason of the negligence or acts of Tenant or its agents, employees, contractors, guests or invitees. 15.03 Except as expressly otherwise provided in this lease, Landlord shall have no liability to Tenant by reason of any inconvenience, annoyance, interruption or injury to business arising from Landlord's making any repairs or changes which Landlord is required or permitted by this lease, or required by law, to make in or to any portion of the Building or the Demised Premises, or in or to the fixtures, equipment or appurtenances of the Building or the Demised Premises, provided that Landlord shall use due diligence with respect thereto and shall perform such work, except in case of emergency, at times reasonably convenient to Tenant and otherwise in such manner as will not materially interfere with Tenant's use of the Demised Premises provided that Landlord shall use reasonable efforts to effect such repairs or changes promptly and in such manner as to minimize such inconvenience, annoyance, interruption or injury to Tenant's business. ARTICLE 16 Electricity 16.01 Subject to the terms of Section 16.03, Landlord shall furnish electrical service to the Demised Premises during business hours (i.e., 8:00 A.M. to 6:00 P.M. on Mondays through Fridays, except such days as are observed by the State or Federal government as legal holidays and those days designated as holidays by the applicable Building service union employees contract) and subject to the terms of Sections 16.04 and 16.06, during other than business hours, for lighting the same and for the operation of office equipment installed or used in the Demised Premises as part of Tenant's initial installations approved by Landlord (even if installed within a reasonable period of time after the Commencement Date). Except as provided to the contrary in Sections 16.04, 16.06, 16.07, 16.08 and 16.09 of this Article, such electrical service shall be furnished without specific measurement, on any meter or otherwise, and without additional specific charge to Tenant, the charge for the furnishing of such electrical service being included -24- in the fixed rent reserved under this lease, subject to adjustment as provided in Section 16.04 of this Article. Notwithstanding the foregoing, however, Tenant agrees that Landlord shall not in anywise be liable or responsible to Tenant for any loss, damage or expense that Tenant may sustain or incur if either the quantity or character of electrical service is changed, is no longer available, or is unsuitable for Tenant's requirements, provided that such loss, damage or expense is not caused by Landlord's willful acts. At Landlord's option, Tenant shall purchase from Landlord or its agent all lamps, starters, ballasts, or bulbs used in the Demised Premises, provided that the charges for such items are comparable to charges for similar items in similar buildings in the vicinity in which the Building is located. 16.02 Tenant covenants and agrees that, at all times, its use of electric current shall never exceed the capacity of the feeders to the Building or the risers or wiring installation thereof. In connection therewith, Tenant expressly agrees that all installations, alterations and additions of and to the electrical fixtures, appliances, or equipment within the Demised Premises, other than Tenant's initial installation as approved by Landlord and the replacement of office and lighting equipment using small amounts of electricity (such as typewriters, calculators, desk or floor lamps and dictaphone machines) with similar office equipment using comparable amounts of electric energy, shall be subject to Landlord's prior written approval, and, if such approval shall be given (or expressly not required as provided above), rigid conduit only shall be permitted. If, in connection with any request for such approval, Landlord shall, in its sole judgment, determine that the risers of the Building servicing the Demised Premises shall be insufficient to supply Tenant's electrical requirements with respect thereto, Landlord shall, at the sole cost and expense of Tenant, install any additional feeder(s) that Landlord shall deem necessary with respect thereto, provided, however, that, if Landlord shall determine, in its sole judgment, that the same will cause permanent damage or injury to the Building or to the Demised Premises, cause or create a dangerous or hazardous condition, entail excessive or unreasonable alterations, repairs, or expense, or interfere with, or disturb, the other tenants or occupants of the Building, then Landlord shall not be obligated to make such installation, and Tenant shall not make the installation, alteration, or addition with respect to which Tenant requested Landlord's consent. In addition to the installation of such riser or risers, Landlord will also, at the sole cost and expense of Tenant, install all other equipment necessary and proper in connection therewith, subject to the aforesaid terms and conditions. All of the aforesaid costs and expenses are chargeable and collectible as additional rent, and shall be paid by Tenant to Landlord within five (5) days after rendition of any bill or statement to Tenant therefor. 16.03 Provided that (a) it is physically possible for Tenant to receive electric current in the Demised Premises directly from the public utility company serving the area in which the Building is located and (b) the discontinuance of electrical service by Landlord will not cause a material interruption in electrical service to Tenant during business hours (unless, with respect to Subdivision (b) hereof, discontinuance of electrical service as aforesaid is required by law or other regulation or requirement of any governmental or quasi-governmental authority having jurisdiction thereof ("Requirements") and, in such event, Landlord shall use reasonable diligence to effectuate such discontinuance in such a manner as to minimize inconvenience, annoyance, interruption or injury to Tenant's business), Landlord may discontinue the aforesaid service upon thirty (30) days' notice to Tenant without being liable to Tenant therefor and without in any way affecting this lease or the liability of Tenant hereunder, and the same shall not be deemed to be a lessening or diminution of services within the meaning of any law, rule, or regulation now or hereafter enacted, promulgated, or issued. In the event that Landlord gives such notice of discontinuance, Landlord shall permit Tenant to receive such service directly from such public utility company and shall permit Landlord's wires and conduits, to the extent available, suitable and safely capable, to be used for such purpose. Any additional wires, conduits, or other equipment necessary and proper in connection therewith shall be installed by Landlord in accordance with the terms of, and subject to the conditions contained in, Section 16.02 of this Article, except that Landlord shall pay for same, and Tenant agrees that Landlord's cost therefor may be included in Operating Expenses as a capital improvement that is included in Operating Expenses as provided in Section 5.07(a) of this lease. In the event that Landlord exercises its rights under this Section 16.03, then: (i) Tenant shall contract for such electrical service directly with the said public utility for all of Tenant's electric current requirements and (ii) as of the date upon which Landlord discontinues furnishing electric current to Tenant, (a) the fixed rent reserved under this lease shall be reduced by $22,731.00 (as such amount may have been previously increased in accordance with the provisions of Sections 16.04 and 16.05 of this Article) and (b) any Increased Usage Charge (as such term is defined in Section 16.06 of this Article) shall be discontinued. The amount set forth in Subsubdivision (a) of Subdivision (ii) above is hereinafter called the Initial Electricity factor, and the said amount, as the same may, from time to time hereafter, be increased pursuant to the terms of Sections 16.04 and 16.05 of this Article, is hereinafter called the Electricity Factor. -25- 16.04 After the Commencement Date, Landlord's Consultant (as such term is defined in Section 16.06 of this Article) shall have the right to make a survey hereinafter called the Initial Survey) of the Demised Premises, which shall include all of Tenant's initial installations approved by Landlord (even if installed within a reasonable period of time after the Commencement Date) of fixtures, appliances or equipment in the Demised Premises, indicating the lighting load, office equipment and electrical usage of Tenant (whether or not during business hours) as of the date of the Initial Survey and shall specifically exclude any electrical usage of Tenant for the Supplemental Air Conditioning System (as such term is defined in Article 39 hereof). Based upon the Initial Survey, Landlord's Consultant shall compute the value to Tenant of the estimated electrical service to be furnished to Tenant for the succeeding twelve (12) month period (hereinafter called the Initial Electrical Value), which computation shall be made utilizing the higher of (i) the service classification under which Landlord is billed by the utility company for such electrical service or (ii) the service classification under which Tenant would be billed by the utility company if Tenant purchased such electrical service directly from such utility company. Landlord's Consultant shall notify Landlord and Tenant of this computation of the Initial Electrical Value (which shall be binding upon both parties). Regardless of the result of the Initial Survey, there shall be no adjustment in the fixed rent herein reserved and the Electricity factor; the Initial Electrical Value shall be used as a base against which any Subsequent Survey (as such term is hereinafter defined) shall be compared. 16.05 If the public utility rate schedule for the supply of electric current to the Building shall be increased, if any surcharge (including, without limitation, a surcharge of the nature of a fuel or other adjustment) with respect thereto shall be imposed or increased and/or if the service classification for the Building shall be changed so as to result in an increase in Landlord's cost of purchasing electricity for the Building during the term of this lease, the fixed rent herein reserved and Electricity Factor shall each be adjusted to reflect the resulting increase by adding thereto an amount equal to the product of (i) the then current Electricity Factor, multiplied by (ii) the percentage of increase in Landlord's cost of purchasing electricity for the Building. Any such percentage increase in Landlord's cost of purchasing electricity for the Building shall be computed by the application of the average consumption (energy and demand) of electricity for the entire Building for the twelve (12) full months immediately prior to the rate increase and/or service classification change to the new rate and/or service classification. When the amount of the increase in the fixed rent and the Electricity Factor is determined, the parties shall execute an agreement supplementary hereto to reflect such increase, which shall be effective from the effective date of such increase in the public utility rate schedule and/or such change in the service classification for the Building; but such increase in the fixed rent and in the Electricity Factor shall be effective from such date whether or not such a supplementary agreement is executed. In addition, if any tax is imposed upon Landlord by any Municipal, State, or Federal Agency with respect to the purchase, sale, or resale of electrical energy supplied to Tenant hereunder, Tenant covenants and agrees that, where permitted by law, Tenant's pro rata share of such taxes shall be passed on to, included in the bill of and paid by Tenant to Landlord. 16.06 Tenant shall not, without prior written notice to Landlord in each instance, connect any fixtures, appliances, or equipment (in addition to those installed as part of Tenant's initial installation approved by Landlord (even if installed within a reasonable period of time after the Commencement Date) and shown on the Initial Survey) to the Building electric distribution system, or make any alteration or addition to the electric system of the Demised Premises, that shall result in Increased Usage (as such term is hereinafter defined) except for the replacement of small office equipment which will not require Landlord's consent or approval. In the event that Tenant (i) installs equipment, increases the lighting load beyond the amount thereof on the date of the Initial Survey, or (ii) operates during longer than business hours in excess of that shown on the Initial Survey, or (iii) installs a Supplemental Air Conditioning System (the foregoing are herein collectively called the "Increased Usage"), Tenant shall pay to Landlord, as additional rent hereunder payable on a monthly basis together with the fixed rent herein reserved, an amount to be computed as hereafter provided and subject to adjustment as set forth in Section 16.07 of this Article. If Landlord is of the opinion that Increased Usage exists, Landlord shall engage an independent electrical engineer or electrical consulting firm (hereinafter called Landlord's Consultant") who shall make a survey (hereinafter called the "Subsequent Survey") of the Demised Premises, indicating the lighting load, office equipment and electrical usage of Tenant as of the date of the Subsequent Survey, and shall compute the monthly amount (hereinafter called the "Increased Usage Charge") to be paid by Tenant for the furnishing of Increased Usage as a service by Landlord in excess of the usage shown on the Initial Survey. Landlord's Consultant shall base his computations on value to Tenant of the estimated Increased Usage to be furnished to Tenant for the succeeding twelve (12) month period, and such computation shall be made -26- utilizing the higher of (i) the service classification under which Landlord is billed by the utility company for such electrical service or (ii) the service classification under which Tenant would be billed by the utility company if Tenant purchased such electrical service directly from such utility company. Landlord's Consultant shall notify Landlord and Tenant of his computation of the Increased Usage Charge (which shall be binding upon both parties). The fees of Landlord's Consultant shall be borne by Landlord and Tenant equally. Tenant shall have the right as hereinafter provided, to contest any amounts determined by Landlord's Consultant as shall be due to Landlord as a result of Increased Service based upon a Subsequent Survey. In the event that Tenant fails to send a written notice (the "Objection Notice") to Landlord within thirty (30) days after Tenant's receipt of a written notice containing the amount of the Increased Usage Charge (the "Increase Notice"), such notice shall become conclusive and binding upon Tenant. If Tenant disputes any Increase Notice by sending an Objection Notice within the time and in the manner hereinbefore provided, then Tenant shall, at its sole cost and expense, have the right to engage an electrical engineer or electrical consulting firm (the "Tenant's Consultant") who shall promptly make a survey (the "Disputing Survey"), indicating Tenant's electrical usage in the Demised Premises. In the event that Landlord and Tenant are unable to agree on the increase, with respect to the Increase Notice within thirty (30) days after the date Tenant furnishes Landlord with a copy of the Disputing Survey, then Landlord's Consultant and Tenant's Consultant shall select a mutually acceptable electrical engineer or electrical consulting firm (the "Third Consultant") within ten (10) days after the expiration of such thirty (30) day period. Landlord's Consultant and Tenant's Consultant shall submit the dispute to the Third Consultant and the determination of any such increased electrical energy charge, by the Third Consultant shall be conclusive and binding upon Landlord and Tenant. During the pendency of any such dispute, Tenant shall pay to Landlord the amount set forth in the Increase Notice until the dispute is finally determined in accordance with the provisions of this Section and, in the event that such final determination is less than the amount set forth in the Increase Notice, Landlord shall, at Tenant's election, refund to Tenant the amount of such excess payment or credit any such excess against any amounts then due or becoming due to Landlord under this lease. The cost of the Third Consultant shall be borne equally by Landlord and Tenant. 16.07 After the same shall be determined pursuant to the terms of Section 16.06 of this Article, the Increased Usage Charge shall continue to be paid on a monthly basis until Landlord's Consultant determines in a Subsequent Survey that there has been a further increase or a decrease in the Increased Usage. The amount of the Increased Usage Charge may be appropriately increased or decreased at any time and from time to time throughout the term of this lease to reflect a change in the rates charged by the utility company servicing the Building (including, without limitation, a change in any taxes assessed, levied, or imposed with respect to such electrical service) in accordance with the provisions of Section 16.05 of this Article. 16.08 For purposes of Sections 16.08, 16.09 and 16.10 of this Article: (i) "Usage" shall mean actual usage of electricity as measured by the metering system described in Section 16.09 for each calendar month or such other period as Landlord shall determine during the term of this lease and shall include the quantity and peak demand (kilowatt hours and kilowatts) and all applicable taxes, surcharges, demand charges, energy charges, fuel adjustment charges, time of day charges and other adjustments made from time to time by the public utility company supplying electric current to the Building or any governmental authority having jurisdiction; (ii) "Landlord's Rate" shall mean the service classification (including all applicable taxes, surcharges, demand charges, energy charges, fuel adjustment charges, time of day charges and other sums payable in respect thereof) pursuant to which Landlord purchases electric current for the Building from the public utility company supplying electric current to the Building; (iii) "Basic Cost" shall mean the product of (a) Usage multiplied by (b) Landlord's Rate. (iv) "Tenant's Cost" shall mean an amount equal to the sum of (a) the Basic Cost plus (b) ten (10%) percent of the Basic Cost for Landlord's overhead and expenses in connection with submetering. -27- 16.09 Landlord shall have the option (hereinafter called the "Submetering Option"), which shall be exercisable in its sole discretion and upon thirty (30) days' notice to Tenant given at any time during the term of this lease, to discontinue charging for electric current on a rent inclusion basis and, instead, to charge for electric current as hereinafter provided as additional rent. If Landlord exercises the Submetering Option, then (i) Landlord shall, at its sole cost and expense, install a meter or meters for the purpose of measuring the electric current consumed in the Demised Premises provided, however, that at no time shall Landlord thereby cause a material interruption in electric service to Tenant during business hours, and (ii) as of the date (hereinafter called the "Conversion Date") upon which Landlord discontinues charging Tenant for electric current on a rent inclusion basis, (a) the fixed rent reserved under this lease shall be reduced by the then current Electricity Factor and (b) any Increased Usage Charge shall be discontinued. With respect to the Demised Premises and/or any portion(s) thereof that are not contiguous with the balance of the same, if the same shall constitute less than a full floor of the Building, Landlord may, at its option, either (x) install a meter to measure the amount of Usage with respect solely to the Demised Premises and/or to such portion(s) or (y) measure the amount of Usage with respect thereto through common meter(s). After the Conversion Date, Landlord shall, from time to time, furnish Tenant with a statement indicating the appropriate period during which the Usage was measured and the amount of Tenant's Cost payable by Tenant to Landlord for furnishing electrical current. Within five (5) days after receipt of each such statement, Tenant shall pay the amount of Tenant's Cost set forth thereon to Landlord as additional rent. In addition, if any tax is imposed upon Landlord by any municipal, state or Federal agency or subdivision with respect to the purchase, sale or resale of electrical energy supplied to Tenant hereunder, Tenant covenants and agrees that, where permitted by law, Tenant's Proportionate Share of such taxes shall be passed on to, included in the bill to and paid by, Tenant to Landlord, as additional rent. 16.10 (i) With respect to any meter system which shall measure more than one (1) tenant's electrical consumption (hereinafter referred to as a "Multi-Tenant Meter"), Tenant shall pay its pro rata share (which, together with any recomputations thereof based upon a "Recomputation Notice" as provided in this Subdivision (i) or a "Survey" as provided in Subdivision (ii), is hereinafter referred to as "Tenant's Pro Rata Share") of the Usage measured by such Multi-Tenant Meter. Tenant's Pro-Rats Share shall be expressed as a percentage and shall be computed on the basis of a fraction, the numerator of which shall be the Multiplication Factor and the denominator of which shall be the total square foot area of the space occupied by tenants whose electrical consumption is measured by such Multi-Tenant Meter (hereinafter referred to as the "Shared Meter Space"). Landlord, using the formula set forth above, shall compute Tenant's Pro Rata Share as of the Conversion Date. Landlord shall recompute Tenant's Pro Rata Share after a change in occupancy in the Shared Meter Space occurs, and shall send Tenant notice thereof (such notice and the notice of a new Tenant's Pro Rata Share based upon a new Survey as provided in Subdivision (ii) of this Section 16.10 are hereinafter referred to as a "Recomputation Notice"), such recomputation to be retroactive to the date of such change in occupancy. Tenant's Pro-Rata Share shall be payable by Tenant as additional rent within ten (10) days after the rendition by Landlord of bills therefor. (ii) In the event that at any time Tenant or any other tenant of the Shared Meter Space (thereinafter referred to as the "Disputing Tenant") shall dispute the accuracy of its pro rata share as so computed by Landlord, the Disputing Tenant shall have the right, at the Disputing Tenant's sole cost and expense, to make a survey (hereinafter referred to as the "Survey") of electrical usage in the space leased to all tenants of the Shared Meter Space using an independent electrical engineer (hereinafter referred to as the "Surveyor") acceptable to all tenants of the Shared Meter Space. The Surveyor shall compute the pro rata share of each of the tenants of the Shared Meter Space, provided, however, that the aggregate pro rata shares of all tenants of the Shared Meter Space as so computed shall in no event be less than 100%. The Survey shall be conclusive and binding upon all tenants of the Shared Meter Space. Until completion of the first Survey made pursuant to this Subdivision (ii) and receipt thereof by Tenant, Tenant shall continue to pay Tenant's Pro Rata Share as determined by Landlord, and Landlord shall not be required to retroactively adjust any amount paid by Tenant prior to the date of the completion of the first Survey. After completion of a Survey and receipt thereof by Tenant, all tenants of the Shared Meter Space shall, effective as of the date of the Survey, and continuing thereafter until completion of a new Survey and receipt thereof by Tenant (or the receipt by Tenant of a Recomputation Notice as provided in Subdivision (i) above), pay their pro rata share based on the Survey retroactively adjusted to the date of the Survey. Tenant shall cooperate with any Disputing Tenant and the Surveyor in the making of the Survey. In the event the tenants of the Shared Meter Space are unable to agree upon a Surveyor, upon request -28- of any Disputing Tenant, Landlord shall designate a Surveyor to make the Survey. In no event shall Landlord have any liability or responsibility with respect to the accuracy of any survey or the fees of the Surveyor. ARTICLE 17 Heat, Ventilation And Air Conditioning 17.01 Landlord, at its expense, shall maintain and operate the heating, ventilating and Air Conditioning systems (hereafter referred to as the "systems") and, subject to energy conservation requirements of governmental authorities, shall furnish heat, ventilating and Air Conditioning (hereinafter collectively referred to as the "air-conditioning service") in the Demised Premises through the systems, which shall be in compliance with the performance specifications of the systems installed by Landlord in the Building. Air Conditioning shall be provided from May 15 through October 15 during "regular hours" (that is between the hours of 8:00 A.M. and 6:00 P.M.) of "business days" (which term is used herein to mean all days except Saturdays, Sundays and days now or hereafter observed by the Federal or New Jersey State government as legal holidays and those now or hereafter designated by the applicable Building service union employees service contract or by the applicable Operating Engineers contract (collectively "holidays") throughout the year. Heating and ventilation shall be provided during other periods of the year as may be required for comfortable occupancy of the Demised Premises during regular hours of business days. If Tenant shall require heating, ventilating or Air Conditioning service at any other time (hereinafter referred to as "after hours), Landlord shall furnish such after hours service upon reasonable advance notice from Tenant, and Tenant shall pay on demand Landlord's cost plus fifteen (15%) percent. In the event the after hours service is shared by other tenants, the cost thereof shall be prorated among all such tenants. Notwithstanding anything in the foregoing to the contrary, after hours Air Conditioning service may only be requested from May 15 through October 15. Anything contained in this Section 17.01 to the contrary notwithstanding, Landlord agrees that upon not less than forty-eight (48) hours prior notice, it shall provide Tenant with Air Conditioning service on not more than five (5) Sundays during any calendar year from 9:00 a.m. to 1:00 p.m. ("Tenant's Limited Special Hours") and that during Tenant's Limited Special Hours, Tenant shall only be required to pay Landlord, upon demand, Landlord's labor and other out-of-pocket costs for providing Air Conditioning service to Tenant during Tenant's Limited Special Hours. 17.02 Use of the Demised Premises, or any part thereof, in a manner exceeding the design conditions (including occupancy and connected electrical load) specified in Exhibit C for the systems, rearrangement of partitioning or opening of windows in the Demised Premises while the systems are in operation which interferes with normal operation of the heat, ventilation and Air Conditioning in the Demised Premise, may require changes in the systems. Such changes, so occasioned, shall be made by Tenant, at its expense, as Tenant's Changes pursuant to Article 13. ARTICLE 18 Landlords Other Services 18.01 Landlord, at its expense, shall provide public elevator service, passenger and freight, by elevators serving the floor on which the Demised Premises are situated during regular hours of business days, and shall have at least one passenger elevator subject to call at all other times. 18.02 Landlord, at its expense, shall cause the Demised Premises to be cleaned in accordance with the cleaning specifications annexed hereto as Exhibit F. Tenant shall pay to Landlord on demand the costs incurred by Landlord for (a) extra cleaning work in the Demised Premises required because of (i) misuse or neglect on the part of Tenant or its employees or visitors, (ii) use of portions of the Demised Premises for preparation, serving or consumption of food or beverages, data processing or reproducing operations; private lavatories or toilets or other special purposes requiring greater or more difficult cleaning work than office areas, (iii) unusual quantity of interior glass surfaces, (iv) non-Building standard materials or finishes installed by Tenant or at its request, and (b) removal from the Demised Premises and the Building of so much of any refuse and rubbish of Tenant as shall exceed that ordinarily accumulated daily in the routine of business office occupancy. Landlord, its cleaning contractor and their employees shall have after -29- hours access to the Demised Premises and the free use of light, power and water in the Demised Premises as reasonably required for the purpose of cleaning the Demised Premises in accordance with Landlord obligations hereunder (and the usage thereof shall be included in the Initial Survey). 18.03 Landlord, at its expense, shall furnish adequate hot and cold water to the floor on which the Demised Premises are located for drinking, lavatory and cleaning purposes. If Tenant uses water for any other purpose Landlord, at Tenant's expense, shall install meters to measure Tenant's consumption of cold water and/or hot water for such other purposes, other than drinking, lavatory and cleaning purposes, and/or steam, as the case may be. Tenant shall pay for the quantities of cold water and hot water, other than drinking, lavatory and cleaning purposes, shown on such meters, at Landlord's cast thereof, on the rendition of Landlord's bills therefor. 18.04 Landlord, at its expense, and on Tenant's request, shall maintain the original listings on the Building directory of the names of Tenant, and the names of any of their officers and employees, provided that the names so listed shall not take up more than 7.8% of the difference between (i) total number of lines on the Building directory and (ii) ten (10). In the event Tenant shall require additional or substitute listings on the Building directory, Landlord shall, to the extent space for such additional or substitute listing is available, maintain such listings and Tenant shall pay to Landlord an amount equal to Landlord's reasonable charge for such listings. 18.05 Tenant shall have the right to use sixty-six (66) parking spaces as assigned by Landlord in parking areas designated by Landlord in and around the Building. Landlord reserves the right to assign different spaces to Tenant or to designate different parking areas for Tenant's use without any liability to Tenant and Tenant agrees that any change in assignment of spaces or reassignment of parking areas shall not give rise to any claims or offset against Landlord hereunder. 18.06 Landlord reserves the right, without any liability to Tenant, except as otherwise expressly provided in this lease, to stop service of any of the heating, ventilating, Air Conditioning, electric, sanitary, elevator or other Building systems serving the Demised Premises, or the rendition of any of the other services required of Landlord under this lease, whenever and for so long as may be necessary, by reason of accidents, emergencies, strikes or the making of repairs or changes which Landlord is required by this lease or by law to make or in goad faith deems necessary, by reason of difficulty in securing proper supplies of fuel, steam, water, electricity, labor or supplies, or by reason of any "other cause beyond Landlord's reasonable control (hereinafter collectively referred to as Landlords delay"). Landlord shall use reasonable diligence to restore the heating, ventilating, Air Conditioning, electric, sanitary, elevator, or other building systems serving the Demised Premises or other service required to be provided by Landlord as soon as reasonably practicable after the abatement of any Landlord's delay in such a manner as to minimize inconvenience, annoyance, interruption or injury to Tenant's business. ARTICLE 19 Access, Changes In Building Facilities, Name 19.01 All except the inside surfaces of all walls, windows and doors bounding the Demised Premises (including exterior Building walls, core corridor walls and doors and any core corridor entrance) and any space in or adjacent to the Demised Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or other Building facilities, and the use thereof, as well as access thereto through the Demised Premises for the purpose of operation, maintenance, decoration and repair, are reserved to Landlord. 19.02 Tenant shall permit Landlord to install, use, replace and maintain pipes, ducts and conduits within the demising walls, bearing columns and ceilings of the Demised Premises. 19.03 Landlord or Landlord's agent shall have the right, upon request (except in emergency under Clause (ii) hereof) to enter and/or pass through the Demised Premises or any part thereof, at reasonable times during reasonable hours, (i) to examine the Demised Premises and to show them to the fee owners, lessors of superior leases, holders of superior mortgages, or prospective purchasers, mortgagees or lessees of the Building as an entirety, and (ii) -30- for the purpose of making such repairs or changes in or to the Demised Premises or in or its facilities, as may be provided for by this lease or as may be mutually agreed upon by the parties or as Landlord may be required to make by law or in order to repair and maintain said structure or its fixtures or facilities. Landlord shall be allowed to take all materials into and upon the Demised Premises that may be required for such repairs, changes, repainting or maintenance, without liability to Tenant, but Landlord shall not unreasonably interfere with Tenant's use of the Demised Premises. Landlord shall also have the right to enter on and/or pass through the Demised Premises, or any part thereof, at such times as such entry shall be required by circumstances of emergency affecting the Demised Premises or said structure. 19.04 During the period of twelve (12) months prior to the Expiration Date Landlord may exhibit the Demised Premises to prospective tenants. 19.05 Landlord reserves the right, at any time, without incurring any liability to Tenant therefor, to make such changes in or to the Building and the fixtures and equipment thereof, as well as in or to the garage and street entrances, public spaces, parking spaces, plazas, common areas, halls, passages, elevators, escalators and stairways thereof, as it may deem necessary or desirable, provided that Tenant's access to the Building or Demised Premises shall not be materially impaired. Landlord agrees that when making such changes, it shall use reasonable efforts to minimize inconvenience, annoyance, interruption or injury to Tenant's business. 19.06 Landlord may adopt any name for the Building. Landlord reserves the right to change the name or address of the Building at any time. 19.07 For the purposes of Article 19, the term "Landlord" shall include lessors of leases and the holders of mortgages to which this lease is subject and subordinate as provided in Article 7. ARTICLE 20 Notice Of Accidents 20.01 Tenant shall give notice to Landlord, promptly after Tenant learns thereof, of (i) any accident in or about the Demised Premises for which Landlord might be liable, (ii) all fires in the Demised Premises, (iii) all damages to or defects in the Demised Premises, including the fixtures, equipment and appurtenances thereof, for the repair of which Landlord might be responsible, and (iv) all damage to or defects in any parts or appurtenances of the Building's sanitary, electrical, heating, ventilating, Air Conditioning, elevator and other systems located in or passing through the Demised Premises or any part thereof. ARTICLE 21 Non-Liability And Indemnification 21.01 Neither Landlord nor any agent or employee of Landlord shall be liable to Tenant for any injury or damage to Tenant or to any other person or for any damage to, or loss (by theft or otherwise) of, any property of Tenant or of any other person, irrespective of the cause of such injury, damage or loss, unless caused by or due to the negligence of Landlord, its agents or employees occurring within the scope of their respective employments without negligence on the part of Tenant, it being understood that no property, other than such as might normally be brought upon or kept in the Demised Premises as an incident to the reasonable use of the Demised Premises for the purpose herein permitted, will be brought upon or be kept in the Demised Premises. 21.02 Tenant shall indemnify and save harmless Landlord and its agents against and from (a) any and all claims (i) arising from (x) the conduct or management of the Demised Premises or of any business therein, or (y) any work or thing whatsoever done, or any condition created (other than by Landlord for Landlord's or Tenant's account) in or about the Demised Premises during the term of this lease or during the period of time, if any, prior to the Commencement Date that Tenant may have been given access to the Demised Premises, or (ii) arising from any -31- negligent or otherwise wrongful act or omission of Tenant or any of its subtenants or licensees or its or their employees, agents or contractors, and (b) all costs, expenses and liabilities incurred in or in connection with each such claim or action or proceeding brought thereon. In case any action or proceeding be brought against Landlord by reason of any such claim, Tenant, upon notice from Landlord, shall resist and defend such action or proceeding. 21.03 Except as otherwise expressly provided in this lease, this lease and the obligations of Tenant hereunder shall be in no wise affected, impaired or excused because Landlord is unable to fulfill, or is delayed in fulfilling, any of its obligations under this lease by reason of strike, other labor trouble, governmental preemption or priorities or other controls in connection with a national or other public emergency or shortages of fuel, supplies or labor resulting therefrom, acts of Cod or other like cause beyond Landlord's reasonable control (collectively "unavoidable delays"). Landlord agrees to use reasonable diligence to fulfill any of such obligations as soon as reasonably practicable after the abatement of the relevant unavoidable delay. ARTICLE 22 Destruction Or Damage 22.01 If the Building or the Demised Premises shall be partially or totally damaged or destroyed by fire or other cause, then, whether or not the damage or destruction shall have resulted from the fault or neglect of Tenant, or its employees, agents or visitors (and if this lease shall not have been terminated as in this Article hereinafter provided), Landlord shall repair the damage and restore and rebuild the Building and/or the Demised Premises, at its expense, with reasonable dispatch after notice to it of the damage or destruction; provided, however, that Landlord shall not be required to repair or replace any of Tenant's Property nor to restore any Tenant's Work. 22.02 If the Building or the Demised Premises shall be partially damaged or partially destroyed by fire or other cause, the rents payable hereunder shall be abated to the extent that the Demised Premises shall have been rendered untenantable and for, the period from the date of such damage or destruction to the date the damage shall be repaired or restored. If the Demised Premises or a major part thereof shall be totally (which shall be deemed to include substantially totally) damaged or destroyed or rendered completely (which shall be deemed to include substantially completely) untenantable on account of fire or other cause, the rents shall abate as of the date of the damage or destruction and until Landlord shall repair, restore and rebuild the Building and the Demised Premises, provided, however, that should Tenant reoccupy a portion of the Demised Premises during the period the restoration work is taking place and prior to the date that the same are made completely tenantable, rents allocable to such portion shall be payable by Tenant from the date of such occupancy. 22.03 If the Building or the Demised Premises shall be totally damaged or destroyed by fire or other cause, or if the Building shall be so damaged or destroyed by fire or other cause (whether or not the Demised Premises are damaged or destroyed) as to require a reasonably estimated expenditure of more than 40% of the full insurable value of the Building immediately prior to the casualty, then in either such case Landlord may terminate this lease by giving Tenant notice to such effect within one hundred eighty (180) days after the date of the casualty. In case of any damage or destruction mentioned in this Article Tenant may terminate this lease, by notice to Landlord, if (i) within thirty (30) days after Landlord's final insurance adjustment, Landlord either (x) notifies Tenant that it does not intend to repair and restore same, or (y) notifies Tenant that Landlord has reasonably and in good faith determined that the required repairs or restoration are not capable of being completed in less than twelve (12) months using due diligence, or (ii) Landlord has not completed the making of the required repairs and restored and rebuilt the Building and the Demised Premises within twelve (12) months from the date of such damage or destruction, or within such period after such date (not exceeding six months) as shall equal the aggregate period Landlord may have been delayed in doing so by adjustment of insurance, labor trouble, governmental controls, act of Cod, or any other cause beyond Landlord's reasonable control. 22.04 No damages, compensation or claim shall be payable by Landlord for inconvenience, loss of business or annoyance arising from any repair or restoration of any portion of the Demised Premises or of the -32- Building pursuant to this Article. Landlord shall use its best efforts to effect such repair or restoration promptly and in such manner as to not unreasonably interfere with Tenant's use and occupancy. 22.05 Notwithstanding any of the foregoing provisions of this Article, if Landlord or the lessor of any superior lease or the holder of any superior mortgage shall be unable to collect all of the insurance proceeds (including rent insurance proceeds) applicable to damage or destruction of the Demised Premises or the Building by fire or other cause, by reason of some action or inaction on the part of Tenant or any of its employees, agents or contractors, which constitutes a breach of any of Tenant's obligations under this lease, then, without prejudice to any other remedies which may be available against Tenant, there shall be no abatement of Tenant's rents, but the total amount of such rents not abated (which would otherwise have been abated) shall not exceed the amount of the uncollected insurance proceeds. 22.06 Landlord will not carry insurance of any kind on Tenant's Property or Tenant's Work, and, except as provided by law or by reason of its fault or its breach of any of its obligations hereunder, shall not be obligated to repair any damage thereto or replace the same. 22.07 The provisions of this Article shall be considered an express agreement governing any case of damage or destruction of the Demised Premises by fire or other casualty, and any provision, law or statute of the State of New Jersey, providing for such a contingency in the absence of an express agreement, now or hereafter in force, shall have no application in such case. ARTICLE 23 Eminent Domain 23.01 If the whole of the Building shall be lawfully taken by condemnation or in any other manner for any public or quasi-public use or purpose, this lease and the term and estate hereby granted shall forthwith terminate as of the date of vesting of title in such taking (which date is hereinafter also referred to as the "date of the taking"), and the rents shall be prorated and adjusted as of such date. 23.02 If only a part of the Building shall be so taken, this lease shall be unaffected by such taking, except that Tenant may elect to terminate this lease in the event of a partial taking, if the remaining area of the Demised Premises shall not be reasonably sufficient for Tenant to continue feasible operation of its business. Tenant shall give notice of such election to Landlord not later than thirty (30) days after (i) notice of such taking is given by Landlord to Tenant, or (ii) the date of such taking, whichever occurs sooner. Upon the giving of such notice by Tenant this lease shall terminate on the date of such taking and the rents shall be prorated as of such termination date. Upon such partial taking and this lease continuing in force as to any part of the Demised Premises, the rents apportioned to the part taken shall be prorated and adjusted as of the date of taking and from such date the fixed rent for the Demised Premises and additional rent shall be payable pursuant to Article 5 according to the rentable area remaining. 23.03 Landlord shall be entitled to receive the entire award in any proceeding with respect to any taking provided for in this Article without deduction therefrom for any estate vested in Tenant by this lease and Tenant shall receive no part of such award, except as hereinafter expressly provided in this Article. Tenant hereby expressly assigns to Landlord all of its right, title and interest in or to every such award. Notwithstanding anything herein to the contrary, Tenant may, at its sole cost and expense, make a claim with the condemning authority for (i) Tenant's moving expenses, (ii) the value of Tenant's fixtures or Tenant's Changes which do not become part of the Building or property of the Landlord and (iii) the value of Tenant's Work which does not become part of the Building or the property of Landlord, the original cost of which is in excess of $272,772.00, provided, however, that in any of such events, Landlord's award is not thereby reduced or otherwise adversely affected. 23.04 If the temporary use or occupancy of all or any part of the Demised Premises shall be lawfully taken by condemnation or in any other manner for any public or quasi-public use or purpose during the term of this lease, Tenant shall be entitled, except as hereinafter set forth, to receive that portion of the award for such taking -33- which represents compensation for the use and occupancy of the Demised Premises and, if so awarded, for the taking of Tenant's Property and for moving expenses, and Landlord shall be entitled to receive that portion which represents reimbursement for the cost of restoration of the Demised Premises. This lease shall be and remain unaffected by such taking and Tenant shall continue responsible for all of its obligations hereunder insofar as such obligations are not affected by such taking and shall continue to pay in full the fixed rent and additional rent when due. If the period of temporary use or occupancy shall extend beyond the Expiration Date, that part of the award which represents compensation for the use or occupancy of the Demised Premises (or a part thereof) shall be divided between Landlord and Tenant so that Tenant shall receive so much thereof as represents the period prior to the Expiration Date and Landlord shall receive so much thereof as represents the period subsequent to the Expiration Date. All moneys received by Tenant as, or as part of, an award for temporary use and occupancy for a period beyond the date to which the rents hereunder have been paid by Tenant shall be received, held and applied by Tenant as a trust fund for payment of the rents falling due hereunder. in the event of a temporary taking during the tenth (lOth) year of the term of this lease, Tenant shall have the right ("Tenant's Condemnation Termination Right") to terminate this lease provided the temporary taking shall affect all or a substantial part of the Demised Premises by sending written notice thereof (the "Condemnation Termination Notice") to Landlord by certified mail, return receipt requested on or before the tenth (10th) day after Tenant receives notice of such temporary taking. If Tenant shall send the Condemnation Termination Notice to Landlord within the time and in the manner hereinbefore provided, then the term of this lease shall end and expire on the later date to occur of (a) the effective date of such temporary taking, or (b) ten (10) days after the Condemnation Termination Notice as if such day were the Expiration Date and Tenant shall thereupon assign all of its right, title and interest in and to any portion of the award to which Tenant might otherwise be entitled. If Tenant shall fail to send the Condemnation Termination Notice within the time and in the manner hereinbefore provided, then Tenant's Condemnation Termination Right shall expire and Tenant shall have no further right to terminate this lease. 23.05 In the event of any taking of less than the whole of the Building which does not result in a termination of this lease, or in the event of a taking for a temporary use or occupancy of all or any part of the Demised Premises which does not extend beyond the Expiration Date, Landlord, at its expense, and to the extent any award or awards shall be sufficient for the purpose, shall proceed with reasonable diligence to repair, alter and restore the remaining parts of the Building and the Demised Premises to substantially a Building standard condition to the extent that the same may be feasible and so as to constitute a complete and tenantable Building and Demised Premises. 23.06 Should any part of the Demised Premises be taken to effect compliance with any law or requirement of public authority other than in the manner hereinabove provided in this Article, then (i) if such compliance is the obligation of Tenant under this lease, Tenant shall not be entitled to any diminution or abatement of rent or other compensation from Landlord therefor, but (ii) if such compliance is the obligation of Landlord under this lease, the fixed rent hereunder shall be reduced and additional rents under Article 5 shall be adjusted in the same manner as is provided in Section 23.02 according to the reduction in rentable area of the Demised Premises resulting from such taking. 23.07 Any dispute which may arise between the parties with respect to the meaning or application of any of the provisions of this Article shall be determined by arbitration in the manner provided in Article 34. ARTICLE 24 Surrender 24.01 On the last day of the term of this lease, or upon any earlier termination of this lease, or upon any re-entry by Landlord upon the Demised Premises, Tenant shall quit and surrender the Demised Premises to Landlord in good order, condition and repair, except for ordinary wear and tear (i.e. superficial marks on the partitions, holes caused by nails or bolts that can be repaired by patching and repainting, and similar ordinary deterioration for executive and general office use) and Tenant shall remove all of Tenants Property therefrom except free standing partitions (which may be removed or left in the Demised Premises at Tenant's option) and as otherwise expressly provided in this lease and shall restore the Demised Premises wherever such removal results in damage thereto. -34- ARTICLE 25 Conditions Of Limitation 25.01 To the extent permitted by applicable law this lease and the term and estate hereby granted are subject to the limitation that whenever Tenant shall make an assignment of the property of Tenant for the benefit of creditors, or shall file a voluntary petition under any bankruptcy or insolvency law, or an involuntary petition alleging an act of bankruptcy or insolvency shall be filed against Tenant under any bankruptcy or insolvency law, or whenever a petition shall be filed or against Tenant under the reorganization provisions of the United States Bankruptcy Act or under the provisions of any law of like import, or whenever a petition shall be filed by Tenant under the arrangement provisions of the United States Bankruptcy Act or under the provisions of any law of like import, or whenever a permanent receiver of Tenant or of or for the property of Tenant shall be appointed, then, Landlord, (a) if such event occurs with the acquiescence of Tenant, at any time after receipt of notice of the occurrence of any such event, or (b) if such event occurs without the acquiescence of Tenant, at any time after the event continues for one hundred twenty (120) days, Landlord may give Tenant a notice of intention to end the term of this lease at the expiration of five (5) days from the date of service of such notice of intention, and upon the expiration of said five (5) day period this lease and the term and estate hereby granted, whether or not the term shall theretofore have commenced, shall terminate with the same effect as if that day were the Expiration Date, but Tenant shall remain liable for damages as provided in Article 27. 25.02 This lease and the term and estate hereby granted are subject to the further limitation that: (a) whenever Tenant shall default in the payment of any installment of fixed rent, or in the payment of any additional rent or any other charge payable by Tenant to Landlord, on any day upon which the same ought to be paid, and such default shall continue for three (3) business days after Landlord shall have given Tenant a notice specifying such default; or (b) whenever Tenant shall do or permit anything to be done, whether by action or inaction, contrary to any of Tenant's obligations hereunder, and if such situation shall continue and shall not be remedied by Tenant within thirty (30) days after Landlord shall have given to Tenant a notice specifying the same, or, in the case of a happening or default which cannot with due diligence be cured within a period of thirty (30) days and the continuance of which for the period required for cure will not subject Landlord to the risk of criminal liability (as more particularly described in Section 10.02) or termination of any superior lease or foreclosure of any superior mortgage, if Tenant shall not, (i) within said thirty (30) day period advise Landlord of Tenant's intention to duly institute all steps necessary to remedy such situation, (ii) duly institute within said thirty (30) day period, and thereafter diligently prosecute to completion all steps necessary to remedy the same and (iii) complete such remedy within such time after the date of the giving of said notice of Landlord as shall reasonably be necessary; or (c) whenever any event shall occur or any contingency shall arise whereby this lease or the estate hereby granted or the unexpired balance of the term hereof would, by operation of law or otherwise, devolve upon or pass to any person, firm or corporation other than Tenant, except as expressly permitted by Article 9; or (d) whenever Tenant shall abandon the Demised Premises (unless as a result of a casualty), or (e) when Tenant shall be in default in the observance or performance of its obligations under any other lease in the Building, then in any of said cases set forth in the foregoing Subsections (a), (5), (c) (d) and (e), Landlord may give to Tenant a notice of intention to end the term of this lease at the expiration of five (5) days from the date of the service of such notice of intention, and upon the expiration of said five (5) days this lease and the term and estate hereby granted, whether or not the term shall theretofore have commenced, shall terminate with the same effect as if that day were the Expiration Date, but Tenant shall remain liable for damages as provided in Article 27. -35- ARTICLE 26 Re-Entry By Landlord 26.01 If Tenant shall default in the payment of any installment of fixed rent, or of any additional rent, on any date upon which the same ought to be paid, and if such default shall continue for three (3) business days after Landlord shall have given to Tenant a notice specifying such default, or if this lease shall expire as in Article 25 provided, Landlord or Landlord's agents and employees may immediately or at any time thereafter re-enter the Demised Premises, or any part thereof, in the name of the whole, either by summary dispossess proceedings or by any suitable action or proceeding at law, or by force or otherwise, without being liable to indictment, prosecution or damages therefor, and may repossess the same, and may remove any persons therefrom, to the end that Landlord may have, hold and enjoy the Demised Premises again as and of its first estate and interest therein. The word re-enter, as herein used, is not restricted to its technical legal meaning. In the event of any termination of this lease under the provisions of Article 25 or if Landlord shall re-enter the Demised Premises under the provisions of this Article or in the event of the termination of this lease, or of re-entry, by or under any summary dispossess or other proceeding or action or any provision of law by reason of default hereunder on the part of Tenant, Tenant shall thereupon pay to Landlord the fixed rent and additional rent payable by Tenant to Landlord up to the time of such termination of this lease, or of such recovery of possession of the Demised Premises by Landlord, as the case may be, and shall also pay to Landlord damages as provided in Article 27. 26.02 In the event of a breach or threatened breach by Tenant of any of its obligations under this lease, Landlord shall also have the right of injunction. The special remedies to which Landlord may resort hereunder are cumulative and are not intended to be exclusive of any other remedies or means of redress to which Landlord may lawfully be entitled at any time and Landlord may invoke any remedy allowed at law or in equity as if specific remedies were not provided for herein. 26.03 If this lease shall terminate under the provisions of Article 25, or if Landlord shall re-enter the Demised Premises under the provisions of this Article, or in the event of the termination of this lease, or of re-entry, by or under any summary dispossess or other proceeding or action or any provision of law by reason of default hereunder on the part of Tenant, Landlord shall be entitled to retain all moneys, if any, paid by Tenant to Landlord, whether as advance rent, security or otherwise, but such moneys shall be credited by Landlord against any fixed rent or additional rent due from Tenant at the time of such termination or re-entry or, at Landlord's option, against any damages payable by Tenant under Article 27 or pursuant to law. ARTICLE 27 Damages 27.01 If this lease is terminated under the provisions of Article 25, or if Landlord shall re-enter the Demised Premises under the provisions of Article 26, or in the event of the termination of this lease, or of re-entry, by or under any summary dispossess or other proceeding or action or any provision of law by reason of default hereunder on the part of Tenant, Tenant shall pay to Landlord as damages, at the election of Landlord, either: (a) a sum which at the time of such termination of this lease or at the time of any such re-entry by Landlord, as the case may be, represents the then value of the excess, if any, of: (1) the aggregate of the fixed rent and the additional rent payable hereunder which would have been payable by Tenant (conclusively presuming the additional rent to be the same as was payable for the year immediately preceding such termination) for the period commencing with such earlier termination of this lease or the date of any such re-entry, as the case may be, and ending with the Expiration Date, had this lease not so terminated or had Landlord not so re-entered the Demised Premises; over (2) the aggregate rental value of the Demised Premises for the same period; or -36- (b) sums equal to the fixed rent and the additional rent (as above presumed) payable hereunder which would have been payable by Tenant had this lease not so terminated, or had Landlord not so re-entered the Demised Premises, payable upon the due dates therefor specified herein following such termination or such re-entry and until the Expiration Date, provided, however, that if Landlord shall relet the Demised Premises during said period, Landlord shall credit Tenant with the net rents received by Landlord from such reletting, such net rents to be determined by first deducting from the gross rents as and when received by Landlord from such reletting the expenses incurred or paid by Landlord in terminating this lease or in re-entering the Demised Premises and in securing possession thereof, as well as the expenses of reletting, including altering and preparing the Demised Premises for new tenants, brokers' commissions, and all other expenses properly chargeable against the Demised Premises and the rental therefrom; it being understood that any such reletting may be for a period shorter or longer than the remaining term of this lease; but in no event shall Tenant be entitled to receive any excess of such net rents over the sums payable by Tenant to Landlord hereunder, nor shall Tenant be entitled in any suit for the collection of damages pursuant to this Subsection to a credit in respect of any net rents from a reletting, except to the extent that such net rents are actually received by Landlord. If the Demised Premises or any part thereof should be relet in combination with other space, then proper apportionment on a square foot basis (for equivalent space) shall be made of the rent received from such reletting and of the expenses of reletting. If the Demised Premises or any part thereof be relet by Landlord for the unexpired portion of the term of this lease, or any part thereof, before presentation of proof of such damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall, prima facie, be the fair and reasonable rental value for the Demised Premises, or part thereof, so relet during the term of the reletting. In the event that (i) Landlord shall terminate this lease or re-enter the Demised Premises as aforesaid and (ii) Landlord elects to collect damages as provided in Subsection (b) of this Section 27.01, then Landlord shall use reasonable efforts to relet the whole or any part or parts of the Demised Premises from time to time, either in the name of Landlord or otherwise, to such tenant or tenants, for such term or terms ending before, on or after the Expiration Date, at such rental or rentals and upon such other conditions, which may include concessions and free rent periods, as Landlord, in its sole discretion, may determine; provided, however, that Landlord shall have no obligation whatsoever to relet the Demised Premises or any part thereof prior to the letting of any other space in the Building or space in other Buildings owned by Landlord in Bergen County, New Jersey, and shall in no event be liable for failure to relet the Demised Premises or any part thereof, or, in the event of any such reletting, for failure to collect any rent due upon any such reletting, and no such failure shall operate to relieve Tenant of any liability under this Lease or otherwise affect any such liability, and Landlord, at Landlord's option, may make such repairs, replacements, alterations, additions, improvements, decorations and other physical changes in and to the Demised Premises and pay such brokerage commissions and legal fees as Landlord, in its sole discretion, considers advisable or necessary in connection with any such reletting or proposed reletting, without relieving Tenant of any liability under this Lease or otherwise affecting any liability. 27.02 Suit or suits for the recovery of such damages, or any installments thereof, may be brought by Landlord from time to time at its election, and nothing contained herein shall be deemed to require Landlord to postpone suit until the date when the term of this lease would have expired if it had not been so terminated under the provisions of Article 25, or under any provision of law, or had Landlord not re-entered the Demised Premises. Nothing herein contained shall be construed to limit or preclude recovery by Landlord against Tenant of any sums or damages to which, in addition to the damages particularly provided above, Landlord may lawfully be entitled by reason of any default hereunder on the part of Tenant. Nothing herein contained shall be construed to limit or prejudice the right of Landlord to prove for and obtain as liquidated damages by reason of the termination of this lease or re-entry on the Demised Premises for the default of Tenant under this lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved whether or not such amount be greater, equal to, or less than any of the sums referred to in Section 27.01. ARTICLE 28 Waiver -37- 28.01 Tenant, for Tenant, and on behalf of any and all persons claiming through or under Tenant, including creditors of all kinds, does hereby waive and surrender all right and privilege which they or any of them might have under or by reason of any present or future Law, to redeem the Demised Premises or to have a continuance of this lease for the term hereby demised after being dispossessed or ejected therefrom by process of law or under the terms of this lease or after the termination of this lease as herein provided. 28.02 In the event that Tenant is in arrears in payment of fixed rent or additional rent hereunder after notice and the expiration of any applicable cure period, then (i) Tenant waives Tenant's right, if any, to thereafter designate the items against which any payments made by Tenant are to be credited, and (ii) Tenant agrees that Landlord may apply any payments made by Tenant to any items it sees fit, irrespective of and notwithstanding any designation or request by Tenant as to the items against which any such payments shall be credited. 28.03 Landlord and Tenant hereby waive trial by jury in any action, proceeding or counterclaim brought by either against the other on any matter whatsoever arising out of or in any way connected with this lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Demised Premises, including any claim of injury or damage, or any emergency or other statutory remedy with respect thereto. 28.04 The provisions of Articles 17 and 18 shall be considered expressed agreements governing the services to be furnished by Landlord, and Tenant agrees that any laws and/or requirements of public authorities, now or hereafter in force, shall have no application in connection with any enlargement of Landlord's obligations with respect to such services unless Tenant agrees, in writing, to pay to Landlord, as additional rent, Landlord's reasonable charges for any additional services provided. ARTICLE 29 No Other Waivers Or Modifications 29.01 The failure of either party to insist in any one or more instances upon the strict performance of any one or more of the obligations of this lease, or to exercise any election herein contained, shall not be construed as a waiver or relinquishment for the future of the performance of such one or more obligations of this lease or of the right to exercise such election, but the same shall continue and remain in full force and effect with respect to any subsequent breach, act or omission. No executory agreement hereafter made between Landlord and Tenant shall be effective to change, modify, waive, release, discharge, terminate or effect an abandonment of this lease, in whole or in part, unless such executory agreement is in writing, refers expressly to this lease and is signed by the party against whom enforcement of the change, modification, waiver, release, discharge or termination or effectuation of the abandonment is sought. 29.02 The following specific provisions of this Section shall not be deemed to limit the generality of any of the foregoing provisions of this Article: (a) no agreement to accept a surrender of all or any part of the Demised Premises shall be valid unless in writing and signed by Landlord. The delivery of keys to an employee of Landlord or of its agent shall not operate as a termination of this lease or a surrender of the Demised Premises. If Tenant shall at any time request Landlord to sublet the Demised Premises for Tenant's account, Landlord or its agent is authorized to receive said keys for such purposes without releasing Tenant from any of its obligations under this lease, and Tenant hereby releases Landlord from any liability for loss or damage to any of Tenant's property in connection with such subletting; (b) the receipt by Landlord of rent with knowledge of breach of any obligation of this lease shall not be deemed a waiver of such breach; and (c) no payment by Tenant or receipt by Landlord of a lesser amount than the correct fixed rent or additional rent due hereunder shall be deemed to be other than a payment on account, nor shall any -38- endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance or pursue any other remedy in this lease or at law provided. ARTICLE 30 Curinq Tenant's Defaults, Additional Rent 30.01 (a) if Tenant shall default in the performance of any of Tenant's obligations under this lease, Landlord, without thereby waiving such default, may (but shall not be obligated to) perform the same for the account and at the expense of Tenant, without notice, in a case of emergency, and in any other case, only if such default continues after the expiration of (i) three (3) business days from the date Landlord gives Tenant notice of intention so to do, or (ii) the applicable grace period provided in Section 25.02 or elsewhere in this lease for cure of such default, whichever occurs later; (b) if Tenant is late in making any payment due to Landlord from Tenant under this lease for five (5) or more days, then interest shall become due and owing to Landlord on such payment from the date when it was due computed at the following rates: (i) for an individual or partnership tenant, computed at the maximum legal rate of interest; (ii) for a corporate tenant, computed at the greater of (A) one and 25/100 (1.25%) percent per month or (B) two (2%) percent per annum over the then prime rate of Chase Manhattan Bank, N.A. but in no event in excess of the maximum legal rate of interest chargeable to corporations in the State of New Jersey. 30.02 Bills for any expenses incurred by Landlord in connection with any such performance by it for the account of Tenant, and bills for all cost; expenses and disbursements of every kind and nature whatsoever, including reasonable counsel fees, involved in collecting or endeavoring to collect the fixed rent or additional rent or any part thereof or enforcing or endeavoring to enforce any rights against Tenant, under or in connection with this lease, or pursuant to law, including any such cost, expense and disbursement involved in instituting and prosecuting summary proceedings, as well as bills for any property, material, labor or services provided, furnished, or rendered, by Landlord or at its instance to Tenant, may be sent by Landlord to Tenant monthly, or immediately, at Landlord's option, and, shall be due and payable in accordance with the terms of such bills. 30.03 If Landlord shall default in the performance of any of Landlord's repair obligations under this lease with respect to the Demised Premises (other than the shafts, stacks, pipes, conduits, ducts, electric, heating, ventilating, Air Conditioning, plumbing, elevator or other Building systems or other utilities, or the Building's exterior, common areas or structural elements), Tenant may (but shall not be obligated to), upon giving Landlord thirty (30) days prior written notice of such default stating Tenant's intention to perform such repair, provided that Landlord has failed to commence such repair prior to the expiration of such thirty (30) day period, perform the same for the account and at the expense of Landlord, in the event that Landlord shall fail to commence such repair within such thirty (30) day period and thereafter proceed with same to completion, subject to unavoidable delays, Tenant may make such repair using contractors first approved by Landlord, after completion of which Tenant may request reimbursement from Landlord, provided that Tenant's request be accompanied by paid receipted invoices for all labor and materials furnished in connection with such repair. In the event that Landlord fails to reimburse Tenant for the cost of such repair within thirty (30) days after Tenant's request is made as aforesaid, Tenant's sole remedy shall be to bring a separate action against Landlord for such reimbursement without any right of offset, deduction, abatement or counterclaim under this lease whatsoever. ARTICLE 31 Broker -39- 31.01 Tenant covenants, warrants and represents that there was no broker or finder except Bender & Company, Inc., Cushman and Wakefield, Inc., and Newmark & Co. instrumental in consummating this lease and that no conversations or negotiations were had with any broker or finder except Bender & Company, Inc., Cushman and Wakefield, Inc., and Newmark & Co. concerning the renting of the Demised Premises. Tenant agrees to hold Landlord harmless against any claims for a brokerage, finder or other commission or fee arising out of any conversations or negotiations had by Tenant with any broker or finder except Bender & Company, Inc., Cushman and Wakefield, Inc., and Newmark & Co. ARTICLE 32 Notices 32.01 Any notice, statement, demand or other communication required or permitted to be given, rendered or made by either party to the other, pursuant to this lease or pursuant to any applicable law or requirement of public authority, shall be in writing (whether or not so stated elsewhere in this lease) and shall be deemed to have been properly given, rendered or made, if sent by registered or certified mail, return receipt requested, addressed to the other party at the address hereinabove set forth (except that after the Commencement Date, Tenant's address, unless Tenant shall give notice to the contrary, shall be the Building), with copies of any notice, statement, demand or other communication required or permitted to be given, other than ordinary statements and demands for rent and additional rent to (a) in the case of notices given to Landlord, to Dreyer and Traub, 101 Park Avenue, New York, New York 10178, Attn: Robert J. Ivanhoe, Esq. and (b) in the case of notices given to Tenant, to Weitzner, Levine, Hamburg and Walzer, 230 Park Avenue, New York, New York, Attn: Martin Walzer, Esq., and shall be deemed to have been given, rendered or made on the day so mailed, unless mailed outside of the State of New Jersey, in which case it shall be deemed to have been given, rendered or made on the expiration of the normal period of time for delivery of mail from the post office of origin to the post office of destination. Either party may, by notice as aforesaid, designate a different address or addresses for notices, statements, demand or other communications intended for it. ARTICLE 33 Estoppel Certificate, Memorandum 33.01 Each party agrees, at any time and from time to time, as requested by the other party, upon not less than ten (10) days' prior notice, to execute and deliver to the other a statement certifying (a) that this lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications) and whether any options granted to Tenant pursuant to the provisions of this lease have been exercised, (b) certifying the dates to which the fixed rent and additional rent have been paid and the amounts thereof, and stating whether or not, to the best knowledge of the signer, the other party is in default in performance of any of its obligations under this lease, and, if so, specifying each such default of which the signer may have knowledge, it being intended that any such statement delivered pursuant hereto may be relied upon by others with whom the party requesting which certificate may be dealing. Additionally, Tenant's Statement shall contain such other information as shall be required by the holder or proposed holder of any superior mortgage or the lessor or proposed lessor under any superior lease. 33.02 Tenant agrees that it shall not record this lease or a copy hereof. At the request of either party, Landlord and Tenant shall promptly execute, acknowledge and deliver a memorandum with respect to this lease sufficient for recording. Such memorandum shall not in any circumstances be deemed to change or otherwise affect any of the obligations or provisions of this lease. ARTICLE 34 Arbitration -40- 34.01 Either party may request arbitration of any matter in dispute wherein arbitration is expressly provided in this lease as the appropriate remedy. The party requesting arbitration shall do so by giving notice to that effect to the other party, and both parties shall promptly thereafter jointly apply to the American Arbitration Association (or any organization successor thereto) in the Borough of Fort Lee, County of Bergen for the appointment of a single arbitrator. 34.02 The arbitration shall be conducted in accordance with the then prevailing rules of the American Arbitration Association (or any organization successor thereto) in the Town of Fort Lee, County of Bergen. In rendering such decision and award, the arbitrator shall not add to, subtract from or otherwise modify the provisions of this lease. 34.03 If for any reason whatsoever a written decision and award of the arbitrator shall not be rendered within sixty (60) days after the appointment of such arbitrator, then at any time thereafter before such decision and award shall have been rendered either party may apply to the Supreme Court of the State of New Jersey or to any other court having jurisdiction and exercising the functions similar to those now exercised by such court, by action, proceeding or otherwise (but not by a new arbitration proceeding) as may be proper to determine the question in dispute consistently with the provisions of this lease. 34.04 All the expenses of the arbitration shall be borne by the parties equally. ARTICLE 35 No Other Representation; Construction, Governing Law, Consents 35.01 Tenant expressly acknowledges and agrees that Landlord has not made and is not making, and Tenant, in executing and delivering this lease, is not relying upon, any warranties, representations, promises or statements, except to the extent that the same are expressly set forth in this lease or in any other written agreement which may be made between the parties concurrently with the execution and delivery of this lease and shall expressly refer to this lease. This lease and said other written agreement(s) made concurrently herewith are hereinafter referred to as the "lease documents". It is understood and agreed that all understandings and agreements heretofore had between the parties are merged in the lease documents, which alone fully and completely express their agreements and that the same are entered into after full investigation, neither party relying upon any statement or representation not embodied in the lease documents, made by the other. 35.02 If any of the provisions of this lease, or the application thereof to any person or circumstances, shall, to any extent, be invalid or unenforceable, the remainder of this lease, or the application of such provision or provisions to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this lease shall be valid and enforceable to the fullest extent permitted by law. 35.03 This lease shall be governed in all respects by the laws of the State of New Jersey. 35.04 Wherever in this lease it is specifically provided that Landlord's consent or approval shall not be unreasonably withheld, such consent or approval shall not be unreasonably delayed. If Landlord shall refuse such consent or approval, Tenant in no event shall be entitled to make, nor shall Tenant make, any claim, and Tenant hereby waives any claim, for money damages (nor shall Tenant claim any money damages by way of set-off, counterclaim or defense) based upon any claim or assertion by Tenant that Landlord unreasonably withheld or unreasonably delayed its consent or approval. Tenant's sole remedy shall be an action or proceeding to enforce any such provision, for specific performance, injunction or declaratory judgment. Article 36 Parties Bound -41- 36.01 The obligations of this lease shall bind and benefit the successors and assigns of the parties with the same effect as if mentioned in each instance where a party is named or referred to, except that no violation of the provisions of Article 9 shall operate to vest any rights in any successor or assignee of Tenant and that the provisions of this Article shall not be construed as modifying the conditions of limitation contained in Article 25. However, the obligations of Landlord under this lease shall not be binding upon Landlord herein named with respect to any period subsequent to the transfer of its interest in the Building as owner or lessee thereof and in event of such transfer said obligations shall thereafter be binding upon each transferee of the interest of Landlord herein named as such owner or lessee of the Building, but only with respect to the period ending with a subsequent transfer within the meaning of this Article. 36.02 If Landlord shall be an individual, joint venture, tenancy in common, copartnership, unincorporated association, or other unincorporated aggregate of individuals and/or entities or a corporation, Tenant shall look only to such Landlord's estate and property in the Building (or the proceeds thereof) and, where expressly so provided in this lease, to offset against the rents payable under this lease, for the satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default by Landlord hereunder, and no other property or assets of such Landlord or any partner, member, officer or director thereof, disclosed or undisclosed shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this lease,. the relationship of Landlord and Tenant hereunder or Tenant's use or occupancy of the Demised Premises. ARTICLE 37 Certain Definitions And Construction 37.01 For the purposes of this lease and all agreements supplemental to this lease, unless the context otherwise requires the definitions set forth in Exhibit E annexed hereto shall be utilized. 37.02 The various terms which are italicized and defined in other Articles of this lease or are defined in Exhibits annexed hereto, shall have the meanings specified in such other Articles and such Exhibits for all purposes of this lease and all agreements supplemental thereto, unless the context shall otherwise require. ARTICLE 38 Adjacent Excavation And Construction-Shorinq 38.01 If an excavation or other substructure work shall be made upon land adjacent to the Demised Premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the Demised Premises for the purpose of doing such work as shall be necessary to preserve the wall of or the Building from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Landlord, or diminution or abatement of rent. ARTICLE 39 Supplemental Air Conditioning Systems 39.01 Landlord agrees that Tenant may install, at Tenant's own cost and expense, an additional Air Conditioning system, including a separate water riser and cooling tower (the "Supplemental Air Conditioning System"), to enable Tenant to receive up to an additional twenty (20) tons of Air Conditioning for the Demised Premises subject to and in accordance with the provisions of this Article 39. The costs of installation, maintenance and operation of the Supplemental Air Conditioning System shall be borne by Tenant. -42- 39.02 Tenant may, at its sole cost and expense, connect its Supplemental Air Conditioning System to Landlord's condenser water riser or the separate water riser attached to Tenant's separate cooling tower, as the case may be, at a location designated by Landlord, which connection shall be subject to Landlord's prior written approval. If Tenant connects to Landlord's condenser water riser, Landlord shall furnish condenser water through its risers for use by Tenant in connection with its Supplemental Air Conditioning System on such days as same is being produced for the operation at the Building's air-conditioning system and available for distribution to tenants, during "regular hours" (that is between the hours of 8:00 a.m. and 6:00 p.m.) of "business days" (which terms are used herein to mean all days except Saturdays, Sundays and holidays observed by the Federal or New York State Government as legal holidays) for Tenant's Supplemental Air Conditioning System and in such event, Tenant covenants and agrees to pay Landlord for its use of condenser water at the rate of twenty cents (20(cent)) (the "Base Rate") per rated ton of cooling capacity of the Air Conditioning system installed by Tenant for every hour of usage thereof as measured by clocks or other devices satisfactory to Landlord and installed by Tenant at Tenant's sole cost and expense. The rate shall be subject to adjustment for increases in the cost to Landlord in connection with the creating and furnishing of condenser water over the costs which exist as of the date hereof. In the event that either (a) a separate water riser and cooling tower is installed and Landlord shall supply condenser water to Tenant's Supplemental Air Conditioning System during the business hours and/or after hours of operation thereof, or (b) Tenant requires condenser water through Landlord's water risers for the after hours operation of Tenant's Air Conditioning system, Landlord shall furnish such condenser water to Tenant and Tenant shall pay Landlord for Tenant's use of condenser water at the rate then charged by Landlord for furnishing condenser water to tenants of the Building, for supplemental Air Conditioning use (including any surcharge then charged by Landlord for the provision of such service after hours not to exceed fifteen (15%) percent of Landlord's Cost) per rated ton of cooling capacity of the Air Conditioning equipment installed by Tenant for every hour of usage thereof, as measured by clocks or other devices satisfactory to Landlord and installed at Tenant's sole cost and expense as a part of the installation of Tenant's Supplemental Air Conditioning System but in no event less than the Base Rate as from time to time adjusted as aforesaid. All payment due under this Section shall be payable by Tenant within ten (10) days after receipt of a demand from Landlord therefor and shall be deemed to constitute additional rent payable under this lease. Tenant may, at its sole cost and expense connect to Landlord's Building waste lines in connection with the operation of the Supplemental Air Conditioning System and the manner of such connection shall be subject to Landlord's prior written approval. All facilities, machinery and equipment relating to the Supplemental Air Conditioning System shall be connected by Tenant and operated by Tenant solely at Tenant's cost and expense. All such facilities, except the cooling tower and condenser water riser, if installed by Tenant, shall be installed by Tenant solely within the Demised Premises. Tenant's Air Conditioning facilities, equipment and machinery shall be water-cooled in design and operation. Tenant's blowers, chilling equipment, fans and other facilities, equipment and machinery used in connection with Tenant's Supplemental Air Conditioning System shall operate on electricity purchased by Tenant in accordance with the provisions of Article 16 of this lease. Prior to installing any facilities, equipment, machinery and ducts in connection with the Supplemental Air Conditioning System or commencing any work in connection therewith, Tenant shall submit to Landlord plans and specifications for the work to be done for Landlord's approval. In performing any work or making any installation in connection with the Supplemental Air Conditioning System after the Commencement Date, Tenant shall comply with and be bound by the provisions of Article 13 of this lease. All facilities; equipment, machinery and ducts installed by Tenant in connection with the Supplemental Air Conditioning System and the connection to Landlord's condenser water and waste lines shall (a) be subject to Landlord's prior written approval which shall not be unreasonably withheld or delayed, (b) comply with Landlord's reasonable requirements as to installation, maintenance and operation, and (c) comply with all other terms, covenants and conditions of this lease applicable thereto. Tenant agrees at all times to cooperate fully with Landlord and to abide by all the regulations and requirements which Landlord may reasonably prescribe for the proper functioning and protection of said facilities. IN WITNESS WHEREOF, Landlord and Tenant have duly executed this lease as of the day and year first above written. -------------------------------- -43- STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of July, 1986, before me personally came ________________________, to me known who, being by me duly sworn, did depose and say that he resides in ____________________________ ; that he is the ____________________ of PHILIPP BROTHERS CHEMICALS, INC., the corporation described in and which executed the foregoing instrument; as TENANT; and that he signed his name thereto by order of the board of directors of said corporation, by like order. ---------------------------- Notary Public -44- EXHIBIT A DESCRIPTION ALL that certain lot, piece or parcel of land, situate, lying and being in the Town of Fort Lee, County of Bergen and State of New Jersey, bounded and described as follows: BEGINNING at a point where the Northeasterly right of way line of Lewis Street (50 feet wide) intersects the Northwesterly right-of-way line of Linwood Avenue (50 feet wide) and running Thence: 1. Along the Northeasterly right-of-way line of Lewis Street, North 51 degrees 22 minutes 11 seconds West, 539.80 feet to a point; Thence 2. Along the Southeasterly right-of-way line of Fletcher Avenue (60 feet wide), North 38 degrees 43 minutes 09 seconds East, 54.43 feet to a point of curvature; Thence 3. Along the Southerly line of Kelby Street (50 feet wide), Northeasterly and Southeasterly on a curve to the right having a radius of 106.82 feet, an arc length of 122.46 feet to a point of curvature; Thence 4. Still along the same, Southeasterly on a curve to the right having a radius of 548.78 feet, an arc length of 232.02 feet to a point of tangency; Thence 5. Still along the same, South 51 degrees 22 minutes 11 seconds East, 206.01 feet to a point of curvature; Thence 6. Southeasterly and Southerly on a curve to the right having a radius of 42.00 feet, an arc length of 66.63 feet to a point of tangency; Thence 7. Along a widened section of Linwood Avenue South 39 degrees 31 minutes 19 seconds West, 7.37 feet to a point; Thence 8. South 51 degrees 22 minutes 11 seconds East, 3.00 feet to a point; Thence 9. Along the widened section of Linwood Avenue, South 37 degrees 13 minutes 46 seconds West, 50.00 feet to a point; Thence 10. South 51 degrees 22 minutes 11 seconds East, 1.00 feet to a point; Thence 11. Along the right of way line of Linwood Avenue (50 feet wide), South 39 degrees 31 minutes 19 seconds West, 100.00 feet to the point or place of Beginning. Reverse to "positive" -45- [GRAPHIC OMITTED] -46- EXHIBIT C WORK LETTER PART A: Tenant's Plan; Specifications and Drawings: 1. On or before the dates listed below, Tenant shall, at its sole cost and expense, prepare and submit to Landlord, for Landlord's approval, the following descriptive information, detailed architectural drawings and specifications and detailed information in connection with mechanical and engineering drawings to be prepared byo Landlord (herein referred to as "Tenant's Plans") for any work to be done by Landlord under Parts B or D hereof in connection with Tenant's layout of the Demised Premises, which Tenant's Plans shall be prepared by an architect or space planner designated by Landlord at Tenant's sole cost and expense: Phase 1: On or before July 25, 1986: Preliminary architectural drawings including: (a) Location, loads and dimensions of telephone equipment rooms. (b) Partition locations and type. (c) Door Locations, size and type, hardware schedule. (d) Reflected ceiling plans. (e) Any structural architectural installations. (f) Cabinet work and any other information affecting other trades. (g) Non-building standard ceiling heights and/or materials, and any other information not specified in Phases 2 and 3 below. Phase 2: On or before July 30, 1986: 1. Detailed information required by Landlord in connection with final mechanical and engineering drawings to be prepared by Landlord including: (a) Total electrical load, including lighting for entire space and location of electrical and telephone outlets, and showing amount and location of areas requiring loads in excess of Building Standard. (b) Air Conditioning loads. (c) specific plumbing requirements, including plans, specifications and sections. 2. Final Architectural working drawings f or the items set forth in Phase 1. Phase 3: On or before August 8, 1986: (a) Decorative plans, including paint schedule, floor coverings and wall coverings. (b) Non-structural architectural detailing. -47- 1. Utilizing the information shown on Tenant's Plans, Landlord shall cause mechanical and structural plans to be prepared at Tenant's sole cost and expense. 2. All plans and specifications for all work to be performed in and to the Demised Premises (including, without limitation, Tenant's Plans) are subject to Landlord's prior written approval, which shall not be unreasonably withheld. Within ten (10) days after notification from Landlord of any objections to Tenant's Plans, Tenant shall submit to Landlord new plans (the "Revised Tenant's Plans") curing Landlord's objections. If Tenant's Plans, the Revised Tenant's Plans or Revisions (as hereinafter defined) require any materials, services, or installations that will result in a delay in construction, Landlord may reject those items of Tenant's Plans, the Revised Tenant's Plans or Revisions which will occasion such delay. Tenant shall pay to Landlord, as additional rent, within five (5) days after submission to Tenant of a statement therefor, the costs incurred by Landlord for review of Tenant's Plans, Revised Tenant's Plans and Revisions. 3. Tenant's Plans and the Revised Tenant's Plans shall comply with and conform to the plans of the Building filed with the Department of Buildings of the Town of Fort Lee, and with all rules, regulations and/or other requirements of any governmental department having jurisdiction over the construction of the Building and/or the Demised Premises. Landlord shall, at Tenant's expense, file all necessary architectural plans, together with any mechanical plans and specifications, in such form (building notice, alteration, or other form) as may be necessary, with the appropriate governmental agencies. Any changes required by any governmental department affecting the construction of the Building and/or the completion of the Demised Premises shall be complied with by Landlord in completing the construction of the Building and/or the completion of the Demised Premises and shall not be deemed to be a violation of Tenant's Plans or the Revised Tenant's Plans or any provisions of this Work Letter. Landlord agrees, that prior to making any changes required by any governmental department to notify Tenant thereof and to provide Tenant with any alternative changes that are acceptable to such governmental department. If such governmental department has given such alternative changes to Landlord, Tenant may designate, within five (5) days after Landlord's notice to Tenant thereof, which alternative that it desires Landlord to utilize for such change. If the governmental department fails to give Landlord alternatives for changes or Tenant fails to notify Landlord which alternative that it desires Landlord to utilize within said five (5) day period, then such changes shall be made by Landlord as required or the alternative selected by Landlord, as the case may be, shall not be deemed a violation of Tenant's Plans, Revised Tenant's Plans or any provisions of this Work Letter and shall be deemed automatically accepted and approved by Tenant and shall, subject to Tenant's prior approval which shall not be unreasonably withheld, provided that Tenant's approval shall be deemed granted if Tenant fails to disapprove such changes within five (5) days after Landlord's notice to Tenant requesting such approval, Tenant's approval shall be deemed given. Additionally, any change in the base Building or any compliance with any rules, regulations and/or other requirements of any governmental agency having jurisdiction necessitated by Tenant's Plans or the Revised Plans (whether such change or compliance is required prior to or during the course or after completion of the work to be performed in the Demised Premises and whether or not Landlord shall have previously approved such Tenant's Plans or the Revised Tenant's Plans) shall be accomplished at Tenant's sole cost and expense. The granting by Landlord of its approval to Tenant's Plans or the Revised Tenant's Plans shall in no manner constitute or be deemed to constitute a judgment or acknowledgment by Landlord as to their legality or compliance with governmental, quasi-governmental or other requirements. 4. Tenant shall have the right to make changes from time to time in Tenant's Plans or the Revised Tenant's Plans (other than changes necessitated by Landlord's objections) by submitting to Landlord revised plans and specifications (herein referred to as the "Revisions"). All Revisions shall be subject to Landlord's prior written approval, which shall not be unreasonably withheld. Upon receipt and approval of any Revisions, Landlord shall submit the Revisions so approved to the contractors or subcontractors performing the trade or trades involved in the Revisions, and, if applicable and as requested by Tenant, obtain and deliver to Tenant "Estimates (as such term is defined in Part D) in connection therewith. The cost of any Revisions shall be borne solely by Tenant and shall be subject to the "Contractors Fee" (as such term is defined in Part D). Landlord shall have the right to disapprove any Revisions that would, in Landlord's reasonable opinion, delay the Commencement Date, unless, in conjunction with submitting the same, Tenant agrees in a writing satisfactory to Landlord to commence to pay the -48- rental reserved under the Lease on the date upon which the Commencement Date would have occurred but for Landlord's performance of the Revisions. 5. Any architect, space planner and engineer that Tenant elects or is required to utilize shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed. 6. All amounts payable by Tenant for work to be done by Landlord pursuant to this Work Letter shall be paid by Tenant within five (5) days after the submission to Tenant of statements, bills or invoices therefore. Such statements, bills or invoices shall be conclusive and binding on Tenant unless Tenant shall notify Landlord within thirty (30) days after its receipt of such statement, bill or invoice that it disputes the correctness thereof, specifying the particular respects in which the statement, bill or invoice is claimed to be incorrect. Pending the resolution of such dispute by agreement between the parties or otherwise, Tenant shall pay all amounts due in accordance with the statement, bill or invoice, but such payment shall be without prejudice to Tenant's right to dispute same. If the dispute shall be resolved in Tenant's favor, Landlord shall, within five (5) days after Tenant's demand pay Tenant the amount of the overpayment, if any, resulting from Tenant's compliance with such statement, bill or invoice. -49- PART B: Landlord shall provide and install the following facilities and materials and complete the following work as part of "Landlord's Work" (as hereinafter defined) in accordance with Tenant's Plans or the Revised Tenant's Plant For purposes of this lease, "Landlord's Work" shall be: 1. Partitions: lA) Interior Office Partitions Furnish and install drywall partitioning with 2-1/2" metal studs and Building Standard gypsum board where designated by Lessee but limited to the lineal footage equal to 50 lineal feet per 1,000 square feet of the Lessee's rentable area as outlined in the Lease. Interior office partitions as hereinafter defined shall extend from floor to underside of ceiling tiles. Any jogs, curves, or angles in any partition is not included. 1B) Demising Wall Partitions Furnish and install drywall partitioning between Lessees, and between Lessee and corridors; with 2-1/2" metal studs and gypsum board. Amount of lineal footage shall be equal to 75 lineal feet of demising wall partitions per 5,000 rentable square feet. These partitions shall extend from floor to underside of slab above. Partitions shall include insulation. 2. Doors: 2A) Interior Doors Furnish and install one (1) Building Standard door and frame complete with latch set for each 40 lineal feet of partition as outlined in Item 1(A). Doors within tenant space to be 3'O" x 7'0" solid wood, stain grade, KD frame. No special undercutting shall be provided. Latchset to be Corbin 863 x410 or equal as selected by Landlord. 2B) Entrance Doors Furnish and install one (1) Building Standard single door and frame including closer and lockset, masterkeyed to Building System for each 10,000 rentable square feet of Tenant's area as outlined in lease. Entrance door to be 3'0" x 9'0" solid core white oak. Lockset to be Corbin (lever type) or equal as selected by Landlord. Closer to be Corbin or equal as selected by Landlord. -50- 3. Painting: a. Interior wall surfaces required to be furnished by Landlord hereunder shall receive one (1) coat of primer and one (1) coat of Building Standard color paint. b. Wood doors required to be furnished by Landlord hereunder will receive one (1) coat of primer and one (1) coat of Building Standard color paint. c. Metal doors required to be furnished by Landlord hereunder not having baked enamel finish shall receive two (2) coats of Building Standard enamel paint over one (1) coat of primer. d. Paint manufacturer to be utilized is Benjamin Moore or equal. 4. Flooring: a. An allowance of $10.00 per square yard will be given to Tenant towards the purchase and installation of carpet and base in areas where VAT is not installed by Landlord, which shall be allowed to Tenant even if Tenant furnishes and installs carpet as provided in Section 4(d) hereof. b. Deleted prior to execution. c. Supply rooms, telephone and equipment rooms, and mailrooms will receive vinyl asbestos tile and base to be selected from Landlord's supplier. An allowance of seventy-five (75) cents per square foot will be given towards this purchase. d. Tenant shall have the right, upon reasonable advance notice to Landlord, to furnish and install all carpet in the Demised Premises as Rejected Tenant's Work was such term is hereinafter defined). 5. Lighting: a. Furnish and install one (1) Building Standard light fixture per 80 rentable square feet. Landlord shall supply and install initial lamps and ballasts, and Tenant will be responsible for the furnishings and installations of any and all additional lamps and ballasts. b. Building Standard light fixture is Keystone #2A440-EXA-GW-SH-277 with energy saving ballast and energy saving lamps. 6. Heating, Ventilating and Air Conditioning: a. Furnish and install Building Standard air conditioning outlets at one (1) diffuser per 200 rentable square feet of enclosed office area. There will be no credits towards additional diffusers if the enclosed office areas are less than 200 square feet. -51- b. Furnish and install Building Standard diffusers at three (3) diffusers per 1,000 rentable square feet open space. c. Building Standard diffusers are 24" x 24" lay-in grills and/or registers connected to a 6" duct. d. If Tenant's equipment (i.e. computers, etc.) requires air conditioning above and beyond Building Standard, said additional air conditioning, including cost of operation as stipulated in the lease) shall be paid for by Tenant as an extra cost. Any special exhaust requirements will also be an extra cost to be paid by Tenant. e. Landlord will provide one (1) smoke exhaust fan per tenant. 7. Electrical: a. Furnish and install one (1) Building Standard duplex receptacle per 125 rentable square feet. The aforesaid outlets are to be located only in the ceiling high partitions at Building Standard mounting heights. The Building proper will contain wires, risers, conduits, feeders and panel equipment necessary to furnish the premises with electrical energy in an amount equal to (i) 2.2 watts per rentable square foot of space for lighting and (ii) 1.8 watts per rentable square foot of space for other electrical consumption. 8. Switches: a. Furnish and install Building Standard switches to service ceiling fixtures as required by the underwriters code at one switch per room. 9. Life Safety System: a. Full floor tenants (occupying floors 7 through 18) will be provided with 132 sprinkler heads per floor, which may be pre-installed. Tenants leasing a partial floor will be provided only with the sprinklers pre-installed in Tenant's space. Revisions to pre-installed sprinkler systems required by any tenant, and any work required to be performed as a result of such revisions, including without limitation, removal, revision and/or reinstallation of any ceiling tiles and/or ceiling grids, shall be at Tenant's expense. 10. Telephone Service: a. The Landlord shall arrange with New Jersey Bell Telephone Company for telephone service within the equipment room in the building core. b. All telephone work and wiring in partitions, floors, and ceilings to be arranged for by Tenant with New Jersey Bell Telephone Company or other qualified installer selected by Tenant. Non-completion of the telephone work will not delay Tenant's acceptance of the demised premises or the payment of rent. All electrical load centers, special wiring, and plywood supplied by Landlord for telephone equipment shall be an extra cost to be paid by Tenant. 11. Window Covering: a. Furnish and install Building Standard horizontal blinds with color as established by Landlord for all exterior windows. No substitutions are permitted. 12. Ceiling: -52- a. Lay-in tile ceilings shall be 24" x 48" exposed T spline. b. Ceiling heights to be 9'O" on office floors. As used in this Work Letter, the term "Building Standard" shall mean such materials as Landlord may elect to use as part of its standard construction substantially throughout the Building. PART C: Substitutions and Credits 1. Tenant may request that Landlord substitute alternate materials, equipment and fixtures for those specified in Part B provided that such substitute items are new and are of a quality at least comparable to those replaced. In addition, Tenant may request that Landlord omit the installation of any item or items not theretofore installed, in which event Landlord shall thereupon be released from any obligation to install the same at any time thereafter. 2. If, upon Tenant's request, Landlord shall utilize materials, or install equipment or fixtures, other than those described in Part B, Tenant shall pay to Landlord, on demand as additional rent under the Lease, an amount equal to the sum of (a) Landlord's Cost (as hereinafter defined) for the substitute item, plus (b) an amount equal to Landlord's cost for its overhead for administration and handling of the substitution, not to exceed fifteen (15%) percent of Landlord's Cost. Notwithstanding such payment by Tenant, the substitute item shall be and remain the property of Landlord and shall not be removed by Tenant either before or after the Expiration Date. 3. In the event that, upon Tenant's request, Landlord shall omit the installation of any item or items described in Part B, whether by reason of substitution or otherwise, Landlord, subject to the further provisions of this paragraph 3, shall credit the amount, if any, allowed to Landlord by Landlord's materialmen for returning such item or items against any amounts due to Landlord in connection with the substitution of other item or items therefor or in connection with Landlord's installation of any additional item or items of like kind pursuant to the terms of Part D and such credits shall be allowed only after such amounts due to Landlord have been determined. In no event, however, shall Landlord (a) pay any cash credit to Tenant, (b) allow a credit to Tenant against fixed or additional rent (except as otherwise set forth in this paragraph 3), (c) allow a credit to Tenant against amounts due to Landlord for the installation of any substitute or additional item or items of a kind, nature, or character different from that omitted, (d) allow a credit to Tenant for such omitted item in an amount to exceed the amount allowed or credited to Landlord by the materialmen furnishing the omitted item upon a return or non- utilization thereof or (e) allow a credit to Tenant of any kind for partitioning omitted or otherwise not installed. 4. For purposes of this Work Letter, "Landlord's Cost" shall mean amounts charged by Landlord's contractor; subcontractors and materialmen for furnishing and installing any item or performing any work, including, without limitation, labor costs and costs for general conditions in connection therewith (which general conditions shall include, without limitation, rubbish removal, hoisting and other items generally included within the term "general conditions" in the Metropolitan New York Area. PART D: Landlord's Performance of Items of Tenant's Work: 1. If Tenant shall desire that Landlord perform any work (the "Tenant's Work") in and to the Demised Premises in addition to the work set forth in Part B same shall be clearly identified in Tenant's Plans or the Revised Tenant's Plans submitted by Tenant for such work pursuant to Part A. With reasonable dispatch, but not more thin sixty (60) days after receipt of such request and plans, Landlord shall notify Tenant as to whether Landlord agrees to perform all or any part of the Tenant's Work, which notice shall be sent to Tenant together with Landlord's written estimates (the "Estimates") of the cost of those parts of the Tenant's Work which Landlord is willing to perform (the "Acceptable Tenant's Work"). Within ten (10) working days after Tenant's receipt of the Estimates, Tenant shall notify Landlord in writing as to which of the Estimates it accepts and desires that Landlord proceed with the Acceptable Tenant's Work covered by the acceptable Estimates. If Tenant shall fail to respond to all Estimates within such ten (10) working day period, then (a) the Estimates not accepted by Tenant shall be -53- deemed disapproved in all respects by Tenant, (b) Landlord shall not be obligated to proceed on any of the Acceptable Tenant's Work including the items covered by Estimates acceptable to Tenant (in which event Landlord shall send Tenant a notice (the "Rejection Notice") indicating the items of Acceptable Tenant's Work as to which Landlord refuses to proceed), and (c) Tenant shall perform all of the Acceptable Tenant's Work which Landlord will not perform as well as the balance of the Tenant's Work, or Tenant will cause the same to be performed, through its own contractors or subcontractors in accordance with the terms of Part E. Notwithstanding anything in this Work Letter to the contrary, any Tenant's Work involving items relating to any of the Building systems or which will be physically attached to the Demised Premises or portions thereof (including, without limitation built-in cabinetry and similar items) and items that will be electrified or have electrical wiring or equipment running through or attached to same (all such items are hereafter referred to as "Required Items"), must be requested by Tenant to be performed by Landlord and if Landlord agrees to perform same, such work must be performed by Landlord and Tenant may not elect to have same performed by another party or parties, and, with respect to such Required Items, the provisions of Part D l.(c), shall not be applicable. 2. If Landlord shall agree, and Tenant shall authorize Landlord, to perform any Acceptable Tenant's Work as provided in paragraph 1 above, Landlord shall perform such Acceptable Tenant's Work for the account of Tenant, and Tenant shall pay Landlord therefor, as additional rent under the Lease, an amount equal to the sum of (a) Landlord's Cost of performing such Acceptable Tenant's Work , plus (b) a "Contractors Fee", which shall be an amount equal to Landlord's Cost for its overhead and supervision for the administration of the performance of such Acceptable Tenant's Work by Landlord and/or its contractor not to exceed fifteen (15%) percent of Landlord's Cost. Landlord or its contractor may submit monthly statements to Tenant for sums due to it under this paragraph 2, for such Acceptable Tenant's Work performed by Landlord or the contractor to date and/or for materials delivered to the job site during the previous month, and the same shall be payable by Tenant to Landlord or its designee within five (5) days thereafter. PART E: Tenant's Performance of Items of Tenant's Work: 1. Landlord shall permit Tenant and its agents to enter upon the Demised Premises prior to the Commencement Date so that Tenant may perform, through its own contractors (to be first approved in writing by Landlord) and in accordance with Tenant's Plans or the Revised Tenant's Plans (as approved in writing by Landlord in accordance with Part A hereof), that portion of Tenant's Work (the "Rejected Tenant's Work") which is other than Acceptable Tenant's Work covered by Estimates approved by Tenant in accordance with paragraph 1 of Part D and which items were not covered in the Rejection Notice and are not Required Items. The approved contractors performing the Rejected Tenant's Work may perform the Rejected Tenant's Work at the same time that Landlord's contractors are working in the Demised Premises, provided, however, that (a) the construction of the Building and of the Demised Premises, and all installations required to be made by Landlord therein, shall have reached a point at which, in Landlord's sole judgment, the performance of the Rejected Tenant's Work will not delay or hamper Landlord in the completion of the same and (b) Tenant and its contractors shall work in harmony and shall not interfere with Landlord, Landlord's contractors, any other tenant, or such tenants' contractors. Landlord may, at any time, deny access to the Demised Premises to Tenant and/or to any of its contractors in the event that Landlord shall, in its sole discretion, determine that the performance or manner of performance of the Rejected Tenant's Work interferes with, delays, hampers, or prevents Landlord from proceeding with the completion of the construction of the Building and/or the completion of the Demised Premises or the Acceptable Tenant's Work at the earliest possible time. Within twenty-four (24) hours after Landlord's direction (which need not be given in writing and may be given by Landlord or its agents or contractors to Tenant or its agents or contractors), Tenant shall, and cause its contractors to, withdraw from the Building and the Demised Premises and cease all work being performed by it or on its behalf by any person, firm, or corporation (other than Landlord). Tenant shall pay to Landlord, as additional rent, within five (5) days after submission to Tenant of a statement therefor, an amount equal to all costs incurred by Landlord or its contractor or otherwise, in connection with such early entry by Tenant including, without limitation, costs for utilities, freight elevator service and hoisting. All requests for any utility or freight elevator service or hoisting shall be made by Tenant in writing. -54- 2. In the event that Tenant shall be permitted to enter upon the Demised Premises prior to the Commencement Date pursuant to the terms of paragraph 1 above, such entry shall be deemed to be upon all of the terms, provisions and conditions of the Lease, except as to the covenant to pay fixed rent and additional rent payable under Article 5 of this lease. In connection therewith, Tenant and/or its contractors shall provide to Landlord, and shall maintain at all times during the performance of any Rejected Tenant's Work, worker's compensation, public liability and property damage insurance policies, all of which shall contain limits, be with companies and be in form satisfactory to Landlord. Certificates of the same shall be furnished to Landlord before Tenant or its contractors commence to perform the Rejected Tenant's Work. Landlord shall not be liable in any way for any injury, loss or damage that may occur to any of Tenant's or Tenant's contractors' decorations, fixtures, installations, supplies, materials, or equipment prior to the Commencement Date; any such entry by Tenant and/or its contractors being at their sole risk. 3. To the extent that Tenant shall perform the Rejected Tenant's Work pursuant to the terms of paragraph 1, whether on or prior to the Commencement Date or thereafter, Tenant shall pay to Landlord, upon demand, as additional rent under the lease and in addition to Landlord's contractor charges, an amount equal to the sum of (a) the cost to Landlord for rubbish removal, hoisting and similar items in connection with the Rejected Tenant's Work, plus (b) an amount equal to Landlord's cost for overhead and supervision of the Rejected Tenant's Work, not to exceed the product of (i) fifteen (15%) percent and (ii) the amounts charged by the subcontractors and materialmen for the furnishing and installation of items of Rejected Tenant's Work including, without limitation, general conditions (as defined in Part C 4. hereof) in connection therewith. In connection with the Rejected Tenant's Work, no equipment or materials shall be delivered to, or removed from, the Building or the Demised Premises by Tenant or its contractor during business days between the hours of 8:00 A.M. and 3:30 P.M. without the prior written authorization, in each instance, of Landlord or its agent. PART F: Delays Caused By Tenant: Additional Expenses: Tenant has been advised of the importance to Landlord of completing the construction of the Building and completing the Demised Premises as quickly as possible and of the great financial loss to Landlord that would result from a delay in such completion. If Tenant, or persons within Tenant's control, delays the progress of completion of work required to be performed by Landlord hereunder or which Landlord has agreed to perform hereunder or pursuant to any separate agreement by (i) failing to submit to Landlord, within the time period set forth in Part A hereof, any phase of Tenant's Plans, or failing to approve any Estimates or failing to make necessary revisions in Tenant's Plans or the Revised Tenant's Plans within the time required or delaying any selections of materials to be made by Tenant or (ii) submitting one or more Revisions to Landlord or (iii) requesting materials, finishes or installations other than Building standard, provided Landlord uses reasonable dispatch in obtaining Estimates as provided in Paragraph 1 of Part D or (iv) otherwise interfering with, or delaying, Landlord's completion of the construction of the Building or the completion of the Demised Premises, then the date of substantial completion of the Demised Premises shall be deemed to be the date (the "Completion Date") upon which the Demised Premises would have been substantially completed but for the acts or omissions of Tenant or persons within Tenant's control, and Tenant shall reimburse Landlord for an amount equal to what the fixed and additional rent for the period of such delay would have been had the Lease commenced on the Completion Date within five days after submission of a bill therefor, whether or not this lease has commenced. In addition, in the event the occurrence of any of the events sets forth in (i) - (iv) above results in any additional expenses to Landlord relating to the sequence in which any of the work to be done by Landlord under this Work Letter is accomplished, such additional expenses shall be borne solely by Tenant and shall be paid within five (5) days after submission of a bill therefor, whether or not this lease has commenced. The above provisions shall be in addition to, and not in limitation of, any other rights that Landlord shall have under this lease or at law. Landlord agrees to notify Tenant of any delays set forth in (i) - (iv) above with reasonable promptness after Landlord's learning of such delay. In the event that Landlord, in connection with the performance of any Landlord's Work or Acceptable Tenant's Work, is required to utilize overtime help either (a) by reason of industry or trade conditions or union requirements or (b) in order to facilitate, in Landlord's reasonable discretion, the timely and orderly -55- completion of Landlord's Work or Acceptable Tenant s Work, Tenant shall pay to Landlord, within five (5) days of demand therefor, the additional cost to Landlord of such overtime help. PART C: Landlord's Payment of a Portion of Acceptable Tenant's Work: Landlord agrees that it will pay up to the sum of (i) fifty (50%) percent of Landlord's Cost of furnishing items 5, 6, 7, 9, 11 and 12(a) of Landlord's Work as set forth in Part B of this Work Letter, plus (ii) $272,772.00 on account of Acceptable Tenant's Work to be performed in the Demised Premises ("Landlord's Contribution"). In the event Tenant fails to spend the entire amount of Landlord's Contribution on account of Acceptable Tenant's Work, fifty (50%) percent of the remaining balance shall be paid to Tenant within sixty (60) days after the completion of Landlord's Work and any Acceptable Tenant's Work performed by Landlord in the Demised Premises, whereupon Landlord shall have no further obligation or liability to Tenant with respect to Landlord's Contribution. -56- EXHIBIT D RULES AND REGULATIONS 1. The rights of tenants in the entrances, corridors and elevators of the Building are limited to ingress to and egress from the tenants' premises for the tenants and their employees, licensees and invitees, and no tenant shall use, or permit the use of, the entrances, corridors, or elevators for any other purpose. No tenant shall invite to the tenant's premises, or permit the visit of, persons in such numbers or under such conditions as to interfere with the use and enjoyment of any of the entrances, corridors, elevators and other facilities of the Building by other tenants. Fire exits and stairways are for emergency use only, and they shall not be used for any other purpose by the tenants, their employees, licensees or invitees. No tenant shall encumber or obstruct, or permit the encumbrance or obstruction of any of the sidewalks, entrances, corridors, elevators, fire exits or stairways of the Building. The Landlord reserves the right to control and operate the public portions of the Building and the public facilities, as well as facilities furnished for the common use of the tenants, in such manner as it deems best for the benefit of the tenants generally. 2. The Landlord may refuse admission to the Building outside of ordinary business hours to any person not known to the watchman in charge or not having a pass issued by the Landlord or the tenant whose premises are to be entered or not otherwise properly identified, and may require all persons admitted to or leaving the Building outside of ordinary business hours to register. Any person whose presence in the Building at any time shall, in the judgment of the Landlord, be prejudicial to the safety, character, reputation and interests of the Building or of its tenants may be denied access to the Building or may be ejected therefrom. In case of invasion, riot, public excitement or other commotion, the Landlord may prevent all access to the Building during the continuance of the same, by closing the doors or otherwise, for the safety of the tenants and protection of property in the Building. The Landlord may require any person leaving the Building with any package or other object to exhibit a pass from the tenant from whose premises the package or object is being removed, but the establishment and enforcement of such requirement shall not impose any responsibility on the Landlord for the protection of any tenant against the removal of property from the premises of the tenant. The Landlord shall, in no way, be liable to any tenant for damages or loss arising from the admission, exclusion or ejection of any person to or from the tenant's premises or the Building under the provisions of this rule. Canvassing, soliciting or peddling in the Building is prohibited and every tenant shall cooperate to prevent the same. 3. No tenant shall obtain or accept for use in its premises ice, drinking water, food, beverage, towel, barbering, boot blacking, floor polishing, lighting maintenance, cleaning or other similar services from any persons not authorized by the Landlord in writing to furnish such services, provided that the charges for such services by persons authorized by the Landlord are not excessive. Such services shall be furnished only at such hours, in such places within the tenant's premises and under such reasonable regulations as may be fixed by the Landlord. 4. The cost of repairing any damage to the public portions of the Building or the public facilities or to any facilities used in common with other tenants, caused by a tenant or the employees, licensees or invitees of the tenant, shall be paid by such tenant. 5. No lettering, sign, advertisement, notice or object shall be displayed in or on the windows or doors, or on the outside of any tenant's premises, or at any point inside any tenant's premises where the same might be visible outside of such premises, except that the name of the tenant may be displayed on the entrance door of the tenant's premises, and in the elevator lobbies of the floors which are occupied entirely by any tenant, subject to the approval of the Landlord as to the size, color and style of such display. The inscription of the name of the tenant on the door of the tenant's premises shall be done by the Landlord at the expense of the tenant. Listing of the name of the tenant on the directory boards in the Building shall be done by the Landlord at its expense; any other listings shall be in the discretion of the Landlord. 6. No awnings or other projections over or around the windows shall be installed by any tenant, and only such window blinds as are supplied or permitted by the Landlord shall be used in a tenant's premises. Linoleum, tile or other floor covering shall be laid in a tenant's premise only in a manner approved by the Landlord. -57- 7. The Landlord shall have the right to prescribe the weight and position of safes and other objects of excessive weight, and no safe or other object whose weight exceeds the lawful load for the area upon which it would stand shall be brought into or kept upon a tenant's premises. If, in the judgment of the Landlord, it is necessary to distribute the concentrated weight of any heavy object, the work involved in such distribution shall be done at the expense of Tenant and in such manner as the Landlord shall determine. The moving of safes and other heavy objects shall take place only outside of ordinary business hours upon previous notice to the Landlord, and the persons employed to move the same in and out of the Building shall be reasonably acceptable to the Landlord and, if so required by law, shall hold a Master Riggers license. Freight, furniture, business equipment, merchandise and bulky matter of any description shall be delivered to and removed from the premises only in the freight elevators and through the service entrances and corridors, and only during hours and in a manner approved by the Landlord. Arrangements will be made by the Landlord with any tenant for moving large quantities of furniture and equipment into or out of the building. 8. No machines or mechanical equipment of any kind, other than typewriters and other ordinary portable business machines, may be installed or operated in any tenant's premises without Landlord's prior written consent, and in no case (even where the same are of a type so accepted or as so consented to by the Landlord) shall any machines or mechanical equipment be so placed or operated as to disturb other tenants but machines and mechanical equipment which may be permitted to be installed and used in a tenant's premises shall be so equipped, installed and maintained by such tenant as to prevent any disturbing noise, vibration or electrical or other interference from being transmitted from such premises to any other area of the Building. 9. No noise, including the playing of any musical instruments, radio or television, which, in the judgment of the Landlord, might disturb other tenants in the Building, shall be made or permitted by any tenant, and no cooking shall be done in the tenant's premises, except as expressly approved by the Landlord. Nothing shall be done or permitted in any tenant's premises, and nothing shall be brought into or kept in any tenant's premises, which would impair or interfere with any of the Building services or the proper and economic heating, cleaning or other servicing of the Building or the premises, or the use or enjoyment by any other tenant of any other premises, nor shall there be installed by any tenant any ventilating, air conditioning, electrical or other equipment of any kind which, in the judgment of the Landlord, might cause any such impairment or interference. No dangerous, inflammable, combustible or explosive object or material shall be brought into the Building by any tenant or with the permission of any tenant. Any cuspidors or similar containers or receptacles used in any tenant's premises shall be cared for and cleaned by and at the expense of the tenant. 10. No acids, vapors or other materials shall be discharged or permitted to be discharged into the waste lines, vents or flues of the Building which may damage them. The water and wash closets and other plumbing fixtures in or serving any tenant's premises shall not be used for any purpose other than the purposes for which they were designed or constructed, and no sweepings, rubbish, rags, acids or other foreign substances shall be deposited therein. 11. No additional locks or bolts of any kind shall be placed upon any of the doors. or windows in any tenant's premises and no lock on any door therein shall be changed or altered in any respect. Additional keys for a tenant's premises and toilet rooms shall be procured only from the Landlord, which may make a reasonable charge therefor. Upon the termination of a tenant's lease, all keys of the tenant's premises and toilet rooms shall be delivered to the Landlord. 12. All entrance doors in each tenant's premises shall be left locked and all windows shall be left closed by the tenant when the tenant's premises are not in use. Entrance doors shall not be left open at any time. 13. Hand trucks not equipped with rubber tires and side guards shall not be used within the Building. 14. All windows in each tenant's premises shall be kept closed and all blinds therein, if any, above the ground floor shall be lowered when and as reasonably required because of the position of the sun, during the operation of the Building air conditioning system to cool or ventilate the tenant's premises. -58- 15. The Landlord reserves the right to rescind, alter or waive any rule or regulation at any time prescribed for the Building when, in its judgment, it deems it necessary, desirable or proper for its best interest and for the best interests of the tenants, and no alteration or waiver of any rule or regulation in favor of one tenant shall operate as an alteration or waiver in favor of any other tenant. The Landlord shall not be responsible to any tenant for the non-observance or violation by any other tenant of any of the rules and regulations at any time prescribed for the Building. -59- EXHIBIT E DEFINITIONS (a) The term mortgage shall include an indenture of mortgage and deed of trust to a trustee to secure an issue of bonds, and the term mortgagee shall include such a trustee. (b) The terms include, including and such as shall each be construed as if followed by the phrase "without being limited to". (c) The term obligations of this lease, and words of like import, shall mean the covenants to pay rent and additional rent under this lease and all of the other covenants and conditions contained in this lease. Any provision in this lease that one party or the other or both shall do or not do or shall cause or permit or not cause or permit a particular act, condition, or circumstance shall be deemed to mean that such party so covenants or both parties so covenant, as the case may be. (d) The term Tenant's obligations hereunder, and words of like import, and the term Landlord's obligations hereunder, and words of like import, shall mean the obligations of this lease which are to be performed or observed by Tenant, or by Landlord, as the case may be. Reference to performance of either party's obligations under this lease, shall be construed as "performance and observance". (e) Reference to Tenant being or not being in default hereunder, or words of like import, shall mean that Tenant is in default in the performance of one or more of Tenant's obligations hereunder, or that Tenant is not in default in the performance of any of Tenant's obligations hereunder, or that a condition of the character described in Section 25.01 has occurred and continues or has not occurred or does not continue, as the case may be. (f) References to Landlord as having no liability to Tenant or being without liability to Tenant, shall mean that Tenant is not entitled to terminate this lease, or to claim actual or constructive eviction, partial or total, or to receive any abatement or diminution of rent, or to be relieved in any manner of any of its other obligations hereunder, or to be compensated for loss or injury suffered or to enforce any other kind of liability whatsoever against Landlord under or with respect to this lease or with respect to Tenant's use or occupancy of the Demised Premises. (g) The term laws and/or requirements of public authorities and words of like import shall mean laws and ordinances of any or all of the Federal, state, city, county and borough governments and rules, regulations, orders and/or directives of any or all departments, subdivisions, bureaus, agencies or offices thereof, or of any other governmental, public or quasi-public authorities, having jurisdiction in the premises, and/or the direction of any public officer pursuant to law. (h) The term requirements of insurance bodies and words of like import shall mean rules, regulations, orders and other requirements of the New Jersey Board of Fire Underwriters and/or the New Jersey Fire Insurance Rating Organization and/or any other similar body performing the same or similar functions and having jurisdiction or cognizance of the Building and/or the Demised Premises. (i) The term repair shall be deemed to include restoration and replacement as may be necessary to achieve and/or maintain goad working order and condition. (j) Reference to termination of this lease includes expiration or earlier termination of the term of this lease or cancellation of this lease pursuant to any of the provisions of this lease or to law. Upon a termination of this lease, the term and estate granted by this lease shall end at noon of the date of termination as if such date were the date of expiration of the term of this lease and neither party shall have any further obligation or liability to the other after such termination (i) except as shall be expressly provided for in this lease, or (ii) except for such obligation as by -60- its nature or under the circumstances can only be, or by the provisions of this lease, may be, performed after such termination, and, in any event, unless expressly otherwise provided in this lease, any liability for a payment which shall have accrued to or with respect to any period ending at the time of termination shall survive the termination of this lease. (k) The term in full force and effect when herein used in reference to this lease as a condition to the existence or exercise of a right on the part of Tenant shall be construed in each instance as including the further condition that at the time in question no default on the part of Tenant exist, and no event has occurred which has continued to exist for such period of time (after the notice, if any, required by this lease), as would entitle Landlord to terminate this lease or to dispossess Tenant. (l) The term Tenant shall mean Tenant herein named or any assignee or other successor in interest (immediate or remote) of Tenant herein named, while such Tenant or such assignee or other successor in interest, as the case may be, is in possession of the Demised Premises as owner of the Tenant's estate and interest granted by this lease and also, if Tenant is not an individual or a corporation, all of the persons, firms and corporations then comprising Tenant. (m) Words and phrases used in the singular shall be deemed to include the plural and vice versa, and nouns and pronouns used in any particular gender shall be deemed to include any other gender. (n) The rule of ejusdem generis shall not be applicable to limit a general statement following or referable to an enumeration of specific matters to matters similar to the matters specifically mentioned. (o) All references in this lease to numbered Articles, numbered Sections and lettered Exhibits are references to Articles and Sections of this lease, and Exhibits annexed to (and thereby made part of) this lease, as the case may be, unless expressly otherwise designated in the context. -61- EXHIBIT F CLEANING SPECIFICATIONS 1. General All linoleum, rubber, asphalt tile and other similar types of flooring (that may be waxed) to be swept nightly, using approved dust-check type of mop. All carpeting and rugs to be carpet swept nightly and vacuum cleaned weekly. Hand dust and wipe clean all furniture, fixtures and window sills nightly; wash sills when necessary. Empty and clean all waste receptacles nightly and remove waste paper and waste materials. Empty and clean all ash trays and screen all sand urns nightly including all ash trays in all toilets. Dust interior of all waste disposal cans and baskets nightly; damp-dust as necessary. Wash clean all water fountains and coolers nightly. Hand dust all door and other ventilating louvres within reach, as necessary. Dust all telephones as necessary. Sweep all private stairway structures nightly. 2. Lavatories in the Core Sweep and wash all lavatory floors nightly using proper disinfectants. Wash and polish all mirror; powder shelves, bright work and enameled surfaces in all lavatories nightly. Scour, wash and disinfect all basins, bowls and urinals throughout all lavatories, nightly. Wash all toilet seats, nightly. Empty paper towel receptacles and transport wastepaper to designated area in basements, nightly (towels, soap and receptacles to be furnished by Tenant). Fill toilet tissue holders nightly. Empty sanitary disposal receptacles, nightly. -62- Thoroughly wash and polish all wall tile and stall surface as often as necessary. 3. High Dusting Dust all Venetian blinds, frames, charts, graphs and similar wall hangings and vertical surfaces not reached in nightly cleaning, quarterly. Cleaning of light fixtures shall be for account of Tenant. 4. Glass Exterior windows to be cleaned inside and outside approximately once every three (3) months (or more often, if required by Landlord), weather permitting. 5. Conditions As herein used "nightly" means five nights a week, Monday through Friday, during regular cleaning hours (between 6:00 P.M. and 6:00 A.M.) and excludes legal and union holidays. Tenant will pay for electricity, power and hot and cold water in the Demised Premises for cleaning during the regular cleaning hours which are after hours. -63- Airborne Express January 6, 1995 Mr. Nathan Bistricer Philipp Brothers Chemicals, Inc. One Parker Plaza Fort Lee, New Jersey 07046 Re: Premises First Modification and Extension of Lease by and between 400 Kelby Associates, as Landlord, and Philipp Brothers Chemicals, Inc, as Tenant A portion of the fourteenth (14th) floor at One Parker Plaza, Fort Lee, New Jersey Dear Mr. Bistricer: Enclosed herewith, please find one (1) fully executed, original counterpart with regard to the above referenced lease modification and extension. I trust this document will complete your files. If you have any questions, please do not hesitate to contact me. Very truly yours, /s/ Bradley R. Siegel - --------------------- BRS:jp enclosure cc: Stanley Berkowitz w/encl Lou Ferrari w/encl Richard Gordon, Esq. w/o encl Jean Pierre Vaganay w/o encl Steve Frank w/encl FIRST MODIFICATION AND EXTENSION OF LEASE DATED AS OF DECEMBER 1994 BETWEEN 400 KELBY ASSOCIATES, AS LANDLORD, AND PHILIPP BROTHERS CHEMICALS, INC., AS TENANT FOR LEASE OF PREMISES LOCATED ON THE FOURTEENTH (14TH) FLOOR IN THE BUILDING AT 400 KELBY STREET, FORT LEE, NEW JERSEY WHEREAS, the parties hereto executed a Lease dated July 25, 1986 between 400 Kelby Associates, a New Jersey Limited Partnership with offices at 104-70 Queens Boulevard, Forest Hills, New York 11375, as Landlord and Philipp Brothers Chemicals, Inc., a New York corporation having an address at 10 Columbus Circle, New York, New York 10019, as Tenant, (hereinafter the "Original Lease"); WHEREAS, the parties executed a Supplementary Agreement on or about December 1, 1986, whereby the Commencement Date was fixed at December 1, 1986 and the Expiration Date was fixed at November 30, 1996; and WHEREAS, the parties hereto desire to modify and extend the Original Lease as set forth herein: NOW, THEREFORE, in consideration of the premises and the mutual terms, covenants and conditions contained in the Original Lease, Landlord and Tenant hereby agree as follows: 1. All capitalized terms herein shall have the same meanings as contained in the Original Lease. 2. Except as amended herein, the terms of the Original Lease shall remain in full force and effect 3. In the event of any inconsistencies between the terms of this First Modification and Extension to Lease (the "First Modification and Extension to Lease") and the Original Lease, the terms of this First Modification and Extension to Lease shall govern. 4. Article 1 of the Original Lease is amended as follows: (a) Paragraph 1.03 shall be amended to reflect that the Expiration Date will be 12:00 P.M. on December 31, 2004. (b) Paragraph 1.04 (a) is hereby amended to include the following as "fixed rent": Term Annual Rent Monthly Rent - ---- ----------- ------------ January 1, 1995 - December 31, 1999 $591,006.00 $49,250.50 January 1, 2000 - December 31, 2004 $653,516.25 $54,459.69 5. Articles 3 and 4 are deleted in their entirety and the following language is substituted in place of Article 3: 3.01 Neither Landlord or Landlord's agents have made any representations or promises with respect to the physical condition of the Building, the Demised Premises, or the Land except as expressly set forth herein. Tenant has inspected the Building and the Demised Premises and is thoroughly acquainted with their condition and agrees to take the same "as is" and acknowledges that the taking of possession of the Demised Premises by Tenant shall be conclusive evidence that the said Demised Premises and the Building were in good and satisfactory condition at the time such possession was so taken. Notwithstanding the foregoing, Landlord agrees to provide Tenant with an allowance of $187,993.00 towards work to be performed by Landlord in the Demised Premises, ("Landlord's Work"), as reflected in the space plan drawing submitted by BFI Planning and Design dated October 3, 1994 (the "BFI Plans"). Tenant may make changes or revisions to the BFI Plans, however, Tenant will be responsible for any fees, expenses or any aspect of Landlord's Work at the Demised Premises that results in a cost above $187,993.00. Landlord agrees to use its best efforts to commence Landlord's Work within a reasonable period of time after all required permits have been issued from the Borough of Fort Lee. Tenant agrees to sign off on the final architectural plan prior to submission to the Borough of Fort Lee for the aforementioned permits. In addition, Landlord shall reimburse Tenant $1,500.00 for space planning services within 30 days after Tenant submits a bill for same to Landlord. Landlord will also provide construction drawings based on the BFI Plans at its sole cost and expense. Tenant acknowledges that Landlord's Work will be performed while Tenant is in possession of the Demised Premises. Landlord will use its best efforts to minimize any inconvenience to Tenant and will use its best efforts to complete a portion of the work after business hours. Tenant will be responsible for installing any and all of its computers or computer network systems and its telephone equipment and/or relocating said equipment at its sole cost and expense, and at absolutely no liability to Landlord. 6. Paragraph 5.01(b) shall be amended to reflect that the "Base Tax Rate", defined in Paragraph 5.01(b) shall mean the Tax Rate for the calendar year 1994. Notwithstanding any other provision in the Lease, the Tenant shall not be responsible for any increase in taxes and/or operating expenses during the 1995 calendar year. 7. Paragraph 5.07(a)(iii) shall be modified to exclude overtime charges for HVAC use by other tenants. 8. Paragraph 5.07(a)(xii) shall be amended to include advertising and other costs related to the procurement of new tenants for the building. 9. Paragraph 5.07(c) shall be amended to reflect that "the Base Operating Expenses", defined in Paragraph 5.07(c) shall mean the Operating Expenses for the calendar year 1994. 10. Section 9.02(a), (c)(ii) and (c)(iii) shall be amended to read as follows: (a) a term sheet, or draft of the proposed assignment or sublease, the effective or commencement date of which shall be not less than 30 nor more than 180 days after the giving of such notice, (c)(ii) terminate this lease (if the proposed transaction is an assignment or a sublease of all or substantially all of the Demised Premises, and if said sublease terminates within two (2) years prior to the expiration date of the lease). (c)(iii) terminate this lease with respect to the Leaseback Space (if the proposed transaction is a sublease of part of the Demised Premises and terminates within two (2) years prior to the expiration date of the lease). 11. Section 9.07 shall be modified to include that if Landlord consents to the proposed assignment or sublease, said consent shall be given within thirty (30) days after notice from Tenant pursuant to Section 9.02 provided Tenant is in complete compliance with Article 9. 12. Section 9.08(b) shall be modified to reflect that tenant shall have 120 days to execute and deliver the assignment or sublease to Landlord. 13. Paragraph 16.03(b)(ii)(a) shall be amended a reflect a rent reduction of $28,413.75 should Landlord exercise its option to discontinue furnishing electrical service to the Tenant 14. Paragraph 18.05 amended to reflect a total number of sixty-five (65) parking spaces. 15. Article 31 shall be amended to add the following language: Article 31 Broker 31.01 Both parties covenant, warrant and represent that there was no broker or finder except C.B. Commercial Real Estate Group, Inc. and Edward S. Gordon Company of New Jersey in consummating this First Modification and Extension of Lease and that no conversations or negotiations were had with any broker or finder except C.B. Commercial Real Estate Group, Inc. and Edward S. Gordon Company of New Jersey concerning the Demised Premises. Both parties agree to hold the other harmless against any claims for a brokerage, finder or other commission or fee arising out of any claim by any broker or finder except C.B. Commercial Real Estate Group, Inc. Tenant represents that Edward S. Gordon Company of New Jersey has represented Tenant as its Broker in connection with this First Modification and Extension of Lease. Notwithstanding this, Landlord agrees, that upon execution of the First Modification and Extension of Lease, it shall be solely responsible for any brokerage fees in connection with realty services by C.B. Commercial Real Estate Group, Inc. and Edward S. Gordon Company of New Jersey. 16. Renewal Option: The following Article 40 shall be added to the Lease: 40.01 Provided that the Original Lease as modified and extended by the Fee Modification and Extension of Lease (the "Modified Lease"), shall be in full force and effect on the Expiration Date without default on the part of Tenant hereunder, Tenant shall have the option (hereinafter referred to as the "Renewal Option") to renew the Modified Lease for a renewal term (hereinafter referred to as the "Renewal Term") of five (5) years, to commence on the day after the Expiration Date (hereinafter referred to as the "Renewal Term Commencement Date") and to expire five (5) years thereafter (herein referred to as the "Renewal Term Expiration Date"). Tenant shall exercise the Renewal Option by sending a written notice thereof (which notice is hereinafter referred to as the "Renewal Notice") to Landlord by certified mail, return receipt requested, not less than twelve (12) months prior to the Expiration Date. If Tenant shall send the Renewal Notice within the time and in the manner hereinbefore provided, the Modified Lease shall be deemed renewed for the Renewal Term upon the terms, covenants and conditions hereinafter contained. If Tenant shall fail to send the Renewal Notice within the time and in a manner hereinbefore provided, the Renewal Option shall cease and terminate, and Tenant shall have no further option to renew the Modified Lease. If the Modified Lease has been assigned or if greater than twenty-five (25%) percent of the Demised Premises has been sublet, this Renewal Option shall be deemed null and void and neither Tenant nor any assignee or subtenant shall have the right to exercise such option during the term of such assignment or sublease. If the Tenant assigns or subleases to an Affiliate as defined by Section 9.11 of the Original Lease, the renewal option shall remain in effect provided Tenant remains responsible for all obligations arising under the Modified Lease. 40.02 The Renewal Term, if any, shall be upon, and subject to, all of the terms, covenants and conditions provided in the Modified Lease for the original term hereof, except that: (a) any terms, covenants, or conditions hereof that are expressly or by their nature inapplicable to the Renewal Term (including, without limitation, Articles 3, 4, 39 and 40 hereof) shall not apply during such Renewal Term; (b) the annual fixed rent payable by Tenant during each year of the Renewal Term (hereinafter referred to as the "Renewal Rent"), subject to adjustment as otherwise provided in the Modified Lease provided, shall be an amount equal to the fair market rental value of the Demised Premises, to be determined as provided in Section 40.03 hereof and to be calculated as the Renewal Term Commencement Date on the basis of a new five (5) year lease of the Demised Premises; (c) effective upon the Renewal Term Commencement Date, the Tenant shall also pay additional rent pursuant to Article 5; and (i) the Base Tax Year shall be deemed to be the year set forth in Section 5.01(b), and (ii) the Base Operating Expenses shall be deemed to be the amount set forth in Section 5.07(c). 40.03 In the event that Tenant shall exercise the Renewal Option as provided in Section 40.01 hereof, the Renewal Rent shall be determined jointly by Landlord and Tenant, and such determination shall be confirmed in a writing (hereinafter referred to as a "Rental Agreement") to be executed in recordable form by Landlord and Tenant not later than the day (hereinafter referred to as the Determination Date) which shall be ninety (90) days next preceding the Expiration Date. In the event that Landlord and Tenant shall have failed to join in executing a Rental Agreement on or before the Determination Date because of their failure to agree upon the Renewal Rent then the Renewal Rent shall be determined by arbitration as follows: (a) Landlord and Tenant shall each appoint an arbitrator by written notice given to the other party hereto not later than thirty (30) days after the Determination Date. If either Landlord or Tenant shall have failed to appoint an arbitrator within such period of time and thereafter shall have failed to do so by written notice given within a period of five (5) days after notice by the other party requesting the appointment of such arbitrator, then such arbitrator shall be appointed by the American Arbitration Association or its successor (the branch office of which is located in or closest to the Borough of Fort Lee, County of Bergen), upon request of either Landlord or Tenant, as the case may be; (b) the two (2) arbitrators appointed as above provided shall appoint a third (3rd) arbitrator by written notice given to both Landlord and Tenant, and, if they fail to do so by written notice given within thirty (30) days after their appointment, such third (3rd) arbitrator shall be appointed as above provided for the appointment of an arbitrator in the event either party fails to do so; (c) all of such arbitrators shall be real estate appraisers having not less than ten (10) years experience in appraising the fair market rental value of real estate similar to the Building located within or adjacent to the Borough of Fort Lee, County of Bergen and whose appraisals are acceptable to savings banks or life insurance companies doing business in the State of New Jersey; (d) the three (3) arbitrators, selected as aforesaid, forthwith shall convene and render their decision in accordance with the then applicable rules of the American Arbitration Association or its successor, which decision shall be strictly limited to a determination of the Renewal Rent as the case may be, within twenty (20) days after the appointment of the third (3rd) arbitrator. The decision of such arbitrators shall be in writing and the vote of the majority of them shall be the decision of all and, insofar as the same is in compliance with the provisions and conditions of this Section 40.03 and of Section 40.04 hereof shall be binding upon Landlord and Tenant. Duplicate original counterparts of such decision shall be sent forthwith by the arbitrators by certified mail, return receipt requested, to both Landlord and Tenant. The arbitrators, in arriving at their decision, shall be entitled to consider all testimony and documentary evidence that may be presented at any hearing, as well as facts and data which the arbitrators may discover by investigation and inquiry outside such hearings. If, for any reason whatsoever, a written decision of the arbitrators shall not be rendered within thirty (30) days after the appointment of the third (3rd) arbitrator, then, at any time thereafter before such decision shall have been rendered, either party may apply to a court of competent jurisdiction sitting in the Borough of Fort Lee, County of Bergen, State of New Jersey (but not by a new arbitration proceeding) as may be proper, to determine the question in dispute consistently with the provisions of this lease. The cost and expense of such arbitration, action, proceeding, or otherwise shall be borne equally by Landlord and Tenant 40.04 Notwithstanding anything to the contrary contained in Section 40.03 hereof, the Renewal Rent shall in no event be less than an amount (hereinafter referred to as the "Renewal Minimum Rent") equal to the fixed rent reserved in Section 1.04(a) hereof. 40.05 In the event that Tenant shall exercise the Renewal Option as provided in Section 40.01 hereof and the Renewal Rent shall not be finally determined pursuant to the terms of Section 40.03 hereof on or before the Renewal Term Commencement Date then: (a) The annual fixed rent payable by Tenant during the Renewal Term until the Renewal Rent shall be so finally determined shall, subject to adjustment as therein provided, be equal to the Renewal Minimum Rent calculated at the then market rate per square foot as Base Rent, plus additional rent charges for Operating Expenses, Real Estate Taxes and other adjustments as set forth in Article 5 herein. Thereafter, when the Renewal Rent finally becomes determined pursuant to the provisions of this Article 42, the Renewal Rent shall be re-computed with appropriate retroactive charges or credits to Landlord for the period in which Tenant paid any sums below the newly determined Renewal Rent; and, (b) In the event that the Renewal Rent as finally determined pursuant to the terms of Section 40.03 hereof, shall be greater than the Renewal Minimum Rent (i) the annual fixed rent payable by Tenant for the balance of the Renewal Term shall be and become the Renewal Rent as finally determined, and (ii) Tenant shall forthwith pay to Landlord an amount equal to the difference between (x) the sum of the actual rental payments paid to Landlord during the Renewal Term before such final determination and (y) the sum of the rental payments that Tenant would have paid to Landlord if the Renewal Rent were finally determined prior to the Renewal Term Commencement Date plus additional rent charges for Operating Expenses, Real Estate Taxes and other adjustments as set forth in Article 5 herein. Exhibit C is deleted in its entirety. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals on the date and year first written above. 400 KELBY ASSOCIATES By: Lynwood Construction Co., Inc., General Partner By: /s/ ------------------------------------- PHILIPP BROTHERS CHEMICAL, INC. By: /s/ ------------------------------------- STATE OF NEW JERSEY ) ) ss: COUNTY OF BERGEN ) On this 30th day of December, 1994 before me personally came N. Bistricer to me known, who, being duly sworn, did depose and say that he resides in Brooklyn, NY and that he is the Vice President of Philipp Brothers Chemical, Inc., the corporation in and who executed the foregoing instrument as TENANT, and that he duly acknowledged to me that he executed the same. /s/ Joseph M. Katzenstein - ------------------------- Notary Public JOSEPH M. KATZENSTEIN Notary Public, State of New Jersey # 2033060 Comm. Expires 8-14-87 EX-10.9 13 0013.txt LEASE BETWEEN FIRST DICE ROAD CO. AND PHILBRO-TECH, INC., AS AMENDED MAY 1998 STANDARD INDUSTRIAL LEASE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION 1. Parties. this Lease, dated, for reference purposes only, June 30, 1995, is made by and between FIRST DICE ROAD COMPANY, A California Limited Partnership (herein called "Lessor") and Phibro-Tech, Inc., a Delaware Corporation (herein called "Lessee"). 2. Premises. Lessor hereby leases to Lessee and Lessee leases from Lessor for the term, at the rental, and upon all of the conditions set forth herein, that certain real property situated in the County of Los Angeles, State of California, commonly known as 8851 Dice Road, Santa Fe Springs, California and described as on Schedule "A" annexed, together with all tangible personal property of Lessor located at the Premises. Said real property including the land and all improvements thereon, is herein called "the Premises." 3. Term. 3.1 The term of this Lease shall be for Ten (10) Years commencing on June 30, 1995 and ending on June 29, 2005 unless sooner terminated pursuant to any provision hereof. 4. Rent. Lessee shall pay to Lessor as annual rent for the Premises Two Hundred Fifty Thousand dollars ($250,000), payable in equal monthly installments of $20,833.33, in advance, on the first day of each month of the term hereof. Lessee shall pay Lessor upon the execution hereof. Rent for any period during the term hereof which is for less than one month shall be a pro rata portion of the month installment. Rent shall be payable in lawful money of the United States to Lessor at the address stated herein or to such other persons or at such other places as Lessor may designate in writing. 5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof $ None as security for Lessee's faithful performance of Lessee's obligations hereunder. If Lessee fails to pay rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Lessee, Lessor may use, apply or retain all or any portion of said deposit for the payment of any rent or other charge in default or for the payment of any other sum to which Lessor may become obligated by reason of Lessee's default, or to compensate Lessor for any loss of damage which Lessor may suffer thereby. If Lessor so uses or applies all or any portion of said deposit, Lessee shall within ten (10) days after written demand therefor deposit cash with Lessor in an amount sufficient to restore said deposit to the full amount hereinabove stated and Lessee's failure to do so shall be a material breach of this Lease. Lessor shall not be required to keep said deposit separate from its general accounts. If Lessee performs all of Lessee's obligations hereunder, said deposit, or so much thereof as has not theretofore been applied by Lessor, shall be returned, without payment of interest or other increment for its use, to Lessee for, at Lessor's option, to the last assignee, if any, of Lessee's interest hereunder) at the expiration of the term hereof, and after Lessee has vacated the Premises. 6. Use. 6.1 Use. The Premises shall be used and occupied only for any lawful purpose. 6.2 Compliance with Law. Lessee shall, at Lessee's expense, comply promptly with all applicable statutes, ordinances, rules, regulations, orders and requirements in effect during the term or any part of the term hereof, regulating the use by Lessee of the Premises. Lessee shall not use or permit the use of the Premises in any manner that will tend to create waste or a nuisance or, if there shall be more than one tenant of the building containing the Premises, which shall tend to disturb such other tenants. 6.3 Condition of Premises. Lessee hereby accepts the Premises in their condition existing as of the date of the execution hereof, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made any representation or warranty as to the suitability of the Premises for the conduct of Lessee's business. 7. Maintenance, Repairs and Alterations. 7.1 Lessor's Obligations. Subject to the provisions of Article 9, Lessee, Lessee's shall keep in good order, condition and repair, the foundations, exterior walls and the exterior roof of the Premises. Lessor shall have no obligation to make Lessee expressly waivers the benefits of any statute now or hereafter in 2 effect which would otherwise afford Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the Premises in good order, condition and repair. *the entire premises including 7.2 Lessee's Obligations. (a) Subject to the provisions of Paragraph 9, Lessee, at Lessee's expense, shall keep in good order, condition and repair the Premises and every part thereof (regardless of whether the damaged proportion of the Premises or the means of repairing the same are accessible to Lessee), including, without limiting the generality of the foregoing, all plumbing, heating, air conditioning, ventilating, electrical and lighting facilities and equipment within the Premises, fixtures, interior walls and interior surface of exterior walls, ceilings, windows, doors, plate glass, and skylights, located within the Premises and all sidewalks, landscaping, driveways, parking lots, fences and signs located in the areas which are adjacent to and included with the Premises. (b) If Lessee fails to perform Lessee's obligations under this Paragraph 7.2 or 7.1, Lessor may at Lessor's option enter upon the Premises after 10 days' prior written notice to Lessee, and put the same in good order, condition and repair, and the cost thereof together with interest thereon at the rate of 10% per annum shall be due and payable as additional rent to Lessor together with Lessee's next rental installment. (c) On the last day of the term hereof, or on any sooner termination. Lessee shall surrender the Premises to Lessor in the same condition as received, broom clean, ordinary wear and ten excepted. Lessee shall repair any damage to the Premises occasioned by the removal of its trade fixtures, furnishings and equipment pursuant to Paragraph 7.3(c), which repair shall include the patching and filling of holes and repair of structural damage. 7.3 Alterations and Additions. (a) Lessee may make any alterations, improvements, additions, or utility installations in, on or about the Premises. (b) Lessee shall pay when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee or for use in the Premises which claims are or may be secured by any mechanics' or material man's lien against the Premises or any interest therein Lessee shall give Lessor not 3 less than ten (10) days' notice prior to the commencement of any work in the Premises, and Lessor shall have the right to post notices of non-responsibility in or on the Premises as provided by law. (c) All alterations, improvements, additions and utility installations (whether or not such utility installations constitute trade fixtures of Lessee, which may be made on the Premises, shall become the property of Lessor and remain upon and be surrendered with the Premises at the expiration of the term. Notwithstanding the provisions of this Paragraph 7.3(c), Lessee's machinery and equipment, other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises shall remain the property of Lessee and may be removed by Lessee subject to the provisions of Paragraph 7.2(c). 8. Insurance; Indemnity. 8.1 Liability Insurance. Lessee shall, at Lessee's expense, obtain and keep in force during the terms of the Lease a policy of comprehensive public liability insurance insuring Lessor and Lessee against any liability arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. 8.2 Property Insurance. Lessee shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Premises, providing protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, special extended perils (all risk). 8.3 Waiver of Subrogation. Lessee and Lessor each hereby waives any and all rights or recovery against the other, or against the officers, employees, agents and representatives of the other, for loss of or damage to such waiving party or its property or the property of others under its control, where such loss or damage is insured against under any insurance policy in force at the time of such loss or damage. Lessee and Lessor shall, upon obtaining the policies of insurance required hereunder, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. 8.4 Indemnity. Lessee shall indemnify and hold harmless Lessor from and against any and all claims arising from Lessee's use of the Premises, or from the conduct of Lessee's business or from any activity, work or things done, permitted or suffered by 4 Lessee in or about the Premises or elsewhere and shall further indemnify and hold harmless Lessor from and against any and all claims arising from any breach or default in the performance of any obligation on Lessee's part to be performed under the terms of this Lease, or arising from any negligence of the Lessee, or any of the Lessee's agents, contractors, or employees, and from and against all costs, attorney's fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon: and in case any action or proceeding be brought against Lessor by reason of any such claim. Lessee upon notice from Lessor shall defend the same at Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material part of the consideration to Lessor, hereby assumes all risk of damage to property or injury to persons, in, upon or about the Premises arising from any cause and Lessee hereby waives all claims in respect thereof against Lessor. 8.5. Exemption of Lessor from Liability. Lessee hereby agrees that Lessor shall not be liable for injury to Lessee's business or any loss of income therefrom or for damage to the goods, wares, merchandise or other property of Lessee. Lessee's employees, invitees, customers, or any other person in or about the Premises, nor shall Lessor be liable for injury to the person of Lessee, Lessee's employees, agents or contractors, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether the said damage or injury results from conditions, arising upon the Premises or upon other portions of the building of which the Premises are a part, or from other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same its inaccessible to Lessee, Lessor shall not be liable for any damages arising from any act or neglect of any other tenant, if any, of the building in which the Premises are located. 9. Damage or Destruction. 9.1 Partial Damage-Insured. Subject to the provisions of Paragraph 9.4, if the Premises are damaged and such damage was caused by a casualty covered under an insurance policy required to be maintained pursuant to Paragraph 8.2. Lessee shall at Lessee's expense repair such damage as soon as reasonably possible and this Lessee shall continue in full force and effect. 9.2 Partial Damage-Uninsured. Subject to the provisions of Paragraph 9.4, if at any time during the term hereof the Premises 5 are damaged, except by a negligent or willful act of Lessee, and such damage was caused by a casualty not covered under an insurance policy required to be maintained by Lessee pursuant to Paragraph 8.2. Lessor may at Lessor's option either (i) repair such damage as soon as reasonably possible at Lessee's expense in which event this Lease shall continue in full force and effect, or (ii) give written notice to Lessee within thirty (30) days after the date of the occurrence of such damage of Lessor's intention to cancel and terminate this Lease as of the date of the occurrence of such damage. In the event Lessor elects to give such damage notice of Lessor's intention to cancel and terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee's intention to repair such damage at Lessee's expense, without reimbursement from Lessor, in which event this Lease shall continue in full force and effect, and Lessee shall proceed to make such repairs as soon as reasonably possible. If Lessee does not give such notice within such 10 day period this Lease shall be canceled and terminated as of the date of the occurrence of such damage. 9.3 Total Destruction. If at any time during the term hereof the Premises are totally destroyed from any cause whether or not covered by the insurance required to be maintained by Lessee pursuant to Paragraph 8.2 (including any total destruction required by any authorized public authority) this Lease shall automatically terminate as of the date of such total destruction. 9.4 Damage Near End of Term. If the Premises are partially destroyed or damaged during the last six months of the term of this Lease, Lessor may at Lessor's option cancel and terminate this Lease as of the date of occurrence of such damage by giving written notice to Lessee of Lessor's election to do so within 30 days after the date of occurrence of such damage. 9.5 Abatement of Rent; Lessee's Remedies. (a) If the Premises are partially destroyed or damaged and Lessor or Lessee repairs or restores them pursuant to the provisions of this Article, the rent payable hereunder for the period during which such damage, repair or restoration continues shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired. Except for abatement of rent, if any, Lessee shall have no claim against Lessor for any damage suffered by reason of any such damage, destruction, repair or restoration. 6 (b) If Lessor shall be obligated to repair or restore the Premises under the provisions of this Paragraph 9 shall not commence such repair or restoration within 90 days after such obligations shall accrue, Lessee may at Lessee's option cancel and terminate this Lease by giving Lessor written notice of Lessee's election to do so at any time prior to the commencement of such repair or restoration. In such event this Lease shall terminate as of the date of such notice. Any abatement in rent shall be computed as provided in Paragraph 9.5(a). 9.6 Termination-Advance Payments. Upon termination of this Lease pursuant to this Paragraph 9, an equitable adjustment shall be made concerning advance rent and any advance payments made by Lessee to Lessor, Lessor shall, in addition, return to Lessee so much of Lessee's security deposit as has not theretofore been applied by Lessor. 10. Real Property Taxes. 10.1 Payment of Tax Increase. Lessee shall pay all real property taxes applicable to the Premises; 10.2 Joint Assessment. If the Premises are not separately assessed, Lessee's liability shall be an equitable proportion of the real property leases for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor's work sheets of such other information as may be reasonably suitable. Lessor's reasonable determination thereof, in good faith, shall be conclusive. 10.3 Personal Property Taxes. (a) Lease shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Lease contained in the Premises or elsewhere. When possible, Lessee shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. 11. [PARAGRAPH NOT LEGIBLE] 12. Assignment and Subletting. 12.1 Lessor's Consent Required. Lessee shall not voluntarily or by operation of law assign, transfer, mortgage, sublet or otherwise transfer or encumber all or any part of Lessee's interest in this Lease or in the Premises, without 7 Lessor's prior written consent, which Lessor shall not unreasonably withhold. Any attempted assignment, transfer, mortgage, encumbrance or subletting without such consent shall be void, and shall constitute a breach of this Lease. 12.2 No Release of Lessee. Regardless of Lessor's consent, no subletting or assignment shall release Lessee of Lessee's obligation or alter the primary liability of Lessee to pay the rent and to perform all other obligations to be performed by Lessee hereunder. The acceptance of rent by Lessor from any other person shall not be deemed to be a waiver by Lessor of any provision hereof. consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. 12.3 Attorney's Fees. In the event that Lessor shall consent to a sublease or assignment under Paragraph 12.1, Lessee shall pay Lessor's reasonable attorneys' fees not to exceed $100 incurred in connection with giving such consent. 13. Defaults; Remedies 13.1 Defaults. The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Lessee: (a) The vacating or abandonment of the Premises by Lessee. (b) The failure by Lessee to make any payment of rent or any other payment required to be made by Lessee hereunder, as and when due, where such failure shall continue for a period of ___ days after written notice thereof from Lessor or Lessee. (c) The failure by Lessee to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by Lessee, other than described in paragraph (b) above, where such failure shall continue for a period of 30 days after written notice hereof from Lessor to Lessee: provided, however, that if the nature of Lessee's default is such that more than 30 days are reasonably required for it cure, then Lessee shall not be deemed to be in default if Lessee commenced such cure within said 30-day period and thereafter diligently prosecutes such cure to completion. (d) (i) The making by Lessee of any general assignment, or general arrangement for the benefit of creditors; (ii) the filing by or against Lessee of a petition to have Lessee adjudged a bankrupt or a petition for reorganization or 8 arrangement under any law relating to bankruptcy unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days; (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within 30 days or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within 30 days. 13.2 Remedies. In the event of any such material default or breach by Lessee, Lessor may at any time thereafter, without notice or demand and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such default or breach: (a) Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee all damages incurred by Lessor by reason of Lessee's default including, but not limited to, the cost of recovering possession of the Premises; expenses of resetting, including necessary renovation and alteration of the Premises, reasonable attorney's fees, and any rest estate commission actually paid; the worth at the time of award by the court having jurisdiction thereof of the amount by which the unpaid rent for the balance of the term alter the time of such award excess the amount of such rental loss for the same period that Lessee proves could be reasonably avoided: that portion of the leasing commission paid by Lessor pursuant to Article 15 applicable to the unexpired term of this Lease. Unpaid installments of rent or other sums shall bear interest from the date due at the rate of 10% per annum. In the event Lessee shall have abandoned the Premises, Lessor shall have the option of (i) retaking possession of the Premises and recovering from Lessee the amount specified in this Paragraph 13.2(a), or (ii) proceeding under Paragraph 13.2(b). (b) Maintain Lessee's right to possession in which case this Lease shall continue in effect whether or not Lessee shall have abandoned the Premises. In such event Lessor shall be entitled to enforce all of Lessor's rights and remedies under this Lease, Including the right to recover the rent as it becomes due hereunder. 9 (c) Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the State of California. 13.3 Default by Lessor, Lessor shall not be in default unless Lessor fails to perform obligations required of Lessor within a reasonable time, but in no event later than thirty (30) days after written notice by Lessee to Lessor and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have theretofore been furnished to Lessee in writing, specifying wherein Lessor has failed to perform such obligation: provided, however, that if the nature of Lessor's obligation is such that more than thirty (30) days are required for performance than Lessor shall not be in default if Lessor commences performance within such 30-day period and thereafter diligently prosecutes the same to completion. 13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and other sums due hereunder may cause Lessor to incur late charges which may be imposed on Lessor by the terms of any mortgage or trust deed covering the Premises. Accordingly, if any installment of rent or any other sum due from Lessee shall not be received by Lessor or Lessor's designee within ten (10) days after such amount shall be due. Lessee shall pay to Lessor a late charge equal to the late charge imposed under any mortgage or trust deed. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's default with respect, to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder. 14. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain, or sold under the threat of the exercise of said poser (all of which are herein called "condemnation:), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the improvements on the premises, or more than 25% of the land area of the Premises which is not occupied by any improvements, is taken by condemnation, Lessee may, at Lessee's option, to be exercised in writing only within ten (10) days after Lessor shall have given Lessee written notice of such taking for in the absence of such notice, within ten (10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the effect as to the portion of the 10 Premises remaining, except that the rent shall be reduced in the proportion that the floor area taken bears to the total floor area of the building situated on the Premises. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages: provided, however, that Lessee shall be entitled to any award for loss of or damage to Lessee's trade fixtures and removable personal property. In the event that this Lessee is not terminated by reason of such condemnation. Lessor shall, to the extent of severance damages received by Lessor in connection with such condemnation, repair any damage to the Premises caused by such condemnation except to the extent that Lessee has been reimbursed therefor by the condemning authority, Lessee shall pay any amount in excess of such severance damages required to complete such repair. 15. Cancellation and/or Modification. This lease shall not be modified or canceled without the express written consent of NatWest Bank, N.A., unless the loan of $1,500,000 made to Jack C. Bendheim by NatWest Bank, N.A. on June 30, 1995 shall have been paid in full. 16. General Provisions. 16.1 Estoppel Certificate. (a) Lessee shall at any time upon not less than ten (10) days' prior written notice from Lessor execute, acknowledge and deliver to Lessor a statement in writing (i) certifying that this Lease is unmodified and in full force and effect for, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect and the date to which the rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to Lessee's knowledge, any uncured defaults on the part of Lessor hereunder, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrances of the Premises. (b) Lessee's failure to deliver such statement within such time shall be conclusive upon Lessee (i) that this Lessee is in full force and effect, without modification except as may be represented by Lessor, (ii) that there are no uncured defaults in Lessor's performance, and (iii) that not more than one month's rent has been paid in advance. 11 (c) If Lessor desires to finance or refinance the Premises, or any part thereof, Lessee hereby agrees to deliver to any lender designated by Lessor such financial statements of Lessee as may be reasonably required by such lender. Such statements shall include the past three weeks financial statements of Lessee. All such financial statements shall be received by Lessor in confidence and shall be used only for the purposes herein set forth. 16.2 Lessor's Liability. The term "Lessor" as used herein shall mean only the owner or owners at the time in question of the fee title or a lessee's interest in a ground lease of the Premises, and except as expressly provided in Paragraph 15, in the even of any transfer of such title or interest, Lessor herein named (and in case of any subsequent transfers the then grantor) shall be relieved from and after the date of such transfer of all liability as respects Lessor's obligations thereafter to be performed, provided that any funds in the hands of Lessor or the then grantor at the time of such transfer, in which Lessee has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by the Lessor shall, subject as aforesaid, be binding on Lessor's successors and assigns, only during their respective periods of ownership. 16.3 Severability. The invalidity of any provision of this Lease as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. 16.4 Interest on Past-due Obligations. Except as expressly herein provided, any amount due to Lessor not paid when due shall bear interest at 10% per annum from the dat due. Payment of such interest shall not excuse or cure any default by Lessee under the Lease. 16.5 Time of Essence. Time is of the essence. 16.6 Captions. Article and paragraph captions are not a part hereof. 16.7 Incorporation of Prior Agreements; Amendments. this Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior agreement or understanding pertaining to any such matter shall be effective. This Lease may be modified in writing only, signed by the parties in interest at the time of the modification. 16.8 Notices. Any notice required or permitted to be given hereunder shall be in writing and may be served personally or by 12 regular mail, addressed to Lessor and Lessee respectively at the addresses set forth after their signatures at the end of this Lease. 16.9 Waivers. No waiver by Lessor of any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Lessee of the same or any other provision. Lessor's consent to or approval of any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to or approval of any subsequent act by Lessee. The acceptance of rent hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of any provision hereof, other than the failure of Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge of such preceding reach at the time of acceptance of such rent. 16.10 Recording. Lessee shall not record this Lease without Lessor's prior written consent, and such recording shall, at the option of Lessor, constitute a non-curable default of Lessee hereunder. Either party shall, upon request of the other, execute, acknowledge and deliver to the other a "short form" memorandum of this Lease for recording purposes. 16.11 Holding Over. If Lessee remains in possession of the Premises or any part thereof after the separation of the term hereof without the express written consent of Lessor, such occupancy shall be a tenancy from month to month at a rental in the amount of the last monthly rental plus all other charges payable hereunder, and upon all the terms hereof applicable to a month-to-month tenancy. 16.12 Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, whenever possible, be cumulative with all other remedies at law or in equity. 16.13 Covenants and Conditions. Each provision of this Lease performable by lessee shall be both a covenant and as condition. 16.14 Binding Effect: choice of Law. Subject to any provisions hereof restricting assignment or subletting by Lessee and subject to the provisions of Paragraph 16.2, this Lease shall bind the parties, their personal representatives, successors and assigns. This Lease shall be governed by the Laws of the State of California. 13 16.15 Subordination. (a) This Lease, at Lessor's option, shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation for security now or hereafter placed upon the real property of which the Premises are a part and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination. Lessee's right to quiet possession of the Premises shall not be disturbed if Lessee is not in default and so long as Lessee shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect to have this Lease prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Lessee, this Lease shall be deemed prior to such mortgage, deed of trust or ground lease, whether this Lease is dated prior or subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof. (b) Lessee agrees to execute any documents required to effectuate such subordination or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be, and failing to do so within ten (10) days after written demand, does hereby make, constitute and irrevocably appoint Lessor as Lessee's attorney in fact and in Lessee's name, place and stead, to do so. 16.16 Attorney's Fees. If either party or the broker named herein brings an action to enforce the terms hereof or declare rights hereunder the prevailing party in any such action, on trial or appeal, shall be entitled to this reasonable attorney's fees to be paid by the losing party as fixed by the court. The provisions of this paragraph shall inure to the benefit or the broker named herein who seeks to enforce a right hereunder. 16.17 Lessor's Access. Lessor and Lessor's agents shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, showing the same to prospective purchases, or lenders, and making such alterations, repairs, or additions to the Premises or to the building of which they are a part as lessor may deem necessary or desirable. Lessor may at any time place on or about the Premises any ordinary "For Sale" signs and Lessor may at any time during the last 120 days of the term hereof place on or about the Premises any ordinary "For Lease" signs, all without rebate of rent or liability to Lessee. 14 16.18 Signs and Auctions. Lessee shall not place any sign upon the Premises or conduct any auction thereon without Lessor's prior written consent. 16.19 Merger. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Lessor, terminate all or any existing subtenancies or may, at the option of Lessor, operate as an assignment to Lessor of any or all of such subtenancies. 16.20 Corporate Authority. If Lessee is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation. 17.1 Payment of Taxes. Lessee shall pay the real property tax as defined in paragraph 10.2, applicable to the Premises during the term of this Lease. All such payments shall be made at least ten (10) days prior to the delinquency date of such payment. Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes have been paid. If any such taxes paid by Lessee shall cover any period of time prior to or after the expiration term thereof, Lessee's share of such taxes shall be equitably prorated to cover only the period of time within the tax fiscal year during which this Lease shall be in effect and Lessor shall reimburse Lessee to the extent required. If Lessee shall fail to pay any such taxes, Lessor shall have the right to pay the same, in which case Lessee shall repay such amount to Lessor with Lessee's next rent installments together with interest at the maximum rate then allowable by law. 17.2 Definitions of "Real Property Tax". As said herein, the term "real Property tax" shall include any form of real estate tax or assessments, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax (other than interference, personal income or estate taxes) imposed on the Premises by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, agricultural, street, drainage or other improvement district thereof, as against any legal or equitable interest of Lessor in the Premises or in the real property of which the Premises are a part, as against Lessor's right to rent or other income therefrom, and as against Lessor's business of leasing the Premises. The term "real property tax" shall also include any tax, fee, levy, assessment or charge (i) in substitution of, partially or totally, any tax, fee, levy, 15 assessment or charge herein above included within the definition of "real property tax" or (ii) the nature of which was hereinbefore included with the definition of "real property tax", or (iii) which is imposed for a service or right not charged prior to June 1, 1978, or, if previously charged, has been increased since June 1, 1978, or (iv) which is imposed as a result of a transfer, either partial or total of Lessor's interest in the Premises or which is added to a tax or charge hereinbefore included within the definition of real property tax by reason of such transfer, or (v) which is imposed by reason of this transaction, any modification or charges hereto or any transfers hereof. The parties hereto have executed this Lease at the place and on the dates specified immediately adjacent to their respective signatures. FIRST DICE COMPANY, A CALIFORNIA LIMITED PARTNERSHIP By: WESTERN MAGNESIUM CORP., General Partner By: /s/ Jack C. Bendheim -------------------- Jack C. Bendheim, President "Lessor" Executed at Epstein, Epstein, Brown & Bosch on June 30, 1995. Address: 245 Green Village Rd., Chatham, N.J. 07928-0901 PHIBRO-TECH, INC. By: /s/ Nathan Bistricer -------------------- V.P. CFO "Lessee" Executed at Epstein, Epstein, Brown & Bosch on June 30, 1995. Address: 245 Green Village Rd., Chatham, N.J. 07928-0901 16 DESCRIPTION SCHEDULE "A" PARCEL 1 OF THE PARCEL MAP 16989, IN THE CITY OF SANTA FE SPRINGS, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 181 PAGE 76 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. ALSO, THAT PORTION OF DICE ROAD AS SHOWN ON PARCEL MAP NO. 16589, IN THE CITY OF SANTA FE SPRINGS, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, FILED IN BOOK 181 PAGE 76 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY AS DESCRIBED IN THE DEED TO THE CITY OF SANTA FE SPRINGS, RECORDED JULY 26, 1968 AS INSTRUMENT NO. 2723 OF OFFICIAL RECORDS OF SAID COUNTY, BOUNDED IN THE NORTH BY THE EASTERLY PROLONGATION OF THAT CERTAIN COURSE IN THE NORTHERLY BOUNDARY OF SAID PARCEL MAP NO. 16989 AS HAVING A BEARING AND LENGTH OF "NORTH 78 DEGREES 25 MINUTES 00 SECONDS WEST 349.97 FEET" AND BOUNDED ON THE SOUTH BY THE EASTERLY PROLONGATION OF THE SOUTHERLY LINE OF SAID PARCEL MAP NO. 16589. EXCEPT THEREFROM THE PROPERTY HEREBY CONVEYED THAT PORTION THEREOF LYING BELOW A DEPTH OF 500 FEET, MEASURED VERTICALLY, FROM THE CONTOUR OF THE SURFACE OF SAID PROPERTY; HOWEVER, GRANTOR, OR ITS SUCCESSORS AND ASSIGNS, SHALL NOT HAVE THE RIGHT FOR ANY PURPOSE WHATSOEVER TO ENTER UPON, INTO OR THROUGH THE SURFACE OF SAID PROPERTY OR ANY PART THEREOF LYING BETWEEN SAID SURFACE AND 500 FEET BELOW SAID SURFACE, AS SHOWN IN DEED RECORDED OCTOBER 24, 1985 AS INSTRUMENT NO. 85-1254948. 17 FIRST AMENDMENT TO LEASE THIS FIRST AMENDMENT TO LEASE is made and entered into this ____ day of May, 1998 by and between First Dice Road Company, a California Limited Partnership ("Landlord") and Phibro-Tech, Inc., a Delaware corporation ("Tenant") WHEREAS, Landlord and Tenant entered into a certain lease dated June 30, 1995 (the "Lease") pursuant to which Landlord leased to Tenant the Demised Premises set forth on Schedule A annexed to the Lease; and WHEREAS, Landlord and Tenant have agreed to amend the Lease; NOW, THEREFORE, for $10.00 and other good and valuable consideration, the receipt and legal adequacy of which are hereby acknowledged, the parties do hereby agree as follows: 1. The term of the Lease, originally scheduled to expire on June 29, 2005, is hereby extended through December 31, 2008; 2. Except as modified hereby, the Lease is unamended and shall continue in full force and effect, and the parties hereto ratify all the terms and conditions of the Lease; and 3. This First Amendment to Lease may be executed in counterparts, each of which shall be deemed an original, but all of which shall be deemed part of one and the same instrument. FIRST DICE COMPANY Witness: a California Limited Partnership /s/ Joseph M. Katzenstein By: Western Magnesium Corp. - --------------------------- its general partner By: /s/ Jack C. Bendheim ------------------------------- Jack C. Bendheim Witness: PHIBRO-TECH, INC. /s/ Joseph M. Katzenstein - --------------------------- By: /s/ I. David Paley ------------------------------- Name: I. David Paley ------------------------ Title: CEO ------------------------ EX-10.11 14 0014.txt MASTER LEASE AGREEMENT BETWEEN GENERAL ELECTRIC CAPITAL CORP., PHILIPP BROTHERS CHEMICALS, INC. AND PHIBRO-TECH, INC. MASTER LEASE AGREEMENT (Quasi) THIS MASTER LEASE AGREEMENT, dated as of 2/27/98 ("Agreement"), between General Electric Capital Corporation, with an office at 44 Old Ridgebury Road, Danbury, CT, 06810-5105 (hereinafter called, together with its successors and assigns, if any, "Lessor"), and Philip Brothers Chemicals, Inc. & Phibro-Tech, Inc. a corporation(s) organized and existing under the laws of the State of New Jersey with their mailing address and chief place of business at One Parker Plaza, Fort Lee, NJ 07024 (each jointly and severally being a "Lessee" and collectively hereinafter called "Lessee"). WITNESSETH: I. LEASING: (a) Subject to the terms and conditions set forth below, Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the equipment ("Equipment") described in Annex A to any schedule hereto ("Schedule"). Terms defined in a Schedule and not otherwise defined herein shall have the meanings ascribed to them in such Schedule. (b) The obligation of Lessor to purchase Equipment from the manufacturer or supplier thereof ("Supplier") and to lease the same to Lessee under any Schedule shall be subject to receipt by Lessor, prior to the Lease Commencement Date (with respect to such Equipment), of each of the following documents in form and substance satisfactory to Lessor: (i) a Schedule relating to the Equipment then to be leased hereunder, (ii) paid in full invoice or other evidence of ownership of the Equipment, (iii) evidence of insurance which complies with the requirements of Section IX and (iv) such other documents as Lessor may reasonably request. As a further condition to such obligations of Lessor, Lessee shall, upon delivery of such Equipment (but not later than the Last Delivery Date specified in the applicable Schedule) execute and deliver to Lessor a Certificate of Acceptance (in the form of Annex C to the applicable Schedule) covering such Equipment. Lessor hereby appoints Lessee its agent for inspection and acceptance of the Equipment from the Supplier. Upon execution by Lessee of any Certificate of Acceptance, the Equipment described thereon shall be deemed to have been delivered to, and irrevocably accepted by, Lessee for lease hereunder. II. TERM, RENT AND PAYMENT: (a) The rent payable hereunder and Lessee's right to use the Equipment shall commence on the date of execution by Lessee of the Certificate of Acceptance for such Equipment ("Lease Commencement Date"). The term of this Agreement shall be the period specified in the applicable Schedule. If any term is extended, the word "term" shall be deemed to refer to all extended terms, and all provisions of this Agreement shall apply during any extended terms, except as may be otherwise specifically provided in writing. (b) Rent shall be paid to Lessor at its address stated above, except as otherwise directed by Lessor. Payments of rent shall be in the amount set forth in, and due in accordance with, the provisions of the applicable Schedule. If one or more Advance Rentals are payable, such Advance Rental shall be (a) set forth on the applicable Schedule, (ii) due upon acceptance by Lessor of such Schedule, and (iii) when received by Lessor, applied to the first rent payment and the balance, if any, to the final rental payment(s) under such Schedule. In no event shall any Advance Rental or any other rent payments be refunded to Lessee. If rent is not paid within ten days of its due date, Lessee agrees to pay a late charge of five cents ($0.05) per dollar on, and in addition to, the amount of such rent but not exceeding the lawful maximum, if any. III. TAXES: Lessee shall have no liability for taxes imposed by the United States of America or any State or political subdivision thereof which are on or measured by the net income of Lessor. Lessee shall report (to the extent that it is legally permissible) and pay promptly all other taxes, fees and assessments due, imposed, assessed or levied against any Equipment (or the purchase, ownership, delivery, leasing, possession, use or operation thereof), this Agreement (or any rentals or receipts hereunder), any Schedule, Lessor or Lessee by any foreign, federal, state or local government or taxing authority during or related to the term of this Agreement including, without limitation, all license and registration fees, and all sales, use, personal property, excise, gross receipts, franchise, stamp or other taxes, imposts, duties and charges, together with any penalties, fines or interest thereon (all hereinafter called "Taxes"). Lessee shall (i) reimburse Lessor upon receipt of written request for reimbursement for any Taxes charged to or assessed against Lessor, (ii) on request of Lessor, submit to Lessor written evidence of Lessee's payment of Taxes, (iii) send a copy thereof to Lessor. IV. REPORTS: (a) Lessee will notify Lessor in writing, within ten days after any tax or other lien shall attach to any Equipment, of the full particulars thereof and of the location of such Equipment on the date of such notification. (b) Lessee will within 90 days of the close of each fiscal year of Lessee, deliver to Lessor, Lessee's balance sheet and profit and loss statement, certified by a recognized firm of certified public accountants. Upon request Lessee will deliver to Lessor quarterly, within 90 days of the close of each fiscal quarter of Lessee, in reasonable detail, copies of Lessee's quarterly financial report certified by the chief financial officer of Lessee. (c) Lessee will permit Lessor to inspect any Equipment during normal business hours. (d) Lessee will keep the Equipment at the Equipment Location (specified in the applicable Schedule) and will promptly notify Lessor of any relocation of Equipment. Upon the written request of Lessor, Lessee will notify Lessor forthwith in writing of the location of any Equipment as of the date of such notification. (e) Lessee will promptly and fully report to Lessor in writing if any Equipment is lost or damaged (where the estimated repair costs would exceed 10% of its then fair market value), or is otherwise involved in an accident causing personal injury or property damage. If within 60 days after any request by Lessor, Lessee will furnish a certificate of an authorized officer of Lessee stating that he has reviewed the activities of Lessee and that, to the best of his knowledge, there exists no default (as described in Section XI) or event which with notice or lapse of time (or both) would become such a default. V. DELIVERY, USE AND OPERATION: (a) All Equipment shall be shipped directly from the Supplier to Lessee. (b) Lessee agrees that the Equipment will be used by Lessee solely in the conduct of its business and in a manner complying with all applicable federal, state, and local laws and regulations. (c) LESSEE SHALL NOT ASSIGN, MORTGAGE, SUBLET OR HYPOTHECATE ANY EQUIPMENT, OR THE INTEREST OF LESSEE HEREUNDER, NOR SHALL LESSEE REMOVE ANY EQUIPMENT FROM THE CONTINENTAL UNITED STATES, WITHOUT THE PRIOR WRITTEN CONSENT OF THE LESSOR. (d) Lessee will keep the Equipment free and clear of all liens and encumbrances other than those which are granted in favor of or result from acts of Lessor. VI. SERVICE: (a) Lessee will, at its sole expense, maintain each unit of Equipment in good operating order, repair, condition and appearance in accordance with manufacturer's recommendations, normal wear and tear excepted. Lessee shall, if at any time requested by Lessor, affix in a prominent position on each unit of Equipment plates, tags or other identifying labels showing ownership thereof by Lessee and Lessor's security interest therein. (b) Lessee will not, without the prior consent of Lessor, affix or install any accessory, equipment or device on any Equipment if such addition will impair the originally intended function or use of such Equipment. All additions, repairs, parts, supplies, accessories, equipment and devices furnished, attached or affixed to any Equipment which are not readily removable shall be made only in compliance with applicable law, and shall become subject to the lien of Lessor. Lessee will not, without the prior written consent of Lessor and subject to such conditions as Lessor may impose for its protection, affix or install any Equipment to or in any other personal or real property. (c) Any alterations or modifications to the Equipment that may, at any time during the term of this Agreement, be required to comply with any applicable law, rule or regulation shall be made at the expense of Lessee. VII. STIPULATED LOSS VALUE: Lessee shall promptly and fully notify Lessor in writing if any unit of Equipment shall be or become worn out, lost, stolen, destroyed, irreparably damaged in the reasonable determination of Lessee, or permanently rendered unfit for use from any cause whatsoever (such occurrences being hereinafter called "Casualty Occurrences"). On the rental payment date next succeeding a Casualty Occurrence (the "Payment Date"), Lessee shall pay Lessor the sum of (x) the Stipulated Loss Value of such unit calculated as of the rental payment date next preceding such Casualty Occurrence ("Calculation Date"); and (y) all rental and other amounts which are due hereunder as of the Payment Date. Upon payment of all sums due hereunder, the term of this lease as to such unit shall terminate and (except in the case of the loss, theft or complete destruction of such unit) Lessor shall be entitled to recover possession of such unit. VIII. LOSS OR DAMAGE: Lessee hereby assumes and shall bear the entire risk of any loss, theft, damage to, or destruction of, any unit of Equipment from any cause whatsoever from the time the Equipment is shipped to Lessee. IX. INSURANCE: Lessee agrees, at its own expense, to keep all Equipment insured for such amounts and against such hazards as Lessor may require, including, but not limited to, insurance for damage to or loss of such Equipment and liability coverage for personal injuries, death or property damage, with Lessor named as additional insured and with a loss payable clause in favor of Lessor, as its interest may appear, irrespective of any breach of warranty or other act or omission of Lessee. The insurance shall provide (i) liability coverage in an amount equal to at least ONE MILLION U.S. DOLLARS ($1,000.000.00) total liability per occurrence, and (ii) casualty/property damage coverage in an amount equal to the higher of the Stipulated Loss value or the full replacement cost of the Equipment, or at such other amounts as may be required by Lessor All such policies shall be with companies, and on terms, satisfactory to Lessor. Lessee agrees to deliver to Lessor evidence of insurance satisfactory to Lessor. No insurance shall be subject to any co-insurance clause. Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make proof of loss and claim for insurance, and to make adjustments with insurers and to receive payment of and execute or endorse all documents, checks or drafts in connection with payments made as a result of such insurance policies. Any expense of Lessor in adjusting or collecting insurance shall be borne by Lessee. Lessee will not make adjustments with insurers except (i) with respect to claims for damage to any unit of Equipment where the repair costs do not exceed 10% of such unit's fair market value, or (ii) with Lessor's written consent. Said policies shall provide that the insurance may not be altered or canceled by the insurer until after thirty (30) days written notice to Lessor. Lessor may, at its option, apply proceeds of insurance, in whole or in part, to (i) repair or replace Equipment or any portion thereof, or (ii) satisfy any obligation of Lessee to Lessor hereunder. X. RETURN OF EQUIPMENT: (a) Upon any expiration or termination of this Agreement or any Schedule, Lessee shall promptly, at its own cost and expense: (i) perform any testing and repairs required to place the affected units of Equipment in the same condition and appearance as when received by Lessee (reasonable wear and tear excepted) and in good working order for their originally intended purpose; (ii) if reinstallation, disassembly or crating is required, cause such units to be reinstalled, disassembled and crazed by an authorized manufacturer's representative or such other service person as is satisfactory to Lessor, and (iii) return such units to a location within the continental United States as Lessor shall direct. (b) Until Lessee has fully complied with the requirements of Section X(a) above, Lessee's rent payment obligation and all other obligations under this Agreement shall continue from month to month notwithstanding any expiration or termination of the lease term. Lessor may terminate such continued leasehold interest upon ten (10) days notice to Lessee. XI. DEFAULT: (a) Lessor may in writing declare this Agreement in default if Lessee breaches its obligation to pay rent or any other sum when due and fails to cure the breach within ten (10) days; Lessee breaches any of its insurance obligations under Section I; Lessee breaches any of its other obligations to Lessor hereunder or under any instrument, document or agreement between Lessor and Lessee and fails to cure that breach within thirty (30) days after written notice thereof; any representation or warranty made by Lessee in connection with this Agreement shall be false or misleading in any material respect; Lessee becomes insolvent or ceases to do business as a going concern; any Equipment is illegally used; or a petition is filed by or against Lessee under any bankruptcy or insolvency laws. Such declaration shall apply to all Schedules except as specifically excepted by Lessor. (b) After default, at the request of Lessor, Lessee shall comply with the provisions of Section X(a). Lessee hereby authorizes Lessor to enter, with or without legal process, any premises where any Equipment is believed to be and take possession thereof. Lessee shall, without further demand, forthwith pay to Lessor (i) as liquidated damages for loss of a bargain and not as a penalty, the Stipulated Loss Value of the Equipment (calculated as of the rental next preceding the declaration of default), and (ii) all rentals and other sums then due hereunder. Lessor may, but shall not be required to, sell Equipment at private or public sale, in bulk or in parcels, with or without notice, and without having the Equipment present at the place of sale; or Lessor may, but shall not be required to, lease, otherwise dispose of or keep idle all or part of the Equipment; and Lessor may use Lessees, premises for any or all of the foregoing without liability for rent, costs, damages or otherwise. The proceeds of sale, lease or other disposition, if any, shall be applied in the following order of priorities: (1) to pay all of Lessor's costs, charges and expenses incurred in taking, removing, holding, repairing and selling, leasing or otherwise disposing of Equipment; then, (2) to the extent not previously paid by Lessee, to pay Lessor all sums due from Lessee hereunder; then (3) to reimburse to Lessee any sums previously paid by Lessee as liquidated damages; and (4) any surplus shall be retained by Lessor. Lessee shall pay any deficiency in (1) and (2) forthwith. (c) The foregoing remedies are cumulative, and any or all thereof may be exercised in lieu of or in addition to each other or any remedies at law, in equity, or under statute. Lessee waives notice of sale or other disposition (and the time and place thereof), and the manner and place of any advertising. Lessee shall pay Lessor's actual attorney's fees incurred in connection with the enforcement, assertion, defense or preservation of Lessor's rights and remedies hereunder, or if prohibited by law, such lesser sum as may be permitted. Waiver of any default shall not be a waiver of any other or subsequent default. Any default under the terms of this or any other agreement between Lessor and Lessee may be declared by Lessor a default under this and any such other agreement. XII. ASSIGNMENT: Lessor may, without the consent of Lessee, assign this Agreement or any Schedule. Lessee agrees that if Lessee receives written notice of an assignment from Lessor, Lessee will pay all rent and other amounts payable under any assigned Equipment Schedule to such assignee or as instructed by Lessor. Lessee further agrees to confirm in writing receipt of a notice of assignment as may be reasonably requested by assignee. Lessee hereby waives and agrees not to assert against any such assignee any defense, set-off, recoupment claim or counterclaim which Lessee has or may at any time have against Lessor for any reason whatsoever. XIII. NET LEASE; NO SET-OFF, ETC: This Agreement is a net lease. Lessee's obligation to pay rent and other amounts due hereunder shall be absolute and unconditional. Lessee shall not be entitled to any abatement or reductions of, or set-offs against, said rent or other amounts, including, without limitation, those arising or allegedly arising out of claims (present or future, alleged or actual, and including claims arising out of strict tort or negligence of Lessor) of Lessee against Lessor under this Agreement or otherwise. Nor shall this Agreement terminate or the obligations of Lessee be affected by reason of any defect in or damage to, or loss of possession, use or destruction of, any Equipment from whatsoever cause. It is the intention of the parties that rents and other amounts due hereunder shall continue to be payable in all events in the manner and at the times set forth herein unless the obligation to do so shall have been terminated pursuant to the express terms hereof. XIV. INDEMNIFICATION: (a) Lessee hereby agrees to indemnify, save and keep harmless Lessor, its agents, employees, successors and assigns from and against any and all losses, damages, penalties, injuries, claims, actions and suits, including legal expenses, of whatsoever kind and nature, in contract or tort, whether caused by the active or passive negligence of Lessor or otherwise, and including, but not limited to, Lessor's strict liability in tort, arising out of (i) the selection, manufacture, purchase, acceptance or rejection of Equipment, the ownership of Equipment during the term of this Agreement, and the delivery, lease, possession, maintenance, uses, condition, return or operation of Equipment (including, without limitation, latent and other defects, whether or not discoverable by Lessor or Lessee and any claim for patent, trademark, copyright infringement or environmental damage) or (ii) the condition of Equipment sold or disposed of after use by Lessee, any sublease or employees of Lessee. Lessee shall, upon request, defend any actions based on, or arising out of, any of the foregoing. (b) All of Lessor's rights, privileges and indemnities contained in this Section XIV shall survive the expiration or other termination of this Agreement and the rights, privileges and indemnities contained herein are expressly made for the benefit of and shall be enforceable by Lessor, its successors and assign. XV. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, With RESPECT TO THE EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as between Lessor and Lessee, are to be borne by Lessee. Without limiting the foregoing, Lessor shall have no responsibility or liability to Lessee or any other person with respect to any of the following, regardless of any negligence of Lessor (i) any liability, loss or damage caused or alleged to be caused directly or indirectly by any Equipment, any inadequacy thereof, any deficiency or defect (latent or otherwise) therein, or any other circumstance in connection therewith; (ii) the use, operation or performance of any Equipment or any risks relating thereto; (iii) any interruption of service, loss of business or anticipated profits or consequential damages; or (iv) the delivery, operation, servicing, maintenance, repair, improvement or replacement of any Equipment. If, and so long as, no default exists under this Lease, Lessee shall be, and hereby is, authorized during the term of this Lease to assert and enforce, at Lessee's sole cost and expense, from time to time, in the name of and for the account of Lessor and/or Lessee, as their interests may appear, whatever claims and rights Lessor may have against any Supplier of the Equipment. XVI. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee hereby represents and warrants to Lessor that on the date hereof and on the date of execution of each Schedule: (a) Lessee has adequate power and capacity to enter into, and perform under, this Agreement and all related documents (together, the "Documents") and is duly qualified to do business wherever necessary to carry on its present business and operations, including the jurisdiction(s) where the Equipment is or is to be located. (b) The Documents have been duly authorized, executed and delivered by Lessee and constitute valid, legal and binding agreements, enforceable in accordance with their terms, except to the extent that the enforcement of remedies therein provided may be limited under applicable bankruptcy and insolvency laws. (c) No approval, consent or withholding of objections is required from any governmental authority or instrumentality with respect to the entry into or performance by Lessee of the Documents except such as have already been obtained. (d) The entry into and performance by Lessee of the Documents will not: (i) violate any judgment, order, law or regulation applicable to Lessee or any provision of Lessee's Certificate of Incorporation or by-laws; or (ii) result in any breach of, constitute a default under or result in the creation of any lien, charge, security interest or other encumbrance upon any Equipment pursuant to any indenture, mortgage, deed of trust, bank loan or credit agreement or other instrument (other than this Agreement) to which Lessee is a party. (e) There are no suits or proceedings pending or threatened in court or before any commission, board or other administrative agency against or affecting Lessee, which will have a material adverse effect on the ability of Lessee to fulfill its obligations under this Agreement. (F) The Equipment accepted under any Certificate of Acceptance is and will remain tangible personal property. (g) Each Balance Sheet and Statement of Income delivered to Lessor has been prepared in accordance with generally accepted accounting principles, and since the date of the most recent such Balance Sheet and Statement of Income, there has been no material adverse change. (h) Lessee is and will be at all times validly existing and in good standing under the laws of the State of its incorporation (specified in the first sentence of this Agreement). (i) The Equipment will at all times be used for commercial or business purposes. XVII. OWNERSHIP FOR TAX PURPOSES, GRANT OF SECURITY INTEREST; USURY SAVINGS: (a) For income tax purposes, the parties hereto agree that it is their mutual intention that Lessee shall be considered the owner of the Equipment. Accordingly, Lessor agrees (i) to treat Lessee as the owner of the Equipment on its federal income tax return, (ii) not to take actions or positions inconsistent with such treatment on or with respect to its federal income tax return, and (iii) not to claim any tax benefits available to an owner of the Equipment on or with respect to its federal income tax return. The foregoing undertakings by Lessor shall not be violated by Lessor's taking a tax position inconsistent with the forgoing sentence to the extent such a position is required by law or is taken through inadvertence so long as such inadvertent tax position is reversed by Lessor promptly upon its discovery. Lessor shall in no event be liable to Lessee if Lessee fails to secure any of the tax benefits available to the owner of the Equipment. (b) Lessee hereby grants to Lessor a first security interest in the Equipment, together with all additions, attachments, accessions, accessories and accessions thereto whether or not furnished by the Supplier of the Equipment and any and all substitutions, replacements or exchanges therefor, and any and all insurance and/or other proceeds of the property in and against which a security interest is granted hereunder. Notwithstanding anything to the contrary contained elsewhere in this Agreement, to the extent that Lessor asserts a purchase money security interest in any items of Equipment ("PMSI Equipment"): (i) the PMSI Equipment shall secure only those sums which have been advanced by Lessor for the purchase of the PMSI Equipment, or the acquisition of rights therein, or the use thereof (the "PMSI Indebtedness"), and (ii) no other Equipment shall secure the PMSI Indebtedness. (c) It is the intention of the parties hereto to comply with any applicable usury laws to the extent that any Schedule is determined to be subject to such laws, accordingly, it is agreed that, notwithstanding any provision to the contrary in any Schedule or the Lease, in no event shall any Schedule require the payment or permit the collection of interest in excess of the maximum amount permitted by applicable law. If any such excess interest is contracted for, charged or received under any Schedule or the Lease, or in the event that all of the principal balance shall be prepaid so that under any of such circumstances the amount of interest contracted for, charged or received under any Schedule or the Lease shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern and control, (b) neither Lessee nor any other person or entity now or hereafter Liable for the payment hereof shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Lessee, at the option of the Lessor, and (d) the effective rate of interest shall be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under any Schedule or the Lease which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Lessee or otherwise by Lessor in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for Lessor to receive a greater interest per annum rate than is presently allowed, the Lessee agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by the amended state law or the law of the United States of America. XVIII. EARLY TERMINATION: (a) On or after the First Termination Date (specified in the applicable Schedule), Lessee may, so long as no default exists hereunder, terminate this Agreement as to all (but not less than all) of the Equipment on such Schedule as of a Rent Payment Date ("Termination Date") upon at least 90 days prior written notice to Lessor. (b) Lessee shall, and Lessor may, solicit cash bids for the Equipment on an AS IS, WHERE IS BASIS without recourse to or warranty from Lessor, express or implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall (i) certify to Lessor any bids received by Lessee and (ii) pay to Lessor (A) the Termination Value (calculated as of the rental due on the Termination Date) for the Equipment, and (B) all rent and other sums due and unpaid as of the Termination Date. (c) Provided that all amounts due hereunder have been paid on the Termination Date, Lessor shall (i) sell the Equipment on an AS IS BASIS for cash to the highest bidder and (ii) refund the proceeds of such sale (net of any related expenses) to Lessee up to the amount of the Termination Value. If such sale is not consummated, no termination shall occur and Lessor shall refund the Termination Value (less any expenses incurred by Lessor) to Lessee. (d) Notwithstanding the foregoing, Lessor may elect by written notice, at any time prior to the Termination Date, not to sell the Equipment. In that event, on the Termination Date Lessee shall (i) return the Equipment (in accordance with Section X) and (ii) pay to Lessor all amounts required under Section XVIII(b) less the amount of the highest bid certified by Lessee to Lessor. XIX. EARLY PURCHASE OPTION: (a) Provided that the Lease has not been earlier terminated and provided further that Lessee is not in default under the Lease or any other agreement between Lessor and Lessee. Lessee may, UPON AT LEAST 30 DAYS BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO LESSOR OF LESSEE'S IRREVOCABLE ELECTION TO EXERCISE SUCH OPTION, purchase all (but not less than all) of the Equipment listed and described in this schedule on any Rent Payment Date following the First Termination Date as set forth in this Schedule, and prior to the date which is the scheduled expiration of this Lease, (the "Early Purchase Date") for a price equal to (i) the Termination Value (calculated as of the Early Purchase Date) for the Equipment, and (ii) all rent and other sums due and unpaid as of the Purchase Date (the "Early Option Price"), plus all applicable sales taxes on an AS IS BASIS. (The purchase option granted by this subsection shall be referred to herein as the "Early Purchase Option"). (b) If Lessee exercises its Early Purchase Option with respect to the Equipment leased hereunder, then on the Early Purchase Date, Lessee shall pay to Lessor any rent and other sums due and unpaid on the Early Purchase Date and Lessee shall pay the Early Option Price, plus all applicable sales taxes, to Lessor in cash. XX. PURCHASE OPTION: a. So long as no default exists hereunder and the lease has not been earlier terminated, Lessee may at lease expiration purchase all (but not less than all) of the Equipment in any Schedule on an AS IS, WHERE IS BASIS for cash equal to the amount indicated in such Schedule (the "Option Payment"). The Option Payment shall be due and payable in immediately available funds on the Expiration Date. (b) Lessee shall be deemed to have waived this option unless it provides Lessor with written notice of its irrevocable election to exercise the same not less than 90 days prior to the Expiration Date. XXI. MISCELLANEOUS: (a) LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. The scope of this waiver is intended to be all encompassing of any and all disputes that may be filed in any court (including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the event of litigation. this Lease may be filed as a written consent to a trial by the court (b) Unless and until Lessee exercises its rights under Section XIX above, nothing herein contained shall give or convey to Lessee any right, title or interest in and to any Equipment except as a lessee. Any cancellation or termination by Lessor, pursuant to the provision of this Agreement. Any Schedule, supplement or amendment hereto, or the lease of any Equipment hereunder, shall not release Lessee from any then outstanding obligations to Lessor hereunder. All Equipment shall as all times remain personal property of Lessor regardless of the degree of its annexation to any real property and shall not by reason of any installation in, or affixation to, real or personal property become a part thereof. (c) Time is of the essence of this Agreement, Lessor's failure at any time to require strict performance by Lessee of any of the provisions hereof shall not waive or diminish Lessor's right thereafter to demand strict compliance therewith. Lessee agrees, upon Lessor's request, to execute any instrument necessary or expedient for filing, recording or perfecting the interest of Lessor. All notices required to be given hereunder shall be deemed adequately given if sent by registered or certified mail to the addressee at its address stated herein, or at such other place as such addressee may have designated in writing. This Agreement and any Schedule and Annexes thereto constitute the entire agreement of the parties with respect to the subject master hereof. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO. /s/ /s/ ----------------------- initials (d) In case of a failure of Lessee to comply with any provision of this Agreement, Lessor shall have the right, but shall not be obligated to, effect such compliance, in whole or in part; and all moneys spent and expenses and obligations incurred or assumed by Lessor in effecting such compliance shall constitute additional rent due to Lessor within five days after the date Lessor sends notice to Lessee requesting payment. Lessor's effecting such compliance shall not be a waiver of Lessee's default. (e) Any rent or other amount not paid to Lessor when due hereunder shall bear interest, both before and after any judgment or termination hereof, at the lesser of eighteen percent per annum or the maximum rate allowed by law. Any provisions in this Agreement and any Schedule which are in conflict with any statute, law or applicable rule shall be deemed omitted, modified or altered to conform thereto. IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be executed by their duly authorized representatives as of the date first above written. LESSOR: LESSEE: General Electric Capital Corporation Philip Brothers Chemicals, Inc. By: /s/ James R. Giaquinto By: /s/ Joseph M Katzenstein -------------------------------- ------------------------------ Name: James R. Giaquinto Name: J. Katzenstein ----------------------------- --------------------------- Title: Risk Analyst Title: Treas --------------------------- LESSEE: Phibro-Tech, Inc. By: /s/ Joseph M. Katzenstein ------------------------------ Name: J. Katzenstein --------------------------- Title: Treas -------------------------- VEHICLE SCHEDULE SCHEDULE NO. 1 DATED THIS 2/27/98 TO MASTER LEASE AGREEMENT DATED AS OF 2/27/98 Lessor & Mailing Address: General Electric Capital Corporation Old Ridgebury Road Danbury, CT 06810-5105 Lessee & Mailing Address: Philip Brothers Chemicals, Inc. One Parker Plaza Fort Lee, NJ 07024 & Phibro-Tech,Inc.44 One Parker Plaza Fort Lee, NJ07024 Capitalized terms not defined herein shall have the meanings assigned to them in the Master Lease Agreement identified above ("Agreement"; said Agreement and this Schedule being collectively referred to as "Lease"). A. Equipment Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to Lessee the Equipment listed on Annex A attached hereto and made a part hereof. B. Financial Terms 1. Advance Rent (if any): $ Not Applicable. 2. Capitalized Lessor's Cost: $339,039.18. 3. Basic Terms, Lease Rate Factor: 2.063844%. 4. Daily Lease Rate Factor: 068795%. 5. Basic Term (No. of Months): 60. 6. Basic Term Commencement Date: 2/27/98. 7. Equipment Location: Various locations. 8. Lessee Federal Tax ID No: 131840-497. 9. Supplier: Acro Trailer, Comptank Corp., Freuhauf Trailer Service, Inc., Poly- Coat Systems, Inc., Sterling Fluid Systems, Inc. 10. Last Delivery Date: 2/27/98 11. First Termination Date: Thirty-six (36) months after the Basic Term Commencement Date. 12. Option Payment $1.00 13. Interest Rate: 8.77% per annum. 14. Lessee agrees and acknowledges that the Capitalized Lessor's Cost of the Equipment as stated on the Schedule is equal to the fair market value of the Equipment on the date hereof. C. Term and Rent 1 Interim Rent. For the period from and including the Lease Commencement Date to the Basic Term Commencement Date ("Interim Period"), Lessee shall pay as rent ("Interim Rent") for each unit of Equipment, the product of the Daily Lease Rate Factor times the Capitalized Lessor's Cost of such unit times the number of days in the Interim Period. Interim Rent shall be due on Not Applicable 2 Basic Term Rent. Commencing on 4/1/98 and on the same day of each month thereafter (each, a "Rent Payment Date") during the Basic Term, Lessee shall pay as rent ("Basic Term Rent") the product of the Basic Term, Lease Rate Factor times the Capitalized Lessor's Cost of all Equipment on this Schedule. 3 Adjustment to Capitalized Lessor's Cost. Lessee hereby irrevocably authorizes Lessor to adjust the Capitalized Lessor's Cost up or down by no more than 10% to account for equipment change orders, equipment returns, invoicing errors, and similar matters. Lessee acknowledges and agrees that the Rent shall be adjusted as a result of such change in the Capitalized Lessor's Cost (pursuant to paragraphs 1 and 2 above). Lessor shall send Lessee a written notice stating the final Capitalized Lessor's Cost, if different from that disclosed on this Schedule. D. Insurance I. Public Liability: $1,000,000 total liability per occurrence. 2 Casualty and Property Damage: An amount equal to the higher of the Stipulated Loss Value or the full replacement cost of the Equipment. E. Modifications and Additions to Agreement For purposes of this Schedule only, the Agreement is amended as follows: 1. The first sentence of Section IV(d) shall be deleted in its entirety and the following substituted in its stead: (d) Lessee will promptly notify Lessor in writing of a change in the Equipment Location in the event that any unit of Equipment fails to return to such location for a period of ninety consecutive days. 2. Section V(b) shall be amended to add the following sentence at the end thereof: Lessee will allow only qualified, properly licensed personnel selected, employed and controlled by Lessee to operate the Equipment. 3. Section X(a) shall be amended by adding the following at the end thereof: Without limiting the foregoing, upon return, each unit of Equipment must meet (i) all of manufactures specifications for performance under full, rated loads and (ii) all of the following conditions: (A) Tires: All tires shall be of the same type (original size) and manufacturer (i.e., matched) and have a minimum of fifty percent (50%) remaining tread on original or recapped casings (except that only original casings shall be allowed on the front tires of any power unity. (B) Mileage: In the case of GVW Class 1 through 5 vehicles, average annual mileage shall not exceed 15,000 miles, and in the ease of GVW Class 6 through 8 vehicles, average annual mileage shall not exceed 100,000 miles. Should mileage exceed these limits, the Lessee agrees to pay a mileage surcharge of five cents ($.05) per mile on GVW class 1-5 vehicles and four cents ($.04) per mile on GVW class 6-8 vehicles, for additional mileage exceeding such limits. All mileage determinations shall be based upon hubodometer readings or, in the absence thereof, by odometer readings. Lessee shall promptly notify Lessor of any malfunction of the hubodometer or odometer. (C) General Condition: With respect to each unit, the cost of necessary repairs for damages to exterior and interior material, may not exceed $250, provided any glass shall not be broken, chipped or cracked. All mechanical and electrical equipment, including radios, heaters, air conditioners and refrigeration units must be in proper operating condition. (D) Documents and Records: Upon return of a unit or units of Equipment, all maintenance records, maintenance record jackets, repair orders, license plates, registration certificates and all other similar documents, in their entirety, will be returned to Lessor. F. Interest Rate: interest shall accrue from the Lease Commencement Date through and including the date of termination of the Lease. Except as expressly modified hereby, all terms and provisions of the Agreement shall remain in full force and effect. This Schedule is not binding or effective with respect to the Agreement or Equipment until executed on behalf of Lessor and Lessee by authorized representatives of Lessor and Lessee, respectively. IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule to be executed by their duly authorized representatives as of the date first above written. LESSOR: LESSEE: General Electric Capital Corporation Philip Brothers Chemicals, Inc. By: /s/ James R. Giaquinto By: /s/ Joseph M. Katzenstein -------------------------------- ----------------------------- Name: James R. Giaqiunto Name: J. Katzenstein Title: Risk Analyst Title: Treasurer Attest: By: /s/ Janet Franco ----------------------------- Name: Janet Franco LESSEE: Phibro-Tech, Inc. By: Joseph M. Katzenstein --------------------- Name: J. Katzenstein Title: Treas ANNEX A TO SCHEDULE NO. 1 TO MASTER LEASE AGREEMENT DATED AS OF 2/27/98 DESCRIPTION OF EQUIPMENT
Capitalized Number Cost of Units Per Unit Manufacturer Serial Numbers Type and Model of Equipment One (1) $783 63.22 Acro Trailer Co. 1A91l422V1005036 1997 Semi-Tank Trailer 1 Model Tanker Above equipment location: 10 Industry Ave., Joliet, IL 60435 One (1) $73,290.82 Comptank Corp. 2C9LTA2B3VB075 115 1997 Vac Trailer Model DOT-E-l 1903-NVRP Above equipment location: 1000 N. First Street, Garland, TX 75040 One (1) $75,627.00 Comptank Corp. 2C9LTA2B2VB17S090 1997 Vac Trailer 1 Model DOT-S-I 1903-NVRP One (1) $27,229.00 Fruehauf 1JJF281FXWS44I306 1998 Trailer Model Platform Trailer One (1) $73,900.80 Polar 1PMC44323W2019060 1998 Trailer Model Tank Above equipment location: 8851 Dice Road, Santa Fe Springs, CA 90670 One (1) $l0,628.34 La Bour N/A Pump/Model LVAY.17
Above equipment location: Industrial Park, Highway 15 South, Sumter, SC 29150 INCLUDING ALL PROCEEDS, ATTACHMENTS, ACCESSORIES, ADDITIONS OR SUBSTITUTIONS NOW OWNED OR HEREAFTER ATTACHED THERETO OR MADE A PART HEREOF. The above is a complete list of the equipment and all attachments related to the equipment. Initials /s/ /s/ J. Katzenstein Lessor ------------------ Lessee /s/ J. Katzenstein ------------------ Lessee ANNEX C TO SCHEDULE NO. 1 TO MASTER LEASE AGREEMENT DATED AS OF 2/27/98 CERTIFICATE OF ACCEPTANCE To: General Electric Capital Corporation ("Lessor") Pursuant to the provisions of the above schedule and lease (collectively, the "Lease"), Lessee hereby certifies and warrants that (a) all Equipment listed in the related invoice is in good condition and appearance, installed (if applicable), and in working order, and (b) Lessee accepts the Equipment for all purposes of the Lease and all attendant documents. Lessee does further certify that as of the date hereof (i) Lessee is not in default under the Lease; and (ii) the representations and warranties made by Lessee pursuant to or under the Lease are true and correct on the date hereof. Philipp Brothers Chemicals, Inc. By: /s/ Joseph M. Katzenstein ------------------------- Title: Treas Dated: 2/27/98 Phibro-Tech, Inc. By: /s/ Joseph M. Katzenstein ------------------------- Title: Treas Dated: 2/27/98 ANNEX D TO SCHEDULE NO. 1 TO MASTER LEASE AGREEMENT DATED AS OF 2/27/98 STIPULATED LOSS AND TERMINATION VALUE TABLE stipulated termination loss payment value value number % of cost % of cost 1 101.666 105.572 2 100.321 104.179 3 98.967 102.776 4 97.603 101.362 5 96.230 99.939 6 94.846 98.506 7 93.452 97.063 8 92.048 95.610 9 90.633 94.146 10 89.209 92.673 11 87.774 91.188 12 86.328 89.694 13 84.872 88.188 14 83.405 86.673 15 81.928 85.146 16 80.440 83.609 17 78.941 82.060 18 77.431 80.501 19 75.910 78.931 20 74.378 77.350 21 72.835 75.758 22 71.280 74.154 23 69.714 72.539 24 68.137 70.912 25 66.548 69.274 26 64.948 67.625 27 63.336 65.964 28 61.712 64.291 29 60.077 62.606 30 58.429 60.909 Initials: /s/ /s/ Joseph M. Katzenstein --------- ------------------------- Lessor Lessee /s/ Joseph M. Katzenstein ------------------------- Lessee The Stipulated Loss Value or Termination Value for any unit of Equipment shall be equal to the Capitalized Lessor's Cost of such unit multiplied by the appropriate percentage derived from the above table. In the event that the Lease is for any reason extended, then the last percentage figure shown above shall control throughout any such extended term. ANNEX D TO SCHEDULE NO. 1 TO MASTER LEASE AGREEMENT DATED AS OF 2/27/98 STIPULATED LOSS AND TERMINATION VALUE TABLE stipulated termination loss payment value value number % of cost % of cost 31 56.769 59.201 32 55.098 57.480 33 53.414 55.747 34 51.718 54.001 35 50.009 52.244 36 48.288 50.474 37 46.555 48.691 38 44.809 46.895 39 43.050 45.087 40 41.278 43.266 41 39.493 41.433 42 37.696 39.586 43 35.885 37.726 44 34.061 35.853 45 32.224 33.966 46 30.373 32.066 47 28.509 30.153 48 26.631 28.226 49 24.739 26.285 50 22.834 24.331 51 20.915 22.362 52 18.982 20.380 53 17.034 18.384 54 15.073 16.373 55 13.097 14.348 56 11.107 12.309 57 9.102 10.255 58 7.083 8.186 59 5.049 6.103 60 3.000 4.005 Initials: /s/ /s/ Joseph M. Katzenstein ---------- ------------------------- Lessor Lessee /s/ Joseph M. Katzenstein ------------------------- Lessee The Stipulated Loss Value or Termination Value for any unit of Equipment shall be equal to the Capitalized Lessor's Cost or such unit multiplied by the appropriate percentage derived from the above table. In the event that the Lease is for any reason extended, then the last percentage figure shown above shall control throughout any such extended term. ADDENDUM TO SCHEDULE NO. I TO MASTER LEASE AGREEMENT (GPO) DATED AS OF 2/27/98 THIS ADDENDUM ("Addendum") amends and supplements the above referenced Schedule ("Schedule") between General Electric Capital Corporation ("Lessor"), and Philip Brothers Chemicals, Inc. & Phibro-Tech, Inc. ("Lessee"), and is hereby incorporated into the Schedule as though fully set forth therein. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Lease. 1. Lessee hereby irrevocably agrees to purchase the Equipment upon the expiration of the Basic Term. Lessee shall pay the Lessor the purchase price of $1.00 in cash for the Equipment, on or before 3/1/03. 2. The Equipment shall be sold to Lessee and possession made available to Lessee "As-Is" and Where-Is; Lessor will not make any representation or warranty, express or implied, including, but not limited to any warranty as to fitness for any particular or other purpose, merchantability or patent infringement, except that Lessor shall have the right to sell the Equipment and shall transfer to Lessee good title free and clear of any superior lien or encumbrance created by Lessor. Lessee is liable for any taxes payable as a result of this sale. Except as expressly modified hereby all terms and provisions of the Lease shall remain in full force and effect. This Addendum is not binding nor effective with respect to the Lease or the Equipment until executed on behalf of Lessor and Lessee by authorized representatives of Lessor and Lessee, respectively. IN WITNESS WHEREOF, Lessee and Lessor have caused this Addendum to be executed by their duly authorized representatives as of the date first above written. LESSOR: LESSEE: General Electric Capital Corporation Philip Brothers Chemicals, Inc. By: /s/ James R. Giaqiunto By: /s/ Joseph M. Katzenstein ---------------------- ------------------------- Name: James R. Giaquinto Name: J. Katzenstein Title: Risk Analyst Title: Treas Attest: By: /s/ Janet Franco --------------------------- Name: Janet Franco LESSEE: By: /s/ Joseph M. Katzenstein --------------------------- Name: J. Katzenstein Title: Treasurer Attest: By: /s/ Janet Franco --------------------------- Name: Janet Franco CROSS-COLLATERAL AND CROSS-DEFAULT AGREEMENT General Electric Capital Corporation 44 Old Ridgebury Road Danbury, CT 06810-5105 Gentlemen: You have entered into or purchased one or more conditional sale contracts, lease agreements, chattel mortgages, security agreements, notes and other chooses in action (herein designated "Accounts") arising from the bona fide sale or lease to us, by various vendors or lessors, of equipment and inventory (herein designated "Collateral") and/or you have made direct loans to or otherwise extended credit to us evidenced by Accounts creating security interests in Collateral. In order to induce you to extend our time of payment on one or more Accounts and/or to make additional loans to us and/or to purchase additional Accounts and/or to lease us additional equipment, and in consideration of you so doing, and for other good and valuable consideration, the receipt of which we hereby acknowledge, we agree as follows: All presently existing and hereafter acquired Collateral in which you have or shall have a security interest shall secure the payment and performance of all of our liabilities and obligations to you of every kind and character, whether joint or several, direct or indirect, absolute or contingent, due or to become due, and whether under presently existing or hereafter created Accounts or agreements, or otherwise. We further agree that your security interest in the property covered by any Account now held or hereafter acquired by you shall not be terminated in whole or in part until and unless all indebtedness of every kind, due or to become due, owed by us to you is fully paid and satisfied and the terms of every Account have been fully performed by us. It is further agreed that you are to retain your security interest in all property covered by all Accounts held or acquired by you, as security for payment and performance under each such Account, notwithstanding the fact that one or more of such Accounts may become fully paid. This instrument is intended to create cross-default and cross-security between and among all the within described Accounts now owned or hereafter acquired by you. A default under any Account or agreement shall be deemed to be a default under all other Accounts and agreements. A default shall result if we fail to pay any sum when due on any Account or agreement, or if we breach any of the other terms and conditions thereof, or if we become insolvent, cease to do business as a going concern, make an assignment for the benefit of creditors, or if a petition for a receiver or in bankruptcy is filed by or against us, or if any of our property is seized, attached or levied upon. Upon our default any or all Accounts and agreements shall, at your option, become immediately due and payable without notice or demand to us or any other party obligated thereon, and you shall have and may exercise any and all rights and remedies of a secured party under the Uniform Commercial Code as enacted in the applicable jurisdiction and as otherwise granted to you under any Account or other agreement. We hereby waive, to the maximum extent permitted by law, notices of default, notices of repossession and sale or other disposition of collateral, and all other notices, and in the event any such notice cannot be waived, we agree that if such notice is mailed to us postage prepaid at the address shown below at least five (5) days prior to the exercise by you of any of your rights or remedies, such notice shall be deemed to be reasonable and shall fully satisfy any requirement for giving notice. All rights granted to you hereunder shall be cumulative and not alternative, shall be in addition to and shall in no manner impair or affect your rights and remedies under any existing Account, agreement, statute or rule of law. This agreement may not be varied or altered nor its provisions waived except by your duly executed written agreement. This agreement shall inure to the benefit of your successors and assigns and shall be binding upon our heirs, administrators, executors, legal representatives, successors and assigns. IN WITNESS WHEREOF, this agreement is executed this 27th day of February, 1998. LESSEE: LESSEE: Philip Brothers Chemicals, Inc. Phibro-Tech, Inc. (Name of Proprietorship, (Name of Proprietorship, Partnership or Corporation, as applicable) Partnership or Corporation, as applicable) By: /s/ Joseph M. Katzenstein By: /s/ Joseph M. Katzenstein ------------------------- ------------------------- (Signature) (Signature) Title: Treas Title: Treas (Owner, Partner, or (Owner, Partner, or Officer, as applicable) Officer, as applicable) Address: One Parker Plaza Address: One Parker Plaza Fort Lee, NJ 07024 Fort Lee, NJ 07024 EX-10.12 15 0015.txt STOCKHOLDERS AGREEMENT, DATED DECEMBER 29, 1987 STOCKHOLDERS AGREEMENT AGREEMENT made this 29th day of December, 1987, by and between PHILIPP BROTHERS CHEMICALS, INC., a New York corporation (the "Corporation") and the following stockholders of the Corporation: CHARLES H. BENDHEIM ("CHB"), owner of 6,300 shares of Class A capital stock of the Corporation; JACK C. BENDHEIM ("JCB"), owner of 5,670 shares of Class B and 6,300 shares of Class C capital stock of the Corporation; and MARVIN S. SUSSMAN ("MSS"), owner of 630 shares of Class B capital stock of the Corporation. WITNESSETH: WHEREAS, the parties desire to provide for certain rights and obligations with respect to the shares of Class B capital stock of the Corporation now owned, or hereafter acquired by MSS; NOW, THEREFORE, in consideration of the mutual covenants herein contained, IT IS AGREED AS FOLLOWS: 1. A. Subject to paragraph "6" hereof, MSS agrees that he will not sell, assign, transfer, pledge, hypothecate, encumber or otherwise dispose of any shares of Class B capital stock of the Corporation now owned, or hereafter acquired, without first offering (by written notice to the Corporation) to sell to the Corporation all such shares of Class B capital stock then owned by him. B. If any such offer of sale shall be made, the Corporation shall have the option to accept the same by written notice to the offeror within thirty (30) days after receipt of such offer. The determination as to whether the Corporation shall exercise the said option to accept any offer of sale shall be made at the election of the holders of the Class A and Class C capital stock, by written notice to the Corporation and the offeror. C. If any such offer of sale shall be accepted by the Corporation, the price of the shares to be sold shall be the agreed value thereof as at the end of the month in which such offer of sale was made, as determined under paragraph "8" hereof, and such price shall be paid as provided in paragraph "9" hereof. D. If the Corporation shall not accept any such offer of sale, then the offeror shall have the right to dispose of such shares without restriction. 2. A. Subject to paragraph "6" hereof, MSS shall have the right, at any time, by written notice to the Corporation, to sell to the Corporation and the Corporation shall purchase from him all (but not less than all) shares of Class B capital stock of the corporation now owned or hereafter acquired by him. B. In the event of such sale, the price shall be the agreed value thereof as at the end of the month in which written notice of such sale was received by the Corporation, as determined under paragraph "8" hereof and such price shall be paid as provided in paragraph "9" hereof. 3. A. Subject to paragraph "6" hereof, in the event MSS shall become permanently disabled (as hereinafter defined), then on the date thirty (30) days following the first anniversary on the commencement of such disability, MSS shall sell and the Corporation shall purchase from him all shares of Class B capital stock of the corporation then owned by him. B. Upon any such sale, the price of the shares to be sold shall be the value thereof as at the end of the month in which such disability shall have commenced, as determined under paragraph "8" hereof "valuation date" and such price shall be paid as provided in paragraph "9" hereof. C. For the purposes of this agreement, the term "permanently disabled" shall mean any physical or mental condition (i) which renders MSS incapable of performing the duties pertaining to his employment by the Corporation, (ii) which shall have endured for a period of at least twelve (12) consecutive months, and (iii) which may reasonably be expected to be permanent. In determining the nature, extent and continuation of such disability, the Corporation may select a physician to examine MSS, and render to the Corporation a medical opinion. The final determination of whether or not MSS is deemed to be permanently disabled hereunder shall be made by CHB and JCB on the basis of all the evidence available. 4. A. Subject to paragraph "6" hereof, upon the death of MSS his personal representatives shall sell to the Corporation, and the Corporation shall purchase from them, all of the shares of Class B capital stock owned by MSS at the time of his death. B. Upon any such sale, the price of the shares to be sold shall be the value thereof as at the end of the month in which MSS's death shall occur, as determined under paragraph "8" hereof, and such price shall be paid as provided in paragraph "9" hereof. 5. A. Subject to paragraph "6" hereof, in the event MSS's employment by the Corporation and all of its subsidiary or affiliated corporations shall be terminated, for any reason whatsoever, MSS shall forthwith sell to the Corporation, and the Corporation shall purchase from him, all of the shares of Class B capital stock owned by MSS at the time of such termination. B. Upon any such sale, the price of the shares to be sold shall be the value thereof as at the end of the month in which MSS's employment shall terminate, as determined under paragraph "8" hereof, and such price shall be paid as provided in paragraph "9" hereof. Provided, however, that in the event that within a period of eighteen (18) months following the termination of MSS's employment, the Corporation shall enter into an agreement to be sold (whether by merger, sale of all or substantially all of its assets, or otherwise), the price of the shares sold hereunder shall be adjusted to equal the price which MSS would have received for such shares had he owned them at the time the Corporation is sold pursuant to such agreement. 6. MSS has executed an Assumption Agreement of even date herewith (a copy of which is annexed hereto) in which he has agreed to be bound by certain of the terms and conditions of a Shareholders Agreement of the Corporation dated December 7, 1984, which provides, inter alia, that after the death of Charles H. Bendheim, all shares of Class B stock of the Corporation will be deposited in escrow to secure certain payments to be made by the Corporation to the holders of its preferred stock. Accordingly, notwithstanding the rights granted to MSS pursuant to paragraphs "1", "2", "3", "4" and "5" hereof, MSS agrees that after the death of Charles H. Bendheim, he (or his personal representatives) will not sell, assign, transfer, pledge, hypothecate, encumber or otherwise dispose of any shares of Class B capital stock of the Corporation, except for depositing such shares in escrow pursuant to subparagraph "8" of said Shareholders Agreement dated December 7, 1984, until payment in full has been made by the Corporation of all amounts payable to such preferred shareholders pursuant to paragraph "8" of the said Shareholders Agreement dated December 7, 1984. 7. A. In the event that JCB shall die before December 7, 1989 and CHB shall then survive, then immediately following JCB's death, MSS shall exchange all shares of Class B capital stock of the Corporation then owned by him for an equal number of shares of Class D capital stock of the Corporation. Such exchange shall be made by MSS delivering all his Class B shares to the Corporation, duly endorsed in blank for transfer, within twenty (20) days after the death of JCB, and pending such delivery, such Class B shares shall be deemed to have been exchanged for Class D shares. B. Following the exchange of MSS's Class B shares for Class D shares as hereinabove provided, all of the provisions of this agreement that refer to Class B shares owned by MSS shall thereafter apply to Class D shares owned by MSS with like force and effect. 8. The price payable upon any sale pursuant to paragraphs "1", "2", "3", "4" and "5" hereof, of any shares of Class B capital stock of the Corporation shall be the agreed value thereof. The agreed value shall be such amount as shall have been last fixed by the holders of all of the outstanding shares of Class A and Class C capital stock prior to the valuation date applicable to any such sale, pursuant to paragraph "5" of the Shareholders Agreement dated December 7, 1984, a copy of which is annexed hereto. MSS agrees that the determination of such value shall be made by the holders of Class A and Class C capital stock without his participation. However, each time such value is fixed, MSS shall be furnished with a copy thereof. The Class A and Class C stockholders agree that in determining such value, (i) as at the end of any fiscal year of the Corporation prior to December 7, 1989, they shall not reduce the value last fixed by an amount greater than 20% of the reduction (if any) in the book value of the Corporation from the end of the Corporation's prior fiscal year to the end of its current fiscal year; and (ii) as at the end of any fiscal year of the Corporation after December 7, 1989, such value shall be equal to the book value of the Corporation. For purposes of this provision, the term "book value" shall have the same meaning as set forth in paragraph "2.D" of the Shareholders Agreement dated December 7, 1984. 9. Upon any sale to the Corporation of any shares of its Class B capital stock pursuant to this agreement, the purchase price shall be paid to the Seller as follows: A. One-fourth (1/4) of the said purchase price shall be paid in cash three (3) months after the valuation date applicable upon such sale, except that any life insurance proceeds shall be applied as hereinafter provided. B. The balance of the purchase price shall be paid nine (9) months after the valuation date applicable upon such sale, without interest. C. The proceeds of any life insurance which shall be received by the Corporation on the death of MSS shall be applied by the Corporation in payment of the purchase price not later than ten (10) days after such proceeds are received by the Corporation. Any balance of the proceeds of insurance in excess of the purchase price shall be retained by the Corporation for its corporate purposes. 10. A. The Corporation shall have the right to procure and maintain insurance on the life of MSS in an amount equal to the agreed value of the Class B shares owned by MSS as fixed from time to time by the Capital Stockholders pursuant to paragraph "9" hereof, and to pay premiums therefor so long as MSS shall live and continue to own any shares of the Corporation. So long as the Corporation shall own and maintain the said insurance, the Corporation shall be designated as the beneficiary thereof. B. Upon any sale by MSS of all of the shares of Class B capital stock then owned by him, MSS shall have the option, provided that he shall have given written notice to the Corporation of his intention to exercise the same within fifteen (15) days prior to the consummation of such sale, to acquire from the Corporation, and, in the event that he shall have given such notice, the Corporation shall assign to him all of the policies of insurance owned and maintained by the Corporation on his life. In the event that such notice shall be given, the Corporation shall execute and deliver to MSS, at the time of such sale, the said policies of insurance on his life, subject to any loans outstanding against such policies, and any and all instruments required to effectuate the assignment thereof to him, and he shall pay to the Corporation an amount equal to the then cash surrender value (net of any loans outstanding) of the said policies against the delivery of the said policies and instruments of assignment. 11. The parties agree to make, execute and deliver any and all papers, instruments and documents, and to do any and all acts, deed and things, which may be necessary or proper to carry out the provisions of this Agreement, or to effectuate the purposes thereof. 12. All written notices provided for herein shall be deemed sufficient if served personally or by registered mail, addressed to the Corporation at its principal place of business, or to any other party, at his address appearing on the stock book of the Corporation. 13. If the then surplus of the Corporation shall be insufficient to permit the Corporation to pay out of surplus any amount which shall be required to be paid by the Corporation, in cash, on any such sale, then the undersigned Class A, B and C stockholders agree to cause the Corporation, and the Corporation agrees, to reduce its capital and create sufficient surplus to enable the Corporation to pay any such amount out of surplus. 14. All certificates representing any shares of Class B capital stock of the Corporation now owned, or at any time hereafter acquired by MSS, shall be endorsed with the following legend: This certificate, and the ownership thereof, shall be subject to all of the terms and conditions of (i) a certain Agreement in writing, bearing date the 29th day of December, 1987, made and entered into by and between the Corporation, Charles H. Bendheim, Jack C. Bendheim and Marvin S. Sussman; and (ii) a certain Agreement in writing, bearing date the 7th day of December, 1984, made and entered into by and between the Corporation and certain of its then shareholders. 15. This Agreement contains all of the terms and conditions agreed upon by the parties with respect to the matters herein provided for, and none of the parties shall be bound by any representations, warranties, covenants or conditions with respect thereto not expressly set forth herein. No modification of this Agreement shall be binding, unless the same shall be in writing, and signed by the parties. 16. This Agreement shall inure to the benefit of, and shall bind, the respective personal representatives, successors and assigns of the parties. 17. The certain Shareholders Agreement in writing dated December 7, 1984 between the Corporation and certain of its shareholders shall remain in full force and effect. 18. This Agreement shal1 be governed, construed and interpreted according to the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have signed and sealed these presents the day and year first above written. PHILIPP BROTHERS CHEMICALS, INC. By: /s/ Charles H. Bendheim ----------------------- Charles H. Bendheim, President /s/ Charles H. Bendheim - ----------------------- Charles H. Bendheim /s/ Jack C. Bendheim - -------------------- Jack C. Bendheim /s/ Marvin S. Sussman - --------------------- Marvin S. Sussman EX-10.13 16 0016.txt EMPLOYMENT AGREEMENT BETWEEN PHILIPP BROTHERS CHEMICALS, INC. AND MARVIN S. SUSSMAN EMPLOYMENT AGREEMENT Agreement dated as of December 29, 1987, by and between PHILIPP BROTHERS CHEMICALS, INC., a New York corporation with its principal offices located at One Parker Plaza, Fort Lee, New Jersey (the "Company"), and MARVIN S. SUSSMAN, residing at 101 Central Park West, New York, New York (hereinafter referred to as "MSS"). MSS and the Company desire to provide for the employment of MSS by the Company on the terms and conditions provided for herein, and the parties agree as follows: 1. Term of Employment. The Company hereby employs MSS and he hereby accepts such employment by the Company, for a term commencing on the date hereof and continuing from year to year until terminated as provided in paragraph "9" hereof (the "Employment Period"). 2. Duties and Responsibilities. MSS shall devote his full time and best efforts to the business and affairs of the Company and its subsidiaries and affiliates during the Employment Period of the Company and of Prince Agriproducts, Inc. Subject to the direction and control of the Board of Directors, MSS shall be responsible for the day to day operation and management of the business of the Company's subsidiary, Prince Agriproducts, Inc. 3. Compensation. (a) During the first year of the Employment Period, MSS's compensation shall continue at the rate in effect immediately prior to the date of this Agreement, and shall be payable in equal monthly installments. Each year thereafter, or at such time as the Board shall determine his compensation shall be fixed by the Board in its sole discretion. (b) As additional compensation for his services to the Company under this Agreement, the Company may (but it shall not be obligated to) pay to MSS an annual bonus in such amount as the Board of Directors shall determine in its sole discretion. 4. Retirement Plan. During the Employment Period, MSS shall participate in the Company's Retirement Plan, subject to the Company's right to modify or amend the Plan in accordance with applicable rules and regulations of the Internal Revenue Code or ERISA. Contributions for the MSS's benefit shall be subject to the contribution formula, the vesting provisions and the other terms and conditions of the Plan. 5. Benefits. During the Employment Period MSS shall participate in such health and insurance benefit plans as are available to all other executives of the Company. 6. Vacations. During the Employment Period, MSS shall be entitled to paid vacations during each twelve (12) month period in accordance with Company policy, to be taken at such times as are requested by him, subject tot he reasonable control of the Board of Directors in light of the Company's reasonable business requirements. 7. Automobile. The Company shall provide MSS with the use of an automobile and shall pay all customary operating expenses therefor. 8. Expenses. The Company shall reimburse MSS for reasonable out- of-pocket expenses incurred in the performance of his duties and responsibilities hereunder. 9. Termination. (a) The Employment Period shall terminate upon the occurrence of any of the following events: (i) Death of MSS; (ii) Permanent disability of MSS; (iii) Notice of termination by the Company at any time, in writing; or (iv) Resignation by MSS at any time, in writing. (b) If the MSS's employment shall terminate by reason of any of the events specified in subparagraph "(a)" above, the Company shall pay to him within ten (10) days following such event, a severance payment which shall equal 2 the aggregate principal balance and all interest accrued thereon up to the date of termination of his employment, then due and owing by MSS and his wife, Aviva Sussman, to Jack C. Bendheim and to his wife, Gail Bendheim, pursuant to certain promissory notes dated the date hereof. The Company shall make such payment to MSS based upon certification furnished to it by Jack C. Bendheim as to the aggregate principal balance and accrued interest due on such promissory notes. MSS agrees that such severance payment shall be used to immediately prepay such notes and interest thereon in full and that the Company is hereby authorized and directed to make payment on his and his wife's behalf directly to the payees of said notes. 10. Notices. Any and all notices required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when personally delivered or on the third business day after the mailing thereof by registered or certified mail, return receipt requested, to the party entitled to receive the same, at the address which appears at the beginning of this Agreement, or at such other address as such party may be similar notice have designated. 11. Miscellaneous. (a) This Agreement, constitutes the entire understanding between the parties relating to the subject matter hereof. This Agreement may be amended or modified only by a written instrument executed by both parties. The failure of a party to insist upon strict adherence to any provision of this Agreement on one occasion, shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that or any other provision of this Agreement. If required, waivers of performance must be in writing and signed by the party giving the waiver. (b) This Agreement is personal in its nature and, except as otherwise provided herein, neither party, without the prior written consent of the other, may assign or transfer this Agreement or any rights or obligations hereunder; except that the Company, without being relieved of its obligations 3 hereunder, may assign this agreement in connection with the acquisition of all or substantially all of the Company's assets and business, whether by merger, consolidation, purchase of assets or otherwise. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors (whether, in the case of the Company, by merger, consolidation, sale of assets or otherwise), and permitted assigns. (c) If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall nevertheless remain in full force and effect: and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. (d) This Agreement shall be governed and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first written above. PHILIPP BROTHERS CHEMICALS, INC. BY: /s/ C. H. Bendheim ------------------ /s/ Marvin S. Sussman --------------------- Marvin S. Sussman 4 EX-10.14 17 0017.txt STOCKHOLDERS AGREEMENT BETWEEN I. DAVID PALEY, NATHAN Z. BISTRICER, JAMES O. HERLANDS AND PHIBRO-TECH, INC., AS AMENDED JUNE 11, 1998 STOCKHOLDERS AGREEMENT Stockholders Agreement (the "Agreement"), dated as of February 21, 1995, between Phibro-Tech, Inc., a Delaware corporation (the "Company"), and the individuals listed on the signature page hereto (together with any person who becomes a party to this Agreement pursuant to Section 8.4, the "Management Stockholders" and, together with any other person who becomes a party to this Agreement pursuant to Section 2.2 hereof, the "Stockholders"). WHEREAS, the Company and the Management Stockholders are concurrently herewith entering into Subscription Agreements, dated the date hereof (the "Subscription Agreements"), pursuant to which the Company shall, among other things, sell to such Management Stockholders an aggregate of 383.42 shares of Class B Common Stock, par value $.Ol per share, of the Company (the "Class B Common Stock"), which shares shall, under certain circumstances, be convertible into shares of Class A Common Stock, par value $.O1 per share, of the Company (the "Class A Common Stock"); and WHEREAS, the Company and the Management Stockholders desire to control the transfer of the Shares (as defined in Section 1), to provide the Stockholders with registration rights in respect of the shares of Class B Common Stock and to make certain provisions regarding the voting of the Shares. 2 NOW, THEREFORE, in consideration of the covenants and agreements contained herein, the parties hereto agree as follows: 1. Certain Definitions. Capitalized terms not otherwise defined herein shall have the following meanings: "Actual or Constructive Termination" means, with respect to any Management Stockholder, the occurrence of any of the following events: (i) a written communication from the President of the Company or any Affiliate employing such Management Stockholder, or from the Chairman of the Board or the Chairman of the Board of Directors of any Affiliate employing such Management Stockholder, or from the Board or the Board of Directors of such Affiliate, that the Management Stockholder's employment with the Company or such Affiliate, as the case may be, has been, or will shortly be, terminated by the Company or such Affiliate; (ii) a written communication from a Management Stockholder to an officer of the Company or, as applicable, any Affiliate, or to the Board or, as applicable, the Board of Directors of any Affiliate, that the Management Stockholder's employment with the Company or such Affiliate, as the case may be, has terminated, or will shortly terminate; (iii) a change (objected to in writing by the Management Stockholder within 30 days after such change) in the Management Stockholder's title or office, or in the nature or scope of the Management Stockholder's authority, duties, responsibility or status, 3 or in his reporting responsibilities, location of work, compensation, employee benefits or perquisites; or (iv) the Permanent Disability of the Management Stockholder; provided, however, that no communication referred to in clauses (i) or (ii) and no change referred to in clause (iii) shall be deemed an Actual or Constructive Termination if the Management Stockholder agrees to remain or become an employee of the Company or any Affiliate; provided further, that no change in compensation referenced in clause (b) shall be deemed an Actual or Constructive Termination if such change is part of a bona fide plan approved by the Board or the Board of Directors of any Affiliate employing such Management Stockholder to reduce the Company's or such Affiliate's overall costs and such change in compensation is proportionate to the changes in compensation experienced by other employees of the Company or such Affiliate. "Affiliate" means, with respect to the Company, a corporation that, directly or indirectly, through one or more intermediaries, controls or is under common control with the Company. "Appraised Value" of any class of common stock of the Company means, on any particular date, the fair market value per share of such class of common stock as most recently determined by a Qualified Appraiser. Appraised Value shall be calculated based upon all considerations that such Qualified Appraiser determines to be relevant. In the 4 event that a stock split, stock dividend or other reorganization of the capital structure of the Company occurs after the Appraised Value has been determined, an appropriate adjustment to the Appraised Value shall be made by the Board. The Company and the Stockholders acknowledge and agree that, based on the determination of Management Planning, Inc., the Appraised Value of one share of Class B Common Stock on the date hereof is $5,800. "Average Market Price" of any class of common stock of the Company means, on any particular date, the average of the daily Closing Prices for such class of common stock for each of the immediately preceding and succeeding ten (10) Trading Days (provided that after the Note Termination Date, the Average Market Price of the Class B common Stock, if such stock has not been converted into Class A Common Stock, shall be deemed to be equal to the Average Market Price of the Class A Common Stock). "Board" means the Board of Directors of the Company. "Change of Control" means the occurrence of any of the following events: (i) Jack C. Bendheim shall cease to be employed by Philipp Brothers Chemicals, Inc. ("PBC") as the President and Chief Operating Officer having substantially the same responsibilities as he has on the date hereof, except as a result of his death or Permanent Disability; (ii) Jack C. Bendheim shall die or become 5 Permanently Disabled; (iii) an event or transaction, after which Jack C. Bendheim and his Immediate Family or trusts, all of the beneficial interests in which shall be held by Jack C. Bendheim or his Immediate Family, shall be entitled to elect less than 40% of the directors of PBC; (iv) Jack C. Bendheim and his Immediate Family or trusts, all of the beneficial interests in which shall be held by Jack C. Bendheim or his Immediate Family, shall be the beneficial owners of less than 50% of the outstanding Class C common stock or Class E common stock of PBC; (v) PBC, directly or indirectly, shall be the beneficial owner of less than 50% of the outstanding common stock of the Company and Jack C. Bendheim and his Immediate Family or trusts, all of the beneficial interests in which shall be held by Jack C. Bendheim or his Immediate Family, shall be the beneficial owners of less than 50% of the outstanding common stock of the Company; or (vi) a reorganization, merger, consolidation, acquisition or other similar transaction, after which all or substantially all of the assets of the Company are controlled by an entity that is not, as of the date hereof, an Affiliate. "Closing Price" of the Shares means, on any date, the last sale price, regular way, or, in case no such sale takes place on such date the average of the closing bid and asked prices, in each case as reported in the principal consolidated transaction reporting system with respect to 6 securities listed on the principal national securities exchange on which the Class A Common Stock or other class of common stock of the Company, as the case may be, is listed or admitted to trading; or, if the Class A Common Stock or other class of Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. (the "NASD") or such other quotation source then in use. "Date of Death" means the later of the date on which (i) a Management Stockholder dies and (ii) the Company receives notice of such death. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Immediate Family" means, with respect to Jack C. Bendheim, a spouse (except for a spouse with whom Jack C. Bendheim has entered into any divorce or separation agreement) and any lineal descendant. "Initial Public Offering" means the Company's initial Public Offering. "IPO Effectiveness Date" means the date upon which the Company commences an Initial Public Offering. "Loan Agreement" means the Loan and Security Agreement, dated as of August 31, 1994, by and among National Westminster Bank NJ,PBC,C.P. Chemicals, Inc., the 7 Company, Prince Agriproducts, Inc., Prince Manufacturing Company, an Illinois corporation, and Prince Manufacturing Company, a Pennsylvania corporation, and any extensions, modifications, renewals or refinancings thereof (provided that no such extension, modification, renewal or refinancing shall increase the restrictions or limitations imposed on the Stockholders or on the Company's ability to make payments to the Stockholders by the Loan Agreement as in effect on the date hereof). "Market Price" means a purchase price based on the Average Market Price. "Note Agreement" means the Note Agreement, dated as of August 15, 1994, between PBC and The Northwestern Mutual Life Insurance Company pursuant to which PBC issued and sold its 11% Senior Notes due June 29, 2004 in the aggregate principal amount of $20,000,000 (the "PBC Notes"), and any extensions, modifications, renewals or ref inancings thereof (provided that no such extension, modification, renewal or refinancing shall increase the restrictions or limitations imposed on the Stockholders or on the Company's or PBC's ability to make payments to the Stockholders by the Note Agreement as in effect on the date hereof). "Note Termination Date" means the earlier of (i) June 30, 2004 and (ii) the date the PBC Notes are pre-paid in full. 8 "Permanent Disability" means, (i) with respect to Jack C. Bendheim, that he has received written notification from the board of directors of PBC stating that in its view he has become mentally or physically incapacitated or disabled, whether totally or partially, so that he is unable substantially to perform (x) for a period of three consecutive months or (y) for shorter periods aggregating three months during a six month period, substantially the same services as he performed for PBC prior to incurring such incapacity or disability and (ii) with respect to any Management Stockholder, that the Management Stockholder has received written notification from the Board or the board of directors of any Affiliate employing such Management Stockholder stating that in its view he has become mentally or physically incapacitated or disabled, whether totally or partially, so that he is unable substantially to perform (x) for a period of three consecutive months or (y) for shorter periods aggregating three months during a six month period, substantially the same services as he performed for the Company and/or such Affiliate prior to incurring such incapacity or disability. "Permitted Transferee" means with respect to any Stockholder, Ci) a member of such Stockholder's family, which shall include a spouse (except for a spouse with whom such Stockholder has entered into any divorce or separation agreement), any lineal ancestor or descendant or any sibling 9 of such Stockholder (collectively, the "Family"), (ii) any personal representative, estate or executor under any will of such Stockholder (collectively, a "Personal Representative") or (iii) a trust (including a voting trust at any time established by such Stockholder for the sole benefit of such Stockholder and/or one or more of such Stockholders' Family), all of the beneficial interests in which shall be held by such Stockholder or one or more members of such Stockholder's Family (or, in the case of a voting trust, all of the voting trust certificates of which are owned by such Stockholder and/or one or more members of such Stockholder's Family). "Pledge Agreements" means, collectively, the Pledge Agreements, each dated as of the date hereof, between the Company and the Management Stockholders, substantially in the form of Exhibit A attached hereto. "Prime Rate" means the rate of interest listed as the prime rate and published in the Wall Street Journal. "Promissory Note" means the Limited Recourse Promissory Note executed by a Management Stockholder in favor of the Company. "Public Offering" means any offer for sale of the common stock of the Company pursuant to an effective Registration Statement. "Qualified Appraiser" means an established banking firm or valuation firm unaffiliated with the Company that is 10 knowledgeable in the field of the Company's business and operations. "Registration Statement" means a registration statement filed under the Securities Act. "Rule 144" means Rule 144 promulgated under the Securities Act or any similar rule then in effect. "Securities Act" means the Securities Act of 1933, as amended. "Shares" means any of the shares of the common stock of the Company, including the Class A Common Stock and Class B Common Stock. "Subordinated Note" shall have the meaning set forth in Section 3.3.3. "Trading Day" means any day on which any class of common stock of the Company is traded on a national securities exchange or a sale price of such class of common stock is reported on the NASD Automated Quotation System. 2. Restrictions on Transfer of Shares. 2.1 General Restriction. No Stockholder shall sell, give, assign, hypothecate, pledge, encumber, grant a security interest in or otherwise dispose of (whether by operation of law or otherwise) (collectively, "Transfer") any Shares or any right, title or interest therein or thereto to any person, except in accordance with the provisions of this Agreement. Any attempt to Transfer 11 any Shares or any rights hereunder in violation of the preceding sentence shall be null and void ab initio. 2.2 All Transfers in Compliance with Law and Subject to this Agreement. Notwithstanding anything to the contrary in this Agreement, any Transfer of Shares otherwise permitted or required by this Agreement (i) shall be in compliance with applicable federal and state securities laws, including, without limitation, the Securities Act, and the Company may require an opinion of counsel to the transferor reasonably satisfactory to the Company as to such com pliance; and, (ii) other than a sale of Shares (v) pursuant to an effective Registration Statement, (w) pursuant to Rule 144, (x) pursuant to Section 3.3.4, (y) to the Company or its Affiliates or (z) to another Stockholder, shall not be effective unless and until the transferee shall execute and deliver to the Company an appropriate instrument in the form of Exhibit B, pursuant to which the transferee shall agree to take and hold such Shares subject to the terms of this Agreement, to observe and comply with this Agreement and with all obligations and restrictions imposed on the Stockholders hereby (including, without limitation, the obligation of a Permitted Transferee to sell Shares to the Company, other Stockholders or a third party, as the case may be, in accordance with Sections 3.4 and 3.5) and that such transferee shall be a Stockholder hereunder. 12 3. Transfers of Shares. 3.1 Transfers Generally. Notwithstanding anything to the contrary contained in this Agreement, a Stockholder (including a Permitted Transferee, except as provided in the last sentence of Section 3.2) may sell Shares pursuant to an effective Registration Statement or pursuant to Rule 144 and may Transfer Shares in accordance with Sections 3.2, 3.3, 3.6 and 3.9. In addition, a Stock holder (including a Permitted Transferee) shall Transfer his Shares in accordance with Sections 3.4 and 3.5. 3.2 Transfers of Shares to Permitted Transferees. A Stockholder may, at any time, subject to this Section 3.2 and Section 3.10 of this Agreement and the restrictions contained in the Pledge Agreements and the Note Agreement transfer his Shares to a Permitted Transferee. No Permitted Transferee of the Shares pursuant to this Section 3.2 shall retransfer such Shares pursuant to this Section 3.2 other than to the transferor Stockholder or, subject to Section 3.10 of this Agreement, to another of such transferor Stockholder's Permitted Transferees or to such Permitted Transferee's Personal Representative. In addition, no Permitted Transferee shall sell Shares pursuant to an effective Registration Statement or Rule 144 or Transfer any Shares pursuant to Section 3.3 for so long as any indebtedness remains outstanding under any Promissory Note executed by the Management Stockholder who, in 13 accordance with this Section 3.2, either directly or indirectly Transferred Shares to such Permitted Transferee, unless the proceeds of such sale or Transfer are applied toward the payment of such outstanding indebtedness in accordance with Section 8 of the Pledge Agreement and such Permitted Transferee complies with the other provisions of Section 8 of the Pledge Agreement. 3.2.1 Proxies. The Permitted Transferee shall (i) irrevocably appoint the transferor Stockholder the attorney and proxy (which shall be coupled with an interest) of such Permitted Transferee with full power of substitution to vote the Shares transferred (the "Irrevocable Proxy"), and (ii) execute such proxies or other instruments as may be necessary or desirable in the judgment of the Company to effectuate such appointment. The voting power of the Shares transferred to a Permitted Transferee shall remain with such transferor Stockholder until the earlier of (i) the termination of this Agreement, (ii) the death of such Permitted Transferee, in which case the Personal Representative of the deceased Permitted Transferee shall grant an Irrevocable Proxy to the transferor Stock holder, (iii) the IPO Effectiveness Date, in which case the voting power of the Shares shall vest in the Permitted Transferee or (iv) the sale of such Shares pursuant to Sections 3.4, 3.5, 3.6 or 3.9 prior to the IPO Effectiveness 14 Date, in which case the voting power of the Shares shall vest in the purchaser of such Shares. 3.2.2 Permitted Transfer Procedures. A Stockholder under this Section 3.2 shall give notice to the Company of its intention to make any Transfer permitted under this Section 3.2 not less than ten (10) days prior to effecting such Transfer, which notice shall state the name and address of the Permitted Transferee to whom such Transfer is proposed and the number of Shares to be transferred. Such notice shall include copies of the instruments and proxies referred to in this Section 3.2. 3.3 Transfer and Right of First Offer. If, after the Market Price of such Shares can be determined, any Stockholder desires to Transfer all, or any portion, of his Shares (other than to a Permitted Transferee or pursuant to an effective Registration Statement or Rule 144 or pursuant to Section 3.9) such Stockholder (the "Offering Stockholder") shall, prior to effecting such Transfer, first make an offer (the "First Offer") to Transfer such Shares (the "Offered Shares") to the Company and the other Stockholders in accordance with the procedures set forth in this Section 3.3. 3.3.1 Notice. The Offering Stockholder shall make the First Offer by delivering written notice of the First Offer (the "Notice") to the Company and the other Stockholders, which Notice shall state (i) that the Offering 15 Stockholder desires to effect a sale of the Offered Shares, (ii) the number and class of Offered Shares and (iii) the name and address of the proposed purchaser, if any, together with the terms and conditions of the proposed sale to such purchaser relating to the Offered Shares, including the proposed purchase price. Upon receipt of the Notice, (i) the Company and (ii) the other Stockholders (if the Company does not exercise (or, pursuant to Section 3.8, assign) its right to purchase all of the Offered Shares), on a pro rata basis set forth below, shall be entitled to purchase all, but not less than all, of the Offered Shares for a purchase price equal to, (x) if the Notice does not describe any proposed sale to a third party purchaser, the Average Market Price on the date upon which the Offering Stockholder delivers the Notice to the Company and the other Stockholders or, (y) if the Notice describes a proposed sale to a third party purchaser, the lesser of (A) the Average Market Price on the date upon which the Offering Stockholder delivers the Notice to the Company and the other Stockholders and (B) the proposed purchase price set forth in the Notice. 3.3.2 Exercise of Right of First Offer. (a) Upon receipt of the Notice, the Company (or its assignee) shall be entitled to exercise the Company's right to purchase the Offered Shares pursuant to Section 3.3.1 by delivery of written notice of exercise 16 to the Offering Stockholder (with a copy to the other Stockholders) within ten (10) days following delivery of the Notice to the Company. (b) If the Company (or its assignee) elects not to purchase all of the Offered Shares as provided in paragraph (a) above (or fails to deliver on a timely basis a notice of exercise as set forth therein), the Offering Stockholder shall immediately notify and extend the First Offer to the other Stockholders (such notice being referred to herein as the "Second Round Notice"), who shall be entitled to purchase those Offered Shares which the Company has elected not to purchase, by delivery of a notice of exercise to the Offering Stockholder (with a copy to the Company) within ten (10) days following delivery of the Second Round Notice. If the total number of remaining Offered Shares which the other Stockholders elect to purchase hereunder exceeds the total number of remaining Offered Shares, then the number of Offered Shares purchased by each such other Stockholder shall be reduced ratably (pro rata according to the number of Offered Shares which each such other Stockholder elected to purchase), so that the number of Offered Shares purchased by such other Stockholders equals the number of remaining Offered Shares. 3.3.3 Closing. The closing of any purchase of Offered Shares by the Company (or its assignee) or the other Stockholders under this Section 3.3 shall be 17 held at the principal office of the Company at 11:00 a.m. local time thirty (30) days after the date on which all Offered Shares shall have been subscribed for or at such other time and place as the parties mutually agree. At such closing, the Offering Stockholder shall deliver certificates representing the Offered Shares being purchased by the Company (or its assignee) or the other Stockholders duly endorsed for transfer and accompanied by all requisite stock transfer taxes, and such Offered Shares shall be free and clear of any liens, claims, options, charges, encumbrances or rights of others (collectively, "Liens") (other than those arising hereunder or under the Pledge Agreement with such Offering Stockholder) and the Offering Stockholder shall so represent and warrant, and further represent and warrant that he is the beneficial owner of all such Offered Shares, with full authority and power to transfer such Offered Shares. If the Offered Shares are being purchased from a Management Stockholder, the Company shall deliver at the closing payment in full, or the portion thereof allocable to the Company, for such Offered Shares in accordance with Sections 4.1.1 and 4.1.2. If the Offered Shares are not being purchased from a Management Stockholder, the Company shall deliver at the closing, by a certified bank check, payment in full, or the portion thereof allocable to the Company, for such Offered Shares. Notwithstanding the foregoing sentence, if the Company's ability to make cash 18 payments with respect to its obligations is restricted or limited under the terms of the Note Agreement or the Loan Agreement, the Company shall (i) make cash payments required by this Section 3.3.3 to the Offering Stockholder on an equal and ratable basis with all the other obligations of the Company to the extent permitted by the Note Agreement and the Loan Agreement, and (ii) deliver to the Offering Stockholder a Subordinated Promissory Note, containing the subordination provisions substantially in the form of Exhibit C attached hereto and bearing interest at the Prime Rate (a "Subordinated Note"), in a principal amount equal to (x) the excess of the purchase price of the Offered Shares purchased by the Company over (y) the amount paid pursuant to clause (i) above. If the Company is not permitted under the terms of the Note Agreement or the Loan Agreement to pay any portion of the purchase price in cash, the Company shall deliver to the Offering Stockholder a Subordinated Note in a principal amount equal to such purchase price. The Company's assignee or the other Stockholders shall deliver at the closing, by a certified bank check, payment in full, or the portion thereof allocable to the Company's assignee or the other Stockholders, as the case may be, for such Offered Shares. At such closing, all of the parties to the transaction shall execute such additional documents as are otherwise necessary or appropriate. 19 3.3.4 Purchase by Third Party. If all of the Offered Shares have not been purchased pursuant to Section 3.3.3, the Offering Stockholder may Transfer all, but not less than all, of the Offered Shares, subject to the provisions of clause (i) of Section 2.2, upon terms that, in the aggregate, are not more favorable to the purchaser than those stated in the Notice, provided that such sale is bona fide and made within 75 days after the date on which the Of fering Stockholder delivers the Second Round Notice to the other Stockholders. If such sale is not consummated within such 75-day period, the restrictions provided for in this Section 3.3 shall again become effective, and no Transfer of Shares pursuant to this Section 3.3 may be made thereafter without again making a First Offer to the Company and the other Stockholders in accordance with the terms and conditions of this Agreement. 3.4 Termination of Employment. If, with respect to any Management Stockholder, an Actual or Constructive Termination shall occur, then the Company shall have the obligation to purchase all of the Shares owned by such Management Stockholder and his Permitted Transferees which have not been registered pursuant to an effective Registration Statement, and such Management Stockholder and his Permitted Transferees shall have the obligation to sell all of such Shares to the Company at a purchase price per Share set forth below. 20 3.4.1 Termination Before Market Price Can Be Determined. (a) If such Actual or Constructive Termination occurs before the Market Price of such Shares can be determined, then, subject to paragraph (b) below, the purchase price per Share shall be (1) the Appraised Value or, (ii) if on the date the Actual or Constructive Termination occurs more than eighteen (18) months have elapsed since the Appraised Value of the applicable class of common stock was last determined, either (x) the price upon which the Company and such Management Stockholder mutually agree or, (y) if the Company and such Management Stockholder are unable to agree in writing on a price within thirty (30) days after the date the Actual or Constructive Termination occurs, the Appraised Value as of the date of the Company's most recently ended fiscal quarter, as determined by a Qualified Appraiser selected by the Board and approved by the Management Stockholder, which approval shall not be unreasonably withheld. If the Management Stockholder does not approve the Qualified Appraiser selected by the Board within fifteen (15) days after the Board's selection, the Qualified Appraiser shall be the banking or appraisal firm that most recently appraised the Shares or, if such banking or appraisal firm is unwilling or unable to appraise the Shares, a Qualified Appraiser selected by such banking or appraisal firm. The Company, on the one hand, and the Management Stockholder, on the other hand, shall each be 21 responsible for one-half of any fees and expenses of such Qualified Appraiser incurred in connection with its determination of the Appraised Value as of the date of the Company's most recently ended fiscal quarter. Promptly after determining the Appraised Value of the Shares, the Qualified Appraiser shall deliver to the Company and the Management Stockholder a copy of its written determination of such Appraised Value. (b) If, notwithstanding paragraph (a) above, the Market Price of the Shares can be determined prior to the closing referred to in clauses (i) through (iii) of paragraph (C) below, the purchase price for such Shares shall be the Average Market Price on the date that is ten (10) Trading Days after a Closing Price is first available for the Shares (the "Availability Date"). (c) The closing of the purchase of the Shares pursuant to this Section 3.4.1 shall be held at the principal office of the Company at 11:00 a.m. local time on the date that is (i) thirty (30) days after the occurrence of the Actual or Constructive Termination if the purchase price is the Appraised Value, (ii) thirty (30) days after the date on which the Company and the Management Stockholder agree in writing upon a price, if the purchase price is such agreed upon price, (iii) thirty (30) days after the later of the date on which the (x) Company and (y) the Management Stockholder receive the Qualified Appraiser's written deter 22 mination of the Appraised Value, if the purchase price is the Appraised Value as of the date of the Company's most recently ended fiscal quarter or (iv) thirty (30) days after the Availability Date, if the purchase price is determined in accordance with paragraph (b) above, or at such other time and place as the parties mutually agree. 3.4.2 Termination After Market Price Can Be Determined. If such Actual or Constructive Termination occurs after the Market Price of such shares can be determined, then the purchase price for such Shares shall be the Average Market Price on the date the Actual or Constructive Termination occurs. The closing of any purchase pursuant to this Section 3.4.2 shall be held at the principal office of the Company at 11:00 a.m. local time on the date that is thirty (30) days after the occurrence of the Actual or Constructive Termination, or at such other time and place as the parties mutually agree. 3.4.3 Company's Right to Deduct Loss. If the Management Stockholder shall have committed an act of theft or intentional fraud against the Company or any of its Affiliates, then the Company may deduct from the purchase price required to be paid for such Shares in accordance with this Section 3.4, an amount equal to the loss suffered by the Company as a result of such Management Stockholder's theft or intentional fraud determined by the Board in good faith. 23 3.5 Death of a Management Stockholder. 3.5.1 Death Before Market Price Can Be Determined. (a) If a Management Stockholder dies before the Market Price of the Shares owned by such Management Stockholder and his Permitted Transferees can be determined, then, subject to paragraph (b) below, the Company shall have the obligation to purchase all of such Shares which have not been registered pursuant to an effective Registration State ment, and the Personal Representative of such Management Stockholder and such Management Stockholder's Permitted Transferees shall have the obligation to sell all of such Shares at the following purchase price: (i) the Appraised Value or, (ii) if on the Date of Death more than eighteen (18) months have elapsed since the Appraised Value of the applicable class of common stock was last determined, either (x) the price upon which the Company and such Personal Representative mutually agree or, (y) if the Company and such Personal Representative are unable to agree in writing upon a price within thirty (30) days of the Date of Death, the Appraised Value of the applicable class of common stock as of the e date of the Company's most recently ended fiscal quarter, as determined by a Qualified Appraiser selected by the Board and approved by such Personal Representative, which approval shall not be unreasonably withheld. If the Personal Representative does not approve the Qualified Appraiser selected by the Board within fifteen (15) days 24 after the Board's selection, the Qualified Appraiser shall be the banking or appraisal firm that most recently appraised the Shares or, if such banking or appraisal firm is unwilling or unable to appraise the Shares, a Qualified Appraiser selected by such banking or appraisal firm. The Company and the Personal Representative shall each be responsible for one-half of any fees and expenses of such Qualified Appraiser incurred in connection with the determination of the Appraised Value of the applicable class of common stock as of the date of the Company's most recently ended fiscal quarter. Promptly after determining the Appraised Value of the Shares, the Qualified Appraiser shall deliver to the Company and the Personal Representative a copy of its written determination of such Appraised Value. (b) If, notwithstanding paragraph (a) above, the Market Price of the Shares can be determined prior to the closing referred to in clauses (i) through (iii) of paragraph (C) below, the purchase price for such Shares shall be the Average Market Price on the date that is ten (10) Trading Days after the Availability Date. (c) The closing of the purchase of the Shares pursuant to this Section 3.5.1 shall be held at the principal office of the Company at 11:00 a.m. local time on the date that is (i) thirty (30) days after the Date of Death if the purchase price is the Appraised (ii)e, thirty (30) days after the date on which the Company 25 and the Personal Representative agree in writing upon a price, if the purchase price is such agreed upon price, (iii) thirty (30) days after the later of the date on which (x) the Company and (y) the Personal Representative receive the Qualified Appraisers written determination of the Appraised Value, if the purchase price is the Appraised Value as of the date of the Company's most recently ended fiscal quarter or (iv) thirty (30) days after the Availability Date, if the purchase price is determined in accordance with paragraph (b) above, or at such other time and place as the Company and the Personal Representative mutually agree. 3.5.2 Death After Market Price Can Be Determined. If a Management Stockholder dies after the Market Price of the Shares owned by such Management Stockholder and his Permitted Transferees can be determined, then the Company shall have the obligation to purchase all of such Shares which have not been registered pursuant to an effective Registration Statement, and the Personal Representative of such Management Stockholder and such Management Stockholder's Permitted Transferees shall have the obligation to sell all of such unregistered Shares at a purchase price per Share equal to the Average Market Price on the Date of Death. The closing of any purchase pursuant to this Section 3.5.2 shall be held at the principal office of the Company at 11:00 a.m. local time on the date that is 26 thirty (30) days after the Date of Death or at such other time and place as the parties mutually agree. 3.5.3 Key Man Life Insurance. Each of the Management Stockholders shall, upon the request of the Company, assist the Company in connection with the Company's obtaining "key man" life insurance on behalf of such Management Stockholder. 3.6 Change of Control. (a) If a Change of Control occurs (other than any event referred to in clause (ii) of the definition of Change of Control), then each of the Management Stockholders by written notice (the "Change of Control Notice") to the Company (with a copy to the other parties hereto) within one hundred eighty (180) days after the occurrence of such Change of Control, shall have the right, but not the obligation, to sell all, but not less than all, of the Shares owned by such Management Stockholder and his Permitted Transferees which have not been registered pursuant to an effective Registration Statement, and, if such Management Stockholder exercises such right, the Company shall have the obligation to buy all of such Shares at the purchase price per Share set forth below. If the Change of Control event referred to in clause (ii) of the definition of Change of Control occurs, then each of the Management Stockholders by written notice (the "Delayed Change of Control Notice") to the Company (with a copy to the other 27 parties hereto) within one hundred eighty (180) days after the date that is three years after the occurrence of such Change of Control event, shall have the right, but not the obligation, to sell all, but not less than all, of the Shares owned by such Management Stockholder and his Permitted Transferees which have not been registered pursuant to an effective Registration Statement, and, if such Management Stockholder exercises such right, the Company shall have the obligation to buy all of such Shares at the purchase price per Share set forth below. (b) If the Change of Control Notice is given before the Market Price of such Shares can be determined, then, subject to paragraph (c) below, the purchase price per Share shall be (i) the Appraised Value or, (ii) if on the date such Change of Control Notice is given, more than eighteen (18) months have elapsed since the Appraised Value of the applicable class of common stock was last determined, either (x) the price upon which the Company and such Management Stockholder mutually agree or, (y) if the Company and such Management Stockholder are unable to agree in writing upon a price within thirty (30) days after the date the Change of Control Notice is given, the Appraised Value as of the date of the Company's most recently ended fiscal quarter, as determined by a Qualified Appraiser selected by the Board and approved by the Management Stockholder, which approval shall not be unreasonably 28 withheld. If the Delayed Change of Control Notice is given before the Market Price of such Shares can be determined, then, subject to paragraph (c) below, the purchase price per Share shall be (i) the Appraised Value or, (ii) if on the date such Delayed Change of Control Notice is given, more than eighteen (18) months have elapsed since the Appraised Value of the applicable class of common stock was last determined, either (x) the price upon which the Company and such Management Stockholder mutually agree or, (y) if the Company and such Management Stockholder are unable to agree in writing upon a price within thirty (30) days after the date the Delayed Change of Control Notice is given, the Appraised Value as of the date of the Company's most recently ended fiscal quarter, as determined by a Qualified Appraiser selected by the Board and approved by the Management Stockholder, which approval shall not be unreasonably withheld. If the Management Stockholder does not approve the Qualified Appraiser selected by the Board within fifteen (15) days after the Board's selection, the Qualified Appraiser shall be the banking or appraisal firm that most recently appraised the Shares or, if such banking or appraisal firm is unwilling or unable to appraise the Shares, a Qualified Appraiser selected by such banking or appraisal firm. The Company and such Management Stockholder shall each be responsible for one-half of any fees and expenses of such Qualified Appraiser incurred in connection 29 with the determination of the Appraised Value as of the date of the Company's most recently ended fiscal quarter. Promptly after determining the Appraised Value of the Shares, the Qualified Appraiser shall deliver to the Management Stockholder and the Company a copy of its written determination of such Appraised Value. (C) If, notwithstanding paragraph (b) above, the Market Price of the Shares can be determined prior to the closing referred to in clauses (i) through (iii) of paragraph (d) below, the purchase price for such Shares shall be the Average Market Price on the date that is ten (10) Trading Days after the Availability Date. (d) The closing of the purchase of the Shares pursuant to paragraphs (b) and (c) of this Section 3.6 shall be held at the principal office of the Company at 11:00 a.m. local time on the date that is (i) thirty (30) days after the Company receives the Change of Control Notice or Delayed Change of Control Notice, as the case may be, if the purchase price is the Appraised Value, (ii) thirty (30) days after the date in which the Company and the Management Stockholder agree in writing upon a price, if the purchase price is such agreed upon price, (iii) thirty (30) days after the later of the date on which the (x) Management Stockholder and (y) the Company receive the Qualified Appraiser's written determination of the Appraised Value, if the purchase price is the Appraised Value as of the date of 30 the Company's most recently ended fiscal quarter or (iv) thirty (30) days after the Availability Date, if the purchase price is determined in accordance with paragraph (b) above, or at such other time and place the Company and the Management Stockholder mutually agree. (e) If the Change of Control Notice is given after the Market Price of such Shares can be determined, the purchase price per Share shall be the Average Market Price on the date that the Change of Control Notice is given. If the Delayed Change of Control Notice is given after the Market Price of such Shares can be determined, then the purchase price per Share shall be the Average Market Price on the date the Delayed Change of Control Notice is given. The closing of any purchase pursuant to this paragraph (e) shall be held at the principal office of the Company at 11:00 A.M. local time on the date that is thirty (30) days after the delivery of the Change of Control Notice or the Delayed Change of Control Notice, as the case may be, or at such other time and place as the parties mutually agree. 3.7 Pledge of Shares. Notwithstanding anything to the contrary in this Agreement, each Management Stockholder may pledge, and grant a security interest in, his Shares in accordance with the provisions of the Pledge Agreement with such Management Stockholder. 31 3.8 Company's Right to Assign. Notwithstanding anything to the contrary in this Agreement, the Company may assign to any Stockholder or third party its right or obligation to purchase Shares pursuant to this Section 3, provided that the Company may not assign its obligation to purchase Shares pursuant to Sections 3.4, 3.5 and 3.6 to any assignee unless such prospective assignee has (i) delivered a letter to the Management Stockholder or Personal Representative having the right or obligation to sell Shares under such Sections, signed by the prospective assignee, agreeing to purchase such Shares in accordance with the terms and provisions of such Sections and (ii) furnished evidence demonstrating (to the reasonable satisfaction of such Management Stockholder or Personal Representative) such prospective assignee's financial ability to consummate the purchase of such Shares. 3.9 Company Purchase. Notwithstanding anything to the contrary in this Agreement and subject to Section 3.10 below, the Company or any Affiliate may purchase from a Management Stockholder, and a Management Stockholder may sell and Transfer to the Company or any Affiliate, the Shares owned by such Management Stockholder and his Permitted Transferees at a purchase price to be agreed upon by the Company or such Affiliate and the Management Stockholder; provided, however, that if any amount of indebtedness remains outstanding under the Promissory Note 32 executed by such Management Stockholder the amount outstanding shall be deducted from the purchase price payable by the Company or such Affiliate with respect to the purchase of such Management Stockholder's Shares. 3.10 No Transfer in Violation of Note Agreement. Notwithstanding anything to the contrary in this Agreement, no Stockholder shall Transfer any Shares, and the Company shall not be required to register the Transfer of any Shares, in violation of any term or provision of the Note Agreement. Each Management Stockholder acknowledges that the Note Agreement contains restrictions and limita tions relating to the Class B Common Stock and the Promissory Notes, including, without limitation, relief from the indebtedness evidenced by the Promissory Notes and payments of dividends on and transfers of the Class B Common Stock. 4. Closing. 4.1 Deliveries at Closing. At any closing pursuant to Sections 3.4, 3.5 and 3.6, the Management Stockholder (or his Personal Representative) and his Permitted Transferees shall deliver certificates representing the Shares being purchased by the Company, the other Stockholders or a third party, as the case may be, duly endorsed for transfer and accompanied by all requisite stock transfer taxes, and such Shares shall be free and clear of any Liens (other than those arising hereunder or under the Pledge Agreement with such Management Stockholder) and the 33 Management Stockholder (or his Personal Representative) shall so represent and warrant, and further represent and warrant that he (or his Permitted Transferee) is the beneficial owner of such Shares. At such closing, all of the parties to the transaction shall execute such additional documents as are otherwise necessary or appropriate. 4.1.1 Method of Payment by the Company. The Company shall deliver at the closing payment in full for any Shares purchased from a Management Stockholder pursuant to Section 3.3 or from a Management Stockholder (or his Personal Representative) and such Management Stockholder's Permitted Transferees pursuant to Sections 3.4, 3.5 and 3.6 as follows: (i) If any principal amount (or accrued but unpaid interest) shall remain outstanding on a Promissory Note executed by a Management Stockholder, the Company shall apply such outstanding principal amount (or such accrued but unpaid interest) toward payment for the Shares and, if all amounts owing on the Promissory Note are thereby satisfied, shall deliver such Promissory Note to the Management Stockholder (or his Personal Representative). (ii) To the extent that the purchase price of such Shares exceeds the principal amount (and accrued but unpaid interest) outstanding on 34 such Promissory Note, the Company shall, subject to Section 4.1.2, promptly deliver to the Management Stockholder (or his Personal Representative) a certified bank check in the amount of such excess (the "Cash Purchase Price"). 4.1.2 Restrictions on Cash Payments. If the Company's ability to make cash payments with respect to its obligations is restricted or limited under the terms of the Note Agreement or the Loan Agreement, (i) the Company shall make cash payments required by Section 4.1.1 to the Management Stockholder (or his Personal Representative) on an equal and ratable basis with all the other obligations of the Company to the extent permitted by the Note Agreement and the Loan Agreement, and (ii) deliver to the Management Stockholder (or his Personal Representative) a Subordinated Note in a principal amount equal to (x) the excess of the Cash Purchase Price over (y) the amount paid pursuant to clause (i) above. If the Company is not permitted under the terms of the Note Agreement or the Loan Agreement to pay any portion of the Cash Purchase Price, the Company shall deliver to the Management Stockholder (or his Personal Representative) a Subordinated Note in a principal amount equal to the Cash Purchase Price. 4.1.3 Method of Payment by the Other Stockholders or Third Party. The other Stockholders or any third party to whom the Company has assigned its right to 35 purchase Shares pursuant to Section 3.8 shall deliver to the Management Stockholder (or his Personal Representative) at the closing, by a certified bank check, payment in full for any Shares purchased from a Management Stockholder (or his Personal Representative) and such Management Stockholder's Permitted Transferees pursuant to Sections 3.4, 3.5 or 3.6. 5. Power of Attorney. Each Stockholder hereby appoints the Company under Sections 3.3, 3.4, 3.5 and 3.6 as the attorney-in-fact for such Stockholder with the power to execute such documents and take such other action to provide for the transfer of the Shares owned by such Stockholder in accordance with such Sections. In addition, the Company is hereby authorized (i) to transfer such Shares on the books of the Company in accordance with this Agreement and without regard to the surrender of certificates representing Shares held by such Stockholder and (ii) to place on all certificates representing Shares a legend reflecting this authority to transfer such Shares. Any such certificates not surrendered as required by this Agreement shall become upon such transfer null and void. 6. Registration Rights. 6.1 Incidental Registration. Subject to Section 6.3, if the Company proposes to register any Shares under a Registration Statement (other than pursuant to a Registration Statement on Form S-4, Form S-8 or any equivalent form then in effect), whether or not for sale for its 36 own account or for the account of any Stockholder, the Company shall give each Stockholder (each, an "Incidental Stockholder") notice of such proposed registration at least thirty (30) days prior to the filing of a Registration Statement with respect to such public sale. Upon the written request of any Incidental Stockholder delivered to the Company within ten (10) days after the receipt of the notice from the Company (which request shall state the number of shares of Class A Common Stock (collectively, the "Incidental Shares") that such Incidental Stockholder wishes to sell or distribute publicly under such Registration Statement proposed to be filed by the Company), the Company shall use its best efforts to register under the Securities Act such Incidental Shares. The Company may withdraw a Registration Statement at any time before it becomes effective or postpone or terminate the offering without obliga tion to any Incidental Stockholder. If a registration of Shares involves an underwritten offering, and the Company's managing underwriter shall advise the Company in writing that, in its opinion, the total number of Shares (including Incidental Shares) requested to be included in such registration exceeds the number which can be sold in such offering, the Company will include in such registration, to the extent of the number of Shares which the Company is so advised can be sold in such offering, (i) first, the Shares the Company proposes to issue and sell for its own account 37 and (ii) second, other Shares it proposes to sell, including Incidental Shares, on a pro rata basis. In no event shall the Company be required to include any Incidental Shares in its Initial Public Offering if the managing underwriter of such offering shall advise the Company in writing, that in its opinion, the inclusion of any such Shares would adversely affect the success of the offering. 6.2 Registration Procedures. With respect to any Registration Statement that includes any Incidental Shares pursuant to Section 6.1: (a) Underwriters. The distribution for the account of the Incidental Stockholders shall be underwritten by the same underwriters, if any, who underwrite the distribution of the securities for the account of the Company and/or any other persons whose securities are covered by such Registration Statement. (b) Legal Opinions. The Incidental Stockholders shall retain counsel and shall cause such counsel to deliver to the managing underwriter such opinions as the managing underwriter may reasonably require. (c) Execution. of Documents. The Incidental Stockholders shall, upon request of the Company, execute power of attorney, deposit and custodian agreements in form and substance satisfactory to the managing underwriter. The Incidental Stockholders shall execute an underwriting agreement in form and substance satisfactory to the 38 Company and managing underwriter, which underwriting agreement shall contain provisions whereby the Company and the Incidental Stockholders indemnify each other as provided in Section 6.4. (d) Registration Statement. The Company shall deliver to the Incidental Stockholders after the effectiveness of any Registration Statement such reasonable number of copies of a definitive prospectus included in such Registration Statement and of any revised or supplemental prospectus as the Incidental Stockholders may from time to time request. (e) Expenses. In connection with the registration of Incidental Shares, the Company shall pay all of the expenses attributable to the sale of the Incidental Shares, including, without limitation, the federal and state filing fees applicable to the Incidental Shares and the underwriting fees applicable to the Incidental Shares; provided that the Company shall not pay, and each Incidental Stockholder shall be responsible for, the fees of counsel to such Incidental Stockholder. (f) Hold-Back. Each Stockholder agrees not to effect any sale or distribution, including a sale pursuant to Rule 144, of any equity securities of the Company or any securities convertible into or exchangeable or exercisable for equity securities of the Company during the ten days prior to, and during the 180-day period following, 39 the effective date of any Registration Statement filed by the Company (except as part of such registration), if and to the extent requested by the Company or by the managing underwriter or underwriters of such registration. 6.3 Limitation on Incidental Registration Rights. Notwithstanding anything to the contrary contained in Sections 6.1 and 6.2, the Company shall not be obligated to give notice to any Stockholder of any proposed registration or to register the Shares of any Stockholder after the Company has effected five registrations in accordance with Section 6.1 and such Registration Statements have been declared or ordered effective. 6.4 Indemnity. The Company will indemnify and hold harmless each Incidental Stockholder and each underwriter (and any person who controls such underwriter within the meaning of Section 15 of the Securities Act) against all claims, losses, damages, liabilities and expenses (collectively, "Losses") resulting from any untrue statement or allegedly untrue statement of a material fact contained in any Registration Statement, preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or from any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus or a preliminary prospectus, in light of the circumstances under 40 which they were made) not misleading, except insofar as the same may have been based on (i) information furnished in writing to the Company by (x) such Incidental Stockholder in accordance with the third sentence of this Section 6.4 or (y) such underwriter, in each case, expressly for use therein and used in accordance with such writing or (ii), with respect to any underwriter, the failure of such underwriter to send or give a copy of the final prospectus (as the same may be supplemented or amended) to the person asserting the untrue statement or allegedly untrue statement or omission or alleged omission at or prior to the sale of the Shares to such person if such statement was corrected in the final prospectus. Any expenses incurred by the Incidental Stockholders that are subject to indemnification pursuant to this Section 6.4 shall be paid by the Company as and when incurred by the Incidental Stockholders. Each Incidental Stockholder agrees to furnish to the Company such information concerning such Incidental Stockholder and the proposed sale or distribution as shall, in the opinion of counsel for the Company, be necessary in connection with any such registration or qualification of any Incidental Shares. Each Incidental Stockholder also agrees to indemnify and hold harmless the Company and its officers and directors (and any person who controls the Company within the meaning of Section 15 of the Securities Act) against all Losses resulting from any untrue statement or allegedly untrue 41 statement of a material fact furnished in writing by such Incidental Stockholder to the Company in accordance with the third sentence of this Section 6.4 expressly for use in connection with such registration or qualification and used in accordance with such writing and from any omission therefrom or alleged omission therefrom of a material fact needed to be furnished or necessary to make the statements therein (in the case of a prospectus or preliminary prospectus, in light of the circumstances under which they were made) not misleading, except insofar as the same may have been based on the failure of the underwriter to send or give a copy of the final prospectus (as the case may be supplemented or amended) to the person asserting the untrue statement or allegedly untrue statement or omission or alleged omission at or prior to the sale of the Shares to such person if such statement was corrected in the final prospectus; provided, however, that the liability of such Incidental Stockholder under this Section 6.4 shall be limited to the amount of proceeds received by such Incidental Stockholder in the offering giving rise to such liability. Any expenses incurred by the Company that are subject to indemnification pursuant to this Section 6.4 shall be paid by the Incidental Stockholder as and when incurred by the Company. 7. Voting. Each Stockholder shall, until the IPO Effectiveness Date, vote his Shares and the Irrevocable Proxy of his Permitted Transferee at any meeting of the 42 stockholders of the Company in the manner recommended by the Board. 8. Miscellaneous. 8.1 Provisions to Apply to All Shares. The provisions of this Agreement, subject to the terms hereof, shall apply to all of the Shares now owned or which may be transferred hereafter to a Stockholder pursuant to Section 3 of this Agreement or issued or transferred hereafter to a Stockholder in consequence of any conversion, exchange or reclassification of Shares, corporate reorganization, or any other form of recapitalization, or consolidation or merger, or share split or share dividend. 8.2 Legend. In addition to any legend required by federal or state securities laws or any other agreement, each Share now held or hereafter acquired by any Stockholder shall, for as long as this Agreement is effective, bear a legend as follows: The sale, assignment, transfer and pledge of any of the securities represented by this Certificate are restricted by the terms of the Stockholders Agreement, dated as of February 21, 1995, among the Company and certain of its stockholders, a copy of which may be inspected at the Company's principal office. Under such Stockholders Agreement, the Company is authorized to transfer the securities represented by this Certificate on the books of the Company in accordance with the terms of such Stockholders Agreement. 8.3 Binding on Transferees. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and any transferee of Shares 43 who becomes a party to this Agreement in accordance with Section 2.2. 8.4 Additional Management Stockholders. If Jack C. Bendheim or Marvin S. Sussman desire to purchase shares of Class B Common Stock from the Company by March 2, 1995, each will, prior to and as a condition to such purchase, execute and deliver to the Company an appropriate instrument in the form of Exhibit D, pursuant to which each shall agree to take and hold such shares of Class B Common Stock subject to the terms of this Agreement and that thereafter each shall be a Management Stockholder hereunder. 8.5 Notices. Notices hereunder shall be given only by personal delivery, registered or certified mail, return receipt requested, overnight courier service, telex or facsimile transmission and shall be deemed transmitted on the fifth day following the date when deposited in the mail, on the day following the date of delivery to a courier service (postage or charges prepaid) or when personally delivered or transmitted by facsimile machine, and addressed to the particular party to whom the notice is to be sent as follows: If to the Company: Phibro-Tech, Inc. One Parker Plaza Fort Lee, New Jersey 07024 Attention: Nathan Z. Bistricer Telecopier: (201) 944-6245 44 With a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Matthew Nimetz, Esq. Telecopier: (212) 757-3990 If to the Stockholders: As set forth on the books and records of the Company or to such address as a party may instruct by notice hereunder (which address will be provided promptly by the Company upon the request of any Stockholder). 8.6 Subdivision and Combination. If the Company shall in any manner subdivide (by stock split, stock dividend or otherwise) or combine (by reverse stock split or otherwise) the outstanding shares of one class of common stock of the Company, the outstanding shares of the other class of common stock shall be proportionately subdivided and combined. 8.7 Severability. In the event any provision hereof is held void or unenforceable by any court, then such provisions shall be severable and shall not affect the remaining provisions hereof. 8.8 Entire Agreement. This Agreement is the entire Agreement among the parties with respect to the subject matter hereof, and, when executed by the parties hereto, supersedes all prior agreements and communications, 45 either oral or in writing, among the parties hereto with respect to the subject matter contained herein. 8.9 Waiver. Any failure by a party hereto to comply with any obligation, agreement or condition herein may be waived only by a written instrument executed by each party adversely affected by such failure to comply, but such waiver or failure to insist upon strict compliance with such obligation, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any such subsequent or other failure. 8.10 Amendments. Amendments may be made to this Agreement from time to time by a written instrument executed by the Company and the Stockholders then holding 80% of the Shares subject to this Agreement. 8.11 Consent to Specific Performance. it is specifically agreed and understood that monetary damages would not adequately compensate the non-breaching party for the breach of this Agreement, and this Agreement shall therefore be specifically enforceable, and any breach or threatened breach of this Agreement shall be the proper subject of a temporary or permanent injunction or restraining order. Therefore, if any party shall institute any action or proceeding to enforce the provisions hereof, any party against whom such action or proceeding is brought hereby waives any claim or defense therein that the other party has an adequate remedy at law. 46 8.12 Variation in Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the antecedent person or persons or entity or entities may require. 8.13 Term. This Agreement shall terminate twenty-five years after the date hereof unless terminated earlier by written agreement of the Company and the Stockholders. 8.14 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such State. 8.15 Further Assurances. Each of the parties shall execute such documents and other papers and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby. 8.16 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. Phibro-Tech, Inc. By: /s/ Joseph M. Katzenstein ------------------------- Vice President Stockholders /s/ I. David Paley - ------------------ /s/ Nathan Z. Bistricer - ----------------------- /s/ James O. Herlands - --------------------- Amendment Agreement Reference is made to that certain Stockholders Agreement (the "Stockholders Agreement"), dated as of February 21, 1995, between Phibro-Tech, Inc., a Delaware corporation ("Phibro-Tech"), and I. David Paley, Nathan Z. Bistricer and James O. Herlands, as the Management Stockholders thereunder. In connection with the Stockholders Agreement, the Management Stockholders purchased an aggregate of 383.42 shares of Phibro- Tech's Class B Common Stock, par value $.01, which shares are convertible under certain circumstances into shares of Phibro- Tech's Class A Common Stock, par value $.01 (collectively, the "Phibro-Tech Stock"). Each of the Management Stockholders and Phibro-Tech hereby agrees as follows: 1. The parties have determined that, in the future, it may be mutually beneficial for such parties and Philipp Brothers Chemicals, Inc., a New York corporation ("PBC"), which is the parent company of Phibro-Tech, to arrange for an exchange of the shares of the Phibro-Tech stock held by the Management Shareholders (or their permitted transferees) for shares of common stock which may be non-voting common stock of PBC ("PBC Stock"), upon exchange rate terms that are mutually acceptable to the party or parties and PBC so effecting such exchange (the "Exchanging Parties"). 2. In the event of such an exchange, references in the Stockholders Agreement (to the extent applicable to the Exchanging Parties) to Phibro-Tech Stock or any class thereof shall be deemed to refer to PBC Stock or the applicable class thereof and applicable provisions of the Stockholders Agreement, including without limitation provisions relating to the computation of the purchase price for shares of Phibro-Tech stock in the event of a purchase or sale thereof pursuant to the Stockholders Agreement, shall be equitably amended and adjusted by Phibro-Tech and PBC to reflect the exchange of Phibro-Tech Stock for PBC Stock contemplated hereby. 3. Notwithstanding the foregoing the provisions of Section 8.4 of the Stockholders Agreement shall, upon such an exchange of Phibro-Tech stock for PBC Stock, cease to be of any force or effect and shall be deemed deleted from the Stockholders Agreement. 4. References in the Stockholders Agreement to the Note Agreement or to the Loan Agreement shall be deemed to refer also to (i) that certain Indenture, dated as of June 11, 1998, between PBC, the Guarantors named therein and The Chase Manhattan Bank, as Trustee, and relating to the 97/8% Senior Subordinated Notes due 2008 of PBC, as the same may be amended, restated, modified or refinanced from time to time (the "Indenture") (provided that no such amendment, restatement, modification or refinancing shall increase the restrictions or limitations imposed on the Stockholders or on the Company's or PBC's ability to make payment to the Stockholders as in effect on the date of such Indenture), and (ii) such senior, secured institutional loan and/or credit facility agreement(s) as may from time to time be entered into by PBC, and as to any extensions, modifications, renewals or refinancings thereof (provided that no such extension, modification, renewal or refinancing shall increase the restrictions or limitations imposed on the Stockholders or on the Company's or PBC's ability to make payments to the Stockholders by any of (A) the Loan Agreement, as in effect on the original date of execution of the Stockholders Agreement, (B) the Note Agreement, as in effect on the original date of execution of the Stockholders Agreement, (C) the Indenture, as in effect on the original date of execution thereof, or (D) the first such loan and/or credit facility agreements entered into by PBC which effectively replaces or refinances the Loan Agreement as in effect on the date hereof. 5. Except as contemplated hereby the Stockholders' Agreement shall remain in full force and effect. 6. This Amendment Agreement may be executed in counterparts and may not be amended orally. Agreed to as of June 11, 1998 /s/ I. David Paley ------------------ I. DAVID PALEY /s/ Nathan Z. Bistricer ----------------------- NATHAN Z. BISTRICER /s/ James O. Herlands --------------------- JAMES O. HERLANDS PHIBRO-TECH, INC. By: /s/ Jack Bendheim ------------------- Title: CEO PHILIPP BROTHERS CHEMICALS, INC. By: /s/ Jack C. Bendheim ---------------------- Title: Pres EX-10.15 18 0018.txt SEVERANCE AGREEMENT BETWEEN I. DAVID PALEY AND PHIBRO-TECH, INC. SEVERANCE AGREEMENT SEVERANCE AGREEMENT (the "Agreement"), dated as of February 21, 1995, between PHIBRO-TECH, INC., a Delaware corporation having its principal office at One Parker Plaza, Fort Lee, New Jersey 07024 (the "Company"), and I. DAVID PALEY residing at 1185 Park Avenue, New York, New York 10128(the "Executive"). WHEREAS, the Executive has made and is expected to make a major contribution to the profitability and growth of the Company; and WHEREAS, the Company considers the continued services of the Executive to be in the best interests of the Company and its stockholders and wishes to assure the continued services of the Executive on behalf of the Company. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereto agree as follows: 1. Certain Definitions. Capitalized terms not otherwise defined herein shall have the following meanings: "Actual or Constructive Termination" means, with respect to the Executive, the occurrence of any of the following events: (a) a written communication from the Chairman of the Board or Chairman of the Board of 2 Directors of any Affiliate or from the Board or Board of Directors of any Affiliate, that the Executive's employment with the Company or such Affiliate has been, or will shortly be, terminated by the Company or such Affiliate, (b) a change (objected to in writing by the Executive within 30 days after such change) in the Executive's title or office, or in the nature or scope of the Executive's authority, duties, responsibility or status, or in his reporting responsibilities, location of work, compensation, employee benefits or perquisites, or (c) the Permanent Disability of the Executive; provided, however, no communication referenced in clause (a) and no change referenced in clause (b) shall be deemed an Actual or Constructive Termination if the Executive agrees to remain or become an employee of any Affiliate; provided further, that no change in compensation referenced in clause (b) shall be deemed an Actual or Constructive Termination if such change is part of a bona fide plan approved by the Board or the Board of Directors of any Affiliate employing the Executive to reduce the Company's or such Affiliate's overall costs and such change in compensation is proportionate to the changes in compensation experienced by other employees of the Company or such Affiliate. "Adjusted Net Income" means, for any fiscal year of the Company, or for any twelve--month period, as the case may be, Net Income for such year or such period plus the sum 3 of all amounts deducted for Interest Expense and income taxes. "Affiliate" means any entity that, directly or indirectly, controls, is controlled by or is under common control with the Company. "Board" means the Board of Directors of the Company. "Change of Control Event" means the cessation of employment of the Executive by the Company or any Affiliate (whether at the election of the Executive or as a result of the Executive's termination by the Company or such Affiliate) (i) within six months after the date on which any of the following events (other than the event described in clause (b)) occurs or (ii) within six months after the date that is three years after the event described in clause (b) occurs: (a) Jack C. Bendheim shall cease to be employed by PBC as the President and Chief Operating Officer having substantially the same responsibilities as he has on the date hereof, except as a result of his death or Permanent Disability; (b) Jack C. Bendheim shall die or become Permanently Disabled; (c) An event or transaction, after which Jack C. Bendheim and his Immediate Family or trusts, all of the beneficial interests in which shall be held by Jack C. 4 Bendheim or his Immediate Family, are entitled to elect less than 40% of the directors of PBC; (d) Jack C. Bendheim and his Immediate Family or trusts, all of the beneficial interests in which shall be held by Jack C. Bendheim or his Immediate Family, shall be the beneficial owners of less than 50% of the outstanding shares of Class C common stock or Class E common stock of PBC; (e) PBC shall, directly or indirectly, be the beneficial owner of less than 50% of the outstanding shares of common stock of the Company and Jack C. Bendheim and his Immediate Family or trusts, all of the beneficial interests in which shall be held by Jack C. Bendheim and his Immediate Family, shall be the beneficial owners of less than 50% of the outstanding shares of common stock of the Company; or (f) a reorganization, merger, consolidation, acquisition or other similar transaction, after which all or substantially all of the assets of the Company are controlled by an entity that is not, as of the date hereof, an Affiliate. "Class A Common Stock" means the Class A Common Stock, par value $.0l per share, of the Company. "Class B Common Stock" means the Class B Common Stock, par value $.0l per share, of the Company. 5 "EBIT" means, as of any date, the higher of (i) an amount equal to (x) the sum of Adjusted Net Income for each of the immediately preceding three fiscal years of the Company divided by (y) three and (ii) Adjusted Net Income for the rolling twelve month period ending on the last day of the immediately preceding fiscal quarter of the Company. "EBIT Per Share" means, as of any date, an amount equal to (i) EBIT divided by (ii) the total number of issued and outstanding shares of Class A Common Stock and Class B Common Stock as set forth in the Company's most recently prepared quarterly balance sheet. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Extraordinary Event" means (i) the initial public offering of the Company's common stock pursuant to an effective registration statement filed under the Securities Act (an "IPO"), (ii) the sale of at least 50% of the issued and outstanding shares of the Company's common stock by the Company, C.P. Chemicals, Inc., PBC or their respective successors to a third party (a "Private Sale") or (iii) the sale of all or substantially all of the assets of the Company to a third party (an "Asset Sale"). "GAAP" means generally accepted accounting principles consistently applied. "Immediate Family" means, with respect to Jack C. Bendheim, a spouse (except for a spouse with whom Jack C. 6 Bendheim has entered into any divorce or separation agreement) and any lineal descendant. "Interest Expense" means, for any fiscal year or twelve--month period, the amount properly recorded or recordable as interest expense of the Company for such year or period, determined in accordance with GAAP. "Loan Agreement" means the Loan and Security Agreement, dated as of August 31, 1994, by and among National Westminster Bank NJ, PBC, C.P. Chemicals, Inc., the Company, Prince Agriproducts, Inc., The Prince Manufacturing Company, an Illinois corporation, and The Prince Manufacturing Company, a Pennsylvania corporation, and any extensions, modifications, renewals or refinancings thereof. "Net Income" means, for any fiscal year or twelve-- month period, the net income of the Company for such year or period, determined in accordance with GAAP, excluding unusual, non--recurring gains or losses requiring disclosure in the Company's financial statements; provided that net income for any twelve--month period shall at the Company's option, exercisable in its sole discretion, be determined by reference to the company's audited income statements for such period prepared by Edward Isaacs & Company or by another firm of independent public accountants of recognized national standing selected by the Company. "Note Agreement" means the Note Agreement, dated as of August 15, 1994, between PBC and The Northwestern 7 Mutual Life Insurance Company pursuant to which PBC issued and sold its 11% Senior Notes due June 29, 2004 in the aggregate principal amount of $20,000,000, and any extensions, modifications, renewals or refinancings thereof. "PBC' means Philipp Brothers Chemicals, Inc., a New York corporation. "Permanent Disability" means, (i) with respect to Jack C. Bendheim, that he has received written notification from the board of directors of PBC stating that in its view he has become mentally or physically incapacitated or disabled, whether totally or partially, so that he is unable substantially to perform (x) for a period of three consecutive months or (y) for shorter periods aggregating three months during a six month period, substantially the same services as he performed for PBC prior to incurring such incapacity or disability and (ii) with respect to the Executive, that the Executive has received written notification from the Board or the Board of Directors of any Affiliate employing the Executive stating that in its view he has become mentally or physically incapacitated or disabled, whether totally or partially, so that he is unable substantially to perform (x) for a period of three consecutive months or (y) for shorter periods aggregating three months during a six month period, substantially the same services as he performed for the Company or such Affiliate prior to incurring such incapacity or disability. 8 "Permitted Transferee" means, with respect to the Executive, (i) a member of such Executive's family, which shall include a spouse (except for a spouse with whom such Executive has entered into any divorce or separation agreement), any lineal ancestor or descendant or any sibling (collectively, the "Family"), or (ii) a trust (including a voting trust at any time established by Executive for the sole benefit of such Executive and/or one or more of such Executive's Family), all of the beneficial interests in which shall be held by such Executive or one or more members of such Executive's Family (or, in the case of a voting trust, all of the voting trust certificates of which are owned by such Executive and/or one or more members of such Executive's Family). "Prime Rate" means the rate of interest listed as the prime rate and published in the Wall Street Journal. "Promissory Note" means the limited recourse promissory note executed by the Executive in favor of the Company as of the date hereof. "Securities Act" means the Securities Act of 1933, as amended. "Shares" means, collectively, (i) the shares of Class B Common Stock issued to the Executive as of the date hereof, (ii) any shares of common stock issued in connection with such shares as a result of a stock split, stock dividend, recapitalization or other capital reorganization, 9 (iii) any shares of Class A Common Stock issued upon conversion of any of the foregoing shares ("Conversion Shares") and (iv) any shares of common stock issued in connection with such Conversion Shares as a result of a stock split, stock dividend, recapitalization or other capital reorganization. The term "Shares" shall not include shares of common stock of the Company purchased by the Executive on the open market or in a private transaction from any person other than his Permitted Transferee. "Stockholders Agreement" means the Stockholders Agreement, dated February 21, 1995, between the Company and the individuals listed on the signature page thereto. 2. Company's Obligation to Pay Severance and Catch--up Payment; Computation of Severance Amount and Catch--up Payment. (a) Upon the occurrence of (i) an Actual or Constructive Termination or (ii) a Change of Control Event, the Executive shall be entitled to a cash payment from the Company in an amount (the "Severance Amount") equal to the excess of (i) the product of (x) 7.84 multiplied by (y) EBIT Per Share multiplied by (z) the number of Shares owned by the Executive and his Permitted Transferees which have not been registered pursuant to an effective registration statement filed under the Securities Act (the "Owned Shares") over (ii) (x) the consideration paid to the Executive under the Stockholders Agreement with respect to the purchase of such Owned Shares (A) in cash or (B) by issuance to the 10 Executive of a subordinated promissory note of the Company bearing interest at the Prime Rate (a "Subordinated Note") or (y) if the Company has exercised its remedies under the Pledge Agreement, dated the date hereof, between the Company and the Executive, following an Event of Default (as defined in the Promissory Note), the greater of (A) the amount of indebtedness outstanding under the Promissory Note or (B) the amount recovered by the Company upon the sale or other disposition of the Owned Shares pursuant to the Pledge Agreement. The Company shall pay the Severance Amount to the Executive on the date (i) that payments with respect to the Owned Shares are made under the Stockholders Agreement or (ii) that is five days after the date the Owned Shares are sold or disposed of by the Company pursuant to the Pledge Agreement. The Company's obligation under this Section 2(a) to pay the Severance Amount to the Executive shall terminate upon payment of such amount and under no circumstances shall the Company be required to pay any amount to the Executive under this Section 2(a) upon the occurrence of any subsequent Actual or Constructive Termination or Change of Control Event. (b) If an Extraordinary Event occurs within 12 months after the occurrence of an Actual or Constructive Termination, the Management Stockholder shall be entitled to the applicable additional payment described in Section 2(c) below (a "Catch-up Payment"). The Catch-up Payment shall be 11 paid by the Company on the later of (i) the date the Severance Amount is required to be paid in accordance with the second sentence of Section 2(a) and (ii) thirty (30) days after the relevant Extraordinary Event. (c) In the case of an IPO, the Management Stockholder shall be entitled to a Catch--up Payment equal to (i) the excess, if any, of (x) the product of (A) the offering price per share of the class of common stock of the Company sold in the Initial Public Offering (net of underwriting discounts and commissions) and (B) the number of Owned Shares over (y) the Severance Amount. In the case of a Private Sale, the Management Stockholder shall be entitled to a Catch-up Payment equal to (i) the excess, if any, of (x) the product of (A) the sale price per share of the class of common stock of the Company sold in the Private Sale (provided that if any portion of the consideration is not cash or other property having a readily ascertainable value, the value of such property for purposes of determining the sale price per share shall be determined by the Board reasonably and in good faith and, at the request of the Executive, the Board shall provide adequate documentation of the basis for its determination) and (B) the number of Owned Shares over (y) the Severance Amount. In the case of an Asset Sale, the Management Stockholder shall be entitled to a Catch-up Payment equal to (i) the excess, if any, of (x) the product of (A) an amount equal to the quotient 12 obtained by dividing (I) the aggregate purchase price of the Asset Sale (provided that if any portion of the consideration is not cash or other property having a readily ascertainable value, the value of such property for purposes of determining such aggregate purchase prices shall be determined by the Board reasonably and in good faith and, at the request of the Executive, the Board shall provide adequate documentation of the basis for its determination) by (II) the total number of shares of the Company's common stock issued and outstanding at the time of the Asset Sale and (B) the number of Owned Shares (y) the Severance Amount. 3. Restrictions on Cash Payments. If the Company's ability to make cash payments with respect to its obligations under Sections 2(a) or 2(c) is restricted or limited under the terms of the Note Agreement or the Loan Agreement, the Company shall (i) make cash payments required by Sections 2(a) or 2(c) to the Executive on an equal and ratable basis with all the other obligations of the Company to the extent permitted by the Note Agreement and the Loan Agreement, and (ii) deliver to the Executive a Subordinated Note in a principal amount equal to (x) the excess of the Severance Amount (or, if applicable, the Catch-up Payment) over (y) the amount paid pursuant to clause (i) above. If the Company is not permitted under the terms of the Note Agreement or the Loan Agreement to pay any portion of the 13 Severance Amount or Catch--up Payment in cash, the Company shall deliver to the Executive a Subordinated Note in a principal amount equal to the Severance Amount (or, if applicable, the Catch-up Payment). 4. Executive Misconduct. If the Executive shall have committed an act of theft or intentional fraud against the Company or any Affiliate, then the Company may deduct from any amounts payable under Section 2 (including, without limitation, under Section 2(c)) an amount equal to the loss suffered by the Company and such Affiliate as a result of the Executive's theft or intentional fraud determined by the Board in good faith. 5. Term. This Agreement shall terminate on the earlier of (i) the date the Executive and his Permitted Transferees cease to own any Shares or (ii) the date all Shares owned by the Executive and his Permitted Transferees have been registered pursuant to an effective registration statement filed under the Securities Act. 6. Other Agreements. To the extent this Agreement may conflict with any previous agreements or understandings between the Company and the Executive, the terms and provisions of this Agreement shall govern. 7. Notice. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and if sent by personal delivery, registered or certified mail, return receipt requested, 14 overnight courier service, telex or facsimile transmission and shall be deemed transmitted on the fifth day following the date when deposited in the mail, on the day following the date of delivery to a courier service (postage or charges prepaid) or when personally delivered or transmitted by facsimile machine to the Executive at the address shown in this Agreement or any later address he has filed in writing with the Company or, in the case of the Company, at the address shown in this Agreement or at the principal executive offices, attention of the Secretary. 8. Governing Law. THE PROVISIONS OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN. 9. Waiver: Amendment. Any provision of this Agreement may be waived at any time by the party entitled to the benefits thereof, and this Agreement may be amended or supplemented at any time. No such amendment or supplement shall be effective unless in writing and signed by the parties or, in the case of a waiver, by the party granting the waiver. 10. Successors. This Agreement shall be binding upon and inure to the benefit of the Executive, the Company and any successor organization which shall succeed to substantially all of the business and assets of the Company, whether by means of merger, consolidation, acquisition of 15 all or substantially all of the assets of the Company, or otherwise, including by operation of law. The Company will require any successor organization, which is a purchaser of all or substantially all of the business or assets of the Company, by written agreement addressed to the Executive, to assume and agree to perform this Agreement. 11. Severability. The invalidity or unenforceability of any provision of this Agreement in any respect shall not affect the validity or enforceability of such provision in any other respect or of any other provision of this Agreement, all of which shall remain in full force and effect; this Agreement shall be deemed rewritten to the minimum extent necessary to cure such invalidity or unenforceabi1ity. 16 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PHIBRO-TECH, INC. By: /s/ Jack C. Bendheim --------------------------- Jack C. Bendheim Chief Executive Officer EXECUTIVE /s/ I. David Paley -------------------------- Name: I. David Paley EX-10.16 19 0019.txt FORM OF SEVERANCE AGREEMENT BETWEEN PHILIPP BROTHERS CHEMICALS, INC. AND EACH OF NATHAN Z. BISTRICER AND JAMES O. HERLANDS SEVERANCE AGREEMENT SEVERANCE AGREEMENT (the "Agreement"), dated as of February 21, 1995, between PHILIPP BROTHERS CHEMICALS, INC., a New York corporation having its principal office at One Parker Plaza, Fort Lee, New Jersey 07024 ("PBC"), and _______________________________________________________. WHEREAS, the Executive has made and is expected to make a major contribution to the profitability and growth of PBC and Phibro-Tech, Inc., a Delaware corporation ("Phibro-Tech"), and a subsidiary of PBC; and WHEREAS, PBC considers the continued services of the Executive to be in the best interests of PBC and its stockholders and wishes to assure the continued services of the Executive on behalf of PBC. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties hereto agree as follows: 1. Certain Definitions. Capitalized terms not otherwise defined herein shall have the following meanings: "Actual or Constructive Termination" means, with respect to the Executive, the occurrence of any of the following events: (a) a written communication from the President of PBC or any Affiliate or from the Chairman of the Board or Chairman of the Board of Directors of any 2 Affiliate or from the Board or the Board of Directors of any Affiliate or any committee thereof, that the Executive's employment with PBC or such Affiliate has been, or will shortly be, terminated, (b) a change (objected to in writing by the Executive within 30 days after such change) in the Executive's title or office, or in the nature or scope of the Executive's authority, duties, responsibility or status, or in his reporting responsibilities, location of work, compensation, employee benefits or perquisites, or (c) the Permanent Disability of the Executive; provided, however, that no communication referenced in clause (a) and no change referenced in clause (b) shall be deemed an Actual or Constructive Termination if the Executive agrees to remain or become an employee of any Affiliate; provided further, that no change in compensation referenced in clause (b) shall be deemed an Actual or Constructive Termination if such change is part of a bona fide plan approved by the Board or the Board of Directors of any Affiliate employing the Executive to reduce PBC's or such Affiliate's overall costs and such change in compensation is proportionate to the changes in compensation experienced by other employees of PBC or such Affiliate. "Adjusted Net Income" means, for any fiscal year of Phibro-Tech, or for any twelve-month period, as the case may be, Net Income for such year or such period plus the sum of all amounts deducted for Interest Expense and income taxes. 3 "Affiliate" means any entity that, directly or indirectly, controls, is controlled by or is under common control with PBC. "Board" means the Board of Directors of PBC. "Change of Control Event" means the cessation of employment of the Executive by PBC or any Affiliate (whether at the election of the Executive or as a result of the Executive's termination by PBC or such Affiliate) (i) within six months after the date on which any of the following events (other than the event described in clause (b)) occurs or (ii) within six months after the date that is three years after the event described in clause (b) occurs: (a) Jack C. Bendheim shall cease to be employed by PBC as the President and Chief Operating Officer having substantially the same responsibilities as he has on the date hereof, except as a result of his death or Permanent Disability; (b) Jack C. Bendheim shall die or become Permanently Disabled; (c) An event or transaction, after which Jack C. Bendheim and his Immediate Family or trusts, all of the beneficial interests in which shall be held by Jack C. Bendheim or his Immediate Family, are entitled to elect less than 40% of the directors of PBC; (d) Jack C. Bendheim and his Immediate Family or trusts, all of the beneficial interests in which shall be held by Jack C. Bendheim or his Immediate Family, 4 shall be the beneficial owners of less than 50% of the outstanding shares of Class C common stock or Class E common stock of PBC; (e) PBC shall, directly or indirectly, be the beneficial owner of less than 50% of the outstanding shares of common stock of Phibro-Tech and Jack C. Bendheim and his Immediate Family or trusts, all of the beneficial interests in which shall be held by Jack C. Bendheim and his Immediate Family, shall be the beneficial owners of less than 50% of the outstanding shares of common stock of Phibro-Tech; or (f) a reorganization, merger, consolidation, acquisition or other similar transaction, after which all or substantially all of the assets of Phibro-Tech are controlled by an entity that is not, as of the date hereof, an Affiliate. "Class A Common Stock" means the Class A Common Stock, par value $.0l per share, of Phibro-Tech. "Class B Common Stock" means the Class B Common Stock, par value S.0l per share, of Phibro-Tech. "EBIT" means, as of any date, the higher of (i) an amount equal to (x) the sum of Adjusted Net Income for each of the immediately preceding three fiscal years of Phibro-Tech divided by (y) three and (ii) Adjusted Net Income for the rolling twelve month period ending on the last day of the immediately preceding fiscal quarter of Phibro-Tech. 5 "EBIT Per Share" means, as of any date, an amount equal to (i) EBIT divided by (ii) the total number of issued and outstanding shares of Class A Common Stock and Class B Common Stock as set forth in Phibro-Tech's most recently prepared quarterly balance sheet. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Extraordinary Event" means (i) the initial public offering of Phibro-Tech's common stock pursuant to an effective registration statement filed under the Securities Act (an "IPO"), (ii) the sale of at least 50% of the issued and outstanding shares of Phibro-Tech's common stock by PhibroTech, C.P. Chemicals, Inc., PBC or their respective successors to a third party (a "Private Sale") or (iii) the sale of all or substantially all of the assets of Phibro- Tech to a third party (an "Asset Sale"). "GAAP" means generally .accepted accounting principles consistently applied. "Immediate Family" means, with respect to Jack C. Bendheim, a spouse (except for a spouse with whom Jack C. Bendheim has entered into any divorce or separation agreement) and any lineal descendant. "Interest Expense" means, for any fiscal year or twelve-month period, the amount properly recorded or recordable as interest expense of Phibro-Tech for such year or period, determined in accordance with GAAP. 6 "Loan Agreement" means the Loan and Security Agreement, dated as of August 31, 1994, by and among National Westminster Bank NJ, PBC, C.P. Chemicals, Inc., Phibro-Tech, Prince Agriproducts, Inc., The Prince Manufacturing Company, an Illinois corporation, and The Prince Manufacturing Company, a Pennsylvania corporation, and any extensions, modifications, renewals or refinancings thereof. "Net Income" means, for any fiscal year or twelve-month period, the net income of Phibro-Tech for such year or period, determined in accordance with GAAP, excluding unusual, non-recurring gains or losses requiring disclosure in Phibro-Tech's financial statements; provided that net income for any twelve-month period shall at PBC's option, exercisable in its sole discretion, be determined by reference to Phibro-Tech's audited income statements for such period prepared by Edward Isaacs & Company or by another firm of independent public accountants of recognized national standing selected by PBC. "Note Agreement" means the Note Agreement, dated as of August 15, 1994, between PBC and The Northwestern Mutual Life Insurance Company pursuant to which PBC issued and sold its 11% Senior Notes due June 29, 2004 in the aggregate principal amount of $20,000,000, and any extensions, modifications, renewals or refinancings thereof. "Permanent Disability" means, (i) with respect to Jack C. Bendheim, that he has received written notification 7 from the board of directors of PBC stating that in its view he has become mentally or physically incapacitated or disabled, whether totally or partially, so that he is unable substantially to perform (x) for a period of three consecutive months or (y) for shorter periods aggregating three months during a six month period, substantially the same services as he performed for PBC prior to incurring such incapacity or disability and (ii) with respect to the Executive, that the Executive has received written notification from the Board or the Board of Directors of any Affiliate employing the Executive stating that in its view he has become mentally or physically incapacitated or disabled whether totally or partially, so that he is unable substantially to perform (x) for a period of three consecutive months or (y) for shorter periods aggregating three months during a six month period, substantially the same services as he performed for PBC or such Affiliate prior to incurring such incapacity or disability. "Permitted Transferee" means, with respect to the Executive, (i) a member of such Executive's family, which shall include a spouse (except for a spouse with whom such Executive has entered into any divorce or separation agreement), any lineal ancestor or descendant or any sibling (collectively, the "Family"), or (ii) a trust (including a voting trust at any time established by Executive for the sole benefit of such Executive and/or one or more of such Executive's Family), all of the beneficial interests 8 which shall be held by such Executive or one or more members of such Executive's Family (or, in the case of a voting trust, all of the voting trust certificates of which are owned by such Executive and/or one or more members of such Executive's Family). "Prime Rate" means the rate of interest listed as the prime rate and published in the Wall Street Journal. "Promissory Note" means the limited recourse promissory note executed by the Executive in favor of Phibro-Tech as of the date hereof. "Securities Act" means the Securities Act of 1933, as amended. "Shares" means, collectively, (i) the shares of Class B Common Stock issued to the Executive as of the date hereof, (ii) any shares of common stock issued in connection with such shares as a result of a stock split, stock dividend, recapitalization or other capital reorganization, (iii) any shares of Class A Common Stock issued upon conversion of any of the foregoing shares ("Conversion Shares") and (iv) any shares of common stock issued in connection with such Conversion Shares as a result of a stock split, stock dividend, recapitalization or other capital reorganization. The term "Shares" shall not include shares of common stock of Phibro-Tech purchased by the Executive on the open market or in a private transaction from any person other than his Permitted Transferee. 9 "Stockholders Agreement" means the Stockholders Agreement, dated February 21, 1995, between Phibro-Tech and the individuals listed on the signature page thereto. 2. Company's Obligation to Pay Severance and Catch-up Payment: Computation of Severance Amount and Catchup Payment. (a) Upon the occurrence of (i) an Actual or Constructive Termination or (ii) a Change of Control Event, the Executive shall be entitled to a cash payment from PBC in an amount (the "Severance Amount") equal to the excess of (i) the product of (x) 7.84 multiplied by (y) EBIT Per Share multiplied by (z) the number of Shares owned by the Executive and his Permitted Transferees which have not been registered pursuant to an effective registration statement filed under the Securities Act (the "Owned Shares") over (ii) (x) the consideration paid to the Executive under the Stockholders Agreement with respect to the purchase of such Owned Shares (A) in cash or (B) by issuance to the Executive of a subordinated promissory note of PBC bearing interest at the Prime Rate (a "Subordinated Note") or (C) by cancellation of the existing indebtedness of the Executive to Phibro-Tech under the Promissory Note, or (y) if Phibro-Tech has exercised its remedies under the Pledge Agreement, dated the date hereof, between Phibro-Tech and the Executive, following an Event of Default (as defined in the Promissory Note), the greater of (A) the amount of indebtedness outstanding under the Promissory Note or (B) the amount recovered by Phibro-Tech upon the sale or 10 other disposition of the Owned Shares pursuant to the Pledge Agreement. PBC shall pay the Severance Amount to the Executive on the date (i) that payments with respect to the Owned Shares are made under the Stockholders Agreement or (ii) that is five days after the date the Owned Shares are sold or disposed of by Phibro-Tech pursuant to the Pledge Agreement. PBC's obligation under this Section 2(a) to pay the Severance Amount to the Executive shall terminate upon payment of such amount and under no circumstances shall PBC be required to pay any amount to the Executive under this Section 2(a) upon the occurrence of any subsequent Actual or Constructive Termination or Change of Control Event. (b) If an Extraordinary Event occurs within 12 months after the occurrence of an Actual or Constructive Termination, the Management Stockholder shall be entitled to the applicable additional payment described in Section 2(c) below (a "Catch-up Payment"). The Catch-up Payment shall be paid by PBC on the later of (i) the date the Severance Amount is required to be paid in accordance with the second sentence of Section 2(a) and (ii) thirty (30) days after the relevant Extraordinary Event. (c) In the case of an IPO, the Management Stockholder shall be entitled to a Catch-up Payment equal to (i) the excess, if any, of (x) the product of (A) the offering price per share of the class of common stock of PhibroTech sold in the Initial Public Offering (net of underwriting discounts and commissions) and (B) the number of 11 Owned Shares over (y) the Severance Amount. In the case of a Private Sale, the Management Stockholder shall be entitled to a Catch-up Payment equal to (i) the excess, if any, of (x) the product of (A) the sale price per share of the class of common stock of Phibro-Tech sold in the Private Sale (provided that if any portion of the consideration is not cash or other property having a readily ascertainable value, the value of such property for purposes of determining the sale price per share shall be determined by the Board reasonably and in good faith and, at the request of the Executive, the Board shall provide adequate documentation of the basis for its determination) and (B) the number of Owned Shares (y) the Severance Amount. In the case of an Asset Sale, the Management Stockholder shall be entitled to a Catch-up Payment equal to (i) the excess, if any, of (x) the product of (A) an amount equal to the quotient obtained by dividing (I) the aggregate purchase price of the Asset Sale (provided that if any portion of the consideration is not cash or other property having a readily ascertainable value, the value of such property for purposes of determining such aggregate purchase prices shall be determined by the Board reasonably and in good faith and, at the request of the Executive, the Board shall provide adequate documentation of the basis for its determination) by (II) the total number of shares of Phibro-Tech's common stock issued and outstanding at the time of the Asset Sale and (B) the number of Owned Shares (y) the Severance Amount. 12 3. Restrictions on Cash Payments. If PBC's ability to make cash payments with respect to its obligations under Sections 2(a) or 2(c) is restricted or limited under the terms of the Note Agreement or the Loan Agreement, PBC shall (i) make cash payments required by Sections 2(a) or 2(c) to the Executive on an equal and ratable basis with all the other obligations of PBC to the extent permitted by the Note Agreement and the Loan Agreement, and (ii) deliver to the Executive a Subordinated Note in a principal amount equal to (x) the excess of the Severance Amount (or, if applicable, the Catch-up Payment) over (y) the amount paid pursuant to clause (i) above. If PBC is not permitted under the terms of the Note Agreement or the Loan Agreement to pay any portion of the Severance Amount or Catch-up Payment in cash, PBC shall deliver to the Executive a Subordinated Note in a principal amount equal to the Severance Amount (or, if applicable, the Catch-up Payment). 4. Executive Misconduct. If the Executive shall have committed an act of theft or intentional fraud against PBC or any Affiliate, then PBC may deduct from any amounts payable under Section 2 (including, without limitation, under Section 2(c)), an amount equal to the loss suffered by PBC and such Affiliate as a result of the Executive's theft or intentional fraud determined by the Board in good faith. 5. Salary Reallocation. PBC shall cause any Affiliate that shall, after the date hereof, pay the base 13 salary of the Executive, or any portion thereof, to assume and agree to the obligations of PBC hereunder and to notify the Executive in writing of the assumption of such obligations. An Affiliate's obligation to pay the Severance Amount shall be in proportion to the portion of the Executive's base salary paid by such Affiliate. 6. Term. This Agreement shall terminate on the earlier of (i) the date the Executive and his Permitted Transferees cease to own any Shares or (ii) the date all Shares owned by the Executive and his Permitted Transferees have been registered pursuant to an effective registration statement filed under the Securities Act. 7. Other Agreements. To the extent this Agreement may conflict with any previous agreements or understandings between PBC and the Executive, the terms and provisions of this Agreement shall govern. 8. Notice. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and if sent by personal delivery, registered or certified mail, return receipt requested, overnight courier service, telex or facsimile transmission and shall be deemed transmitted on the fifth day following the date when deposited in the mail, on the day following the date of delivery to a courier service (postage or charges prepaid) or when personally delivered or transmitted by facsimile machine to the Executive at the address shown in this Agreement or any later address he has filed in 14 writing with PBC or, in the case of PBC, at the address shown in this Agreement or at the principal executive offices, attention of the Secretary. 9. Governing Law. THE PROVISIONS OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN. 10. Waiver: Amendment. Any provision of this Agreement may be waived at any time by the party entitled to the benefits thereof, and this Agreement may be amended or supplemented at any time. No such amendment or supplement shall be effective unless in writing and signed by the parties or, in the case of a waiver, by the party granting the waiver. 11. Successors. This Agreement shall be binding upon and inure to the benefit of the Executive, PBC and any successor organization which shall succeed to substantially all of the business and assets of PBC, whether by means of merger, consolidation, acquisition of all or substantially all of the assets of PBC, or otherwise, including by operation of law. PBC will require any successor organization, which is a purchaser of all or substantially all of the business or assets of PBC, by written agreement addressed to the Executive, to assume and agree to perform this Agreement. 12. Severability. The invalidity or unenforceability of any provision of this Agreement in any respect 15 shall not affect the validity or enforceability of such provision in any other respect or of any other provision of this Agreement, all of which shall remain in full force and effect; this Agreement shall be deemed rewritten to the minimum extent necessary to cure such invalidity or unenforceability. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PHILIPP BROTHERS CHEMICALS, INC. By: ------------------------------ Jack C. Bendheim President EXECUTIVE ---------------------------------- Name: EX-10.17 20 0020.txt AGREEMENT OF LIMITED PARTNERSHIP OF FIRST DICE ROAD COMPANY AGREEMENT OF LIMITED PARTNERSHIP OF FIRST DICE ROAD COMPANY, A CALIFORNIA LIMITED PARTNERSHIP THIS AGREEMENT of Limited Partnership, made as of The 1st day of June, 1985 by and among WESTERN MAGNESIUM CORP., a California corporation, having an office at 8851 Dice Road, Santa Fe Springs, California, 90670-0118 (the "General Partner"); JACK BENDHEIM, residing at 697 West 247th Street, Riverdale, New York 10471, and MARVIN S. SUSSMAN, residing at 101 Central Park West, New York, New York 10023, and JAMES 0. HERLANDS, residing at 115 Central Park West, New York, N.Y. 10024 (as "Limited Partners"). WITNESSETH NOW, THEREFORE, it is mutually agreed that: 1. Formation, Name and Office. a. The parties hereto hereby agree to form a limited partnership (the "Partnership") and to conduct the Partnership business, under the name of First Dice Road Company, a California Limited Partnership, as a limited partnership under and pursuant to the provisions of the California Revised Limited Partnership Act (the "Act"). The principal office of the Partnership shall be maintained at 8851 Dice Road, Santa Fe Springs, County of Los Angeles, State of California, or at such other location as the General Partner may from time to time select, upon 30 days prior written notice to the Limited Partners. b. Certificate. The General Partner shall immediately execute a Certificate of Limited Partnership and cause that Certificate to be filed in the office of the Secretary of State of California. Thereafter, the General Partner shall execute and cause to be filed certificates of amendment of the Certificate of Limited Partnership whenever required by the Act or this Agreement. The General Partners shall execute and cause to be filed original amended certificates evidencing the formation and operation of the Partnership whenever required under the laws of any other states in which the Partnership determines to do business. The General Partner shall also record a certified copy of the Certificate and any amendment thereto in the office of the county recorder in every county in which the Partnership owns real property. 2. Definitions. a. Partners. The term "Partners" as used in this Agreement shall refer collectively to the General Partner and Limited Partners and any additional or substitute Limited Partner or General Partner of the Partnership. The term "Partner" shall refer to any one of the Partners. b. Limited Partners. The term "Limited Partners" shall refer to Jack Bendheim, Marvin S. Sussman, and James O. Herlands so long as they or any of them are Limited Partners, and any additional or substitute Limited Partner who is admitted to the Partnership and has executed this agreement and been named in an amendment to the Certificate. The term "Limited Partner" shall refer to any of the Limited Partners. c. General Partner. The term "General Partner" shall refer to Western Magnesium Corp. and any successor to such General Partner and any additional or substitute General Partner named in any amendment to the Certificate. d. Partnership Interest. The term "Partnership Interest" shall refer to the entire ownership interest (which may be expressed as a percentage) of a Partner in the Partnership at any particular time, including, without limitation, the right of such Partner to participate in the Partnership's "Profits and Losses", "Distributable Cash" and any and all benefits to which a Partner may be entitled as provided in this Agreement or in the Act, together with the obligations of such Partner to comply with all the terms and provisions of this Agreement and the Act. Until changed pursuant to the provisions hereof the Partnership Interest of the Partners shall be as follows: Western Magnesium Corp. (General Partner) 1% Jack Bendheim (Limited Partner) 39% Marvin Sussman (Limited Partner) 40% James 0. Herlands (Limited Partner) 20% Total 100% e. Profits and Losses. The term "Profits and Losses" shall refer to the ordinary income or loss of the Partnership for Federal income tax purposes determined as of the close of the Partnership's fiscal year. f. Code. The term "Code" shall refer to the Internal Revenue Code of 1954, as amended. g. Property. "Property" means those certain parcels and buildings and improvements now or hereafter erected thereon located in the city of Santa Fe Springs, State of California consisting of approximately 4.43 acres located on Dice Road and being acquired from Southern Pacific Transportation Company pursuant letter agreement dated July 25, 1984, together with all incidents and interest of ownership attendant with or appurtenant thereto. The term "Property" shall also include: the interest of the Partnership; in the event of a sale, conveyance or other disposition of the Property, in any (i) leasehold interest, (ii) mortgage, (iii) partnership or corporate interest, or (iv) any other real or personal property, that is held by the Partnership in exchange therefor. h. Certificate. "Certificate" means the Certificate of Limited Partnership filed pursuant to the Act, as such certificate may be amended from time to time. i. Agreement. The term "Agreement" shall mean this Limited Partnership Agreement as amended from time to time. 3. Partnership Purposes and Powers. a. Purposes. The purposes of the Partnership shall be to own, maintain, operate and otherwise deal with respect to the Property including the right to develop and construct buildings thereon. b. No Other Business. The Partnership shall participate in no other business unless authorized in this Agreement or in a separate writing executed by all of the Partners. c. Powers. In furtherance of the purposes contained in Paragraph a. of this article, the Partnership shall be empowered: (i) To purchase, sell, lease, exchange, pledge or otherwise encumber any property, real or personal, upon such terms and conditions as may be deemed desirable. (ii) To finance all or any of its activities authorized under the provisions of this Agreement by secured or unsecured indebtedness and, in connection therewith, issue evidences of indebtedness and execute and deliver mortgages and other security instruments of every nature and kind as security therefor and prepay, refinance and recast any or other lien on partnership property; and (iii) To enter into, perform and carry out contracts, leases and agreements of every kind necessary or incidental to the accomplishments of its purposes, including, without limitation, contracts, leases and agreements with the General Partner, and persons or entities affiliated with, or related to it in any manner, which persons or entities may be controlled by it, and agreements to arbitrate disputes with other parties, and take or omit such other or further action in connection with the Property as may be necessary or desirable to further the purposes of the Partnership; and (iv) To continue to hold its interest in the Property or to convert its interest in the Property by way of an interest in another entity such as a Partnership or Corporation; and (v) To carry on any other activities necessary to, in connection with or incidental to any of the foregoing. d. The General Partner. (i) The business and affairs of the Partnership shall be managed by the General Partner acting through any one of its officers who shall have all necessary powers to carry out the business of the Partnership. (ii) In the event the income and/or cash flow of the Partnership is not sufficient to pay the interest and/or amortization of any Partnership obligation, the General Partner shall not be obligated to advance sufficient funds to the Partnership. In such event, the General Partner shall have the right in its sole discretion to permit the Partnership to default in the payment of any such Partnership obligation and to permit the property to be forfeited or lost by foreclosure or any other voluntary or involuntary proceeding or transaction. The General Partner shall not be liable to any Limited Partner by reason of any such decision or by reason of the loss or forfeiture of the partnership property. (iii) As provided herein, the General Partner shall devote such time to the management of the Partnership's business as shall be reasonably required for its welfare and success. (iv) File all certificates, notices, statements or other instruments required by the Act and by law for the formation, operation and dissolution of the Partnership, its business and its property in all appropriate jurisdictions. (v) Cause the Partnership to carry public liability, property damage and other insurance, all of which shall name the Partnership and the General Partner as insureds. (vi) Maintain records of all Partners' capital accounts, pursuant to the provisions of this Agreement, on the books and records of the Partnership in respect of each Partnership Interest. 4. Term. The term of the Partnership shall commence upon the date the Partnership's Certificate of Limited Partnership is filed by the Secretary of Acts of the State of California in the manner required by the Act and shall continue until May 31, 2020, unless sooner dissolved as hereinafter provided. 5. Capital. a. The initial capital of the Partnership shall be $1,000.00 and each of the Partners shall contribute to the capital of the Partnership the amount set forth hereinbelow: Western Magnesium Corp. (General Partner) -0- Jack Bendheim - 394 Marvin S. Sussman - 404 James O. Herlands - 202 $ 1,000 b. Capital Accounts. Capital accounts shall be maintained for each Partner on the books and records of the Partnership. Such account shall be credited with the amounts of any capital contributions which may (but are not required) be made from time to time to the Partnership and properly adjusted, by allocation in proportion to the various Partnership Interests, to reflect distributive shares of income, gain, deduction, loss, and cash distributions made by the Partnership. Any Partner whose Partnership Interest shall be increased or decreased by means of the transfer of all or part thereof shall have a capital account which has been appropriately adjusted to reflect such transfer. c. Limitation of Liability of Limited Partners. The liability of any Limited Partner to provide funds or any other property to the Partnership shall be limited to the capital which the Limited Partner is required to contribute pursuant to subparagraph "a." of this Article "5". Nothing contained in this Agreement shall be construed to require any Limited Partner to restore any deficit in his capital account by making any capital contributions to the Partnership. The Limited Partners shall have no further personal liability to contribute money to the Partnership for, or in respect of, the liabilities or obligations of the Partnership and shall not be personally liable for any obligations of the Partnership. The liability of the Limited Partners is restricted and limited to the amount of the actual capital contributions that each limited partner makes or agrees to make to the Partnership. d. No Interest on Capital Contributions. No interest shall be paid by the Partnership to any Partner with respect to any capital of the Partnership. e. No Priority Among Limited Partners; No Withdrawal of Capital. No Partner shall have priority over any other Partner either as to the return of his capital of the Partnership or as to distributions made by the Partnership. Except as otherwise specifically set forth in this Agreement, no Partner shall 'have the right to demand or receive property other than cash in return for -capital in the Partnership or as any other distributions from the Partnership. No Partner shall have the right to withdraw any part of his capital from the Partnership. f. Liability of General Partners. Except as otherwise provided in this Agreement, the liability of a General Partner arising from the conduct of the business affairs or operations of the Partnership or for the debts of the Partnership is unrestricted. 6. Allocations and Distributions. a. Allocations Among Partners. Except as otherwise set forth in this Agreement, any income, gain, loss, deduction, or credit of the Partnership with respect to any Partnership fiscal period shall be allocated to all Partners according to their Partnership Interests during such fiscal period. b. Benefits of Agreement. None of the provisions of this Agreement shall be construed as existing for the benefit of any creditor of the Partnership or creditor of any of the Partners, or shall be enforceable by any third party not a successor in interest to a signatory to this Agreement. c. Distributable Cash. (i) For the purposes of this Agreement, the term "Distributable Cash" shall mean the net cash received by the Partnership during any fiscal year from all sources after the payment of all expenses, and amounts expended or reserved for reasonable working capital needs, replacement of equipment, fixtures and personality, replacement reserves, and sinking funds, all as determined by the General Partner, shall be deducted. (ii) As soon as practicable after the end of each fiscal period the Distributable Cash derived during such fiscal period, if any, shall be distributed to the Partners in the same percentages as their Partnership Interests. All distributions to the Partners shall be made pro rata at the same time so that no Partner shall be entitled to or shall receive a distribution in advance of any other Partner. 7. Books and Records. a. Maintenance and Accounting Method. The General Partner shall keep or cause to be kept full and accurate accounts of the transactions of the Partnership in proper books of account. Such books shall be maintained at the principal place of business of the Partnership and be available for reasonable inspection and examination by the Partners or their duly authorized agents or representatives. The Limited Partners may, at their own expense and not at the expense of the General Partner or the Partnership, cause the books and records of the Partnership to be examined by accountants other than the Partnership's accountants. b. Fiscal Year. The fiscal year of the Partnership shall be the calendar year. c. Required Records. The General Partners shall maintain at the principal executive office of the Partnership within California all of the following records: (i) A current list of the full name and last known business or residence address of each Partner, set forth in alphabetical order, together with the contribution and the share in profits and losses of each Partner. (ii) A copy of the certificate of limited partnership and all certificates of amendment thereto, together with executed copies of any powers of attorney pursuant to which any certificate has been executed. (iii) Copies of the limited partnership's federal, state and local income tax or information returns and reports, if any, for the six most recent taxable years. (iv) Copies of this Agreement and all amendments thereto. (v) Financial statements of the Partnership for the six most recent fiscal years. (vi) The Partnership's books and records for at least the current and past three fiscal years. d. Delivery of Records to Limited Partners. Upon the request of any Limited Partner, the General Partners shall promptly deliver to that Partner, at the expense of the Partnership, a copy of: (i) The current list of each partner's name, address, contribution, and share in profits and losses. (ii) The certificate of limited partnership, as amended, and any powers of attorney pursuant to which any certificate was executed. (iii) This Agreement, as amended. 8. Powers and Authority of the General Partner. The Partners hereby acknowledge and agree that the General Partner (without the necessity of any further consent or authorization of any Partner) shall have complete and exclusive control over the management of the Partnership's business and affairs, and the Limited Partners shall have no right to participate in the management or conduct of such business or affairs nor any power or authority to act for or on behalf of the Partnership in any respect whatsoever. Except as otherwise expressly provided in this Agreement, the General Partner shall have the right, power and authority, on behalf of the Partnership and in its name, to exercise all of the rights, powers and authority permitted to general partners under the Act, including, without limitation, the power and authority to do all of the following, at such times and on such terms and conditions as it deems to be in the best interests of the Partnership: a. To acquire, hold, sell, lease, or otherwise dispose of all or less than all the Property, interests therein or appurtenances thereto, as well as personal or mixed property connected therewith, including the purchase, lease, development, improvement, maintenance, repair, exchange, trade or sale of the Property, as well as causing to be prepared and filed with respect to the Property such plans, declarations and other documents with appropriate federal, state or municipal-agencies as may be required. b. To borrow money required for the conduct of the business and affairs of the Partnership and secure the repayment of such borrowing by executing mortgages, pledging or otherwise encumbering or subjecting to security interests all or any part of the assets of the Partnership, and to repay, refinance, increase, modify, consolidate or extend the maturity of any indebtedness created by such borrowing, or any such mortgage, pledge, encumbrance or other security device; c. To place record title to, or the right to use, Partnership assets in the name or names of a nominee or nominees for any purposes convenient or beneficial to the Partnership; d. To open, maintain and close bank accounts and draw checks or otherwise for the payment of monies; e. To receive, receipt for and otherwise dispose of and deal in all checks, monies, securities and other property of the Partnership; f. To do any act or execute any document or enter into any contract or agreement of any nature necessary or desirable, in the opinion of the General Partner, in pursuance of the purposes of the Partnership including, without limitation, to enter into, modify and perform agreements (including joint venture agreements) relating to the acquisition, operation and development of the Property; g. To operate, manage and develop the Property, to enter into a lease or leases and agreements with others with respect to such management, operation and development, and to employ persons, at the expense of the Partnership, in the operation, management and development of the Property. h. To purchase, at the expense of the Partnership, contracts of liability, casualty and other insurance for the protection of the assets or affairs of the Partnership or for any purpose convenient or beneficial to the Partnership; t. To employ from time to time any persons, firms or corporations for the operation of the Partnership's business including, without limitation, accountants and attorneys, on such terms and for such compensation as the General Partner shall determine. j. To enter into such agreements, contracts, documents and instruments with such parties, and to give such receipts, releases and discharges with respect to all of the foregoing and any matters incident thereto, a~ the General Partner may deem advisable, appropriate and convenient; k. When required for the proper conduct of the business and affairs of the Partnership, to exercise all rights, powers and privileges of ownership with respect to any and all rights of property held by the Partnership, including, without limitation, the right to sell, grant options affecting exchange, transfer, finance, lease (for any term whether or not extending beyond the term of this Agreement), mortgage, pledge, hypothecate or otherwise dispose of or encumber such rights or property, all upon such terms as the General Partner deems proper; 1. To adjust, compromise, settle or refer to arbitration, any claim against or in favor of the Partnership or any nominee, and to institute, prosecute or defend any legal proceedings relating to the business and property of the Partnership. All powers of the General Partner shall be limited to matters relating to the Property and the Partnership shall not make any loans to, or engage in, any venture not relating to the Property. In the exercise of his power and authority, the General Partner shall have fiduciary responsibility for the safekeeping and use of all funds and other assets of the Partnership, whether or not the same are in the immediate possession or control of the General Partner. 9. Duties of the General Partner. In addition to any other obligations imposed upon him by this Agreement, the General Partner shall have the specific duties described below. a. Maintenance of Limited Partnership Status. The General Partner shall now and hereafter take all actions necessary and reasonably practicable to maintain the Partnership's valid existence and, after formation thereof, its status as a limited partnership in the State of California. b. Management of the Property, The General Partner shall at all times use reasonable efforts to provide to the Partnership, either through its own employees or other agents with qualified supervisory management services. c. Insurance. The General Partner shall be responsible either through his own employees or other agents for obtaining and keeping in force policies of fire and extended coverage in limits sufficient to avoid effect of co-insurance and otherwise satisfactory to all mortgagees, worker's compensation and public liability insurance covering the Partnership and the Property, with such carriers and in such amounts as the General Partner deems appropriate, but no less (and in deductible amounts no greater) than customarily maintained for properties similar to the Property. Any such policies of insurance may, at the election of the General Partner, name the General Partner, and such other Persons as the General Partner deems appropriate as additional insureds thereunder. d. Reports. The General Partner shall cause to be prepared and distributed to each of the Limited Partners within ninety (90) days after the end of each fiscal year of the Partnership, a copy of the Partnership's Federal income tax return for such year together with a financial statement for such year. 10. Restrictions on Authority of Partners. a. Without the prior written consent of all the Limited Partners, the General Partner shall not have the authority to: (i) Do any act in contravention of this Agreement; (ii) Do any act which would make it impossible to carry on the ordinary business of the Partnership, except the liquidation of the Partnership's assets by sale of the Property authorized under this Agreement; (iii) Admit any additional General or Limited Partners into the Partnership or establish any additional classes of Partners; (iv) Possess Partnership property or assign rights in Partnership property for other than Partnership purposes; (v) Amend this Agreement; (vi) Change or reorganize the Partnership into any other legal form; (vii) Confess a judgment against the Partnership; (viii) Knowingly perform any act which would subject the Limited Partners to liability as general partners in any jurisdiction; (ix) File or consent to the filing of a Petition under any federal or state bankruptcy or insolvency act with respect to the Partnership; or (x) Enter into any transaction not relating to the Property. b. Voting Rights of Limited Partners. In addition to any other rights granted the Limited Partners under this Agreement, none of the following actions shall be taken without the prior written consent or vote of a majority in interest of the Limited Partners: (i) The sale, exchange, lease, mortgage, pledge, or transfer of all or a substantial part of Property other than in the ordinary course of business; (ii) The incurrence of indebtedness by the Partnership other than in the ordinary course of business; (iii) A change in the nature of the Partnership's business; (iv) The removal of the General Partner; and (v) The dissolution and winding up of the Partnership. c. No Limited Partner shall take part in, or interfere in any manner with, the conduct or control of the Partnership business, nor shall any Limited Partner have any right or authority to act for or bind the Partnership. The provisions of this paragraph c. of Article 10 shall have no effect upon the specific rights granted to the Limited Partners herein or under the Act. 11. Compensation to Partners. No partner shall be entitled to compensation for services rendered to the Partnership other than to the rights with respect to his Partnership Interest. 12. Transfers of Interests; Substitute Limited Partners. a. Requirements for Substitution. No assignee of the whole or any portion of a Partnership Interest shall have the right to become a Substitute Limited Partner in place of his assignor unless: (i) The assignor has designated such intention in a written instrument of assignment delivered to the General Partner; and (ii) Except as provided in subparagraph "b" of this Article 12, the written consent of the General Partner has been obtained, the granting or denial of which shall be within the sole discretion of the General Partner; and (iii) The assignee has adopted and agreed in writing to be bound by all of the provisions hereof, as the same may have been amended; and (iv) All documents reasonably required by the General Partner to effect the substitution of the assignee as a Limited Partner shall have been executed and filed at the sole cost and expense of the assignor; and (v) The provisions of Paragraph b. of this Article 12 have been satisfied. When all of the provisions of law and of this Article have been complied with, the assignee forthwith, shall become a Limited Partner. b. Limitations on Transfers. Except as provided in Article 14 hereof, there shall be no sale, exchange or other transfer, or assignment of the whole or any portion of a Partnership Interest without the prior written consent of the General Partner, which consent the General Partner may grant or refuse in its discretion. c. Tax Elections. In the event of the sale, exchange or transfer of a Partnership Interest, or any portion thereof, or upon the death of an individual Limited Partner, or in the event of the distribution of Partnership property to any Limited Partner, the Partnership may file an election, the filing of which election shall be in the sole discretion of the General Partner, in accordance with applicable Treasury Regulations, to cause the basis of the Partnership property to be adjusted for Federal income tax purposes as provided by Section 735, 743 and 754 of the Code. 13. Distributions and Allocations Subsequent to Assignment or Substitution. An assignee or a substitute (but not additional), Limited Partner who purchases or otherwise acquires a Limited Partner's Partnership Interest, or any portion thereof, shall be entitled to receive distributions of cash and allocations of income and loss from the Partnership attributable to such Partnership Interest subsequent to the effective date of such assignment, sale, exchange or other transfer with proration. The "effective date" of an assignment for the purposes of this Article, shall be the date fixed by the Code or if none then the date on which a written instrument of assignment that conforms to the requirements hereof has been received by the Partnership. 14. Death of a Limited Partner. The death of any Limited Partner shall neither dissolve nor terminate the Partnership. If a Limited Partner shall die or shall be adjudicated incompetent, his legal representative shall have the right to be a Substitute Limited Partner taking such Limited Partner's interest in the Partnership. In she event of the death of a Limited Partner, the remaining, surviving Limited Partners shall have the option to purchase, in proportion to their interest in the Partnership, the interest of the deceased Limited Partner at a purchase price equal to the total capital investment made by the deceased Limited Partner in the Partnership. Said option shall be exercised by the surviving Limited Partners within six months after the appointment of a legal representative for the deceased Limited Partner and in the event that they fail to exercise such option, then the Partnership shall have a like option to acquire the deceased Limited Partner's interest for the same price which option shall be exercisable within nine (9) months after the appointment of a legal representative for the deceased Limited Partner. Either of said options shall be exercised by notice given to the legal representative of the deceased Limited Partner within the time period provided. If neither the surviving Limited Partners nor the Partnership shall exercise said option of purchase then the legal representative who acquires such Limited Partner's interest in the Partnership shall have the right to transfer same to the person or persons designated in the Last Will and Testament of the deceased Limited Partner or those persons entitled to take same pursuant to the intestacy laws of the jurisdiction applicable. No consent of the General Partner shall be required for any transfer pursuant to the conditions of this Article 14 provided, however, that the transferee shall comply with the provisions of subparagraph (a)(iii) and (iv) of Article 12. Death or other events relating to the General Partner. The death, resignation, removal, adjudication of incompetency or insanity, or an assignment for benefit of creditors by the General Partner, a filing of a petition for bankruptcy or any other insolvency proceeding by the General Partner or the filing of a petition for bankruptcy or any other insolvency proceeding against the General Partner, not dismissed within 90 days shall not automatically dissolve or terminate the Partnership but in the event of any such events (such events sometimes hereunder being referred to as "Involuntary Withdrawal") the General Partner's interest shall automatically be terminated and the amount in the capital account of said terminated General Partner shall be paid to it within a reasonable time. a. In the event of the Involuntary Withdrawal of the General Partner the Limited Partners acting unanimously shall within sixty (60) days designate some other person or entity as the General Partner; or elect to terminate and dissolve the Partnership and designate a General Partner to carry out such termination and dissolution. A failure to properly designate a successor General Partner within sixty (60) days shall be deemed and election to terminate and dissolve the Partnership. b. No voluntary resignation of a General Partner shall be effective until thirty (30) days after he has given written notice of same to the Limited Partners. c. A General Partner can be removed involuntarily by an action brought by a majority of the Limited Partners in a court of competent jurisdiction after a determination by such court that the General Partner has committed fraud, gross negligence or willful misconduct in office. 16. Dissolution of the Partnership. a. Dissolution. The Partnership shall be dissolved and its affairs wound up upon the expiration of the term providing for the existence of the Partnership or upon the occurrence of any of the following events, whichever is first to occur: (i) The Partnership shall be dissolved upon any date specified in a Consent to Dissolution signed by the General Partner and by a majority in interest of the Limited Partners. (ii) The Partnership shall be dissolved and its affairs shall be wound up when its assets are sold or otherwise disposed of and the only property of the Partnership consists of cash available for distribution to the Partners. (iii) The Partnership shall be dissolved and its affairs shall be wound up when required by a decree of judicial dissolution entered under Section 15682 of the California Corporations Code. b. Distribution Upon Dissolution. Upon the dissolution of the Partnership, the General Partner or his successor(s) shall proceed to liquidate the Partnership, and the proceeds of liquidation shall be applied and distributed in the following order of priority: (i) First, to the payment of debts and liabilities of the Partnership (other than any loans or advances that may have been made by any of the Partners to the Partnership) and the expenses of liquidation. (ii) Second, to the establishment of any reserve which the General Partner may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership. Such reserve may be paid over to any attorney at law, or bank as escrow agent to be held for disbursement in payment of any of the aforementioned liabilities and, at the expiration of such period as shall be deemed advisable by the General Partner, any balance shall be distributed in the manner hereinafter provided in this Paragraph. (iii) Third, to the repayment of loans or advances that may have been made by any of the Partners to the Partnership. (iv) Finally, the balance of any funds then remaining shall be distributed to the Partners in the following order of priority: (a) First, to the Partners in proportion to their capital accounts an amount necessary to reduce the capital accounts to zero or if any Partner's capital account has a negative balance then an amount to the Partners to bring all capital accounts into a negative balance in proportion to their Partnership Interest. (b) The balance then remaining shall be distributed to the Partners, in the same proportion as the Partnership Interest held by each Partner bears to the total Partnership Interests held by all of the Partners. c. Distribution in Kind. In the event of the termination and dissolution of the Partnership, to the extent that the Partnership's assets have not been sold or otherwise disposed of, the Partnership's non-cash assets, if any, may be distributed in kind in the proportions set forth in Paragraph b. (iv) of this Article, each Partner accepting a pro rata undivided interest therein subject to the Partnership 1iabi1ities. d. Time for Liquidation. A reasonable amount of time shall be allowed for the orderly liquidation of the assets of the Partnership and the discharge of liabilities to creditors so as to enable the General Partner to minimize the normal losses attendant upon such liquidation. e. Filing. Upon dissolution of the Partnership, the General Partner shall execute and file in the office of the Secretary of State of the State of California a certificate of dissolution. Upon completion of the winding up of the Partnership's affairs the Partners conducting the winding up of the Partnership's affairs shall execute and file in the office of the Secretary of State of the State of California a certificate of cancellation of the Certificate of Limited Partnership. Upon compliance with the foregoing distribution plan (including payment over to an escrow agent, if deemed appropriate by the General Partner and if there be sufficient funds therefor), the Partnership shall cease to be such, and the General Partner shall take such action as shall be required by law to terminate such Partnership's existence. f. General Partner Not Personally Liable for Return of Capital Contributions. The General Partner shall not be personally liable for any distribution required pursuant to this Article 16, and such distribution shall be made solely from available Partnership assets, if any. g. Operations During Dissolution. Upon dissolution of the Partnership, the affairs of the Partnership shall be wound up by a General Partner who has not wrongfully caused the dissolution or if there is no General Partner remaining, the Partnership's affairs shall be wound up by the Limited Partners. If the Limited Partners wind up the Partnership's affairs, they shall be entitled to reasonable compensation. 17. Withdrawals; Retirement of Partners. Each Limited Partner shall have the right to withdraw from the Partnership at any time by written notice to the General Partner. The withdrawing Limited Partner shall be paid by the Partnership within sixty (60) days of said notice of withdrawal a sum equal to the capital account of said withdrawing Limited Partner on the books of the partnership as of the date of notice of withdrawal, plus the principal outstanding, together with any accrued interest, of any loans by said withdrawing Limited Partner to the Partnership as of the date of payment. Notwithstanding the foregoing, in the event a Limited Partner gives notice of withdrawal, the General Partner shall have the right to elect by written notice to all Limited Partners, to dissolve and terminate the Partnership instead of permitting a Limited Partner to withdraw. 18. Power of Attorney to Execute Documents. a. Grant of Power of Attorney. Each Limited Partner hereby irrevocably constitutes and appoints the General Partner acting through any officer thereof as his true and lawful attorney in his name, place and stead to make, execute, acknowledge and, if necessary file: (i) Any certificates or other instruments which the Partnership may be required to file under the laws of the State of California, or any other governmental authority having jurisdiction, or which the General Partner shall deem it advisable to file. (ii) Any certificates or other instruments amending or modifying the certificate or the certificates and instruments referred to in subparagraph (i) of this Paragraph. (iii) Any certificates or other instruments which may be required to admit one or more Limited Partners to the Partnership or to effectuate the dissolution and termination of the Partnership. b. Irrevocable and Coupled With an Interest; Copies to be Transmitted. The powers of attorney granted under Paragraph a. of this Article shall be deemed irrevocable and to be coupled with an interest. A copy of each document executed by the General Partner pursuant to the powers of attorney granted in Paragraph a. of this Article shall be transmitted to each Limited Partner promptly after the execution of any such document. c. Survival of Power of Attorney. The powers of attorney granted in Paragraph a. of this Article shall survive delivery of an assignment by any Limited Partner of the whole or any portion of his Partnership Interest, except that if such assignment was of all of his Partnership Interest and the substitution of the assignee as a Limited Partner has been consented to by the General Partner, the foregoing powers of attorney shall survive the delivery of such assignment for the sole purpose of enabling the General Partner to execute, acknowledge and file any and all certificates and other instruments necessary to effectuate the substitution of the assignee as a Limited Partner. d. Limitation on Power of Attorney. The powers of attorney granted under Paragraph a. of this Article cannot be utilized by the General Partner to increase or extend any financial obligation or liability of the Limited Partners. The General Partner may not modify the terms of this Agreement without the written consent of all of the Limited Partners. 19. Non-Waiver. No provision of this Agreement shall be' deemed to have been waived except if such waiver is in writing and signed by the party making such waiver and no such waiver shall be deemed to be a waiver of any other or further similar or dissimilar obligation or liability. 20. Additional Documents and Instruments. The parties shall execute and deliver to each other such other and further documents and instruments as may be necessary to carry out the purposes of this Agreement and which are required by the General Partner, or any other federal, state or local governmental agency having jurisdiction over the Partnership. 21. Illegality. If any provision or provisions of this Agreement (or any part thereof) or the application thereof to any particular facts or circumstances shall be illegal and unenforceable by reason of any statute or rule of law, the remaining provisions (or parts thereof) of this Agreement or the application of the particular provision or provisions (or parts thereof) to other facts or circumstances shall not be affected thereby and shall remain in full force and effect. It is the intention of the provisions of this Article to make clear that the agreement of the parties to this Agreement is that this Agreement shall be enforced insofar as it may be enforced consistent with applicable statutes and rules of law. 22. Notices. All notices, demands, requests, consents or approvals given, required or permitted to be given hereunder, shall be contained in writing and shall be deemed sufficiently given if sent by registered or certified mail, postage prepaid and return receipt requested, addressed to the parties at the addresses set forth above or below, or on any addendum to or counterpart of this Agreement, or to such other address as the recipient shall have previously notified the sender of in writing, and shall be deemed received three (3) days after the date of mailing. 23. Merger and Amendments. This Agreement contains the entire understanding and agreement between parties upon the subject matter of this Agreement and, except as otherwise provided herein, may be changed only by written amendment signed by all of the Partners at such time. Any prior understandings and agreements between the parties are merged herein, except only as herein otherwise expressly stated. 24. Provisions Binding. This Agreement shall inure to the benefit of and be binding upon the parties and their respective heirs, executors, administrators, successors and assigns and any additional or substitute Limited Partners or General Partners (except as may otherwise be specifically provided herein). 25. Captions. The captions set forth herein are for convenience and reference only and are not intended to modify, limit, describe or affect in any way the contents, scope or intent of this Agreement. 26. Definitions. All terms used herein which are defined in this Agreement shall have the meaning set forth in this Agreement, unless the context clearly indicates otherwise. 27. Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one (1) and the same instrument. 28. Gender and Plural. Whenever the sense of this Agreement so requires, the masculine or feminine gender shall be substituted for or deemed to include the neuter and the plural, the singular, and vice-versa. 29. Applicable Law. This Agreement and the rights of the parties hereto shall be interpreted in accordance with the laws of the State of California. 30. Execution by Spouses. This agreement is signed by the spouses of the Limited Partners, who are not themselves Partners. Such signature shall not be construed as making any spouse a Partner or as imposing on any spouse any responsibility for any Partnership obligation but merely recording the consent of such spouse to the execution by her spouse of this agreement and to all of the terms and conditions to the extent that any community property interest, if any, may be involved. IN WITNESS WHEREOF, the undersigned have duly executed this Agreement of Limited Partnership of First Dice Road Company. General Partner Western Magnesium Corp. By /s/ Jack C. Bendheim -------------------- Limited Partners Spouses /s/ Jack Bendheim /s/ Gail Bendheim - ----------------- ----------------- /s/ Marvin S. Sussman /s/ Aviva Sussman - --------------------- ----------------- /s/ James O. Herlands /s/ Joyce C. Herlands - --------------------- --------------------- The undersigned, desiring to enter into the Agreement of Limited Partnership of First Dice Road Company, a California Limited Partnership (the "Partnership") in the form attached, hereby agree to all of the terms and provisions thereof. Each of the undersigned hereby constitutes and appoints Western Magnesium Corp., the General Partner of the Partnership, his true and lawful attorney-in-fact, with all the powers and authorities as set forth in said Agreement of Limited Partnership, including, without limitation, in his name, place and stead to make, execute, sign, acknowledge, swear to, deliver and file a Certificate of Limited Partnership and any amendment thereof. The power of attorney hereby granted shall be deemed to be coupled with an interest and shall be irrevocable. This power of attorney shall not be affected by subsequent disability or incapacity of the principal, or lapse of time. WITNESS, the execution hereof by the undersigned, as Limited Partners of First Dice Road Company, and individually. Dated: , 1985 /s/ Jack C. Bendheim - -------------------- Jack C. Bendheim 697 West 247th Street Riverdale, New York 10471 /s/ Marvin S. Sussman - --------------------- Marvin S. Sussman 101 Central Park West New York, New York 10023 /s/ James 0. Herlands - --------------------- James 0. Herlands 115 Central Park West New York, New York 10023 STATE OF NEW YORK ) SS.: COUNTY OF NEW YORK ) On the 19th day of June, 1985, before me personally came JACK C. BENDHEIM, to me known, who, being by me duly sworn did depose and say that he resides at 697 West 247th Street, Riverdale, New York 10471; that he is the Executive Vice President of WESTERN MAGNESIUM CORP., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Wermer Adler - ---------------- Notary Public STATE OF NEW YORK ) ss.: COUNTY OF NEW YORK ) On the 19th day of June, 1985, before me came JACK C. BENDREIM, to me known and known to me to be the individual described in and who executed the foregoing instrument, and who acknowledged to me that he executed the same. /s/ Wermer Adler - ---------------- Notary Public STATE OF NEW YORK ) ss.: COUNTY OF NEW YORK ) On the 19th day of June, 1985, before me came MARVIN S. SUSSMAN, to me known and known to me to be the individual described in and who executed the foregoing instrument, and who acknowledged to me that he executed the same /s/ Wermer Adler - ---------------- Notary Public STATE OF NEW YORK ) ss.: COUNTY OF NEW YORK ) On the 19th day of June, 1985, before me came JAMES 0. HERLANDS, to me known and known to me to be the individual described in and who executed the foregoing instrument, and who acknowledged to me that he executed the same. /s/ Wermer Adler - ---------------- Notary Public STATE OF NEW YORK ) ss.: COUNTY OF NEW YORK ) On the 19th day of June, 1985, before me came GAIL BENDHEIM, to me known and known to me to be the individual described in and who executed the foregoing instrument, and who acknowledged to me that she executed the same. /s/ Wermer Adler - ---------------- Notary Public STATE OF NEW YORK ) ss.: COUNTY OF NEW YORK ) On the 19th day of June, 1985, before me came AVIVA SUSSMAN, to me known and known to me to be the individual described in and who executed the foregoing instrument, and who acknowledged to me that she executed the same /s/ Wermer Adler - ---------------- Notary Public STATE OF NEW YORK ) ss.: COUNTY OF NEW YORK ) On the 19th day of June, 1985, before me came JOYCE C. HERLANDS, to me known and known to me to be the individual described in and who executed the foregoing instrument, and who acknowledged to me that she executed the same. /s/ Wermer Adler - ---------------- Notary Public AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP OF FIRST DICE ROAD COMPANY A California Limited Partnership AGREEMENT made this day of November, 1985 by and between WESTERN MAGNESIUM CORP., as general partner and JACK BENDHEIM, MARVIN S. SUSSMAN and JAMES 0. HERLANDS, as limited partners. WHEREAS, an Agreement of Limited Partnership was entered into on June 1, 1985; and WHEREAS, the parties thereto desire to amend the said Agreement. NOW, THEREFORE, it is agreed as follows: 1. Article 3, Paragraph a., is hereby amended by adding the following: "In addition and to the foregoing, the partnership shall engage in such other business ventures as the general partner shall from time to time determine whether or not related to the Property". 2. In all other respects the Agreement of Limited Partnership dated June 1, 1985 is hereby ratified and confirmed. WESTERN MAGNESIUM CORP. By: /s/ Nathan Bistricer -------------------- /s/ Jack C. Bendheim - -------------------- JACK C. BENDHEIM /s/ Marvin S. Sussman - --------------------- MARVIN S. SUSSMAN /s/ James O. Herlands - --------------------- JAMES O. HERLANDS EX-10.18 21 0021.txt PHILIPP BROTHERS CHEMICALS, INC. RETIREMENT INCOME AND DEFERRED COMPENSATION PLAN TRUST PHILIPP BROTHERS CHEMICALS, INC. RETIREMENT INCOME AND DEFERRED COMPENSATION PLAN TRUST (a) This Agreement made as of this 1st day of January, 1994 by and between PHILIPP BROTHERS CHEMICALS, INC. ("Company") on its own behalf and on behalf of its wholly owned subsidiaries CP CHEMICALS, INC. and PHIBRO-TECH, INC., and DONALD A. HAMBURG ("Trustee); (b) WHEREAS, Company has adopted the non-qualified deferred compensation Plan as listed in Appendix A; (c) WHEREAS, Company has incurred or expects to incur liability under the terms of such Plan with respect to the individuals participating in such Plan; (d) WHEREAS, Company wishes to establish a trust (hereinafter called "Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of Company's creditors in the event of Company's Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan; (e) WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; (f) WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan; NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: Section 1. Establishment of Trust. Section 1. Establishment of Trust. (a) Company hereby deposits with Trustee in trust the sum of One Hundred ($100) Dollars, which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement. (b) The Trust hereby established shall be irrevocable. (c) The Trust is intended to be a grantor trust, of which Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein. (e) Company shall make such deposits of cash in trust with the Trustee as are appropriate or required under the terms of and, in conformity with the Plan, and Company, in its sole discretion, may at any time, or from time to time, make "additional" deposits of cash or other property in trust with Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Neither Trustee nor any Plan participant or beneficiary shall have any right to compel such "additional" deposits. Section 2. Payments to Plan Participants and Their Beneficiaries. (a) Company shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Plan participant (and his or her beneficiaries), that provides a formula or other instructions reasonably acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid as provided for (or available) under the Plan, and the time of commencement for payment of such amounts. Except as otherwise provided herein, Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by Company. (b) The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan shall be determined by Company or such party as it shall designate under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan. (c) Company may make payment of benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plan. Company shall notify Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan, Company shall make the balance of each such payment as it falls due. Trustee shall notify Company where principal and earnings are not sufficient. Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When Company Is Insolvent. (a) Trustee shall cease payment of benefits to Plan participants and their beneficiaries if the Company is Insolvent. Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay its debts as they become due, or (ii) Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Company under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of Company shall have the duty to inform Trustee in writing of Company's Insolvency. If a person claiming to be a creditor of Company alleges in writing to Trustee that Company has become Insolvent, Trustee shall determine whether Company is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to Plan participants or their beneficiaries. (2) Unless Trustee has actual knowledge of Company's Insolvency, or has received notice from Company or a person claiming to be a creditor alleging that Company is Insolvent, Trustee shall have no duty to inquire whether Company is Insolvent. Trustee may in all events rely on such evidence concerning Company's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Company's solvency. (3) If at any time Trustee has determined that Company is Insolvent, Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of Company with respect to benefits due under the Plan or otherwise. (4) Trustee shall resume the payment of benefits to Plan participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by Company in lieu of the payments provided for hereunder during any such period of discontinuance. Section 4. Payments to Company. Except as provided in Section 3 hereof, Company shall have no right or power to direct Trustee to return to Company or to divert to others any of the Trust assets before all payment of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan. Section 5. Investment Authority. In no event may Trustee invest in securities or obligations issued by Company, other than a de minimis amount held in common investment vehicles in which Trustee invests. All rights associated with assets of the Trust shall be exercised by Trustee or the person designated by Trustee, and shall in no event be exercisable by or rest with Plan participants. Section 6. Disposition of Income. During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested. Section 7. Accounting by Trustee. (a) Trustee shall establish and maintain a separate Deferred Compensation Account in the name of each Plan participant who elects an Annual Deferral Amount in accordance with Section 2.01 of the Plan. There shall be credited to said Account(s) all of such Amounts, together with all Company Matching Contribution Amount (s) (if any), contributed on behalf of each such Plan participant in accordance with Section 2.03 of the Plan. Within thirty (30) days after the end of each Plan Year, Trustee shall prepare, and deliver to Company for distribution to all Plan participants, a statement of benefits in the name of each Plan participant, reflecting the value of said participant's Deferred Compensation Account (if any), as well as the participant's Retirement Income Benefit (if any) earned for the previous Plan Year, and the total of said participant's accrued benefit, to date. (b) Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between Company and Trustee. Within sixty (60) days following the close of each calendar year and within thirty (30) days after the removal or resignation of Trustee, Trustee shall deliver to Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. Section 8. Responsibility of Trustee. (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Company which is contemplated by, and in conformity with, the terms of the Plan or this Trust and is given in writing by Company. In the event of a dispute between Company and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) If Trustee undertakes or defends any litigation arising in connection with this Trust, Company agrees to indemnify Trustee against Trustee's costs, expenses and liabilities (including, without limitation, reasonable attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If Company does not pay such costs, expenses and liabilities in a reasonably timely manner, Trustee may obtain payment from the Trust. (c) Trustee may consult with legal counsel (who may also be counsel for Company generally) with respect to any of its duties or obligations hereunder. (d) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals as reasonably required to assist it in performing any of its duties or obligations hereunder. (e) Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. (f) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. Section 9. No Compensation to Trustee. Trustee shall serve without compensation; however, Company shall pay all administrative and Trustee's expenses. If not so paid, the expenses shall be paid from the Trust. Section 10. Resignation and Removal of Trustee. (a) Trustee may resign at any time by written notice to Company, which shall be effective sixty (60) days after receipt of such notice unless Company and Trustee agree otherwise. (b) Trustee may be removed by Company on fifteen (15) days notice or upon shorter notice accepted by Trustee. (c) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within ten (10) days after receipt of notice of resignation, removal or transfer, unless Company extends the time limit. (d) If Trustee dies resigns or is removed, his successor shall be STEVEN G. CHILL, and if STEVEN G. CHILL dies, resigns or is removed, a successor may be appointed, in accordance with Section 11 hereof, within fifteen (15) days after death, or by the effective date of resignation or removal under paragraph(s) (a) [or (b)] of this section, as the case may be. If no such appointment has been made, Trustee (or a representative of Plan participants in the event of Trustee's death) may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. Section 11. Appointment of Successor. If Trustee resigns [or is removed] in accordance with Section 10(a) [or b] hereof; (a) either Company may appoint a successor; or (b) In the event Company fails to do so within a reasonable time Trustee may appoint a successor. (c) Upon a Change of Control as defined herein, Trustee may not be removed for five (5) years. (d) In either event the appointment of a successor Trustee shall be effective when accepted in writing by the new Trustee. The new Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer. (e) The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. Section 12. Amendment or Termination. (a) This Trust Agreement may be amended by a written instrument executed by Trustee and Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan. (b) The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan. Upon termination of the Trust any assets remaining in the Trust shall be returned to Company. (c) Sections 6, 7, 8 and 10 of this Trust Agreement may not be amended by Company for five (5) years following a Change of Control, as defined herein. Section 13. Miscellaneous. (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of New York. (d) For purposes of this Trust, Change of Control shall mean: the purchase or other acquisition by any person, entity or group of persons, within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 ("Act"), or any comparable successor provisions, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of fifty (50%) percent or more of either the outstanding shares of common stock or the combined voting securities entitled to vote generally, or the approval by the stockholders of Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were stockholders of Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty (50%) percent of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated Company's then outstanding securities, or a liquidation or dissolution of Company or the sale of all or substantially all of Company's assets"). Section 14. Effective Date. The effective date of this Trust Agreement shall be January 1, 1994. IN WITNESS WHEREOF, this Agreement has been executed by the Trustee and on behalf of Company by a duly authorized officer as of the date first above written. PHILIPP BROTHERS CHEMICALS, INC. ------------------------------ By: /s/ Jack C. Bendheim /s/ Donald A. Hamburg ------------------------------ Trustee PHILIPP BROTHERS CHEMICALS, INC. RETIREMENT INCOME AND DEFERRED COMPENSATION PLAN - -------------------------------------------------------------------------------- PREAMBLE This Plan is an unfunded deferred compensation arrangement for a select group of management or highly compensated personnel. ARTICLE 1. DEFINITIONS Section 1.01 "Company" means PHILIPP BROTHERS CHEMICALS, INC., a New York Corporation, CP CHEMICALS, INC., a New Jersey Corporation, and PHIBRO-TECH, INC., a Delaware Corporation and their corporate successors. Section 1.02 "Board" means the Board of Directors of Company. Such terms may be used interchangeably. Section 1.03 "Committee" means the Deferred Compensation Plan Committee. Section 1.04 "Plan" means the Deferred Compensation Plan as it may be amended from time to time. The calendar year shall be the Plan Year. Section 1.05 "Effective Date of Plan" means March 18, 1994. Section 1.06 "Employee" means an employee of the Company. Section 1.07 "Annual Compensation" shall mean the regular compensation paid to an employee in a calendar year, exclusive of any bonus or other incentive compensation. Section 1.08 "Base Salary Amount" shall be a minimum amount of Annual Compensation, determined by the Committee at the beginning of each Plan Year, which must be earned by an employee in order for said employee to be eligible to participate in the Plan during said Plan Year. The Base Salary Amount for the calendar years 1993 and 1994 shall be $150,000. In no event shall said amount be less than $150,000 in any subsequent calendar year. Section 1.09 "Eligible Compensation" shall mean the maximum amount of a Participant's Annual Compensation that may be taken into account in determining his Retirement Income Benefits hereunder. For the calendar year 1993, Eligible Compensation shall be $235,840; that amount shall be increased 6% each calendar year thereafter that the Plan is in force and effect. Section 1.10 "Eligible Employee" means an employee who has not attained the age of fifty-five (55), and whose Annual Compensation in a Plan Year is at least equal to the Base Salary Amount in effect for such year. Section 1.11 "Participants" means all Eligible Employees who participate in the Plan, or persons who were such at the time of their retirement, death, disability or resignation and who retain, or whose beneficiaries obtain, benefits under the Plan in accordance with its terms. An employee shall be deemed to have been a Participant in the Plan during each year of his employment on or after the Effective Date in which he was eligible to earn a Retirement Income Benefit hereunder. A Participant will remain in the Plan during any period in which he is on an approved leave of absence, or is on disability leave provided he is then receiving disability payments paid for by Company. Section 1.12 "Normal Retirement Date" means the date on which a Participant attains the age of sixty-five (65) years and has completed at least ten (10) years of service with the Company. "Early Retirement Date" means the date on which the employment of a Participant terminates, provided he has completed at least ten (10) years of service with the Company and has attained the age of fifty-five (55) years. Section 1.13 "Benefit Percentage" means that percentage (if any) declared by the Committee with respect to a Plan Year, which when multiplied by a Participant's Eligible Compensation shall determine the Annual Percentage Accrual. Section 1.14 "Annual Percentage Accrual" shall mean the amount, if any, of the Eligible Compensation earned by a Participant in a Plan Year, with respect to which the Committee shall determine to award a Retirement Income Benefit for said year. Said determination shall be made during the first quarter of the immediately following year with respect to Participants who are employed by the Company at the time said determination is made. Thus, for example, the Committee will determine the 1993 Annual Percentage Accrual, if any, during the first quarter of 1994. Section 1.15 "Retirement Income Benefit". A Participant's Retirement Income Benefit shall be equal to the sum of the Annual Percentage Accrual(s), if any, declared by the Committee during the years that said Participant participated in the Plan. Within thirty (30) days after the end of each Plan Year, each Participant shall receive a statement of benefits reflecting the Participant's Retirement Income Benefit (if any) earned for the previous Plan Year, as well as the total of said Participant's accrued benefit, to date. Section 1.16 "Survivor's Income Benefit" is the benefit payable to the Beneficiary of a Participant who dies before having retired from the Company. Section 1.17 "Deferred Compensation Benefit" is an optional benefit which a Participant may elect, prior to the start of each Plan Year, (except the first Plan Year, in which such election must be made within thirty (30) days of the Effective Date with respect to Compensation payable to said Participant for that period in 1994 subsequent to the date of such election) and which the Company may (partially) match each year. Section 1.18 "Deferred Compensation Account" means the account maintained by the Trustee in the name of each Participant. Section 1.19 "Beneficiary" means the person or persons a Participant shall have designated to succeed to his right to receive payments hereunder in the event of his death. In case of a failure to designate a beneficiary, or the death of a designated beneficiary without a designated successor, such payments shall be made to the Participant's estate. No designation of beneficiaries shall be valid unless in writing signed by the Participant, dated, and filed with both the Committee and the Trustee. Beneficiaries may be changed without the consent of any prior beneficiaries. Section 1.20 "Trust" means the PHILIPP BROTHERS CHEMICALS, INC. RETIREMENT INCOME AND DEFERRED COMPENSATION PLAN TRUST created as of January 1, 1994. Such Trust and any other trust which may be created by Company to assist it in meeting its obligations hereunder, shall conform to the terms of the model trust as described in Revenue Procedure 92-64. Section 1.21 "Trustee" means the Trustee of the Trust. Section 1.22 The terms hereof shall be read in the plural or singular, or masculine or feminine, as the case may be, whenever appropriate. ARTICLE II. ANNUAL DEFERRALS Section 2.01. During the first Plan Year, each Participant shall notify Company within thirty (30) days of the Effective Date, on a form provided by company, of the portion, if any, of said Participants' Base Salary Amount in excess of $150,000 payable to said Participant for the period in 1994 subsequent to the date of such election, that said Participant elects to defer (the "1994 Deferral Amount"). Thereafter, on or before the fifteenth (15th) day of the month preceding the first month of each twelve (12) month period commencing January 1, 1995 during his employment, each Participant shall notify Company, on a form provided by Company, of the portion, if any, of said Participant's Base Salary Amount in excess of $150,000 payable to said Participant in the next calendar year that said Participant elects to defer (hereinafter "Annual Deferral"). The election, once made, shall be irrevocable. However, a Participant who has received a Hardship Distribution as provided for in Section 8.01, shall not be eligible to elect an Annual Deferral until after the close of the calendar year following the date of such Hardship Distribution. Section 2.02 The amount of the Annual Deferral elected by a Participant in any calendar year may not be less than $3,000.00 and may not exceed $20,000.00. Section 2.03 If a Participant who has elected a 1994 Deferral Amount or in any Plan Year after 1994 has elected an Annual Deferral is a member of the Company's Qualified Section 401(k) Plan and has elected to contribute the maximum deductible amount to said Plan in 1994 or any subsequent calendar year, Company will match the first $3,000 which said Participant has elected to defer hereunder during said calendar year (hereinafter "Company Matching Contribution Amount"). The Company shall withhold, each quarter, or such other period determined by Company, from the compensation payable to said Participant, one-quarter (1/4), or such other proportionate amount of said Participant's Annual Deferral. Section 2.04 The Annual Deferral Amount and the Company Matching Contribution Amount, if any, shall be credited to a Participant's Deferred Compensation Account at the time said amounts are withheld from the Participant's salary and/or paid by Company, as the case may be. Section 2.05 Notwithstanding the provisions of Section 2.01, on or before the first (1st) day of the month preceding the first month of each twelve (12) month period commencing January 1, 1995, Company may determine, in it's sole discretion, to advise each Participant that no Annual Deferral will be permitted in the next calendar year. ARTICLE III. RETIREMENT BENEFITS Section 3.01 "Normal Retirement Benefit". A Participant who retires on or after his Normal Retirement Date shall be paid a monthly retirement benefit in an amount determined by dividing his Retirement Income Benefit by twelve (12). Section 3.02 "Early Retirement Benefit". Upon the retirement of a Participant who shall have attained his Early Retirement Date, he shall be paid a monthly retirement benefit in an amount determined by dividing his Retirement Income Benefit, by twelve (12), reduced as follows: REDUCTION FOR EACH REDUCTION FOR EACH AGE AT RETIREMENT MONTH LESS THAN AGE 65 YEAR LESS THAN 65 Greater than 55 but less than 60 .1667% 2% 60 to 62 .0833% 1% Greater than 62 0% 0% Section 3.03 "Survivor's Income Benefit". If a Participant shall die during his employment prior to having begun to receive any Retirement Income Benefits hereunder, his Beneficiary shall be entitled to receive, in said Beneficiary's discretion, a monthly death benefit in an amount equal to the greater of (i) the than value of said Participant's Retirement Income Benefit, (hereinafter "Survivor's Retirement Benefit") or (ii) an amount determined as follows: Section 3.03.1. If said Participant died prior to attaining the age of forty (40) years, an amount equal to three (3)times the Participant's Annual Compensation at the time of death (annualized). Section 3.03.2. If said Participant died after having attained the age of forty (40) years but prior to having attained the age of fifty (50) years, an amount equal to two (2) times the Participant's Annual Compensation at the time of death (annualized). Section 3.03.3. If said Participant died after having attained at least the age of fifty (50) years, an amount equal to the Participant's Annual Compensation at the time of death (annualized). Section 3.03.4. The benefit determinable under Section 3.03.1, 3.03.2 or 3.03.3, as the case may be, is hereinafter referred to as the "Annualized Benefit". Section 3.05 "Forfeiture For Cause". Notwithstanding anything contained in the Plan to the contrary, if, in the Committee's discretion, it is determined that a Participant's employment be terminated for Cause, such Participant shall forfeit all rights to any Retirement Income Benefit payable under the Plan. For purposes of the foregoing, "Cause" shall mean any one or more of the following: (a) theft or misappropriation of Company funds or assets, or intentionally damaging the Company's assets; (b) falsification of Company records; (c) willful failure or refusal to perform duties reasonably assigned; (d) conviction (including a guilty plea) of a felony or misdemeanor which creates apprehension or insecurity on the part of the Committee, other officers of the Company, customers or the public in dealing with the Participant; or (e) acting either willfully or with gross negligence in a disloyal manner or to the detriment of the Company's best interest. ARTICLE IV. PAYMENT OF BENEFITS Section 4.01 "Retirement Income Benefit". The payment of a Participant's Retirement Income Benefit shall commence on or about the first day of the month next following thirty (30) days after his employment with the Company terminates, and shall be payable on or about the first day of each subsequent month until a total of 180 such payments have been made. If said Participant shall die after having received any of said payments and before having received the entire benefit to which he is entitled, said payments shall continue to be made to his Beneficiary. Section 4.02 "Survivor's Income Benefit". The payment of a Participant's Survivor's Income Benefit shall be made as follows: Section 4.02.1. If his Beneficiary shall have elected to receive the "Survivor's Retirement Benefit", payment of same shall commence, at the election of said beneficiary, on or about the first day of the month next following thirty (30) days after (a) the Participant's date of death, if the Participant died after having attained his Early Retirement Date, on his Normal Retirement Date, as the case may be, (b) the date on which the Participant would have attained his Early Retirement Date if he died prior to his Early Retirement Date, or (c) the date on which the Participant would have attained his Normal Retirement Date if he died prior to his Normal Retirement Date, and shall continue to be payable on or about the first day of each subsequent month until a total of 180 such payments have been made. Section 4.02.2. If his Beneficiary shall have elected to receive the "Annualized Benefit", payment of same shall be made in that number of equal monthly installments commencing on or about the first day of the month next following thirty (30) days after the death of the Participant, determined as follows: (i) If Section 3.03.1 applies, thirty-six (36) months; (ii) If Section 3.03.2 applies, twenty-four (24) months; and (iii)If Section 3.03.3 applies, twelve (12) months. ARTICLE V. FUNDING Section 5.01 "Unfunded Character". Notwithstanding the fact that the Company has established the Trust for the purpose of providing the benefits payable under the Plan, such Trust, or the Company's assets, as the case may be, shall be subject to the claims of the Company's general unsecured creditors. Any liability of the Company to any person with respect to benefits payable under the Plan shall be based solely upon such contractual obligations, if any, as shall be created by the Plan, and shall give rise only to a claim against the general assets of the Company. No such liability shall be deemed to be secured by any pledge or any other encumbrance on any specific property of the Company. The Plan is not intended to comply with the requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended, and is intended to be unfunded for tax purposes and for purposes of Title I of ERISA. Section 5.02 "Life Insurance". The Trust may apply for and become the owner and beneficiary of a life insurance policy on the life of each Participant, so as to provide some or all of the benefits hereunder. Accordingly, each Participant, as a condition of participation in the Plan, may be required to submit to a physical examination by the carrier issuing said policy, said examination to be paid for by the Company. Any such policy which the Company may utilize to assure itself of the funds to provide the benefits hereunder, shall not serve in any way as security to a Participant for the Company's performance hereunder and shall remain the sole property of the Trust. The rights accruing to a Participant or any Beneficiary hereunder shall be solely those of an unsecured creditor of the Company. Notwithstanding anything herein contained to the contrary, if a Participant is not insurable at standard rates, the Committee shall have the option to reduce (or eliminate, if said Participant is uninsurable) the Survivor Benefit payable hereunder with respect to such Participant. Notice of any such determination shall be delivered by the Committee to said Participant, in writing, within thirty (30) days after said determination has been made, and shall be final, conclusive, and binding on the Participant, and his heirs, successors, assigns and beneficiary. Section 5.03 Title to and beneficial ownership of any assets, whether cash or investments, which the Trust may hold to pay any Plan benefits, shall at all times remain in the Trustee and neither the Participants nor their designated Beneficiaries shall have any property interest whatsoever therein. Section 5.04 Payment of the Retirement Income Benefit payable under the Plan shall be conditioned upon the Participant remaining in the employ of company at least until he attains his Early Retirement Date. If a Participant's employment terminates prior to his having attained his Early Retirement Date, (other than on account of his death or permanent disability) he shall forfeit the Retirement Income Benefit otherwise payable to him hereunder. VI. DEFERRED COMPENSATION ACCOUNT Section 6.01 Company shall establish a Deferred Compensation Account in the name of each Participant. Notwithstanding the establishment of each said Account, no Participant shall be deemed to have any present interest therein and the amounts credited thereto shall be subject to the claims of Company's general creditors. Section 6.02 At the end of any Plan Year in which a Participant makes a deferral election hereunder, his Deferred Compensation Account shall be credited with (i) the amount of said deferrals, (ii) all Company Matching Contribution Amount(s) (if any), and (iii) interest, from the date of actual deferral, compounded annually in arrears at the Moody's Corporate Bond Index rate as published by Moody's Investors Services, Inc. Within thirty (30) days after the end of each Plan Year, each such Participant shall receive a statement reflecting the value of said Participant's Deferred Compensation Account (if any). Section 6.03 If a Participant shall have completed the number of years of Plan participation from and after December 31, 1993 indicated in the table below, his Deferred Compensation Account shall retroactively be credited with an additional rate of interest as set forth in the table below: YEARS OF PARTICIPATION ADDITIONAL RATE SINCE JANUARY 1, 1994 OF INTEREST --------------------- ---------------- Five (5) Years One (1%) Percent Ten (10) Years Two (2%) Percent Notwithstanding the above, the interest rate credited to the Deferred Compensation Account of a Participant who shall have made a hardship withdrawal in accordance with the terms of Section 8.01 hereof prior to having attained the age of sixty-two (62) years, shall be retroactively reduced to seventy-five (75%) percent of the rates indicated above. ARTICLE VII. DISTRIBUTION OF DEFERRED COMPENSATION ACCOUNT Section 7.01 At any time prior to the date of his separation from service, a Participant may elect to have the value of his Deferred Compensation Account paid to him, upon his termination of service with the Company, or to his designated Beneficiary in the event of his death prior to his termination of service with the Company, as follows: Section 7.01.1. Upon termination of service for any reason other than death, by one of the following methods: (i) In a lump sum, on a date selected by the Participant but no later than the April 1st. of the year following said termination of service, or (ii) In monthly installments, for any period (selected by Participant) from two (2) to fifteen (15) years certain, commencing on a date selected by the Participant but no later than the April 1st. following the year of termination (hereinafter "Installment Payment Inception Date"), in an amount determined as follows: Commencing on the Installment Payment Inception Date, and continuing thereafter in substantially equal amounts (but not less than $100 per month), an amount equal to the average of payments for a period certain annuity, as quoted by two (2) insurance companies at the time of said Installment Inception Payment Date, for the selected number of installments. A Participant's election may be changed at any time prior to his termination of employment. Section 7.01.2. Upon the death of a Participant, in a lump sum no later than sixty (60) days following his date of death. ARTICLE VIII. HARDSHIP DISTRIBUTION Section 8.01 In the event a Participant has an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal or other unforeseen occurrence which constitutes an unforeseeable emergency in the affairs of the Participant creating a hardship upon him, he may apply to the Committee for permission to withdraw the entire amount in his Deferred Compensation Account. The Committee will promptly act upon such request, and if it is approved, the entire value (but no lesser amount) of said Participant's Deferred Compensation Account will be distributed to said Participant within thirty (30) days of said approval. ARTICLE IX. MISCELLANEOUS Section 9.01 The Plan shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of Company and the Participants. Notwithstanding the foregoing, a Participant's right to receive payment hereunder shall not be subject to attachment or garnishment by creditors of the Participant or the Participant's beneficiary, and is hereby expressly declared to be personal, and not subject in any manner to alienation, sale, transfer, assignment, pledge or incumbrance, and in the event of any attempted assignment or transfer of such rights contrary to the provisions hereof, Company shall have no further liability for payments hereunder. Section 9.02 Any payments under the Plan shall be independent of, and in addition to, those under any other plan, program or agreement which may have been adopted by Company or any other compensation payable to a Participant or a Participant's designated Beneficiary by the Company. Section 9.03 Notwithstanding anything contained herein to the contrary, Company reserves the right to terminate the Plan if there is an adverse change in the Federal Income Tax laws governing the taxation of deferred compensation plans similar to the Plan; provided, however, that any such termination shall be prospective in effect and shall not diminish in any way the then current Deferred Compensation Obligation to Participants in the Plan. Section 9.04 It is intended and understood by the Company, the Trustee and the Participants, that this Plan is designed to comply with the provisions of the Internal Revenue Code and Regulations relating to Non Qualified Deferred Compensation Plans in effect at the time of its adoption and that the benefits payable to Participants shall not be deemed current compensation and shall not be included in taxable income under Federal or State law until actually distributed. If, at a later date, the laws of the United States of America or the State of New York are construed in such a way as to make such understanding and intent invalid or not in compliance with the Internal Revenue Code and Regulations thereunder, then this Plan will be given effect in such matter as will best carry out the purposes and intentions of the parties. Section 9.05 The Plan, and any amendment thereto, shall be interpreted and administered so as to be consistent with, the terms of the Trust. EX-10.19 22 0022.txt FORM OF EXECUTIVE INCOME DEFERRED COMPENSATION AGREEMENT BETWEEN PHILIPP BROTHERS CHEMICALS, INC. AND EACH OF JACK BENDHEIM, JAMES HERLANDS AND MARVIN SUSSMAN Executive Income Deferred Compensation Agreement AGREEMENT, made and entered into this First day of March, 1990, by and between Philipp Brothers Chemicals, Inc., a Corporation duly organized and existing under the laws of the State of New Jersey, and having its usual place of business at 1 Parker Plaza, Fort Lee, NJ, (hereinafter sometimes called the "Corporation"), and _____________, currently residing at _________________, _____________ (hereinafter call "Executive"), WITNESSETH THAT: WHEREAS, the Executive is presently employed by the Corporation in the position of ________________, in which capacity his services have contributed to the successful operation of the Corporation, and the Corporation and its Directors believe it is in the best interest of the Corporation to retain the services of the Executive; and WHEREAS, the Executive desires to enter into this Agreement with the Corporation under which, in consideration of services rendered and to be rendered by him to the Corporation, it will agree to make certain payments to him in the event of his retirement while in the employment of the Corporation or as otherwise provided for herein, all subject to the terms and conditions hereof; and WHEREAS, the Directors of the Corporation have concluded and agreed that it is in the best interests of the Corporation to enter into this Agreement with the Executive; NOW, THEREFORE, in consideration of the premises, and the services rendered and to be rendered to the Corporation by the Executive, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Corporation and the Executive hereby mutually convenant and agree as follows: ARTICLE I Retirement of Executive Following Age 65 1.01 The Corporation agrees that the Executive may retire from the active and daily service of the Corporation on the day which is one day prior to the first day of the month in which the Executive has his sixty-fifth (65th) birthday. It is understood and agreed that the word "retirement" as used in this Agreement shall refer to the actual retirement of the Executive, and that no benefits shall be paid the Executive under this Agreement until his actual retirement from regular full--time employment in the Corporation, unless the Executive and the Corporation shall otherwise mutually agree in writing. 1.02 The Corporation agrees that commencing on the first payment date (as defined in Section 5.02) after the date of the Executive's retirement, and on each payment date thereafter for the term of this Agreement, it will make monthly retirement payments in the amount provided in Article IV hereof. The Corporation agrees to continue to make such monthly payments to the Executive during his life for Ten (10) years and until the Executive shall have received One Hundred Twenty (120) monthly payments; subject, however, to the conditions and limitations provided for and set forth hereinbelow. ARTICLE II Death During Retirement 2.01 The Corporation agrees that if the Executive shall retire but shall die before receiving any or all of the said monthly payments as provided in Section 1.02, it will continue to make such monthly retirement payments to the designated beneficiary of the Executive who shall be living and entitled to receive such payment on the then current monthly payment date. If the Executive retires and dies after the expiration of said One Hundred Twenty month period, no further payments shall be due or payable by the Corporation under this Agreement. 2.02 As long as this Agreement is in force, the Executive shall be entitled to specify, in accordance with the procedures set forth in Section 11.01, the beneficiary or beneficiaries of any payments remaining to be paid at the time of his death under the provisions of Section 2.01 above. ARTICLE III Termination of Employment 3.01 In the event that the Executive terminates his employment with the Corporation voluntarily, or if he is discharged for any reason prior to his retirement date as set out in Section 1.01, no payments shall be due or payable by the Corporation under this Agreement. ARTICLE IV Amount of Monthly Payments 4.01 The amount of each monthly retirement payment to be made by the Corporation from its own funds and by its own check to the Executive or the Executive's beneficiary, as provided for in this Section 1.02, shall be Two Thousand Five Hundred dollars ($2,500). 4.02 Monthly retirement benefits shall commence on the first business day following the Executive's retirement, and thereafter shall be made on the first business day of each succeeding calendar month. ARTICLE V Employee Retirement Income Security Act of 1974 (ERISA) 5.01 For the purposes of ERISA, the Corporation will be the "Named Fiduciary" and "Plan Administrator" of the plan for which this Agreement is hereby designated the written plan instrument. 5.02 The Corporation's Board of Directors may authorize a person or group of persons to fulfill the responsibilities of the Corporation as Plan Administrator. The Named Fiduciary or the Plan Administrator may employ others to render advice with regard to its responsibilities under the plan. The Named Fiduciary may also allocate fiduciary responsibilities to others and may exercise any other powers necessary for the discharge of its duties to the extent not in conflict with ERISA. ARTICLE VI Claims Procedure 6.01 The following Claims Procedure shall control the determination of benefit payments under this Plan: (a) Filing of a Claim for Benefits If the Executive, the Executive's beneficiary or other individual ("Claimant") believes he or she is entitled to receive benefits under the plan he or she must submit a written claim for benefits to the Plan Administrator. The Corporation's independent decision on the beneficiary's Claim for Benefits shall be determinative of whether or not the beneficiary shall be entitled to receive benefits under this Plan. A beneficiary's Claim for Benefits shall be submitted in writing to the Plan Administrator on a form to be supplied by said Administrator. (b) Denial of Claim A Claim for Benefits under the Plan will be denied if the Corporation determines that the Claimant is not entitled to receive benefits under the Plan. Notice of a denial shall be furnished to the Claimant within a reasonable period of time after receipt of the Claim for Benefits by the Plan Administrator. (c) Content of Notice The Plan Administrator shall provide within ninety (90) days to every Claimant who is denied a Claim for Benefits written notice setting forth, in a manner calculated to be understood by the Claimant, the following: 1. The specific reason or reasons for the denial; 2. Specific reference to pertinent Plan provisions on which the denial is based; 3. A description of any additional material or information necessary for the Claimant to perfect the claim, and any explanation of why such material or information is necessary; and 4. An explanation of the Plan's Claim Review Procedure as set forth below. (d) Review Procedure The purpose of the Review Procedure is to provide a method by which a Claimant may have a reasonable opportunity to appeal a denial of a Claim to the Named Fiduciary for a full and fair review. To accomplish that purpose, the Claimant or his duly authorized representative: 1. May require a review upon written application to the Named Fiduciary; 2. May review pertinent Plan documents; and 3. May submit issues and comments in writing. A Claimant (or his duly authorized representative) shall request a review by filing a written application for review with the Named Fiduciary at any time within sixty (60) days after receipt by the Claimant of written notice of the denial of his claim. (e) Decision on Review A decision on review of a denied claim shall be made in the following manner: 1. The decision on review shall be made by the Named Fiduciary, who may in his discretion hold a hearing on the denied claim. Such decision shall be made promptly, and not later than sixty (60) days after receipt of the request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than one hundred and twenty (120) days after receipt of the request for review. 2. The decision on review shall be in writing and shall include specific reasons for the decisions, written in a manner calculated to be understood by the Claimant, and specific references to the pertinent Plan provisions upon which the decision is based. ARTICLE VII Financing of Benefits 7.01 All benefits under the plan shall be provided out of the general assets of the Corporation at the time such benefits are to be paid. The parties agree that the Corporation is under no obligation to set aside funds in advance of the time for payment, or to otherwise provide security for its obligations under this Agreement. 7.02 Payments from the Plan shall be made out of the general assets of the Corporation upon submission and approval of a Claim for Benefits made pursuant to the Claims Procedure established as required by ERISA, and set forth above. ARTICLE VIII Governing Laws 8.01 This Agreement shall be governed by and construed in accordance with the laws of New Jersey, where it is made and to be performed. It sets forth the entire agreement between the parties concerning the subject matter thereof, and any amendment or discharge will be made only in writing. This Agreement will bind and benefit the parties and their legal representatives and successors. ARTICLE IX Not a Contract of Employment 9.01 This Agreement shall not be deemed to constitute a contract of employment between the parties, nor shall any provision restrict the right of the Corporation to discharge the Executive. ARTICLE X Amendment or Termination 10.01 No beneficiary under this Agreement shall obtain any vested right to have this Agreement continued in force and it may be amended or modified, in whole or in part, by the Executive and the Corporation in writing at any time without the consent of said beneficiary. ARTICLE XI Further Provisions 11.01 The term "beneficiary" as used herein shall mean any person or trust, or combination thereof, last designated by the Executive in writing and filed with the Corporation by the Executive during his lifetime upon a Nomination of Beneficiary form provided by the Corporation. Any such designation or designations of beneficiary shall be revocable at any time or times without the consent of any beneficiary, whether now living or born hereafter, by written designation of beneficiary made by the Executive and similarly filed by him with the Corporation during his lifetime. In the absence of or failure of designated beneficiaries, the executor(s) or administrator(s) of the Executive shall be his beneficiary. 11.02 It is agreed that neither the Executive nor any beneficiary hereunder shall have any right to commute, sell, assign, transfer or otherwise convey the right to receive any payments hereunder, which payments and the right thereto are expressly declared to be nonassignable and nontransferable, and in the event of any attempted assignment or transfer, this Agreement shall terminate and the Corporation shall have no further liability hereunder. 11.03 The Corporation agrees that it will not merge or consolidate with another Corporation or organization, or permit its business activities to be taken over by any other organization unless and until the succeeding or continuing corporation or other organization shall expressly assume the rights and obligations of the Corporation herein set forth. 11.04 This Agreement shall be executed in duplicate, each copy of which when so executed and delivered shall be an original, but both copies shall, together, constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have set their hands and seals this First day of March 1990. - ----------------- Jack Bendheim Phi1ipp Brothers Chemicals, Inc. By: ---------------------------- - ------------------- Chairman President NOMINATION OF BENEFICIARY TO: Philipp Brothers Chemicals, Inc. (hereinafter called the "Corporation") I Jack Bendheim, in accordance with the right granted to me in Section 2.01 of the Executive Income Deferred Compensation Agreement between me and the Corporation dated March 1, 1990, do hereby nominate as Beneficiary thereunder in the event of my death: Giti Bendheim, Spouse, if living, otherwise to my Estate still reserving the privilege of changing the Beneficiary herein named at any time or times without the consent of any such Beneficiary. This nomination is made upon the following terms and conditions: 1. The word Beneficiary as used herein shall include the plural wherever the contract so permits. 2. If any sole Beneficiary who is then receiving monthly payments hereunder and under said agreement shall not be living on any monthly payment date provided for in said agreement, any and all remaining monthly payments shall be payable to the next Beneficiary in the order named above unless the executors or administrators of such sole Beneficiary are named as Beneficiaries hereinabove. 3. If more than one Beneficiary is named either individually or as a class, monthly payments shall be made equally to such Beneficiaries unless otherwise provided hereinabove. If any such Beneficiaries die while receiving monthly payments under said agreement, any and all remaining payments shall be made equally to the surviving Beneficiaries of such designation or class or all to the sole survivor of them unless otherwise provided hereinabove. If all of such Beneficiaries shall die, any and all remaining payments shall be made to the next Beneficiary in the order named hereinabove. 4. If none of the Beneficiaries named hereinabove is living on any said monthly payment date, any and all remaining payments shall be made to my executors or administrators. 5. If any such monthly payments shall be payable upon any trust, the Corporation shall not be liable to see to the application by the Trustee of any payment hereunder at any time, and may rely upon the sole signature of the Trustee to any receipt, release or waiver, or to any transfer or other instrument to whomsoever made purporting to affect this nomination or any right hereunder. This nomination shall be executed in duplicate, but it shall not be valid unless one copy thereof is filed with and receipt thereof is acknowledged thereon by the Corporation during my lifetime. Any revocation or change of this Nomination of Beneficiary shall not be valid unless it is filed with and receipt thereof is acknowledged thereon by the Corporation during my lifetime, and loss or destruction of any copy retained by me shall NOT constitute a revocation or change of this nomination. This nomination cancels and supersedes any Nomination of Beneficiary heretofore made by me with respect to said agreement and the right to receive payments thereunder. Date: March 1, 1990 - ----------------- Jack Bendheim The Corporation hereby acknowledges receipt of the above Nomination of Beneficiary this First day of March, 1990. Philipp Brothers Chemicals, Inc. By: ----------------------------- EX-10.20 23 0023.txt FORM OF EXECUTIVE INCOME SPLIT DOLLAR AGREEMENT BETWEEN PHILIPP BROTHERS CHEMICALS, INC. AND EACH OF JACK BENDHEIM, JAMES HERLANDS AND MARVIN SUSSMAN Executive Income Split Dollar Agreement AGREEMENT, made and entered into this First day of March, 1990, by and between Philipp Brothers Chemicals, Inc., a corporation duly organized and existing under the laws of the State of New Jersey, and having its usual place of business at 1 Parker Plaza, Fort Lee, NJ (hereinafter sometimes called the "Corporation"), and ____ ________, currently residing at _________________, _________, __, (hereinafter called "Executive"), WITNESSETH THAT: WHEREAS, the Executive is presently employed by the Corporation in the position of _________, in which capacity his services have contributed to the successful operation of the Corporation, and the Corporation and its Directors believe it is in the best interest of the Corporation to retain the services of the Executive; and WHEREAS, the Corporation is desirous of assisting the Executive in paying for a pre--retirement life insurance benefit; and WHEREAS, the Corporation has determined that this insurance can best be provided under a "split dollar" arrangement and the Corporation has applied for Insurance Policy No. 32000924 (the "policy") issued by Guardian Life Insurance Company of America (the "Insurer") in the face amount of $1,000,000 on the Executive's life; and WHEREAS, the Corporation and the Executive agree to make said insurance policy subject to this split dollar agreement. NOW, THEREFORE, in consideration of the premises, and the services to be rendered to the Corporation by the Executive, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Corporation and the Executive hereby mutually covenant and agree as follows: ARTICLE I Policy Ownership and Dividend Application 1.01 The policy has been issued to the Corporation as the owner thereof. The Corporation will have and may exercise all ownership rights in the policy, including, without limitation, the following: (a) The Corporation will have the right to designate the beneficiary, as provided in Article III hereof. (b) The Corporation will have the right to borrow from the Insurer and to secure that loan by the policy for any purpose including, but not limited to, borrowing for the purpose of paying premiums without giving notice to the Executive. 1.02 Except as provided in paragraph 1.01 above, the Corporation agrees with the Executive that so long as this agreement is in force, it will not exercise any rights under the policy which will compromise or reduce the death benefit payable to the beneficiary. 1.03 Dividends payable under the policy, if any, will be applied as the Corporation shall determine. 1.04 As between the Executive and the Corporation, this agreement shall take precedence over any provisions of the policy (including any riders, amendments and attachments thereto) in case of a conflict between the terms of the policy and this agreement. ARTICLE II Payment of Premiums 2.01 As long as this agreement is in force, the Executive and the Corporation agree to share in the payment of premiums on said policy of insurance in such amounts and in the manner set forth below: The Executive's share of the annual premium shall be that portion of the annual premium due on the policy that is equal to the amount of the economic benefit that would be taxable to the Executive but for the payment by the Executive of such amount based upon an amount of insurance protection equal to the Executive's death benefit specified in Article I. 2.02 The amount of economic benefit that would be taxable to the Executive shall be computed in accordance with the Insurer's current published rate per $1,000 of insurance protection for Individual 1--year term life insurance available to all standard risks as provided in Revenue Ruling 66--110, 1966--1 C.B.12. 2.03 In order to facilitate the payment of premiums on the policy, it is agreed that the Corporation in the first policy year, and in each year thereafter and as long as this agreement is in force, shall forward the total amount of the premium then currently due and payable on the policy directly to the Insurer and, immediately thereafter, it shall indicate in the appropriate Corporate records that the annual sum payable by the Executive as provided for above in Section 2.01, shall be added to his annual salary or compensation. ARTICLE III Beneficiary Provisions 3.01 If the Executive dies while this agreement is in force, the policy death benefit shall be paid, in a lump sum, as follows: (a) The first $1,000,000 of death benefit proceeds shall be paid to the wife of the Executive, if she shall survive the Executive, or if she shall then be deceased, then to the Executive's lawful issue then surviving, in equal shares, per stirpes. (b) If the death benefit proceeds shall exceed $1,000,000, then the first $1,000,000 shall be paid as provided in "(a)" above and any excess shall be paid, as follows: (i) There shall be paid to Philipp Brothers Chemicals, Inc. an amount equal to the aggregate premiums which it shall have paid on the policy from the inception thereof up to the date of the Executive's death; and (ii) The entire remaining balance of death benefit proceeds shall be paid as provided in "(a)" above. 3.02 If the Executive shall die while this agreement is in force, the Corporation agrees to take such action as may be necessary to obtain payment from the insurer of the amounts payable to the beneficiaries as herein provided. ARTICLE IV Termination of Agreement 4.01 This agreement shall automatically terminate upon the happening of any of the following events: (a) The Executive's termination of employment voluntarily, or his discharge for any reason prior to death. The Executive's total disability shall not be considered a termination of employment. (b) Express termination of this agreement by either the Corporation or the Executive at any time upon 30 days written notice to the other. (c) On the day prior to the date of the Executive's retirement, which retirement date shall be the day prior to the first day of the month in which the insured has his sixty-fifth (65th) birthday, unless with the consent of the Directors of the Corporation, the Executive remains in the active and full-time employment after the above stated retirement date. The retirement date as used in this Agreement shall refer to the actual retirement date of the Executive. The retirement date shall be specified on a Policy Contract Change Form provided by the Insurer. (d) Death of the Executive subject, however, to the provisions of Article III. (e) Lapse or termination of the policy. ARTICLE V Reorganization 5.01 The Corporation agrees that it will not merge or consolidate with another corporation or organization, or permit its business activities to be taken over by any other organization unless and until the succeeding or continuing corporation or other organization shall expressly assume the rights and obligations of the Corporation herein set forth. ARTICLE VI Governing Laws 6.01 This Agreement shall be governed by and construed in accordance with the laws of New Jersey, where it is made and to be performed. It sets forth the entire agreement between the parties concerning the subject matter thereof, and any amendment shall be made only in writing. This Agreement shall bind and benefit the parties and their legal representatives and successors. ARTICLE VII Not a Contract of Employment 7.01 This Agreement shall not be deemed to constitute a contract of employment between the parties, nor shall any provision restrict the right of the Corporation to discharge the Executive. ARTICLE VIII Employee Retirement Income Security Act of 1974 (ERISA) 8.01 For the purposes of ERISA, the Corporation shall be the "Named Fiduciary" and "Plan Administrator" of the split dollar life insurance plan for which this Agreement is hereby designated the written plan instrument. 8.02 The Corporation's Board of Directors may authorize a person or group of persons to fulfill the responsibilities of the Corporation as Plan Administrator. The Named Fiduciary or the Plan Administrator may employ others to render advice with regard to its responsibilities under the plan. The Named Fiduciary may also allocate fiduciary responsibilities to others and may exercise any other powers necessary for the discharge of its duties to the extent not in conflict with ERISA. ARTICLE IX Claims Procedure 9.01 The following Claims Procedures shall control the determination of benefit payments under this Plan: (a) Any insured, beneficiary or other individual ("claimant") entitled to benefits under the plan or under the policy shall file a claim request with the Plan Administrator with respect to benefits under the Plan and with the Insurer with respect to benefits under the policy. The Plan Administrator shall, upon written request of a claimant, make available copies of any claim forms or instructions provided by the Insurer or advise the Claimant where copies of such forms or instructions may be obtained. (b) Denial of Claim. A Claim for Benefits under the Plan shall be denied if the Corporation determines that the claimant is not entitled to receive benefits under the Plan. Notice of a denial shall be furnished to the Claimant within a reasonable period of time after receipt of the Claim for Benefits by the Plan Administrator. In the case of benefits which are provided under the policy, the initial decision on the claims shall be made by the Insurer. (c) Content of Notice. The Plan Administrator shall provide within ninety (90) days to every Claimant who is denied a Claim for Benefits written notice setting forth, in a manner calculated to be understood by the Claimant, the following: 1. The specific reason or reasons for the denial; 2. specific reference to pertinent Plan provisions on which the denial is based; 3. A description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and 4. An explanation of the Plan's Claim Review Procedure as set forth below. (d) Review Procedure. The purpose of the Review Procedure is to provide a method by which a Claimant may have a reasonable opportunity to appeal a denial of a Claim to the Named Fiduciary for a full and fair review. To accomplish that purpose, the Claimant or his duly authorized representative: 1. May require a review upon written application to the Named Fiduciary; 2. May review pertinent Plan documents; and 3. May submit issues and comments in writing. A Claimant (or his duly authorized representative) shall request a review by filing a written application for review with the Named Fiduciary at any time within sixty (60) days after receipt by the Claimant of written notice of the denial of his claim. (e) Decision on Review. A decision on review of a denied claim shall be made in the following manner: 1. The decision on review shall be made by the Named Fiduciary, who may in his discretion hold a hearing on the denied claim. Such decision shall be made promptly, and not later than sixty (60) days after receipt of the request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than one hundred and twenty (120) days after receipt of the request for review. 2. The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the Claimant, and specific references to the pertinent Plan provisions upon which the decision is based. ARTICLE X Amendment 10.01 No beneficiary under the policy shall obtain any vested right to have this Agreement continued in force and it may be amended or modified in whole or in part by the Executive and the Corporation in writing at any time without the consent of said beneficiary. IN WITNESS WHEREOF, the parties hereto have set their hands and seals this First day of March, 1990. - ----------------- Philipp Brothers Chemicals, Inc. By: ------------------ EX-10.23 24 0024.txt ADMINISTRATIVE CONSENT ORDER ISSUED BY THE NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION State of New Jersey DEPARTMENT OF ENVIRONMENTAL PROTECTION DIVISION OF HAZARDOUS WASTE MANAGEMENT LANCE R. MILLER, DIRECTOR CN O28 Trenton. N.J. 08625-0028 (609) 633-1408 Fax # (609) 633-1454 IN THE MATTER OF : ADMINISTRATIVE C. P. CHEMICALS INCORPORATED : CONSENT Respondent : ORDER This Administrative Consent Order ("ACO") is issued to C.P. Chemicals pursuant to the authority and the statutory and regulatory enforcement responsibilities vested in the Commissioner of the New Jersey Department of Environmental Protection (hereinafter "NJDEP" or the "Department") by N.J.S.A. 13:1D-1 et seq., the Water Pollution Control Act, N.J.S.A. 58:10A-1 et seq., the Solid Waste Management Act N.J.S.A. 13:1.E-1 et seq., and the Spill Compensation and Control Act, N.JS.A. 58:10-23.11 et seq. (hereinafter the "Spill Act"), and duly delegated to the Assistant Director of the Responsible Party Cleanup Element of the Division of Hazardous Waste Management, and the Assistant Director of the Enforcement Element of the Division of Water Resources, pursuant to N.J.S.A. 13:1B-4. FINDINGS I. The Site 1. C.P. Chemicals Incorporated (hereinafter "CP. Chemicals") operates a specialty chemical manufacturing facility and a separate hazardous waste treatment, storage and disposal (TSD) facility (EPA ID# NJD002141950) located on Arbor Street in Sewaren, Woodbridge Township, Middlesex County, New Jersey. The facilities are located on a tract of land consisting of fourteen acres and occupy property listed as Block 729 Lot 3, Block 729A Lot 1, Block 730 Lot 1, Block 730 Lot 1B and Block 731 Lot 1B on the tax map of Woodbridge Township (hereinafter "the Site"). The property is bounded by industrial areas to the north, south and east and by Woodbridge Creek to the west. 2. a. The property has been utilized by C.P. Chemicals since 1964. Prior to that time, the, site was used by other companies for heavy industrial operations since approximately 1860. C.P. Chemicals purchased the Site in 1964 from the Vulcan Detinning Company. Prior to the sale of the facility, the Vulcan Detinning Company was established at the site since 1907. Maps detailing the manufacturing facility date back to the 1920's and some of the original buildings are currently in use by C.P. Chemicals. It is believed that the Vulcan Detinning Company was the first major manufacturing company at the Site. 2. C.P. Chemicals has been engaged since 1964 in the manufacture at the Site of various metal cyanides, sulfates, carbonates and salts. The types of metals involved in the manufacturing process include, but are not limited to, copper, zinc, cobalt, nickel, and manganese. C.P. Chemicals obtains metals for its manufacturing processes through the use of relatively pure chemical compounds and relatively impure chemical wastes from various sources. 3. The impure chemical wastes are metal-containing liquids, sludges and filter cakes which C.P. Chemicals receives from other manufacturers and from its own manufacturing processes. Chemical wastes are stored in various storage tanks, particularly in the southern and western sections of the Site. C.P. Chemicals subjects the wastes to chemical processes to extract the metals and/or to increase the concentration of the metals to a useful level. The chemical wastes which remain after the extraction or concentration process, and/or the impure chemical wastes which are not suitable for extraction or concentration were treated and disposed of on site, by C.P. Chemicals, through the use of two infiltration/percolation lagoons. In 1977, a waste water treatment plant was constructed; however, C.P. Chemicals continued to use the two infiltration/percolation lagoons for waste disposal until approximately 1981. The liquid effluent from the waste water treatment plant is discharged to Woodbridge Creek via a permitted discharge pipe designated Discharge Serial Number (DSN) 002 in the NJPDES permit No. NJ0003867. Originally, noncontact cooling water was discharged through a permitted discharge pipe designated DSN001. Said discharge was voluntarily discontinued in 1987 after the installation of a cooling tower. The sludges which result from the treatment plant process are disposed of at off-site facilities. 4. C.P. Chemicals utilizes various processes to extract and concentrate the metals in the impure chemical wastes. The basic process involves reacting virgin metals and metal bearing waste with an acid solution followed by precipitation to remove impurities. This is followed by a crystallization process, recovery, drying and packaging. The waste water which is left over from this process is subject to further processing in order to further extract and concentrate the dilute metals still remaining. 5. The impure chemical wastes, remnant chemical wastes and unsuitable chemical wastes are hazardous wastes within the meaning of the Solid Waste Management Act, N.J.S.A. 13:1E-1 et seq. Accordingly, C.P. Chemicals stores and treats hazardous wastes at the Site. 6. The chemical products, raw materials, impure chemical wastes, remnant chemical wastes, and unsuitable chemical wastes are all pollutants within the meaning of the Water Pollution Control Act, N.J.S.A. 58:10A-l et seq., and such materials have been discharged to the land, ground waters and surface waters of the State. 7. The chemical products, raw materials, impure chemical wastes, remnant chemical wastes and unsuitable chemical wastes discharged by C. P. Chemicals at the Site contain hazardous substances within the meaning of the Spill Act, N.J.S.A. 58:10- 23.11a et seq. The discharge of the hazardous substances to the land, ground water, or surface water is prohibited by the Spill Act. 8. Soil, ground water and surface water pollution exists at the Site due to the discharge of hazardous wastes, hazardous substances and pollutants by C.P. Chemicals during the handling, transfer, storage, processing and disposal of raw materials, chemical products, impure chemical wastes, remnant chemical wastes and unsuitable chemical wastes. 9. An analysis of ground water sampling results shows that 3 various metals have been detected in the ground water collected at the Site from the outset of sample collection. Various organic chemicals have also been detected in the ground water. The Department alleges that although some of these organic chemicals have also been detected in the upgradient wells on the Shell Oil property, the concentrations were not as high as those observed on the C.P. Chemicals property. II. Site history 3. Based upon the Department's review of its files and inspections conducted at the Site, the Department has determined that the following environmental statutes have been violated, by C.P. Chemicals, at the Site: The Water Pollution Control Act, N.J.S.A. 58:10A-l et seq.; the Solid Waste Management Act N.J.S.A. 13:1E-l et seq.; and the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. 4. The Department initiated numerous enforcement actions relating to such violations, including, but not limited to: Administrative Order, dated February 21, 1980; Administrative Consent Order, dated February 9, 1981; June 7, 1982 Court Order; Administrative Order, dated May 4, 1983; Administrative Consent Order, dated on or about May 19, 1983; Notice of Violation/Penalty Assessment/Penalty Settlement Offer, dated August 9, 1983; Amended Administrative Consent Order, dated August 13, 1983; Notice of Violation/Penalty Settlement Offer, dated October 24, 1983; Administrative Consent Order, dated on or about September 19, 1986; Amended Notice of Civil Administrative Penalty Assessment, dated September 22, 1986; Administrative Order and Notice of Civil Administrative Penalty Assessment, dated October 16, 1986; Notice of Civil Administrative Penalty Assessment, dated April 3, 1987; Notice of Civil Administrative Penalty Assessment, dated June 3,1987; Administrative Order and Notice of Civil Administrative Penalty Assessment, dated June 30, 1987; Administrative Order and Notice of Civil Administrative Penalty Assessment, dated May 24,1988; Administrative Order and Notice of Civil Administrative Penalty Assessment, dated November 30, 1988; Notice of Civil Administrative Penalty Assessment, dated February 22, 1990; 4 Administrative Order and Notice of Civil Administrative Penalty Assessment, dated April 1, 1990; Administrative Order and Notice of Civil Administrative Penalty Assessment, dated April 10, 1989; July 28, 1989 Final Notice; Directive and Notice to Insurer, dated October 16, 1990 (Attachment VIII); the Department's Summons Nos. 05816, 05817, 05818, dated August 13, 1990; Woodbridge Municipal Court Docket Nos. H2495, H2496, H2497; Municipal Summons dated December 18, 1959. In response to these documents C.P. Chemicals submitted various hearing requests, stay requests and other correspondence. In response to those items that the Department recognizes as being in violation of various state regulations, C.P. Chemicals alleges that it has done extensive work in the areas of ground water cleanup, storm water runoff and an upgrade to the on-site treatment plant. The above documents are herein incorporated by reference. 5. The Department issued a New Jersey Pollutant Discharge Elimination System ("NJPDES") discharge to surface water Permit No. NJ0003867 (hereinafter the "Permit") which is attached herein and made a part hereof as Attachment I, to C.P. Chemicals on June 11, 1984. In December 1987, a public hearing was held regarding a draft NJPDES/DSW Permit that was publicly noticed by the Department. At that hearing, testimony was heard and written comments received from various sources, including C.P. Chemicals, NJPIRG and members of the public. On April 10, 1989, the Department issued a Notice of Intent to Terminate and Not Renew the NJPDES/DSW Permit. An additional public comment period was held and on July 28, 1989, a Final Notice was issued. Both the Notice of Intent and the Final Notice are incorporated herein by reference. Pursuant to the New Jersey Water Pollution Control Act, N.J.S.A. 58:10A-1 et seq., no person shall discharge any pollutant except in conformity with a valid NJPDES permit. 6. C.P. Chemicals has submitted Discharge Monitoring Reports (DMRs) to the Department as required by Part IV, Sections A. 1, 2, and 3 of the Permit for the monitoring period through January 31, 1991. The Department alleges that these DMRs demonstrate that C.P. Chemicals violated the effluent limitations of the Permit during such period. Listed in Attachment II, which is incorporated herein by reference, are certain of the effluent limitations which the Department finds were allegedly violated by C.P. Chemicals during the specified monitoring period (January 1, 1989 - September 30, 1990) for outfall DSN002. Although no AONOCAPA has yet been issued, the Department has determined that a penalty for these violations should be assessed against C.P. Chemicals in the amount of $3,742,500.00, pursuant to the provisions of N.J.S.A. 58:10A-10d and N.J.A.C. 7:14-8.1 et seq. The Department finds that there are additional violations of the Permit during the period from January 1, 1989 through January 31, 1991, that have not been the subject of a formal enforcement action and are not listed in Attachment II, and this ACO resolves the penalties for such violations. 5 7. In December 1989, March 1990, and November 1990 the Department conducted a review of C.P. Chemicals' hazardous waste activities. Based on a review of C.P. Chemicals' original Part A, subsequent revisions to the Part A, site inspections, manifests listed in Attachment IV hereto (which is incorporated herein by reference) and the following manifests, #NJA0570301, #NJA0570302, #NJA0765111, the Department alleges that C.P. Chemicals has violated the Solid Waste Management Act, N.J.S.A. 13:1E-l et seq. ("SWMA"), and the hazardous waste regulations promulgated pursuant thereto, N.J.A.C. 7:26-I et seq. C.P. Chemicals, without admitting said allegations, represents that to the best of its knowledge no additional major violations or substantial numbers of violations of SWMA and the hazardous waste regulations occurred up to the effective date of this ACO. Pursuant to N.J.S.A. 13:1E-9e and N.J.A.C. 7:26-5.4 and 5.5 and based upon this FINDING the Department has determined, although a NOCAPA has not yet been issued, that another civil administrative penalty should be assessed against C.P. Chemicals in the amount of $1,407,750.00, and this ACO resolves the penalty for such alleged violations. 8. In addition to the above, the Department has determined from inspections at the Site that C.P. Chemicals has had periodic leaks from its hazardous waste equipment. The Department has determined that it is necessary for C.P. Chemicals to submit a plan to correct and prevent these equipment leaks. 9. In August 1988, C.P. Chemicals submitted to the Department a Part B permit application pursuant to the provisions of the Solid Waste Management Act and the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. (hereinafter "RCRA"). By -- --- correspondence dated 6/30/89, the Department notified C.P. Chemicals that the permit application was deficient. By correspondence dated 9/1/89 and 10/31/89, C.P. Chemicals responded to the Notice of Deficiency. In March 1990, C.P. Chemicals modified the application for the Part B permit. By a Technical Notice of Deficiency, dated December 14, 1990, the Department notified C.P. Chemicals that its Part B permit application was still deficient. This Notice of Deficiency is attached hereto as Attachment V and is incorporated herein by reference. Responses to that Notice of Deficiency were submitted on January 30, 1991, and on February 12, 1991 and are incorporated herein. The Department has not yet completed its review of these responses. The Department has provided C.P. Chemicals with a letter status report, dated February 22, 1991, regarding the issuance of the draft Part B permit decision. This ACO and the alleged violations referenced in the FINDINGS shall not constitute the grounds for disapproval of the Part B permit. 6 10. On December 20, 1990 and January 3, 1991, the Department and C.P. Chemicals met to discuss, among other things, the hazardous waste activities which C.P. Chemicals was authorized to conduct by virtue of the various Part A applications and modifications it has submitted. By letter dated January 4, 1991, the Department set forth the hazardous waste activities which C.P. Chemicals is authorized to conduct. A copy of this letter is attached hereto as Attachment VI, and is incorporated herein by reference. Clarification of this letter has been requested by C.P. Chemicals. That request and any response by the Department are incorporated by reference. 11. a. The C.P. Chemicals facility is regulated pursuant to the New Jersey Solid Waste Management Act N.J.S.A. 13:lE-1 et seq., specifically the Hazardous Waste --- Regulations, N.J.A.C. 7:26-l et seq. The C.P. Chemicals facility is also regulated -- --- pursuant to RCRA, and the Hazardous and Solid Waste Amendments of 1984 (hereinafter "HSWA") and is subject to the corrective action requirements contained in Section 3004(a) and 3008 (h) of HSWA. The State of New Jersey currently has similar corrective action authorities and therefore acts as the U.S. Environmental Protection Agency's contractor (through the FY 89 Subtitle C RCRA Grant Agreement) to oversee corrective action activities at the C.P. Chemicals facility. In this capacity, all documents submitted pursuant to this ACO may be reviewed by the USEPA to determine compliance with RCRA guidance documents for RCRA Facility Investigation, Corrective Measures Study, and Corrective Measures Implementation to comply with HSWA requirements. Such comments will be transmitted to the C.P. Chemicals facility by the Department as the lead agency for these activities. b. C.P. Chemicals has received Part A interim authorization and has applied for a final Part B permit pursuant to said laws, and is therefore subject to the corrective action requirements noted above. 12. In order to more fully determine the nature and extent of the problem presented by the discharge of hazardous substances and pollutants at and emanating from the Site and to develop environmentally sound remedial actions, the Department has determined that it is necessary to conduct a remedial investigation and feasibility study of remedial action alternatives (hereinafter "RI/FS") for the Site. The Department has further determined that to correct the problems presented by the discharges, it may be necessary to design and implement a remedial action alternative to remedy all pollution at the Site, emanating from the Site, or which has emanated from the Site. 13. At the present time, C.P. Chemicals alleges that there are a 7 total of 20 ground water monitoring wells located on the Site (1-5, 7-21). Installation of these wells began in 1981 and were completed over the next several years. A ground water recovery system was installed in 1983 in order to pump ground water to the on-site waste water treatment plant and then to Woodbridge Creek through the DSN002 outfall line. This system included the installation of a French drain trench for the collection of ground water which extends throughout the southwest portion of the Site and pumps ground water to the treatment plant. A slurry wall was also installed in 1983 by C.P. Chemicals. This slurry wall extends along the same horizontal line as the French drain collection system. 14. At the present time, C.P. Chemicals alleges that roof runoff from the main manufacturing building is collected in a 36,000 gallon holding tank, and that this water is sent to the on-site waste water treatment plant prior to discharge. Additionally, sump pump pits are allegedly located in low areas near buildings 15, 32, 44 and 54 as well as near the railroad tracks and the waste water treatment plant. C.P. Chemicals alleges that water collected in these sumps is sent to the treatment plant for processing prior to discharge. A NJPDES application for a proposed storm water management plan was submitted to the Department in April 1989. The Department reviewed the application and determined not to act on the application at that time. 15. A berm has also been constructed at the southwest portion of the site adjacent to Woodbridge Creek. This was designed to contain contaminated rain water runoff that flows towards this low area. However, during periods of successive days of intense rain, C.P. Chemicals has breached the berm on at least two occasions in order to prevent water from backing up into buildings in the area, allowing this rain water to enter Woodbridge Creek. The berm is also breached occasionally by storm water when there is natural erosion due to storm water. Pursuant to this ACO, a new interim storm water management plan will be submitted. 16. At the present time, it is C.P. Chemicals' position that: all sampling required by the Middlesex County Utilities Authority ("MCUA") as found in the "Application for Non- Domestic Waste Water Discharge Permit" has been completed; this sampling of treated production waste water and treated ground water was performed by a Department certified laboratory for those parameters found on Tables 1 and 2 of the permit; additionally, a full priority pollutant + 40 analysis was performed on the composited samples; the sampling methods, analysis and QA/QC requirements were agreed upon by the MCUA prior to the sample collection; and the permit application has been completed and is awaiting submission to the MCUA. 17. The permit for construction of the original waste water treatment plant was issued by the Department on 7/22/77. The 8 plant went into operation later that year. In December 1987, a construction and discharge permit was sent to the Department for an $880,000 upgrade of the plant. This upgrade work was completed in early 1989 and the plant went on-line shortly after completion. The treatment plant processing of the waste waters removes metals by neutralization with caustic soda in order to precipitate metal hydroxides, this is followed by a gravity settler, which is a Lamella slanted plate unit. A coagulated polymer is added to the settler feed to increase precipitation. The water then goes through a gravity settler and sand filter to lower the solids content and remove solids. The pH is then adjusted through the addition of sulfuric acid and the water then enters a carbon filter and is then discharged through the DSN002 line to Woodbridge Creek. The separate cyanide destruct system handles waste from the cyanide salts manufacturing line. Waste water treated in the cyanide destruction system is routed to the waste water treatment plant. At the present time, C.P. Chemicals alleges that all waste water streams from the manufacturing units, ground water pumped from the French drain collection systems, as well as rein runoff from both the sump pumps and the roof collection system is also treated at the plant. 18. C.P. Chemicals Inc., by its agreement to this ACO, does not make any admission as to any fact, liability or fault as to any and/or all of the FINDINGS. Notwithstanding that there are no admissions made in this ACO, C.P. Chemicals does agree to enter into this ACO and comply with the terms of the ORDER listed in the remaining paragraphs of this ACO. No FINDING shall be admissible in any civil, administrative or other court proceeding as proof of the information it purports to find as a fact. The ACO can be admitted in an action for enforcement of this ACO or in any proceeding between the parties to establish the fact that the ACO was entered into. 19. Based on all of the above and to resolve this matter without the necessity for litigation, C.P.. Chemicals has agreed to undertake the activities set forth in the ORDER section of this ACO, including, but not limited to: a. Cease the effluent discharge to the Woodbridge Creek, except in compliance with a storm water management plan and effective NJPDES permit approved by the Department and to discharge production waste water and treated ground water directly to the MCUA in accordance with the schedule provided in this ACO; b. Conduct interim remedial measures, to conduct an RI/FS and to design and implement a remedial action alternative based upon the results of the RI/FS, to remedy all pollution at the Site, emanating from the Site, or which 9 has emanated from the Site; c. Hire a Compliance Officer ("CO"); d. Submit a treatability analysis; e. Design, prepare and implement its interim or final storm water discharge management plan, as the case may be, in the event of a waste water treatment plant "cease operations" order from the Department. ORDER NOW THEREFORE IT IS HEREBY ORDERED AND AGREED THAT: I. Penalty and Reimbursement of Damages A. Penalty 20. C.P. Chemicals shall pay a penalty of $ 2,200,000.00 to the Department, by cashier's or certified checks payable to the "Treasurer, State of New Jersey", submitted with a white copy of form DEP-062A (copy attached) for the violations referenced in the FINDINGS hereinabove in paragraphs 3, 4, 6, 7, and 8. This penalty, with interest calculated at 8.57% per annum, shall be payable in ten (10) yearly installments as set forth in Attachment IX. The initial payment shall be due on May 15, 1991, and each annual installment shall be due on March 15 of each successive year. $2,000,000.00 of this penalty shall constitute settlement for the violations of the Water Pollution Control Act referenced in this ACO. $200,000.00 of this penalty shall constitute settlement of all other violations referenced in this ACO. B. Reimbursement of Prior Costs and Damages 21. Within sixty (60) calendar days after receipt from the Department of a written summary of all costs incurred by the Department to date, in connection with the investigation of, and response to, the matters described in the FINDINGS hereinabove, including the costs associated with the preparation of this ACO, C.P. Chemicals shall submit to the Department a cashier's or certified check payable to the "Treasurer, State of New Jersey" for the Department' s 10 oversight costs. Payment shall be submitted to the Department's contact listed in paragraph 60 below. The Department agrees that with respect to this initial billing for costs, that initial costs are currently estimated at $40,279.74 through December 15, 1990 and will not exceed $75,000.00 in such initial billing. Any additional costs that the Department incurs prior to entry of this ACO, will be billed subsequently pursuant to paragraph 68. II. Immediate Actions A. Interim Remedial Measures 22. C.P. Chemicals shall continue implementation of those Interim Remedial Measures (hereinafter "IRM") undertaken pursuant to the 1981 Administrative Consent Order, specifically: development and implementation of a plan for lagoon sediment removal; elimination of surface runoff and discharges to ground water; installation of eight (8) monitoring wells and borings as well as excavation of eight (8) test pits to determine the extent of soil and ground water contamination; submission of sample results from the monitoring wells and test pits to the Department; development and implementation of a ground water decontamination plan; and a determination of the direction of ground water flow. The Department acknowledges that the development and implementation of a plan for the removal of sediments in both the large unlined and small unlined lagoons; installation of eight (8) monitoring wells as well as eight (8) test pits to determine the extent of soil and ground water contamination; and development and implementation of a ground water decontamination plan have been completed and that the remaining remedial measures, namely the elimination of surface runoff and discharges to the ground water; submission of sample results from the monitoring wells and test pits to the Department; and determination of the direction of ground water flow have been undertaken and will be re-evaluated by C.P. Chemicals in the RI/FS, except as required by paragraph 23. C.P. Chemicals will continue to maintain its surface water control systems and ground water decontamination system in conjunction with paragraph 23. 23. Within the time limits specified below, C.P. Chemicals shall implement additional interim remedial measures, including but not limited to the implementation of the following measures: a. Immediately secure any spilled or damaged drums/containers that have discharged or threaten to discharge hazardous substances. b. Manage drums in accordance with solid and hazardous waste regulations. 11 c. Within thirty (30) calendar days after the effective date of this ACO, C.P. Chemicals shalt submit all ground water quality monitoring data which it or its consultants possess. C.P. Chemicals shall submit additional data, within sixty (60) calendar days after the effective date of this ACO, including, but not limited to, water level elevations, ground water contour maps, sampling methodologies, and laboratory certification. d. Within thirty (30) calendar days after the effective date of this ACO, C.P. Chemicals shall submit an engineering plan for revising the current pumping system for the interceptor drain system from the current manual operation to an automatic system so as to minimize the risk of overflow at the trench and/or sumps. Within ten (10) calendar days after the receipt of the Department's comments, C.P. Chemicals shall submit to the Department an engineering plan which conforms to the Department's comments. The determination as to whether or not the modified engineering plan, as resubmitted, conforms to the Department's comments and is otherwise acceptable by the Department shall be made solely by the Department in writing. The system is to be installed and operational within fifteen (15) calendar days of C.P. Chemicals' receipt of the approval of plans by the Department. e. Within sixty (60) calendar days after the effective date of this ACO C.P. Chemicals shall submit to the Department a copy of those documents in its files regarding the construction, integrity and effectiveness of the ground water decontamination system. Within thirty (30) calendar days after the receipt of the Department's comments regarding such documents and decontamination system, C.P. Chemicals shall respond to such comments. The determination as to whether or not the response conforms to such comments and is otherwise acceptable by the Department shall be made solely by the Department in writing. B. Interim Hazardous Waste Activities 24. C.P. Chemicals shall fully comply with the requirements of the December 14, 1990 Technical Notice of Deficiency (Attachment V). C.P. Chemicals believes it has fully complied with this NOD at this time. 12 25. C.P. Chemicals shall immediately cease all hazardous waste activities not authorized in, and shall fully comply with the terms of, the January 4, 1991 "Authorized Hazardous Waste Activities" letter from the Department (Attachment VI) and any modification thereto. 26. Within fifteen (15) calendar days of the effective date of this ACO, C.P. Chemicals shall submit to the Department a plan for inspection and schedule for maintenance ("Plan"), of all equipment used in conjunction with C.P. Chemicals' hazardous waste activities at the Site, for all areas where such Plan will not require Department approval pursuant to the Part B permit process. Construction activities relating to treatment, storage and disposal activities shall be considered part of the Part B process and shall not be included in the Plan. C.P. Chemicals shall modify this Plan to conform to the Department's comments and shall submit the modified Plan to the Department. The determination as to whether or not the modified Plan, as resubmitted, conforms to the Department's comments and is otherwise acceptable to the Department shall be made solely by the Department in writing. C. Interim Storm Water Management 27. On or before April 15, 1991, C.P. Chemicals shall submit an interim storm water management plan. Said plan shall consider the current Site conditions and shall remain in effect until such time as a long term storm water management plan is approved and implemented. The plan shall address measures that will eliminate the breaking of the berm at the Site and the associated discharge of storm water to the Woodbridge Creek. Within thirty (30) calendar days after the receipt of the Department's comments, C.P. Chemicals shall modify the interim storm water management plan to conform to the Department's comments and shall submit the modified interim storm water management plan to the Department. The determination as to whether or not the modified interim storm water management plan, as resubmitted, conforms to the Department's comments and is otherwise acceptable to the Department shall be made solely by the Department in writing. Upon receipt of the Department's written approval, C.P. Chemicals shall implement this interim storm water management plan pursuant to the deadlines included therein. 13 D. Interim Enforcement Effluent Limits 28. On the effective date of this ACO and until the final compliance date specified in paragraph 33(d), unless the final date is modified pursuant to the provisions of paragraph 72, C.P. Chemicals shall meet the interim enforcement effluent limits specified in Attachment VII, which is incorporated herein by reference. The Department shall use the interim effluent enforcement limits in determining C.P. Chemicals' compliance with the terms and conditions of the 1984 Permit. The Department's enforcement of violations of these interim effluent enforcement limits shall be based upon the stipulated penalties and the enforcement mechanisms set forth in this ACO. III. Waste Water Treatment Plant Actions A. Middlesex County Utilities Authority ("MCUA") 29. Pursuant to 33 USC 1314(1), and the Individual Control Strategy submitted by the Department and approved by the USEPA, C.P. Chemicals is required to discontinue Its discharge of treated ground water and process waste water to Woodbridge Creek no later than 6/4/92, and may discharge directly to MCUA's treatment plant subject to MCUA's approval. Should the June 4, 1992 date be changed legislatively, administratively, or judicially, the date in this paragraph shall be adjusted accordingly. In the event MCUA does not approve C.P. Chemical's discharge: (1) C.P. Chemicals shall immediately develop alternative strategies regarding such discharge; and (2) this ACO shall not preclude an application by C.P. Chemicals, as a new source, to discharge to the Woodbridge Creek. The execution of this ACO shall not constitute an approval or disapproval of such an application, and the parties reserve all rights regarding such application. These alternative strategies shall be subject to the Department's approval. Failure of MCUA to approve the discharge shall not constitute a Force Majeure event pursuant to paragraphs 75 and 76. B. Independent Waste Water Consultant 30. Within thirty (30) calendar days of the completion of the Department's review of a list of consultants submitted by C.P. 14 Chemicals, CA'. Chemicals shall obtain the services of an independent consultant who shall be responsible to perform an independent evaluation of C.?. Chemicals" waste water treatment plant. The evaluation shall include, but not be limited to. an assessment of the performance of each of the treatment units in relation to their design' specifications and the adequacy of the current staffing levels and operation and maintenance procedures. The evaluation shall include a review of any treatability studies performed in conjunction with the projected sewer hookup to MCUA. A report, to include recommendations for improved operation at the facility, shall be submitted by the independent consultant directly to the Department within sixty (60) calendar days after C.P. Chemicals obtains the services of the consultant. 31. C.P. Chemicals shall make all reasonable good faith efforts, to obtain, within sixty (60) calendar days after the effective date of this ACO, the services of a Compliance Officer ("CO") who shall be responsible for determining C.!'. Chemicals' compliance with the Water Pollution Control Act, N.J.S.A. 58:10A-1 et seq. The CO shall observe all sampling, subject to reasonable exception for sick leave, vacation, etc., and shall be employed for a period of not less than two (2) years. In order to allow the CO to determine compliance, the CO shall be given access to all documentation which relates to the operation of the waste water treatment plant, including, but not limited to, invoices, manifests, laboratory reports, chains of custody and sampling data. C.P.. Chemicals shall give the Department at least two (2) weeks notice of any of the CO's planned sick leave, vacation, etc. The individual to be employed as CO shall be subject to the approval by the Department. Upon the hiring of the CO, C.P. Chemicals shall place into escrow an amount equivalent to that individual's salary and maintain said escrow for a period of two years. The escrow shall serve as a guarantee of that individual's salary for the two-year period. The CO's function shall include all aspects of the Site's environmental compliance program. The CO shall not report to the plant manager but shall report to the Corporate Vice President for environmental affairs. The CO's employment shall not be terminated except upon the written approval by the Department, unless for cause, or resignation by the employee. Cause shall not include reporting of information or results unfavorable to C.P. Chemicals. In the event that the CO's employment is terminated, C.P. Chemicals shall, no 15 later than thirty (30) calendar days thereafter, present to the Department a proposed CO candidate subject to the same conditions referenced above. If extensions are granted pursuant to paragraphs 75 and 76, or if the final compliance date is modified pursuant to the revisions of paragraph 72, this shall automatically extend, for an equivalent time period, the term of employment of the CO. The CO shall, no later than the twenty-fifth (25) calendar day of each month, together with the DMR provide a written report which must include the CO's determination regarding C.P. Chemicals' compliance with all sampling, analysis, reporting, and waste water treatment plant operations. The Department shall have the authority to confer with the CO at any time. C. Significant Industrial User ("SIU") Application 32. On or before May 1, 1991, C.P. Chemicals shall submit an application to the Department for a NJPDES Significant Industrial User (SIU) Permit to allow its present surface water discharge to be conveyed to the MCUA for subsequent treatment and discharge. The SIU application shall include the information generated during the treatability analysis performed by C.P. Chemicals to determine the effect of its treated waste water on MCUA's facility and operation. The treatability analysis shall have considered the following items: a. pass-through of pollutants, both chemical specific and whole effluent toxicity; b. interference with any of MCUA's unit operations; c. effect on MCUA's sludge quality; and d. any treatability resting required by MCUA; C.P. Chemicals alleges that it is currently not discharging process waste water to its waste water treatment plant. Therefore, in addition, the following assessments may be required at such time that C.P. Chemicals begins discharging process waste water to its waste water treatment plant: e. Inhibition tests using the Continuously Fed Batch Reactor (FBR) Procedure and Glucose Inhibition Test [see Larson, R.J. and Schaeffer, S.L., 1982, A Rapid Method for Determining the Toxicity of Chemicals to Activated Sludge. Water Research, 16 (675)]; f. A Tier II Refractory Toxicity Assessment (RTA) as described in the U.S. Environmental Protection Agency document, "Toxicity Reduction Evaluation Protocol for Municipal Waste Water Treatment Plants." (EPA/600/2-88/062). D. Construction Compliance Schedule 13. C.P. Chemicals shall provide for waste water treatment which is fully capable of complying 16 with its final NJPDES SIU permit and sewer connection to MCUA, in accordance with the following schedule: a. On or before November 20, 1991, C.P. Chemicals shall submit to the Department a Stage 2 TWA application prepared in accordance with N.J.A.C. 7:14A-12.l et seq., including a detailed construction schedule consistent with this ACO. b On or before April 5, 1992, C.P. Chemicals shall award contracts and initiate construction as required in the approved Stage 2 TWA for the connection to MCUA, and any other separate Stage 2 TWA that may be necessary for the waste water treatment plant. c. On or before April 16, 1993, C.P. Chemicals shall complete all construction and apply for a Stage 3 TWA in accordance with N.J.A.C. 7:14A-12.l et seq. d. On or before April 17, 1993, C.P. Chemicals shall cease its discharge to Woodbridge Creek, and shall discharge waste water only in compliance with the final effluent limitations set forth in the SIU permit and shall discharge only in compliance with said SIU permit. The Department recognizes C.P. Chemicals' estimation of the Department's review time for Stage 2 TWAs of 90 days and 180 days for the SIU application. The Department shall extend the time for performance as necessary in accordance with paragraphs 75 and 76 of this ACO. The Department has considered the proposed construction schedule dated 2/8/91, referenced as Attachment X, in evaluating C.P. Chemicals' commitment to cease its discharge to Woodbridge Creek. IV. Remedial Investigation and Cleanup 34. C.P. Chemicals shall select a consultant from the Department's approved Term Feasibility Study or Term Design Contract List, and such consultant shall conduct the Remedial Investigation, Feasibility Study and cleanup of the Site, as set forth in paragraphs 35 through 50 below. A. Remedial Investigation 35. On or before May 1, 1991, C.P. Chemicals shall submit to the Department a detailed draft Remedial Investigation Work Plan (hereinafter the "RI Work Plan") in accordance with the scope of work set forth in Appendices B, C and D, which are attached hereto and made a part hereof. 36. Within thirty (30) calendar days after receipt of the Department's written comments on the draft RI Work Plan, C.P. Chemicals shall modify the draft RI Work Plan to conform to the Department's comments and shall submit the modified RI Work Plan to the Department. The determination as to whether or not the modified RI Work Plan, as resubmitted, conforms to 17 the Department's comments and is otherwise acceptable to the Department shall be made solely by the Department in writing. 37. Upon receipt of the Department's written final approval of the RI Work Plan, C.P. Chemicals shall conduct the remedial investigation in accordance with the approved RI Work Plan and the schedule therein. 38. C.P. Chemicals shall submit to the Department a draft Remedial Investigation Report (hereinafter "RI Report") in accordance with Appendix B and the RI Work Plan and the schedule therein. 39. If upon review of the draft RI Report the Department determines that additional remedial investigation is required, C.P. Chemicals shall conduct additional remedial investigation as directed by the Department and submit a second draft RI Report. 40. Within thirty (30) calendar days after receipt of the Department's written comments on the draft RI Report, C.P. Chemicals shall modify the draft RI Report to conform to the Department's comments and shall submit the modified RI Report to the Department. The determination as to whether or not the modified RI Report, as resubmitted, conforms with the Department's comments and is otherwise acceptable to the Department shall be made solely by the Department in writing. B. Feasibility Study 41. Within thirty (30) calendar days after receipt of the Department's written final approval of the RI Report, or as otherwise directed by the Department, C.P. Chemicals shall submit to the Department a detailed draft Feasibility Study Work Plan (hereinafter, "FS Work Plan") in accordance with the scope of work set forth in Appendix E, which is attached hereto and made a part hereof, and which shall also address the final storm water management plan for the Site. 42. Within thirty (30) calendar days after receipt of the Department's written comments on the draft FS Work Plan, C.P. Chemicals shall modify the draft FS Work Plan to conform to the Department's comments and shall submit the modified FS Work Plan to the Department. The determination as to whether or not the modified FS Work Plan, as resubmitted, conforms to the Department's comments and is otherwise acceptable to the Department shall be made solely by the Department in writing. 43. Upon receipt of the Department's written final approval of the FS Work Plan, C.P. Chemicals shall conduct the feasibility study in accordance with the approved FS Work Plan and the schedule therein. 44. C.P. Chemicals shall submit to the Department a draft Feasibility Study Report (hereinafter 18 "FS Report") in accordance with Appendix E and the approved FS Work Plan and the schedule therein. 45. Within thirty (30) calendar days after receipt of the Department's written comments on the draft FS Report, C.P. Chemicals shall modify the draft FS Report to conform to the Department's comments and shall submit the modified FS Report to the Department. The determination as to whether or not the modified FS Report, as resubmitted, conforms the Department's comments and is otherwise acceptable to the Department shall be made solely by the Department in writing. C. Remedial Action 46. The Department will make the selection of the remedial action alternative based on the criteria set forth in Appendix E, Section I.D. 47. Within sixty (60) calendar days after receipt of the Department's written notification of selection of a remedial action alternative, C.P. Chemicals shall submit to the Department a detailed draft Remedial Action Plan, which shall include the final Storm water management plan, in accordance with the scope of work set forth in Appendix V, which is attached hereto and made a part hereof. 48. Within thirty (30) calendar days after receipt of. the Department's written comments on the draft Remedial Action Plan, C.P. Chemicals shall modify the draft Remedial Action Plan to conform to the Department's comments and shall submit the modified Remedial Action Plan to the Department. The determination as to whether or not the modified Remedial Action Plan, as resubmitted, conforms to the Department's comments and is otherwise acceptable to the Department shall be made solely by the Department in writing. 49. Upon receipt of the Department's written final approval of the Remedial Action Plan, C.P. Chemicals shall implement the approved Remedial Action Plan in accordance with the schedule therein. D. Additional Remedial Investigation and Remedial Action 50. If at any time prior to C.P. Chemicals' receipt of written notice from the Department pursuant to paragraph 109, the Department determines that the criteria set forth in Appendix E (Section I.D.) are not being achieved or that additional remedial investigation and/or remedial action is required to protect human health or the environment, C.P. Chemicals shall conduct such additional activities as directed by the Department and in accordance with this ACO. E. Progress Reports 19 51. C.P. Chemicals shall submit to the Department quarterly progress reports; the first progress report shall be submitted on or before the 30th calendar day of the month following the first full quarter after the effective date of this ACO. Each progress report thereafter shall be submitted on or before the 30th calendar day of the month following the quarter being reported. Each progress report shall detail the status of C.P. Chemicals' compliance with this ACO and shall include the following: a. Identification of the Site and reference to this ACO; b. Identify specific requirements of this ACO (including the corresponding paragraph number or schedule) which were initiated during the reporting period; c. Identify specific requirements of this ACO (including the corresponding paragraph number or schedule) which were initiated in a previous reporting period, which are still in progress and which will continue to be carried out during the next reporting period; d. Identify specific requirements of this ACO (including the corresponding paragraph number or schedule) which were completed during this reporting period; e. Identify specific requirements of this ACO (including the corresponding paragraph numbers or schedule) which should have been completed during the reporting period and were not; f. An explanation of any non-compliance with any approved work plan(s), schedule(s) or Remedial Action Plan, and actions taken or to be taken to rectify non-compliance; g. Identify the specific requirements of this ACO (including the corresponding paragraph number or schedule) that will be initiated during the upcoming reporting period; h. C.P. Chemicals and the Department agree to meet quarterly, if necessary, in order to review the progress reports, as well as any other issues the parties deem to be appropriate. V. Operational Records 52. Immediately upon the execution of this ACO by C.P. Chemicals, C.P. Chemicals shall, upon reasonable notice, make available, for inspection and copying, all operational records associated with the Site, including, but not limited to, documents relating to the waste water treatment plant operations, effluent discharges, hazardous waste documents relating to the shipments and receipts of hazardous waste, documents relating to the treatment, storage and/or disposal of hazardous wastes, hazardous substances, hazardous pollutants and pollutants, as well as any other documents deemed necessary by the Department. Production information not directly related to state environmental law (for example, quantity of virgin raw materials, commercial products, cost information and the like) is confidential and may 20 be reviewed by the Department on a confidential basis. No copies of such information will be retained by the Department, the Department shall not treat such copies as public records, and all such copies will be returned to C.P. Chemicals, unless these copies provide a basis for any subsequent enforcement action. The determination as to whether or not this information could possibly provide a basis for a subsequent enforcement action shall be made solely by the Department. VI. Permits 53. This ACO shall not be construed to be a permit or in lieu of a permit for existing or former activities which require permits and it shall not relieve C.P. Chemicals from obtaining and complying with all applicable Federal, State and local permits necessary for any future activities which C.P. Chemicals must perform in order to carry out the obligations of this ACO. The interim enforcement effluent limitations set forth in Attachment VII will be deemed to be the effluent limitations for determining compliance with the Water Pollution Control Act, N.J.S.A. 58:10A-l et seq., as amended by P.L. 1990, c.28, and any regulations -- --- promulgated pursuant thereto, including but not limited to: whether there is a serious violation; whether and by how much an effluent limitation has been exceeded; and whether C.P. Chemicals is a significant non-complier. This ACO precludes the use of a more stringent frequency or factor of exceedance than those set forth in the Water Pollution Control Act, as amended, to determine if a serious violation has occurred or if C.P. Chemicals is a significant non-complier. 54. No provisions of the 1984 NJPDES Permit are modified by this ACO. The enforcement construction compliance schedule set forth above in paragraph 33 and the interim enforcement effluent limits set forth in Attachment VII are enforcement compliance requirements that C.P. Chemicals shall meet until C.P. Chemicals begins discharging to the MCUA, or until implementation of the approved alternative strategy referenced in paragraph 29. 55. C.P. Chemicals shall submit applications for all Federal, State and local permits required to carry out the obligations of this ACO in accordance with the approved time schedules. 56. Within thirty (30) calendar days after receipt of written comments concerning any permit application to a Federal, State or local agency, or sooner if required by the permitting agency, C.P. Chemicals shall modify the permit application to conform to the agency's comments and resubmit the permit application to the agency. The determinations as to whether or not the permit application, as resubmitted, conforms with the Department's comments or is otherwise acceptable to the Department shall be made 21 solely by the Department in writing. To the extent that the terms and conditions of any such permit or permit modifications are substantially equivalent with the terms and conditions agreed to under this ACO, C.P. Chemicals waives any rights it may have to a hearing on such terms and conditions during any such permit process. To the extent that such terms and conditions are not substantially equivalent, C.P. Chemicals reserves any rights it may have. 57. This ACO shall not preclude the Department from requiring that C.P. Chemicals apply for any permit or permit modification issued by the Department under the authority of the Water Pollution Control Act, N.J.S.A. 58:10A-l et seq., the Solid Waste Management Act, N.J.S.A. 13:1E-l et seq. and/or any other statutory authority for the matters covered herein. The terms and conditions of any such permit or permit modification shall not be preempted by the terms and conditions of this ACO even if the terms and conditions of any such permit or permit modification are more stringent than the terms and conditions to this ACO. VII. Project Coordination 58. C.P. Chemicals shall submit to the Department all documents required by this ACO, including correspondence relating to Force Majeure issues, by certified mail, return receipt requested, or by Federal Express, or by hand delivery with an acknowledgment of receipt form for the Department's signature. The date that the Department executes the receipt or acknowledgment will be the date the Department uses to determine C.P. Chemicals' compliance with the requirements of this ACO and the applicability of stipulated penalties and any other remedies available to the Department. 59. The individual identified in this paragraph shall be the Department's contact for C.P. Chemicals for all matters concerning this ACO. C.P. Chemicals' contact for the Department for all matters concerning this ACO shall be Mr. Thomas L. Moran, C.P. Chemicals, Inc., One Parker Plaza, Fort Lee, New Jersey 07024, and the Department will copy George J. Tyler, Esq., Giordano, Halleran & Ciesla, 270 State Highway #35 P.O. Box 190, Middletown, NJ 07048, on all correspondence submitted to C.P. Chemicals pursuant to this ACO. 60. C.P. Chemicals shall submit four (4) or more copies, as advised, of all documents required by this ACO, unless otherwise directed in writing by the Department, to: Ian R. Curtis, Case Manager New Jersey Department of Environmental Protection Division of Hazardous Waste Management Bureau of Federal Case Management 401 East State Street, CN 028 Trenton, NJ 08625 Also, C.P. Chemicals, unless otherwise directed by the Department in writing, shall submit three (3) copies of all documents required by this ACO to: 22 Ellen Doering, Chief New Jersey Facility Section USEPA - Region II Room 1138 26 Federal Plaza New York, NY 10278 61. C.P. Chemicals shall notify, in writing, and shall attempt to contact telephonically the contact persons listed in paragraph 60, above, at least two weeks prior to the initiation of any field activities. VIII. Financial Requirements A. Financial Assurance 62. Within ninety (90) calendar days after the effective date of this ACO, C.P. Chemicals shall obtain and provide to the Department financial assurance in the form of either an irrevocable letter of credit or a performance bond or other form of acceptable financial assurance, for example an insurance policy, in the amount of $500,000.00. C.P. Chemicals hereby agrees to adjust such financial assurance at the end of the RI/FS to reflect the estimated cost of an engineering design. C.P. Chemicals further agrees to adjust said financial assurance at the end of the engineering design to reflect the estimated cost of the remedial program. However, at no time shall the financial assurance be allowed to drop below $500,000.00. C.P. Chemicals shall also establish an irrevocable standby trust fund, with an initial deposit of One Thousand dollars ($1,000.00). The irrevocable letter of credit, the performance bond and the irrevocable trust fund agreement shall meet the following requirements: i. Letter of Credit a. Is identical to the wording specified in Appendix G for the letter of credit, which is attached hereto and made a part hereof; b. Is issued by a New Jersey State or Federally chartered bank, savings bank, or savings and loan association which has its principal office in New Jersey or New York City, unless otherwise approved by the Department; and c. Is accompanied by a letter from C.P. Chemicals referring to the Letter of Credit by number, issuing institution and date and providing the following information: the name and address of the facility and/or Site which is the subject of the ACO and the amount of funds securing the C.P. Chemicals' performance of all its obligations under the ACO. 23 ii. Performance Bond a. Is identical to the wording specified in Appendix I for performance bonds, which is attached hereto and made a part hereof; b. The surety company issuing the performance bond shall, at a minimum, be among those listed as acceptable sureties on Federal bonds in the most recent version of Circular 570 issued by the U.S. Department of the Treasury, which is published annually on July 1 in the Federal Register; and c. Is accompanied by a letter from C.P. Chemicals referring to the Performance Bond by number, issuing institution and date and providing the following information: the name and address of the facility and/or site which is the subject of the ACO and the amount of fund securing the company's performance of all its obligations under the ACO. iii. Standby Trust. a. Is identical to the wording specified in Appendix H, which is attached hereto and made a part hereof; b. The irrevocable standby trust fund shall be the depository for all funds paid pursuant to a draft by the Department against the letter of credit or payments made under the performance bond as directed by the Department; c. The trustee shall be an entity which has the authority to act as a trustee and whose trust operations are regulated and examined by a Federal or New Jersey agency; d. Is accompanied by an executed certification of acknowledgment that is identical to the wording specified in Appendix H. 63. C.P. Chemicals shall establish and maintain the standby trust fund until terminated by the written agreement of the Department, the trustee and C.P. Chemicals, or of the trustee and the Department if C.P. Chemicals ceases to exist. C.P. Chemicals shall maintain the letter of credit, performance bond, or other form of acceptable financial assurance until the Department provides written notification to C.P. Chemicals that the financial assurance is no longer required for compliance with this ACO. In the event that the Department determines that C.P. Chemicals has failed to perform any of its obligations under this ACO, the Department may proceed to have the financial assurance deposited into the standby trust; provided, however, that before the Department draws on the letter of credit or makes a claim against the performance bond or other financial assurance, the Department shall notify C.P. Chemicals in writing of the obligation(s) which it has not performed, and C.P. Chemicals 24 shall have a reasonable time, not to exceed thirty (30) calendar days, unless approved in writing by the Department, to perform such obligation(s). 64. At any time, C.P. Chemicals may apply to the Department to substitute other financial assurances in a form, manner and amount acceptable to the Department. B. Project Cost Review 65. Beginning three hundred sixty-five (365) calendar days after the effective date of this ACO and annually thereafter on that same calendar day, C.P. Chemicals shall submit to the Department a detailed review of all costs required for C.P. Chemicals' compliance with this ACO. This cost review shall include a detailed summary of all monies spent pursuant to this ACO up to thirty (30) days prior to the submission, the estimated cost of all known future expenditures required to comply with this ACO (including any operation and maintenance costs), and the reason for any changes from the previous cost review submitted by C.P. Chemicals. These cost reviews are in addition to the adjustments in the financial assurance called for in paragraph 67. 66. At any time after C.P. Chemicals submits the first cost review pursuant to the preceding paragraph, C.P. Chemicals may request the Department's approval to reduce the amount of the financial assurance to reflect the remaining costs of performing its obligations under this ACO. If the Department grants written approval of the request, C.P. Chemicals may amend the amount of the then existing letter of credit, performance bond, or other form of acceptable financial assurance. 67. If the estimated cost of meeting C.P. Chemicals' obligations in this ACO at any time increases to an amount greater than the financial assurance, C.P. Chemicals shall, within forty-five (45) calendar days after receipt of written notice of the Department's determination, increase the amount of the then existing letter of credit, performance bond, or other form of financial assurance, so that it is equal to the estimated cost as determined by the Department. C.P. Chemicals shall provide the amended financial assurance to the Department within seven (7) calendar days after it has been obtained. C. Oversight Cost Reimbursement 68. Within thirty (30) calendar days after receipt from the Department of a written summary of all costs incurred in connection with its oversight functions of this ACO for a fiscal year, or any part thereof, C.P. Chemicals shall submit to the Department a cashier's or certified check payable to the "Treasurer, State of New Jersey" for the full amount of the Department's oversight costs. D. Stipulated Penalties and Cessation of Operations 25 69. Except as provided in paragraphs 75 and 76 below, upon a demand made the Department, C.P. Chemicals shall pay stipulated penalties to the Department for its failure to comply with any of the deadlines, schedules, or limits contained in, or any other requirements of, this ACO, including those established and approved hy the Department in writing pursuant to this ACO. Each deadline, schedule, limit or other requirement not complied with shall be considered a separate violation. The Department agrees to use its best efforts to respond, within ten (10) calendar days, to any request by C.P. Chemicals regarding clarification of any such deadline, schedule, limit or other requirements. Failure by the Department to respond within such time period shall not preclude the assessment of stipulated penalties for any violations. Payment of stipulated penalties shall be made according to the following schedule, unless the Department has modified the compliance date pursuant to the Force Majeure provisions hereinbelow: Calendar Days After Due Date Stipulated Penalties or for construction or operation -------------------- without a TWA -------------------------------- 1 - 7 $ 500 per calendar day 8 - 14 $ 1,000 per calendar day 15 - 21 $ 1,500 per calendar day 22 - 28 $ 2,500 per calendar day 29 - over $ 5,000 per calendar day For violations of any interim enforcement effluent limits contained in this ACO or for any reporting, monitoring or sampling violations, C.P. Chemicals shall pay a stipulated penalty of $5,000 per violation which shall be included in any penalty mandated under the Water Pollution Control Act, N.J.S.A. 58:10A-1 et seq., as amended by P.L. 1990, c.28. These stipulated penalties do not apply to the construction and compliance schedule, or the completion date, with respect to the tie-in to the MCUA. 70. Any such penalty shall be due and payable no later than fourteen (14) calendar days following receipt of a written demand by the Department. Payment of stipulated penalties shall be made by a cashier's or certified check payable to the "Treasurer, State of New Jersey". 71. C.P. Chemicals shall pay a stipulated penalty of $10,000.00 per month for its failure to meet the deadline set forth in paragraph 29, above. C.P. Chemicals agrees to cease its discharge of treated ground water and process waste water to Woodbridge Creek no later than April 17, 1993, unless such date is extended pursuant to the provisions of paragraph 72, or pursuant to the provisions of paragraphs 75 and 76 (Force Majeure). In the event that C.P. Chemicals continues to discharge storm water to the Woodbridge Creek, such storm water shall be treated prior to discharge. The $10,000.00 per month stipulated penalty shall not apply to the extent compliance dates are extended beyond the April 17, 1993 deadline pursuant to 26 paragraphs 75 and 76. 72. C.P. Chemicals agrees that if the date for connection to the MCUA (April 17, 1993) is not met, it will pay an additional penalty with a principal amount of $1,000,000.00. Alternatively, C.P. Chemicals may cease, on April 17, 1993, discharge of treated process and ground water effluent to the Woodbridge Creek and pay a penalty with a principal amount of $500,000.00. The Department reserves the right to seek enforcement of the April 17, 1993 date in Superior Court, notwithstanding payment of the higher penalty, unless the Department determines that C.P. Chemicals is diligently continuing to pursue its connection to the MCUA. However, if the Department determines that the continuation of C.P. Chemicals' discharge poses an immediate risk to public health or an immediate risk to the environment, the Department reserves the right to seek injunctive relief against C.P. Chemicals to cease its discharge. C.P. Chemicals further agrees to cease the process and ground water discharged to Woodbridge Creek no later than 12/31/93. In the event C.P. Chemicals elects to continue the process and ground water discharge beyond 4/17/93, C.P. Chemicals shall, on 4/17/93, file an amended interim storm water management plan including an appropriate NJPDES-DSW permit application. C.P. Chemicals also agrees not to discharge storm water to Woodbridge Creek after 12/31/93 except in conformity with a final NJPDES-DSW permit, which permit shall take into account, if appropriate, the remedial action plan and the final storm water management plan. Nothing in this ACO shall be construed to set a specific date for completion of the remedial action plan and the final storm water management plan, as such a specific date will be established as part of the implementation of paragraphs 35 through 50 above. The Department anticipates that a final NJPDES-DSW permit may be issued within 8 months from its date of receipt of a completed permit application. The execution of this ACO shall not constitute approval or disapproval of such application, and the parties reserve all rights regarding such application. The Department may extend the time for performance as necessary in accordance with paragraphs 75 and 76 of this ACO. All payments pursuant to this paragraph shall be made in accordance with the attached schedule (Attachment XI), with no penalty for prepayment, and with interest calculated at 8.57% per annum. The first payment shall be due with the next annual payment pursuant to paragraph 20. In the event C.P. Chemicals elects to pay the $1,000,000.00 penalty pursuant to this paragraph, the final installment shall be due on the same date as the last scheduled payment pursuant to paragraph 20. 73. All penalties paid pursuant to this ACO shall be considered civil and/or civil administrative penalties. 74. Payment of stipulated penalties does not alter C.P. Chemicals' responsibility to complete any requirements of this ACO. IX. Force Majeure 75. If any event as specified in the following paragraph occurs which C.P. Chemicals believes 27 will or may cause delay in the compliance or non-compliance with any provision of this ACO, C.P. Chemicals shall notify the Department in writing within ten (10) calendar days of becoming aware of the delay, or anticipated delay, as appropriate, referencing this paragraph and describing, to the extent practicable, the anticipated length of the delay, the precise cause or causes of the delay, any measures taken or to be taken to minimize the delay, and the time required to take any such measures to minimize the delay. C.P. Chemicals shall take all reasonably necessary actions within its control to prevent or minimize any such delay. 76. If the Department finds that: (a) C.P. Chemicals has complied with the notice requirements of the preceding paragraph; (b) that any delay or anticipated delay has been or will be caused by fire, flood, riot, strike or other circumstances beyond the reasonable control of C.P. Chemicals, including delay by the Department or other governmental agency; and (c) C.P. Chemicals has taken all reasonably necessary action within its control, to prevent or minimize any such delay, the Department shall extend the time for performance hereunder for a period no longer than the delay resulting from such circumstances. If the Department determines that: (i) C.P. Chemicals has not complied with the notice requirements of the preceding paragraph, or (ii) the event causing the delay is not beyond the control of C.P. Chemicals, or (iii) C.P. Chemicals has not taken all necessary action to prevent or minimize the delay, this paragraph shall not be applicable and failu re to comply with the provisions of this ACO shall constitute a breach of the requirements of this ACO. The burden of proving that the existence of any delay is caused by circumstances beyond the control of C.P. Chemicals and the length of any such delay attributable to those circumstances shall rest with C.P. Chemicals. Increases in the costs or expenses incurred by C.P. Chemicals which do not create an inability to fulfill the requirements of this ACO shall not constitute inability the Department shall have the right to draw upon the financial assurance as provided in paragraph 62. Delay in the attainment of an interim requirement shall not automatically justify or excuse delay in the attainment of subsequent requirements. Force Majeures hall not include non-attainment of the goals, standards, guidelines and requirements set forth in the appendices attached hereto. Force Majeure shall not include contractor's breach unless such breach falls under (a), (b) and (c) of this paragraph. X. Reservation of Rights 77. The Department reserves the right, in appropriate circumstances, to unilaterally terminate this ACO in the event C.P. Chemicals violates the terms of this ACO. 78. a. With respect to the Solid Waste Management Act ("SWMA") nothing in this ACO shall preclude the Department from seeking civil or civil administrative penalties or any other legal or equitable relief against C.P. Chemicals for matters not set forth in the FINDINGS of this ACO. However, for matters which could have been encompassed in the Department's investigation described in this ACO, the 28 Department agrees not to take such action unless the Department finds that C.P. Chemicals' representation set forth in paragraph 7 of this ACO is incorrect. If the Department's investigation conducted pursuant to paragraph 52 reveals violations which could not have been encompassed in the Department's investigation described in this ACO, the Department reserves the right to take enforcement action regarding any of such violations. This paragraph relates to all SWMA matters arising up to the effective date of this ACO. b. Except as otherwise provided in paragraphs 69 and 72, with respect to the Water Pollution Control Act, as amended, nothing in this ACO shall preclude the Department from seeking civil or civil administrative penalties or any other legal or equitable relief against C.P. Chemicals for matters not encompassed in the DMRs filed by C.P. Chemicals through the date of final compliance with this ACO. Further, this ACO governs any and all matters that have arisen or may arise under said Act with respect to the discharge to Woodbridge Creek and the compliance schedule, up to the date of final compliance. c. With respect to the Spill Compensation and Control Act nothing in this ACO shall preclude the Department from seeking civil or civil administrative penalties or any other legal or equitable relief against C.P. Chemicals for matters not covered by the FINDINGS of this ACO. This ACO relates to any and all matters covered by the FINDINGS that have arisen or the underlying facts known to the Department which may arise up to the date of execution of this ACO. 79. In the event of a termination or cessation of operations, or any other event which triggers the applicability of the Environmental Cleanup Responsibility Act, N.J.S.A. 13:lK-6 et seq. (ECRA), C.P. Chemicals agrees to comply with all the requirements of ECRA. Prior to the completion of the Remedial Action Plan, the Department agrees that the approved sampling, cleanup, and other technical activities required by the terms of this ACO shall satisfy the ECRA technical requirements for these areas of environmental concern which have been addressed under this ACO. 80. This ACO shall not be construed to affect or waive the claims of Federal or State natural resource trustees against any party for damages for injury to, destruction of, or loss of natural resources. 81. The Department reserves the right to require C.P. Chemicals to take or arrange for the taking of, any and all additional measures should the Department determine that such actions are necessary to protect human health or the environment. Nothing in this ACO shall constitute a waiver of any statutory right of the Department to require C.P. Chemicals to undertake such additional measures should the Department determine that such measures are necessary. 82. Nothing in this ACO, including the Department's assessment of stipulated penalties, shall 29 preclude the Department from seeking maximum civil or civil administrative penalties or any other legal or equitable relief against C.P. Chemicals, for violations of this ACO. In any such action brought by the Department under this ACO for injunctive relief, or civil, civil administrative or stipulated penalties, C.P. Chemicals may raise, among other defenses, a defense that C.P. Chemicals failed to comply with a decision of the Department, made pursuant to this ACO, on the basis that the Department's decision was arbitrary, capricious or unreasonable. If C.P. Chemicals is successful in establishing such a defense, C.P. Chemicals shall not be liable for stipulated penalties for failure to comply with that particular requirement of the ACO. Although C.P. Chemicals may raise such defenses in any action initiated by the Department for injunctive relief, termination of this ACO, or stipulated penalties, C.P. Chemicals shall not otherwise seek review of any decision made or to be made by the Department pursuant to this ACO and under no circumstances shall C.P. Chemicals initiate any action or proceeding challenging any decision made or to be made by the Department pursuant to this ACO. 83. Paragraphs 77, 78, 79, 80, 81 and 82 notwithstanding, C.P. Chemicals reserves whatever rights it has to contest, after implementation of the remediation for which the financial assurance was used by the Department, that the Department's use of the financial assurance provided pursuant to this ACO was arbitrary, capricious or unreasonable. The Department reserves its rights to contest any such action. XI. General Provisions 84. By its execution of this ACO, C.P. Chemicals hereby withdraws all requests for administrative hearings regarding the Administrative Orders and Notices of Civil Administrative Penalty Assessment referenced in the FINDINGS above. All such AO and NOCAPA actions are retained within the jurisdiction of the Department, and the stay issued by the Department on August 28, 1989 and revised on September 22, 1989, remains in effect while this ACO remains in effect. Additionally, upon execution of this ACO, C.P. Chemicals shall immediately, voluntarily, dismiss, with prejudice, the action captioned: "C.P. Chemicals, Inc. v. N.J. Department of Environmental Protection", Docket No. AM-280- 90T3, Motion No. M-1323-90. The Department and C.P. Chemicals agree that this ACO shall be the basis for the settlement of the State of New Jersey v. C.P. Chemicals, Inc., Docket No. C-3916-89E pending before the Honorable Erminie L. Conley, J.S.C. (the "Chancery Action") and that this ACO shall be incorporated by reference in the Settlement and Dismissal with Prejudice in that matter. Settlement of that matter is predicated on the comprehensive nature of this ACO. The Department and C.P. Chemicals further agree that the Department has the primary, but not exclusive, jurisdiction to enforce the environmental laws of the State of New Jersey at their discretion, and that the Chancery Action sought to, and did, enforce the NJPDES Permit issued to C.P. Chemicals. 85. This ACO shall be binding on C.P. Chemicals, its agents, successors, assignees and any trustee in bankruptcy or receiver appointed pursuant to a proceeding in law or equity. 30 86. C.P. Chemicals shall perform all work conducted pursuant to this ACO in accordance with prevailing professional standards. 87. C.P. Chemicals shall require that the independent waste water consultant referred to in this ACO submit simultaneously to the Department all data, information, or any other materials, that it submits to C.P. Chemicals or its agents. Failure of the consultant to submit simultaneously shall be considered a violation of this ACO by C.P. Chemicals. Regarding all other deliverables under this ACO, C.P. Chemicals shall require that all independent consultants submit such deliverables to the Department simultaneously with the submission of such deliverables to C.P. Chemicals. 88. C.P. Chemicals shall conduct all Site operations in accordance with the Health and Safety plan developed for this Site (as set forth in Appendix B). All Site activities shall be conducted in accordance with all general industry (29 CFR 1910) and construction (29 CFR 1926) standards of the federal Occupational Safety and Health Administration (OSHA), U.S. Department of Labor, as well as any other State or municipal codes or ordinances that may apply. Special attention shall be given to compliance with those requirements set forth in OSHA's final rule entitled "Hazardous Waste Operations and Emergency Response", Section 1910.120 of Subpart H of 29 CFR (published March 6, 1989, Volume 54, Number 42, Federal Register). 89. In accordance with N.J.S.A. 45:8-45, all plans or specifications involving professional engineering, submitted pursuant to this ACO, shall be submitted affixed with the seal of a professional engineer licensed pursuant to the provisions of N.J.S.A. 45:8-1 et seq. 90. C.P. Chemicals shall conform all actions pursuant to this ACO with all applicable Federal, State, and local laws and regulations. 91. All appendices referenced in this ACO, as well as all reports, work plans and documents required under the terms of this ACO are, upon approval by the Department, incorporated into this ACO by reference and made a part hereof. 92. Each field activity to be conducted pursuant to this ACO shall be coordinated by an on-site professional(s) with experience relative to the particular activity being conducted at the Site each day, such as experience in the area of hydrogeology, geology, environmental controls, risk analysis, health and safety or soils. 93. Upon the receipt of a written request from the Department, C.P. Chemicals shall submit to the Department all data and information, including technical records and contractual documents, concerning pollution at and/or emanating from the Site, or which has emanated from the Site, including raw sampling and monitor data, whether or not such data and information, including technical records and contractual documents, was developed pursuant to this ACO. By signing this ACO, C.P. Chemicals does not waive the right to assert any 31 attorney-client privilege regarding the information requested pursuant to this paragraph, but agrees not to assert any attorney-client privilege regarding data, technical records and contractual documents requested pursuant to this paragraph. 94. C.P. Chemicals shall preserve, during the pendency of this ACO and for a minimum of six (6) years after its termination, all data, records and documents in its possession or in the possession of its divisions, employees, or agents (except for data, records and documents also in the possession of C.P. Chemicals), which relate in any way to the implementation of work under this ACO, despite any document retention policy to the contrary. After this six year period, C.P. Chemicals shall notify the Department no later than thirty (30) calendar days prior to the destruction of any such documents. If the Department requests in writing that some or all of the documents be preserved for a longer time period, C.P. Chemicals shall comply with that request. Upon receipt of a written request by the Department, C.P. Chemicals shall submit to the Department all non-privileged records or copies of any such records. 95. Obligations and penalties of the Order are imposed pursuant to the police powers of the State of New Jersey for the enforcement of the law and the protection of the public health, safety and welfare and are not intended to constitute debt or debts which may be limited or discharged in a bankruptcy proceeding. 96. In addition to the Department's statutory and regulatory rights to enter and inspect, C.P. Chemicals shall allow the Department and its authorized representatives access to the Site during reasonable business hours, unless cause exists justifying access at other times for the purpose of monitoring, without unreasonable interference with business operations, C.P. Chemicals' compliance with this ACO and/or to perform any remedial activities C.P. Chemicals fails to perform as required by this ACO. 97. C.P. Chemicals shall not construe any informal advice, guidance, suggestions, or comments by the Department, or by persons acting on behalf of the Department, as relieving C.P. Chemicals of its obligation to obtain written approvals as required herein, unless the Department specifically relieves C.P. Chemicals of such obligations, in writing in accordance with the following paragraph. 98. No modification or waiver of this ACO shall be valid except by written amendment to this ACO duly executed by C.P. Chemicals and the Department. 99. C.P. Chemicals hereby consents to and agrees to comply with this ACO which shall be fully enforceable as an Order in the New Jersey Superior Court upon the filing of a summary action for compliance pursuant to N.J.S.A. 13:ID-1 et seq., the Water Pollution Control Act, N.J.S.A. 58:10A-1 et seq ., the Solid Waste Management Act, N.J.S.A. 13:1E-1 et seq., and/or the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. 32 100. In the event that the Department determines that a public meeting concerning the cleanup of the Site is necessary at any rime, C.P. Chemicals shall ensure that the C.P. Chemicals' appropriate representative is prepared, available, and participates in such a meeting upon notification from the Department of the date, time and place of such meeting. 101. C.P. Chemicals waives its rights to an administrative hearing concerning the entry of this ACO pursuant to N.J.S.A. 52:14B-1 et seq. and N.J.S.A. 58:10A-l et seq., N.J.S.A. 58:10- 23.11 et seq., and N.J.S.A. 13:lE-l et seq. 102. C.P. Chemicals agrees not to contest the authority or jurisdiction of the Department to issue this ACO; C.P. Chemicals further agrees not to contest the terms or conditions of this ACO, except as to interpretation or application of such terms and conditions in any action brought by the Department to enforce the provisions of this ACO. 103. C.P. Chemicals shall provide a copy of this ACO to each contractor and subcontractor retained to perform the work required by this ACO and shall condition all contracts and subcontracts entered for the performance of such work upon compliance with the terms and conditions of this ACO. C.P. Chemicals shall be responsible to the Department for ensuring that their contractors and subcontractors perform the work herein in accordance with this ACO. 104. C.P. Chemicals shall give written notice of this ACO to any successor in interest no later than 90 calendar days prior to transfer of ownership of C.P. Chemicals' facilities which are the subject of this ACO, and shall simultaneously verify to the Department that such notice has been given. This requirement shall be in addition to any other statutory or regulatory requirements arising from the transfer of ownership of C.P. Chemicals' facilities. 105. C.P. Chemicals agrees not to bring an action or maintain any existing or future claim or demand upon any State funds, including the New Jersey Spill Compensation Fund, N.J.S.A. 58:10-23.11i and the Sanitary Landfill Closure Fund, for the cost of investigation and remediation or any other actions required by this ACO and for damages sustained by C.P. Chemicals or its successors and assignees as a result at contamination attributable to C.P. Chemicals or its predecessor's ownership and/or operations at the Site. This provision shall be construed as a covenant not to sue or make any claim or demand; provided, however, C.P. Chemicals does not release or waive any right it may have to seek damages from a third party for such costs or damages. 106. No later than sixty (60) calendar days after the effective date of this ACO, C.P. Chemicals shall record a copy of this ACO with the County Clerk, Middlesex County, State of New Jersey and submit a letter to the Department which shall include the deed book and page number on which the ACO was recorded. 107. The Site that is the subject of this ACO may be freely alienated provided that: 33 a. No later than ninety (90) calendar days prior to the date of such alienation, C.P. Chemicals shall notify the Department in writing of the proposed alienation, the name of the grantee, and a description of the grantor's obligations, if any, proposed to be performed by such grantee. b. Any contract to alienate the Site shall require the grantee to allow and provide access for the implementation, continuation and oversight of all activities and obligations pursuant to this ACO. C.P. Chemicals' obligations under this ACO shall continue unless the grantee agrees to assume C.P. Chemicals' obligations and unless the Department in its sole discretion agrees to permit the grantee to assume the obligations of C.P. Chemicals. c. Any deed, title or other instrument of conveyance regarding the Site shall contain a notice that the Site is the subject of this ACO. Any such deed, title or other instrument of conveyance shall be subject to the requirements set forth in paragraph 108 below regarding the use of the Site and deed restrictions. d. Nothing herein shall relieve C.P. Chemicals of the obligation to comply with all applicable statutes and rules relating to the alienation of the Site. 108. C.P. Chemicals agrees not to make any use of the Site or take any actions inconsistent with this ACO. C.P. Chemicals agrees to impose such reasonable use and/or access restrictions regarding the Site as may be deemed necessary. The use and access restrictions shall run with the land, shall be for the benefit of and enforceable by the Department and the citizens of the State of New Jersey and shall provide actual and constructive notice of such restrictions to any subsequent grantee. C.P. Chemicals shall record the restrictions with the Middlesex County Clerk immediately upon request of the Department that C.F. Chemicals do so. 109. The requirements of this ACO shall be deemed satisfied upon the receipt by C.P. Chemicals of written notice from the Department that C.P. Chemicals has demonstrated, to the satisfaction of the Department, that the obligations imposed by this ACO have been completed by C.P. Chemicals. Upon satisfaction of the terms of this ACO, all obligations and provisions contained therein shall cease and shall not survive the receipt by C.P. Chemicals of written notice from the Department, unless otherwise expressly indicated. 110. C.P. Chemicals shall submit to the Department, along with the executed original ACO, the appropriate documentary evidence (such as a corporate resolution) that the signatory for C.P. Chemicals has the authority to bind C.P. Chemicals to the terms of this ACO. 111. In the event that the day on which a submission is due falls on a weekend or holiday, the due date will be on the next business day. 34 112. This Administrative Consent Order shall become effective upon the execution by all parties. DEPARTMENT OF ENVIRONMENTAL PROTECTION Date: 3/8/96 By: /s/ Dennis Hart ---------------------- ------------------------------------------ Dennis Hart, Acting Assistant Director Responsible Party Cleanup Element Division of Hazardous Waste Management Date: 3/7/91 By: /s/ James K. Hamilton ---------------------- ------------------------------------------ James K. Hamilton, Assistant Director Enforcement Element Division of Water Resources Robert J. Del Tufo Attorney General of New Jersey Attorney for the State of New Jersey Department of Environmental Protection Date: 3/11/91 By: /s/ Craig S. Provorny ---------------------- ------------------------------------------ Craig S. Provorny Deputy Attorney General C.P. Chemicals Incorporated Date: 3/7/91 By: /s/ Jack C. Bendheim ---------------------- ------------------------------------------ Name: Jack C. Bendheim Title: Chairman 35 EX-12.1 25 0025.txt RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 PHILIPP BROTHERS CHEMICALS INC. RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS OF DOLLARS, EXCEPT RATIO)
PRO FORMA YEARS ENDING JUNE 30, -------- -------------------------------------------------- 1998 1998 1997 1996 1995 1994 -------- -------- ------- ------ ------- ------ Earnings: Income (loss) before income taxes and extraordinary items................... $(15,151) $(11,754) $ 9,104 $2,651 $ 5,285 $5,110 Add: Interest expense......................... 11,672 6,865 6,253 5,546 5,409 4,205 Interest component of rent expense....... 786 709 741 648 506 561 -------- -------- ------- ------ ------- ------ $ (2,693) $ (4,180) $16,098 $8,845 $11,200 $9,876 -------- -------- ------- ------ ------- ------ -------- -------- ------- ------ ------- ------ Fixed charges: Interest expense......................... $ 11,672 $ 6,865 $ 6,253 $5,546 $ 5,409 $4,205 Interest component of rent expense....... 786 709 741 648 506 561 -------- -------- ------- ------ ------- ------ $ 12,458 $ 7,574 $ 6,994 $6,194 $ 5,915 $4,766 -------- -------- ------- ------ ------- ------ -------- -------- ------- ------ ------- ------ Ratio...................................... * * 2.3x 1.4x 1.9x 2.1x
- ------------------ * Ratio is less than 1:1. For the year ended June 30, 1998, historical and pro forma, earnings are less than fixed charges by $11,754 and $15,151, respectively. EX-21.1 26 0026.txt PHILLIP BROTHERS CHEMICALS, INC. EXHIBIT 21.1
SUBSIDIARIES OF JURISDICTION OF PHILLIP BROTHERS CHEMICALS, INC. ORGANIZATION - -------------------------------------------------------- -------------------------------------------------------- C.P. Chemicals, Inc. New Jersey Ferro Metal and Chemical Corporation Limited U.K. Koffolk, Inc. Delaware Koffolk Ltd. Israel Mineral Resource Technologies, L.L.C. Delaware MRT Management Corp. Delaware Prince Agriproducts, Inc. Delaware Phibrochem, Inc. New Jersey Phibro Chemicals, Inc. New York The Prince Manufacturing Company Pennsylvania The Prince Manufacturing Company Illinois Western Magnesium Corp. California
EX-21.2 27 0027.txt C.P. CHEMICALS, INC. EXHIBIT 21.2
SUBSIDIARIES OF JURISDICTION OF C.P. CHEMICALS, INC. ORGANIZATION - -------------------------------------------------------- -------------------------------------------------------- Phibro-Tech, Inc. Delaware
EX-21.3 28 0028.txt PHIBRO-TECH, INC. EXHIBIT 21.3
SUBSIDIARIES OF JURISDICTION OF PHIBRO-TECH, INC. ORGANIZATION - -------------------------------------------------------- -------------------------------------------------------- MRT Management Corp. Delaware Mineral Resource Technologies, Inc. Delaware L.C. Holding S.A. France
EX-23.1 29 0029.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-4 of our report dated September 11, 1998, which report is based, in part, on the report of other auditors for fiscal 1997, on our audits of the consolidated financial statements of Philipp Brothers Chemicals, Inc and Subsidiaries as of June 30, 1998 and 1997 and for the years then ended. We also consent to the references to our firm under the caption "Experts." PRICEWATERHOUSECOOPERS LLP Florham Park, New Jersey September 29, 1998 EX-23.2 30 0030.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the use in this Registration Statement of Philipp Brothers Chemicals, Inc. on Form S-4 of our report dated September 6, 1996 relating to the financial statements of Philipp Brothers Chemicals, Inc. and Subsidiaries for the year ended June 30, 1996, and to all reference to our firm included in or made a part of the Registration Statement of Philipp Brothers Chemicals, Inc. EDWARD ISAACS & COMPANY LLP New York, New York September 25, 1998 EX-23.3 31 0031.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on form S-4 of our report dated May 13, 1998 on our audits of the consolidated financial statements of Koffolk (1949) Ltd. DOV KAHANA & CO. Certified Public Accountants (Isr.) Tel-Aviv, Israel September 28, 1998 EX-23.4 32 0032.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-4 (File No. 333- ) of our report dated August 24th, 1998 on our audits of the consolidated financial statements of L.C. Holding Company. CONSTANTIN ASSOCIES Paris, France September 25th, 1998 EX-23.5 33 0033.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.5 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-4 of our report dated 28th August 1998 on our audit of the consolidated financial statements of Ferro Metal and Chemical Corporation Limited for the year ended 30th June 1996. WILSON WRIGHT & CO., Chartered Accountants and Registered Auditors, 71 Kingsway, London WC2B 6 ST. Date: 25th September 1998 EX-23.6 34 0034.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.6 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-4 of our report dated 29th August 1998 on our audit of the consolidated financial statements of Wychem Limited for the year ended 30th June 1996. WILSON WRIGHT & CO., Chartered Accountants and Registered Auditors, 71 Kingsway, London WC2B 6 ST. Date: 29th September 1998 EX-25.1 35 0035.txt FORM T-1 EXHIBIT 25.1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ---------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ---------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________ ---------- THE CHASE MANHATTAN BANK (Exact name of trustee as specified in its charter) New York 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 Park Avenue New York, New York 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) ---------- Philipp Brothers Chemicals, Inc. (Exact name of obligor as specified in its charter) New York 13-1840487 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) One Parker Plaza Fort Lee, New Jersey 07024 (Address of principal executive offices) (Zip Code) ---------- 9 7/8% Senior Subordinated Note Due 2008, Series A ---------- GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551 Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. - 2 - Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, The Chase Manhattan Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 16th day of September, 1998. THE CHASE MANHATTAN BANK By /s/ Sheik Wiltshire ----------------------------- Sheik Wiltshire, Second Vice President - 3 - EX-27 36 0036.txt FINANCIAL DATA SCHEDULE
5 1000 YEAR JUN-30-1998 JUL-01-1997 JUN-30-1998 24,221 0 58,311 751 37,567 130,839 96,436 55,926 192,195 51,172 100,000 0 521 3 23,053 192,196 274,056 277,983 208,913 208,913 73,153 144 6,865 (11,754) (4,689) (7,065) 0 (1,962) 0 (9,027) 0.000 0.000
EX-99.1 37 0037.txt LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL PHILIPP BROTHERS CHEMICALS, INC. 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, Pursuant to the Prospectus, dated __________, 1998 ------------------------------------------------------------------------------ THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON _______, _______, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. ------------------------------------------------------------------------------ Delivery To: 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 this instrument to an address other than as set forth above, or transmission of instructions via facsimile other than as set forth above, will not constitute a valid delivery. The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated __________, 1998 (the "Prospectus"), of Philipp Brothers Chemicals, Inc., a New York corporation (the "Company"), and this Letter of Transmittal (the "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange an aggregate principal amount of $100,000,000 of the Company's 9 7/8% Senior Subordinated Notes due 2008 which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for a like principal amount of the Company's issued and outstanding 9 7/8% Senior Subordinated Notes due 2008 (the "Old Notes") from the registered holders thereof (the "Holders"). 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. This Letter is to be completed by a holder of Old Notes either if certificates are to be forwarded herewith or if a tender of certificates for Old Notes, if available, is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer -- Book-Entry Transfer" section of the Prospectus. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. 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. The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. List below the Old Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Old Notes should be listed on a separate signed schedule affixed hereto.
- ------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD NOTES - ------------------------------------------------------------------------------------------------------------------------- Aggregate Principal Principal Name(s) and Address(es) of Registered Holder(s) Certificate Amount of Amount (Please fill in, if blank) Number(s)* Old Note(s) Tendered** - ------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- Totals: - -------------------------------------------------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry transfer. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Noted represented by the Old Notes indicated in column 1. See Instruction 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1. - ------------------------------------------------------------------------------- PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the undersigned's true and lawful agent and attorney-in-fact with respect to such tendered Old Notes, with full power of substitution, among other things, to cause the Old Notes to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes, and to acquire Exchange Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, that neither the Holder of such Old Notes nor any 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 that neither the Holder of such Old Notes nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), of the Company. The undersigned acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the New Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by Holders thereof (other than any such Holder that 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 other circumstances. If the undersigned is not a broker-dealer, the undersigned represents 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. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus meeting the requirements of the Securities Act, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section of the Prospectus. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Old Notes." [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ------------------------------------------------- Account Number: ---------------------------------------------------------------- Transaction Code Number: ------------------------------------------------------- [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): ----------------------------------------------- Window Ticket Number (if any): -------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ---------------------------- Name of Institution Which Guaranteed Delivery: --------------------------------- If Delivered by Book-Entry Transfer, Complete the Following: Account Number: --------------------------------------------------------------- Transaction Code Number: ------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ------------------------------------------------------------------------- Address: --------------------------------------------------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act of 1993, as amended, in connection with any resale of such New Notes; however, by so acknowledging and by delivering such a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended. If the undersigned is a broker-dealer that will receive New Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired as a result of market making activities or other trading activities. - ------------------------------------------------------------------------------- PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) (Complete Accompanying Substitute Form W-9 on reverse side) Dated: , 199 ---------------------------------------------------------------- -- x , 199 -------------------------------------- ------------------------ -- x , 199 -------------------------------------- ------------------------ -- Signature(s) of Owner Date Area Code and Telephone Number ---------------------------------- If a holder is tendering any Old Notes, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s): ------------------------------------------------------------------ -------------------------------------------------------------------------- (Please Type or Print) Capacity: ------------------------------------------------------------------ Address: ------------------------------------------------------------------ -------------------------------------------------------------------------- (Including Zip Code) SIGNATURE GUARANTEE (If required by Instruction 3) Signature(s) Guaranteed by an Eligible Institution: -------------------------------------------------- (Authorized Signature) -------------------------------------------------------------------------- (Title) -------------------------------------------------------------------------- (Name of Firm) Dated: , 199 ------------------------------------------------------------ -- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 5) PAYOR'S NAME: THE CHASE MANHATTAN BANK - ------------------------------------------------------------------------------- SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN ______________________________ Form W-9 IN THE BOX AT RIGHT AND CERTIFY Social Security Number or BY SIGNING AND DATING BELOW. Employer Identification Number ----------------------------------------------------------------- Department of Part 2--CHECK IF AWAITING TIN [ ] the Treasury Internal Revenue Service ----------------------------------------------------------------- CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: (1) the number shown on this form is my correct Taxpayer Payor's Identification Number (or I am waiting for a number to Request for be issued to me). Taxpayer (2) I am not subject to backup withholding either because: (a) I Identification am exempt from backup withholding, or (b) I have not been Number notified by the Internal Revenue (the "IRS") that I am Service subject to backup withholding as a result of a failure ("TIN") and to report all interest or dividends, or (c) the IRS has Certification notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. SIGNATURE _________________________________ DATE _____________ - ------------------------------------------------------------------------------- You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE. - ------------------------------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 3 and 4) - ------------------------------------------------------------------------------- To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be issued in the name of and sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above, or if Old Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue: New Notes and/or Old Notes to: Name(s) ----------------------------------------------------------------------- (Please Type or Print) - ------------------------------------------------------------------------------- (Please Type or Print) Address ----------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Zip Code) Complete Substitute Form W-9 [ ] Credit unexchanged Old Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. - ------------------------------------------------------------------------------- (Book-Entry Transfer Facility Account Number, if applicable) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) - ------------------------------------------------------------------------------- To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above or to such person or persons at an address other than shown in the box entitled "Description of Old Notes" on this Letter above. Mail: New Notes and/or Old Notes to: Name(s) ------------------------------------------------------------------------ (Please Type or Print) - ------------------------------------------------------------------------------- (Please Type or Print) Address ------------------------------------------------------------------------ - ------------------------------------------------------------------------------- (Zip Code) - ------------------------------------------------------------------------------- IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer for the 9 7/8% Senior Subordinated Notes due 2008 of Philipp Brothers Chemicals in Exchange for the 9 7/8% Senior Subordinated Notes due 2008 of Philipp Brothers Chemicals, Inc., which Have Been Registered Under the Securities Act of 1933, As Amended 1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures. This letter is to be completed by holders of Old Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer -- Book-Entry Transfer" section of the Prospectus. Certificates for all physically tendered Old Notes, or Book- Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. Holders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution, (ii) prior to 5:00 P.M., New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter (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 this Letter 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 this Letter, are received by the Exchange Agent within three NYSE trading days after the Expiration Date. The method of delivery of this Letter, the Old Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing be registered mail, properly insured, with return receipt requested, made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer" section of the Prospectus. 2. Partial Tenders (not applicable to noteholders who tender by book-entry transfer). If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled "Description of Old Notes--Principal Amount Tendered." A reissued certificate representing the balance of nontendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. All of the Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. 3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of Signatures. If this Letter is signed by the registered holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s) and signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter or any certificates or bond powers 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. Endorsements on certificates for Old Notes or signatures on bond powers required by this Instruction 3 must be guaranteed 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 (each an "Eligible Institution"). Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Old Notes are tendered: (i) by a registered holder of Old Notes (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Old Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for the account of an Eligible Institution. 4. Special Issuance and Delivery Instructions Tendering holders of Old Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and or substitute certificates evidencing Old Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Noteholders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book- Entry Transfer Facility as such noteholder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name and address of the person signing this Letter. 5. Taxpayer Identification Number. Federal income tax law generally requires that a tendering holder whose Old Notes are accepted for exchange must provide the Company (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Company is not provided with the current TIN or an adequate basis for an exemption, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to such tendering holder of New Notes may be subject to backup withholding in an amount equal to 31% of all reportable payments made after the exchange. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines of Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering holder of Old Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, or (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the tendering holder of Old Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Company a completed Form W-8, Certificate of Foreign Status. These forms may be obtained from the Exchange Agent. If the Old Notes are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines for instructions on applying for a TIN, check the box in Part 2 of the Substitute Form W-9. Note: Checking this box on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. If such holder does not provide its TIN to the Company within 60 days, backup withholding will begin and continue until such holder furnishes its TIN to the Company. 6. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Old Notes specified in this Letter. 7. Waiver of Conditions. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 8. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them incur any liability for failure to give any such notice. 9. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. 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 of a tender of Old Notes to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth above 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 Old Notes to be withdrawn (including certificate number or numbers and the 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 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 set forth in "The Exchange Offer -- Book-Entry Transfer" section of the Prospectus, 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 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 set forth in "The Exchange Offer - -- Book-Entry Transfer" section of the Prospectus, 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 above at any time on or prior to 5:00 p.m., New York City time, on the Expiration Date. 11. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, and requests for Notices of Guaranteed Delivery and other related documents may be directed to the Exchange Agent, at the address and telephone number indicated above. EX-99.2 38 0038.txt NOTICE OF GUARANTEED DELIVERY FOR PHILIPP BROTHERS CHEMICALS, INC. NOTICE OF GUARANTEED DELIVERY FOR PHILIPP BROTHERS CHEMICALS, INC. This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Philipp Brothers Chemicals, Inc. (the "Company") made pursuant to the Prospectus, dated _______ __, 1998 (the "Prospectus"), if certificates for the outstanding 9 7/8% Senior Subordinated Notes due 2008 of the Company (the "Old Notes") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach The Chase Manhattan Bank, as exchange agent (the "Exchange Agent") prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to the Exchange Agent as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Old Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof) must also be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized terms not defined herein are defined in the Prospectus. Delivery To: 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 this instrument to an address other than as set forth above, or transmission of instructions via facsimile other than as set forth above, will not constitute a valid delivery. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedure described in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. - ------------------------------------------------------ SIGNATURES - ------------------------------------------------------ Signature of Owner - ------------------------------------------------------ Signature of Owner (if more than one) Dated: , 199 ----------------------------------- -------- Name(s): ---------------------------------------------- ---------------------------------------------- (Please Print) Address: ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- (Include Zip Code) Area Code and Telephone No.: ---------------------------------------- Capacity (full title), if signing in a representative capacity: - ------------------------------------------------------ Taxpayer Identification or Social Security No.: - ------------------------------------------------------ - ------------------------------------------------------ Principal Amount of Old Notes Exchanged: $ ------------------------------------- Certificate Nos. of Old Notes (if available) - ------------------------------------------------- - ------------------------------------------------- Total $ ----------------------------------------- IF OLD NOTES WILL BE DELIVERED BY BOOK- ENTRY TRANSFER, PROVIDE THE DEPOSITORY TRUST COMPANY ("DTC") ACCOUNT NO.: Account No. -------------------------------------- - ------------------------------------------------------------------------------- GUARANTEE OF DELIVERY (Not to be used for signature guarantee) The undersigned, 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, hereby guarantees that the certificates representing the principal amount of Old Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus, together with any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than three New York Stock Exchange trading days after the Expiration Date. - ------------------------------------------------------------------------------- - ------------------------------------- --------------------------------------- Name of Firm Authorized Signature - ------------------------------------- --------------------------------------- Number and Street or P.O. Box Title Name: - ------------------------------------ ---------------------------------- City State Zip Code (Please Type or Print) Tel. No. Date: - ------------------------------------ ---------------------------------- - ------------------------------------------------------------------------------- NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. EX-99.3 39 0039.txt CLIENT LETTER PHILIPP BROTHERS CHEMICALS, INC. 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 To Our Clients: Enclosed for your consideration is a Prospectus, dated __________, 1998 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of Philipp Brothers Chemicals, Inc. (the "Company") to exchange its 9 7/8% Senior Subordinated Notes due 2008, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for its outstanding 9 7/8% Senior Subordinated Notes due 2008 (the "Old Notes"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated June 11, 1996, by and among the Company and the Initial Purchaser referred to therein. This material is being forwarded to you as the beneficial owner of the Old Notes carried by us in your account but not registered in your name. A tender of such Old Notes may only be made by us as the holder of record and pursuant to your instructions. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Old Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on __________, __________, 1998, unless extended by the Company. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Old Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer -- Certain Conditions to the Exchange Offer." 3. Any transfer taxes incident to the transfer of Old Notes from the holder to the Company will be paid by the Company, except as otherwise provided in the Instructions in the Letter of Transmittal. 4. The Exchange Offer expires at 5:00 p.m., New York City time, on __________, __________, 1998, unless extended by the Company. If you wish to have us tender your Old Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. The Letter of Transmittal is furnished to you for information only and may not be used directly by you to tender Old Notes. INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Philipp Brothers Chemicals, Inc. with respect to its Old Notes. This will instruct you to tender the Old Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. Please tender the Old Notes held by you for my account as indicated below: - -------------------------------------------------------------------------------- Aggregate Principal Amount of Old Notes to be exchanged $_________________________________________* - -------------------------------------------------------------------------------- *I (we) understand that if I (we) sign these instruction forms without indicating an aggregate principal amount of Old Notes in the space above, all Old Notes held by you for my (our) account will be exchanged. Dated: , 1998 ------------- ----------------------------------------- ----------------------------------------- Signature(s) ----------------------------------------- ----------------------------------------- ----------------------------------------- Please print name(s) here ----------------------------------------- ----------------------------------------- Address(es) ----------------------------------------- Area Code and Telephone Number ----------------------------------------- Tax Identification or Social Security No(s). EX-99.4 40 0040.txt LETTER TO BROKER DEALERS PHILIPP BROTHERS CHEMICALS, INC. 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 To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Philipp Brothers Chemicals, Inc. (the "Company") is offering, upon and subject to the terms and conditions set forth in the Prospectus, dated __________, 1998 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") its 9 7/8% Senior Subordinated Notes due 2008, which have been registered under the Securities Act of 1933, as amended, for its outstanding 9 7/8% Senior Subordinated Notes due 2008 (the "Old Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated June 11, 1998, by and among the Company and the subsidiary guarantors referred to therein and the Initial Purchaser referred to therein. We are requesting that you contact your clients for whom you hold Old Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Old Notes registered in your name or in the name of your nominee, or who hold Old Notes registered in their own names, we are enclosing the following documents: 1. Prospectus dated __________, 1998; 2. The Letter of Transmittal for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Old Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. Return envelopes addressed to The Chase Manhattan Bank, the Exchange Agent for the Exchange Offer. Your prompt action is requested. The Exchange Offer will expire at 5:00 p.m., New York City time, on __________, 1998, unless extended by the Company (the "Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Old Notes should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If a registered holder of Old Notes desires to tender, but such 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 by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures." The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Old Notes held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all stock transfer taxes applicable to the exchange of Old Notes pursuant to the Exchange Offer, except as set forth in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to The Chase Manhattan Bank, the Exchange Agent for the Exchange Offer, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, PHILIPP BROTHERS CHEMICALS, INC. NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures -----END PRIVACY-ENHANCED MESSAGE-----